Gyroscopic Investing

Here’s how the system works: When a doctor administers a drug in his or her office, Medicare pays 106 percent of its average selling price. The doctor keeps the extra as compensation for administering the injection. What has this got to do with eye doctors? The drug Lucentis, used to treat macular degeneration, cost Medicare almost $2,000 a shot in 2012. Another drug, Avastin, which works just as well, costs about $50. If you were the doctor, faced with a system that pays you 6 percent of the drug’s cost, which would you choose? That Medicare spent a total of about $1 billion on Lucentis in 2012 suggests most ophthalmologists went with the more expensive one.

http://www.businessweek.com/articles/20 ... aper-drugs

Ha, if you only knew!!!

These kinds of cost accounting weirdnesses happen everywhere, all the time.  Here's one of my favorite examples:  MRI scans for outpatients are reimbursed at a much higher rate than for hospital inpatients.  It could be the same patient, same scanner, same study, but if they're newly discharged or not yet admitted, the hospital gets more money.  Thus, it's now nearly impossible to get MRI scans for hospitalized patients because they purposely book it solid with outpatients - even though inpatients often have a far more critical need for it.

Because these things are so pervasive and totally untracked as far as I know, it's impossible to tell how much money is involved.  Remember that the game is also about keeping hospitals/doctors afloat.  6% of $50 doesn't come anywhere close to covering that ophthalmologist's costs for administering an injection, between storing the drug, buying the syringe/needles, hiring staff, electronic system for documentation, paying rent, maintaining required certifications, etc etc.  So the more expensive drug is helping to keep the less expensive one available.  You could consider it as a way of occasionally CUTTING costs in this instance.

MachineGhost wrote: Here’s how the system works: When a doctor administers a drug in his or her office, Medicare pays 106 percent of its average selling price. The doctor keeps the extra as compensation for administering the injection. What has this got to do with eye doctors? The drug Lucentis, used to treat macular degeneration, cost Medicare almost $2,000 a shot in 2012. Another drug, Avastin, which works just as well, costs about $50. If you were the doctor, faced with a system that pays you 6 percent of the drug’s cost, which would you choose? That Medicare spent a total of about $1 billion on Lucentis in 2012 suggests most ophthalmologists went with the more expensive one.

http://www.businessweek.com/articles/20 ... aper-drugs

So maybe the real Medicare fraudsters are the docs...

moda0306 wrote: So maybe the real Medicare fraudsters are the docs...

Incentives in action, baby. Put an honest man in a system that rewards dishonesty and you get a dishonest man.

Pointedstick wrote:

moda0306 wrote: So maybe the real Medicare fraudsters are the docs...

Incentives in action, baby. Put an honest man in a system that rewards dishonesty and you get a dishonest man.

True dat.

moda0306 wrote:

Pointedstick wrote:

moda0306 wrote: So maybe the real Medicare fraudsters are the docs...

Incentives in action, baby. Put an honest man in a system that rewards dishonesty and you get a dishonest man.

True dat.

True dat, and true dat (for mortals who do not have an eye on the ultimate future). 

... Mountaineer

Coming from the person who argued in another thread that leftists are not all alike, painting doctors with that comment is amusing. 

Benko wrote: Coming from the person who argued in another thread that leftists are not all alike, painting doctors with that comment is amusing.

I was making a snarky comment. I think most doctors do a good job.

They should also be well-paid. And usually are.

MangoMan wrote: Did you guys not read what WiseOne wrote above? What is dishonest about wanting to get paid enough to cover your expenses? The idiot bureaucrats make the rules of the game. And then you fault the players for trying to win the game with the cards they are dealt?

"Dishonest" may have been the wrong word; my point was that the character of the system determines the actions people take within it, which appears to be what you're saying too, so I agree with you. But because it's a government system, the game is zero-sum instead of win-win. So " wanting to get paid enough to cover your expenses" is transformed into "skyrocketing costs for other patients."

P.S., for the first time ever I don't have a clue what your post means....

I think we can all agree that the current system is incredibly illogical, and forces physicians ("providers" in Medicare-speak) to spend their time and energy playing games in order to maximize profits.  The question is whether you think physicians should try to maximize profits.  Is it only ok to do so when the physician would otherwise go bankrupt?  Or is it something you expect any smart business owner to do?

Profit-seeking really only makes sense in a free market, which this isn't.  So either medical workers become essentially government employees with fixed salaries, or switch medicine to a free market economy, or things will have to continue as they are.

WiseOne wrote: Profit-seeking really only makes sense in a free market, which this isn't.  So either medical workers become essentially government employees with fixed salaries, or switch medicine to a free market economy, or things will have to continue as they are.

Yeah, I agree. I think that's sort of what I was trying to say. Sorry I was confusing everybody.

I always think of processes, systems to put the processes that work efficiently and effectively in place and finally structure to formalize it all.  Unfortunately, many, if not most, organzations do those three things in reverse order and everything flops as soon as a strong leader is no longer present.  To me, that helps me think about why the current Medicare/Medicaid/Insurance/Doctor/Pharmaceutical mess exists in the form it does.  Bass-akwards implementation most likely by a well meaning but incompetent (vs. free market) bureaucracy.

... Mountaineer