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> An awful lot of hospitals are organized as non profits. Same with insurance. Yep, and they all have administrators that make a ton of money. I worked for a

> An awful lot of hospitals are organized as non profits. Same with insurance. Yep, and they all have administrators that make a ton of money. I worked for a Blue Cross Blue Shield franchise a decade ago. It is/was a "non-profit", the CEO made 2.1 million dollars per year. Non-profit != Money well spent

maxerickson 9y ago
Gee I wonder why I used the exact phrase organized as non profits. But hundreds of millions in executive salaries at companies that pay billions in insurance claims isn't the thing driving health care costs. It barely registers.
- GiorgioG 9y ago
  Administrative overhead in 2014 accounted for 25% of US hospital spending. http://www.commonwealthfund.org/publications/in-the-literature/2014/sep/hospital-administrative-costs http://www.commonwealthfund.org/publications/in-the-literatu... Overall the administrative overhead is 8% for healthcare in the US, more than double global average (3%) http://money.cnn.com/2017/01/11/news/economy/healthcare-administrative-costs-us-obamacare/index.html http://money.cnn.com/2017/01/11/news/economy/healthcare-admi...
  - adventured 9y ago
    And further to that point, the admin side of US healthcare costs have massively expanded - similar to what has occured in education - over the last 30 years. That 25% share, is about double what it is in Canada (although a few are equally high, the Netherlands is at 20%). The famous chart showing the US growth in admin vs physicians since 1970: https://i.imgur.com/lnIcjo2.jpg https://i.imgur.com/lnIcjo2.jpg
    - maxerickson 9y ago
      Is there one that shows dollar amounts instead of growth? If a dollar amount chart showed the same effect it would do a better job of making the point that chart is intended to make. But I think it is pretty likely that the 1970 administrative baseline is tiny (because in 1970 there were lots of small hospitals run by 1 doctor).
      - beagle3 9y ago
        It needs to be inflation adjusted, and then you have to agree about which inflation measure (there are several, and the differences over 50 years are significant) But you could sidestep all of that by comparing to other countries, non of which ever had a significant number of “small hospitals run by 1 doctor”; their expenditure as a percentage is mostly consistent through the years and about half as high as the US, with similar trends in education.
        maxerickson 9y ago
        Presumably the underlying data for the linked chart is already adjusted for inflation. And the index used doesn't matter all that much, it will be applied to both data series and various inflation measures aren't that different anyway. The higher administrative costs at US hospitals account for something like 3% or 4% of total US healthcare spending. A huge win if you take it all back and not any sort of solution to the cost problem.
        beagle3 9y ago
        Different inflation measures can diverge up to 1%/year, so at 50 years, the choice matters a lot. Also, things like "core CPI" get redefined through the years (in a way that almost always makes them lower) and other "hedonistic" adjustments are not universally accepted.
techman9 9y ago
While I see your point, "CEO/Executive Pay" is a poor indicator of waste in these organizations. Fundamentally, Non-profits need to operate like businesses, in the sense that their balance sheets need to remain stable and their income needs to cover their costs. The difference between a non-profit and a corporation of course exists, in their respective names imply, in who they're beholden to. Non-profits exist to not make a profit, where "for-profit" corporations exist to deliver a profit to their shareholders. For-profit corporations pay their CEOs exorbitant amounts as well, and for non-profits to recruit talent, they have to do the same.

maxerickson 9y ago

Gee I wonder why I used the exact phrase organized as non profits. But hundreds of millions in executive salaries at companies that pay billions in insurance claims isn't the thing driving health care costs. It barely registers.

GiorgioG 9y ago
Administrative overhead in 2014 accounted for 25% of US hospital spending. http://www.commonwealthfund.org/publications/in-the-literature/2014/sep/hospital-administrative-costs http://www.commonwealthfund.org/publications/in-the-literatu... Overall the administrative overhead is 8% for healthcare in the US, more than double global average (3%) http://money.cnn.com/2017/01/11/news/economy/healthcare-administrative-costs-us-obamacare/index.html http://money.cnn.com/2017/01/11/news/economy/healthcare-admi...
- adventured 9y ago
  And further to that point, the admin side of US healthcare costs have massively expanded - similar to what has occured in education - over the last 30 years. That 25% share, is about double what it is in Canada (although a few are equally high, the Netherlands is at 20%). The famous chart showing the US growth in admin vs physicians since 1970: https://i.imgur.com/lnIcjo2.jpg https://i.imgur.com/lnIcjo2.jpg
  - maxerickson 9y ago
    Is there one that shows dollar amounts instead of growth? If a dollar amount chart showed the same effect it would do a better job of making the point that chart is intended to make. But I think it is pretty likely that the 1970 administrative baseline is tiny (because in 1970 there were lots of small hospitals run by 1 doctor).
    - beagle3 9y ago
      It needs to be inflation adjusted, and then you have to agree about which inflation measure (there are several, and the differences over 50 years are significant) But you could sidestep all of that by comparing to other countries, non of which ever had a significant number of “small hospitals run by 1 doctor”; their expenditure as a percentage is mostly consistent through the years and about half as high as the US, with similar trends in education.
      - maxerickson 9y ago
        Presumably the underlying data for the linked chart is already adjusted for inflation. And the index used doesn't matter all that much, it will be applied to both data series and various inflation measures aren't that different anyway. The higher administrative costs at US hospitals account for something like 3% or 4% of total US healthcare spending. A huge win if you take it all back and not any sort of solution to the cost problem.
        beagle3 9y ago
        Different inflation measures can diverge up to 1%/year, so at 50 years, the choice matters a lot. Also, things like "core CPI" get redefined through the years (in a way that almost always makes them lower) and other "hedonistic" adjustments are not universally accepted.

techman9 9y ago

While I see your point, "CEO/Executive Pay" is a poor indicator of waste in these organizations. Fundamentally, Non-profits need to operate like businesses, in the sense that their balance sheets need to remain stable and their income needs to cover their costs. The difference between a non-profit and a corporation of course exists, in their respective names imply, in who they're beholden to. Non-profits exist to not make a profit, where "for-profit" corporations exist to deliver a profit to their shareholders. For-profit corporations pay their CEOs exorbitant amounts as well, and for non-profits to recruit talent, they have to do the same.