7 ms·

What Atul Gawande Got Wrong about U.S. Health Care Spending

46 points by fluentmundo 7y ago

notadoc 7y ago
tldr: health care spending is high because prices are high That seems obvious in general, but should be extra obvious to anyone who has ever received a bill from anything in the US health system.
- aidenn0 7y ago
  AFAICT, every part of the health care system is abnormally expensive in the US. Basically every article that says "The healthcare system in the US is expensive because of X" is partially right. X is part of what's driving costs up.
  - Ididntdothis 7y ago
    It’s a common strategy when people point out that one area in US health care is too expensive/inefficient to immediately counter by saying “but area Y is even worse”. That way nothing ever gets done because there is not a single factor that’s messing up the system. In reality pretty much all sectors are f....ed and need reform. You can choose randomly any sector and start improving and get good results.
- toomuchtodo 7y ago
  When demand is inelastic, and you have no price controls, this is the result.
  - darawk 7y ago
    That's not really true, though. Prices are set by the intersection of supply and demand. Oil demand is relatively inelastic, for instance, but the price is quite reasonable because there is tremendous competition in supply. Prices are high in healthcare in part due to inelastic demand, but much moreso due to supply constriction. For just one, particularly egregious example of this: https://en.wikipedia.org/wiki/Certificate_of_need https://en.wikipedia.org/wiki/Certificate_of_need If you want to open a new hospital in many states in the US, you need to acquire this "Certificate of Need". Who approves this certificate? Other hospitals in the area. It's as though Google required the permission of Yahoo to form a new search engine.
    - vkou 7y ago
      If I didn't know how much I had to pay for gas until two months after I left the pump, my gas would cost $25/gallon, and I would count myself lucky that I'm buying it from a station that has a reputation for not swindling me. That is, of course, after my 'gas insurer' comped the station anywhere between $0 and $25, that number being determined by the astrological position, and retrograde state of the planets.
      - darawk 7y ago
        Sure, non-transparent pricing is a problem too. My point is just that inelastic demand is not on its own an explanation for the problem.
    - cmiles74 7y ago
      While this is true and it's difficult to open a new hospital in the US, it strikes me as unlikely that this could be blamed for the high cost of care. In fact, US hospitals have been merging and this seems to be a trend that is continuing to this day.[0] I entirely agree that hospitals are part of the problem, but I think that casting this as a supply and demand issue is oversimplifying the issue. People who need health care very often cannot choose to "shop around" for their provider, the increase in mergers make it less likely there are any competitors in their area. Agreements between hospitals and insurance companies often place other health care providers "outside network", thus artificially increasing their costs. In the same way consumers do not choose their hospital, they also frequently cannot choose their insurance provider; often the health insurance comes along with their employment. In my opinion, the tangled co-dependency between hospitals, insurance companies, pharmaceutical companies and all of the lesser industries that depend on them are all factors in the rising costs. Every step of the way along the chain, profit is maximized at the expense of the patient. We will need large scale change in order to address the issue and I don't think it will be easy. I hope that some kind of "medicare for all" system will start moving things in the right direction. In my opinion, this system is failing everyone except the very wealthy. [0]: https://www.pwc.com/us/en/industries/health-industries/library/health-services-quarterly-deals-insights.html https://www.pwc.com/us/en/industries/health-industries/libra...
- RcouF1uZ4gsC 7y ago
  When you are designing a service, you can optimize for median latency or tail latency. Sometimes when you optimize for tail latency, median latency gets worse. It is similar to the health care systems. The US system is awesome at doing really crazy life saving stuff. For example US is probably the best in keeping premature babies alive. In addition it has a ton of resources. If you want an MRI scan, you can get one in the US pretty quickly and easily. Also, the profits in the US subsidize worldwide drug development. This is why, if you look where all the really rich rulers decide to go for surgery or other complicated care, it is the US. Canada and other countries optimize for the median case and rely on the US for their outliers. Look at the instances of Canadians coming to the US for surgery or MRI scans because they cannot get them in Canada in a timely manner.
  - cmiles74 7y ago
    I do not believe that this is accurate, in my opinion this assertion requires some documentation. I looked up the survival rate of premature babies and the neonatal mortality rate (28 days after birth) is higher in the US than in Canada.[0] I'm having trouble finding numbers on other procedures, in my opinion it may be because because the US is falling behind on them as well. [0]: https://www.healthsystemtracker.org/chart-collection/infant-mortality-u-s-compare-countries/#item-neonatal-mortality-u-s-higher-comparable-countries https://www.healthsystemtracker.org/chart-collection/infant-...
    - RcouF1uZ4gsC 7y ago
      I am talking about premature infants. The one study I could find from 2000 that compares them showed >Relative risks for infant death from all causes among singletons born at 32 through 33 gestational weeks were 6.6 (95% confidence interval [CI], 6.1-7.0) in the United States in 1995 and 15.2 (95% CI, 13.2-17.5) in Canada in 1992-1994; https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_vis=1&q=preterm+infant+mortality+Canada&btnG=#d=gs_qabs&u=%23p%3Di6pCP5D8fvQJ https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_vis...
      - cmiles74 7y ago
- epmaybe 7y ago
  I urge everyone to read these two fantastic papers: It's The Prices, Stupid (2003): https://www.healthaffairs.org/doi/full/10.1377/hlthaff.22.3.89 https://www.healthaffairs.org/doi/full/10.1377/hlthaff.22.3.... It's Still The Prices, Stupid (2019): https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.05144 https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.05144
- deleted 7y ago
  [deleted]
darawk 7y ago
a) This article purports to answer the question of why medical care costs so much, collectively. Its answer: 'prices'. But it does basically nothing to interrogate why prices are high, despite claiming to at several points. b) One extraordinarily simple thing we could do to deflate medical costs in this country that would have essentially zero negative effects would be to create a market in kidneys. Medicare currently spends 90k per patient per year on dialysis. Allowing people to sell a spare kidney would completely and totally solve this problem, essentially overnight. Everyone currently on dialysis would get a transplant, and the costs would go to zero. 7% of Medicare's budget would evaporate instantly, and the numbers would probably be similar for private insurers.
- SketchySeaBeast 7y ago
  Why draw the line at kidneys? Why not create a whole system of voluntary for-profit organ harvest? Anything you got two of, might as well sell one. No one needs two lungs, or two eyes.
  - darawk 7y ago
    I think that'd be great. But kidneys are an easy starting place because you genuinely do not require two kidneys.
    - SketchySeaBeast 7y ago
      A major surgery like that isn't low risk - the chance of major complications is quite high. You're asking people to put their lives at risk in a very real way to make a quick buck, which probably isn't actually solving any long term problems as it's a single cash infusion and not any sort of actual revenue stream they can rely on. And, as I asked elsewhere - how much money are you expecting these organs to be sold for? There are far, far, far more desperate individuals than those who need kidneys - it'd be a buyers market for human organs.
      - darawk 7y ago
aaavl2821 7y ago
30% of US healthcare spend goes to hospitals, and 20% to physicians (many of whom are employed by hospitals even if they are outpatient clinics -- the % of physicians employed by hospitals in the US is at an all time high) Hospital consolidation has been increasing the last few decades. Many hospitals are regional monopolies and have a ton of leverage in negotiations with insurers. Insurance companies put the squeeze on smaller providers, increasing pressure on them to sell to big hospitals. After buying a smaller hospital or clinic, the hospital system can bill insurance companies at the hospital systems' much higher negotiated rate -- for the exact same care (at least this is what i heard from several execs at big hospital systems). My first job out of college was an investment banking analyst and our most profitable clients were hospital systems (HCA, Community Health, Tenet Healthcare, etc). They were so profitable that their profit margins were 20-30% even after writing off 30% of their revenues as uncollectible (this was before the Affordable Care Act). These hospital systems were major targets of private equity buyouts. A buyout fund would buy a big hospital system, finance the deal with a ton of debt, then buy more hospitals and clinics and roll them up into the bigger system. They made so much cash that they could pay down huge amounts of debt quickly so the private equity groups made tons of money. Many non-profit hospital systems engage in similar aggressive behavior
- vkou 7y ago
  How can we fight this, when so much money is on the line, to make sure that this golden goose keeps fleecing the middle class?
  - dominotw 7y ago
    allow doctors on H1B to come from india. That's what they do in UK.
    - basementcat 7y ago
      Wouldn't that help the bottom lines of hospital conglomerates even more?
zarro 7y ago
Prices are high because of inefficiencies in the markets caused by bad laws attempting to subsidize one class of people by another. Hospitals aren't able to refuse treatment to those that can't afford to pay for their services, insurance companies are forced to insure unprofitable people and the net effect is to try and coerce people into a redistribution of money from people that require more care from those that require less care to cover these expenditures. Because there is no mechanism to coerce people to do this willingly both industries to give the invoices to the government (who created the problem) thereby getting rid of the requirement to think about how they will fund their expenditures - making it the governments problem to figure out. This thereby allows them to continue uncontrolled expenditure in an ever increasing downward spiral to catastrophe as in effect they are spending 'other peoples money' in the hopes that "eventually these invoices will be paid" through some sort of government sponsored coercion mechanism forcing socialized heath care or some other such method with the same result. Its really quite simple and clever. -5% of the population accounts for more than half of all health spending. -50% of the population with the lowest spending accounts for only 3% of all total health spending.
j8014 7y ago
I really wish we had transparent pricing, it's maddening, outrageous and needs to be required by law.
- geodel 7y ago
  First step towards transparent pricing would to hospital turn back patients who cannot pay. Without that they roughly need to collect payment from those who pay for those who don't.
  - j8014 7y ago
    Hospitals manage uncompensated care right now, its not as if its an unknown.
secabeen 7y ago
> When most people speak of health care “prices,” they often have in mind point-of-service prices one pays when picking up a prescription, being hospitalized, having a baby, or seeing a doctor. This reminds me of the infuriating pattern in some health care conversations when discussing consumer discounts and rebates for prescription drugs. The pharma company will say, "we give pricing relief to our customers, and ensure that no patient will pay more than $20 for a monthly supply!" That's all well and good, but it elides over the fact that the insurance company is still paying $1000+/month for their share of the prescription, and that money eventually comes out of the patient or the employers pocket, which means it eventually comes out of our pockets as their consumers. > However, when economists refer to “health care prices,” they mean the overall payments for a service—not just what the patient pays to the provider in the form of a copay or deductible, but what the insurer pays to the provider on behalf of the patient...But the distinction between these two ways of thinking about prices leads me to the second problem with the emerging price consensus: the failure to consider what is baked into the payments that payers (whether public or private) make to providers. Fundamentally, if we were able to reduce our spend as a percentage of GDP to that of the average OECD country, it would remove $1 Trillion in annual revenue from our health care system. The existing health care industry is going to fight that tooth and nail. That doesn't mean we shouldn't do it.
geodel 7y ago
Similar pattern is there for College education in US. A lot of discussion is around loans and financial aid but not why basic classroom based degrees cost so much.
- Mathnerd314 7y ago
  There I think it's just supply and demand. Around the 1970s the job market shrunk and suddenly everyone wanted a college degree so they could get a decent job. The pressure's continued to increase to the point where you have 400+ students in an introductory classroom. http://www.nbcnews.com/id/21951104/ns/us_news-education/t/monstrous-class-sizes-unavoidable-colleges/ http://www.nbcnews.com/id/21951104/ns/us_news-education/t/mo... There are some new universities being founded to increase supply, but online education is taking off too.
faiza01 7y ago
i am Mrs Faiza Tariq a citizen of Oman I want to thank medical Darrell Allen who has made my family and i proud when i was frustrated in life after many doctors have scammed me, i came across his phone contact on the internet as Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only published by one Sophia thanking doctor and telling the world on how he came to their rescue financially as a result of buying their kidneys without stress, i quickly applied by contacting his Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only by giving Doctor a trier within 5 working hours my half money was like a dream when it came into my bank account before the transplant, i urge you to contact Doctor Darrell Allen on Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only for your financial awesomeness to come through like mine. I promised to do this when i eventually scale through and Dr. Darrell Allen Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only

46 points by fluentmundo 7y ago

tldr: health care spending is high because prices are high That seems obvious in general, but should be extra obvious to anyone who has ever received a bill from anything in the US health system.

aidenn0 7y ago
AFAICT, every part of the health care system is abnormally expensive in the US. Basically every article that says "The healthcare system in the US is expensive because of X" is partially right. X is part of what's driving costs up.
- Ididntdothis 7y ago
  It’s a common strategy when people point out that one area in US health care is too expensive/inefficient to immediately counter by saying “but area Y is even worse”. That way nothing ever gets done because there is not a single factor that’s messing up the system. In reality pretty much all sectors are f....ed and need reform. You can choose randomly any sector and start improving and get good results.
toomuchtodo 7y ago
When demand is inelastic, and you have no price controls, this is the result.
- darawk 7y ago
  That's not really true, though. Prices are set by the intersection of supply and demand. Oil demand is relatively inelastic, for instance, but the price is quite reasonable because there is tremendous competition in supply. Prices are high in healthcare in part due to inelastic demand, but much moreso due to supply constriction. For just one, particularly egregious example of this: https://en.wikipedia.org/wiki/Certificate_of_need https://en.wikipedia.org/wiki/Certificate_of_need If you want to open a new hospital in many states in the US, you need to acquire this "Certificate of Need". Who approves this certificate? Other hospitals in the area. It's as though Google required the permission of Yahoo to form a new search engine.
  - vkou 7y ago
    If I didn't know how much I had to pay for gas until two months after I left the pump, my gas would cost $25/gallon, and I would count myself lucky that I'm buying it from a station that has a reputation for not swindling me. That is, of course, after my 'gas insurer' comped the station anywhere between $0 and $25, that number being determined by the astrological position, and retrograde state of the planets.
    - darawk 7y ago
      Sure, non-transparent pricing is a problem too. My point is just that inelastic demand is not on its own an explanation for the problem.
  - cmiles74 7y ago
    While this is true and it's difficult to open a new hospital in the US, it strikes me as unlikely that this could be blamed for the high cost of care. In fact, US hospitals have been merging and this seems to be a trend that is continuing to this day.[0] I entirely agree that hospitals are part of the problem, but I think that casting this as a supply and demand issue is oversimplifying the issue. People who need health care very often cannot choose to "shop around" for their provider, the increase in mergers make it less likely there are any competitors in their area. Agreements between hospitals and insurance companies often place other health care providers "outside network", thus artificially increasing their costs. In the same way consumers do not choose their hospital, they also frequently cannot choose their insurance provider; often the health insurance comes along with their employment. In my opinion, the tangled co-dependency between hospitals, insurance companies, pharmaceutical companies and all of the lesser industries that depend on them are all factors in the rising costs. Every step of the way along the chain, profit is maximized at the expense of the patient. We will need large scale change in order to address the issue and I don't think it will be easy. I hope that some kind of "medicare for all" system will start moving things in the right direction. In my opinion, this system is failing everyone except the very wealthy. [0]: https://www.pwc.com/us/en/industries/health-industries/library/health-services-quarterly-deals-insights.html https://www.pwc.com/us/en/industries/health-industries/libra...
RcouF1uZ4gsC 7y ago
When you are designing a service, you can optimize for median latency or tail latency. Sometimes when you optimize for tail latency, median latency gets worse. It is similar to the health care systems. The US system is awesome at doing really crazy life saving stuff. For example US is probably the best in keeping premature babies alive. In addition it has a ton of resources. If you want an MRI scan, you can get one in the US pretty quickly and easily. Also, the profits in the US subsidize worldwide drug development. This is why, if you look where all the really rich rulers decide to go for surgery or other complicated care, it is the US. Canada and other countries optimize for the median case and rely on the US for their outliers. Look at the instances of Canadians coming to the US for surgery or MRI scans because they cannot get them in Canada in a timely manner.
- cmiles74 7y ago
  I do not believe that this is accurate, in my opinion this assertion requires some documentation. I looked up the survival rate of premature babies and the neonatal mortality rate (28 days after birth) is higher in the US than in Canada.[0] I'm having trouble finding numbers on other procedures, in my opinion it may be because because the US is falling behind on them as well. [0]: https://www.healthsystemtracker.org/chart-collection/infant-mortality-u-s-compare-countries/#item-neonatal-mortality-u-s-higher-comparable-countries https://www.healthsystemtracker.org/chart-collection/infant-...
  - RcouF1uZ4gsC 7y ago
    I am talking about premature infants. The one study I could find from 2000 that compares them showed >Relative risks for infant death from all causes among singletons born at 32 through 33 gestational weeks were 6.6 (95% confidence interval [CI], 6.1-7.0) in the United States in 1995 and 15.2 (95% CI, 13.2-17.5) in Canada in 1992-1994; https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_vis=1&q=preterm+infant+mortality+Canada&btnG=#d=gs_qabs&u=%23p%3Di6pCP5D8fvQJ https://scholar.google.com/scholar?hl=en&as_sdt=0%2C5&as_vis...
    - cmiles74 7y ago
epmaybe 7y ago
I urge everyone to read these two fantastic papers: It's The Prices, Stupid (2003): https://www.healthaffairs.org/doi/full/10.1377/hlthaff.22.3.89 https://www.healthaffairs.org/doi/full/10.1377/hlthaff.22.3.... It's Still The Prices, Stupid (2019): https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.05144 https://www.healthaffairs.org/doi/10.1377/hlthaff.2018.05144
deleted 7y ago
[deleted]

darawk 7y ago

a) This article purports to answer the question of why medical care costs so much, collectively. Its answer: 'prices'. But it does basically nothing to interrogate why prices are high, despite claiming to at several points. b) One extraordinarily simple thing we could do to deflate medical costs in this country that would have essentially zero negative effects would be to create a market in kidneys. Medicare currently spends 90k per patient per year on dialysis. Allowing people to sell a spare kidney would completely and totally solve this problem, essentially overnight. Everyone currently on dialysis would get a transplant, and the costs would go to zero. 7% of Medicare's budget would evaporate instantly, and the numbers would probably be similar for private insurers.

SketchySeaBeast 7y ago
Why draw the line at kidneys? Why not create a whole system of voluntary for-profit organ harvest? Anything you got two of, might as well sell one. No one needs two lungs, or two eyes.
- darawk 7y ago
  I think that'd be great. But kidneys are an easy starting place because you genuinely do not require two kidneys.
  - SketchySeaBeast 7y ago
    A major surgery like that isn't low risk - the chance of major complications is quite high. You're asking people to put their lives at risk in a very real way to make a quick buck, which probably isn't actually solving any long term problems as it's a single cash infusion and not any sort of actual revenue stream they can rely on. And, as I asked elsewhere - how much money are you expecting these organs to be sold for? There are far, far, far more desperate individuals than those who need kidneys - it'd be a buyers market for human organs.
    - darawk 7y ago

aaavl2821 7y ago

30% of US healthcare spend goes to hospitals, and 20% to physicians (many of whom are employed by hospitals even if they are outpatient clinics -- the % of physicians employed by hospitals in the US is at an all time high) Hospital consolidation has been increasing the last few decades. Many hospitals are regional monopolies and have a ton of leverage in negotiations with insurers. Insurance companies put the squeeze on smaller providers, increasing pressure on them to sell to big hospitals. After buying a smaller hospital or clinic, the hospital system can bill insurance companies at the hospital systems' much higher negotiated rate -- for the exact same care (at least this is what i heard from several execs at big hospital systems). My first job out of college was an investment banking analyst and our most profitable clients were hospital systems (HCA, Community Health, Tenet Healthcare, etc). They were so profitable that their profit margins were 20-30% even after writing off 30% of their revenues as uncollectible (this was before the Affordable Care Act). These hospital systems were major targets of private equity buyouts. A buyout fund would buy a big hospital system, finance the deal with a ton of debt, then buy more hospitals and clinics and roll them up into the bigger system. They made so much cash that they could pay down huge amounts of debt quickly so the private equity groups made tons of money. Many non-profit hospital systems engage in similar aggressive behavior

vkou 7y ago
How can we fight this, when so much money is on the line, to make sure that this golden goose keeps fleecing the middle class?
- dominotw 7y ago
  allow doctors on H1B to come from india. That's what they do in UK.
  - basementcat 7y ago
    Wouldn't that help the bottom lines of hospital conglomerates even more?

zarro 7y ago

Prices are high because of inefficiencies in the markets caused by bad laws attempting to subsidize one class of people by another. Hospitals aren't able to refuse treatment to those that can't afford to pay for their services, insurance companies are forced to insure unprofitable people and the net effect is to try and coerce people into a redistribution of money from people that require more care from those that require less care to cover these expenditures. Because there is no mechanism to coerce people to do this willingly both industries to give the invoices to the government (who created the problem) thereby getting rid of the requirement to think about how they will fund their expenditures - making it the governments problem to figure out. This thereby allows them to continue uncontrolled expenditure in an ever increasing downward spiral to catastrophe as in effect they are spending 'other peoples money' in the hopes that "eventually these invoices will be paid" through some sort of government sponsored coercion mechanism forcing socialized heath care or some other such method with the same result. Its really quite simple and clever. -5% of the population accounts for more than half of all health spending. -50% of the population with the lowest spending accounts for only 3% of all total health spending.

j8014 7y ago

I really wish we had transparent pricing, it's maddening, outrageous and needs to be required by law.

geodel 7y ago
First step towards transparent pricing would to hospital turn back patients who cannot pay. Without that they roughly need to collect payment from those who pay for those who don't.
- j8014 7y ago
  Hospitals manage uncompensated care right now, its not as if its an unknown.

secabeen 7y ago

> When most people speak of health care “prices,” they often have in mind point-of-service prices one pays when picking up a prescription, being hospitalized, having a baby, or seeing a doctor. This reminds me of the infuriating pattern in some health care conversations when discussing consumer discounts and rebates for prescription drugs. The pharma company will say, "we give pricing relief to our customers, and ensure that no patient will pay more than $20 for a monthly supply!" That's all well and good, but it elides over the fact that the insurance company is still paying $1000+/month for their share of the prescription, and that money eventually comes out of the patient or the employers pocket, which means it eventually comes out of our pockets as their consumers. > However, when economists refer to “health care prices,” they mean the overall payments for a service—not just what the patient pays to the provider in the form of a copay or deductible, but what the insurer pays to the provider on behalf of the patient...But the distinction between these two ways of thinking about prices leads me to the second problem with the emerging price consensus: the failure to consider what is baked into the payments that payers (whether public or private) make to providers. Fundamentally, if we were able to reduce our spend as a percentage of GDP to that of the average OECD country, it would remove $1 Trillion in annual revenue from our health care system. The existing health care industry is going to fight that tooth and nail. That doesn't mean we shouldn't do it.

geodel 7y ago

Similar pattern is there for College education in US. A lot of discussion is around loans and financial aid but not why basic classroom based degrees cost so much.

Mathnerd314 7y ago
There I think it's just supply and demand. Around the 1970s the job market shrunk and suddenly everyone wanted a college degree so they could get a decent job. The pressure's continued to increase to the point where you have 400+ students in an introductory classroom. http://www.nbcnews.com/id/21951104/ns/us_news-education/t/monstrous-class-sizes-unavoidable-colleges/ http://www.nbcnews.com/id/21951104/ns/us_news-education/t/mo... There are some new universities being founded to increase supply, but online education is taking off too.

faiza01 7y ago

i am Mrs Faiza Tariq a citizen of Oman I want to thank medical Darrell Allen who has made my family and i proud when i was frustrated in life after many doctors have scammed me, i came across his phone contact on the internet as Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only published by one Sophia thanking doctor and telling the world on how he came to their rescue financially as a result of buying their kidneys without stress, i quickly applied by contacting his Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only by giving Doctor a trier within 5 working hours my half money was like a dream when it came into my bank account before the transplant, i urge you to contact Doctor Darrell Allen on Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only for your financial awesomeness to come through like mine. I promised to do this when i eventually scale through and Dr. Darrell Allen Telephone Whatsup app no: +918587907904 or +447537147433 whatsup app only