The cost dynamics of healthcare

From smart-as-a-whip MaxedOutMama, who discusses healthcare cost dynamics. An excerpt:

Anyway, leaving the guillotines for the moment, let us take a big leap forward in time to our present day, and contemplate two WaPo articles about health care reform.

The first is about the Mayo clinic, and it critically analyzes the assertion in President Obama's health care speech that the Mayo model can deliver cost savings. Now although the title claims that the jury is still out, it is only out in Washington. The bottom line is that the Mayo clinic does not serve anywhere near a representative slice of the US population:

"It's not [Mayo's] model. It's their patients and money. If you have the money, you can attract good staff, good doctors, good nurses," said Richard A. Cooper, a professor of medicine at the University of Pennsylvania. "You are going to force hospitals to find ways to avoid taking care of poor people just because they are going to be penalized because poor people cost more."
...
Cooper and others note that Mayo's other facilities, in Jacksonville, Fla., and Phoenix, have total spending rates that are roughly proportional to those in other hospitals in those areas. And across the Upper Midwest, per-patient spending is low, including at centers where doctors are not on salaries.

It's a long article, but the bottom line is that Mayo's efficiencies are gained from keeping their share of Medicaid patients extraordinarily low,

Even in Rochester, a city of 85,000, Mayo serves a higher-income echelon than the town's other hospital, Olmsted Medical Center. Just 5 percent of Mayo's hospital patients receive Medicaid, an exceptionally low figure, compared with 29 percent at Olmsted, where officials say they do more to help people in the community apply for Medicaid.

and for limiting their services to Medicare patients. Mayo doesn't accept Medicare patients from outside the state unless they agree to pay more than Medicare for services. So they are not serving the old and the poor in proportion to the US population, although they do provide excellent medical care to those they do serve. Mayo has a large referral clientele, and it also has a big group of foreign patients. It would be rare indeed to find a hospital that didn't have better outcomes and cheaper services if the hospital's clientele were hugely shifted toward the young and the wealthy.

So perhaps now my readers can begin to understand why my reaction to Obama's speech was so bad. Either he is appallingly ignorant of the facts, or his plan is to strip funding from medical services for the poor and the elderly. The proposal in Obama's speech was to pay more to hospitals like Mayo that have good stats but may have created those stats by not providing services to the poor and the elderly. Is it right that a hospital like Olmstead with 29% of its patients on Medicaid should get paid less to care for those with the more severe problems, whereas Mayo would be paid more to pay for a clientele that has already been sorted to be in the upper socio-economic group?

Anyone who holds traditional democratic values and who understands what is being proposed ought to be just as upset as I am.

Whether Michelle Obama truly believes that the poor will be rushing to the Vermont Avenue organic farmer's market for their double food stamps and whether Barack Obama really desires to defund the medical system for the elderly and poor is a big question. "Dumb or dastardly?" is how I frame it to myself. [all emphasis above in original] ...

Read it here. A bit on the wonkish side, but an interesting read.