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.
>"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).
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.
>"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.
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.
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.
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.
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.
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.
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
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.)
> 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.
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)"
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).
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.
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.
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.
>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.
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".
But that's the problem with your argument. Of course people have done it, nearly every developed country has.
> 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.
No, it won't. I'm talking about eliminating the positions that would only exist because of the private insurance system. Which is a massive amount of dead weight loss.
It's not remotely hard to understand conceptually, I mean EVERY dollar that's devoted to arguing over insurance bills is completely wasted. As are all the dollars spent on insurance advertising and marketing, and so on. Every dollar paid back to health care companies as dividends, or used for stock buybacks.
That's a lot of dollars.
Every time this argument comes up people in the US start talking about it like "Oh yeah? Sure but what's YOUR solution then smart guy? Stumped you didn't I?"
Um, no. My solution is the NHS. Like you can go there and look at it I swear it's a real thing, they have buildings and everything, just book a flight to London and see for yourself. Or, in US terms, Medicare for all, which is also a real understandable thing that exists, except for the "for all" part.
The NHS/UK isn't cheaper (just) because of insurance related dead weight though- they also just pay everyone less.
The US Government estiamtes the total adminstration and health insurance expenditure cost $288B in 2019. Total health consumption was $3.69T. Thats about 7.5% of total health spending. Even if you assume a 2 or 3x multiplier to the effect of eliminating insurance companies you STILL don't get US healthcare spending on a GDP basis in line with international norms.
Insurance companies are awful, but they alone are not the cause of American's health care spening problems.
To believe that administrative overhead would significantly reduce healthcare costs is just obviously false. We spend 20% of GDP on healthcare and UK spends 10%.
Total spend is employees * average salary per employee.
Let's take a look:
* For doctors, there are roughly the same number, ~2.8 per 1000, but US doctors earn three times as much as UK doctors[1]. 294K/year US versus 66K/year (UK).
* The US has twice as many nurses[2] per 1000 people (17.4 per 1000) as the UK does (9.8 per 1000), and the US pays its nurses much more. The US pays 77K/year for an RN and 112K/year for an PN and 181K/year average salary for a nurse anasthesologist[3]. Nurses in the UK earn about 1/3 less, a total average of 33K/year[4]
* The US has 315K pharmacists (not assistants) or roughly 1 per 1000, whereas the UK has 43K or .65 per 1000. US pharmacists make average of 140K/year[7]. UK pharmacists make an average salary of 58K per year[8].
* The US has 23,200 microbiologists (earning 69K/year). The UK has 490 (earning 52K/yr)
* The US has 40 MRI machines per million. The UK has 6.
* Now let's generally talk about staffing. The US employs 20 million healthcare workers with a payroll of 1 Trillion (2018)[5] an average wage of 70K (and median wage of 42K/year). This is occupational data from BLS (https://www.bls.gov/ooh/healthcare/home.htm), so you can't complain about insurance employees at hospitals being included.
The UK has 1.3 Million[5] in both hospitals and clinics counting both NHS and Independents, with an average salary of 24.7K/year.
That means, relative to population, that the US employs 60 per 100,000 healthcare employees while the UK employs 20 per 1000. We have triple the number of healthcare workers and our health care workers earn double what the do in the UK.
Now let's talk about this enormous waste in insurance that will make healthcare affordable if only we got rid of it. Total insurance overhead in the US is 7% of healthcare expenditures[8]. So if we reduced it to zero, we would pay 7% less. Whoppee.
Thinking that you can keep paying doctors and nurses triple and have so many more staff and keep their high wages but merely with insurance reforms reduce healthcare spending by half is so wrong I am amazed I even need to say it. It's a terrible, misleading, evasive non-answer.
What we need to cut are salaries and employment. If you don't acknowledge that, then you are not a serious participant in this discussion because you are refusing to acknowledge that this problem has tough trade offs. You are not going to solve it by "cutting waste".
And this is important, because our problem, as a nation, is the general problem of professional guilds extracting too much from the rest of society. We have this problem with higher education, with finance, with healthcare. A large chunk of our professional middle class is employed by these sectors, and their well-being would be threatened if we significantly cut their wages and employment. It is not evil insurance companies, it is not shadowy billionaires, but our neighbors down the street -- the nurses, the college professors, and the X-ray technicians -- who are the ones blocking meaningful reform. And until we are willing to face that and recognize what must be done, then we will not get affordable healthcare. The incurable diseases of the modern west are all due to the professional classes extracting too much. It is not due to excessive "waste".
> The US has 40 MRI machines per million. The UK has 6.
Funny story - these days most DI (diagnostic imaging) machines (CT, fMRI, PET) are owned by doctors or consortiums of doctors.
They are money printing machines.
Doctors, and manufacturers know this. Manufacturers will find you doctors you can partner up with to buy DI assets, and get set up. You can pay off a CT machine in a couple of months, even high end fMRI in under a year. The manufacturer will finance. They'll even help you write CON applications (Certificate of Need, a nice little thing that hospitals lobbied for to reduce competition - if a new hospital wants to open up in an area it has to demonstrate that the existing community healthcare needs are being underserved. And the existing hospital gets input into the process). A nice little imaging production line.
Interestingly, though perhaps unsurprisingly, doctors who own an interest in imaging equipment tend to refer their patients to it at a rate approaching 2 standard deviations higher (comparing specialties like-for-like).
> What we need to cut are salaries and employment. If you don't acknowledge that, then you are not a serious participant in this discussion because you are refusing to acknowledge that this problem has tough trade offs. You are not going to solve it by "cutting waste".
Yes I agree. Take the windfall profit motive out of the system and you’ll see quite a bit of change. Paying doctors less sounds like a great plan.
But we can start with the truly staggering amount of deadweight loss. Do you actually interact with the US health care system? Is it really that hard to understand just how much energy is wasted fucking around with just the billing component alone?
The problem with eliminating "waste" is the bang for the buck. It would take massive restructuring to cut the 7% administration in half. But then you've only saved 3.5%!
So when addressing a problem, you start with the first order stuff, and then go to the second order stuff, and you do this in terms of impact, not in terms of conceptual clarity.
Cut nurses and doctors, medical staff wages in half, and you save 40%.
The real point here is that you can't have affordable healthcare if nurses are earning 6 figures.
That's why nurses in the UK earn 40K/year. It's the price of affordable healthcare.
That's the core trade off between affordable healthcare and US style healthcare.
But all of a sudden now we do not have the same moral clarity as we did when we were only talking about "waste".
So let's have that debate right now - the real healthcare debate, not the fake healthcare debate -- and stop pretending this is a problem that can be solved with waste while allowing nurses to keep their 6 figure salaries.
It is what we call cheap moralism to decry how unfair high healthcare costs are in the US and then avoid raising any of the tough issues of what would happen to people whose livelihoods depend on those costs being so high.
But is it substantially lower percent wise in single payer systems like the NHS? Assuming the 7% figure is correct that does not seem like an excessive amount and event cutting it by half would only result in a marginal decrease in prices.
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.
