Somehow everybody in this system claims they're not the ones making bank on this swindling. The doctors say they're underpaid. The hospital admin says they're underpaid. The insurance companies say they're barely covering their payouts. So who is lying?
I had to go to the ER in Hong Kong and I got better service uninsured for $35 US than I've ever gotten in the United States fully insured. And no surprise bills afterwards whatsoever.
There you go. The insurance company is actually incentivized to not negotiate a lower price.
What if they refuse a ludicrous price? Their customers will complain -- what, what? go without MRIs?
Worse -- the insurance company gets to keep 20% of the costs as profit. For a $16,000 bill, that's $3,200. For a $3,000 bill, that's just $600.
So why, again, would they fight for a lower bill? No reason. Competition from other companies? Unfortunately, they're all playing the same game, and lower premiums are simply not happening.
The insurer did negotiate the price down - from $20,000, so a 20% discount.
But yes, UCSF just leverages their name and the desire for insurers to have them in network. Their attitude is basically “no, I won’t go lower, and you’ll pay anyways”.
No, insurance companies don’t keep 20% as profit. They can keep 20% in reserve, the rest has to be paid out as benefits that calendar year. United Healthcare’s profit margin is like 2-4%.
And of course they fight to lower their insurance premiums, that’s how they attract new customers.
> The insurer did negotiate the price down - from $20,000, so a 20% discount.
I've just got to point out that they're adding back 20% -- to keep in "reserve," as you say. So what's the advantage of insurance? The "premiums" force the scam pricing on everyone! (And not just the direct victims of this type of fraud.)
No one is lying. The system is filled with massive inefficiencies.
1) Insurance companies don’t pay sticker prices. They pay negotiated rates. At the same time, hospitals have to pick up a lot of ER costs that are never covered. They might be making money but reasonable amounts at best (also that’s probably not true either considering how many hospitals are shutting down in the US).
2) The negotiated rates insurance companies pay are still very high. They are probably making a good profit, but their margin is still probably a fraction of the margin of many other industries, and it’s not like they have no competition, so they do have market pressure to reduce prices.
3) Doctors pay a ton in education and liability insurance and delayed earnings due to the extensive education required. They can spend over a decade, and be into their 40s before their net worth turns positive.
So where is all the money going is an excellent question. No one is benefitting from this current system.
1 obvious destination for the money is the education system in the US. Higher Ed in the US is an increasingly growing money pit. Tuitions are exploding. Loans are exploding (and educational loans are unique in the US in that they cannot be canceled in a bankruptcy). Administrative salaries are blowing up. Ever fancier buildings are being built. Yet money for teachers, researchers and remasters/phds is plummeting. It’s a complete scam with the entire system paying ever more money to build fancy buildings, the vast majority of the cost of which is captured by corrupt contractors with connections to university presidents, etc.
Then you have the pharma industry, which unlike any other civilized society, needs to advertise to consumers in the US. This means they have pressure to constantly grow their sales and once popular enough they have parents, and once generic, brand value, to force hospitals and patients to buy overpriced drugs.
But the US can’t outlaw pharma ads like nearly every other civilized country has, because that will then destroy your Media and Tech industries, and where ads, and therefore pharma ads, make up a massive source of income.
And I’m sure the same dynamic probably applies to medical tech as we’ll.
So in honesty, the money is likely going to the places that are showing that they are receiving money. Not in the healthcare system, but rather to tech, media, and construction and real estate.
Distinctive thing I found in the US is that hospitals are always big and do everything under one roof. There are some smaller clinics run by chains in some states but they operate primarily only for insurance money and are not common. At the bottom of the chain, some doctors run their own operations from a strip mall like place but they again provide very minimal service.
Meanwhile, in developing countries, it's not that hard to find a decently qualified doctor running his own small clinic with couple of nurses in a busy street. And to the next level, there is always a small 20-bed hospital around with 3-4 doctors and a bunch of nurses. And options keeps increasing in size and cost from small to the big hospitals like you typically see in the US. Almost 95% of primary healthcare are met by these small-mid level operations and people go to the big hospitals only for complicated surgeries and intensive care.
In this example of just 6 stitches, it probably would have been administered by a nurse in a 20-bed hospital for fraction of the cost of a big hospital.
Germany is public-private healthcare insurance driven healthcare model compared to the pure play private insurance or out-of-pocket driven healthcare model in the US and other poor countries. Germany has statutory public insurance while the examples I’m quoting including the US don’t have any such. For a private driven healthcare system, it’s strange there are no smaller, cheaper and nimble competitors.
the US is not a poor country, it is an astonishingly rich country whose elites want poor (and working-class more generally) people insecure so as to maximize the degree to which they can be exploited via economic coercion.
Of course the US is not a poor country. Sorry if my sentence structure meant that way. The US is in a special cohort when it comes to healthcare where rest in the group are all developing or under developed countries.
Another big inefficiency is the margin of error allowed due to malpractice lawsuits. If a patient is at a 1 in a 10,000 risk for a problem, the Doctor will order a test to rule that problem out. Because if the Doctor doesn't order the test and the person ends up having the problem, the Doctor could be sued for malpractice. In other countries the Doctor would say this is very unlikely so I'm not going to run the test.
I don’t buy this. If this were true, Texas would have much better health outcomes than most other states, as med mal payments are capped and basically nonexistent relative to other states given the low cap/incentive for lawyers to pursue.
Instead of any kind of dramatic increase in patient results, this system instead protected truly terrible doctors like the murderer Dr. Christopher Duntsch.
You are actually proving my point. Incompetent doctors are incentivized to come to Texas because there is a low cap on malpractice. That makes healthcare worse. Also, the extra tests that are being run just to cover someone's liability in other states don't make outcomes better because they are overwhelmingly unnecessary. They just add extra cost to the medical system to avoid lawsuits outside of Texas.
Some people somewhere, with cigars, in $5,000 suits. "Look at all those schmucks! $400 per shot and $1,000 per stitch." The whole healthcare system needs to be regulated by the government end-to-end. All procurement must be transparent. Every cent traced. Pharma mafia dismantled - on a federal level.
They don’t exist. They’re the imagined scapegoat for what is actually just a much harder to comprehend creeping bureaucracy cost.
The human mind loves clear enemies but Hanlon’s Razor almost always applies. Almost no one ever actually has malicious intent, but our brain evolved to watch for enemies and loves seeing patterns where they aren’t.
The USA expenditure in healthcare per capita is, more or less, the double that the Netherlands (1) and doesn't cover all the population. Where the difference goes?
Sorry if some of us, in our biased minds, suspect that some of that money is spent in cigars and expensive suits.
So what you're saying is there is an horrendous creeping bueaucracy cost here.
Funny, because that's exactly what free market proponents argue is the cause of inefficiency in publicly managed healthcare systems, and the reason to move towards models based on the US system.
It’s you, to yourself. What we have is not by any stretch of the imagination a free market solution. It’s insane amounts of paper pushers created by the government. The whole insurance system we have is an impractical mess designed to fail. The free market would never have designed something so customer unfriendly, people would have gone elsewhere had competing solutions been allowed to exist. In a free market, you are free to go somewhere else.
Our health system is designed by the government, by way of outlawing everything else. If you want to talk free market, in the early 1900s it was common for large companies to keep a doctor on staff and offer their services to employees. That was essentially outlawed.
The rise of cash only flat rate doctors in current years is the closest thing we have to free market, and they’re great. Prices posted up front. No back and forth with insurance companies.
There can never be a free market solution as long as there is a need allocate resources between those who have and those who do not have, without letting the latter not die on the street.
I'd be interested in how the free market develops that solution. At the very least, regulation would be involved. And we all know how adept the free market is at getting around regulation.
Anyway. I'm off to go lie to myself some more. Cheers.
> They don’t exist. They’re the imagined scapegoat for what is actually just a much harder to comprehend creeping bureaucracy cost.
> The whole insurance system we have is an impractical mess designed to fail.
You shifted the boogeyman from corporate suits to politicians in the space of a few comments. If nobody has malicious intent then nothing was "designed to fail". It just doesn't work as expected or wanted by anyone involved.
The costs are more diffuse than this. First, the U.S. system costs twice as much as other systems because we have more people employed delivering care and they make higher salaries. Doctors, nurses, they all make more in the U.S. than in Europe. So more people, getting paid higher wage, results in double the costs.
But wait, the financing in the U.S. is quite predatory, so a lot of people pay nothing, and a few people are stuck with outrageous bills. It's like the infamous SF General Hospital that offered loads of free care to the poor and to immigrants and then refused to take any insurance so that normal people were regularly driven to bankruptcy if the ambulence took them there. The U.S. healthcare is one in which a half a million is spent on emergency care for an indigent person and 10 middle class families lose their life savings of 50K treating snakebites and broken arms.
Once you wrap your head around this, you'll understand we have a very similar problem in higher education, and for very similar reasons.
Ok, I'll take all of that at face value and as given. It just sounds completely broken over there and I'm not sure I will manage to wrap my head around it.
All I know is simpler systems around the world exist and work such that those 10 middle class families would never get stiffed like that, whilst also looking after the needy.
> It just sounds completely broken over there and I'm not sure I will manage to wrap my head around it.
Agreed. But that's the way it is, and it's important to understand why it's this way.
When Europe and Australia adopted national healthcare systems, the industry was ~3-5% of GDP. So at that point it wasn't politically strong enough to resist either nationalization or strict controls.
Then healthcare mushroomed in size, being ~10% of GDP in Europe and 20% of GDP in the U.S.
So now, when you try to do the politics that the europeans did, it doesn't work. The industry is too powerful. Merely blaming the US for not doing what Europe did misses this essential point.
There are millions of nurses, lab techs, administrators, and doctors, and they have money and they vote. So the left keeps looking for some villain -- greedy insurance executives, Wall Street, Evil Billionaires, etc. And basically refuses to understand that these are not the ones standing in the way of reform. It's the 13% of our labor force that earns 20% of national income, and these are not the same easy targets that the left can attack, because they are a large portion of the US middle class, and are core Democratic constituencies.
That's why healthcare reform in the U.S. always focuses on having the government pay some of the costs charged to consumers rather then reducing the costs of providing healthcare. E.g. more subsidies for this bloated industry, which only results in costs rising even more, and then calls for even more subsidies when people can't afford to pay the costs. When what we should do is fire 50% of the staff and cut the pay of those that remain by another 50%. That's the only way to get affordable healthcare.
Yes, the healthcare system is politically powerful in the US, but also we have a culture war that has existed since the founding of the country such that half the country considers is highest political priority avenging slights and punishing the other half. Any sufficiently powerful minority can leverage this state of low level war to prevent any legislation that might harm them. Someone wants to prevent hog waste runoff from CAFOs? Inflame the culture war! Medical pricing is out of control? Inflame the culture war! People are being destroyed by payday lending and someone wants to address this? Inflame the culture war! Someone wants to reduce our profits by forcing us to internalize the costs of methane leaks? Inflame the culture war! There are a bunch of people itching to beat up their neighbors. Tell them that the people who want to fix something are their enemies and away they go. That is why the Land of the Free is such a shitshow.
I think we can all agree the US healthcare system is broken. The above describes exactly why it can't just be "fixed"; only after taking those steps would moving to a universal solution make sense. No one, including healthcare workers, wants to be downsized or get a pay cut.
These people are rarely public, you don't even need to know they exist. They exist behind the figures we see on the TV. Where there is money and a chance of corruption, they definitely exist.
> The health insurance industry continued its tremendous growth
trend as it experienced a significant increase in net earnings to $31 billion
and an increase in the profit margin to 3.8% in 2020 compared to net
earnings of $22 billion and a profit margin of 3% in 2019.
My understanding is that the ER system is especially expensive because paying customers are subsidizing non-paying customers (homeless) who use the ER as primary care.
That said, I don't think this excludes the possibility that the insurance companies and the hospitals are also not telling the full truth.
I find it hard to believe the small non-paying contingent is unique to the US or even a significant % of daily patients, plenty of other countries have homeless who end up in ED's.
America somehow spends far more than any other country on healthcare and yet patients still have some of the highest out of pocket costs even when they have expensive private insurance schemes, something is clearly broken to anyone looking and it's not the homeless causing it.
The US's non-paying contingent doesn't need to be any different from any other countries in order to cause the problem. The issue is that the uninsured subsidize the non-payers alone. This is radically different from countries with universal health care where the costs are spread among the entire tax-paying population.
As for why the US spends more than any other country: it's due to an overabundance of caution among the comfortably insured. It's much easier to get a variety of expensive (and often unnecessary) tests and scans (such as MRI scans) in the US. In countries with universal health care these tests and scans are restricted only to those with demonstrable need and they may be subject to long waiting lists.
> As for why the US spends more than any other country: it's due to an overabundance of caution among the comfortably insured. It's much easier to get a variety of expensive (and often unnecessary) tests and scans (such as MRI scans) in the US.
Countries with universal healthcare also tend to have private health companies which can provide tests and scans at a higher speed, either on an insured or a pay-as-you use basis, typically at much lower costs than the US. Yet there doesn't seem to be the same "overabundance of caution" elsewhere. To the extent that precautionary procedures are responsible for high US spend, I don't think that can be decoupled from a system designed to ensure that primary healthcare providers are sales outlets for those procedures.
Do you have numbers for that? Even the comfortably insured in the US have to pay a fee when they visit a doctor, typically around $35 for GP and $100 or more for a specialist.
My last 5 insurers had copays between $0 and $20. Same price whether it's a specialist or primary care.
If it's an HMO, often it's just free entirely. PPO plans tend to have a small fee -- it's never been enough that I've given it a second thought -- and have wide coverage with few limits.
My wife and I never pay a fee to see our doctors. I pay $30 for sick visits for my kids. $100 seems really high. I’ve only had something like that for a test.
Imaging is used as a revenue center. Many states restrict CT and MRI machines based on the broken thought process that restricting capital spending will lead to lower overall prices. Of course in reality you also restrict investment and competition.
The issue is why it costs $6.5K to get the stitches rather than who pays for it.
I mean, it's clear that it's not sustainable to have a healthcare system in which stitches cost this much. Things are not made any better or less outrageous if these costs are transferred to someone else or if they are paid out of pocket.
The only thing that is particularly unusual about the US is that private insurance companies are probably not very efficient (admin costs are multiples of similar mixed healthcare systems).
But if you look at healthcare spending as a % of GDP: the US has the largest public healthcare system in the world, and it has a private healthcare system that invests very heavily in people's health (I think people get confused about this because US life expectancy isn't much higher but that is largely a function of things like obesity that, ultimately, aren't solvable without people eating less...the US does very well with quality of life and difficult to treat stuff like cancer, I am in the UK and a lot of cancers are treated properly, there is just no money to do so).
So, imo, the US is more expensive than similar systems like Germany. But incomes in the US are much higher, people are willing to spend more (particularly on quality of life stuff like joint replacements), and a lot of the additional cost is not in treatment but admin. Maybe moving to a public insurance system would help but look at France: public healthcare system, and doesn't spend that much less than the US (and in the US, public healthcare prices are cheaper than private but private does subsidise the public...and the gap isn't huge)...doctors don't work for free, medicine isn't free, nurses aren't free, you just pay the same but in taxes (btw, I think a public healthcare system would reduce costs by removing admin...would they like it when they couldn't get a knee replacement? No. Would they like it when a parent got cancer or their kid has a rare type of epilepsy and they can't get medicine? No...there are trade-offs, fully public healthcare systems generally do not perform as well as mixed systems like Germany or Netherlands...making insurers non-profit might be a good first step).
The US conducted the experiment to limit insurance companies' profits. A component of the ACA (Obamacare) was the 80/20 rule, where at least 80% of all premiums collected by health ins. companies had to be paid out for care. That was a failure. In the 10 years or so since that rule, premiums have increased dramatically.
Your reply is well-stated. There isn't one single 'bad guy' in the US system; it's more a function of a bunch of little factors that nobody wants to change: the US has the best, highly trained doctors (expensive), best equipment/hospitals (expensive), subsidizes much of the drug development for the rest of the world (for better or worse), and a weird public/private system where the private insurers make up for lower payments from public insurance like Medicaid/Medicare.
In talking with a number of physicians, my biggest concern is that they're starting to feel like most of the 'reforms' and changes the US is making are impacting them the most. None of my physician friends recommend their children go into the profession, and many are leaving poorly-run hospital systems to focus on boutique, private practice (catering to the rich.) We have a huge healthcare provider shortage coming, and I'm terrified the system is straining hard as I get older and will need to start relying on it.
They didn't stop increasing or go down, was my point. One would expect that if insurance company profits were a large component of the premium cost, limiting that to 20% would lead to some beneficial reduction in premiums.
I think it is more that prices are not transparent. Instead they are impredictable.
And you can't shop around for cheaper treatment. Partly because you are not in position to do so and partly because no one will tell you full price in advance.
I agree that those are problems with American healthcare. I'm describing why ER prices are specifically so much higher than care in other areas of the hospital.
Lol what? Insurers are hugely profitable— many are public companies and don’t hide that. And you can underpay plenty of people if you give them difficult to do bullshit jobs that don’t provide value. That doesn’t make “administrators” liars. Doctor salaries have declined over time with inflation— is hard to blame them for higher healthcare expenditures. My main point is outright calling people liars and playing a blame game isn’t going to get anywhere. The system is fubard.
Though in this case it is quite obvious that there are some parties making an obscene amount amount of money in healthcare, there are businesses where employees feel underpaid, owners lose money / break even, and customers believe they are overpaying, so no one is happy. Childcare is first example I can think of.
> The hospital admin says they're underpaid. The insurance companies say they're barely covering their payouts. So who is lying?
Insurance companies are definitely lying (their execs are paid tens of millions) though it should be noted that the US system greatly limits the ability to spread insurance payments on health populations, so it makes sense that the population using medical services is a larger share of the insured population, and thus has to pay more.
Anyway more generally the administrative overhead of US healthcare is absolutely enormous e.g. as of 2017[0] it was almost 35% of medical expenses, versus 17% in Canada (up from respectively 31 and 16.7 in 2003).
> [Administrative costs per capita in the US versus Canada are] $844 versus $146 on insurers' overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians' insurance-related costs.
So the admin overhead in the US (v Canada) is:
- 5.78x on insurance
- 4.76x on hospitals
- 2.07x on nursing homes, home care, and hospices
- 5.34x on physicians
Importantly though you did not list drug companies in there.
Drug costs are completely out of control in the US (some generic and out of patent drugs have seen price increases of 80x in a decade), and AFAIK modern treatment regimens tend to include a lot more different drugs.
At the hospital level, aside from the administrative overhead above, as an other commenter notes there is also the issue that because it's not a single-payer public health system hospitals have to compensate for indigent ER clients by billing more to, well, people who can pay.
Then of course there's the issue that because all the incentives are fucked under the US system it's being used the least efficient way possible e.g. medical costs are sky-high, so people can't have a GP, so they can't take care of their conditions until those go south, at which point they go to the ER which is the most expensive and least efficient medical service center.
And then the ER's job is to stabilise them, but they still don't have any more money to pay for long-term treatment than they did before having to go to the ER (less, really), so they can't follow through, so they degrade again, and back to the ER.
The doctors likely aren't the ones coding the visit. That is often done by separate back-office staff (especially in case like this, where the physician is working for a medical staffing company).
Most medical practices employee (or outsource) medical "coders" whose job it is to take the notes written by the doctor and determine which procedure codes should be applied (which then determine what gets billed for)
I've had doctors in the ER bill directly out of their own practice several times. Out of network, but I've had no choice in the matter except to receive treatment or refuse treatment for life-threatening conditions.
The law here has changed since then to prohibit this kind of thing, though.
In the case where an ER doctor isn’t employed by the hospital, they are likely employed by a physicians’s group. These used to be ran by physicians, but now many of them have been bought up and consolidated by private equity.
The doctors likely have very little say in the pricing.
Yet they still charged roughly $2,000 for a single patient and that is something that did not take the whole day. If I was a physician I'd be happy if I could bill half that amount even if it took me the whole day to treat the patient
The hospital admins are lying. Doctors will go through a billing agency who can charge whatever they want. The doctor might not know, but would be naive to believe it’s not expensive.
Probably a lot of actors. You know that the hospitals who claimed that their prices were trade secrets when being forced to reveal them were telling porkies.
The American insurance system has inherent efficiency problems.
Hospitals are for profit corporations. Doctors are reviewed on how much revenue they generate per patient - usually by asking for more diagnosis and treatments - which is what patients want too.
Too much admin, too little doctors. Someone should get the admin to doctor ratios at hospitals, it is nuts. A lot of admin is there to handle the insane documentation requirements, software, machinery and dealing with insurance providers.
Insurance providers have their own army of admins, talking everyday to hospital admins.
On top of this, supplies providers know that insurance is going to foot any bill. So they charge more. Insurance tries to negotiate it down but there's only so much they can do - unless they buy stuff directly from China or somewhere else.
To add, each of these institutions has their own management ladder with fatter paychecks than the doctors themselves. These folks are nothing but leeches who just need the corporate ladder to exist.
Unfortunately, the only capitalist solution out of this is to allow massive production of doctors (blocked by AMA), allow doctors to unite and form their own hospitals
willy nilly (harder than you think because legal requirements are burdensome) and for insurance providers to compete in open market - as they do for cars. No more open enrollment.
> Hospitals are for profit corporations. Doctors are reviewed on how much revenue they generate per patient - usually by asking for more diagnosis and treatments - which is what patients want too.
FWIW lots of hospitals are non-profit (though I expect that changes are investors are moving more and more into the space).
That doesn't mean they don't focus on doctor's revenue, it only means there are no owners skimming off the top, but there are still execs being paid (a lot), as well as suppliers, etc... I'm not saying NFP hostpitals are worse (or even as bad as) FP, but they're hardly good.
