the lung post March 10. 2013 The high costs of Medicare's low prices By David Goldhill David Goldhill is chief executive of GSN, a media company, and the author of "Catastrophic Care: How American Health Care Killed My Father — and How We Can Fix It." Steven Brill's recent Time magazine cover story, "Bitter Pill: Why Medical Bills Are Killing Us," is an extraordinarily well-reported look at medical pricing, demonstrating that high health-care prices have little relationship to underlying cost. For many commentators, the much lower prices paid by Medicare suggests an obvious solution to our health-care problems — "Medicare for all." There's only one problem with this "obvious" solution: Medicare has been a primary driver of the explosion of health- care costs in the United States despite — and perhaps because of — the low prices it pays. Over the past decade, Medicare's spending per beneficiary has risen at roughly the same rate as spending for privately insured patients. Medicare's supporters have a simple explanation: Americans are living longer, and this is driving up the program's costs. But Medicare's own data say that a much more important factor is the growing intensity of use: more demand for care at every age. In the mainstream of our health-care debate, this growth in seniors' demand is considered organic — a need to be fulfilled. But this extraordinary growth in volume is better understood as a provider reaction to the perverse incentives of low prices. Faced with buyers focused on volumes — such as private insurers — the health-care industry prices high; when dealing with buyers focused on prices — such as Medicare and Medicaid — the focus shifts to raising volumes, especially of more-costly procedures. Both strategies demonstrate the industry's enormous market power. Medicare beneficiaries get a lot of health care, and these amounts grow every year. In 10 years, the number of CT and MRI scans per beneficiary more than doubled; hip r