Stephen Beale’s article in GoLocalProv about the recently released Medicare database showing payments to doctors in 2012 features a comment from me.  It’s a tough thing to analyze, because there’s just so much data, and each data point would require investigation.  The costs for the government to adequately police this stuff would be massive, and there’s only so much interested citizens or private-sector analysts can find the time or resources to review.  And this is only one dataset out of many that are compiled for the activities of government.

One silver lining of the hopelessness of it all is its illustration of economic principles, particularly with regard to prices.

Stephen notes Fathalla Mashali, an anesthesiologist in East Providence, who received $3.4 million for his 727 patients served in 2012, after requesting $13.5 million.  Apparently, the feds announced nine counts of Medicare fraud against Mashali last month.

Sorting through the data, we see that Mashali claims to have provided 138,195 discrete services to those 727 people, or 190 services each.  Per his requested payment, he wanted $98 per service; per what he received, he got $25 each.

This illustrates how backwards the whole system is.  If Mashali had tried to sell almost two hundred $100 anesthetic services to each of the 727 senior citizens, the chances are that his services would frequently have been declined.  If that was actually a good rate, and if he was able to safely and honestly provide so many services to so many people, maybe he would have deserved the $13.5 million for finding a more efficient way to serve customers.

That would have attracted the attention of other anesthesiologists, who might have been happy to provide fewer services to fewer clients for less money.  That’s how prices work to collect the large amounts of subtle factors that go into every economic translation and prompt changes in the economy.  There’s no need for government to collect the data, analyze it, and release it to the public in unmanageable waves.

Of course, there’s no need to dwell on somebody who’s already been accused of fraud.  Providence doctor of internal medicine Jonah Licht claimed 5,187 services for 652 patients and received an average payment of for $611 each service, although he’d requested four times that.

Four Providence opthalmologists, two of them at the same location, averaged 801 services to 17 patients each, for around $170 per service. In this case, their $1.2 million in average compensation was only about half of their average request of $2.3 million.

Individual doctors and private organizations aren’t the only ones that catch the eye.  The City of Providence made 16,644 claims for 2,594 Medicare patients for an average of $101 each, although the city had requested $190 each.  That would be an average of 46 services to seven Medicare patients each and every day of the year.

Warwick, Cranston, East Providence, Westerly, Pawtucket, and Woonsocket followed, in that order.  All of them requested about twice what they received, except East Providence and Pawtucket, which received only about one-quarter of their requests.

Surgeon and Senator Christopher Ottiano (R, Portsmouth) served 367 patients 1,598 services.  Although his requested reimbursement averaged $393 each, he received $112.

And the list goes on.  Most likely, the great majority of claims are appropriate.  Many of the doctors listed might be justified in stating that Medicare dramatically underpays what their services are worth.

The point is that it shouldn’t fall to government — or insurance companies, for that matter — to determine how much the treatments are worth, whether they’re worth paying for, or if the providers are trying to cheat the system.  All of these judgments should be made before service is rendered, and with the patient having incentive to consider all of the data that is relevant to his or her personal needs and circumstances.