Health AGEnda

The Ship of State Capsized by a Silver Tsunami of Greedy Geezers?

Posted in category Health Policy, Health Reform, Medicare


One of my favorite papers is a Health Affairs piece by Bruce Vladeck, the former administrator of what was then HCFA, (the Health Care Financing Administration, now CMS – the Centers for Medicare and Medicaid Services) entitled, The Political Economy of Medicare:  Medicare Reform Requires Political Reform.   In it he contrasts the view of Medicare beneficiaries as “Greedy Geezers” who just want to spend, spend, spend other people’s money on health care versus the observation that Medicare’s money is most directly spent on “providers” for whom it is a source of income.  Drawing an analogy to President Eisenhower’s famous warning, he dubs this constituency “the health-care industrial complex.”

Recently there has been a great deal of attention to “entitlement” programs (itself a loaded term) such as Social Security, Medicare, and Medicaid.  Clearly, there is an upswing in characterizing older adults as “Greedy Geezers” particularly “entitled” about health care spending.  But what Dr. Vladeck reminds us is that Medicare puts no money in the hands of older people.  At the very most, it buys them health care — services and products — by paying other people.   And despite what doctors often feel about the endless neediness of their patients, in my experience, most people would prefer to avoid health care entirely and don’t actually enjoy the process itself.    

Knowing this, I was very struck by an op-ed in the Wall Street Journal from the middle of July:



I have never seen an analysis that shows a 50% increase in health service utilization attributable to having Medicare (as opposed to insurance from an employer) after controlling for age and health status.  It really struck me because Medicare (at least without supplementation) is not very good insurance compared to mine or that of most people who have commercial insurance purchased for them by a large employer.   So, I would be very interested in how to interpret such a result (greedy geezers vs. health care industrial complex?).  However, I would like to get the facts straight before trying to explain them. 

Now, I am not an actuary or even an economist and there are some very technical arguments about the role of moral hazard in insurance (that is people doing things once insured that they wouldn’t do with their own money).  And some suspect moral hazard particularly if a beneficiary has “first dollar coverage,” as is possible if he or she has purchased one of the more generous (and expensive) Medicare Supplemental Plans (Medigap).  I know these issues are complex and contentious, but I would really like to know if this phenomenon is real. 

I started by writing to the authors about the source of their data.  They were very polite and quick to reply, and in addition to offering to talk me through their analyses on the phone, they told me to look at a 1990s study somewhere on the website of the Council for Affordable Health Insurance  (still can’t find it) or to stay tuned for a book to come out next year.

I must say that I don’t really think it is fair to say that we have been “ignoring one key factor” when it really hasn’t been made very public.  So in the meantime I went to the public data available at the National Center for Health Statistics and looked up age and ambulatory care visit rates.  I figured that if moral hazard were at work, it would show itself the most in ambulatory visits (as opposed to hospitalizations or nursing home stays that seem less voluntary).  And this is what I found for all site ambulatory care visits (primary care, specialty, ED).  Please pardon my bad excel graphing:


Even without adjustment for health status, the relationship looks like a straight line to me and doesn’t seem to increase faster after age 65 when insurance usually changes.  Moreover, these data are going to be a very conservative view, as they reflect the entire population — including those who had no coverage when they were younger than 65 (and therefore fewer visits). 

Perhaps I’m missing something or doing something wrong, but I just don’t see an increase in utilization that can’t be attributed to age.  Perhaps the age ranges are wrong to see an inflection towards higher than predicted use for Medicare beneficiaries or perhaps I’ve misunderstood the point.  But until it is clearer, I don’t see any phenomenon to discuss except that as people age they have more health problems, need more care, and have more visits.  If anyone has data on the WSJ argument or knows where to get it, I would be very grateful.


3 thoughts on “The Ship of State Capsized by a Silver Tsunami of Greedy Geezers?

  1. My husband needs a parathyroidectomy. He has found a surgeon he likes, who practices in a local surgery center, and accepts Medicare patients. He scheduled his appointment for the operation.
    Yesterday we were called by the surgery center’s billing office. My husband cannot have the surgery performed there after all, because Medicare won’t pay for it as outpatient surgery, but Medicare will pay for it to be done in the local hospital. Fine, we said, if Medicare won’t pay, we’ll willingly pay for the costs of the surgery center; he absolutely doesn’t want this operation to be done in the hospital, and this is worth it to us. Can’t do that, says the office; the surgery center is contracted with Medicare, and since Medicare says that this procedure cannot be done as outpatient surgery for Medicare patients (though it is done at the surgery center as outpatient surgery for non-Medicare patients; and I know from the web that this procedure is routinely done across the country as outpatient surgery), the surgery center cannot accept money from the patient. How about if we pay the doctor too? Nope, Medicare won’t allow that. How about if he goes through the procedure, I suggest to the billing lady, then you file, and after Medicare denies the claim, then we pay you? No, Medicare won’t let us take your money if they have denied the claim. The patient’s only option is to have the surgery in the hospital, and Medicare will pay the hospital.
    I know from past experiences (broken arm; also a routine colonoscopy), that the local surgery center is less expensive than the hospital; that a patient is not exposed to all the bugs that hospitalized patients are; and that the doctors and nurses in the Surgery Center are competent, helpful, and attentive.
    And my husband and I know first hand of several incompetencies at the local hospital that make us both want to stay away from it if at all possible.
    However, despite that, here is the result:
    Medicare will require that my husband have his surgery in the hospital for a more expensive procedure, than if Medicare had allowed him to have it at the Surgery Center; and Medicare will pay for the operation–when he would have paid for it, at the facility of his choice, if Medicare had denied payment, but allowed him to pay for it.
    Granted, we are not talking here about gazillions of dollars that Medicare could have saved; the hospital’s list price for a single overnight stay is under $3000; so suppose Medicare saved $500 or less by letting my husband stay overnight (if he needed to) in the Surgery Center. But he is only one of many Medicare patients.
    $500 x lots of people = considerable savings.
    Or suppose Medicare let him pay, so he coughed up $2500 himself for the surgery center.
    $2500 x some number = considerable savings to Medicare.
    But Medicare won’t allow either of these.
    I have no idea how many such regulatory issues cost Medicare how many big bucks, but recently I spoke with a patient at this hospital who was going to be transported some 60 miles to a different facility. This is a totally stable, clearly alert, fifty year old. For transport, the hospital is using an ambulance. Local transport in an ambulance around town runs around $1000. I shudder to think what 120 miles round trip will cost; I think taxis and tow trucks come lots cheaper.
    So I do think there are cost savings out there that could easily be implemented without compromising medical services in the least, and I fear that if this many are this obvious to me, that there must be incredible numbers of them that I don’t happen to know anything about.

  2. Editor’s note: This post was featured in the August 9, 2011, edition of Grand Rounds, hosted by Dr. Deb at

  3. Thank you, Chris, for questioning irrational and potentially damaging assertions such as the “50% more” claim. Chris’ simple numbers and logic resonate with my practical experience in looking at Medicare and non-Medicare patterns of use. In addition the 2 points made in the first section are critically important -1) people don’t really want “more” healthcare if avoidable; 2) the money goes to providers (the health care industrial complex, more than to the individual clinicians and care givers), not patients. We are at risk for over-utilization because of a payment system that rewards the health care industrial complex for service volume – but that is not unique to Medicare patients.

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