"Medicare spends a fortune each year on procedures that have no proven benefit and should not be covered."

The headline quote is from this May op-ed by Rita Redberg in The New York Times, who provides a handy list of procedures that Medicare continues to pay for despite a lack evidence that they are medically effective, several of which still manage to cost taxpayers $1 billion a year. Even still, it's an incomplete list. "The full extent of Medicare payments for procedures with no known benefit needs to be quantified. But the estimates are substantial," writes Redberg, noting the familiar estimate that as much as 30 percent of health care expenditures may be wasteful. When it comes to the federal budget, of course, it's Medicare that's the big problem, which is why it's even more alarming to find that there's some evidence that Medicare's squandering is significantly worse than its private sector counterparts.

Why is Medicare so daffy? According to Redberg, one of the biggest factors is the payment system:

One reason is that Medicare's reimbursement procedures are not sophisticated enough to track the appropriateness of the care provided. Medicare delegates its claims administration to private local contractors based on how quickly and cheaply they can process claims.

These contractors have few incentives to audit the taxpayer dollars they are paying out, and even if they wanted to, they would need information often not available on the claim form. For example, a claims administrator, processing a claim for a screening colonoscopy, does not know when the patient's last colonoscopy was, or whether there was a new clinical reason for repeating it. While this information is available, finding it would require extra steps, and there are no incentives to do so.

It's just another illustration of the way that Medicare's reimbursement system is a wreck. According to a March report published by the Government Accountability Office, Medicare suffers from "pervasive internal control deficiencies." Consequently, the GAO has dubbed Medicare a "high risk" program "because its complexity and susceptibility to improper payments, combined with its size, have led to serious management challenges." Part of the reason for those challenges, though, is the mere fact that Medicare is attempting to manage a huge portion of the country's medical system throughly a poorly designed, poorly controlled, easily defrauded system of essentially arbitrary price controls administered from on high. Bureaucratic systems beget bureaucratic problems.