My primary source on the large claims was a State of Indiana summary called “50 most expensive statewide discharges by MS DRG” Jan-Dec 2011.

As far as I know, this table has the actual DRG amount which Medicare pays.

Also see a posting on 4-12-2011 on a small blog called Misunderstood Finance by Milton Recht. The title is :
“Small Percentage of Medicare Beneficiaries account for most of its costs.”

Colleges have gone through the same thing. In the last 20-30 years the number of college and university employees, especially administrators, per student has skyrocketed without much impact, as far as I can tell, on the overall quality of the education that students actually receive. On the plus side, the student unions are bigger and fancier as are the football stadiums and athletic training facilities.

Medicare has to deal with determining prices for at least 10,000 different medical services, tests and procedures and they can vary considerably from one county to the next based mainly on differences in medical input costs. The U.S. has 3,147 counties. It’s inevitable that Medicare will overpay for some billing codes and underpay for others and the workings of the RUC tend to ensure that procedures continue to be much more generously compensated than E&M codes. Hospitals make most of their money on surgical procedures and cancer treatments. The medical, as opposed to the surgical, cases aren’t nearly as lucrative.

I would attack drug costs with reference pricing. In each therapeutic class, the most cost-effective drug would be paid for in full and patients would pay the entire difference for more expensive drugs unless they couldn’t tolerate the cheaper drug for some reason which would probably happen about 10%-20% of the time. For devices, we need to get rid of the confidentiality agreements that currently preclude disclosure of actual contract, as opposed to list, prices. Let hospital discover what their competitors are paying and maybe we can get some convergence toward the lower prices paid by the larger, high volume hospitals.

Finally, I recently had a Medicare eligible relative go through a six week hospital stay at a leading academic medical center with almost half the time spent in the ICU but no surgical procedures were performed. Medicare was billed almost $500K by the hospital but it was paid less than $70K which it accepted as full payment. So, I’m not sure if Bob’s figures reflect billed charges or what Medicare actually collected. The difference is always huge.