Ep 13. Why Healthcare Markets Fail: MedPAC Chair Michael Chernew on Medicare's Future & Payment Reform

Michael Chernew is a distinguished Harvard economist, Chair of MedPAC, and leading healthcare policy expert with decades of experience in healthcare economics. In this episode, Michael provides a masterclass on why healthcare economics differs fundamentally from other markets, unpacking information asymmetry, moral hazard, and adverse selection in accessible terms. He reveals the surprising truth that Medicare Advantage plans cost the government approximately 20% more than traditional Medicare despite delivering care more efficiently, explains how these plans use this payment gap to finance enhanced benefits, and discusses the future challenges of healthcare payment reform. Michael shares breaking news about MedPAC's upcoming recommendation to partially tie physician payments to inflation after decades of declining purchasing power, explores the complexities of drug price negotiations, and offers insider insights into how Medicare policy decisions affecting billions of healthcare dollars are actually made.

Chapters

00:00 Introduction to Healthcare Economics and MedPAC

02:56 The Evolution of Health Economics

06:05 Unique Challenges in Healthcare Markets

09:11 Moral Hazard and Insurance Dynamics

12:10 The Role of Technology in Rising Costs

15:10 Understanding MedPAC's Function and Influence

18:01 MedPAC Recommendations and Their Impact

22:16 The Complexity of Medicare Payment Systems

25:07 Challenges in Hospital Profitability

28:20 The Future of Payment Models in Healthcare

38:16 Geographic Variation in Medical Practice

39:15 Alternative Payment Models and Pricing Issues

46:53 The Rise of Medicare Advantage

55:20 Future of Medicare and Healthcare Reform

About:

Value Health Voices is a podcast redefining conversations around health policy and healthcare finance, delivering accessible and expert-driven discussions on the topics shaping the future of healthcare. Hosted by Dr. Anthony Paravati and Dr. Amar Rewari, the podcast explores how regulations, emerging technologies, and financial pressures impact patient care, provider operations, and healthcare systems. With their combined experience as radiation oncologists and healthcare leaders, they break down complex topics like Medicare reimbursement, artificial intelligence in healthcare, and prior authorization in ways that are actionable and engaging. Each episode features insights on legislative efforts, best practices for providers navigating policy changes, and trends shaping the future of value-based care, empowering listeners with knowledge they can use immediately.

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