I buy that the locus of American overspending is in fees charged by providers (my understanding is that a further principle component of that spending is in end-of-life care).
The problem, though, with going after pharma costs, and pharma benefit managers is that pharma is a relatively small component of overall spending; it's less than 10%. That is to say, you could make all pharmaceuticals entirely free, and we'd get at best a 10% discount on what we pay. I don't think any of us would be satisfied with that!
This is data from the most recent (as of last year) CMS NHE:
The 9.2% figure is pharma's direct share of NHE, but drugs are a net-positive externality. Cheap statins can stave off cardiac surgeries, GLP-1 can stave off bariatric surgeries, etc. It's ridiculous to conclude we would only save 9.2% on costs--this is not zero-sum.
No comment on drug pricing and its incentives, the existence of America's prescription drug markets drives the new innovative drugs that the rest of the world picks up for cheap.
That's an interesting argument --- that massively increased access to pharmaceuticals would have knock-on impacts on other cost areas in the NHE.
I think if we dig into the numbers we're likely to find those effects, even if we maximize them, are marginal, unless we do other structural things to untangle the provider pricing system and do price transparency. Like: you could posit a material impact on CVD costs by making statins more widespread, and that should make a dent somewhere, but I don't know that CVD costs in non-Medicare-insured patients are really that big a line item, and non-Medicare is important here because people already Medicare-qualified generally have all the statins they want already. Meanwhile, providers are still ripping patients (and insurers) faces off for shoulder impingements, stents, and spinal fusions.
Mostly not marketing (still large), but the R&D costs and clinical trial costs. The latter are in hundreds of millions to billions range for the entire journey from a promising discovery to an FDA-approved medicine.
Huge chunk of the costs come from the fact that Doctors pay astronomical malpractice insurance rates in some states with no tort reform. Some have to spend more than 100k on insurance - 1/3 of their total pay. Since some states allows multi-million dollar judgments from juries that raises insurance everywhere, which raises not only prices for everyone but also dramatically contributes to more procedures and tests being done at even higher costs to avoid liability. The risks of having your entire livelihood wiped out chases out doctors from those states and reduces availability of care for patients as well. If you want objective cost comparison, compare Veterinary care which has similar consumables and training, but no insurance and liability impact on prices.
This project reminds me of a book I highly recommend called An American Sickness. It sheds a lot of light on the same sorts of issues.
One underlying, perverse incentive behind many of the problems is that insurers are regulated based on percentages of spending rather than total costs.
The US passed laws meant to limit marketing and overhead that tied insurers economics to the size of the overall medical bill... which means as healthcare spending rises, the dollars they’re allowed to retain can rise too, which basically means they're incentivized to drive costs up rather than down.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD. That gap is roughly $3 trillion per year.
The difference in life expectancy will be influenced by multiple factors and may have more to do with diet and lifestyle than with healthcare.
Japan also spends less per capita than the UK, France or Germany. The US spends a lot more than any of those so the US system is bad value for money.
They make more than they would in Japan. But people can make $0 in any country. Regardless, part-time Walmart greeters are fortunately not paying full price for health insurance in the US.
This feels like a misleading ratio, it's just saying the cost is the same in per capita terms but says nothing about the absolute cost or more importantly cost as a percentage of income, which matters for the majority of people in the denominator of the GDP per capita calculation.
Try seeing a doctor in Japan as a foreigner. Just a simple consult costs $300 USD or so, and it goes up from there. It's actually a rather expensive system.
Social reasons it would never work. I hate to mention anything race related online but simple truth is America has complicated history and African Americans are 30% more likely to be obese than White Americans and also earn approximately 60% of income that whites earn. A fat tax, especially one that properly allocated the cost burden to the individual, would erode race relations.
fwiw the “tax” in Japan is not paid by the individual, and generally taxing the behavior via e.g sugar taxes rather than the outcome has worked better without much public outcry after the fact
That 6% number isn't even close to accurate. There are many other very expensive chronic conditions that are downstream of obesity including type-2 diabetes, heart failure, hypertension, MSK injuries, etc. We are digging our graves with our teeth.
Although I tend to think we overwork the working class such that they have no energy to keep up their health, so this would basically be taxing them because they're poor in many cases.
I suspect you would see the exact same trend comparing Japan and the U.S. in transit, education, and many other services. The U.S. spends more per capita to get less.
In domains like healthcare, education and transportation, the cost is primarily labour. A wealthier country pays its workers more, which gets passed down in higher prices to its consumers. And, while healthcare and education do not benefit from economies of scale, transportation does, so the denser population gets cheaper transportation per capita.
The US is a wealthier country and wages are higher here than Japan.
The median equivalised household disposable income of a US household is over twice that of a household in Japan.
This is one of many reasons why it’s so misleading to compare prices across countries in a vacuum. All of the people doing the work for those education, transportation, and other services and all of their inputs aren’t going to work for Japan-equivalent pay when they’re living in the United States.
The Japanese system is amazing. Cheap drugs, cheap dentistry, no wait times and reimbursements for all kinds of things (government covered more than 100% of childbirth cost - yes we got more back than we paid). But the best part IMO is the emphasis on preventative medicine. My wife and I get annual checkups which cover a whole range of things including screening for various kinds of cancer.
We in Germany copied a lot of the stupid stuff from America (including the stupid billing system for inpatient stays), so it's not that surprising that our system is also bad value for money.
PS: Outcomes here are not worse than those of rich people in the US, because I know some idiots will claim this to cope
Germany didn't copy the US - they just happen to share similar roots.
Both historically had private hospital systems, and just so happen to implement pension/employer-based insurance programs very early on. German's just evolved in one direction and the US evolved in the other.
We copied the DRG reimbursement System from the US.
And no, we didn't had a historically significant share of private hospital systems, those came with the introduction of the DRG System, which forced many city/church owned hospitals into privatisation.
Before that, they had a "Fixed Price per Night" System, which also was a bit stupid, before that they got reimbursed their cost.
Healthcare administrative overhead in the US is pretty huge and has been for a long time. Back in the early 90s I worked on claim processing software and I recall it being discussed as being around a third of healthcare costs.
Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider.
Administrative spending accounts for between 15% and 30% of total medical spending, with lower estimates covering only billing- and insurance-related expenses, and higher ones including general business overhead such as quality assurance, credentialing, and profits. https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/
Challenge is the whole system is just a mess. Medicare probably lays too little. Commercial insurers have formed a mountain of red tape and bureaucracy and arguably pay too much, although individual bills (EOBs) are rarely logically defensible against any scrutiny.
Healthcare providers try and combat all this by literally just making up pricing and trying to negotiate something while also having bloated administrative structures that raise costs for all.
Nothing about the current state of the healthcare system makes much sense to anyone that tries to peel back the onion.
>Nothing about the current state of the healthcare system makes much sense to anyone that tries to peel back the onion.
I'd offer a slight tweak. None makes sense in a vacuum or solely considering efficiency. It all makes sense seeing the evolution over time and the misaligned incentives.
When you really dig into the difference it's metabolic health that is driving most of it, and that will be fixed by agricultural and food regulation for the most of it, starting with going with the whitelist system that japan and the EU have for food additives & manufacturing processes vs. the wild west that is GRAS in the USA, and way more strict food quality / inspection standards than you would think.
This! I flew from Madrid to SF last year and I can't begin to describe the difference in the quality of food. The scale of agricultural industrialization is terrifying - I wish you luck but I don't think anything short of this becoming a major campaign issue will help you.
Medicare prices are too low to operate on. They generally factor in the bare minimum or slightly less for the variable costs of a procedure but severely under value the fixed costs of providing the same procedure. So those costs largely get pushed to commercial payors as those are the only ones who can shoulder it.
There’s plenty of arguements about waste and executive compensation but when I was a healthcare CFO we had our financials separated where I could see individual hospital performance and all the executive/corporate stuff was separate and it still was an issue as basic capex was hard to keep up with in a hospital that had a low % of commercial patients.
Sure you’re not thinking of Medicaid? Medicare was generally pretty good for reimbursement. When my wife treated Medicaid patients, she often lost money on the cost of the supplies used to treat them, let alone rent and paying the staff etc etc. Most doctors who see Medicaid patients do it as basically pro bono. Some figured out how to game the system with economies of scale but it’s nearly impossible do do and maintain a decent standard of care.
But Medi care was right with the commercial insurers on reimbursement.
Medicaid is usually a big loss for hospitals. It’s just a cost of doing business and another reason why someone else has to pay more. It’s completely a subsidy essentially. This is why certain areas only have a county hospital, it’s likely the same area that is a food desert and has no retail banks, the simple truth is too high of a Medicaid mix will quickly sink a for profit hospital.
Medicare is as I described. Every specialty and procedure has its quirks though, some even make a killing on Medicare and not commercial but the hospital kind of represents a portfolio and the overarching economics in aggregate favor the commercial insurance. I’m guessing your wife’s specialty had decent Medicare rates but it’s not always true.
There’s even some private insurance which is effectively Medicare that has different reimburse ranges (Medicare advantage plans).
Executives like to lament the lose money on Medicare but I never really saw it that way. If you look at it isolated, sure it’s true. But if you look at it as a portfolio where your fixed costs are covered by another cohort, then it’s a huge volume to add and make money at the contribution profit line. You just have to be careful not to run fixed costs as a percentage of total revenues or something like that. The extra volume Medicare brings to a hospital or network of hospitals also has tremendous negotiating power for pharma, medical supplies and devices, etc.
Generally speaking Medicaid is worse than Medicare for provider reimbursement rates. In some states, Medicaid plan members are effectively uninsured because they can't find a provider within reasonable distance who will take new patients.
Lots of people are saying nonsense here. The actual reason commercial insurers pay more is that's the only way to can make more profits.
Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money.
In a vacuum sure. But insurance companies operate the only part of the healthcare system that is moderately competitive. In the end employers are the ones largely paying and they are professional negotiators enough to put price pressure on insurance plans. 20% of $0 is $0.
As such, as light of an incentive it is - it’s the only party in the entire system that is incentivized in any way whatsoever to keep costs down.
Insurance providers also rarely operate at the full freight 20% either way though. So they are at least at this time incentivized to control costs at some level since every dollar saved is a dollar added to the profit line. Otherwise they would not be known for denying claims so often.
This is ignoring a whole lot of very important complexities as well - such as self funded insurance plans that most major companies utilize. There the insurance company is simply a plan administrator getting paid the same either way.
It’s one of those tropes that has a source of truth behind it but the actual reality is far less satisfying of an answer. Makes for great sound bites and ability to shut down further thought on the subject though. The uncomfortable truth is that there is no simple fix and no one bad actor that is the cause of all the insanity.
What OP said is true. You’re forgetting that health insurers are just one organization in the corporate chart. They often work to own the providers as well to funnel money to parent corporations.
So if United is the insurer they’re owned by an umbrella, that umbrella takes 20% or less. However United makes special deals and steers people to providers owned by the Umbrella. So that the Umbrella makes more money as well. This is true for medicine as well. For example Cigna requires all maintenance medication be purchased through express scripts as a means to retain or increase profit.
United has a history of also squeezing organizations by forcing them into pre-payment review when they’re high volume. This causes the providers to basically not have no revenue for months on end until it gets sorted. Then they might get a chunk or settle out of court. Often they go bankrupt and are purchased by the umbrella.
In terms of Medicare/Medicaid another catch-22 is that insurance handles the claims for providers. The insurance can recode claims and pocket the difference without telling the provider. It’s on the provider to catch it.
There is a tremendous amount of dark money, shadow games, hidden corporate structures, Wyoming and NM LLCs with Anonymous owners, etc.
Insurance as a whole tries to own the entire feedback loop for healthcare. They don’t like you going out of their feedback loop.
>For example Cigna requires all maintenance medication be purchased through express scripts
Important note: Cigna owns Express Scripts. Today the biggest "insurance" companies are actually massive conglomerates that own the clinics, the doctors and the pharmacies. United = Optum. Aetna = CVS + Caremark. Humana = CenterWell. Elevance/Blue Cross/Anthem/Carelon. Centene = Envolve
Once a giant like United gets big enough in a city, say ~40% of the population, they lower the reimbursement rates for independent doctors and if the doctor refuses the contract, they are kicked out of network and lose 40% of their patients. Go bankrupt or sell to Optum.
Digi is also right about Medicare upcoding. It is a well-documented $$billions scam where Medicare Advantage insurers comb through patient records to add diagnostic codes making the patient look sicker on paper than they actually are so the government pays the insurer a higher flat rate for that patient.
Pharmaceuticals are a small component of overall US health spending. Upcoding is endemic across the entire system; it's endemic across the whole system. Ironically, the complaint you'd be making with upcoding under Advantage is that Medicare should be denying coverage to people; Advantage upcoding involves altering risk scores to authorize more care.
Why wasn't it set up so the government is the insurer. Rather than 3rd partying it. It is akin to federal reserve using wells fargo to store their money.
I’m well aware of the vertically integrated systems. But that’s not the entire market - just getting to slowly be more and more common.
Insurance as standalone entities are not much better or worse for total cost than these giant vertical monopolies. At least yet, thy are only recently becoming large enough to truly put the screws to people. Because insurance was not all that profitable made it prime targets for these sorts of shell game shenanigans.
It’s basically the point I was making. Fixing “insurance” isn’t a fix at all because the problem is far greater than just that layer of the onion. Costs are hidden and embedded and cross-subsidied to the point no one can unwind it without burning the entire thing to the ground. It’s grift from bottom to top. Aside from a few poor souls actually at the ground level who are still true believers trying to provide service to patients. And a lot of those are burning out. I think out of the 5 or 6 medical doctors I met while they were in medical school, only one is still practicing. They would now be late 30s to early 40s and in theory at the prime of their careers. Instead they got out as soon as medical school debt was paid off and moved onto other less stressful things. Another hidden cost in the shit-tier system rarely talked about.
I’m simply pushing back on the idea that the 20% medical loss ratio is the source of all (or even most) issues for the cost of healthcare or why insurance sucks so much to deal with. It’s nearly irrelevant.
You're right that there's no single bad actor, and that's exactly the framing of this series. Each issue isolates one mechanism with one savings estimate. The 254% figure is RAND's. What I added is the HCRIS cost-to-charge analysis across 3,193 hospitals showing the variance by ownership type.
The surprise was nonprofit hospitals: median markup of 3.96x actual operating costs, versus 2.39x for for-profit and 1.87x for government hospitals. That's hard to square with the narrative that nonprofits deserve their tax exemptions ($28-37B/year) because they serve charitable purposes.
On the self-funded employer point — you're correct that self-funded plans have more negotiating latitude, and thousands of them already use reference pricing (capping hospital payments at a percentage of Medicare). That's actually the policy fix this analysis proposes. Montana Medicaid implemented it and saved $47.8M. The question is why it isn't the default.
> part of the healthcare system that is moderately competitive.
That’s only half the story though insurance companies also try and reject way more claims, cover fewer people, and are just harder to get money from than Medicare.
This means hospitals can’t afford to give them cheaper rates as they just require vastly more work from staff for the same procedure.
The industry isn’t blind to this effect, but has little reason to change.
Hospitals and clinics can only take so many Medicare patients as a ratio to private pay because it’s very well known that Medicare and Medicaid is often provided at below cost. It’s of course area and demographic dependent but as a rule any private clinic has a cap on these patients they will accept overall. Hospitals cannot cap it realistically speaking, so looking at clinics is a good proxy.
Private insurance subsidizes Medicare and Medicaid even after you add in admin overhead.
The MLR incentive question is one I'm digging into for a future issue. The short version: the ACA's 80/85% MLR floor was supposed to constrain overhead, but vertical integration changed the math. When UnitedHealth's Optum division provides services to UnitedHealthcare's members, those internal payments count as "medical expenses" for MLR purposes. The money stays in-house but reports as care delivery.
On the denial rate point: 15-17% initial denial rate, 80%+ overturned on appeal, but less than 1% of patients actually appeal. That gap between the overturn rate and the appeal rate is where the profit lives. If you deny 100 claims and only 1 patient appeals, you've effectively reduced payouts on 99 claims at the cost of processing 1 appeal. I'll have the numbers on this in a later issue.
Yes but the Medicare and Medicaid reimbursement rates are below breakeven so cash and insurance rates have to be above provider breakeven. The main cost frictions are administrative costs for billing on both the insurance and provider sides.
That's true to an extent, but some provider organizations manage to survive with patient populations that are almost entirely Medicare / Medicaid. Many provider organizations are just badly managed and haven't taken steps to optimize their finances through automation or participation in value-based care programs.
They waste billions on fraudulent claims because they don't fund the program well enough to have compliance enforcement or auditing.
Also, I'm not going to trust a podcast owned and operated by Stacey Richter, who also just so happens to be the co-president of Aventria Health Group and QC-Health.
> They waste billions on fraudulent claims because they don't fund the program well enough to have compliance enforcement or auditing.
These are synonyms for having higher overhead, right? If you pay a billion dollars in claims with ten million dollars in administrative costs then your "administrative overhead" is 1%, even if half the claims are fraud. If you increase "administrative costs" to a hundred million to get rid of the fraud, in practice you just saved 410 million dollars but now your "administrative overhead" is up to 20%.
There's another reason. The harder you make it for a provider to get reimbursed for a service (in order to cut down on fraud), the more difficult it is for legitimate patients to access that service. Medicare patients are elderly. Many of them aren't able to chase after doctors to get the services they need.
I'm working on a project in an area of healthcare where there was massive Medicare fraud decades ago. Medicare now requires extensive documentation for each claim and the paperwork is so onerous that providers have exited the market and it's very, very difficult to access care.
Right, CMS plays whack-a-mole with Medicare claim fraud. When they catch on to a systemic pattern they clamp down in a way that creates extra burdens for everyone, and then the fraudsters move on to something else.
It can't be both: either insurers are incentivized to authorize as much care as possible so as to fit more money through the 20% opening, or they're incentivized to deny care to minimize their expenses. Which is it?
What do you mean elevators go up and down clearly someone only wants to go in one direction. If they are below 80% they want costs to increase, over 80% costs better decrease.
The ideal long term strategy is to drive everyone’s costs to go up slowly over time slightly faster than inflation. Adding administrative burden to medical institutions is a perfect way to achieve that, but clearly that never happens…
This isn't even close to true. Keep in mind that Medicare, together with Medicaid (which operates under much of the same administrative rules), account for nearly half of medical spending. So basically, if a provider doesn't want to play by their rules, they MUST deal with Medicare. That is, the government is nearly a monopsony in this industry.
There's a common, misleading, claim that Medicare is more efficient because they spend far less than commercial insurance on overhead like claims processing. This claim is true. But the impression that it gives is absolutely the opposite of reality. The reason that Medicare doesn't spend as much on admin is that they offload all of this work onto the providers. Every hospital in America has a "Medicare Reimbursement" team. A moderate-sized hospital is going to have something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid. And that's a lot more work than just filing the right forms for each case. There's a ton of additional work. Each spring they have to file a HUGE "Medicare Cost Report", requiring a couple of months of work to get all the data in place for it. (Source: my wife was "Director of Reimbursement" at various hospitals for quite a few years, before going into consulting.)
That Medicare Cost Report that I mentioned is, beyond a huge effort sink, the source of many other evils. Because of the amount of work that's needed to gather and collate all this data, hospitals naturally structure their Accounting around the way Medicare wants them to report. The thing is, that's largely orthogonal to the way a rational person would do cost accounting. The result is the common criticism about how widely varying the cost of a given specific line-item is between hospitals: they don't really know how much a given procedure costs because that's not how they track their expenses, so they apply some allocation heuristics, and every hospital does that a bit differently.
There are also various perverse incentives in the system. For example, Medicare is smart enough to know that it costs more to deliver care in NYC or SF and so forth. Every locale has a Cost Index that scales how much they expect to need to pay. This leads to hospitals needing to show that their expenses are higher so they should be classified into locale X rather than neighboring locale Y.
Another one my wife told me about her hospital: Medicare realized that a lot of UTIs were hospital-acquired, and they rationally said that they would no longer pay for UTI treatments unless the hospital could prove that they were not hospital acquired. Well, maybe that wasn't rational, because with Medicare/caid being such a huge portion of their business, they changed their policy to test for UTI for everyone at admission, so that they could furnish the proof demanded. Think of all that wasted lab work...
So no, Medicare is NOT more streamlined and efficient. It's absolutely, 180-degrees, the opposite of that.
> something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid
2FTE’s vs what?
The question isn’t is this free, the question is how large is the total staff including price negotiations, doctors, and IT time spent handling billing issues, and is Medicare more or less than 50% of the total.
I am ware of one hospital and 2 medical clinics where the difference is very much in favor of Medicare.
2 FTEs vs a department. Most hospitals have entire departments to handle insurer coding and some even have departments just to handle insurer disputes.
versus nothing. Hospitals don't have to maintain a whole team for UnitedHealth, or for Anthem, etc.
This is my point. Medicare cooks the books to look more efficient by offloading their administrative costs onto providers. Other payers can't do that because, even if huge, they don't operate at the same scale.
Think about it: we often hear on the news about disputes about contracts when a local hospital's agreement with some insurance company comes up for renewal. They play hardball, getting local news to run stories on how many people will be affected if they can't come to terms. But you'll never hear this in the context of Medicare/caid. Hospitals have leverage to negotiate with commercial payers, but not with the government.
Depending on the size of the health system it may not be a team of multiple FTEs but they absolutely do expend significant resources on managing differences between commercial payers. They all have different rules about covered services, step therapy, prior authorization, hospital admission, etc. Sometimes those differ significantly even between health plans offered by a single carrier.
This isn't really true anymore (if it was ever true). Providers are spending a huge amount of time dealing with prior authorizations and appeals for private insurance.
I work in this area and you're right that Medicare can require a huge amount of paperwork from providers. And a hospital will have far more than 2 FTEs for this (it's called Revenue Cycle Management).
Medicare has overhead, but you’re not saying whether it is more than commercial insurance. The admin expense/profit portion of commercial insurers also don’t take into account provider admin costs (not to mention the huge amount of time patients can deal with denials, appeals, etc.)
It's further the case, regarding Medicare expense ratios, that their admin costs are low relative to private insurance because the median private insurance customer incurs far lower medical costs, leaving admin as a higher fraction.
They really aren’t. They package benefits to try to hit different price points. Obamacare accelerated consolidation of providers and most regions have a cartel of 2-4 health networks.
> In the end employers are the ones largely paying and they are professional negotiators enough to put price pressure on insurance plans. 20% of $0 is $0.
That's assuming price is the only variable.
Suppose one insurance company is accepted by more providers, including ones that might be closer (but pay higher real estate costs) or have nicer rooms etc. Meanwhile employers are looking for cost/benefit rather than just cost. If they give employees a better insurance plan they could pay them less or provide less of some other benefit and still get people to work there.
So before the insurance company didn't really care if you got a $10,000 plan or a $20,000 plan if they both had a $2200 margin, or if anything would prefer the former because they make the same money with lower costs. The employer is likewise fairly ambivalent as long as the more expensive plan seems like it's buying something (even if the something is convenience/luxury). But now the insurance company isn't allowed to have a $2200 margin on the first plan and still is on the second, so that's what they market, and then what more employers choose, resulting in higher average costs.
> Insurance providers also rarely operate at the full freight 20% either way though.
There are only really two options, right? Either the market is actually competitive and then a margin cap has no effect because competition would prevent margins higher than that regardless and the rule should be gotten rid of as totally redundant, or the market is less than perfectly competitive and then it does something but the something is a bad perverse incentive to raise costs to cheat the rule and it should be gotten rid of as actively harmful.
It's such a small market that it's really not competitive. Further, because medicine is so expensive, it means there aren't going to be newcomers to the market who can shake thing up. It requires way too much startup capital to start a new insurance company. The agencies with the most negotiation power don't because it negatively affects their bottom line.
This is why there needs to be a real second option. A public option like medicare for all would be the way to go. Let everyone choose between either private insurance or public insurance. Then you'd actually see some real competition.
Insurance is really not the issue, it’s provider cost. And just the total cost entirely of the system of insanity. If you look closely into it there is no single (or few even) knobs you can tweak to fix the system. Not even Medicaid for all, at least as it’s currently designed.
No argument from me that insurance is not competitive enough. But they are almost all public corporations that are highly regulated so the numbers on profit and expense ratios are easy to get for yourself to prove the point. No need to take my, or anyone with an agenda word for it. Almost everyone wants a simple answer to a complex interdependent problem that does not have one.
If there was a single solitary answer of “what is the problem with US healthcare” I’d have to go with it being a principle agent problem. If everyone who consumed healthcare had to pay up front very few services would cost what they do. Even changing it so people were billed directly and then had to submit insurance claims later like how pet insurance or car insurance works would go a long ways. But even that doesn’t solve the problem entirely, as it leaves massive gaps. Second answer would be “administrative class bloat” like in all areas of the US today.
Single payer is certainly a major part of the answer, but in isolation it’d solve almost nothing and potentially make things even worse as all the inane cross-subsidy comes crashing down overnight.
Edit: the point is medical loss ratios, admin overhead, etc. is public information not hidden behind some private company firewall. The fact non profits haven’t captured 100% of the market by being crazily cheaper should be telling on its own.
Trying to understand why healthcare in the U.S. is so expensive is like trying to understand why building subway in New York is so expensive: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-.... The issues lend themselves to facile explanations ("insurance companies are greedy," "NYC's government is wasteful") but those are driven by ideology not analysis.
What we can say for certain is that heath insurance companies in the US stuff their pockets with tens of billions in profits each year and that Americans are paying far more while getting less for their money than other developed nations. I don't think those two things are unrelated.
Something around half of UnitedHealth Group (UHN) profits come from other business units that aren't directly related to UnitedHealthcare insurance plans. They have a huge software business under the Optum brand that would be one of the top 20 largest US tech companies if it was broken out separately.
Many of the largest health plans are non-profit, not publicly traded corporations. This includes most of the Blue Cross Blue Shield Association licensees as well as some other large payers such as EmblemHealth.
This is the same problem with cost-plus contracts in the military. In theory, capping profit is meant to reduce profiteering. But in practice, if your profit is fixed at 6% of the cost to built a jet fighter then you're incentivized to make that jet fighter as expensive as possible. The way to maximize profit under a cost-plus regime is to maximize the cost.
I will piggy back off of your comment because I was going to say a very similar thing. In my state, electric utilities are guaranteed a rate of return on investment of approximately 12%, if I remember correctly. And so there's a lot of incentive for build out and maintenance that's high in total dollar amount and high in volume of work done. In some ways it's the system working as designed but the "cap" can incentivize erroneous build out, as you noted in the jet fighter example.
It's about threading the needle between a well funded grid, and an over engineered grid. There's a point where diminishing returns makes investment greater than that threshold wasteful relative to opportunity cost of spending that tax money on different public services.
Absolutely not. The way to spend as much money as possible is to do intentionally inefficient repairs (e.g. last minute/reactive). The providers gain from grid unreliability since by causing problems, they get to justify spending money to "fix" them.
Depends on if the investments were in the right stuff or not. Overbuilt sounds great, so long as it’s overbuilt in capacity and reliability.
If those were malinvestments instead it’s simply throwing money away for not even a theoretical “someday” return. Plenty of ways to look busy while spending massive amounts of capital.
Generally agreed in principle though. Investment in the grid is pathetic almost everywhere in the US and has been for generations.
There's not necessarily a difference because they overlap on the venn diagram. The returns to the shareholders go up the more you build out, the benefits and performance face diminishing returns. Different utilities around the country get different scores for reliability and infrastructure integrity, because a dollar spent by one utility on one grid doesn't necessarily have the same impact as a dollar spent by another.
You can really just say anything and get upvoted on this website.
If this were true then private insurers would have paid comparable rates to Medicare prior to the ACA passing, and that's just not the case. This fact has been a fixture of the US healthcare system since the creation of Medicare.
It's a bit more complicated than that. First, most large health plans regulated under the Affordable Care Act are actually subject to an 85% minimum medical loss ratio. Some of the larger payers which also have their own providers as employees within the same parent corporation are able to shift money around with internal pricing agreements so that they make larger profits on the care delivery side.
But at the same time, the business is still pretty competitive with the employers and consumers who purchase policies or rent networks being price sensitive. Employers will switch carriers to get a significant cost savings so that holds down prices (and carrier profits) to an extent. Most large employers (and unions) are now self-funded so the "insurance" company isn't actually bearing much risk, they just set up a provider network and process the claims.
Most doctors are almost completely ignorant about the broader issues of healthcare financing and medical economics so take anything you hear from your friends with a grain of salt. (And to be fair, it's not something we should expect them to be experts in.)
So I happen to be in Costa Rica for the month. Just like every other 1st world country, it has managed to have universal health care that is better and cheaper without private insurance.
Even if you do get private insurance for quicker access, it’s still much cheaper than the US.
I just spoke to someone who flew down here to save $30K on dental work.
The problem isn’t the ACA, it’s the ass backwards American health care system. I was at a meetup of American ex-pats here and half of them said they established residency here to join CAJA - the health care system
ACA enshrined the worst parts of the American healthcare system for years to come. It is a politicized victory that is the best solution for no American citizens. Places I’ve been with fully privatized healthcare or single payer are both significantly better for consumers.
Insurance companies have raised prices to restore profit, were briefly a mandatory expense, and will exist for years to come.
> Why is that inherently bad? Should I be able to buy fire insurance on pre-existing embers?
What if someone gets Type 1 diabetes as a child so they can no longer get insurance because of that "pre-existing" condition: if they get cancer for unrelated reasons they should just be saddled with medical debt? Or because of your Type 1 you can't get coverage, and you get t-boned in your car by a drunk driver.
Certainly it sounds 'unfair' that someone who smokes (a personal choice) gets similar cancer coverage for someone who does not smoke. But it also means that if your ((great-)grand-)mother had cancer, and you get it through no fault/choice of your own (i.e. genetics), you can also get coverage. (This latter effects a cousin of mine: her aunt (mom's sister) died of cancer at 37, her mom at 63; so now she's wonder when here number will come up. We're in Canada, so have universal care, but it's still something in her DNA.)
There are many circumstances in which you suffer through no fault of your own, and universal health coverage is present in many societies because it was decided to protect those people—even if it allows some 'free-riding' by others making poor choices.
People make all sorts of crazy decisions to prevent the "wrong" people from getting what they "don't deserve":
Pre-existing conditions also continue to frame healthcare as 'insurance' against a bad thing happening to you, when it should just be a regular service like any other.
You don't need 'insurance' in order to get your vehicle serviced, but that is what the US does with healthcare.
The most it will ever cost me to go from “not having a working car” to “having a working car” is the cost of used car that will reliably get me from point A to point B.
If you live long enough, you will have a pre existing condition.
The way it was suppose to work with the original mandate is that everyone had to be insured either through their employee or the exchange. So you couldn’t just buy insurance when you were sick. The Supreme Court struck that down.
If you lost your job, before the ACA, you could not get health insurance outside of working for someone and having group insurance at any cost.
But you do realize that the entire idea of not being able to get insurance because of pre-existing conditions is completely unique to the US?
Costa Rica for instance (where I am right now for a month and half) allows anyone to become a resident as long as you have guaranteed income of around $2000 a month or you deposit $60K into a local bank account and they arrange monthly disbursements and you pay 15% of your stated income to CAJA. Healthcare is both better and more affordable here.
The same is true for Panama. Why can’t the US figure this out?
When one of my kids was 4, they had an unexplained seizure. Hospital workup, whole nine yards, never recurred; it was probably a medication reaction. Years later we were denied coverage from all the private insurers over it (more accurately: we were denied any coverage for that child).
Similarly, insurers would as a matter of course exclude from coverage any woman with one of several extremely common conditions, including endometriosis, PCOS, fibroids, and adenomyosis.
Prior to Obamacare, insurers were free to deny coverage wholesale for these conditions. It would have been fucked up to extend coverage but exclude any neurological conditions from my kid, but the actual outcome was worse: they were under the law entitled to withhold any coverage.
It interacts badly with insurance being offered as workplace benefit. If you quit or lose your job, you'd lose your health insurance. And any plan you signed up for after that would then treat you as "pre-existing embers" and expect you to pay accordingly. The bundling of health insurance with workplace seems like the healthcare original sin to me.
Obama couldn't change that, so the ACA redesigned the system to work with it. Despite being called insurance, health insurance is no longer really viewed or designed to be any kind of insurance. Instead, it's supposed to be Netflix for healthcare. You pay a flat rate, and then get unlimited healthcare. Obviously, the issue with this is that if you don't need healthcare you can just not sign up for the subscription. So the ACA tried to solve this by requiring everyone to sign up. Once everyone is required to sign up, it's not right to discriminate against preexisting conditions. It may not be an especially good system, but it is coherent.
The US is allergic to taxes. Maybe it's a marketing thing. Benefits paid for by society.
Maybe a department of Return on Investment. See what those taxes pay for. Contrast to buying private versions of the services at the same SLA or better.
It’s more that the US is more like a collection of 50 little countries, and it’s supposed to be hard to accomplish much at a federal level. That separation has eroded a bit in the last 50 years but it’s still very much a part of our political ideology.
it's bad for the person, obviously. The point of society-wide policies is not to maximize economic efficiency; they're supposed to making society a good place to live. Of course if you only look at them under an economic lens they're going to seem bad. Economically the best policy would be to kill all the sick people.
Not really, because whereas before things were bad for people with pre-existing conditions, now they are really bad for everyone.
People are paying exorbitant prices either for insurance, for routine health care stuff, or for both.
There was no free lunch, so we traded some health care for the chronically ill, for slightly less healthcare for everyone else. The insurance companies make sure it's an extractive zero-sum game in terms of actual healthcare provided.
It's a difficult fix, because the real issue here isn't who pays, but how much it's paid, total. If the cost of care in the US was the same as the cost in, say, Spain, the vast majority of people would have little problem paying out of pocket, and having just high deductible insurance for really big ticket items. At the same time, it'd be easy to have the government pay for it all. The US system is just very expensive in general, so it's a problem regardless of who pays for it.
Most of the costs are ultimately salaries to Americans, and money handed to American companies, so most savings would come from someone's livelihood. That's why we cannot reform: The party that actually cuts costs will build resentment for decades, and create a blip of unemployment. Nobody wants to do that, and therefore you aren't going to be a serious, relentless attempt at cutting costs. We've seen how the attempts that the ACA made were counteracted by consolidation at all levels.
Serious cuts have to have no mother. Say, if we ever did have an AI that worked well enough at this, and outcompeted primary care physicians. Foreign pharmacies bypassing all controls and being able to hand you much discounted drugs the day after. Telemedicine and cheap travel put together to make surgery that didn't involve an ER visit just as easy and much cheaper than using the US system. Straight out disruption, because the incentives are such we sure aren't getting improvements in regulation.
Would doctors need to make as much money if the cost of education wasn’t so high? Would they need to charge as much if they didn’t have go have a staff to chase down payments from patients and deal with insurance companies?
Not to mention that because of Bush, the government is not allowed to negotiate drug prices.
Costa Rica is a beautiful country. But it is in no way “first world”.
It has no military, and is effectively dependent of the US and in best cases neighboring countries. It has excellent weather and soil which account for its fruits exports… and outside of some niche industry, is mostly reliant on tourism which means importing money.
I love that country and have been many times. But if it were god forbid wiped off the face of the earth, it would be sad and annoying at best.
Costa Rica has “free healthcare” / healcare from taxes because it has 5 million people, about 1/2 of New Jersey.
This isn’t some mechanism that the US just refuses to use. It’s a matter of scale. You either don’t know and should remain silent on the topic, or do know it and lack the honor to not state it.
Costa Rica purposefully got rid of its military so it could provide services. It didn’t feel a need to fund three unnecessary wars in two years.
Guess which other country has universal healthcare - China. They are just slightly more populous than the US.
> This isn’t some mechanism that the US just refuses to use. It’s a matter of scale. You either don’t know and should remain silent on the topic, or do know it and lack the honor to not state it.
China does have a military…
Maybe you should take your own advice. Every other country in the world seems to have figured this out.
Please stop spreading lies and propaganda. China does not have "universal healthcare" in any meaningful sense. They may claim to have it, but it's not something that poor people can actually access for expensive treatments. Patients have to pay out of pocket for most services.
This isn't the whole story. There's a lot of "legal" self-dealing going on where insurance companies essentially own providers and then pay the providers which allows the insurance companies to circumvent the medical loss ratios.
There are other structural issues at work that you see across US government procurement generally, Medicare just being one example.
The unit costs of doing business with the US government are higher than with private companies even after accounting for economies of scale. The US government also requires that they pay the lowest price. Consequently, unit economics are usually worse when dealing with the government than when dealing with private companies.
The maths often don't math but the law doesn't care. Most inexplicable and bizarre pricing you see related to government procurement are structural tricks vendors use to indirectly fix the unit economics across their customers while technically staying compliant with bad regulations. Everyone else who is not the government is collateral damage of that byzantine theater.
Ideally, we would all drop the pretense that the US government deserves the lowest price just because they are very large, instead letting it reflect the true overhead cost.
I'd argue it's a subsidy/incentive problem. Since every subsidy works by raising a cost somewhere which is used to subsidize a cost elsewhere, I'm inclined to believe in the Bennett hypothesis. Our government mostly subsidizes demand, and does little to incentivize productivity/outcomes. You see high prices everywhere the government funnels money: in education, healthcare, even the military - as where's the incentive to lower costs if the government is on the hook and will fund it no matter the cost?
Most insurance is funded by employers who would switch insurers if they feel they're getting screwed by them.
> So insurance companies spend more so they can collect higher premiums.
This part is still true though. Insurers want you to consume more healthcare, so they'll happily pay for your chiropractor, acupuncturist, acne treatment, and Chanel gift bag [1]. Patients are happy with their benefits. Employers are happy with increasing employee retention in a tax advantaged way. Insurers are happy with the profit. Of course, you aren't going to see much health improvement from this though.
These limits don’t apply to self-funded programs that are administered by big insurance companies (most large employers’ plans, then) or plans less than two years old (whether there are measures in place to prevent simply rotating plans often to exploit this, I do not know)
That's not why prices continue to increase. They can't just let prices skyrocket to pad their pockets. If they try, government regulators will block premium hikes, regular people will ditch them for cheaper competitors, and big businesses that pay premiums from cash will fire them for not keeping medical bills lower.
> regular people will ditch them for cheaper competitors
I love the particular irony of people who advocate for regulations then attempt refutation of free market theory for what is already unquestionably and objectively not a free market.
This seems like we need similar price caps for healthcare providers, medical equipment providers, pharmaceuticals, etc. Done just in isolation for 1 part of the healthcare industry results in this obvious bad effect.
That would break the system completely. The only reason any of this holds together at all is medical providers shift costs from one patient to another. Medicare doesn't pay enough for the care patients are provided, so hospitals charge private patients extra. If you introduced price caps either hospitals would start to go out of business or they'd stop accepting Medicare entirely.
Price caps always and everywhere cause shortages, including long queues for certain types of care. This may be acceptable but we need to understand the trade-offs when making any changes.
Electricity price regulation, at least for transmission, has been a thing for states for 100+ years and federally since the 1930s. Pipelines and railroads also have price regulation of some sort.
Monopolies, in these cases natural monopolies, can in fact exist. Look at the Micro supply and demand curves. As a general rule over those 100 years, there has not been rationing of electricity. There are natural blackouts and today an unplanned surge in demand (as happens in every industry such as chips after Covid), but generally the price regulation did not cause some kind of gas lines.
Price caps create shortages when they are the rate limiting factor, which is always the case when imposed on a free market whenever the cap is below the market price, so this is an extremely accurate statement when dealing with things like lightly regulated commodities.
Whether they would be the rate limiting factor in health care remain to be seen, since health care is highly regulated with regulatory capture, licensing, and violence enforced market manipulations. As a thought experiment, in the extreme that health care were a pure monopoly, then I could envision some price caps somewhere between cost and price where the supply curve is relatively flat on either side thus creating minimal effects to supply.
You don't need to waste time with though experiments, you can just look around at various national healthcare systems. Wherever there are price caps, certain treatments have long queues or are simply not available at all. That's why affluent Canadians often come to the USA as medical tourists and pay cash for MRI scans or joint replacement surgery. Every system rations care somehow and price caps aren't necessarily the worst way to do it so let's just be real about the consequences.
Indeed. The US has something around 4X the number of MRI scanners per capita compared to Canada. That’s an insane figure for what has become a baseline diagnostic tool.
Are those market price caps, or are those caps on what the 'single payer' in a 'national healthcare system[s]' is willing to pay? I was under the impression that in these systems, the 'shortage' was created by the fact the single payer was not willing to pay the free market rate that would clear for these services, therefore there is an undersupply of services provided to the 'single payer', not that there was usually an actual market cap.
Typically in these countries you actually can get health care as long as you pay privately yourself and don't go through the 'single payer.' A price cap would mean that no matter how much you're willing to pay, you can't pay over the cap, which is much rarer than the presence of 'national healthcare systems' that merely won't pay over the supposed soft 'cap'.
You've identified a real issue with cost-plus pricing. But there's more to it than that. Commercial insurers have to pay more than Medicare, for the very simple reason that Medicare's pricing terms are that they get a discount beyond whatever the lowest price is that you charge anyone for the same thing.
(Is it a 60% discount? No; a 150% margin has to be explained in other ways. But the phenomenon is real and important.)
The problem is the market isn’t competitive due to hidden pricing and also anti competitive aspects like insurance. The supply of doctors is itself artificially low. There is a lot more regulation needed than something as simple as Obamacare.
My understanding is that there are a number of reasons why commercial insurance companies pay more. A big one is that Medicare has enormous pricing power because people on Medicare are a huge segment of the population and also the segment that consumes the most healthcare services. Your local healthcare system can't NOT take Medicare. They're effectively stuck with the reimbursement rates that Medicare sets. On the other hand, healthcare systems have a ton of power in their local markets. A healthcare system can afford to not be in network for a particular insurer, but if that insurer loses access to the biggest healthcare system in a particular market, it can be devastating for them. A major employer is not going to be happy if their executives have to all change doctors because the big local hospital system is no longer in network.
>So insurance companies spend more so they can collect higher premiums. That's how they make more money. >
If this is correct, then how come there are so many complaints about insurance denying payment for healthcare or the hoops they make patients and doctors jump through for pre authorizations?
If the path to more profit was spend more money, then there would be no reason to question a doctors’ orders? Nor threaten doctors and hospitals with leaving the network if they don’t agree to lower prices?
Yet, one often hears about so and so plan will not have so and so hospital system in network unless they come to an agreement.
> If this is correct, then how come there are so many complaints about insurance denying payment for healthcare or the hoops they make patients and doctors jump through for pre authorizations?
Because those anecdotes get reader and viewer engagement. Charts comparing how much U.S. insurers pay on average for common procedures compared to, say, the UK NHS, don’t drive forward the narrative.
You should interrogate the media sources you consume and ask why you’re fed so many stories like that, and investigate what the real data is. A few years ago my friend got a continuous glucose monitor for Type 2 diabetes. I looked at the coverage polices for continuous glucose monitoring (for Type 2) for my insurer and some of the other big ones. Turns out that most US insurers, Medicare, and Medicaid in 45 states+DC cover continuous glucose monitors for people who have type 2 even those that don’t use insulin. At the time, most Canadian provincial systems didn’t cover the technology except for Type 1 or people who take insulin. UK NHS was worse, covering it only for Type 1, or Type 2 with certain conditions (such as you’d otherwise need to do 8 or more pin prick tests a day). https://www.diabetes.org.uk/about-diabetes/looking-after-dia...
You should take your own advice and widen your media sources.
Yes, you only get a continuous glucose monitor for free if you really need it on the NHS. If you want one otherwise you need to spend $100. It's not going to bankrupt you.
That’s the price for one monitor You need to buy a new monitor every 10-15 days. And your point about my media sources doesn’t make sense. As stated, I researched the coverage of continuous glucose monitoring because my friend got prescribed one.
The point isn’t that the UK NHS should cover CGM. I think they shouldn’t; it’s a waste of money unless you really need one. My point was about why the media pays so much attention to denials of coverage while you don’t hear about the over-coverage. You can’t go by the anecdotes. Talking about insurance covering unnecessary procedures doesn’t generate clicks.
Complaints about denied claims or prior authorization requirements should generally be directed at employer HR departments. Most HN users in the USA probably have employer-sponsored group health plans, and often those are self-funded where the insurance company doesn't actually bear any risk but just administers the plan. Commercial insurers would be happy to sell plans that pay every claim that comes in at 100% with zero denials. It would be less work for them. But naturally employers don't want to pay for that, so the HR departments have the insurance carriers impose more restrictive coverage rules to hold down medical expenses.
> Commercial insurers would be happy to sell plans that pay every claim that comes in at 100% with zero denials. It would be less work for them. But naturally employers don't want to pay for that, so the HR departments have the insurance carriers impose more restrictive coverage rules to hold down medical expenses.
This is not my experience as a buyer of health plans on healthcare.gov, or as a buyer of health plans as an employer (where the employer is not self insuring). The prior authorizations and denials happen all the same.
Additionally, the premiums are the same between employers’ self insured plans and healthcare.gov plans, so the coverage must be similar.
>In 2024, individual market insurance premiums averaged $540 per member per month, slightly below the average $587 per member per month premium for fully-insured employer coverage.
The idea that health insurers can simply spend more to earn more is not passing the smell test.
Your experience is irrelevant. Insurance carriers have some standard default policies but they'll write whatever custom policy that a group buyer is willing to pay for.
> Commercial insurers would be happy to sell plans that pay every claim that comes in at 100% with zero denials.
And yet I have never seen one of these after buying insurance in 3 different states.
Again, the grandparent claim was that insurance companies can increase profits simply by increasing their expenses. Yet there is no evidence of this, and the fact that everyone has to deal with approval and denial of healthcare coverage means it cannot be true.
You're really missing the point. Have you ever been in charge of employee benefits for a large group buyer? Obviously such plans aren't available to individual consumers but commercial carriers will absolutely customize products for larger customers.
It's easy with hindsight to believe you could have capped expense at 200% medicare but getting what we got passed was nearly impossible at the time. Before Affordable Care Act, insurers had every tool available to deny care, maximize profits, and skim more than 20% off the top. It's great we're getting closer to the point that it feels to you like incompetence that these things aren't fixed today but your anger with the medical lobby is clearly misplaced here.
Every major piece of legislation needs revisions to chase circumvention and we're well past due on updates but no legitimate bills have been presented that cover these topics and that's not a one-party issue.
Private insurance companies still do not cover pre-existing conditions. How? By not writing insurance to individuals except during ACA open enrollment. I know this because I tried to get private insurance before going to Mayo Clinic, because my ACA insurance with Ambetter was out of network. When I got through to an insurance company sales person for individual coverage, they told me they don't cover pre-existing conditions for 6 months. When I challenged them and said that's illegal, they hung up on me. Most companies I called had a phone menu that, when I pushed the buttons for individual coverage, would lead me into a loop, hang up on me, put me on hold forever, etc. They simply won't write individual coverage outside a couple of months at the end of the year. This effectively allows them to not cover pre-existing conditions, at least for individuals. For company employees, yes, the coverage of pre-existing conditions is a win.
I ended up paying $12K to Mayo for a week of appointments. Private insurance, if I could have gotten it, would have been at least $1000/mo for premiums (in 2020) plus $10K deductible, so I actually saved money just paying Mayo instead of getting private insurance.
IMO the only reason insurance companies allowed the ACA to pass was the stipulation that everyone in the US was required to get insurance coverage or face a penalty. When the Supreme Court ruled that provision illegal, I'm sure the insurance companies were furious that they were duped.
That's how it was supposed to work though? There's an open enrollment period where anyone can sign up, pre-existing conditions or not. To prevent the adverse selection problem, which is where you don't sign up for insurance until you have a condition and then cost the insurance company a lot of money, you can only sign up at that time.
The thing you're trying to do - sign up for insurance to cover a specific procedure - is quite literally what the system is designed to prevent. You're supposed to have insurance all the time or none of the time. Did you try asking the clinic how much it would cost if you are uninsured and paid cash?
Your story is missing some pieces. Why didn't you sign up during ACA open enrollment? Those policies absolutely do cover pre-existing conditions. But not every provider organization will be in network for every health plan.
>Private insurance companies still do not cover pre-existing conditions. How? By not writing insurance to individuals except during ACA open enrollment.
Sorry I'm struggling to follow here. You think the open enrollment period effectively means that there's no prohibition on pre-existing conditions? Think you're kind of bending words outside of their normal usage because quite literally pre-existing condition policies are banned. The compensating counterbalance is a neutral open enrollment period so people don't just jump when they learn they have a health problem, it's a compromise to ensure financial sustainability.
You do understand that before this, it was worse right? One comment after another here is comparing the ACA to a magical fantasy, rather than the status quo that it improved upon.
It’s probably the single worst decision of the entire bill and one of the largest wealth transfers in history.
If you tell me you’re going to light your house on fire and then ask me for fire insurance, I should be able to say no.
Instead what we have is not insurance, but the world’s worst socialized health plan. Insurance is for managing tail risk, not for distributing the cost of healthcare. If we’re willing to pay a tax to subsidize the elderly, we should cut out the middleman and let the government fill that function.
Obamacare was totally subverted by the medical lobby during its creation. They had a lot of great ideas but there were way too many politicians in Congress who had sold out to the lobby (Lieberman, Baucus on the democrat side) and would block anything that would reduce cost.
And since then it has been a fight for survival without much chance for improvement. The republican refuse anything that could improve it but want to “repeal and replace” but are struggling a little with the “replace” part. And the democrats are too timid to make another push.
So we end up with the worst of all worlds. Super expensive, overall results not very good and super complex.
It was the best they could do to get 60 votes because universal health care was too radical even though every industrialized country in the world does it.
Obama had nothing to do with what's in the ACA. It was ideas from moderate Republicans (previously prototyped in Massachusetts under governor Mitt Romney), advanced on the basis that it would receive bipartisan support as a result. But it didn't, so it was heavily amended until John McCain provided the last vote to get it through.
It's almost as if no healthcare legislation gets passed before private insurers have figured out how to extract shareholder value.
(Which makes the system worse. The fiction of a fiduciary responsibility to extract top dollar from a business regardless of consequences is the opposite of "capitalism". Which derives its name from the practice of sound investment to build something of lasting value.
To say nothing of the social deviance of for-profit healthcare.)
I remember consulting for a healthcare company in .... 2003. Very short assignment so I never got deep into it, but anyways my consulting company made me read up an in house guide about ALR and MLR (Administrative or Medical Loss Ratios). Obamacare or not, such constraints already exists. Maybe they varied by state, maybe there were other loopholes such as not supporting pre-existing conditions, but IIRC there were restraints on pure profits, so even then the same perverse incentives existed. More revenue you can get more profits.
I am going by very old memory of a few days/weeks of work, but it will be good for a medical system historian to chime in.
Firey take, but health insurers are not the problem they are made out to be. They're on your team and benefit from lower prices just as much as you do. They don't make any money either, don't argue with me, buy their stocks if you are so convinced and see how that goes over.
Health care providers carry immense blame. It's full of passionless people in it for the outsized paychecks, who once inside will just seek whatever local minimum to stay employed.
Having worked in medicine, I agree about providers. People who probably got in it to help people burn out immediately and become like the rest of us looking for the best paycheck with a tolerable workplace.
Insurance companies make plenty of money though. Cigna makes $7-8B per year and pays a decent dividend.
This is a comically uneducated take. Talk to a nurse and ask them how their week was. Then talk to someone at an insurance provider. The ask how much each makes.
Exactly, ask anyone in a job for the money how their week was.
Not saying nursing is stress free, or every nurse is bad, but like tech companies in 2021, it's full of directionless people who pushed through the cert program to get paid $50/hr with $100/hr weekend shifts and be disgruntled with you that you are making them do work.
> health insurers...'re on your team and benefit from lower prices just as much as you do
You're missing a very, very, very important piece here.
Which is that the lowest price of all is to deny treatment entirely.
They are not on your team, they are the opposite team. Their revenue is basically fixed, at the level of your premiums. But the more health care they pay for you to receive, the less profit they make. That's just arithmetic.
This is why there are so many horror stories of people being denied necessary treatment, or having to fight for months and years to get their treatment actually paid for. Insurance providers are incentivized to do their absolute best at taking your money and then not paying for care, through every sort of technicality and "mistake" and arbitrary judgment and limit they can come up with.
The several+ times in my life I've had to sort out billing issues, the health "insurance" agents have been helpful and friendly, stating what bills should be in no uncertain terms, even offering to conference call with billing departments to get things resolved, etc... Meanwhile provider billing departments routinely try to defraud me, even going so far as to bully me to pay those fraudulent amounts, don't follow up on things (eg filing claims) that are their responsibility and that they've said they will take care of, and generally make their problems into my problems.
This certainly isn't a defense of health "insurance" companies though! I just think they're better modeled as Lovecraftian horrors animated by paperwork and compelling the creation of ever more paperwork to feed on, rather than money-grubbing cheapskates as the pop-political narrative goes. And the approaches for fixing one are much different than the approaches for fixing the other.
If health insurers are on my team why do they blatantly lie about their network coverage to me? Why do they list providers as in-network, when the providers consider themselves out of network?
Why aren't the executives of these insurers shilling ghost networks not in prison for mail fraud?
> Japan spends ~$5,790 and has the highest life expectancy in the OECD
Is Japan's life expectancy because of its healthcare or culture? I'm pretty sure Americans would not live to the same age as Japanese even with Japanese healthcare because of our low nutrition high sugar diets...
Life expectancy is not a useful health care system comparison because the primary factors that cause divergences between developed countries aren't based in the health system --- they're things like traffic accidents, homicides, drug overdoses, and suicide. Yes, CVD will appear in that list of factors, but it's noisy; despite having structurally the same health care system, states in New England will have Scandinavian CVD outcomes while southern states (some of whom actually do a better job than New England at making care available) have developing-nation CVD outcomes.
As a European I would think a large part of the problem is that Americans are just sick more seriously and often. Your car culture, quality of food, and general preventative healthcare accessibility seem all terrible there. The prevalence of obesity in younger population is staggering. In my (engineering) programme I see one very obese person and a couple fairly overweight, but that's about it.
Author here. The 254% figure comes from RAND Round 5.1. I built a Python pipeline on CMS HCRIS cost reports (FY2023, 3,193 hospitals) to compute cost-to-charge ratios by ownership type. The surprising finding: nonprofit hospitals have a median markup of 3.96x actual costs. All scripts are in the repo. Happy to discuss methodology.
I like this. It'd be great to see such a table of the key issues with proposed solutions, to highlight how the waste isn't an insurmountable impossibility to solve. Having said that, federal lobbying by the healthcare industry was $750 million in 2024 [1], and this is the blocker that needs to be addressed first to be able to enact change.
We rarely discuss the primary source of health care cost differences in the United States -- US doctors get paid a lot more than elsewhere. I haven't seen a credible proposal to address that. Most of the salary difference can be blamed on deliberately created shortages of doctors in many specialities. Not enough medical school slots (horror stories among my kid's friends of not getting accepted) and then also shortages of residencies that allow foreign trained doctors to work in the US. The only change in recent memory is replacing some primary care physician services with nurse practitioners.
I really don’t think doctor salaries are the primary difference when they make up less than 10 % of health care costs:
> However, new research by Stanford health economist Maria Polyakova and colleagues — using unique data on physician income — shows that physicians’ personal earnings account for only 8.6 percent of national health-care spending
That’s the thing about American health care costs. We pay so much more than everyone else, but there’s no obvious single thing that costs more, or even a few factors together. It’s a ton of different things all adding up. Which means it’s very hard to fix, because there are so many different things you’d have to fix.
Idk why but I feel the need to add an empty “co-sign” comment. It is 100% this and I have so many stories from friends who are doctors and nurses that back up every detail.
One note: the doctors won’t agree or want to hear this, as they too are human, but listen to how they talk about nurses. Hit me once I had both a CRNA (advanced nursing degree in anesthesiology) and an anesthesiologist friend
Edit: glad I did add an empty cosign, right after replying, the parent is now downvoted to gray. And gets it much, much, better info than any other comment, and I read all of them. Last thing I’ll throw out to back it up is, check into who decides how many seats there are at med schools. Can’t remember the exact name but it’s basically the doctors union / professional organization. AMA?
Unregulate the insurance industries problem solved. Let people actually buy insurance for it's intended purpose. No insurance company would pay these rates willingly, they do it because of all the regulations. They aren't allowed to profit normally, so they find ways around it. Just let them operate normally, like all sorts of other insurance programs.
I think the problem is the system is designed to inflate what is being done to the point it's barely affordable. This new treatment requires more equipment and time? No problem, it's x% more effective, so it gets rolled out. And as medicine expands, the opportunities to make it marginally better also increase.
If what we defined as care was constant, it would get cheaper over time. But it doesn't stay constant.
This is an interesting way of presenting a topic, I like it. Especially if it’s got included datasets that allow others to mess with said topic. I don’t want to suggest bloating it up with any complicated UIs, but a Jupyter notebook could be nifty. Maybe not for this specific topic, but other data-heavy subjects.
Does anyone here remember how health care was delivered before medicare and medicaid was enacted in 1965? It was not pretty. Prices were low then because it was all private pay and charity. Why do you think so many hospitals are named after saints? The church made a significant contribution to running healthcare. But when the govt got involved in 1965, the MBAs started salivating. Now we have a system that is built around govt style procurement that we cannot afford. As our population ages, as salaries continue to remain flat, we will have hard choices to make.
There's so much culturally different here that blaming just the differences in the system of health care is effectively meaningless.
Yearly physical exams are much more thorough in Japan. Unless you are optimally fit, you will be prescribed lifestyle changes to make and there is a strong expectation that you will work hard on these. Your employer will be involved. There is _tremendous_ social pressure if you are overweight.
Healthy food options are ubiquitous there with healthy and cheap meals available 24/7. Combini food certainly has bad options but nothing compared to American fast food or the American diet generally.
There are other health problems that are significantly overrepresented in Japan compared to the western world. Alcohol, smoking and stress-related illnesses. Liver & Kidney diseases. Peptic ulcers, GI problems in general.
As a non-American, I find it interesting that so many comments in the thread insist that "No, American healthcare is not that expensive compared to that of other countries; no, the costs of the American healthcare system are not high due to greed and capitalism; and no, the American healthcare system cannot be cheaper or better, it is not perfect, but it works as it is."
As an American, I think most of my countrymen's arguments on the subject resemble something like "learned helplessness". The "healthcare system" is craptasm of kludges that each partly counter the fundamental irrationality of rapacious private healthcare but introduce their own idiocy. So the arguments and "ideas" involve this already dumb measure needs to be changed in that half-assed fashion. A few election cycles ago, an old woman was quoted saying "get the government out of my medicare [medicare is a state program, for foreigners trying to understand this stuff]"
For a country that prides itself on CapItAlIsM, U.S. healthcare is the farthest thing from it.
- Doctors and hospitals don't compete on price
- Prices aren't just opaque, they are unknowable
- Shopping around is not possible
- Insurer incentive is to maximize billing (cost). They pass along cost as increased premiums to an employer. Employer passes along increased costs to employee as below-inflation wage increases
If you ever want to "sanewash" healthcare spending in the US, this random guy stood up an entire website to argue that per-capita healthcare spending in the US is more or less in line with expectations based on per-capita income:
TL;DR: As people/countries get richer, a larger share of their money goes towards consumption. It's not just that Americans pay more for the same procedures (sometimes they do, sometimes it's just sticker prices) but we consume more healthcare the more money we make. So it skews costs up disproportionally. That wealth also enables chronic health and lifestyle problems that are expensive in their own right.
I'm not sure I'd buy the theory entirely, but it's very well argued and as a null hypothesis it makes a lot of sense.
My personal experience is that people in the US feel much more entitled to consume medical services than people in the country I came from (UK). They are richer, but there's a cultural difference too.
I recently travelled to Vietnam for dental work, it's really shocking how easy to it to shop around when dentists actually publish their price lists online for easy comparison/perusal. In my native country, dentists rarely if ever publish prices online, and it's hard to get prices over the phone.
If hospitals could be forced to publish price lists, it would be game changing, allowing patients to shop and compare quality/prices.
In the Netherlands dental service prices are set by the government [1]. Under 18 are universally covered by basic health insurance; for adults average dental for regular work + emergency is 30/month.
But at a consumer level it's still quite difficult to predict what your total out-of-pocket expense will be for the same course of treatment at two different facilities.
Oh wow. Appreciate the correction. I wonder what improvements in price transparency Trump has in mind. Perhaps it's that website in the parent comment.
This is a believable result. Meta-analysis is 141-259% [1].
Three reasons:
1. Medicare has quasi-monopolistic negotiation power that private insurers can only dream of -- Medicare spend two-thirds of all the private insurers combined. That's why private insurers would combine in a heartbeat if the FTC allowed it.
2. Moreover, that Medicare volume is concentrated in a specific segment of the market. If many providers dropped expensive United contracts, the insured people/companies might move to a new insurer. But Medicare's base will never leave.
3. Since Medicare covers older individuals, often on a fixed income, there is natural discriminatory pricing. (Think of the "senior discount" at your local entertainment venue.)
Also, commercial insurers are essentially cross-subsidizing Medicare: the higher revenue from commercial insurers is partly why Medicare can be paid less. Similar dynamics exist with drug prices: the high US cost is a cross-subsidy to other countries. Maybe this is good (someone's got to fund R&D), maybe this is bad (it's a net wealth transfer to the elderly), but it's an important part of the dynamic either way.
The cross-subsidy argument is one hospitals use to justify high commercial rates: "Medicare underpays, so we have to make it up on commercial." The HCRIS data lets you test this. If cross-subsidization were the full story, you'd expect cost-to-charge ratios to be tight — hospitals would charge commercial just enough to cover the Medicare shortfall. Instead, the median markup is 2.6x across all hospitals, and 3.96x for nonprofits. That's not cross-subsidy. That's pricing power in a concentrated market.
If you want to understand the hidden cross-subsidies in the US healthcare financing system then a good place to start is the book "The Price We Pay: What Broke American Health Care--and How to Fix It" by Dr. Marty Makary.
Look at hearing aids. 50,000% markup or higher, even up in the 70k% range in some examples. Old people don't know what to be skeptical of, or at least haven't been nearly skeptical enough, and some industries are getting away with terrible exploitation, all blessed and sanctioned by the FDA.
Thanks for the meta-analysis reference. The 141-259% range tracks with what I see in the HCRIS data. The variance across hospitals is enormous — even within the same bed-size category, the P75/P25 ratio for cost-to-charge is 2.5-3.4x. Hospitals in the same peer group are charging wildly different amounts for equivalent services. All the scripts are in the repo if you want to dig into the hospital-level data: github.com/rexrodeo/american-healthcare-conundrum
I recently had a preventive CT angiogram and the cash price was $500 and the price with insurance was going to be $1000. The system we are in makes no sense at all.
Not to hold the commercial insurers' balls here, but if I were a doctor, I'd probably demand more from them. The patient age distribution is not uniform. Most patients are going to be old. If medicare gives me peanuts, I just have to deal with it, for if I don't accept whatever crumbs medicare sends my way, I no longer have a practice. If a private insurer tries to throw me peanuts -- especially when that insurer's customers only make up a percent or two of my practice -- I can easily tell them where to shove those peanuts, so they had better pay well.
Agreed. As a spouse of a specialist doctor in the US, average folks don't include doctors when they blame the exorbitant prices of the US healthcare. Sure, big pharma, insurance companies, hospital admins and everyone in between play a part in this big profit-making machine.
But doctors (a lot of them, not all) are complicit in this healthcare complex. American Medical Association is one of the top lobbying groups in D.C. They gate-keep the production of US doctors artificially low by making the candidates go through longer years of education (4 years of college before another 4 years of med school is an overkill for most doctors) compared to other developed nations, resulting in high compensations for doctors AND longer wait-time for patients (due to doctor shortage). They also put up regulation barriers and it requires a lot of certification and exams to become a doctor, so whoever becomes a doctor has the best interest to keep the system (status quo) going.
Average US doctor gets paid a lot more than their counterparts in other developed nations.
The AMA may cause some problems but you can't reasonably blame them for this one. They are not a regulatory or accreditation body. State medical boards control provider certification. Some universities have combined BS / MD programs that cut education time down to 6 years.
Doctors are motivated, intelligent and sometimes self-interested. By no means are all of them against it but like any party there are plenty who unabashedly oppose increased accessibility to their profession in favor of increasing their own value/pay.
No debate about the viability of Medicare-For-All is made in good faith, at this point. The only valid debates are about implementation. No one should entertain any move conversations about whether we should go to a single-payer system, only how we should.
Why? I’m in favor of reform and making our system more like other developed nations. But single payer isn’t the only way it’s done, not even the most common way.
The US' refusal to move to a single-payer system, while refusing to accept a world where poor people just die if they can't afford healthcare, creates a lot of deeply weird side effects.
Daily reminder to always check data definitions before interpreting statistics.
According to the OECD data, US 2023 healthcare spending was 28% by the government, 55% by private health insurance, 11% out of pocket, and 5% from other sources. OECD lists all US private health insurance policies under the "compulsory health insurance" heading. Apparently because there is no clear separation between compulsory and voluntary insurance, and because employer-paid insurance is not truly voluntary when it exists. (Because there is usually no option to take cash instead.)
And then the chart you linked to combines compulsory insurance with government spending. Mostly because if compulsory health insurance exists in an OECD member state, it is usually legally mandated, regardless of whether it is provided by public or private entities.
I think this is a political and economic problem rather than a technological one.
I cannot think of a more important skill than surgery to continue training humans to do and to be wary of AI robotics replacing. Sure, some surgeries could likely be automated, but the entire point of specialist surgeons is to make choices and act in a timely manner in ambiguous situations with extremely high stakes.
What happens when the robot messes up? What happens when the internet is down, or the hospital is operating under abnormal circumstances? How do you teach, train, and collaborate with human medical workers and caregivers in a world where surgeons have been replaced by robots?
Most of the excess costs for healthcare and surgery aren't the humans doing the work. I think there's a lot of other areas we can optimize first, chief among those in healthcare being the cost structure around private businesses and insurers bloating the bill with administrative costs. There's a reason every other developed nation has a single-payer healthcare system and better outcomes, and I don't think an AI breakthrough is the only plausible solution to improving costs in the US. In fact, under the current system, an AI breakthrough in medicine would likely hurt the workforce more than it would improve costs.
2/3 of the costs are already wasted. Even if your robot is cheaper, the provider will hire more lawyers, admins, facilities staff, etc to keep the budget growing. Prices have been going up 15% yoy for 20 years do you think that will stop?
The problem, though, with going after pharma costs, and pharma benefit managers is that pharma is a relatively small component of overall spending; it's less than 10%. That is to say, you could make all pharmaceuticals entirely free, and we'd get at best a 10% discount on what we pay. I don't think any of us would be satisfied with that!
This is data from the most recent (as of last year) CMS NHE:
https://nationalhealthspending.org/
No comment on drug pricing and its incentives, the existence of America's prescription drug markets drives the new innovative drugs that the rest of the world picks up for cheap.
I think if we dig into the numbers we're likely to find those effects, even if we maximize them, are marginal, unless we do other structural things to untangle the provider pricing system and do price transparency. Like: you could posit a material impact on CVD costs by making statins more widespread, and that should make a dent somewhere, but I don't know that CVD costs in non-Medicare-insured patients are really that big a line item, and non-Medicare is important here because people already Medicare-qualified generally have all the statins they want already. Meanwhile, providers are still ripping patients (and insurers) faces off for shoulder impingements, stents, and spinal fusions.
It's a super interesting comment. Thanks!
That's the ludicrous propaganda that you've been fed but you really should be intelligent enough to dismiss it.
The world would get along just fine without you overpaying for your drugs. You pay for marketing costs.
One underlying, perverse incentive behind many of the problems is that insurers are regulated based on percentages of spending rather than total costs.
The US passed laws meant to limit marketing and overhead that tied insurers economics to the size of the overall medical bill... which means as healthcare spending rises, the dollars they’re allowed to retain can rise too, which basically means they're incentivized to drive costs up rather than down.
Here's a link to the book: https://www.helmpublishing.com/products/an-american-sickness...
The difference in life expectancy will be influenced by multiple factors and may have more to do with diet and lifestyle than with healthcare.
Japan also spends less per capita than the UK, France or Germany. The US spends a lot more than any of those so the US system is bad value for money.
Put another way, in both countries a hip replacement surgery is almost exactly 1/8 of someone's per capita GDP.
So the USA is still significantly more expensive as a portion of actual income. “GDP per capita” is a relatively useless figure
So that's about 6% of the difference? I'm not immediately saying no, but it sounds like that's not the real problem.
These have to be purchasing power adjusted.
The median equivalised household disposable income of a US household is over twice that of a household in Japan.
This is one of many reasons why it’s so misleading to compare prices across countries in a vacuum. All of the people doing the work for those education, transportation, and other services and all of their inputs aren’t going to work for Japan-equivalent pay when they’re living in the United States.
PS: Outcomes here are not worse than those of rich people in the US, because I know some idiots will claim this to cope
https://jamanetwork.com/journals/jamainternalmedicine/fullar...
Both historically had private hospital systems, and just so happen to implement pension/employer-based insurance programs very early on. German's just evolved in one direction and the US evolved in the other.
And no, we didn't had a historically significant share of private hospital systems, those came with the introduction of the DRG System, which forced many city/church owned hospitals into privatisation.
Before that, they had a "Fixed Price per Night" System, which also was a bit stupid, before that they got reimbursed their cost.
Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider.
In 2021, the U.S. spent $1,055 per capita on healthcare administration, while the second-highest country — Germany — spent just $306 per capita, Japan is $82. https://www.pgpf.org/article/almost-25-percent-of-healthcare...
Administrative spending accounts for between 15% and 30% of total medical spending, with lower estimates covering only billing- and insurance-related expenses, and higher ones including general business overhead such as quality assurance, credentialing, and profits. https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/
The Center for American Progress estimates that health care payers and providers in the United States spend about $496 billion annually on billing and insurance-related (BIR) costs alone. https://www.americanprogress.org/article/excess-administrati...
The time burden on physicians is staggering — estimated at $68,000 per physician per year spent dealing with billing-related administrative matters. https://www.pgpf.org/article/almost-25-percent-of-healthcare...
Healthcare providers try and combat all this by literally just making up pricing and trying to negotiate something while also having bloated administrative structures that raise costs for all.
Nothing about the current state of the healthcare system makes much sense to anyone that tries to peel back the onion.
I'd offer a slight tweak. None makes sense in a vacuum or solely considering efficiency. It all makes sense seeing the evolution over time and the misaligned incentives.
There’s plenty of arguements about waste and executive compensation but when I was a healthcare CFO we had our financials separated where I could see individual hospital performance and all the executive/corporate stuff was separate and it still was an issue as basic capex was hard to keep up with in a hospital that had a low % of commercial patients.
But Medi care was right with the commercial insurers on reimbursement.
Medicare is as I described. Every specialty and procedure has its quirks though, some even make a killing on Medicare and not commercial but the hospital kind of represents a portfolio and the overarching economics in aggregate favor the commercial insurance. I’m guessing your wife’s specialty had decent Medicare rates but it’s not always true.
There’s even some private insurance which is effectively Medicare that has different reimburse ranges (Medicare advantage plans).
Executives like to lament the lose money on Medicare but I never really saw it that way. If you look at it isolated, sure it’s true. But if you look at it as a portfolio where your fixed costs are covered by another cohort, then it’s a huge volume to add and make money at the contribution profit line. You just have to be careful not to run fixed costs as a percentage of total revenues or something like that. The extra volume Medicare brings to a hospital or network of hospitals also has tremendous negotiating power for pharma, medical supplies and devices, etc.
Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money.
Several doctor friends have told me this as well.
As such, as light of an incentive it is - it’s the only party in the entire system that is incentivized in any way whatsoever to keep costs down.
Insurance providers also rarely operate at the full freight 20% either way though. So they are at least at this time incentivized to control costs at some level since every dollar saved is a dollar added to the profit line. Otherwise they would not be known for denying claims so often.
This is ignoring a whole lot of very important complexities as well - such as self funded insurance plans that most major companies utilize. There the insurance company is simply a plan administrator getting paid the same either way.
It’s one of those tropes that has a source of truth behind it but the actual reality is far less satisfying of an answer. Makes for great sound bites and ability to shut down further thought on the subject though. The uncomfortable truth is that there is no simple fix and no one bad actor that is the cause of all the insanity.
So if United is the insurer they’re owned by an umbrella, that umbrella takes 20% or less. However United makes special deals and steers people to providers owned by the Umbrella. So that the Umbrella makes more money as well. This is true for medicine as well. For example Cigna requires all maintenance medication be purchased through express scripts as a means to retain or increase profit.
United has a history of also squeezing organizations by forcing them into pre-payment review when they’re high volume. This causes the providers to basically not have no revenue for months on end until it gets sorted. Then they might get a chunk or settle out of court. Often they go bankrupt and are purchased by the umbrella.
In terms of Medicare/Medicaid another catch-22 is that insurance handles the claims for providers. The insurance can recode claims and pocket the difference without telling the provider. It’s on the provider to catch it.
There is a tremendous amount of dark money, shadow games, hidden corporate structures, Wyoming and NM LLCs with Anonymous owners, etc.
Insurance as a whole tries to own the entire feedback loop for healthcare. They don’t like you going out of their feedback loop.
>For example Cigna requires all maintenance medication be purchased through express scripts
Important note: Cigna owns Express Scripts. Today the biggest "insurance" companies are actually massive conglomerates that own the clinics, the doctors and the pharmacies. United = Optum. Aetna = CVS + Caremark. Humana = CenterWell. Elevance/Blue Cross/Anthem/Carelon. Centene = Envolve
Once a giant like United gets big enough in a city, say ~40% of the population, they lower the reimbursement rates for independent doctors and if the doctor refuses the contract, they are kicked out of network and lose 40% of their patients. Go bankrupt or sell to Optum.
Digi is also right about Medicare upcoding. It is a well-documented $$billions scam where Medicare Advantage insurers comb through patient records to add diagnostic codes making the patient look sicker on paper than they actually are so the government pays the insurer a higher flat rate for that patient.
Insurance as standalone entities are not much better or worse for total cost than these giant vertical monopolies. At least yet, thy are only recently becoming large enough to truly put the screws to people. Because insurance was not all that profitable made it prime targets for these sorts of shell game shenanigans.
It’s basically the point I was making. Fixing “insurance” isn’t a fix at all because the problem is far greater than just that layer of the onion. Costs are hidden and embedded and cross-subsidied to the point no one can unwind it without burning the entire thing to the ground. It’s grift from bottom to top. Aside from a few poor souls actually at the ground level who are still true believers trying to provide service to patients. And a lot of those are burning out. I think out of the 5 or 6 medical doctors I met while they were in medical school, only one is still practicing. They would now be late 30s to early 40s and in theory at the prime of their careers. Instead they got out as soon as medical school debt was paid off and moved onto other less stressful things. Another hidden cost in the shit-tier system rarely talked about.
I’m simply pushing back on the idea that the 20% medical loss ratio is the source of all (or even most) issues for the cost of healthcare or why insurance sucks so much to deal with. It’s nearly irrelevant.
The surprise was nonprofit hospitals: median markup of 3.96x actual operating costs, versus 2.39x for for-profit and 1.87x for government hospitals. That's hard to square with the narrative that nonprofits deserve their tax exemptions ($28-37B/year) because they serve charitable purposes.
On the self-funded employer point — you're correct that self-funded plans have more negotiating latitude, and thousands of them already use reference pricing (capping hospital payments at a percentage of Medicare). That's actually the policy fix this analysis proposes. Montana Medicaid implemented it and saved $47.8M. The question is why it isn't the default.
That’s only half the story though insurance companies also try and reject way more claims, cover fewer people, and are just harder to get money from than Medicare.
This means hospitals can’t afford to give them cheaper rates as they just require vastly more work from staff for the same procedure.
The industry isn’t blind to this effect, but has little reason to change.
Private insurance subsidizes Medicare and Medicaid even after you add in admin overhead.
https://relentlesshealthvalue.com/episode/ep502-how-some-pre...
Also, I'm not going to trust a podcast owned and operated by Stacey Richter, who also just so happens to be the co-president of Aventria Health Group and QC-Health.
These are synonyms for having higher overhead, right? If you pay a billion dollars in claims with ten million dollars in administrative costs then your "administrative overhead" is 1%, even if half the claims are fraud. If you increase "administrative costs" to a hundred million to get rid of the fraud, in practice you just saved 410 million dollars but now your "administrative overhead" is up to 20%.
The ideal long term strategy is to drive everyone’s costs to go up slowly over time slightly faster than inflation. Adding administrative burden to medical institutions is a perfect way to achieve that, but clearly that never happens…
There's a common, misleading, claim that Medicare is more efficient because they spend far less than commercial insurance on overhead like claims processing. This claim is true. But the impression that it gives is absolutely the opposite of reality. The reason that Medicare doesn't spend as much on admin is that they offload all of this work onto the providers. Every hospital in America has a "Medicare Reimbursement" team. A moderate-sized hospital is going to have something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid. And that's a lot more work than just filing the right forms for each case. There's a ton of additional work. Each spring they have to file a HUGE "Medicare Cost Report", requiring a couple of months of work to get all the data in place for it. (Source: my wife was "Director of Reimbursement" at various hospitals for quite a few years, before going into consulting.)
That Medicare Cost Report that I mentioned is, beyond a huge effort sink, the source of many other evils. Because of the amount of work that's needed to gather and collate all this data, hospitals naturally structure their Accounting around the way Medicare wants them to report. The thing is, that's largely orthogonal to the way a rational person would do cost accounting. The result is the common criticism about how widely varying the cost of a given specific line-item is between hospitals: they don't really know how much a given procedure costs because that's not how they track their expenses, so they apply some allocation heuristics, and every hospital does that a bit differently.
There are also various perverse incentives in the system. For example, Medicare is smart enough to know that it costs more to deliver care in NYC or SF and so forth. Every locale has a Cost Index that scales how much they expect to need to pay. This leads to hospitals needing to show that their expenses are higher so they should be classified into locale X rather than neighboring locale Y.
Another one my wife told me about her hospital: Medicare realized that a lot of UTIs were hospital-acquired, and they rationally said that they would no longer pay for UTI treatments unless the hospital could prove that they were not hospital acquired. Well, maybe that wasn't rational, because with Medicare/caid being such a huge portion of their business, they changed their policy to test for UTI for everyone at admission, so that they could furnish the proof demanded. Think of all that wasted lab work...
So no, Medicare is NOT more streamlined and efficient. It's absolutely, 180-degrees, the opposite of that.
> something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid
2FTE’s vs what?
The question isn’t is this free, the question is how large is the total staff including price negotiations, doctors, and IT time spent handling billing issues, and is Medicare more or less than 50% of the total.
I am ware of one hospital and 2 medical clinics where the difference is very much in favor of Medicare.
versus nothing. Hospitals don't have to maintain a whole team for UnitedHealth, or for Anthem, etc.
This is my point. Medicare cooks the books to look more efficient by offloading their administrative costs onto providers. Other payers can't do that because, even if huge, they don't operate at the same scale.
Think about it: we often hear on the news about disputes about contracts when a local hospital's agreement with some insurance company comes up for renewal. They play hardball, getting local news to run stories on how many people will be affected if they can't come to terms. But you'll never hear this in the context of Medicare/caid. Hospitals have leverage to negotiate with commercial payers, but not with the government.
I work in this area and you're right that Medicare can require a huge amount of paperwork from providers. And a hospital will have far more than 2 FTEs for this (it's called Revenue Cycle Management).
That's assuming price is the only variable.
Suppose one insurance company is accepted by more providers, including ones that might be closer (but pay higher real estate costs) or have nicer rooms etc. Meanwhile employers are looking for cost/benefit rather than just cost. If they give employees a better insurance plan they could pay them less or provide less of some other benefit and still get people to work there.
So before the insurance company didn't really care if you got a $10,000 plan or a $20,000 plan if they both had a $2200 margin, or if anything would prefer the former because they make the same money with lower costs. The employer is likewise fairly ambivalent as long as the more expensive plan seems like it's buying something (even if the something is convenience/luxury). But now the insurance company isn't allowed to have a $2200 margin on the first plan and still is on the second, so that's what they market, and then what more employers choose, resulting in higher average costs.
> Insurance providers also rarely operate at the full freight 20% either way though.
There are only really two options, right? Either the market is actually competitive and then a margin cap has no effect because competition would prevent margins higher than that regardless and the rule should be gotten rid of as totally redundant, or the market is less than perfectly competitive and then it does something but the something is a bad perverse incentive to raise costs to cheat the rule and it should be gotten rid of as actively harmful.
This is why there needs to be a real second option. A public option like medicare for all would be the way to go. Let everyone choose between either private insurance or public insurance. Then you'd actually see some real competition.
No argument from me that insurance is not competitive enough. But they are almost all public corporations that are highly regulated so the numbers on profit and expense ratios are easy to get for yourself to prove the point. No need to take my, or anyone with an agenda word for it. Almost everyone wants a simple answer to a complex interdependent problem that does not have one.
If there was a single solitary answer of “what is the problem with US healthcare” I’d have to go with it being a principle agent problem. If everyone who consumed healthcare had to pay up front very few services would cost what they do. Even changing it so people were billed directly and then had to submit insurance claims later like how pet insurance or car insurance works would go a long ways. But even that doesn’t solve the problem entirely, as it leaves massive gaps. Second answer would be “administrative class bloat” like in all areas of the US today.
Single payer is certainly a major part of the answer, but in isolation it’d solve almost nothing and potentially make things even worse as all the inane cross-subsidy comes crashing down overnight.
Edit: the point is medical loss ratios, admin overhead, etc. is public information not hidden behind some private company firewall. The fact non profits haven’t captured 100% of the market by being crazily cheaper should be telling on its own.
https://en.wikipedia.org/wiki/Averch%E2%80%93Johnson_effect
If those were malinvestments instead it’s simply throwing money away for not even a theoretical “someday” return. Plenty of ways to look busy while spending massive amounts of capital.
Generally agreed in principle though. Investment in the grid is pathetic almost everywhere in the US and has been for generations.
If this were true then private insurers would have paid comparable rates to Medicare prior to the ACA passing, and that's just not the case. This fact has been a fixture of the US healthcare system since the creation of Medicare.
But at the same time, the business is still pretty competitive with the employers and consumers who purchase policies or rent networks being price sensitive. Employers will switch carriers to get a significant cost savings so that holds down prices (and carrier profits) to an extent. Most large employers (and unions) are now self-funded so the "insurance" company isn't actually bearing much risk, they just set up a provider network and process the claims.
Most doctors are almost completely ignorant about the broader issues of healthcare financing and medical economics so take anything you hear from your friends with a grain of salt. (And to be fair, it's not something we should expect them to be experts in.)
Even if you do get private insurance for quicker access, it’s still much cheaper than the US.
I just spoke to someone who flew down here to save $30K on dental work.
The problem isn’t the ACA, it’s the ass backwards American health care system. I was at a meetup of American ex-pats here and half of them said they established residency here to join CAJA - the health care system
Insurance companies have raised prices to restore profit, were briefly a mandatory expense, and will exist for years to come.
before the ACA, insurers could deny coverage for pre-existing conditions
people have forgotten how bad things used to be
What if someone gets Type 1 diabetes as a child so they can no longer get insurance because of that "pre-existing" condition: if they get cancer for unrelated reasons they should just be saddled with medical debt? Or because of your Type 1 you can't get coverage, and you get t-boned in your car by a drunk driver.
Certainly it sounds 'unfair' that someone who smokes (a personal choice) gets similar cancer coverage for someone who does not smoke. But it also means that if your ((great-)grand-)mother had cancer, and you get it through no fault/choice of your own (i.e. genetics), you can also get coverage. (This latter effects a cousin of mine: her aunt (mom's sister) died of cancer at 37, her mom at 63; so now she's wonder when here number will come up. We're in Canada, so have universal care, but it's still something in her DNA.)
There are many circumstances in which you suffer through no fault of your own, and universal health coverage is present in many societies because it was decided to protect those people—even if it allows some 'free-riding' by others making poor choices.
People make all sorts of crazy decisions to prevent the "wrong" people from getting what they "don't deserve":
* https://en.wikipedia.org/wiki/Dying_of_Whiteness
You don't need 'insurance' in order to get your vehicle serviced, but that is what the US does with healthcare.
I can’t say the same about health care
The way it was suppose to work with the original mandate is that everyone had to be insured either through their employee or the exchange. So you couldn’t just buy insurance when you were sick. The Supreme Court struck that down.
If you lost your job, before the ACA, you could not get health insurance outside of working for someone and having group insurance at any cost.
But you do realize that the entire idea of not being able to get insurance because of pre-existing conditions is completely unique to the US?
Costa Rica for instance (where I am right now for a month and half) allows anyone to become a resident as long as you have guaranteed income of around $2000 a month or you deposit $60K into a local bank account and they arrange monthly disbursements and you pay 15% of your stated income to CAJA. Healthcare is both better and more affordable here.
The same is true for Panama. Why can’t the US figure this out?
This is a flat out lie. You absolutely could buy health insurance without being at a company.
Similarly, insurers would as a matter of course exclude from coverage any woman with one of several extremely common conditions, including endometriosis, PCOS, fibroids, and adenomyosis.
Prior to Obamacare, insurers were free to deny coverage wholesale for these conditions. It would have been fucked up to extend coverage but exclude any neurological conditions from my kid, but the actual outcome was worse: they were under the law entitled to withhold any coverage.
Obama couldn't change that, so the ACA redesigned the system to work with it. Despite being called insurance, health insurance is no longer really viewed or designed to be any kind of insurance. Instead, it's supposed to be Netflix for healthcare. You pay a flat rate, and then get unlimited healthcare. Obviously, the issue with this is that if you don't need healthcare you can just not sign up for the subscription. So the ACA tried to solve this by requiring everyone to sign up. Once everyone is required to sign up, it's not right to discriminate against preexisting conditions. It may not be an especially good system, but it is coherent.
Maybe a department of Return on Investment. See what those taxes pay for. Contrast to buying private versions of the services at the same SLA or better.
Not really, because whereas before things were bad for people with pre-existing conditions, now they are really bad for everyone.
People are paying exorbitant prices either for insurance, for routine health care stuff, or for both.
There was no free lunch, so we traded some health care for the chronically ill, for slightly less healthcare for everyone else. The insurance companies make sure it's an extractive zero-sum game in terms of actual healthcare provided.
Why do their stocks underperform so badly?
https://imgur.com/S8bNSM2
You can find out similar results for longer periods here:
https://dqydj.com/stock-return-calculator/
https://dqydj.com/sp-500-return-calculator/
Most of the costs are ultimately salaries to Americans, and money handed to American companies, so most savings would come from someone's livelihood. That's why we cannot reform: The party that actually cuts costs will build resentment for decades, and create a blip of unemployment. Nobody wants to do that, and therefore you aren't going to be a serious, relentless attempt at cutting costs. We've seen how the attempts that the ACA made were counteracted by consolidation at all levels.
Serious cuts have to have no mother. Say, if we ever did have an AI that worked well enough at this, and outcompeted primary care physicians. Foreign pharmacies bypassing all controls and being able to hand you much discounted drugs the day after. Telemedicine and cheap travel put together to make surgery that didn't involve an ER visit just as easy and much cheaper than using the US system. Straight out disruption, because the incentives are such we sure aren't getting improvements in regulation.
Not to mention that because of Bush, the government is not allowed to negotiate drug prices.
It has no military, and is effectively dependent of the US and in best cases neighboring countries. It has excellent weather and soil which account for its fruits exports… and outside of some niche industry, is mostly reliant on tourism which means importing money.
I love that country and have been many times. But if it were god forbid wiped off the face of the earth, it would be sad and annoying at best.
Costa Rica has “free healthcare” / healcare from taxes because it has 5 million people, about 1/2 of New Jersey.
This isn’t some mechanism that the US just refuses to use. It’s a matter of scale. You either don’t know and should remain silent on the topic, or do know it and lack the honor to not state it.
Guess which other country has universal healthcare - China. They are just slightly more populous than the US.
> This isn’t some mechanism that the US just refuses to use. It’s a matter of scale. You either don’t know and should remain silent on the topic, or do know it and lack the honor to not state it.
China does have a military…
Maybe you should take your own advice. Every other country in the world seems to have figured this out.
More here:
https://healthcareuncovered.substack.com/p/self-dealing-ille...
The unit costs of doing business with the US government are higher than with private companies even after accounting for economies of scale. The US government also requires that they pay the lowest price. Consequently, unit economics are usually worse when dealing with the government than when dealing with private companies.
The maths often don't math but the law doesn't care. Most inexplicable and bizarre pricing you see related to government procurement are structural tricks vendors use to indirectly fix the unit economics across their customers while technically staying compliant with bad regulations. Everyone else who is not the government is collateral damage of that byzantine theater.
Ideally, we would all drop the pretense that the US government deserves the lowest price just because they are very large, instead letting it reflect the true overhead cost.
> So insurance companies spend more so they can collect higher premiums.
This part is still true though. Insurers want you to consume more healthcare, so they'll happily pay for your chiropractor, acupuncturist, acne treatment, and Chanel gift bag [1]. Patients are happy with their benefits. Employers are happy with increasing employee retention in a tax advantaged way. Insurers are happy with the profit. Of course, you aren't going to see much health improvement from this though.
[1] https://nypost.com/2024/07/25/lifestyle/nyc-hospital-bills-3...
I love the particular irony of people who advocate for regulations then attempt refutation of free market theory for what is already unquestionably and objectively not a free market.
Insurers are also adding some %+ increase on premiums every year, which is taken as a % of their yearly spend, ie 2-3%.
ie (1+inflation)^N*(base_prem+overpay_prem_increase) = new_premium. The compounding of $ returned is pretty big on this.
That being said underwriting risk, under the law and avoiding correlated risks, is tough.
Removing the rule wouldn't help things.
It depends on the level of market failure, but there are not a ton of hospitals to choose from regardless.
https://fortune.com/2025/11/10/nvidia-hometown-santa-clara-c...
Monopolies, in these cases natural monopolies, can in fact exist. Look at the Micro supply and demand curves. As a general rule over those 100 years, there has not been rationing of electricity. There are natural blackouts and today an unplanned surge in demand (as happens in every industry such as chips after Covid), but generally the price regulation did not cause some kind of gas lines.
Whether they would be the rate limiting factor in health care remain to be seen, since health care is highly regulated with regulatory capture, licensing, and violence enforced market manipulations. As a thought experiment, in the extreme that health care were a pure monopoly, then I could envision some price caps somewhere between cost and price where the supply curve is relatively flat on either side thus creating minimal effects to supply.
Typically in these countries you actually can get health care as long as you pay privately yourself and don't go through the 'single payer.' A price cap would mean that no matter how much you're willing to pay, you can't pay over the cap, which is much rarer than the presence of 'national healthcare systems' that merely won't pay over the supposed soft 'cap'.
(Is it a 60% discount? No; a 150% margin has to be explained in other ways. But the phenomenon is real and important.)
-- Charlie Munger
If this is correct, then how come there are so many complaints about insurance denying payment for healthcare or the hoops they make patients and doctors jump through for pre authorizations?
If the path to more profit was spend more money, then there would be no reason to question a doctors’ orders? Nor threaten doctors and hospitals with leaving the network if they don’t agree to lower prices?
Yet, one often hears about so and so plan will not have so and so hospital system in network unless they come to an agreement.
Because those anecdotes get reader and viewer engagement. Charts comparing how much U.S. insurers pay on average for common procedures compared to, say, the UK NHS, don’t drive forward the narrative.
You should interrogate the media sources you consume and ask why you’re fed so many stories like that, and investigate what the real data is. A few years ago my friend got a continuous glucose monitor for Type 2 diabetes. I looked at the coverage polices for continuous glucose monitoring (for Type 2) for my insurer and some of the other big ones. Turns out that most US insurers, Medicare, and Medicaid in 45 states+DC cover continuous glucose monitors for people who have type 2 even those that don’t use insulin. At the time, most Canadian provincial systems didn’t cover the technology except for Type 1 or people who take insulin. UK NHS was worse, covering it only for Type 1, or Type 2 with certain conditions (such as you’d otherwise need to do 8 or more pin prick tests a day). https://www.diabetes.org.uk/about-diabetes/looking-after-dia...
Yes, you only get a continuous glucose monitor for free if you really need it on the NHS. If you want one otherwise you need to spend $100. It's not going to bankrupt you.
The point isn’t that the UK NHS should cover CGM. I think they shouldn’t; it’s a waste of money unless you really need one. My point was about why the media pays so much attention to denials of coverage while you don’t hear about the over-coverage. You can’t go by the anecdotes. Talking about insurance covering unnecessary procedures doesn’t generate clicks.
This is not my experience as a buyer of health plans on healthcare.gov, or as a buyer of health plans as an employer (where the employer is not self insuring). The prior authorizations and denials happen all the same.
Additionally, the premiums are the same between employers’ self insured plans and healthcare.gov plans, so the coverage must be similar.
https://www.kff.org/health-costs/how-aca-marketplace-costs-c...
>In 2024, individual market insurance premiums averaged $540 per member per month, slightly below the average $587 per member per month premium for fully-insured employer coverage.
The idea that health insurers can simply spend more to earn more is not passing the smell test.
> Commercial insurers would be happy to sell plans that pay every claim that comes in at 100% with zero denials.
And yet I have never seen one of these after buying insurance in 3 different states.
Again, the grandparent claim was that insurance companies can increase profits simply by increasing their expenses. Yet there is no evidence of this, and the fact that everyone has to deal with approval and denial of healthcare coverage means it cannot be true.
Those poor, benighted shareholders. What a socialist hellscape.
Every major piece of legislation needs revisions to chase circumvention and we're well past due on updates but no legitimate bills have been presented that cover these topics and that's not a one-party issue.
I ended up paying $12K to Mayo for a week of appointments. Private insurance, if I could have gotten it, would have been at least $1000/mo for premiums (in 2020) plus $10K deductible, so I actually saved money just paying Mayo instead of getting private insurance.
IMO the only reason insurance companies allowed the ACA to pass was the stipulation that everyone in the US was required to get insurance coverage or face a penalty. When the Supreme Court ruled that provision illegal, I'm sure the insurance companies were furious that they were duped.
The thing you're trying to do - sign up for insurance to cover a specific procedure - is quite literally what the system is designed to prevent. You're supposed to have insurance all the time or none of the time. Did you try asking the clinic how much it would cost if you are uninsured and paid cash?
Sorry I'm struggling to follow here. You think the open enrollment period effectively means that there's no prohibition on pre-existing conditions? Think you're kind of bending words outside of their normal usage because quite literally pre-existing condition policies are banned. The compensating counterbalance is a neutral open enrollment period so people don't just jump when they learn they have a health problem, it's a compromise to ensure financial sustainability.
You do understand that before this, it was worse right? One comment after another here is comparing the ACA to a magical fantasy, rather than the status quo that it improved upon.
If you tell me you’re going to light your house on fire and then ask me for fire insurance, I should be able to say no.
Instead what we have is not insurance, but the world’s worst socialized health plan. Insurance is for managing tail risk, not for distributing the cost of healthcare. If we’re willing to pay a tax to subsidize the elderly, we should cut out the middleman and let the government fill that function.
And since then it has been a fight for survival without much chance for improvement. The republican refuse anything that could improve it but want to “repeal and replace” but are struggling a little with the “replace” part. And the democrats are too timid to make another push.
So we end up with the worst of all worlds. Super expensive, overall results not very good and super complex.
(Which makes the system worse. The fiction of a fiduciary responsibility to extract top dollar from a business regardless of consequences is the opposite of "capitalism". Which derives its name from the practice of sound investment to build something of lasting value.
To say nothing of the social deviance of for-profit healthcare.)
I am going by very old memory of a few days/weeks of work, but it will be good for a medical system historian to chime in.
Health care providers carry immense blame. It's full of passionless people in it for the outsized paychecks, who once inside will just seek whatever local minimum to stay employed.
Insurance companies make plenty of money though. Cigna makes $7-8B per year and pays a decent dividend.
Not saying nursing is stress free, or every nurse is bad, but like tech companies in 2021, it's full of directionless people who pushed through the cert program to get paid $50/hr with $100/hr weekend shifts and be disgruntled with you that you are making them do work.
Patient populations are up, nursing FTEs down. Support staff down.
You're missing a very, very, very important piece here.
Which is that the lowest price of all is to deny treatment entirely.
They are not on your team, they are the opposite team. Their revenue is basically fixed, at the level of your premiums. But the more health care they pay for you to receive, the less profit they make. That's just arithmetic.
This is why there are so many horror stories of people being denied necessary treatment, or having to fight for months and years to get their treatment actually paid for. Insurance providers are incentivized to do their absolute best at taking your money and then not paying for care, through every sort of technicality and "mistake" and arbitrary judgment and limit they can come up with.
This certainly isn't a defense of health "insurance" companies though! I just think they're better modeled as Lovecraftian horrors animated by paperwork and compelling the creation of ever more paperwork to feed on, rather than money-grubbing cheapskates as the pop-political narrative goes. And the approaches for fixing one are much different than the approaches for fixing the other.
Why aren't the executives of these insurers shilling ghost networks not in prison for mail fraud?
Is Japan's life expectancy because of its healthcare or culture? I'm pretty sure Americans would not live to the same age as Japanese even with Japanese healthcare because of our low nutrition high sugar diets...
[1] https://www.managedhealthcareexecutive.com/view/health-syste...
> However, new research by Stanford health economist Maria Polyakova and colleagues — using unique data on physician income — shows that physicians’ personal earnings account for only 8.6 percent of national health-care spending
https://siepr.stanford.edu/news/just-how-much-do-physicians-...
https://www.commonwealthfund.org/publications/issue-briefs/2...
One note: the doctors won’t agree or want to hear this, as they too are human, but listen to how they talk about nurses. Hit me once I had both a CRNA (advanced nursing degree in anesthesiology) and an anesthesiologist friend
Edit: glad I did add an empty cosign, right after replying, the parent is now downvoted to gray. And gets it much, much, better info than any other comment, and I read all of them. Last thing I’ll throw out to back it up is, check into who decides how many seats there are at med schools. Can’t remember the exact name but it’s basically the doctors union / professional organization. AMA?
https://en.wikipedia.org/wiki/Maryland_hospital_payment_syst...
If what we defined as care was constant, it would get cheaper over time. But it doesn't stay constant.
Yearly physical exams are much more thorough in Japan. Unless you are optimally fit, you will be prescribed lifestyle changes to make and there is a strong expectation that you will work hard on these. Your employer will be involved. There is _tremendous_ social pressure if you are overweight.
Healthy food options are ubiquitous there with healthy and cheap meals available 24/7. Combini food certainly has bad options but nothing compared to American fast food or the American diet generally.
There are other health problems that are significantly overrepresented in Japan compared to the western world. Alcohol, smoking and stress-related illnesses. Liver & Kidney diseases. Peptic ulcers, GI problems in general.
Source: owned a medical practice for over 20 years, and was staff engineer at a company that processed medical bills.
The layering on of profit margins causes costs to grow exponentially
- Doctors and hospitals don't compete on price
- Prices aren't just opaque, they are unknowable
- Shopping around is not possible
- Insurer incentive is to maximize billing (cost). They pass along cost as increased premiums to an employer. Employer passes along increased costs to employee as below-inflation wage increases
https://randomcriticalanalysis.com/why-conventional-wisdom-o...
TL;DR: As people/countries get richer, a larger share of their money goes towards consumption. It's not just that Americans pay more for the same procedures (sometimes they do, sometimes it's just sticker prices) but we consume more healthcare the more money we make. So it skews costs up disproportionally. That wealth also enables chronic health and lifestyle problems that are expensive in their own right.
I'm not sure I'd buy the theory entirely, but it's very well argued and as a null hypothesis it makes a lot of sense.
If hospitals could be forced to publish price lists, it would be game changing, allowing patients to shop and compare quality/prices.
Trump vaguely mentioned he'd try to do something like this but it's not clear what he's attempting: https://www.youtube.com/watch?v=8PQ7l905aVM&t=10h57m30s
Maybe this? https://trumprx.gov/
[1] https://puc.overheid.nl/nza/doc/PUC_789284_22/1/
https://www.cms.gov/priorities/key-initiatives/hospital-pric...
But at a consumer level it's still quite difficult to predict what your total out-of-pocket expense will be for the same course of treatment at two different facilities.
Three reasons:
1. Medicare has quasi-monopolistic negotiation power that private insurers can only dream of -- Medicare spend two-thirds of all the private insurers combined. That's why private insurers would combine in a heartbeat if the FTC allowed it.
2. Moreover, that Medicare volume is concentrated in a specific segment of the market. If many providers dropped expensive United contracts, the insured people/companies might move to a new insurer. But Medicare's base will never leave.
3. Since Medicare covers older individuals, often on a fixed income, there is natural discriminatory pricing. (Think of the "senior discount" at your local entertainment venue.)
[1] https://www.kff.org/medicare/how-much-more-than-medicare-do-...
https://www.bloomsbury.com/us/price-we-pay-9781635574128/
They have every incentive for the price to be as high as possible.
Such entity can't be left to utilize market forces for the same reason cancer can't be left to utilize human physiology.
But doctors (a lot of them, not all) are complicit in this healthcare complex. American Medical Association is one of the top lobbying groups in D.C. They gate-keep the production of US doctors artificially low by making the candidates go through longer years of education (4 years of college before another 4 years of med school is an overkill for most doctors) compared to other developed nations, resulting in high compensations for doctors AND longer wait-time for patients (due to doctor shortage). They also put up regulation barriers and it requires a lot of certification and exams to become a doctor, so whoever becomes a doctor has the best interest to keep the system (status quo) going.
Average US doctor gets paid a lot more than their counterparts in other developed nations.
According to the OECD data, US 2023 healthcare spending was 28% by the government, 55% by private health insurance, 11% out of pocket, and 5% from other sources. OECD lists all US private health insurance policies under the "compulsory health insurance" heading. Apparently because there is no clear separation between compulsory and voluntary insurance, and because employer-paid insurance is not truly voluntary when it exists. (Because there is usually no option to take cash instead.)
And then the chart you linked to combines compulsory insurance with government spending. Mostly because if compulsory health insurance exists in an OECD member state, it is usually legally mandated, regardless of whether it is provided by public or private entities.
Healthcare and housing are simply too important to not allow the market alone to dictate.
I cannot think of a more important skill than surgery to continue training humans to do and to be wary of AI robotics replacing. Sure, some surgeries could likely be automated, but the entire point of specialist surgeons is to make choices and act in a timely manner in ambiguous situations with extremely high stakes.
What happens when the robot messes up? What happens when the internet is down, or the hospital is operating under abnormal circumstances? How do you teach, train, and collaborate with human medical workers and caregivers in a world where surgeons have been replaced by robots?
Most of the excess costs for healthcare and surgery aren't the humans doing the work. I think there's a lot of other areas we can optimize first, chief among those in healthcare being the cost structure around private businesses and insurers bloating the bill with administrative costs. There's a reason every other developed nation has a single-payer healthcare system and better outcomes, and I don't think an AI breakthrough is the only plausible solution to improving costs in the US. In fact, under the current system, an AI breakthrough in medicine would likely hurt the workforce more than it would improve costs.