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Facts and Misuse Of Facts

Posted Mar 09 2013 3:47pm

Stanley Feld M.D.,FACP,MACE

All of us try to understand the facts and make logical decisions by synthesizing the facts.

There is a lot of misinformation and disinformation being printed. This misinformation and disinformation leads to the wrong conclusions because the facts are inaccurate.

 A master purveyor of this misinformation and disinformation is Paul Krugman.

I believe his misuse of facts is icreasing as he is subconsciously realizing his ideology is incorrect.

Here are a few examples of disinformation or misinformation in Paul Krugman’s most recent article “Mooching off of Medicaid”  

“For there is a lot of price-gouging in health care — a fact long known to health care economists but documented especially graphically in a recent  article in Time magazine . “

This is true. The margins on hospital systems retail prices are outrageous. The margins on some discounted hospital system prices are equally outrageous.

 There is a continuous price war between hospital systems and payers (government and healthcare insurance companies).

 The uninsured and under insured primary stakeholders (consumers) are stuck with these outrageous prices.

"As Steven Brill, the article’s author, points out, individuals seeking health care can face incredible costs, and even large private insurance companies have limited ability to control profiteering by providers."

 This statement is not quite true. Most people have healthcare insurance. The healthcare insurance industry and government have negotiated discounted prices that are as low as 10% of the retail prices published in Steven Brill’s article.

In the struggle to retain providers, private insurance companies offer slightly higher prices than the government.

The healthcare insurance industry knows the government’s exact reimbursement prices. The private insurance companies provide the administrative services for the government’s healthcare plans.

Individuals not under the umbrella of these discounted prices are liable for these high prices. As insurance premiums increase, employers are reducing insurance coverage for employees.

The deductibles and co-pays are increasing to unaffordable levels for everyone as an increasing numbers of employees are becoming under insured.  

 “For there is a lot of price-gouging in health care —"

 Price gouging is the result of a lack of transparency and special deals the government and the healthcare insurance industry makes with certain hospital systems   

“Medicare does much better at preventing price gouging , and although Mr. Brill doesn’t point this out, Medicaid — which has greater ability to say no — seems to do better still”.

 This is false. There are fewer physicians seeing Medicaid patients because reimbursement is very low. In fact, in most cases physician reimbursement is lower than physician overhead. The result is access to care for a Medicaid patient is restricted. The access to care for private insured patients is not.

Hospitals receive a bonus for seeing Medicaid patients. This fact is not transparent and known by few.

 “And despite some feeble claims to the contrary, privatizing Medicaid will end up requiring more, not less, government spending”,

Paul Krugman makes declarative statements as if they are unequivocal evidence. 

 “because there’s overwhelming evidence that  Medicaid is much cheaper  than private insurance.”

The evidence in Paul Krugman’s quoted study is not that overwhelming.

I reviewed this 2008 study. The demographic difference of the Medicaid group compared to the privately insured group is different. The difference can reveal alternate conclusions.


Jpeg demographics krugman

Note the demographic differences of the Medicaid vs. Private insurance patients.


Heath status good      53.5% vs 41.2%

Mental health             17.4 % vs  6.4%

Hispanic                     23.4% vs 16.9%

African American        27.5% vs 16.4%

White                          49% vs 66%

Employed                   48% vs 74.6%

No hi school degree   36.7% vs 17.2%

Married                        33.6% vs 51.7%

Income less than poverty 62.3% vs 22.2%


An alternate conclusion could be that it is too difficult for Medicaid patients to find a physician. Medicaid patients are more poorly educated. The do not seek physicians’ help compared to the privately insured group. Medicaid patients cannot afford the minimal out of pocket expenses.

Jpeg 2 costs


To my amazement the unadjusted annual per person Medicaid spending was higher in this article for the Medicaid insured group than the privately insured group by $1000.  

Paul Krugman states Medicare and Medicaid have lower administrative costs.

“Partly this reflects lower administrative costs, because Medicaid neither advertises nor spends money trying to avoid covering people”.

 He goes on to say.

 “But a lot of it reflects the government’s bargaining power, its ability to prevent price gouging by hospitals, drug companies and other parts of the medical-industrial complex.”

The government does have bargaining power. However reimbursement to physicians is so low that it is difficult for Medicaid patients to find a physician.

This could be a reason Medicaid costs are lower than privately insured patients with a high school education and a job.

Acute care hospitals have a 10% Medicaid threshold. They can also be eligible for incentive pay.

 “ In addition, to be eligible to receive a Medicaid EHR incentive payment, acute care hospitals must also meet a 10 percent Medicaid patient volume threshold.”

Paul Krugman and others conclude,

Our nation cannot control runaway medical spending without fundamentally changing how physicians are paid.”

Physicians receive only 9% of healthcare dollars spent. The real facts are physicians write orders for the inflated services of the hospital systems without receiving financial benefit. In fact, the government restricts physician participation. Physicians’ reimbursement decreases yearly.

It is very easy to draw the wrong conclusions when relying on inaccurate facts from so called experts.

The real challenge is to dig down and get the correct facts.

This is not done because ideology, non-transparency and bias stand in the way. This contributes to the healthcare system becoming more dysfunctional and costly each year.

 Healthcare policy errors are made because policy is made using incorrect facts.

 The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

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