7 ms·

First of all thanks for the book, it was a formative read for me as I started out in healthcare data and programming. Second of all, I can’t just upvote, this

by entee 6y ago

First of all thanks for the book, it was a formative read for me as I started out in healthcare data and programming. Second of all, I can’t just upvote, this is so so accurate. The thing to remember in US healthcare is there’s actually not a single entity that has an incentive to be efficient. There are some incentives scattered through the system to pay less or to not get sued, those are not the same. To a first approximation nobody spends money in healthcare except insurers and the government. The government just says what they’ll pay, and where they can’t, they have limited negotiating ability. You’d think an insurer would care about paying less, but they actually don’t. They care about predictability. How much are costs going to rise next year? If you’re right, you make money. If you’re wrong you lose money. That’s not really an incentive to reduce costs in the absolute because the people who pay for insurance are not patients but employers. As an employer I care about my health insurance plan’s cost. BUT I also have no clue about what one plan vs another really means or how they’re maybe gonna save me money long term. I simply don’t have the time to understand that, and I’m probably more informed than most on the subject having worked in the sector. I too care about predictability more than cost. Crazy part of the pandemic, during a historic health crisis many medical systems were facing bankruptcy. Why? Most of the money being paid with a good profit margin into these systems is for “elective” care. This includes cancer treatment, because surgery can take place today or a week from now and it doesn’t matter that much. Contrast to a heart attack, which is non-elective. When a pandemic rolls around, all elective care gets shut down, so hospitals lose money despite being needed more than ever. The whole system is a zombie with none of the right incentives, no clear way to even measure the right outcomes, and worse: nobody is driving the ship.

lotsofpulp 6y ago
> As an employer I care about my health insurance plan’s cost. BUT I also have no clue about what one plan vs another really means or how they’re maybe gonna save me money long term. I simply don’t have the time to understand that, and I’m probably more informed than most on the subject having worked in the sector. I too care about predictability more than cost. As an employer, my insurance brokers are able to show me very easy to compare tables listing premiums/deductibles/oop max/copays. It’s all pretty comparable as long as you’re comparing within the same types of networks (HMO/PPO/EPO/etc), especially with metal levels. If anything, HDHP PPO plans or Kaiser Permanente type HDHP HMO plans do have an incentive to keep costs down as they compete with each other for my business. I’ve been able to go to my health insurance website, and type in a healthcare procedure or exam and it will usually tell me the cost at various facilities. Nowhere near perfect, but a good start towards price transparency. This all would work a lot better if everyone was forced to buy health insurance from healthcare.gov and employers were completely removed from the equation.
- entee 6y ago
  You’re totally right, and I love those charts. But let’s be clear about what they’re telling us: what we are buying for our employees. It provides no information about how those costs will increase or any “gotcha” features of the plan. While it provides information about a copay and percentage an employee pays and a deductible, I have no clue if plan 1 has negotiated 25% lower prices from the local hospital system vs its competitor. Likely, all the major plans have more or less the same negotiated rates with providers, but that opacity makes it even harder for anyone to drive efficiency. Kaiser is a very interesting example actually. Because they own both sides of the business (provider AND payer) they have a big incentive to be efficient. They do pretty well! There’s a few issues: 1.) they are still part of a larger market, so they have to pay for doctors, which means they can’t be TOO far below market salaries. Many doctors are paid on both salary and based on how many and what procedures they do i.e. how much revenue they bring to the hospital. Your doctor in many cases is paid on commission. Kaiser doesn’t do this, which some docs like, but others don’t. 2.) they are regionally limited. You can’t get Kaiser in a lot of places in the US. I’m not sure why it hasn’t scaled nationally, I’d really love to know. Oddly, I’m told by a friend who works there that Kaiser is run internally as two halves, the insurer and the provider, they then negotiate somewhat independently and keep each other accountable. Anyway, my pet project is something like what you suggest, decoupling insurance for employment. As an employer (and by extension an employee) I pay no taxes on a health plan I buy. I pay with pre-tax $$. As an individual if I buy insurance I pay with post tax $$ unless it makes up a certain percentage of my income and that falls above some threshold and... I lost track it’s too complicated. It shouldn’t be, there should be a way to properly decouple employment and healthcare.
  - lotsofpulp 6y ago
    >But let’s be clear about what they’re telling us: what we are buying for our employees. It provides no information about how those costs will increase or any “gotcha” features of the plan. You're definitely right about this, but in my experience, they're all the same negotiated pricing. And the insurance companies will conveniently group different doctors/healthcare facilities based on their costs into different tiers. You can also be sure prices will keep going up, and I like to assume that I am liable for my out of pocket maximum since healthcare providers just bill willy nilly anyway, so I know I need to keep enough cash for 2 years worth of out of pocket expenses (in case something happens in Nov/Dec of one year and carries into next year). Hint: plan to have babies in April/May, so any complications all get stuffed into one plan year, and you hit out of pocket maximum sooner. Plus you avoid the new inexperienced resident doctors coming in during June. >It shouldn’t be, there should be a way to properly decouple employment and healthcare. It's really simple, remove the tax benefit from employers purchasing health insurance, and give it only to individuals purchasing on healthcare.gov. Ideally no one would have a tax benefit period, and everyone would be forced to go to healthcare.gov and employer plans and whatnot would be outlawed. Politically, big business will fight that though since price transparency helps people compare job offers properly and makes it easier for people to change jobs.
malloryerik 6y ago
From what you can tell, is there any real and sensible reason for having health insurance paid by employers? Is it just an artifact of the past? I honestly can't see a single benefit from this system.
- Xylakant 6y ago
  It’s an accident. The TL;DR is: During WW2 wages were frozen and employers were looking for benefits they could offer to hire workers. Health care was one. https://www.nytimes.com/2017/09/05/upshot/the-real-reason-the-us-has-employer-sponsored-health-insurance.html https://www.nytimes.com/2017/09/05/upshot/the-real-reason-th...
  - eru 6y ago
    And afterwards wages were pro-forma unfrozen, but income tax went up to ridiculous levels in the higher brackets like 90%. So sneaking some tax free compensation to your employees was just as valuable.
dwighttk 6y ago
How do proponents of “Medicare for all” propose to fix any of these issues? (Honestly, not trying to stir the pot)
- gvjddbnvdrbv 6y ago
  Nationalised health systems work very hard on cost control. There is a lot of FUD spread about e.g. the UK's NHS but the actual numbers show that it provides an excellent healthcare service to everyone for the same amount as Medicare+Medicade+health insurance for federal and state employees (in total via these channels half the people in the US have their healthcare paid for by the US taxpayer). I.e. the NHS is nearly twice as efficient as the US system. I guess just copy their methods?
  - arethuza 6y ago
    I'd imagine the lack of billing staff at NHS hospitals probably helps keep the cost down quite a bit?
    - gvjddbnvdrbv 6y ago
      Sadly they've added a billing system for 'health tourism'. Before that they didn't ask too many questions just treated people. I guess the billing system pays for itself? Not sure.
    - pc86 6y ago
      In the US medical billers make like $8/hr, I'm not sure that's a huge cost center compared to the $400k/yr physician.
      - ric2b 6y ago
        But is the ratio 1 to 1? Or are there way more medical billers than physicians? Anyway, it's an unnecessary cost.
        6y ago
TeMPOraL 6y ago
> When a pandemic rolls around, all elective care gets shut down, so hospitals lose money despite being needed more than ever. Sort of off-topic, but I'm increasingly starting to believe that this kind of complexity in business models should be disallowed in general. I mean in particular the cases of selling something with a high margin in order to fund something else that's sold at or below costs. Be it related items ("razor and blades model") or unrelated (elective vs. non-elective care). My usual reason is that it's anti-competitive and allocates incentives in the exactly wrong way, leading to ridiculous waste (that's how we get throwaway printers with expensive cartridges), but healthcare example points to another problem: stability. A critical system whose functionality is strongly subsidized by "extra offerings" is a system that fails when those extras aren't being bought for some reason. In engineering, simplicity is desirable. So should it be in business. After all, transparent pricing is important for proper functioning of free markets, and such schemes confuse the pricing.
- truckerbill 6y ago
  Very much agreed. Systems thinking should be taught from kindergarten.
- biztos 6y ago
  The "razor and blades model" is maybe not the best example here, as it's entirely voluntary for the consumer. The ads convinced me to buy overpriced Mach 3 blades for 20 years, but at no time was I prevented from buying a safety razor and having cheap blades and a better shave. I could even buy one from Gillette if I really wanted to. I'm not sure I'd want regulation protecting me from being a wasteful consumer, but I do think that something as important as a hospital shouldn't be allowed to run on whatever Ponzi scheme is momentarily profitable. Perhaps we could regulate them more like we do banks? Something about maintaining certain critical capacity, or you lose your license to facelift?
- maxerickson 6y ago
  This would destroy the ability of businesses to take on fixed costs. Or imagine a hospital that only did high margin elective care. Instead of keeping the low margin service available while it struggled financially, it just wouldn't offer any services. Winning! Interestingly, loss/waste aversion has caused problems in US healthcare. CON laws haven't done anybody any good, save incumbent hospitals.

by entee 6y ago

lotsofpulp 6y ago

> As an employer I care about my health insurance plan’s cost. BUT I also have no clue about what one plan vs another really means or how they’re maybe gonna save me money long term. I simply don’t have the time to understand that, and I’m probably more informed than most on the subject having worked in the sector. I too care about predictability more than cost. As an employer, my insurance brokers are able to show me very easy to compare tables listing premiums/deductibles/oop max/copays. It’s all pretty comparable as long as you’re comparing within the same types of networks (HMO/PPO/EPO/etc), especially with metal levels. If anything, HDHP PPO plans or Kaiser Permanente type HDHP HMO plans do have an incentive to keep costs down as they compete with each other for my business. I’ve been able to go to my health insurance website, and type in a healthcare procedure or exam and it will usually tell me the cost at various facilities. Nowhere near perfect, but a good start towards price transparency. This all would work a lot better if everyone was forced to buy health insurance from healthcare.gov and employers were completely removed from the equation.

entee 6y ago
You’re totally right, and I love those charts. But let’s be clear about what they’re telling us: what we are buying for our employees. It provides no information about how those costs will increase or any “gotcha” features of the plan. While it provides information about a copay and percentage an employee pays and a deductible, I have no clue if plan 1 has negotiated 25% lower prices from the local hospital system vs its competitor. Likely, all the major plans have more or less the same negotiated rates with providers, but that opacity makes it even harder for anyone to drive efficiency. Kaiser is a very interesting example actually. Because they own both sides of the business (provider AND payer) they have a big incentive to be efficient. They do pretty well! There’s a few issues: 1.) they are still part of a larger market, so they have to pay for doctors, which means they can’t be TOO far below market salaries. Many doctors are paid on both salary and based on how many and what procedures they do i.e. how much revenue they bring to the hospital. Your doctor in many cases is paid on commission. Kaiser doesn’t do this, which some docs like, but others don’t. 2.) they are regionally limited. You can’t get Kaiser in a lot of places in the US. I’m not sure why it hasn’t scaled nationally, I’d really love to know. Oddly, I’m told by a friend who works there that Kaiser is run internally as two halves, the insurer and the provider, they then negotiate somewhat independently and keep each other accountable. Anyway, my pet project is something like what you suggest, decoupling insurance for employment. As an employer (and by extension an employee) I pay no taxes on a health plan I buy. I pay with pre-tax $$. As an individual if I buy insurance I pay with post tax $$ unless it makes up a certain percentage of my income and that falls above some threshold and... I lost track it’s too complicated. It shouldn’t be, there should be a way to properly decouple employment and healthcare.
- lotsofpulp 6y ago
  >But let’s be clear about what they’re telling us: what we are buying for our employees. It provides no information about how those costs will increase or any “gotcha” features of the plan. You're definitely right about this, but in my experience, they're all the same negotiated pricing. And the insurance companies will conveniently group different doctors/healthcare facilities based on their costs into different tiers. You can also be sure prices will keep going up, and I like to assume that I am liable for my out of pocket maximum since healthcare providers just bill willy nilly anyway, so I know I need to keep enough cash for 2 years worth of out of pocket expenses (in case something happens in Nov/Dec of one year and carries into next year). Hint: plan to have babies in April/May, so any complications all get stuffed into one plan year, and you hit out of pocket maximum sooner. Plus you avoid the new inexperienced resident doctors coming in during June. >It shouldn’t be, there should be a way to properly decouple employment and healthcare. It's really simple, remove the tax benefit from employers purchasing health insurance, and give it only to individuals purchasing on healthcare.gov. Ideally no one would have a tax benefit period, and everyone would be forced to go to healthcare.gov and employer plans and whatnot would be outlawed. Politically, big business will fight that though since price transparency helps people compare job offers properly and makes it easier for people to change jobs.

malloryerik 6y ago

From what you can tell, is there any real and sensible reason for having health insurance paid by employers? Is it just an artifact of the past? I honestly can't see a single benefit from this system.

Xylakant 6y ago
It’s an accident. The TL;DR is: During WW2 wages were frozen and employers were looking for benefits they could offer to hire workers. Health care was one. https://www.nytimes.com/2017/09/05/upshot/the-real-reason-the-us-has-employer-sponsored-health-insurance.html https://www.nytimes.com/2017/09/05/upshot/the-real-reason-th...
- eru 6y ago
  And afterwards wages were pro-forma unfrozen, but income tax went up to ridiculous levels in the higher brackets like 90%. So sneaking some tax free compensation to your employees was just as valuable.

dwighttk 6y ago

How do proponents of “Medicare for all” propose to fix any of these issues? (Honestly, not trying to stir the pot)

gvjddbnvdrbv 6y ago
Nationalised health systems work very hard on cost control. There is a lot of FUD spread about e.g. the UK's NHS but the actual numbers show that it provides an excellent healthcare service to everyone for the same amount as Medicare+Medicade+health insurance for federal and state employees (in total via these channels half the people in the US have their healthcare paid for by the US taxpayer). I.e. the NHS is nearly twice as efficient as the US system. I guess just copy their methods?
- arethuza 6y ago
  I'd imagine the lack of billing staff at NHS hospitals probably helps keep the cost down quite a bit?
  - gvjddbnvdrbv 6y ago
    Sadly they've added a billing system for 'health tourism'. Before that they didn't ask too many questions just treated people. I guess the billing system pays for itself? Not sure.
  - pc86 6y ago
    In the US medical billers make like $8/hr, I'm not sure that's a huge cost center compared to the $400k/yr physician.
    - ric2b 6y ago
      But is the ratio 1 to 1? Or are there way more medical billers than physicians? Anyway, it's an unnecessary cost.
      - 6y ago

TeMPOraL 6y ago

> When a pandemic rolls around, all elective care gets shut down, so hospitals lose money despite being needed more than ever. Sort of off-topic, but I'm increasingly starting to believe that this kind of complexity in business models should be disallowed in general. I mean in particular the cases of selling something with a high margin in order to fund something else that's sold at or below costs. Be it related items ("razor and blades model") or unrelated (elective vs. non-elective care). My usual reason is that it's anti-competitive and allocates incentives in the exactly wrong way, leading to ridiculous waste (that's how we get throwaway printers with expensive cartridges), but healthcare example points to another problem: stability. A critical system whose functionality is strongly subsidized by "extra offerings" is a system that fails when those extras aren't being bought for some reason. In engineering, simplicity is desirable. So should it be in business. After all, transparent pricing is important for proper functioning of free markets, and such schemes confuse the pricing.

truckerbill 6y ago
Very much agreed. Systems thinking should be taught from kindergarten.
biztos 6y ago
The "razor and blades model" is maybe not the best example here, as it's entirely voluntary for the consumer. The ads convinced me to buy overpriced Mach 3 blades for 20 years, but at no time was I prevented from buying a safety razor and having cheap blades and a better shave. I could even buy one from Gillette if I really wanted to. I'm not sure I'd want regulation protecting me from being a wasteful consumer, but I do think that something as important as a hospital shouldn't be allowed to run on whatever Ponzi scheme is momentarily profitable. Perhaps we could regulate them more like we do banks? Something about maintaining certain critical capacity, or you lose your license to facelift?
maxerickson 6y ago
This would destroy the ability of businesses to take on fixed costs. Or imagine a hospital that only did high margin elective care. Instead of keeping the low margin service available while it struggled financially, it just wouldn't offer any services. Winning! Interestingly, loss/waste aversion has caused problems in US healthcare. CON laws haven't done anybody any good, save incumbent hospitals.