5 ms·

This is why we need reference based pricing. You can't charge more than 1.2 * Medicare and if you pay cash, you get the Medicare price. This change alone would

This is why we need reference based pricing. You can't charge more than 1.2 * Medicare and if you pay cash, you get the Medicare price. This change alone would remove 25+% of unnecessary bloat from the US system.

nickff 5y ago
>"This change alone would remove 25+% of unnecessary bloat from the US system." Where do you think the money is going? Insurance companies are not as profitable as you might think, drugs are not a massive burden on healthcare expenditures, and many hospitals are non-profits. The truth is that most of the money is going to staff wages; if you want to reduce healthcare spending, the only way to do it sustainably is to increase the numbers of doctors and nurses, so as to drive down their salaries (but this is not a popular option).
- kazinator 5y ago
  > many hospitals are non-profits. That can't possibly be true of a hospital that charged $3000 for something on Tuesday, and $53000 for the same thing on Friday. (Under reasonable assumptions like that Tuesday wasn't done at a $25K loss relative to breaking even; why would such be the case? And that they are busy with procedures, not simply doing a way overpriced procedure once every few weeks, and then just burning through cash in between that time.)
  - nickff 5y ago
    Very few hospitals do cost-accounting, so they don't even know how much things cost; this results in the inconsistencies you see in prices. From Wikipedia: >"In 2003, of the roughly 3,900 nonfederal, short-term, acute care general hospitals in the United States, the majority—about 62 percent—were nonprofit. The rest included government hospitals (20 percent) and for-profit hospitals (18 percent)" https://en.wikipedia.org/wiki/Non-profit_hospital https://en.wikipedia.org/wiki/Non-profit_hospital
    - kazinator 5y ago
      If you don't know how much things cost, how can you say you're doing accounting? If you're doing accounting you have a ledger which balances down to the penny, and the expenses are spelled out in there with concrete amounts. This is why that judge, as noted in the article, rejected the argument that the cost of an X-ray can be unknowable.
      - nickff 5y ago
        Cost accounting consists of more than just balancing a chequebook to the penny; you need to attribute expenses to specific procedures, which can get a bit tricky. It requires discipline and cooperation throughout the organization, which would likely be a huge change for hospitals (as I'm certain doctors would be loathe to log their time like lawyers do).
        kazinator 5y ago
        OK, so if my company knows how much it's spending on toilet paper for the washroom, but doesn't know exactly which departments are wiping how much ass, then we are not doing cost accounting though we are tracking the bulk expense properly in the ledger. We are not able to answer the question of how much toilet paper is required to operate our marketing department, for instance.
        nickff 5y ago
        Widely used supplies like that are usually just put into a general overhead account, sometimes specific to a department. Healthcare companies would need to attribute things like depreciation of equipment (MRIs & CAT scanners for example), as well as doctor and nurse time (outside of operating rooms). These things are generally not tracked accurately, and many professionals are indignant at the idea that they could be.
  - BurningFrog 5y ago
    PSA: Non profits can be as greedy as any other organization. Typically the money goes to wages for the leadership rather than profits to the owners.
    - kazinator 5y ago
      Yes; basically it's just a classification combined with an accounting strategy.
      - nickff 5y ago
        The most famous (infamous?) example of this was the Hughes Medical Foundation.
    - lostlogin 5y ago
      > Non profits can be as greedy as any other organization. The term ‘non-profit’ is one I find hilarious. With the smoke and mirrors of accounting and standard insurance company behaviour it can mean anything. The directors can get bonuses, the cars can be upgraded and the conferences/holidays can get more impressive. It’s surprising that ‘non-profit’ doesn’t generate an eye-roll in more people.
- eganist 5y ago
  > increase the numbers of doctors and nurses and tort reform to manage the lawsuits to enable lower malpractice insurance costs. and a scheme to drive down med school pricing. Maybe more competition? Enabling more MD and DO schools? There are <200 medical schools (both MD and DO schools) in the US.
  - iratewizard 5y ago
    Medical errors cause an estimated 250,000 deaths in the United States annually.
  - nradov 5y ago
    Tort reform only helps a little. In fact several US states have already implemented major tort reform and their healthcare costs aren't significantly lower. Doctors still tend to practice defensive medicine and err on the side of doing too much rather than too little. The current bottleneck in producing more physicians isn't medical schools but rather funded residency program slots. Every year some students graduate from medical school but are unable to actually practice medicine because they don't get matched to a residency program. We need Congress to increase funding. https://www.ama-assn.org/press-center/press-releases/ama-fund-graduate-medical-education-address-physician-shortages https://www.ama-assn.org/press-center/press-releases/ama-fun...
  - DaveExeter 5y ago
    >and tort reform to manage the lawsuits to enable lower malpractice insurance costs. A great insurance company talking point! The purpose of 'tort reform' is to increase insurer profits. We need more medical malpractice lawsuits, not less!
- snarf21 5y ago
  You are forgetting about all the brokers and all the staff at the insurance companies whose jobs is to negotiate different prices for procedures with different doctors. Most brokers charge 5%. Additionally, this change would cause a loss of some clinical jobs. A lot of the urgent cares would no longer be profitable and would have to get shutdown. Additionally, all these changes would ripple in other ways. Some providers may start offering sub Medicare cash prices to attract business. There is no reason healthcare costs needed to go up 6% per year and the main reason it does is that it can.
  - coredog64 5y ago
    If you accept Medicare, you cannot legally charge anyone less than the Medicare price. I won’t say always, but Medicare price is usually marginal but not profitable. I.e. if you’ve got an empty bed, Medicare is better than nothing, but you wouldn’t actively try to fill beds at sub-Medicare rates even without the hassle of dealing with insurance companies
- programmertote 5y ago
  I didn't downvote you and in fact, I agreed with the fact that a significant portion of the exorbitant healthcare prices in the US can be traced back to administrative bloat, MBAs who are in the management and to a degree, the significantly-higher-than-OECD-average salaries of the doctors in the US. Having said that, your belief that many hospitals are non-profit might not be as simple as it looks from the outside. I recently read an insider writing something about it on Reddit: https://old.reddit.com/r/SelfAwarewolves/comments/pruk4x/they_are_almost_aware_that_a_forprofit_healthcare/hdlki0v/ https://old.reddit.com/r/SelfAwarewolves/comments/pruk4x/the... Hope that gives you an additional viewpoint regarding the "non-profit" label of the hospitals.
  - nickff 5y ago
    I completely agree with that user's statement: >"The end result is a privately-owned hospital that operates as a non-profit on the books when it is anything but that... American doctors and hospital executives are printing money using the backs of their patients as the die. They take in millions per year in compensation that was given to them by people who worked hard and fell on bad times. It is one of the most shameful forms of exploitation in modern history." I'm just unsurprised, as that is consistent with my view of many (most?) non-profits. I also think that the executive pay component is a smaller share than that Redditor seems to.
  - wintermutestwin 5y ago
    >administrative bloat I'd love to know how much money is spent by hospital admin staff dealing with the insurance industry.
- alex_smart 5y ago
  >the only way to do it sustainably is to increase the numbers of doctors and nurses, so as to drive down their salaries Getting the hospitals to accept a price ceiling which forces the issue is another way to do it.
  - rsj_hn 5y ago
    Yes, but supposedly the author was referring to a way to lower prices while maintaining an equilibrium of supply versus demand. You can always lower prices by fiat proclamation, but then you have shortages and wait lines as hospitals go bankrupt and shut down, which will hit rural areas particularly hard. If you want to lower prices and make sure that everyone gets served, you need to be a bit more sophisticated than just cutting hospital revenue in half and washing your hands of the consequences.
    - alex_smart 5y ago
      >supposedly the author was referring to a way to lower prices while maintaining an equilibrium of supply versus demand They were trying to solve the problem by increasing the supply of doctors into the system. The other proposed solution was taking the approach of reducing the supply of money into the system. Neither are contradictory to "maintaining an equilibrium of supply versus demand" but both are trying to move where that equilibrium is by adjusting the supply of two different things. So however you define "while maintaining an equilibrium of supply versus demand" either they were both doing it, or both weren't. >then you have shortages and wait lines as hospitals go bankrupt and shut down, which will hit rural areas particularly hard Sure, that is what happens if you only fix the prices in certain states and not others, which incentivizes the doctors to move from states that have such price ceilings into states that don't. That is why the only possible way to implement that solution is nation-wide. >If you want to lower prices and make sure that everyone gets served I don't see why lowering the price nation-wide would reduce the supply of doctors. What are the doctors going to do? Migrate? But no other large economy has doctor compensation as high as the US. So as a country, you are only competing against yourselves.
- CPLX 5y ago
  > Where do you think the money is going? To the millions of people making a living in the health care system that have no actual role (direct or indirect) in improving the health of patients.
  - rsj_hn 5y ago
    I think this is far too facile. It's like saying half your taxes go to government waste. I mean sure, OK, but how do you get rid of government waste? So far no one has been able to do it. So this is really an unwillingness to engage in the problem, which is absolutely endemic in the current discourse. The key problem is that 20% of our GDP goes to healthcare, and similarly 20% of our population is employed in healthcare provision. This isn't just people sitting around doing nothing. It's nurses, doctors, administrators, etc. If you want to reduce healthcare costs in half, so that it is only 10% of GDP, then expect to throw 10% of the population out of work. That will include nurses, doctors, EMT personnel as well as administrators. Sure, you can try to shift that and fire a bit more administrators than nurses, but you will soon discover that's about as easy as eliminating government waste. This inability to address the core issue arisies from people approaching these difficult problems in administration and systems science from a facile moral point of view. "it's wrong!" they say, to be given a big bill for a snake bite. Well, OK, it's wrong. But that same attitude will tell you "it's wrong" to fire a hard working nurse, or to reduce the pay of a doctor, etc. So now you are left with boogeymen like greedy insurance companies and fat cat CEOs. This is like the person who insists on a tax cut funded by reducing government waste. It's not a serious proposal. And what we have in the US healthcare debate is two sides, the first side is just lying and obfuscating (that is the side opposed to reform) and the second side is so bound in the chain of moralizing that they are unable to make any serious proposals. They can only go after the fat cats, and not the nurses. Thus their proposals will never work. Same thing for education -- you need to fire most of the university staff and reduce the pay or fire many of the teachers. Same thing for all the difficult problems in life where we complain that things cost too much. It is not shadowy fat cats that are causing these problems, it is too many people employed in the provision of services who are earning too much. Ordinary professionals. The biggest problems of modern life are that professionals have too much power and are extracting too much from the society as a whole. Whether it is hospital workers or government workers or teachers, the issues of skyrocketing costs and bureaucratic bloat are very similar across these areas, and they cannot be solved by getting rid of shadowy fat cats or employees that "do nothing".
- jeffdn 5y ago
  A substantial portion of the money spent on wages at primary care physicians offices is on staff to negotiate with insurance companies. At a previous employer, where I worked closely with many primary care physicians offices, it was not uncommon for there to be three or more staff members working entirely on billing. That is ludicrous.
- sarpeedo 5y ago
  Even if you drive down staff salaries physician, nurse, and everyone else working in the hospital, the profits that are made from those changes would simply be pocketed by the CEOs and MBAs in the system. Many business which successfully reduce costs don't pass on those savings to consumers. I will also point out medical students graduate (after 4 years college and 4 years medical school) on average with $210,000 of debt and make $60,000 dollars a year while working 60-80 hours a week for 3-8 years of residency. While yes doctors after residency are well compensated they have gone through 11-16 years of post secondary education by the time they achieve these salaries. Cutting salaries without reforming medical school tuition and residency salaries would be a mistake.
refurb 5y ago
This is what other countries with large well functioning private systems (Netherlands, Germany, Switzerland) do - they set reference prices that generously cap the costs that can be charged. What people don’t understand is the appetite for healthcare spending is practically limitless - there is always something more you can do even if the benefit is marginal. As such you have to control spending somehow and the options are (not exhaustive): - ration care by capping total healthcare spending - “we will do 1,000 hip replacements this year, everyone else waits” - make the cost visible to patients so they ration their own care - Singapore does this even in their public system. There is no free care, you are expected to pay something according to your ability. This is what the US is trying to do with the move to HDHPs - closely regulate coverage and prices. Many systems do this.

nickff 5y ago

>"This change alone would remove 25+% of unnecessary bloat from the US system." Where do you think the money is going? Insurance companies are not as profitable as you might think, drugs are not a massive burden on healthcare expenditures, and many hospitals are non-profits. The truth is that most of the money is going to staff wages; if you want to reduce healthcare spending, the only way to do it sustainably is to increase the numbers of doctors and nurses, so as to drive down their salaries (but this is not a popular option).

kazinator 5y ago
> many hospitals are non-profits. That can't possibly be true of a hospital that charged $3000 for something on Tuesday, and $53000 for the same thing on Friday. (Under reasonable assumptions like that Tuesday wasn't done at a $25K loss relative to breaking even; why would such be the case? And that they are busy with procedures, not simply doing a way overpriced procedure once every few weeks, and then just burning through cash in between that time.)
- nickff 5y ago
  Very few hospitals do cost-accounting, so they don't even know how much things cost; this results in the inconsistencies you see in prices. From Wikipedia: >"In 2003, of the roughly 3,900 nonfederal, short-term, acute care general hospitals in the United States, the majority—about 62 percent—were nonprofit. The rest included government hospitals (20 percent) and for-profit hospitals (18 percent)" https://en.wikipedia.org/wiki/Non-profit_hospital https://en.wikipedia.org/wiki/Non-profit_hospital
  - kazinator 5y ago
    If you don't know how much things cost, how can you say you're doing accounting? If you're doing accounting you have a ledger which balances down to the penny, and the expenses are spelled out in there with concrete amounts. This is why that judge, as noted in the article, rejected the argument that the cost of an X-ray can be unknowable.
    - nickff 5y ago
      Cost accounting consists of more than just balancing a chequebook to the penny; you need to attribute expenses to specific procedures, which can get a bit tricky. It requires discipline and cooperation throughout the organization, which would likely be a huge change for hospitals (as I'm certain doctors would be loathe to log their time like lawyers do).
      - kazinator 5y ago
        OK, so if my company knows how much it's spending on toilet paper for the washroom, but doesn't know exactly which departments are wiping how much ass, then we are not doing cost accounting though we are tracking the bulk expense properly in the ledger. We are not able to answer the question of how much toilet paper is required to operate our marketing department, for instance.
        nickff 5y ago
        Widely used supplies like that are usually just put into a general overhead account, sometimes specific to a department. Healthcare companies would need to attribute things like depreciation of equipment (MRIs & CAT scanners for example), as well as doctor and nurse time (outside of operating rooms). These things are generally not tracked accurately, and many professionals are indignant at the idea that they could be.
- BurningFrog 5y ago
  PSA: Non profits can be as greedy as any other organization. Typically the money goes to wages for the leadership rather than profits to the owners.
  - kazinator 5y ago
    Yes; basically it's just a classification combined with an accounting strategy.
    - nickff 5y ago
      The most famous (infamous?) example of this was the Hughes Medical Foundation.
  - lostlogin 5y ago
    > Non profits can be as greedy as any other organization. The term ‘non-profit’ is one I find hilarious. With the smoke and mirrors of accounting and standard insurance company behaviour it can mean anything. The directors can get bonuses, the cars can be upgraded and the conferences/holidays can get more impressive. It’s surprising that ‘non-profit’ doesn’t generate an eye-roll in more people.
eganist 5y ago
> increase the numbers of doctors and nurses and tort reform to manage the lawsuits to enable lower malpractice insurance costs. and a scheme to drive down med school pricing. Maybe more competition? Enabling more MD and DO schools? There are <200 medical schools (both MD and DO schools) in the US.
- iratewizard 5y ago
  Medical errors cause an estimated 250,000 deaths in the United States annually.
- nradov 5y ago
  Tort reform only helps a little. In fact several US states have already implemented major tort reform and their healthcare costs aren't significantly lower. Doctors still tend to practice defensive medicine and err on the side of doing too much rather than too little. The current bottleneck in producing more physicians isn't medical schools but rather funded residency program slots. Every year some students graduate from medical school but are unable to actually practice medicine because they don't get matched to a residency program. We need Congress to increase funding. https://www.ama-assn.org/press-center/press-releases/ama-fund-graduate-medical-education-address-physician-shortages https://www.ama-assn.org/press-center/press-releases/ama-fun...
- DaveExeter 5y ago
  >and tort reform to manage the lawsuits to enable lower malpractice insurance costs. A great insurance company talking point! The purpose of 'tort reform' is to increase insurer profits. We need more medical malpractice lawsuits, not less!
snarf21 5y ago
You are forgetting about all the brokers and all the staff at the insurance companies whose jobs is to negotiate different prices for procedures with different doctors. Most brokers charge 5%. Additionally, this change would cause a loss of some clinical jobs. A lot of the urgent cares would no longer be profitable and would have to get shutdown. Additionally, all these changes would ripple in other ways. Some providers may start offering sub Medicare cash prices to attract business. There is no reason healthcare costs needed to go up 6% per year and the main reason it does is that it can.
- coredog64 5y ago
  If you accept Medicare, you cannot legally charge anyone less than the Medicare price. I won’t say always, but Medicare price is usually marginal but not profitable. I.e. if you’ve got an empty bed, Medicare is better than nothing, but you wouldn’t actively try to fill beds at sub-Medicare rates even without the hassle of dealing with insurance companies
programmertote 5y ago
I didn't downvote you and in fact, I agreed with the fact that a significant portion of the exorbitant healthcare prices in the US can be traced back to administrative bloat, MBAs who are in the management and to a degree, the significantly-higher-than-OECD-average salaries of the doctors in the US. Having said that, your belief that many hospitals are non-profit might not be as simple as it looks from the outside. I recently read an insider writing something about it on Reddit: https://old.reddit.com/r/SelfAwarewolves/comments/pruk4x/they_are_almost_aware_that_a_forprofit_healthcare/hdlki0v/ https://old.reddit.com/r/SelfAwarewolves/comments/pruk4x/the... Hope that gives you an additional viewpoint regarding the "non-profit" label of the hospitals.
- nickff 5y ago
  I completely agree with that user's statement: >"The end result is a privately-owned hospital that operates as a non-profit on the books when it is anything but that... American doctors and hospital executives are printing money using the backs of their patients as the die. They take in millions per year in compensation that was given to them by people who worked hard and fell on bad times. It is one of the most shameful forms of exploitation in modern history." I'm just unsurprised, as that is consistent with my view of many (most?) non-profits. I also think that the executive pay component is a smaller share than that Redditor seems to.
- wintermutestwin 5y ago
  >administrative bloat I'd love to know how much money is spent by hospital admin staff dealing with the insurance industry.
alex_smart 5y ago
>the only way to do it sustainably is to increase the numbers of doctors and nurses, so as to drive down their salaries Getting the hospitals to accept a price ceiling which forces the issue is another way to do it.
- rsj_hn 5y ago
  Yes, but supposedly the author was referring to a way to lower prices while maintaining an equilibrium of supply versus demand. You can always lower prices by fiat proclamation, but then you have shortages and wait lines as hospitals go bankrupt and shut down, which will hit rural areas particularly hard. If you want to lower prices and make sure that everyone gets served, you need to be a bit more sophisticated than just cutting hospital revenue in half and washing your hands of the consequences.
  - alex_smart 5y ago
    >supposedly the author was referring to a way to lower prices while maintaining an equilibrium of supply versus demand They were trying to solve the problem by increasing the supply of doctors into the system. The other proposed solution was taking the approach of reducing the supply of money into the system. Neither are contradictory to "maintaining an equilibrium of supply versus demand" but both are trying to move where that equilibrium is by adjusting the supply of two different things. So however you define "while maintaining an equilibrium of supply versus demand" either they were both doing it, or both weren't. >then you have shortages and wait lines as hospitals go bankrupt and shut down, which will hit rural areas particularly hard Sure, that is what happens if you only fix the prices in certain states and not others, which incentivizes the doctors to move from states that have such price ceilings into states that don't. That is why the only possible way to implement that solution is nation-wide. >If you want to lower prices and make sure that everyone gets served I don't see why lowering the price nation-wide would reduce the supply of doctors. What are the doctors going to do? Migrate? But no other large economy has doctor compensation as high as the US. So as a country, you are only competing against yourselves.
CPLX 5y ago
> Where do you think the money is going? To the millions of people making a living in the health care system that have no actual role (direct or indirect) in improving the health of patients.
- rsj_hn 5y ago
  I think this is far too facile. It's like saying half your taxes go to government waste. I mean sure, OK, but how do you get rid of government waste? So far no one has been able to do it. So this is really an unwillingness to engage in the problem, which is absolutely endemic in the current discourse. The key problem is that 20% of our GDP goes to healthcare, and similarly 20% of our population is employed in healthcare provision. This isn't just people sitting around doing nothing. It's nurses, doctors, administrators, etc. If you want to reduce healthcare costs in half, so that it is only 10% of GDP, then expect to throw 10% of the population out of work. That will include nurses, doctors, EMT personnel as well as administrators. Sure, you can try to shift that and fire a bit more administrators than nurses, but you will soon discover that's about as easy as eliminating government waste. This inability to address the core issue arisies from people approaching these difficult problems in administration and systems science from a facile moral point of view. "it's wrong!" they say, to be given a big bill for a snake bite. Well, OK, it's wrong. But that same attitude will tell you "it's wrong" to fire a hard working nurse, or to reduce the pay of a doctor, etc. So now you are left with boogeymen like greedy insurance companies and fat cat CEOs. This is like the person who insists on a tax cut funded by reducing government waste. It's not a serious proposal. And what we have in the US healthcare debate is two sides, the first side is just lying and obfuscating (that is the side opposed to reform) and the second side is so bound in the chain of moralizing that they are unable to make any serious proposals. They can only go after the fat cats, and not the nurses. Thus their proposals will never work. Same thing for education -- you need to fire most of the university staff and reduce the pay or fire many of the teachers. Same thing for all the difficult problems in life where we complain that things cost too much. It is not shadowy fat cats that are causing these problems, it is too many people employed in the provision of services who are earning too much. Ordinary professionals. The biggest problems of modern life are that professionals have too much power and are extracting too much from the society as a whole. Whether it is hospital workers or government workers or teachers, the issues of skyrocketing costs and bureaucratic bloat are very similar across these areas, and they cannot be solved by getting rid of shadowy fat cats or employees that "do nothing".
jeffdn 5y ago
A substantial portion of the money spent on wages at primary care physicians offices is on staff to negotiate with insurance companies. At a previous employer, where I worked closely with many primary care physicians offices, it was not uncommon for there to be three or more staff members working entirely on billing. That is ludicrous.
sarpeedo 5y ago
Even if you drive down staff salaries physician, nurse, and everyone else working in the hospital, the profits that are made from those changes would simply be pocketed by the CEOs and MBAs in the system. Many business which successfully reduce costs don't pass on those savings to consumers. I will also point out medical students graduate (after 4 years college and 4 years medical school) on average with $210,000 of debt and make $60,000 dollars a year while working 60-80 hours a week for 3-8 years of residency. While yes doctors after residency are well compensated they have gone through 11-16 years of post secondary education by the time they achieve these salaries. Cutting salaries without reforming medical school tuition and residency salaries would be a mistake.

refurb 5y ago

This is what other countries with large well functioning private systems (Netherlands, Germany, Switzerland) do - they set reference prices that generously cap the costs that can be charged. What people don’t understand is the appetite for healthcare spending is practically limitless - there is always something more you can do even if the benefit is marginal. As such you have to control spending somehow and the options are (not exhaustive): - ration care by capping total healthcare spending - “we will do 1,000 hip replacements this year, everyone else waits” - make the cost visible to patients so they ration their own care - Singapore does this even in their public system. There is no free care, you are expected to pay something according to your ability. This is what the US is trying to do with the move to HDHPs - closely regulate coverage and prices. Many systems do this.