Medicare and cutting health care costs

Why cutting physician reimbursements and other Medicare tactics to cut costs aren’t doing the job. Too bad cost-cutting makes for bad politics – talking about universal coverage is so much sexier:

So why aren’t Medicare’s cost control measures working? Because CMS has focused most of its efforts to limit spending on controlling prices. This strategy arises out of the mistaken belief that if they could just rein in the price per unit of care, the price of each CT scan and each office visit, they could control spending overall. This would be a dandy strategy in any other industry, but in health care it hasn’t worked out. And it hasn’t worked out because in health care, the real driver of cost is volume. Costs go up when the amount of care doctors and hospitals deliver to each patient goes up. And because the amount of care delivered doesn’t have all that much to do with the amount of care that patients actually need, whenever Medicare slashes the price it will pay, hospitals and individual physicians can always find ways to deliver more stuff in order to maintain their revenue stream.