5 ms·

I don't think the spending story alone is helpful because it doesn't acknowledge where there's room for actual improvement. Of the $1.5T spent on "Hospital Care

by abeppu 1y ago

I don't think the spending story alone is helpful because it doesn't acknowledge where there's room for actual improvement. Of the $1.5T spent on "Hospital Care", if almost all of it went to medical staff, facilities, equipment etc, and if good data suggested that people aren't in hospital unnecessarily, maybe that number isn't a problem. But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much. In the context of the cost of medication, the $449B on "prescription drugs" doesn't break out what goes to drug makers vs PBMs or anyone else. We can easily imagine a world without PBMs that still delivers drugs to patients, but someone has to actually make the drugs. We can also ask, are people on medications they don't actually need? Are we sometimes _causing_ later health issues when medicating (e.g. fueling a giant opioid crisis)? None of this is apparent in the top-line spending figures.

tptacek 1y ago
Whoah, that smuggles in an enormous assumption: that a dollar directed to a medical professional is automatically well spent. In reality, medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures (they're often working on "RVU" scales that incentivize delivery of more procedures). This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.
- abeppu 1y ago
  I did _not_ make that assumption. I specifically called out the possibility that some hospital care may not be necessary. Regarding hospital care, the two sentences describing hypotheticals where spending is or is not improvable specifically included clauses: > and if good data suggested that people aren't in hospital unnecessarily > if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
  - knowaveragejoe 1y ago
    I don't think they were insinuating that _you_ were making that assumption, but rather that your line of reasoning must necessarily make that assumption if brought to fruition
- lostlogin 1y ago
  > medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures Do you have a source on that? I ant to understand how that works. The US is ludicrously inefficient per dollar spent, so how does that work?
  - tptacek 1y ago
    By us compensating medical professionals more and allowing them to perform more procedures. It's weird to see people startled by this claim because it's a pretty basic and accepted one!
    - elcritch 1y ago
      It’s not purely a bad thing per se if it attracts doctors who excel and are the best. However, it seems now more like straight-up profiteering the past decade or two by doctors as a whole but it’s harder to point a finger at. In contrast with “Big Pharma” the profits are fairly centralized and easy to point a finger at. Personally I’ve for a while believed the biggest issue with wealth inequality in the US isn’t primarily due to billionaire class, but rather the millionaire class and “managerial class”, though I’d include doctors in that list. Most CEOs would also be in that list. Doctors via the AMA keep salaries artificially high, just the same as similar tactics used by land lords using software to jack up rent prices.
      - tptacek 1y ago
        Your claim here, were you to try to make it, would have to be that American doctors are across the board 2-3x better than European doctors, and that European pts are getting drastically fewer procedures than they need. (I think we agree though).
        elcritch 1y ago
        Specifically for doctors, that seems a reasonable point or question. I know intimately from my PhD studies that some procedures performed widely in the US aren't that effective (meniscectomies in particular). Though that's gotta be balanced with procedures that are helpful that Europeans don't do enough. More broadly though, I believe what's occurring with doctors is also happening across the board in other professions. Landlords as an aggregate are charging more than if fair, and the median landlord isn't a billionaire or Blackrock but probably part of the professional managerial class (PMC) [1]. No idea if landlords as a whole are charging 25% or 250% more for rent, but rent seems to have outpaced inflation by a fair bit. Similarly others here mention doctors owning portions of diagnostic imaging companies who go on to request unnecessary imaging. That's the PMC enrich-yourself-first mindset. Historically it was the local landed nobles. Repeat that across more fields and professions and you see that the middle and lower classes will be squeezed much more by PMCs than by billionaires, IMO. For example, it'll be some VP at Google who's pushing to raise the cost of YouTube premium rather than Sergey Brin or the Youtube CEO. Another VP who's figuring out how to move software to a never-ending subscription, etc. Though it'd be hard to split out the effect of say PMC's vs corporate profiteering. Perhaps they are part of the same effect. 1: https://en.wikipedia.org/wiki/Professional%E2%80%93managerial_class https://en.wikipedia.org/wiki/Professional%E2%80%93manageria...
- FireBeyond 1y ago
  > and deliver way more procedures Diagnostic imaging companies - each of the big ones (Siemens, GE, Philips) offer in-house financing for MRI, CT, etc., that they advertise to physicians. They also all offer specialist consulting help to facilitate you getting a CoN (Certificate of Need) for your facility. Hell, they also will help you find other physicians in your area who'd like to go in on setting up a DI facility (and will assist with spinning up the practice). We then find that physicians who own a DI practice (or a share in one) refer their patients to diagnostic imaging at rates several standard deviations above other physicians and at rates that are "statistically improbable" when correlated to underlying ICD-10 diagnostic codes. Upton Sinclair comes to mind ("It is difficult to get a man to understand something, when his salary depends on his not understanding it").
  - tptacek 1y ago
    My favorite statistic is that there are more MRI machines in Massachusetts than there are in all of Canada.
    - nradov 1y ago
      Is that a good thing or a bad thing? MRI machines are expensive, but very useful for certain conditions and with zero radiation exposure. We see a lot of affluent Canadians coming to the USA as medical tourists for imaging procedures and elective surgery due to long queues at home.
      - tptacek 1y ago
        It's an indicator. By many accounts, the US drastically overuses imaging. For instance: it's not unlikely that a patient presenting with persistent back pain will be imaged quickly in the US. That imaging service is itself expensive and a cost driver, but far worse are the procedures the imaging results drive, most of which wouldn't be prescribed over the border in Canada. We do not on the whole get better results for back pain here! Another example, though with a less comical indicator than the MRI thing: at least up until recently, hernia repairs in Europe were all inpatient procedures. The US innovated on laparoscopic hernia repair that's done outpatient. This is by itself a very good thing! But the knock-on result is that the US now delivers way more hernia repairs; we do medically unnecessary hernia repair because we made it so easy to do. None of these are my insights; they're just things you learn about if you read and listen to podcasts about the problems with our health care economics.
- cogman10 1y ago
  What makes it hard to discuss is everyone at every level is gouging for various reasons. Like, for example, doctors are going to be paid more than foreign counter parts, but they also end up needing very expensive schooling. (Similar thing happens to dentists). Go into the hospital, and you end up paying 10x the amount for any medication (Tylenol being a good example) because either the hospital has an agreement with a medical supplier for exclusive supplies or they are trying to make up for ER treatments. Then there's simply the added layer of bloat on top of everything. Health insurance ends up hiring a large staff of people to try and reject all claims while hospitals hire patient advocates to appeal the denials for the patients. All that ends up being paid for somehow (usually a large chunk is from the patient's insurance principle). And, much like funerals, slap on "medical" on any piece of equipment and you get to raise the price by 10x. A $10 stethoscope ends up costing $100 from a medical supplier. Or one I've personally seen, a "medical" pocket protector made from $1 in fabric costing $50. The reason non-us healthcare ends up being cheaper is because the governments are running most everything rather than having 3 or 4 private businesses duking it out over cost. It eliminates a huge amount of redundancy in the system when a government builds the hospitals, pays the doctors directly, and is the only one negotiating with medical equipment providers.
  - tptacek 1y ago
    I don't disagree and wouldn't valorize anybody in the field† (though: of all the entities, I come closest to respecting Pharma's role and, if those companies were well-behaved, could make a pretty coherent argument for why they should be making much more money given what they produce). But it remains important to get a picture of where the money is going, and the real picture disrupts a bunch of narratives. Even in your comment: you're handwaving past physician comp and overdelivery! † writ-large, I mean; I know some awesome doctors
    - cogman10 1y ago
      > Even in your comment: you're handwaving past physician comp and overdelivery! I'm really not. I'm simply pointing out exactly why they have such an oversized salary. It costs a ton of money to become a physician. In order to survive, they initially need a pretty sizable salary. After the loans are paid off, that salary can't go down, there would be a revolt if it did. Over delivery is really just a general attitude of wanting to test everything to make sure nothing is missed. I have a hard time faulting them over that. IMO, the way to address this problem is addressing the cost of education for physicians. There's no reason getting an MD should cost $500,000, and yet it does. And, of course, the best way to do this is to make medical school publicly funded and tuition free. A lot of small hospitals close down because they can't afford regular doctors. It's also next to impossible for a doctor to setup a private clinic. That won't fully solve the current salary bloat, the only way to really address that is expanding the number of doctors being trained.
- dredmorbius 1y ago
  RVU is presumably "relative value units": <https://medicalbillingservicereview.com/rvu-explained/ https://medicalbillingservicereview.com/rvu-explained/>.
- analyte123 1y ago
  It seems like you've been referring to "Hospital Services", which was 31% of all healthcare spending in 2023, and "Physician and Clinical Services", which was 20% of all healthcare spending in 2023, according to the CMS spreadsheet. But this is made up of revenue to the hospital or doctor's office, not just compensation for the medical professionals. These numbers include all the administration/dealing with insurance that has to be done at the hospital or physician office, as well as rent, malpractice insurance, drugs provided at the hospital, imaging costs and almost everything else that pays for capital spend, etc. The fees at the point of service basically have to account for all the bloat in the system, which of course includes some overdelivery and bloat inside the hospitals and clinics. But I really don't think this builds a case (like you seem to be doing) that doctors and nurses need to be squeezed in order to reduce US health care costs, especially when total healthcare expenditure has grown much faster than clinician pay over the past decades.
  - tptacek 1y ago
    I agree that the figure includes administration costs. CMS won't tell you that US physicians are paid 2x-3x more than they are in Europe, but OECD numbers will. CMS won't tell you about upcoding and overprescription, but the Dartmouth Atlas will. Meanwhile: the CMS picture will at least tell you that the majority of spending in our system is in on the provider side, and not in either prescription or insurance. Again: I'm not out on a limb with these claims. I'm literally just remembering things Jonathan Gruber told Derek Thompson on a podcast, then looking up and bookmarking the numbers to confirm them. Many of the most popular message board narratives about healthcare disintegrate in the face of even these simple CMS numbers!
gruez 1y ago
> But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much. The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.
- abeppu 1y ago
  I saw the economist chart, and am responding to tptacek advocating for a specific _spending_ based spreadsheet. But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
  - tptacek 1y ago
    The Economist charts are a rhetorical tool designed to highlight a point they're making (I think the points are valid and the charts are good and interesting). The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from. I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.

by abeppu 1y ago

tptacek 1y ago

Whoah, that smuggles in an enormous assumption: that a dollar directed to a medical professional is automatically well spent. In reality, medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures (they're often working on "RVU" scales that incentivize delivery of more procedures). This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.

abeppu 1y ago
I did _not_ make that assumption. I specifically called out the possibility that some hospital care may not be necessary. Regarding hospital care, the two sentences describing hypotheticals where spending is or is not improvable specifically included clauses: > and if good data suggested that people aren't in hospital unnecessarily > if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
- knowaveragejoe 1y ago
  I don't think they were insinuating that _you_ were making that assumption, but rather that your line of reasoning must necessarily make that assumption if brought to fruition
lostlogin 1y ago
> medical professionals in the US make drastically more money than they do in Europe and deliver way more procedures Do you have a source on that? I ant to understand how that works. The US is ludicrously inefficient per dollar spent, so how does that work?
- tptacek 1y ago
  By us compensating medical professionals more and allowing them to perform more procedures. It's weird to see people startled by this claim because it's a pretty basic and accepted one!
  - elcritch 1y ago
    It’s not purely a bad thing per se if it attracts doctors who excel and are the best. However, it seems now more like straight-up profiteering the past decade or two by doctors as a whole but it’s harder to point a finger at. In contrast with “Big Pharma” the profits are fairly centralized and easy to point a finger at. Personally I’ve for a while believed the biggest issue with wealth inequality in the US isn’t primarily due to billionaire class, but rather the millionaire class and “managerial class”, though I’d include doctors in that list. Most CEOs would also be in that list. Doctors via the AMA keep salaries artificially high, just the same as similar tactics used by land lords using software to jack up rent prices.
    - tptacek 1y ago
      Your claim here, were you to try to make it, would have to be that American doctors are across the board 2-3x better than European doctors, and that European pts are getting drastically fewer procedures than they need. (I think we agree though).
      - elcritch 1y ago
        Specifically for doctors, that seems a reasonable point or question. I know intimately from my PhD studies that some procedures performed widely in the US aren't that effective (meniscectomies in particular). Though that's gotta be balanced with procedures that are helpful that Europeans don't do enough. More broadly though, I believe what's occurring with doctors is also happening across the board in other professions. Landlords as an aggregate are charging more than if fair, and the median landlord isn't a billionaire or Blackrock but probably part of the professional managerial class (PMC) [1]. No idea if landlords as a whole are charging 25% or 250% more for rent, but rent seems to have outpaced inflation by a fair bit. Similarly others here mention doctors owning portions of diagnostic imaging companies who go on to request unnecessary imaging. That's the PMC enrich-yourself-first mindset. Historically it was the local landed nobles. Repeat that across more fields and professions and you see that the middle and lower classes will be squeezed much more by PMCs than by billionaires, IMO. For example, it'll be some VP at Google who's pushing to raise the cost of YouTube premium rather than Sergey Brin or the Youtube CEO. Another VP who's figuring out how to move software to a never-ending subscription, etc. Though it'd be hard to split out the effect of say PMC's vs corporate profiteering. Perhaps they are part of the same effect. 1: https://en.wikipedia.org/wiki/Professional%E2%80%93managerial_class https://en.wikipedia.org/wiki/Professional%E2%80%93manageria...
FireBeyond 1y ago
> and deliver way more procedures Diagnostic imaging companies - each of the big ones (Siemens, GE, Philips) offer in-house financing for MRI, CT, etc., that they advertise to physicians. They also all offer specialist consulting help to facilitate you getting a CoN (Certificate of Need) for your facility. Hell, they also will help you find other physicians in your area who'd like to go in on setting up a DI facility (and will assist with spinning up the practice). We then find that physicians who own a DI practice (or a share in one) refer their patients to diagnostic imaging at rates several standard deviations above other physicians and at rates that are "statistically improbable" when correlated to underlying ICD-10 diagnostic codes. Upton Sinclair comes to mind ("It is difficult to get a man to understand something, when his salary depends on his not understanding it").
- tptacek 1y ago
  My favorite statistic is that there are more MRI machines in Massachusetts than there are in all of Canada.
  - nradov 1y ago
    Is that a good thing or a bad thing? MRI machines are expensive, but very useful for certain conditions and with zero radiation exposure. We see a lot of affluent Canadians coming to the USA as medical tourists for imaging procedures and elective surgery due to long queues at home.
    - tptacek 1y ago
      It's an indicator. By many accounts, the US drastically overuses imaging. For instance: it's not unlikely that a patient presenting with persistent back pain will be imaged quickly in the US. That imaging service is itself expensive and a cost driver, but far worse are the procedures the imaging results drive, most of which wouldn't be prescribed over the border in Canada. We do not on the whole get better results for back pain here! Another example, though with a less comical indicator than the MRI thing: at least up until recently, hernia repairs in Europe were all inpatient procedures. The US innovated on laparoscopic hernia repair that's done outpatient. This is by itself a very good thing! But the knock-on result is that the US now delivers way more hernia repairs; we do medically unnecessary hernia repair because we made it so easy to do. None of these are my insights; they're just things you learn about if you read and listen to podcasts about the problems with our health care economics.
cogman10 1y ago
What makes it hard to discuss is everyone at every level is gouging for various reasons. Like, for example, doctors are going to be paid more than foreign counter parts, but they also end up needing very expensive schooling. (Similar thing happens to dentists). Go into the hospital, and you end up paying 10x the amount for any medication (Tylenol being a good example) because either the hospital has an agreement with a medical supplier for exclusive supplies or they are trying to make up for ER treatments. Then there's simply the added layer of bloat on top of everything. Health insurance ends up hiring a large staff of people to try and reject all claims while hospitals hire patient advocates to appeal the denials for the patients. All that ends up being paid for somehow (usually a large chunk is from the patient's insurance principle). And, much like funerals, slap on "medical" on any piece of equipment and you get to raise the price by 10x. A $10 stethoscope ends up costing $100 from a medical supplier. Or one I've personally seen, a "medical" pocket protector made from $1 in fabric costing $50. The reason non-us healthcare ends up being cheaper is because the governments are running most everything rather than having 3 or 4 private businesses duking it out over cost. It eliminates a huge amount of redundancy in the system when a government builds the hospitals, pays the doctors directly, and is the only one negotiating with medical equipment providers.
- tptacek 1y ago
  I don't disagree and wouldn't valorize anybody in the field† (though: of all the entities, I come closest to respecting Pharma's role and, if those companies were well-behaved, could make a pretty coherent argument for why they should be making much more money given what they produce). But it remains important to get a picture of where the money is going, and the real picture disrupts a bunch of narratives. Even in your comment: you're handwaving past physician comp and overdelivery! † writ-large, I mean; I know some awesome doctors
  - cogman10 1y ago
    > Even in your comment: you're handwaving past physician comp and overdelivery! I'm really not. I'm simply pointing out exactly why they have such an oversized salary. It costs a ton of money to become a physician. In order to survive, they initially need a pretty sizable salary. After the loans are paid off, that salary can't go down, there would be a revolt if it did. Over delivery is really just a general attitude of wanting to test everything to make sure nothing is missed. I have a hard time faulting them over that. IMO, the way to address this problem is addressing the cost of education for physicians. There's no reason getting an MD should cost $500,000, and yet it does. And, of course, the best way to do this is to make medical school publicly funded and tuition free. A lot of small hospitals close down because they can't afford regular doctors. It's also next to impossible for a doctor to setup a private clinic. That won't fully solve the current salary bloat, the only way to really address that is expanding the number of doctors being trained.
dredmorbius 1y ago
RVU is presumably "relative value units": <https://medicalbillingservicereview.com/rvu-explained/ https://medicalbillingservicereview.com/rvu-explained/>.
analyte123 1y ago
It seems like you've been referring to "Hospital Services", which was 31% of all healthcare spending in 2023, and "Physician and Clinical Services", which was 20% of all healthcare spending in 2023, according to the CMS spreadsheet. But this is made up of revenue to the hospital or doctor's office, not just compensation for the medical professionals. These numbers include all the administration/dealing with insurance that has to be done at the hospital or physician office, as well as rent, malpractice insurance, drugs provided at the hospital, imaging costs and almost everything else that pays for capital spend, etc. The fees at the point of service basically have to account for all the bloat in the system, which of course includes some overdelivery and bloat inside the hospitals and clinics. But I really don't think this builds a case (like you seem to be doing) that doctors and nurses need to be squeezed in order to reduce US health care costs, especially when total healthcare expenditure has grown much faster than clinician pay over the past decades.
- tptacek 1y ago
  I agree that the figure includes administration costs. CMS won't tell you that US physicians are paid 2x-3x more than they are in Europe, but OECD numbers will. CMS won't tell you about upcoding and overprescription, but the Dartmouth Atlas will. Meanwhile: the CMS picture will at least tell you that the majority of spending in our system is in on the provider side, and not in either prescription or insurance. Again: I'm not out on a limb with these claims. I'm literally just remembering things Jonathan Gruber told Derek Thompson on a podcast, then looking up and bookmarking the numbers to confirm them. Many of the most popular message board narratives about healthcare disintegrate in the face of even these simple CMS numbers!

gruez 1y ago

> But if private hospitals have very fat margins, and some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much. The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.

abeppu 1y ago
I saw the economist chart, and am responding to tptacek advocating for a specific _spending_ based spreadsheet. But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
- tptacek 1y ago
  The Economist charts are a rhetorical tool designed to highlight a point they're making (I think the points are valid and the charts are good and interesting). The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from. I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.