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In the study, nearly all the computed savings comes from two sources. 1. Decrease in pharmaceutical costs as a result of better bargaining power. 2. Decrease

In the study, nearly all the computed savings comes from two sources. 1. Decrease in pharmaceutical costs as a result of better bargaining power. 2. Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy. I don't have an informed opinion on either of these estimates, but my intuition is that #1 seems reasonable while #2 seems unlikely. The justifications they give include lower executive salaries and decreased fraud. From what I have been told by healthcare professionals, medicare has less incentive to negotiate cost, less incentive to investigate fraud, and therefore lower administrative cost.

ameister14 7y ago
I believe they say $100 billion will come from the lower average reimbursement rates, something that is also pretty unrealistic to think will continue.
bduerst 7y ago
I worked in the EMR software industry and have certifications that involve hospital & lab billing, among others. I've been on site with healthcare providers, and there are entire buildings full of people whose job it is just to code and scrub claims, and cover disputes/negotiations with private insurance providers. Consumers do not see it because it's typically off-site from the main hospital care facilities, but believe me, the administrative savings potential is real.
- anonsivalley652 7y ago
  IIRC, coding is on the order of a million jobs across insurance, hospitals and doctor offices. Then there's all the other non-value-add activities of negotiating of prices, authorizing/denying treatment, billing and management. Oh and there's going through bankruptcy while you have cancer... I forgot that one.
- mochomocha 7y ago
  I once worked at a US biotech startup getting paid by insurers where we would build ML models just to reverse-engineer the inconsistencies of CPT coding & claim reimbursement by insurers & hospitals so we could get paid. Basically trying to automate "learn that Karen at insurer X processing claims wiht code Y from hospital Z usually decides to reimburse $XX". This whole idea of "free market is more efficient for healthcare" has to die. All the incentives are backwards. For example: insurers don't want efficient claim processing because that means less revenues for them.
  - beat 7y ago
    Yes! Perverse incentives are what is making it like this. And the incentives cross boundaries - relationships between providers, insurers, regulators, legislators, and consumers. There's no single guilty party that we can blame and fix. (Since insurance companies are such a target for blame, I've started to say blaming insurance is like yelling at the cashier.)
  - BurningFrog 7y ago
    > * This whole idea of "free market is more efficient for healthcare" has to die* The current US healthcare system has very little to do with "free markets"!
    - joe_the_user 7y ago
      "The current US healthcare system has very little to do with 'free markets'!" Sure, the US health care system is certainly not governed by wide open competition, transparent pricing or similar things. But it certainly has something to do with the "free markets". The system is basically "what you get when you realize you have to insure and regulate but you never, ever do it in a centralized rational way, 'cause that would be socialism - plus you never, ever separate an 'entrepreneur' from a real or potential stream profits". Which indeed, builds the worst of all possible systems, sending risks to the consumer and profits to the investor/rent-seekers. And from here, we could go forward to actual socialized, state-run medicine as functions adequately in most industrialized economies or back to a "wild west" system, where costs are lower, treatment is often OK and the heroin runs in large rivers as due the fatal scams(as was the US' 19th century health care reality).
      - maxerickson 7y ago
        Medicine changed so much after ~1880 (or maybe ~1900) that there's little to learn from the prior era.
  - chrisdhoover 7y ago
    You realize the market is highly regulated and fully captured by the insurance companies? Not to mention the doctors guild that limits practitioners. The current system is not a free market. It is highly distorted and gamed.
- rayiner 7y ago
  Medicare billing isn’t any different, it’s just a different payer.
  - codegeek 7y ago
    Yes but at least, Govt. is not looking to make record profits.
    - rayiner 7y ago
      No, but government has strong incentives to deny claims to control costs. At least at the state level, governments have gotten extremely aggressive about money collection. E.g. $50 administrative fee for not paying a $4.00 toll.
      - codegeek 7y ago
        Personally, I would go for ANY system right now other than what we have. I am too pissed off at how our healthcare system is. Single Payer may or may not have the same issues but I am ready to take my chances. Status quo is not good enough for me.
        pw 7y ago
        What problems have you had with the current system?
        codegeek 7y ago
        Many problems. - Every visit to a doctor is a game of cat and mouse. I am never sure what bill to expect and how many bills to expect. - Price is always inflated due to the fact that insurance company has to make money on every visit to the doctor. - Every visit requires a Claim. Claims get filed incorrectly. Fun and games trying to call a bunch of different "departments" trying to understand the claim and why am I being charged ? - In network/out of network game. Ohh, I am sick and unconscious but I have to make sure that the person seeing me is "in network" so that I don't get a million dollar bill. Sorry, bad luck. While you were unconscious, we called a doctor who was "out of network" and not our problem. Have fun fighting wit the insurance company. - Why does every visit require me to show insurance ? I just wanna talk to my damn doctor. Can I not just give you some money directly ? - I visited the doctor. Doctor has to file a claim for $x while the insurance company only allows $y. So the doctor inflates the amount of initial claim knowing that they will be reduced anyway by the insurance company. Cat and mouse game continues and finally, poor me is left with a bill that I now have to figure out. Have I already paid enough (copay, deductible, out of pocket limit) ? Lucky me. - My employer changes my insurance company. Oh, I have to redo the entire paperwork with al my doctors. Ok I did it. Oops the doctor office still filed a claim with my previous company. I am now fighting to get that sorted.
- PeteLee-Us 7y ago
  About 10 years ago, I was a freelance consultant for clinics, hospitals and insurance companies (EMR, billing, claims, practice management, etc.). I've also been a volunteer EMT for about 20 years and have many friends who are clinicians. The amount of administrative overhead is just absurd: a common and believable number is about 15%. This does NOT include the "shadow labor" that everyday people have to deal with, like being on hold with a billing department or insurance company, the merry-go-round of "prior authorization hell" for procedures or prescriptions, etc. It's TERRIBLE that someone like me--conversant in business practices, ICD/CPT codes, and clinical practice in general--struggles to interpret a bill. It's literally worse than buying a car. I can make lots of choices in life, but one of them isn't health care: if I need it--especially urgently--I'm not in a position to game out every scenario possible to minimize costs because the ecosystem is non-transparent and labyrinthine.
- tptacek 7y ago
  Nobody is saying there aren't real administrative savings to be had, but the amount we spend on administrative costs is something close to an empirically observable fact, and you can do the mental exercise of taking any credible number and zeroing it out to see how big an impact it would have on overall health spending. It's not huge. Which is to say that even in the most optimistic case, where single-payer forces everyone into a perfectly efficient system where nobody has to waste any time on coding or paper-shuffling and everything is perfectly streamlined, we still won't have meaningfully fixed the problem. The amounts we'd save would be a grocery-store-sale discount.
  - laurencerowe 7y ago
    According to this study healthcare administration costs account for the bulk of the difference between US and Canada healthcare spending. 34% of 18% of US GDP (=6% GDP) vs 17% of 11.6% of Canada's GDP (=2% of GDP). https://www.healio.com/primary-care/practice-management/news/online/%7B83beb11a-add5-4324-9bef-03f5edc21f88%7D/a-third-of-us-health-care-spending-stems-from-administrative-costs https://www.healio.com/primary-care/practice-management/news... Other studies looking at only hospital costs put it at 1.43% of GDP. https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us https://www.commonwealthfund.org/publications/journal-articl...
    - tptacek 7y ago
      That is a much higher estimate of admin overhead than other sources, covers both payer and provider administrative expenses, and implicitly attributes all provider administrative expenses to billing/coding. But we don't have to litigate this in the context of the Lancet article. That article derives much higher savings from pharmaceutical price reductions than from administrative savings. We know with some certainty what percentage of overall spending comes from pharmaceuticals, and it is a low number.
  - burnte 7y ago
    > It's not huge. It's massive. Healthcare is byzantine on purpose. It's opaque to patients so that providers can prevent shopping around and adjust charges per patient, and it's opaque to providers from insurers to help prevent having to pay claims.
markroseman 7y ago
Lower administrative costs? In the US, doctors need at least one or two full-time admin staff to negotiate with a variety of insurance providers, argue for approval of every line item, etc. Here in Canada, I spend about 5-10 minutes per week dealing with all aspects of billing for my wife's medical practice.
- Gibbon1 7y ago
  Back when I was a teenager my doctor was part of a four doctor practice. They had a nurse and one of the doctors wives handled everything else. Compare with a doctors office today.
  - kasey_junk 7y ago
    My doctor does not have any full time staff. He does not accept health insurance directly though is in many networks so you can submit claims for reimbursement. I tend not to because he’s so cheap it’s not worth the hassle.
deugtniet 7y ago
All you need to do is look at the health care costs per citizen of other developed countries to understand that the US is paying way too much in their current healthcare system. I'm aware that the US's healthcare system is unique in many ways, but so are all the other countries on that list and they made it work. https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...
- tptacek 7y ago
  The problem is that when you break those costs down into buckets and then compare the buckets with other countries, we're overspending in all of them, by very large amounts. Pharma and admin is nibbling at the edges of the problem. We pay way more for inpatient and outpatient procedures than other countries do. We prescribe more procedures than other countries (possibly as a consequence of how well we've gotten at delivering procedures on an outpatient basis; the UK, for instance, apparently fixes fewer hernias, but that's probably a result of the fact that they do a lot more of then on an inpatient basis). Our doctors also just make substantially more money.
anonsivalley652 7y ago
I watched a long-form interview with one of the PI's. They used very conservative estimates and didn't estimate additional savings and benefits from uncountable knock-on side-effects that would increase lives saved. M4A would save additional lives per year over double that of the ACA. That's a minimum additional twenty-three (23) 9/11's of people saved every year like clockwork while saving money on a net basis.
burkaman 7y ago
> less incentive to investigate fraud From the paper: "In addition to savings on overheads, a comprehensive database of health-care charges would facilitate detection of fraud, which extracts $85·7 billion every year. Following the transition to a single-payer system in Taiwan, an 8% reduction in overall national expenditure was attributed to the reduction in fraud. By moving from a fragmented health-care payment system to a unified system, irregularities in provider claims can be more easily detected. For example, under the fragmented system excessive claims for physician time can be spread across patients with several different insurance providers. However, acknowledging that improvements have been made in fraud detection since Taiwan's transition, we conservatively assume that the improved fraud detection would garner savings amounting to half that observed in Taiwan, corresponding to 4% of total health-care expenditure." https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)33019-3/fulltext#seccestitle50 https://www.thelancet.com/journals/lancet/article/PIIS0140-6... Aside from decreased executive pay and decreased fraud, many jobs will be eliminated. From the paper: "Improvements in system efficiency, such as reductions in billing tasks, will involve a contraction of the workforce. Although the country will benefit from lower costs, 936 000 administrative positions and 746 600 positions in the health-care insurance industry are estimated to become redundant. However, detailed transition plans have suggested either funding for early retirement options, extensive severance, retraining programmes, and relocation expenses for all workers in these sectors. Implementation of such a plan is estimated to cost $61·5 billion annually over 2 years, a sum which would be recouped within the first year by the health-care savings estimated here." https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)33019-3/fulltext#seccestitle90 https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
- aqme28 7y ago
  Is that saying that we could give 2 years of severance to all displaced insurance workers for less than what we would save in the first year? That's incredible, and a great argument against the cries for lost administrative jobs.
- omegaworks 7y ago
  >many jobs will be eliminated. I just wanted to emphasize this point from your quote: >funding for early retirement options, extensive severance, retraining programmes, and relocation expenses for all workers in these sectors. Implementation of such a plan is estimated to... a sum which would be recouped within the first year by the health-care savings estimated here." Even if we provided a generous 2 years of severance for people to transition into other roles, we still save in the long term.
ncallaway 7y ago
We do a lot of development work for client's in the medical and medical billing department. > Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy. That doesn't strike me as unlikely at all. Maybe their extrapolation is aggressive, but there are people at nearly every practice who spend a large portion of their day just managing the billing of cases to insurance companies. The amount of work that goes into billing a case to insurance companies is really insane. It tends to be a very manual process, because every insurance company is different.
- chasd00 7y ago
  i've done medical billing systems too and it is, indeed, crazy but what's make you think the gov. would be any better? I wrote a specialized service dealing with Medicaid in a handful of states and it was even worse than normal. The incompetence at Medicaid is dangerous. Formularies, eligibility, reimbursements changed randomly with reimbursement changes retroactive to some random date. I have zero faith in any part of gov to get it close to right.
  - james-mcelwain 7y ago
    > i've done medical billing systems too and it is, indeed, crazy but what's make you think the gov. would be any better? Well, first of all, because there's no medical billing in M4A. It's free at point of service, so I'd hope they do better at billing considering they don't need to bill at all.
    - refurb 7y ago
      Billing is how the doctors and hospitals get paid. If there is no billing, do they work for free?
    - andymockli 7y ago
      Medicare requires billing, but Medicare 4 All does not require billing?
burnte 7y ago
I work in healthcare as a CIO. I interact with all of our billing systems, processes, and departments. Frankly, I think the estimate of a 14% savings due to reduced administration to be low. Single payer would eliminate 30% of non-medical jobs in my company. Teams eliminated or dramatically reduced: * VOB, verification of benefits, they fight with the insurance company just to determine what coverage the patient has, and it is purposefully not automated. If it were automated, it would be easier for us to know what they'll pay. By making it a manual process (or at least only partially automated) we have a greater chance of making a mistake they can reject a claim over. We also have a greater chance of simply getting someone on a bad day and refusing to cover things preemptively, required it to be elevated to our Appeals department. * Coding, people whose jobs it is to make sure the notes left in the record by medical staff (doctors, nurses, techs, etc) is properly translated to ICD10 codes. * Billers, people whose job it is to bundle up claims and records, make sure they're properly sorted for each insurance company, and submit the claims. * UR, utilization review, the group that reviews how accurately we're tracking the treatment guidelines of the INSURER so they don't deny the claim for missing a comma. Our UR group missed a small technicality on some claims and we had to submit paper copies of every claim for 6 months to the insurer, in addition to the electronic requests as a "remediation and verification step", aka, punishment. We would literally print out the electronic claim, and mail it, so it's going to be identical to the electronic claim, but we had to do it for 6 months for one facility to one insurer. * Collections, the people who call up the insurance company to demand payment for claims they approved but haven't paid on. This is a much larger group than you'd think, as most insurers will happily make you wait for payment until you complain. * Appeals. They address complains made by insurers over rejected claims, either fixing the issue with the charge, or going to the insurers appeals department to tell them why it's correct. They also talk to insurers over patients that are rejected at the VOB stage. * Out Of Network, these folks do nothing but deal with insurers we're not in-network with, collecting payments, negotiating Single Case Agreements, etc. VOB and OON would be gone completely. Coders, UR, Bilelrs would have a lot less to do because there would be one insurer to deal with, so we could have fewer people. Medicare pays promptly and without hassle on approved claims, so does Tricare, so we'd need a lot fewer people in collections. We'd need fewer appeals people too due to one set of rules for everyone. Healthcare in the USA is REALLY messed up, it's the worst sausage I've ever seen being made.
maxerickson 7y ago
There's US insurance companies that enroll about as many people as live in Canada. The negotiating power Canada has comes from "take it or leave it", not from scale.
briandear 7y ago
This study however, doesn't seem to account for the dramatically increased usage of the system. If medical care were "free" -- the demand would quickly outstrip supply -- there's a real cost to that.
- genomer 7y ago
  That's an interesting point and I completely agree, but wouldn't America's already real lack of "supply" buffer this a bit? I have to wait several weeks to get into my personal family doctor, and it took over 4 hours to be admitted during our last visit to the ER (we went in because of a suspected ectopic pregnancy, which it turned out to be). It seems like the physician shortage will only continue to worsen. https://www.aamc.org/news-insights/press-releases/new-findings-confirm-predictions-physician-shortage https://www.aamc.org/news-insights/press-releases/new-findin... Edit: Basically, I think a lot of people will still be left without adequate health care in minor cases, but at least the most urgent cases will be taken care of without leaving people bankrupt.
  - pnutjam 7y ago
    Most of these shortages are regional. That will probably continue, but at least it would be possible for people to get reimbursed for travel expenses, etc. At least that's what other countries do.
SubiculumCode 7y ago
Unfortunately most innovation in the medical insurance industry is a detriment to insurance consumers i.e. innovation in how to better screw the customers by not paying out. Profit in such insurance companies comes out of consumer's pockets.
michaelbuckbee 7y ago
There's a third major cost-saving which is preventative care. I have a family friend who lost his job, lost his insurance and couldn't afford to take his meds which would have prevented the massive stroke that paralyzed him 3 weeks later. This was 10 years ago and his rehabilitation is still ongoing. His wife can't work and is his full-time caretaker. Multiple lives destroyed because we as a society can't get a system together where it makes rational sense to provide this man with the couple cents worth of pills that would have prevented this calamity. It's the same story with every other chronic disease and health care issue - just massive amounts of human suffering that could be avoided.
- istjohn 7y ago
  Not to mention the societal costs incurred by failing to provide mental health services to everyone.
- pnutjam 7y ago
  Just look what a lack of mental healthcare has done to the country...
wahern 7y ago
In 2017 retail prescription drug expenditures were $333 billion, accounting for just 10% of total healthcare expenditures.[1] I realize prescription drug prices are insane, the patent regime is broken, and the industry is generally messed up. But at 10%, relying on lower cost prescription drugs to save the day isn't going to help. People feel it's a bigger issue than it is (relative to the overall problem), because it's one of the few aspects with which most people have regular and direct experience, including with pricing. Likewise, total billing and insurance related (BIR) administrative costs are ~$500 billion.[2] (Year unknown.) Or roughly 15% of total healthcare expenditures. And that's up from $471 billion in 2012[3], even though the ACA capped insurance provider administrative overhead and instituted many other reforms intended to address these costs. Plus, it's odd that people on both the left and the right who are convinced that lobbyists control Washington will simultaneously hold the notion in their head that either a public option or single-payer would be able to consistently cap reimbursements and contain costs. If they're right then it's a miracle Medicare and Medicaid do as it as much as they do, and impossible for it to do so once the Federal government is directly reimbursing the majority of healthcare expenditures. Indeed, if it were possible then defense expenditures would be more efficient and a fraction of what they currently are. These rosy estimates are ridiculous. We have over 10 years of direct experience with substantial and serious healthcare reform. Obamacare attempted and does enact a variant of almost every concrete reform imaginable. Whatever you think of Obamacare, you can't deny that it has provided mountains of empirical data about the difficulties and promises of containing costs. And yet Obamacare opponents on both sides--those who want to return to the pre-Obamacare system, and those who want a public option or single-payer--willfully ignore the evidence, unchastened by reality. A California congressional committee looked at the potential costs for single-payer in the state and it would have required an additional $200 billion/year in tax revenue even after accounting for diverting existing private and Federal expenditures. That's what a cold, hard, realistic examination of the facts looks like even by those predisposed to enacting it. Maybe that $200 billion would be worth it; from a moral perspective it certainly seems so. But to deny the costs is to invite failure and financial ruin as not even a majority of Californians, let alone Americans, are willing to make that sacrifice. We need to figure out how to better solve the cost problems before we continue to wade further into the waters. Otherwise we're just going to drown. If you look at all the other healthcare systems around the world with both better outcomes and lesser costs, neither single-payer nor a public option are defining characteristics. Rather, they run the gamut from mostly private to mostly public. It we can't lower costs with Obamacare, which has both substantial public and private components (and thus opportunities for exploring structural efficiencies across the spectrum), switching to single-payer or a public option won't move the needle. [1] https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/highlights.pdf https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta... [2] https://www.americanprogress.org/issues/healthcare/reports/2019/04/08/468302/excess-administrative-costs-burden-u-s-health-care-system/ https://www.americanprogress.org/issues/healthcare/reports/2... [3] https://www.ncbi.nlm.nih.gov/pubmed/25540104 https://www.ncbi.nlm.nih.gov/pubmed/25540104
charwalker 7y ago
I worked ops support at a local heath insurance group of maybe 250 people. We had an entire floor the building next to us dedicated to billing and 30-40 billers with some of the older employees making upwards of $75k a year not to mention the infrastructure and systems to support that department. With a universal system, those costs (and jobs) would evaporate to the tune of millions per year in salaries alone. For the employees, each of them could quickly retrain or just shift into other departments as needed as most staff did when the company was acquired and IT admins moved to PM or lead roles in other departments. #2 exists and would have a huge impact not only on the industry but your time and mine. I've spent maybe 8 hours this year already just working with medical billing groups to pay up and already spent close to $2000 between my partner and I with an estimate $4-6000 before the end of the year without doing a sleep study which I greatly need. Universal is definitely cheaper. All we have to do is compare ourselves to just about every other western democracy to see ow.
ChrisLomont 7y ago
> calculated by extrapolating the overhead in medicare to the entire US healthcare economy Many friends in healthcare have pointed out (correctly it seems) that medicare has lower overhead because medicare shifted that cost onto the existing admin, and many places lose money on medicare, but are forced to take it. So it's simply not possible to extrapolate that to all hospitals without bankrupting many. Here's a WaPo article with ample links to peer reviewed papers on the issue. (Note the part WaPo rates as false is that ALL hospitals would close; WaPo does admit with cited sources that there is ample evidence Medicare pricing would cause less service and less capacity from many fronts). https://www.washingtonpost.com/politics/2019/07/03/would-medicare-for-all-mean-hospitals-none/ https://www.washingtonpost.com/politics/2019/07/03/would-med...
Barrin92 7y ago
>From what I have been told by healthcare professionals, medicare has less incentive to negotiate cost, less incentive to investigate fraud, and therefore lower administrative cost. I don't think that's more likely to explain the cost saving than the sheer scale advantages of having a unified bureaucracy rather than countless of small insurance agents. I will dig the source out when I'm home but (I think it was Paul Krugman) who went over the administrative overhead in one of his blog posts. Medicare and Medicaid both have administrative costs of less than 1% of their budget, the private industry clocks in at more than 15-18% IIRC. I have trouble believing that this is mainly fraud detection considering that it's consistent across other countries with consolidated healthcare sectors. A single large administration can simply streamline these processes better than thousands of individual companies. To be frank the insurance industry seems mostly like an employment program for the middle class white collar sector.
tptacek 7y ago
I wrote this comment before reading the excellent comment 'wahern wrote, so I'm getting rid of my redundant point about pharma and admin as a percentage of overall spending. Rather, I'd like to point out something that I haven't seen discussed. Maybe someone here can knock it down. Health care spending increases drastically and nonlinearly after age 55. Medicare's admin overhead is in part a consequence of the cohort of patients it serves: they receive more medical services than everyone else, and so more of their medical spending goes to services relative to administrative costs. Conversely, younger patients receive relatively few medical services, and the services they receive are much less expensive. Compared to that lower amount, fixed administrative costs are a higher percentage of their medical spending. Some admin costs scale directly with the costs of services rendered, but others don't. As a result, it seems pretty clear that Medicare's admin overhead ratio would necessarily be higher if it covered everyone, and that any result taken by extrapolating current administrative overhead to the whole population would be dubious.
aaavl2821 7y ago
Does the study also look at lower provider and hospital costs? Spending on hospital and providers makes up ~50% of US healthcare spend according to CDC. Rx spend is between 10-20% and admin overhead is 30% or so I wonder why this paper didn't contemplate effect of Medicare for all on hospital and provider spend?

ameister14 7y ago

I believe they say $100 billion will come from the lower average reimbursement rates, something that is also pretty unrealistic to think will continue.

bduerst 7y ago

I worked in the EMR software industry and have certifications that involve hospital & lab billing, among others. I've been on site with healthcare providers, and there are entire buildings full of people whose job it is just to code and scrub claims, and cover disputes/negotiations with private insurance providers. Consumers do not see it because it's typically off-site from the main hospital care facilities, but believe me, the administrative savings potential is real.

anonsivalley652 7y ago
IIRC, coding is on the order of a million jobs across insurance, hospitals and doctor offices. Then there's all the other non-value-add activities of negotiating of prices, authorizing/denying treatment, billing and management. Oh and there's going through bankruptcy while you have cancer... I forgot that one.
mochomocha 7y ago
I once worked at a US biotech startup getting paid by insurers where we would build ML models just to reverse-engineer the inconsistencies of CPT coding & claim reimbursement by insurers & hospitals so we could get paid. Basically trying to automate "learn that Karen at insurer X processing claims wiht code Y from hospital Z usually decides to reimburse $XX". This whole idea of "free market is more efficient for healthcare" has to die. All the incentives are backwards. For example: insurers don't want efficient claim processing because that means less revenues for them.
- beat 7y ago
  Yes! Perverse incentives are what is making it like this. And the incentives cross boundaries - relationships between providers, insurers, regulators, legislators, and consumers. There's no single guilty party that we can blame and fix. (Since insurance companies are such a target for blame, I've started to say blaming insurance is like yelling at the cashier.)
- BurningFrog 7y ago
  > * This whole idea of "free market is more efficient for healthcare" has to die* The current US healthcare system has very little to do with "free markets"!
  - joe_the_user 7y ago
    "The current US healthcare system has very little to do with 'free markets'!" Sure, the US health care system is certainly not governed by wide open competition, transparent pricing or similar things. But it certainly has something to do with the "free markets". The system is basically "what you get when you realize you have to insure and regulate but you never, ever do it in a centralized rational way, 'cause that would be socialism - plus you never, ever separate an 'entrepreneur' from a real or potential stream profits". Which indeed, builds the worst of all possible systems, sending risks to the consumer and profits to the investor/rent-seekers. And from here, we could go forward to actual socialized, state-run medicine as functions adequately in most industrialized economies or back to a "wild west" system, where costs are lower, treatment is often OK and the heroin runs in large rivers as due the fatal scams(as was the US' 19th century health care reality).
    - maxerickson 7y ago
      Medicine changed so much after ~1880 (or maybe ~1900) that there's little to learn from the prior era.
- chrisdhoover 7y ago
  You realize the market is highly regulated and fully captured by the insurance companies? Not to mention the doctors guild that limits practitioners. The current system is not a free market. It is highly distorted and gamed.
rayiner 7y ago
Medicare billing isn’t any different, it’s just a different payer.
- codegeek 7y ago
  Yes but at least, Govt. is not looking to make record profits.
  - rayiner 7y ago
    No, but government has strong incentives to deny claims to control costs. At least at the state level, governments have gotten extremely aggressive about money collection. E.g. $50 administrative fee for not paying a $4.00 toll.
    - codegeek 7y ago
      Personally, I would go for ANY system right now other than what we have. I am too pissed off at how our healthcare system is. Single Payer may or may not have the same issues but I am ready to take my chances. Status quo is not good enough for me.
      - pw 7y ago
        What problems have you had with the current system?
        codegeek 7y ago
        Many problems. - Every visit to a doctor is a game of cat and mouse. I am never sure what bill to expect and how many bills to expect. - Price is always inflated due to the fact that insurance company has to make money on every visit to the doctor. - Every visit requires a Claim. Claims get filed incorrectly. Fun and games trying to call a bunch of different "departments" trying to understand the claim and why am I being charged ? - In network/out of network game. Ohh, I am sick and unconscious but I have to make sure that the person seeing me is "in network" so that I don't get a million dollar bill. Sorry, bad luck. While you were unconscious, we called a doctor who was "out of network" and not our problem. Have fun fighting wit the insurance company. - Why does every visit require me to show insurance ? I just wanna talk to my damn doctor. Can I not just give you some money directly ? - I visited the doctor. Doctor has to file a claim for $x while the insurance company only allows $y. So the doctor inflates the amount of initial claim knowing that they will be reduced anyway by the insurance company. Cat and mouse game continues and finally, poor me is left with a bill that I now have to figure out. Have I already paid enough (copay, deductible, out of pocket limit) ? Lucky me. - My employer changes my insurance company. Oh, I have to redo the entire paperwork with al my doctors. Ok I did it. Oops the doctor office still filed a claim with my previous company. I am now fighting to get that sorted.
PeteLee-Us 7y ago
About 10 years ago, I was a freelance consultant for clinics, hospitals and insurance companies (EMR, billing, claims, practice management, etc.). I've also been a volunteer EMT for about 20 years and have many friends who are clinicians. The amount of administrative overhead is just absurd: a common and believable number is about 15%. This does NOT include the "shadow labor" that everyday people have to deal with, like being on hold with a billing department or insurance company, the merry-go-round of "prior authorization hell" for procedures or prescriptions, etc. It's TERRIBLE that someone like me--conversant in business practices, ICD/CPT codes, and clinical practice in general--struggles to interpret a bill. It's literally worse than buying a car. I can make lots of choices in life, but one of them isn't health care: if I need it--especially urgently--I'm not in a position to game out every scenario possible to minimize costs because the ecosystem is non-transparent and labyrinthine.
tptacek 7y ago
Nobody is saying there aren't real administrative savings to be had, but the amount we spend on administrative costs is something close to an empirically observable fact, and you can do the mental exercise of taking any credible number and zeroing it out to see how big an impact it would have on overall health spending. It's not huge. Which is to say that even in the most optimistic case, where single-payer forces everyone into a perfectly efficient system where nobody has to waste any time on coding or paper-shuffling and everything is perfectly streamlined, we still won't have meaningfully fixed the problem. The amounts we'd save would be a grocery-store-sale discount.
- laurencerowe 7y ago
  According to this study healthcare administration costs account for the bulk of the difference between US and Canada healthcare spending. 34% of 18% of US GDP (=6% GDP) vs 17% of 11.6% of Canada's GDP (=2% of GDP). https://www.healio.com/primary-care/practice-management/news/online/%7B83beb11a-add5-4324-9bef-03f5edc21f88%7D/a-third-of-us-health-care-spending-stems-from-administrative-costs https://www.healio.com/primary-care/practice-management/news... Other studies looking at only hospital costs put it at 1.43% of GDP. https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us https://www.commonwealthfund.org/publications/journal-articl...
  - tptacek 7y ago
    That is a much higher estimate of admin overhead than other sources, covers both payer and provider administrative expenses, and implicitly attributes all provider administrative expenses to billing/coding. But we don't have to litigate this in the context of the Lancet article. That article derives much higher savings from pharmaceutical price reductions than from administrative savings. We know with some certainty what percentage of overall spending comes from pharmaceuticals, and it is a low number.
- burnte 7y ago
  > It's not huge. It's massive. Healthcare is byzantine on purpose. It's opaque to patients so that providers can prevent shopping around and adjust charges per patient, and it's opaque to providers from insurers to help prevent having to pay claims.

markroseman 7y ago

Lower administrative costs? In the US, doctors need at least one or two full-time admin staff to negotiate with a variety of insurance providers, argue for approval of every line item, etc. Here in Canada, I spend about 5-10 minutes per week dealing with all aspects of billing for my wife's medical practice.

Gibbon1 7y ago
Back when I was a teenager my doctor was part of a four doctor practice. They had a nurse and one of the doctors wives handled everything else. Compare with a doctors office today.
- kasey_junk 7y ago
  My doctor does not have any full time staff. He does not accept health insurance directly though is in many networks so you can submit claims for reimbursement. I tend not to because he’s so cheap it’s not worth the hassle.

deugtniet 7y ago

All you need to do is look at the health care costs per citizen of other developed countries to understand that the US is paying way too much in their current healthcare system. I'm aware that the US's healthcare system is unique in many ways, but so are all the other countries on that list and they made it work. https://en.wikipedia.org/wiki/List_of_countries_by_total_health_expenditure_per_capita https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...

tptacek 7y ago
The problem is that when you break those costs down into buckets and then compare the buckets with other countries, we're overspending in all of them, by very large amounts. Pharma and admin is nibbling at the edges of the problem. We pay way more for inpatient and outpatient procedures than other countries do. We prescribe more procedures than other countries (possibly as a consequence of how well we've gotten at delivering procedures on an outpatient basis; the UK, for instance, apparently fixes fewer hernias, but that's probably a result of the fact that they do a lot more of then on an inpatient basis). Our doctors also just make substantially more money.

anonsivalley652 7y ago

I watched a long-form interview with one of the PI's. They used very conservative estimates and didn't estimate additional savings and benefits from uncountable knock-on side-effects that would increase lives saved. M4A would save additional lives per year over double that of the ACA. That's a minimum additional twenty-three (23) 9/11's of people saved every year like clockwork while saving money on a net basis.

burkaman 7y ago

> less incentive to investigate fraud From the paper: "In addition to savings on overheads, a comprehensive database of health-care charges would facilitate detection of fraud, which extracts $85·7 billion every year. Following the transition to a single-payer system in Taiwan, an 8% reduction in overall national expenditure was attributed to the reduction in fraud. By moving from a fragmented health-care payment system to a unified system, irregularities in provider claims can be more easily detected. For example, under the fragmented system excessive claims for physician time can be spread across patients with several different insurance providers. However, acknowledging that improvements have been made in fraud detection since Taiwan's transition, we conservatively assume that the improved fraud detection would garner savings amounting to half that observed in Taiwan, corresponding to 4% of total health-care expenditure." https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)33019-3/fulltext#seccestitle50 https://www.thelancet.com/journals/lancet/article/PIIS0140-6... Aside from decreased executive pay and decreased fraud, many jobs will be eliminated. From the paper: "Improvements in system efficiency, such as reductions in billing tasks, will involve a contraction of the workforce. Although the country will benefit from lower costs, 936 000 administrative positions and 746 600 positions in the health-care insurance industry are estimated to become redundant. However, detailed transition plans have suggested either funding for early retirement options, extensive severance, retraining programmes, and relocation expenses for all workers in these sectors. Implementation of such a plan is estimated to cost $61·5 billion annually over 2 years, a sum which would be recouped within the first year by the health-care savings estimated here." https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(19)33019-3/fulltext#seccestitle90 https://www.thelancet.com/journals/lancet/article/PIIS0140-6...

aqme28 7y ago
Is that saying that we could give 2 years of severance to all displaced insurance workers for less than what we would save in the first year? That's incredible, and a great argument against the cries for lost administrative jobs.
omegaworks 7y ago
>many jobs will be eliminated. I just wanted to emphasize this point from your quote: >funding for early retirement options, extensive severance, retraining programmes, and relocation expenses for all workers in these sectors. Implementation of such a plan is estimated to... a sum which would be recouped within the first year by the health-care savings estimated here." Even if we provided a generous 2 years of severance for people to transition into other roles, we still save in the long term.

ncallaway 7y ago

We do a lot of development work for client's in the medical and medical billing department. > Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy. That doesn't strike me as unlikely at all. Maybe their extrapolation is aggressive, but there are people at nearly every practice who spend a large portion of their day just managing the billing of cases to insurance companies. The amount of work that goes into billing a case to insurance companies is really insane. It tends to be a very manual process, because every insurance company is different.

chasd00 7y ago
i've done medical billing systems too and it is, indeed, crazy but what's make you think the gov. would be any better? I wrote a specialized service dealing with Medicaid in a handful of states and it was even worse than normal. The incompetence at Medicaid is dangerous. Formularies, eligibility, reimbursements changed randomly with reimbursement changes retroactive to some random date. I have zero faith in any part of gov to get it close to right.
- james-mcelwain 7y ago
  > i've done medical billing systems too and it is, indeed, crazy but what's make you think the gov. would be any better? Well, first of all, because there's no medical billing in M4A. It's free at point of service, so I'd hope they do better at billing considering they don't need to bill at all.
  - refurb 7y ago
    Billing is how the doctors and hospitals get paid. If there is no billing, do they work for free?
  - andymockli 7y ago
    Medicare requires billing, but Medicare 4 All does not require billing?

burnte 7y ago

I work in healthcare as a CIO. I interact with all of our billing systems, processes, and departments. Frankly, I think the estimate of a 14% savings due to reduced administration to be low. Single payer would eliminate 30% of non-medical jobs in my company. Teams eliminated or dramatically reduced: * VOB, verification of benefits, they fight with the insurance company just to determine what coverage the patient has, and it is purposefully not automated. If it were automated, it would be easier for us to know what they'll pay. By making it a manual process (or at least only partially automated) we have a greater chance of making a mistake they can reject a claim over. We also have a greater chance of simply getting someone on a bad day and refusing to cover things preemptively, required it to be elevated to our Appeals department. * Coding, people whose jobs it is to make sure the notes left in the record by medical staff (doctors, nurses, techs, etc) is properly translated to ICD10 codes. * Billers, people whose job it is to bundle up claims and records, make sure they're properly sorted for each insurance company, and submit the claims. * UR, utilization review, the group that reviews how accurately we're tracking the treatment guidelines of the INSURER so they don't deny the claim for missing a comma. Our UR group missed a small technicality on some claims and we had to submit paper copies of every claim for 6 months to the insurer, in addition to the electronic requests as a "remediation and verification step", aka, punishment. We would literally print out the electronic claim, and mail it, so it's going to be identical to the electronic claim, but we had to do it for 6 months for one facility to one insurer. * Collections, the people who call up the insurance company to demand payment for claims they approved but haven't paid on. This is a much larger group than you'd think, as most insurers will happily make you wait for payment until you complain. * Appeals. They address complains made by insurers over rejected claims, either fixing the issue with the charge, or going to the insurers appeals department to tell them why it's correct. They also talk to insurers over patients that are rejected at the VOB stage. * Out Of Network, these folks do nothing but deal with insurers we're not in-network with, collecting payments, negotiating Single Case Agreements, etc. VOB and OON would be gone completely. Coders, UR, Bilelrs would have a lot less to do because there would be one insurer to deal with, so we could have fewer people. Medicare pays promptly and without hassle on approved claims, so does Tricare, so we'd need a lot fewer people in collections. We'd need fewer appeals people too due to one set of rules for everyone. Healthcare in the USA is REALLY messed up, it's the worst sausage I've ever seen being made.

maxerickson 7y ago

There's US insurance companies that enroll about as many people as live in Canada. The negotiating power Canada has comes from "take it or leave it", not from scale.

briandear 7y ago

This study however, doesn't seem to account for the dramatically increased usage of the system. If medical care were "free" -- the demand would quickly outstrip supply -- there's a real cost to that.

genomer 7y ago
That's an interesting point and I completely agree, but wouldn't America's already real lack of "supply" buffer this a bit? I have to wait several weeks to get into my personal family doctor, and it took over 4 hours to be admitted during our last visit to the ER (we went in because of a suspected ectopic pregnancy, which it turned out to be). It seems like the physician shortage will only continue to worsen. https://www.aamc.org/news-insights/press-releases/new-findings-confirm-predictions-physician-shortage https://www.aamc.org/news-insights/press-releases/new-findin... Edit: Basically, I think a lot of people will still be left without adequate health care in minor cases, but at least the most urgent cases will be taken care of without leaving people bankrupt.
- pnutjam 7y ago
  Most of these shortages are regional. That will probably continue, but at least it would be possible for people to get reimbursed for travel expenses, etc. At least that's what other countries do.

SubiculumCode 7y ago

Unfortunately most innovation in the medical insurance industry is a detriment to insurance consumers i.e. innovation in how to better screw the customers by not paying out. Profit in such insurance companies comes out of consumer's pockets.

michaelbuckbee 7y ago

There's a third major cost-saving which is preventative care. I have a family friend who lost his job, lost his insurance and couldn't afford to take his meds which would have prevented the massive stroke that paralyzed him 3 weeks later. This was 10 years ago and his rehabilitation is still ongoing. His wife can't work and is his full-time caretaker. Multiple lives destroyed because we as a society can't get a system together where it makes rational sense to provide this man with the couple cents worth of pills that would have prevented this calamity. It's the same story with every other chronic disease and health care issue - just massive amounts of human suffering that could be avoided.

istjohn 7y ago
Not to mention the societal costs incurred by failing to provide mental health services to everyone.
pnutjam 7y ago
Just look what a lack of mental healthcare has done to the country...

wahern 7y ago

In 2017 retail prescription drug expenditures were $333 billion, accounting for just 10% of total healthcare expenditures.[1] I realize prescription drug prices are insane, the patent regime is broken, and the industry is generally messed up. But at 10%, relying on lower cost prescription drugs to save the day isn't going to help. People feel it's a bigger issue than it is (relative to the overall problem), because it's one of the few aspects with which most people have regular and direct experience, including with pricing. Likewise, total billing and insurance related (BIR) administrative costs are ~$500 billion.[2] (Year unknown.) Or roughly 15% of total healthcare expenditures. And that's up from $471 billion in 2012[3], even though the ACA capped insurance provider administrative overhead and instituted many other reforms intended to address these costs. Plus, it's odd that people on both the left and the right who are convinced that lobbyists control Washington will simultaneously hold the notion in their head that either a public option or single-payer would be able to consistently cap reimbursements and contain costs. If they're right then it's a miracle Medicare and Medicaid do as it as much as they do, and impossible for it to do so once the Federal government is directly reimbursing the majority of healthcare expenditures. Indeed, if it were possible then defense expenditures would be more efficient and a fraction of what they currently are. These rosy estimates are ridiculous. We have over 10 years of direct experience with substantial and serious healthcare reform. Obamacare attempted and does enact a variant of almost every concrete reform imaginable. Whatever you think of Obamacare, you can't deny that it has provided mountains of empirical data about the difficulties and promises of containing costs. And yet Obamacare opponents on both sides--those who want to return to the pre-Obamacare system, and those who want a public option or single-payer--willfully ignore the evidence, unchastened by reality. A California congressional committee looked at the potential costs for single-payer in the state and it would have required an additional $200 billion/year in tax revenue even after accounting for diverting existing private and Federal expenditures. That's what a cold, hard, realistic examination of the facts looks like even by those predisposed to enacting it. Maybe that $200 billion would be worth it; from a moral perspective it certainly seems so. But to deny the costs is to invite failure and financial ruin as not even a majority of Californians, let alone Americans, are willing to make that sacrifice. We need to figure out how to better solve the cost problems before we continue to wade further into the waters. Otherwise we're just going to drown. If you look at all the other healthcare systems around the world with both better outcomes and lesser costs, neither single-payer nor a public option are defining characteristics. Rather, they run the gamut from mostly private to mostly public. It we can't lower costs with Obamacare, which has both substantial public and private components (and thus opportunities for exploring structural efficiencies across the spectrum), switching to single-payer or a public option won't move the needle. [1] https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/highlights.pdf https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta... [2] https://www.americanprogress.org/issues/healthcare/reports/2019/04/08/468302/excess-administrative-costs-burden-u-s-health-care-system/ https://www.americanprogress.org/issues/healthcare/reports/2... [3] https://www.ncbi.nlm.nih.gov/pubmed/25540104 https://www.ncbi.nlm.nih.gov/pubmed/25540104

charwalker 7y ago

I worked ops support at a local heath insurance group of maybe 250 people. We had an entire floor the building next to us dedicated to billing and 30-40 billers with some of the older employees making upwards of $75k a year not to mention the infrastructure and systems to support that department. With a universal system, those costs (and jobs) would evaporate to the tune of millions per year in salaries alone. For the employees, each of them could quickly retrain or just shift into other departments as needed as most staff did when the company was acquired and IT admins moved to PM or lead roles in other departments. #2 exists and would have a huge impact not only on the industry but your time and mine. I've spent maybe 8 hours this year already just working with medical billing groups to pay up and already spent close to $2000 between my partner and I with an estimate $4-6000 before the end of the year without doing a sleep study which I greatly need. Universal is definitely cheaper. All we have to do is compare ourselves to just about every other western democracy to see ow.

ChrisLomont 7y ago

> calculated by extrapolating the overhead in medicare to the entire US healthcare economy Many friends in healthcare have pointed out (correctly it seems) that medicare has lower overhead because medicare shifted that cost onto the existing admin, and many places lose money on medicare, but are forced to take it. So it's simply not possible to extrapolate that to all hospitals without bankrupting many. Here's a WaPo article with ample links to peer reviewed papers on the issue. (Note the part WaPo rates as false is that ALL hospitals would close; WaPo does admit with cited sources that there is ample evidence Medicare pricing would cause less service and less capacity from many fronts). https://www.washingtonpost.com/politics/2019/07/03/would-medicare-for-all-mean-hospitals-none/ https://www.washingtonpost.com/politics/2019/07/03/would-med...

Barrin92 7y ago

>From what I have been told by healthcare professionals, medicare has less incentive to negotiate cost, less incentive to investigate fraud, and therefore lower administrative cost. I don't think that's more likely to explain the cost saving than the sheer scale advantages of having a unified bureaucracy rather than countless of small insurance agents. I will dig the source out when I'm home but (I think it was Paul Krugman) who went over the administrative overhead in one of his blog posts. Medicare and Medicaid both have administrative costs of less than 1% of their budget, the private industry clocks in at more than 15-18% IIRC. I have trouble believing that this is mainly fraud detection considering that it's consistent across other countries with consolidated healthcare sectors. A single large administration can simply streamline these processes better than thousands of individual companies. To be frank the insurance industry seems mostly like an employment program for the middle class white collar sector.

tptacek 7y ago

I wrote this comment before reading the excellent comment 'wahern wrote, so I'm getting rid of my redundant point about pharma and admin as a percentage of overall spending. Rather, I'd like to point out something that I haven't seen discussed. Maybe someone here can knock it down. Health care spending increases drastically and nonlinearly after age 55. Medicare's admin overhead is in part a consequence of the cohort of patients it serves: they receive more medical services than everyone else, and so more of their medical spending goes to services relative to administrative costs. Conversely, younger patients receive relatively few medical services, and the services they receive are much less expensive. Compared to that lower amount, fixed administrative costs are a higher percentage of their medical spending. Some admin costs scale directly with the costs of services rendered, but others don't. As a result, it seems pretty clear that Medicare's admin overhead ratio would necessarily be higher if it covered everyone, and that any result taken by extrapolating current administrative overhead to the whole population would be dubious.

aaavl2821 7y ago

Does the study also look at lower provider and hospital costs? Spending on hospital and providers makes up ~50% of US healthcare spend according to CDC. Rx spend is between 10-20% and admin overhead is 30% or so I wonder why this paper didn't contemplate effect of Medicare for all on hospital and provider spend?