October 31, 2014
Yes that is the big scoop that the folks at AP uncovered today. According to a report from its Inspector General, $292,381 was paid out for HIV drugs after the patients were already dead. That undoubtedly sounds awful to many readers — yet another case of bungling bureaucrats in Washington throwing our hard-earned tax dollars into the garbage.
It turns out the situation could be even worse. According to the article, the $292,381 is just for one narrow program. If we add up the cost of all the drugs paid out to dead people, it could be in the millions. How horrible is that?
If AP wanted to treat this seriously instead of trying to create an Ebola panic over Medicare payments for dead people, it would have given some context for these numbers. The spending on dead people is from Medicare Part D, a program with an annual budget of $85 billion. That means the $292,381 that was identified as paying for dead people comes to 0.0003 percent of total spending. If the full amount for the whole program runs as high as $3-4 million then we might be looking at 0.004-0.005 percent of total spending.
Expressing these numbers in percentage terms might not make for as good a story, but it would actually be giving readers information. The incredible aspect to this issue is that there really is no disagreement about the basic point. Everyone knows that the numbers in the AP article are completely meaningless to almost everyone who reads them.
The question is why use them? Why would a news service not express the numbers as percentage so that the vast majority of readers would understand their significance. This was a point that Margaret Sullivan, the NYT Public Editor raised last year. She found David Leonhardt, then the Washington editor in complete agreement. Nonetheless, nothing changed at the NYT or anywhere else. Huge numbers are still expressed without any context even though everyone knows that almost none of their readers will understand them.
Naturally this creates an impression of massive fraud and waste even when the numbers are actually trivial compared to the size of the program. Just to be clear, any fraud and waste is bad. It would be nice if the money spent buying drugs for dead people were zero, but that is not going to happen in a program that spends $85 billion a year.
The goal would be to minimize the amount of fraud of this sort, but that does involve some common sense. It would be crazy to spend $1 million hiring investigators to eliminate $292,381 in payments for dead people. Furthermore, to let people in on a little secret, this sort of stuff happens in our ultra-efficient private sector as well. We are of course less likely to know about it, because private corporations don’t have inspector generals who publicly disclose evidence of waste and fraud.
Anyhow, this sort of inept economic reporting is the sort of thing that could be corrected if there were organizations in Washington that cared about protecting government programs like Medicare, Mediciad, Social Security, and the rest. They could pressure AP, the NYT, the WaPo to stop indefensible practices in reporting. Unfortunately, no such organizations seem to exist.
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