7 ms·

I work in this industry (on administration, no less) and sometimes even adjust claims myself, so I can speak to this with experience. 1/3 of US healthcare spen

by bhupy 5y ago

I work in this industry (on administration, no less) and sometimes even adjust claims myself, so I can speak to this with experience. 1/3 of US healthcare spending is absolutely not from administration fees. Here is a more concrete breakdown of all of the cost components, compared with the same in peer countries: https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/ https://www.healthsystemtracker.org/brief/what-drives-health... If you look at the breakdown, the vast majority of the cost difference comes from just the raw cost of inpatient and outpatient care. Even if you were to completely zero out the administrative costs per capita, you'd hardly make a dent in bridging the gap. > The free market is not a solution to the problem of healthcare spending. Consumers do not have enough information, they aren't in position to refuse treatment if it's too expensive, and hospitals aren't in a position to turn someone away if they can't pay. It depends on what you mean by "healthcare". "Healthcare" is way too broad to have useful conversations. What constitutes "healthcare"? Getting the flu? Vaccines? Annual physicals? Routine treatments? Brain surgery? Cancer? It's a spectrum. There are some parts of healthcare that are highly predictable and fungible, and some that aren't. Whether or not a market can provision predictable/plannable healthcare is quite debatable. Also, what we have in the US is nowhere close to a free market in healthcare, so making this argument is a bit of a non sequitur. > The rest of the developed world has figured this out but we're too stubborn to adopt what is undoubtedly a better system. The rest of the developed world isn't a monolith. Singapore, Switzerland, the UK, Denmark, Germany, and the Netherlands all have wildly different healthcare systems, but all produce fairly good outcomes! All have dramatically different levels of privatization, market mechanisms, and welfare generosity.

onlyrealcuzzo 5y ago
> The rest of the developed world isn't a monolith. Singapore, Switzerland, the UK, Denmark, Germany, and the Netherlands all have wildly different healthcare systems, but all produce fairly good outcomes! All have dramatically different levels of privatization, market mechanisms, and welfare generosity. This is why I'm interested why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it.
- JohnFen 5y ago
  > why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it. I'm not only not obsessed with the idea, but I'm not sure that would be a desirable way to go. That said, the healthcare system in the US is way beyond broken, and I don't see how it can possibly be fixed by half measures. Something really drastic is required. It's not hard to see why some people reach the "burn it all down" position.
  - bhupy 5y ago
    Depends on what you mean by "half measures". One way we can dramatically improve the status quo is by decoupling health insurance from employment (effectively bringing the US to parity with Switzerland). Tactically speaking, it could conceivably be achieved by enacting a series of what some might consider "half measures": - Simply getting rid of the Federal employer mandate as well as the payroll tax deductibility for group health insurance premiums could go a long way. A lot of employers really don't want to be in the business of hiring monster HR teams that spend the majority of their time becoming health insurance experts... - Expanding ICHRAs (https://news.ycombinator.com/item?id=22527102 https://news.ycombinator.com/item?id=22527102) can also go a long way.
    - username90 5y ago
      Making it illegal for health insurance companies to discriminate based on employment status would be a good first step. This includes not being allowed to giving rebates to company plans. Such a law would have popular support, but probably will never be done since politicians are friends with the insurance companies who needs the costs to be opaque.
  - iammisc 5y ago
    What is broken about it really? Having been insured my whole life, I've never dealt with hospital issues, and we've had several major medical events (complicated pregnancies mainly, lots of time in the emergency room, etc). For the most part, I pay the max out-of-pocket every year, and then I pay nothing more. It's not particularly difficult to deal with. The only annoying part is after your first ER / doctor visits each year, you end up with a bunch of different random charges from people that you have to pay separately. It's an annoyance, but hardly one that requires us to 'burn it all down'. This year I have an HDHP and an HSA, so I have more of those, but I also have an HSA. As an example, my wife's first pregnancy probably cost about $200k nominally, but I paid... $2000-3000 at most. The only real 'issue' I see is the tying of health insurance to employment, but there are straightforwards ways to get around that (federal incentives to purchase your own health insurance, and then employers can pass along savings so employees can purchase themselves). For me, I've never been unemployed longer than COBRA so it's not been an issue. There are a lot of good things about America's system. My wife's pregnancies are extremely complicated. Many doctors said to give up. However, we searched and searched for a doctor to help, and we figured out what works. Basically, for unknown reasons (although many plausible ones that cannot be confirmed), she needs to take an expensive blood thinner during pregnancy or the baby dies. Since her tests don't come back for the 'standard' conditions this works for, it is difficult finding a doctor willing to prescribe. In fact, we didn't even know it was an option, until we went all over the country to various experts. Due to the free market, we were able to get to these experts in a matter of weeks. Similar experts in countries with socialized systems have long queues. When it comes to the medication, due to the fact that we are the ones that pay (via insurance), not the government, as long as we can pay, we can continue to live our lives and have our children. Based on our conversations with other women in my wife's position in countires with socialized medicine, they have to really advocate for themselves in ways we do not in order to get their government to even provide the medication or pay for it. Many wait months before they are able to get someone. Every once in a while the government revokes access because some bureaucrat says it's not medically indicated. We've never had that. Should her doctor decide to do that and sentence our child to certain death, we have several backup doctors willing to prescribe the medication. Some moms in other countries we're in contact with have been cut off from the medication and subsequently had miscarriages in the second or third trimester. This is insane. I'm glad to live here. We recently moved, and just scheduled a bunch of appointments and asked the doctors point blank whether they'd consider it based on her history. Some said no, others said yes. In a few weeks, we figured out what her friend over in Canada took many, many months to figure out. When it comes to pregnancy, months matter. 24 months of waiting can drastically change the spectra of outcomes in a women's pregnancy, especially given the age at which many women have children these days. Same with things like surgeries and such. My relatives in countries with socialized care are waiting many months for things Americans get in a few days.
wefarrell 5y ago
I also work in the industry, specifically in claims processing and you're wrong. In the link that you sent they are not including administrative costs from providers: > Administrative costs include spending on running governmental health programs and overhead from insurers but exclude administrative expenditures from healthcare providers
- bhupy 5y ago
  Yes, and that's because administrative expenditures from healthcare providers (specifically in claims processing, again I do this every day for a living) amortized per capita like it's done in this study is negligible. There's an upfront cost to setting up EHR systems to facilitate claims processing, and there's a variable cost to handling claims disputes, but they're a drop in the bucket compared to the actual patient costs, which we know to be in the tens of thousands of dollars per capita. There are a bajillion different reasons why raw costs are so high, but admin overhead isn't one of them.
  - wefarrell 5y ago
    That's simply not true. Administrative costs account for 25% of a hospital's budget and 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... In the study that you sent they would be included under the inpatient and outpatient costs rather than administrative.
    - bhupy 5y ago
      Yeah but you're mixing up denominators. The question is how you factor in 25% of a hospital's budget to the per capita cost of healthcare provision in the link that I included, which includes all other costs. Those other costs are so high that that even zeroing out the administrative cost doesn't do much to bridge the gap. I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries. Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either.

by bhupy 5y ago

onlyrealcuzzo 5y ago

> The rest of the developed world isn't a monolith. Singapore, Switzerland, the UK, Denmark, Germany, and the Netherlands all have wildly different healthcare systems, but all produce fairly good outcomes! All have dramatically different levels of privatization, market mechanisms, and welfare generosity. This is why I'm interested why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it.

JohnFen 5y ago
> why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it. I'm not only not obsessed with the idea, but I'm not sure that would be a desirable way to go. That said, the healthcare system in the US is way beyond broken, and I don't see how it can possibly be fixed by half measures. Something really drastic is required. It's not hard to see why some people reach the "burn it all down" position.
- bhupy 5y ago
  Depends on what you mean by "half measures". One way we can dramatically improve the status quo is by decoupling health insurance from employment (effectively bringing the US to parity with Switzerland). Tactically speaking, it could conceivably be achieved by enacting a series of what some might consider "half measures": - Simply getting rid of the Federal employer mandate as well as the payroll tax deductibility for group health insurance premiums could go a long way. A lot of employers really don't want to be in the business of hiring monster HR teams that spend the majority of their time becoming health insurance experts... - Expanding ICHRAs (https://news.ycombinator.com/item?id=22527102 https://news.ycombinator.com/item?id=22527102) can also go a long way.
  - username90 5y ago
    Making it illegal for health insurance companies to discriminate based on employment status would be a good first step. This includes not being allowed to giving rebates to company plans. Such a law would have popular support, but probably will never be done since politicians are friends with the insurance companies who needs the costs to be opaque.
- iammisc 5y ago
  What is broken about it really? Having been insured my whole life, I've never dealt with hospital issues, and we've had several major medical events (complicated pregnancies mainly, lots of time in the emergency room, etc). For the most part, I pay the max out-of-pocket every year, and then I pay nothing more. It's not particularly difficult to deal with. The only annoying part is after your first ER / doctor visits each year, you end up with a bunch of different random charges from people that you have to pay separately. It's an annoyance, but hardly one that requires us to 'burn it all down'. This year I have an HDHP and an HSA, so I have more of those, but I also have an HSA. As an example, my wife's first pregnancy probably cost about $200k nominally, but I paid... $2000-3000 at most. The only real 'issue' I see is the tying of health insurance to employment, but there are straightforwards ways to get around that (federal incentives to purchase your own health insurance, and then employers can pass along savings so employees can purchase themselves). For me, I've never been unemployed longer than COBRA so it's not been an issue. There are a lot of good things about America's system. My wife's pregnancies are extremely complicated. Many doctors said to give up. However, we searched and searched for a doctor to help, and we figured out what works. Basically, for unknown reasons (although many plausible ones that cannot be confirmed), she needs to take an expensive blood thinner during pregnancy or the baby dies. Since her tests don't come back for the 'standard' conditions this works for, it is difficult finding a doctor willing to prescribe. In fact, we didn't even know it was an option, until we went all over the country to various experts. Due to the free market, we were able to get to these experts in a matter of weeks. Similar experts in countries with socialized systems have long queues. When it comes to the medication, due to the fact that we are the ones that pay (via insurance), not the government, as long as we can pay, we can continue to live our lives and have our children. Based on our conversations with other women in my wife's position in countires with socialized medicine, they have to really advocate for themselves in ways we do not in order to get their government to even provide the medication or pay for it. Many wait months before they are able to get someone. Every once in a while the government revokes access because some bureaucrat says it's not medically indicated. We've never had that. Should her doctor decide to do that and sentence our child to certain death, we have several backup doctors willing to prescribe the medication. Some moms in other countries we're in contact with have been cut off from the medication and subsequently had miscarriages in the second or third trimester. This is insane. I'm glad to live here. We recently moved, and just scheduled a bunch of appointments and asked the doctors point blank whether they'd consider it based on her history. Some said no, others said yes. In a few weeks, we figured out what her friend over in Canada took many, many months to figure out. When it comes to pregnancy, months matter. 24 months of waiting can drastically change the spectra of outcomes in a women's pregnancy, especially given the age at which many women have children these days. Same with things like surgeries and such. My relatives in countries with socialized care are waiting many months for things Americans get in a few days.

wefarrell 5y ago

I also work in the industry, specifically in claims processing and you're wrong. In the link that you sent they are not including administrative costs from providers: > Administrative costs include spending on running governmental health programs and overhead from insurers but exclude administrative expenditures from healthcare providers

bhupy 5y ago
Yes, and that's because administrative expenditures from healthcare providers (specifically in claims processing, again I do this every day for a living) amortized per capita like it's done in this study is negligible. There's an upfront cost to setting up EHR systems to facilitate claims processing, and there's a variable cost to handling claims disputes, but they're a drop in the bucket compared to the actual patient costs, which we know to be in the tens of thousands of dollars per capita. There are a bajillion different reasons why raw costs are so high, but admin overhead isn't one of them.
- wefarrell 5y ago
  That's simply not true. Administrative costs account for 25% of a hospital's budget and 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... In the study that you sent they would be included under the inpatient and outpatient costs rather than administrative.
  - bhupy 5y ago
    Yeah but you're mixing up denominators. The question is how you factor in 25% of a hospital's budget to the per capita cost of healthcare provision in the link that I included, which includes all other costs. Those other costs are so high that that even zeroing out the administrative cost doesn't do much to bridge the gap. I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries. Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either.