Several  federal government agencies and programs help make our healthcare system more expensive than it has to be.  In no particular order, the primary contributors are:

MEDICARE

The reach of Medicare goes well beyond the reach of merely paying for the healthcare of elderly Americans. The vast majority of private insurance plans and Medicaid base their payment fees to hospitals, doctors, nursing homes, and equipment vendors on the Medicare fee schedule. The most important issues are:

• The Medicare physician fee schedule overpays procedures and underpays thinking. This imbalance has led to the oversupply of expensive technology and a shortage of primary care.

• Medicare doesn’t pay primary care physicians for the work they do. Primary care physicians are paid NOTHING for the following services: spending extra time with patients to address more than two concerns, seeing their patients at both the clinic and hospital on the same day, spending time to make sure all the other providers of healthcare for a patient are in agreement on the overall plan of care, answering questions and solving problems over the phone, and filling out mountains of paperwork so other people can be paid for their work.

• The root cause of this functional lack of respect the work of primary care is that the vast majority of physicians who advise Medicare on payment issues are ologists. The formulas Medicare uses to calculate fees also contribute.

• Medicare isn’t allowed to consider costs in its coverage decisions, though it rations care in sneaky ways at times.

The federal government spends more on medical care than any other single category and Medicare is the largest component of that.

Medicaid

Medicaid uses the same payment policies as Medicare, except it pays a lot worse in most states. It rations care primarily by paying so poorly that access is limited to people on Medicaid. The largest single expenditure for Medicaid is for nursing homes.

National Institutes of Health (NIH)

The NIH is the largest single funder of biomedical research in the U.S. and probably the world, though other government agencies and private firms (drug companies) also have large budgets.

• The NIH funds research in miracles not efficiency. Its mission is to fund basic and applied science to invent new tests and treatments. We can’t afford the treatments coming out of the NIH pipeline.

• The NIH favors research in easily identifiable diseases. For example, there is gobs of research on asthma and chronic obstructive pulmonary disease (COPD), but little research on people who have both. There is no research on symptoms such as “I have no energy” to guide primary care physicians on the best way to help patients with this concern. There is little research on low back pain because it is not an identifiable disease, even though its economic impact is around $80 billion per year.

• The NIH rarely funds research to see if a less expensive approach works as well as a more expensive one.

• A new initiative called Comparative Effectiveness Research, which is shared by the NIH and two other agencies, will help make our healthcare system more efficient and effective, though its impact will be limited because the program is expressly prohibited from considering the cost of care in its recommendations.

FOOD AND DRUG ADMINISTRATION (FDA)

The FDA is mostly helpful by insuring that drugs that reach the market have some evidence that they are more helpful than harmful to treat a certain disease. My criticism of the FDA, shared by others, is that:

• Medical devices aren’t required to meet the same level of proof as drugs.  For example, a new drug that claims to treat back pain has to prove its better than a placebo for some reasonable length of time. A new procedure just has to prove its reasonably safe and not that it’s effective for a prolonged amount of time.

• New drugs treating diseases that already have drug treatments aren’t required to compare the new drugs to existing drugs