I've spent a lot time around people doing statistics for environmental science, especially regulatory compliance around accidentally killing birds and bats. The unfortunate reality for the statisticians is that every tech thinks they're Henry David Thoreau or something. Like, nobody cares if it was a particular large exemplar of a given species, or that it had magnificent plummage, just write down the species of the carcass and where it was located, and move on. Instead, there's so much variance from (mass produced and standardized) data sheet to data sheet that you can't even use hand writing recognition to automate the process of ingesting the data. Manually entering the data is somebody's whole job, because they've tried to automate it, and failed.
The billing codes exist explicitly to limit the amount of independent thought that can be applied to something that is adequately summarized as "bit by a duck, third visit".
> The billing codes exist explicitly to limit the amount of independent thought that can be applied to something that is adequately summarized as "bit by a duck, third visit".
None of this explains why these codes are needed for billing though. We simply don't need to bill differently for these pieces of information. The visit might have all these tags for informational purposes, but the bill should be for "visit to GP" and that's it.
The application is so misunderstood that I called them billing codes, when these are in fact diagnosis codes. They exist primarily to simplify records transfer when you go to a new clinic/hospital/doctor/whatever, and secondarily to allow the NIH to track how a given health risk develops over time.
That doesn't make sense, it's easy to imagine that subsequent visits will cost slightly different amounts in terms of resources, labour, etc... and require somewhat different procedures in terms of treatment.
Your position is kind of ridiculous. That applies to every single business ever and yet magically hospitals can't get by without itemizing _everything_? Of course not. Besides nowhere but in the US is this normal, which alone demonstrates your claim that somewhat different procedures _require_ this to be totally false.
The only reason that hospitals in the US get away with it is because of the ludicrous agreements that you sign when arriving (you agree to pay whatever magical amounts we decide to bill you...). If those contracts were unenforceable (as they should be), hospitals wouldn't come up with this idiocy and would charge things simpler and would tell you ahead of time what your cost will be.
Those are ICD codes, which are not the same as billing codes. ICD represent diagnoses, not services rendered.
ICD codes also are somewhat procedural in their generation - that is, there's a whole grammar to how they're formed. For example, you'll have something like "contact with", then a whole number of different animals, and then each of those will have three different varieties (initial encounter, subsequent encounter, sequela). So it does end up with very funny lists, like the one you posted, but:
(a) most of those codes are never used, and
(b) just because it's assigned just means that it's a "grammatically valid" combination, not that it has any particular clinical relevance.
The goal is to assign granular and hierarchical codes at the outset, to allow for more robust analysis later, at least in theory.
But again, all of that is irrelevant to billing, because while ICD codes are typically submitted along with the billing info (along with a whole other slew of data), ICD codes are not the actual code that's billed - there's a whole separate list of codes used for billing.
That's really interesting, because I had a customer that did nothing but provide medical billing services, and about 15 years ago when the industry was moving from ICD-9 to ICD-10, that customer seemed really focused on their billing coders learning ICD-10.
That's to ensure that the service provided (procedure code) matches the diagnosis.
For example, the procedure (HCPCS) code "71045" corresponds with the procedure "RADIOLOGIC EXAMINATION, CHEST; SINGLE VIEW" for billing purposes.
If you were to match that up with the diagnosis code (ICD10) S80.211 for "Abrasion, right knee" there would be a mismatch between the diagnosis and the procedure. This happens all the time due to human error and often results in insurance denials, which sadly take a long time to fix since now you have to get MORE HUMANS involved.
> That's really interesting, because I had a customer that did nothing but provide medical billing services, and about 15 years ago when the industry was moving from ICD-9 to ICD-10, that customer seemed really focused on their billing coders learning ICD-10.
I mean, sure? You can't bill for a service without a diagnosis code that justifies the service. Anyone who does medical billing is going to need to be able to format that data. But ICD codes are not the codes that insurers are billed for - billing codes are completely separate and not even determined by the same party.
But why? I could understand from a treatment perspective the type of animal mattering (but even then initial vs subsequent encounters?). From a billing perspective, wouldn't it make sense to have animal bite exam fee, with possible additional charges for bandaging, stitches, rabies shot, etc based on doctor's discretion?
Because these are world health organisation 'international disease classification' codes that are designed for population health study and happen to be used for insurance billing in the US.
There are requirements for some data to be reported to federal and international organisations. For instance, these codes are also used on death certificates I think, so they can track whether a lot of people are dieing of flu (primary cause) after contact with duck (qualifier) and there is a bird flu outbreak.
There are many coding systems - semi-standard extensions of ICD used to identify very specific types of cancer or the ontology based SNOMED which is rarely used as intended but none the less is becoming the standard.
These codes are used for billing in the US to some extent but also for lots of other things, they are just a standardized set of codes that hospital IT systems use to talk about what is wrong with patients so they can somewhat interoperate - and they are forced to use them by government because the vendors prefer walled gardens over interoperability.
I’ve lost count of all these times a freshly onboarded dev, replacing the old one, decided the système was needlessly complex, nothing made sense, and it’d be easier to just rebuild everything from the ground up.
Only to end up with a similarly complicated nonsense, because the complexity actually was in the domain, and he knew nothing of it.
> Because these are world health organisation 'international disease classification' codes that are designed for population health study and happen to be used for insurance billing in the US.
This is the root of the problem. These codes should not be used for billing. That should be much more coarse. They bill you for visiting the GP. They bill you for a surgery. Adding the codes to the records is fine and good, but really should just be an internal detail that isn't that relevant to the patient.
>> I could understand from a treatment perspective the type of animal mattering
Rabies, which is not just animals but also predators (snakes) that eat animals with rabies. There is even a disease called "seal finger" that is linked to seal bites. And bats, all sorts of nasty stuff can come from bats.
Well, it employs a lot of people to have this complex billing. And whoever argued the need for it got to do some major empire building, maybe scored a promotion.
Medical billing is a dreary business. Check out https://www.reddit.com/r/CodingAndBilling/. It's not clear that anyone is _trying_ to build an empire out of this. More likely, they're trying to build a bigger trash heap to climb on top of.
No one got a promotion out of it. The USA adopted the WHO ICD code system for diagnoses on billing claims because it was good enough, and much easier than defining a whole new code system. Some of the codes are never used, but so what.
Because, like it or not, a doctor's discretion can sometimes be self-serving. The more treatments a doctor gives, the more they get paid, and there is an enormous information imbalance between doctor and patient. (As in, they went to medical school, and you didn't.)
Unfortunately, some doctors are willing to take advantage of this.
> The more treatments a doctor gives, the more they get paid
You could say this 30 years ago, but it's not really the case today. The majority of physicians are now salaried, not independent. And even for many of the ones in independent private practice, the amount they make is not necessarily tied anymore to the services they provide, due to the rise of capitation and other forms of bundled service agreements.
Nowadays, it's actually statistically more likely that you receive care from a doctor who has an explicit incentive to undertreat, because they receive a fixed amount of money per patient per year, and the costs of treatment come out of pocket directly with no additional reimbursement.
This is the basis of all Medicare Advantage Plans, where the physician or their employer gets X$ a month per MAP patient and must pay for most of the cost of care. The insurance company gets to keep most of its share of what Medicare pays. Nice profit ensues for the insurance company.
Insurance companies that sell Medicare Advantage plans end up keeping only a tiny fraction of what they're paid, hardly "most". This is a low-margin, high-volume business. You can find the details in their published financial reports.
I would love to see some data on this, if anyone knows of any. I'll just provide anecdata that of the doctors among my friends and family, more of them get paid by "wRVU" [0], which is basically a derivative of "how much treatment you give", than by salary.
(I only happen to know this because they complain nearly incessantly about the wRVU system! I make no claim to be an expert on the topic.)
It's kinda ridiculous that because it costs x billion in doctors overcharging, we'll spend 100x on administration to control costs. Cutting off one's nose to spite one's face and all that.
Actually if you think about it insurance is forced investment in a fund where the amount they make is driven as much by the amount they can get you to pay in as much as efficiency. It is only beneficial not to be so obviously egregious that nobody will touch you in an environment full of people who are tacitly collaborating to increase prices so that the pie gets bigger for everyone.
Everyone is actually collaborating against you which is why in the US we only provide free health care for a small fraction of the populace but still manage to pay for THOSE folks as much as some other developed nations pay to cover their entire population.
Corporate entities consume administrative hours, paperwork, procedures, etc... of the healthcare system, which have many interested parties that benefit from that, they are consumers in a broader sense.
You're really missing the point. The word "consumer" has a specific meaning in the health insurance industry, which is what this article covers. What you're describing is irrelevant and off topic.
How is that 'off-topic'? That is the point of the parent, that many, including employers, corporate entities, etc., benefit from increasing consumption of the healthcare system.
Did you misread my comment? Corporate entities certainly consume non-zero amounts of resources. They are definitely consumers in an economic sense. That applies for all sectors of the economy, not just healthcare.
This has gradually changed with the emergence of "value-based healthcare", which is what we should be solving for (and building the right incentive structures for)
> From a billing perspective, wouldn't it make sense to have animal bite exam fee, with possible additional charges for bandaging, stitches, rabies shot, etc based on doctor's discretion?
That is FFS (fee-for-service) billing. And indeed that does not use the diagnosis code, except for reporting purposes and documentation that the treatments were appropriate/necessary.
The diagnosis code would be used if billing in a DRG (diagnostic-related groups) model, which is an overall fee for overall treatment related to the condition -- exam, stitches, etc.
It partly arises as a mechanism to pay per case, not just per visit. For example, if we put all payment for a breast cancer treatment into the first visit, there is now an incentive to either complete the treatment (ideal) or keep the patient from coming back (less ideal). You can use these follow-up codes to measure rates of return visits, which can be related to quality of care metrics.
because CDC wanted to collect epidemiological data on how those bites were happening, instead of having single generic "animal bite" code. If there is a sudden rise in duck bites in a future decade, we can start asking about whether there's a reason behind that, or something we should be doing to control duck populations, or something. That's what CDC is there to do.
It's extraordinarily difficult to capture this information after the encounter... the patient is gone, the provider is working from notes/memory, and now it's this additional specific burden. How are you supposed to run an epidemiological study on the prevalence of duck bites if everyone involved has vanished into the ether? If you're going to capture it, it has to be rolled into the diagnosis codes and captured during the encounter. Also, you really want to capture the contemporaneous narrative including any misdiagnoses/etc - the CDC wants to know how much that is happening too!
really those low-level codes are kinda just there, they're not really used in practice, and most billing systems would care about the higher levels of the hierarchy anyway. The part insurance cares about is "cleaning and stitches after small wild animal bite", not the levels of the coding scheme that indicate that it's a duck bite.
(but you can see how it is potentially useful to shake some of these details out - is it a large animal, or a small one? a pet or a wild animal? a wild bear bite and a pet duck bite are two very different scenarios for the provider+insurer!)
It's also really more about things like "gunshot wound from stranger" vs "gunshot wound from partner" vs "gunshot wound from LEO" where there is obvious value in capturing what is going on. Jokes aside, nobody is super concerned about duck bites, it's just a funny example of how detailed the coding system can be (not must be... at least yet).
The real travesty is the idea that the same action using the same materials in the same facility can be billed 2 different ways based on two different ICD codes, not that ICD codes include the diagnosis data. It shouldn't matter if it's a duck or a cat, it's a superficial clean-and-bandage, that's what procedure coding (CPT) is supposed to capture. If there's major variations in how you perform a procedure based on how the patient presents, such that cost is substantially impacted... that is a deficiency in CPT and needs to be fixed independently, not forcing everyone to track CPT+ICD for eternity.
~~CPT itself incorporates a huge amount of nuance and sub-coding for this exact reason.~~ Simple example but we'd spit out CPT codes like "MRI with contrast-enhancer" vs "without", "MRI 3-tesla" vs "1.5T" vs "Open", "CT 64-slice" vs "40-slice", etc. If you're not capturing some aspect of the procedure you need to take it up with the CPT people, not make it everyone else's problem.
edit: superfun memory this just triggered, in fact this imprecision in CPT coding actually does lead to different things having the same CPT code and operators have to select from a picker of these possibilities that are specific to their organization's coding/billing systems. Forgot about that, awesome!
Looks like it's W50.3XXA if it was accidental. Or Y04.8XXA if it was intentional. If you were the communist and bit yourself on the upper right arm it would be S40.871A or S41.151A depending on how deep the bite went.
> I wonder if bitten by duck is more expensive that bitten by chicken.
They're diagnosis codes, so they're mostly irrelevant for determining cost. You don't get charged for "having the flu" - you get charged for the various services or treatments you received in the course of your illness.
Diagnosis codes do factor into claims reimbursement indirectly. For example, some services can be done either as treatment or for preventive purposes, and insurance is legally required[0] to cover the latter at no cost to the patient, whereas insurers can require that the patient pay for the former. But that's pretty indirect - by and large, the payment agreements between insurers and in-network providers apply to services rendered, which doesn't really factor in diagnoses codes (assuming that the service was appropriate for the diagnosis in the first place). That's assuming fee-for-service: capitation is a whole other model, although in that case it's still typically determined independent of the diagnosis, because the whole point of capitation is to minimize care delivered.
But getting bitten by a duck vs. a chicken is unlikely to cause any difference in the price you pay, unless:
(a) the injuries from the duck bite were significantly different from the injuries from a chicken bite, or
(b) one was considered an occupational exposure and the other wasn't (in which case worker's compensation would be billed for it).
[0] well, until March of this year, when a judge in Texas overturned that clause of the ACA
Not even ironically, this all smells of insurers wanting sufficient data to raise rates on different types of farmers and breeders. It might be scandalous if they didn’t collect the data and then were biased against, say, chicken farmers. But if they do collect the data, they can say they analyzed it, whether or not they did, to support any kind of tactic they desired.
True for marketplace insurance, but private plans (which companies would provide to employees at enticingly lower premiums than public options) vary considerably. See, for but one example, https://www.lgbtmap.org/img/maps/citations-nondisc-insurance...
The Z codes (ICD to be specific) are similar. Although those two are not exhaustive -- it can be conditional so can be confusing.
You have different rules for chronic conditions, so for example something could be rolled up into a billable DRG one visit, but should not be included in a follow up visit.
The DRG example on this website is interesting -- so I think these are valuable services, but I look at claims data everyday for my job and I would have a hard time knowing the exact codes before I go for a visit. (Also obviously in an emergency I am not shopping around!)
And then there are service modifiers for "how long" for CPT codes for just outpatient visits -- you wouldn't be able to know 15/30/60 minutes before hand even if you did know the specific CPT code. So for that you may want to know the proportion the doctor bills, not compare the prices on the same CPT.
Take however complicated you think medical billing is and multiply 5x. For starters.
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You are using a bit of a mixed example with bandaids, aspirin, and duck bite.
The simplest billing is FFS (fee for service). This associates a fee for each procedure/drug/product using a 5-digit CPT/HCPC code.
For example, 29877 would be Arthroscopy, knee, surgical; debridement/shaving of articular cartilage (chrondroplasty). Add a 50 modifier to make it bilateral (both knees). Add an AS modifier if billing for an assistant surgeon. Add a 26 if the bill is only for the professional (human services) portion. And so on.
The in-network price will be based on the health organization (9-digit tax ID), the rendering physician (10-digit NPI), the insurance plan/network (no standardized format), and the place of service (2-digit code, e.g. 24 Ambulatory Surgery Center).
The price is further modified by a variety of adjustments, such as MPPR (multiple-procedure price reduction), MACRA, etc.
W61.61XA (Bitten by duck, initial encounter) is a ICD10 diagnosis code. That is, a diagnosis of a condition, not a service. While you will always have a diagnosis, it's not relevant for FFS pricing. This is used in a whole other set of billing called DRG (diagnosis-related groups) typically used for inpatient care.
And of course there are even more billing methods.
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This is all very, very complicated.
A lot of it is essential complexity -- modern medicine is indeed very complex.
IIRC the "initial encounter" refers to the first visit between the patient and doctor about the duck bite, and "subsequent encounter" means a follow-up visit about the issue, not a second maiming by the duck.
That does make more sense, but I refuse to let go of the image of a duck with a vendetta tracking some poor bastard down, and the stalwart medical coding technician who is dutifully documenting it all.
That is correct.
Obviously, there's little value in distinguishing between the first and second occurrences of duck bites. Rather, the suffix describes which treatment it is.
A - initial encounter (initial treatment)
D - subsequent encounter (continued treatment)
S - sequela (after the treatment plan is completed)
Ok, so it's _broken_.
As a system of recording stuff is it also ... incoherent?
Slapping on a bandaid or giving someone tylenol are _services_.
"Bitten by duck" is a _cause_, and different people bitten by ducks could need different services, and people impacted by different causes could need the same services. If I have a laceration, I'm guessing that how I'm treated should depend on how deep/large/severe it is, rather than what kind of implement was involved? If they're equally sharp, dirty, etc, a kitchen utensil, non-powered tool, scissors, or other sharp implement may all result in the same slapped bandaid, right?
> Ok, so it's _broken_. As a system of recording stuff is it also ... incoherent? Slapping on a bandaid or giving someone tylenol are _services_. "Bitten by duck" is a _cause_, and different people bitten by ducks could need different services, and people impacted by different causes could need the same services.
As others have explained, these are diagnosis codes; there are also procedure codes. Procedure codes are the primary thing billed for, the diagnosis code is just to justify the procedure - some doctors will perform (or falsely claim to have performed) medically irrelevant procedures as a form of billing fraud, and cross-checking the procedure and diagnosis is meant to prevent that.
And the reason why there are so many diagnosis codes, is because their primary purpose is public health statistics not insurance billing; and ICD codes are global (although the US also adds its own US-specific ones.) Probably, somewhere in the world, some bureaucrat is tracking the public health cost of animal attacks by species, and those species-specific animal attack codes exist to enable them to do that.
Yes, the cause or problem is needed as well as the procedure or treatment that was delivered to treat the problem. The treatment will be charged separately for professional (like MDs) and technical (like nurse, pharmacy). It also matters who is performing a procedure. An MD slapping the bandaid charges more than a PA, Nurse Practitioner or PharmD.
> My personal favorite is V97.33XD "Sucked into jet engine, subsequent encounter."
If you were sucked into a jet engine, you'd probably sustain serious injuries, so hopefully you'd have a followup visit with your doctor about it after the fact, rather than just one single visit.
(Yes, I get that you're joking, but that's what "subsequent encounter" actually means.)
If a person were sucked into a jet engine, they'd be turned into soup. Maybe they could be poured into a container and the doctor could subsequently encounter them in that state.
Here's a video of a guy getting sucked into a jet engine and surviving. Most, of course, do die.
I don't quite understand why everyone is so bothered by the extensive ICD taxonomy; it clearly needs to be extremely extensive to cover even fairly common scenarios, and once you're past the point that things can be easily managed why not cover everything?
Sure, it's necessary to have some specificity so that providers and insurance companies can be reasonably informed about what's going on, but this stuff has a very real cost. Healthcare providers have entire departments of people dealing with coding. The more complex it gets, the more time consuming and expensive it is to correctly code things. At some point (I suspect well behind us), the added cost isn't worth the marginal benefit.
These codes were originally developed by the World Health Organisation to collect public health statistics, and statistics on causes of death - that’s their original purpose, not insurance billing. A lot of codes which seem silly or pointless for insurance have more validity when keeping their original purpose in mind.
There’s an ICD-10 code for executions - Y35.5 - can you bill an execution to health insurance? I hope not, but as a possible value for a cause of death field in a death certificate database, it makes sense.
Sure, there are other uses for the data. But the fact remains that generating it isn't free. And changing the coding in and of itself incurs significant administrative cost, so "we've come this far; we might a well just keep going" isn't really a compelling reason to expand ICD.
> Sure, there are other uses for the data. But the fact remains that generating it isn't free. And changing the coding in and of itself incurs significant administrative cost, so "we've come this far; we might a well just keep going" isn't really a compelling reason to expand ICD.
The WHO expands and revises ICD all the time - and how it gets used by US health insurance isn’t really a concern of theirs. The WHO has 194 member states and the US is only one of them. WHO intends the ICD to be used for collecting public heath and cause of death statistics, and if some countries want to use it for insurance/billing - that’s their problem, not the WHO’s
The US uses its own modified version of ICD-10, ICD-10-CM, which adds even more codes. A lot of those added US-specific codes exist simply because some hospital - or bureau of vital statistics - somewhere in the US, was tracking that. Other countries have done the same thing - Australia has the ICD-10-AM, Canada the ICD-10-CA, Germany the ICD-10-GM, etc
Just because a code exists doesn’t mean you have to use it for any particular purpose. Indeed, most medical software packages permit disabling codes you don’t want clinicians to be able to use. In an insurance system, a code like Y35.5 is likely marked as non-billable.
Yes, but the ICD isn’t for health insurance, it is for international standardisation of mortality and morbidity statistics, so they can be compared between countries. That’s its purpose and the reason for its existence
The fact that the US chooses to use it for something which was not its originally intended purpose is the fault of the US, not the fault of the ICD. The WHO doesn’t force the US health insurance system to use it, the US could invent its own totally unrelated coding system for that purpose and the WHO wouldn’t care (so long as those codes can be converted to ICD codes for statistical analysis)
Most of the complaints in these comments have been about diagnosis codes (ICD-10-CM) not procedure codes (ICD-10-PCS).
Both ICD-10-CM and ICD-10-PCS are produced by Centers for Medicare and Medicaid Services (CMS). But ICD-10-CM is just a national version of WHO ICD-10, and as such entirely comparable to other national versions such as Australia's ICD-10-AM or Germany's ICD-10-GM. Whereas, ICD-10-PCS, despite its name, doesn't really have anything to do with WHO ICD at all, it is a purely American invention. Other countries have their own equivalents to ICD-10-PCS–for example, the Australian equivalent is ACHI (Australian Classification of Health Interventions), but unlike the US, Australia doesn't mislead people into thinking that our national procedure coding system is part of WHO ICD
This reminds me, I recently read of this happening in TX [1]. It was ultimately ruled a suicide. A horrible, scarring event for all in the vicinity without a doubt.
Do we get separate diagnosis codes for each verb? So, sucked into jet engine, walked into jet engine, fell into jet engine, pushed into jet engine, etc.?
I'd hope all those fall under "made contact with jet engine internals"
If you fell into a jet or were pushed into a jet are the same. You fell into it because you were pushed. If you were sucked into it, the push just came from the other side and you still fell into it.
I worked in health insurance. The code is supposed to make it easy to pay. It doesn't.
We could do away with the codes. In addition to having to look up the codes, I read records all day, called and wrote providers for additional info, consulted my technical lead regularly to see if it was covered and once had to print the entire file and get it reviewed by the retired surgeon who came in once a week to read surgical reports on difficult cases.
I'm underwhelmed with the value they provide and I paid claims as my job for 5+ years.
We were drowning in data. It was a Fortune 200 company and every few years they completely overhauled their system for looking up state exceptions etc, which meant longstanding employees could no longer use it efficiently and new people still didn't magically get it instantaneously and inevitably some important thing could no longer be accessed at all.
It was all in-house, homegrown software, I tried more than once to suggest moving to GIS -- a map-based system -- for some things and was ignored.
I'm curious how that works for you because I just have trouble imagining that actually works. Like what value does that provide that you cannot do some other way and which justifies the systemic cost burden?
We're one of the guys who are creating all that work for you lol. We too have been through a number of systems. Since i've been with the company, we've gone from SQL Server, to an on-prem Hadoop cluster, to Databricks on the cloud, and plenty of home grown software. The cloud has been a real game changer for us from the simple fact that we finally have enough compute to start running some machine learning models. We have this standard data model with something like 300 columns, but every clients data is so different, some of them have around 400 columns in the data.... We're in theory using the medallian architecture, but there's so many legacy business processes we're not anywhere close to an ideal implementation. We've also recently started using AI in a big way as well.
My email is in my bio, we should chat sometime i'd be facinated to hear more of your perspective.
I wish instead of charging 100x for random things to pay for the hospital, they'd just charge per minute of room and per minute of doctor contact.
I understand why you need to charge me $2000 to have an entire hospital ready in case I need stitches at 3am. But I get annoyed when you try to play it off as having to charge $85 for an aspirin. Just be upfront and say, we charge $100 a minute and this is going to take 15-20 minutes.
So then you also add a constant per patient, but then there's an incentive to be rushed. Gosh, it seems like profit incentive is a really bad way to run a healthcare system, doesn't it!
Even systems without a profit motive will have to economize, and therefore will track resource usage and discourage waste. The NHS still has e.g. PSAs telling people not to go to the emergency room for non-emergencies.
The nominal reason for the (seemingly insane) billing codes is the codes are based on ICD-10. The ICD (International Classification of Diseases) system was supposedly originally developed for epidemiological tracking.
Nuanced but important distinction: these are ICD-10 diagnosis codes. They are only loosely related to what is billed and would not show up in the pricing data referenced by the OP.
The initial/subsequent encounter coding seems to refer to the encounter with medical personnel (for the specified issue), not the number of times the same issue has been encountered by the individual. Which is maybe a good thing for recipients of T18.5XXA.
> Hell, W61.61XA is the medical code for "Bitten by duck, initial encounter." Presumably, this means there's also a code for "Bitten by duck, again."
All this means is "first visit", as in "I need immediate attention for this", and "subsequent encounter" doesn't mean "another duck" it means "follow up for X, but it's already been 'counted' (and presumably the care is less acute)" (i.e. for statistical purposes, "X,000/year people bit by ducks".
Yep. Was involved in medical billing software. Health companies do everything they can to “upgrade” billing to more expensive codes. Lots of AI and such.
Broken compared to what literally any other country in the world does? Personally I'd replace it with publicly funded healthcare, but even those countries that still feel the need to bill the victim have avoided the whole billing-insurance complex that the US has.
Well obviously (or so I thought) was referring to how it's modeled (with the crazy codes and all) based on the way the system currently is -- not on how the system "should be".
The comment I was responding to just seemed to be saying: "Gee, this is complicated." Well yeah. Because what it has to do is (based on the way things are presently, and beyond anyone's ability to change in the near-term) complicated.
Crazy billing codes are a pain signal. They aren't the underlying malady itself.
Yep, this seems like surface level complexity. Like adding a new/non-existing key to a dictionary, it shouldn't surprise us that there can be different codes for getting bitten by different things
Can we bill it like my mechanic does? Parts and labour. I could see that some medical people would want to have their time considered more valuable, so how about bill for parts, and labour depending on minimum qualification to do it.
Companies are going to grow around this data. An entire industry might grow around this data, and it will be an industry that I support every time I pay an insanely high insurance premium or medical bill.
15% of our workers are in the medical system [0], and this doesn't even include the surrounding insurance industries or pharma industries (I think). Someone has to pay all these people, and that someone is me when I pay high insurance premiums and high medical bills.
I'm picturing a satirical 40s style poster that shows the doctor putting a bandaid on Timmy's knee, and then mom doing her patriotic duty and writing out a $1000 check. The poster then shows that the $1000 supports medical coders who know all the codes for duck attacks, and the pharma advertisers who one-up even Broadway and Hollywood with their 90-second advertisements, and the people who reassemble the poorly organized data this article talks about, and--oh yeah, there's a few bucks left for the doctor too.
I used to work at a company that does background checks on doctors. We'd gather data from all 50 states, all of it in different formats, all of it a pain to work with. Hundreds of people were involved in this process, all of us ultimately paid through high hospital bills (hospitals were our customers). With the right regulation, we all could have been replaced with a 50 line Python script.
Ultimately, if we're going to build a medical system that takes 15% to 20% of our workers to run, then we're going to have to pay for that. The problem is that "let's make the industry more efficient and put a lot of people out of work" is not politically popular.
There's a similar issue in academia. Tuition costs have risen far faster than inflaction but the number of professors per student is roughly similar. Where does all the extra go? Administrators and bureaucracy!
There's two things here. First, payment for the cost of education has two major parts: tuition, and state allocations to higher ed. When tuition goes up, it can mean that education costs have risen, that state allocations have gone down, or both. Although there have been some understandable increases in the cost of education, the main driver in the increase in the nameplate tuition is the decreases in state allocations.
https://fivethirtyeight.com/features/fancy-dorms-arent-the-m...
Second, the nameplate tuition number that looks to have risen is not even the amount that most students pay, as most students get financial aid. The correct number to judge whether tuition has gone up is the Net tuition number. Most reports of the net tuition number show that it has gone up much much less than the nameplate number, but it's also not public in the same way. If we had an anonymized national database of net tuition paid by all students receiving any amount of a federal financial aid, it would go a long way towards improving the quality of the discussion around higher education costs.
I paid MORE to sit at home on zoom during Covid, through a "distance learning fee". And that money didn't even go towards buying the professors decent internet.
I mean based on all the numbers provided it could have also go into
- Construction costs of smaller classrooms
- Advanced labs
- Land Taxes
---
But also if the number of students & teachers has increased at a proportional rate then tuition would be expected to increase to cover the more administrators required to administrate the increased staff.
What sort of company could you start around this data?
It looks like this parent company (turquoise.health) is already targeting price comparisons ("rate sense"), contract negotiations for people/companies who purchase health care ("clear contracts") and other parts of the value chain. Are there any other parts of the value chain left? I can't think of anything...
There is so much data because of insurance. Insurers are in the business of declining claims. They have discovered that the best way to decline claims is to create byzantine rules while offloading all the work to comply with those rules to healthcare providers. The only way to fix it at this point is to nationalize the system or to exclude all routine care from the insurance system. Something like a legal ban on deductibles smaller than 20k/year would work.
Per federal law (ACA), health insurers in the US are required to spend 80% to 85% of revenues on healthcare expenses. Their profit margins are 2% to 6%. Therefore, the higher the revenue, the higher the profit.
Competitive? In every job I've had it was basically the same 3-4 HMOs: Aetna, Bluecross, Cigna, and United Healthcare. If you are getting employer provided healthplans, as most Americans are, those are your options, 4. With so few options you aren't choosing the most competitive, you're choosing the lease worst.
That is because the messed up pre-tax benefit the US gives to big businesses so they have (another) advantage over small businesses, so you are buying from whoever your employer chooses to let you buy from.
Ideally, everyone in the US would have to buy health insurance from healthcare.gov, and can choose whoever they want with zero input from their employer.
I would prefer to buy my health insurance on the open market. But without the subsidies its pretty uneconomical. The fact that your employer offering it automatically locks you out of the best plans on the marketplace is anticompetitive and anti-labour.
Oscar I've never heard of but appears to be only available in NY/NJ and is operated by Cigna in other states. Kaiser operates primarily in the west coast. And Humana doesn't have much presence in Florida. They primarily do Medicare Advantage, AFAICT.
Is that real profit or profit after a bunch of accounting sleight of hand? Are they cutting their "profit" by taking heavy debt burdens via leveraged buyouts or other schemes, pulling way more than 20% off the top for their shareholders and then making it look like much less?
I trust the financial figures filed with 10-K reports and the US SEC enough to not worry about that. If one does not trust those figures (for multiple different companies employing tens of thousands of people each), then further conversation cannot be had.
For sure, and that is where the government should be handing out heavy penalties. There supposedly is an appeals process, but obviously not enough auditing is being done:
In Switzerland, healthcare is somewhat private. The legal framework is enacted by law, and the Confederation decides the types of claims, prices, conditions, etc..
Every hospital (public or private) must follow the prices decided by the Confederation, and every health insurance must reimburse following the same prices, not more and not less.
I wonder how you deal with the usual problems of price fixing. What services aren't done because they pay too little? How do you lure doctors into fields where the pay is terrible? What about rationing of procedures that are costly but pay too little - is the scheduling delay so long it impacts your health?
Because our (US) system is at Monty Python levels of absurdity.
We waste more money with this "system" than most other countries spend as a total, and with worse outcomes on average [1].
Fundamentally, there are two factors, IMO, that have been conclusively proven (repeatedly, and for decades - much more strongly, recently) to be incompatible with delivering quality healthcare with some level of efficiency:
1) For-profit entities (particularly, publicly-traded / with "fiduciary responsibility" to shareholders)
2) Administrative burden / bureaucracy (partly stemming from all of the competing private entities, partly stemming from essentially impossible efforts to effectively regulate these entities and the created "market")
The manner in which the US system evolved, tying insurance to employment through basically existing tax policies, and the move by companies to take advantage of this to attract workers (IIRC), created a massive landscape of entrenched interests that works exactly like such ecosystems work. It is a "teergrube" - an absolute tarpit - where any attempt to fix problems ultimately fails.
The administrative situation is out of control, which means fraud (particularly with the turn towards "digital crime" of everyone from traditional organized crime networks to high schoolers) and waste are impossible to effectively control, adding to an already absurd situation where ever-increasing money is spent on marketing, lobbying, administrators / clerks, etc. Meanwhile, we desperately need more doctors, nurses, etc. AND, these professionals are now increasingly being politicized by "exploiters". A great many healthcare professionals are quitting, and those remaining are often trying to move away from areas that often MOST need their services!
It's amazing to watch (from the inside, so far) a country that built such "soft-power" might ... such a dominant "marketed / exported 'culture'", have those same tools (used, in any scenario, intentionally or not) turn against itself (/ be turned against it) - sowing the seeds of collapse in all sorts of systems, top-to-bottom.
There isn't a face or palm big enough for the facepalm this BS deserves.
You're talking about the ticket price for the service when that really shouldn't be the consideration. It doesn't matter how affordable it is when most US citizens can't cover a $500 emergency with savings. It's a shameful, political choice to have people walking around with curable blindness. Or to have people rationing insulin. The body is a temple but the temple is made of meat. It's inevitable at some point that you'll be sick. We may as well bake that assumption into the social contract than try to treat it as any other good or service. Can't exactly shop around hospitals when you're in an ambulance, unconscious.
It's funny how people casually throw out how something has "conclusively" been proven and yet it's a hot debated contentious issue that 50% of people don't agree with.
Well gee, zo1, if it's been "conclusively" proven then it should be trivial to convince them to change their mind, right? Perhaps it hasn't been as "conclusively" proven as we've been led to believe.
It might be 50% in the US (although studies show that even in the US most (>60 % IIRC) people favor some form of public healthcare if asked in non-polarizing terms), but if you look at worldwide statistics countries that have publically funded healthcare have typically better outcomes at lower costs, which might not be "proven" in the strictest sense, but is pretty strong evidence.
I used to work for a company that writes claims benefit management software. This:
> Notice how every item has a price that requires external information to understand:
> Per diem rates are paid for each day a patient is in the hospital. We need to know how long the patient will be in the hospital to know the total amount.
> Rates for Cardiac Studies require knowing the price the hospital will bill in the future. The rate is essentially “44.8% of another unknown price,” which isn’t terribly helpful to a patient.
> Radiology rates are based on an external price list that has to be looked up in an entirely different database. External rate lists are very common in health insurance but are not helpful unless you have access to the latest price list and can do the math yourself.
is where they stood out from their competitors, who typically had huge, and very wide database tables to capture this, but my ex-employer had written a DSL that allowed billing rules to be described with lookups and logic.
Why build LLMs when the problem does not need to exist in the first place. The rest of the civilized world does not need LLMs to solve this because they didn't build this dumpster fire in the first place.
They're using information overload tactic. This approach leverages a psychological principle that suggests when people are given too many choices or too much information, they can become overwhelmed and struggle to make decisions. The point is to overwhelm, the consumer, the people trying to fix this system etc.
A simpler and more rational explanation, is that they're trying to overwhelm the adversary.
The insurance company, its claims department. If you can't ever compare two medical treatments because they're never similar, let along identical, then any price at all might be attached to these.
The consumer hands over a laminated card and says "I have insurance". No one's overwhelming him. He's not even really a party to the transaction. Not until the insurance company denies the claim, at least.
An even more rational explanation is that the human body is one of the most complex machines there is, and we barely have an understanding of it. Those who do have some understanding of it spend decades learning about it, and so a layperson will simply never have the expertise to make informed purchasing decisions.
That is why the insurance company (ideally) can serve as an informed agent (employing doctors and pharmacists), who (ideally) will more often than not know what is and is not worth paying for.
Yes. Your explanation totally makes sense for why there's a billing code for "bitten by duck, initial encounter". I see it now. Disregard my first comment.
Like, I dunno... filling the entire system with so much garbage, that the insurance company is unable to determine exactly how much a reasonable price might be?
What? No. This isn't user facing. And they are following a schema created as a result of regulation. It sounds like the schema sucks. It sucks because it implies a lot of redundancy, and allows you to remove some of that redundancy, but does not require it, resulting in a foreseeable and unfortunate amount of redundancy.
It doesn't matter if its user facing. This mass of data must be filtered through and understood by the medical coders, the confusion and mass amount of data can lead to overcharging. 80% of medical bills contain an error and usually not in the patient's favor.
I read the article, and I understand that the cause of that size is an absurd amount of redundancy.
However, I still can't conceive how it could be that big. A petabyte is a million gigabytes. Wikipedia, uncompressed, is about 42 gigabytes. So, every month there is the equivalent of about 24,000 Wikipedias generated just from pricing data? And it's all just text. Wow.
It’s interesting that so many commentators are blaming the insurers here. The whole article is about how insurers use rules engines and lookups to define these prices and that the data explosion was a result of the legislation requiring price lists instead of an open standard for describing rules and lookups.
Having worked with this data extensively (tynbil.com) and talked to several payers and providers, I don't think any of this intentional. CMS did their best at guessing what format the payer data could be exported to (with little to no help from the payers themselves). None of the payers have exactly the same schema for defining these rates as they all have home-grown solutions developed over decades. That said, most insurers have gone out of their way to bury us in data. The result is messy and annoying, but not impossible to work with. It's the best we can expect in this imperfect world.
Medical billing coder is one of the most bullshitiest of bullshit jobs. Even when I was chatting with a coder a while back and she was explaining to me, a programmer, her job. And in the back of my mind I'm thinking, "I'm sorry, but why does this job exist?" I guess in the government's battle against medical fraud they have created a convoluted system that is even easier to defraud.
I always find it amusing what excuses people come/came up with when they hate on new ideas or inventions. Usually a few decades into the project/revolution the real issues appear. No one would have argued against computers back in the day because it will cause petabytes worth of important nonsense. It would have sounded unbelievable.
While the pitchfork argument may be appealing, the actual article makes a convincing case that it's just combinatorial expansion:
> As a result, the Transparency in Coverage rule requires insurance companies to do the math for patients and, in most cases, publish prices as dollar amounts. That’s helpful for patients, but it requires that a price be pre-calculated for every possible service.
... So, they could publish the rules engine instead of the combinatorial expansion of all possible inputs, but it sounds like the regulation did not specify that.
I work with petabytes of data. A petabyte of text is an insane amount of text. You need a billion X multiplication of basic data. That’s not just combinatrionics, it’s deliberate obfuscation.
4 tables, each with 1k rows and one of them with a 1K text column in it, joined together to give a cartesion product, will give you a petabyte of data. So it doesn't sound impossible (just absurd).
That's a very artificially bloated way of compounding the data in memory with lots of data duplication. From storing the example tables you used, you'd need to store 62.5 million times that to get a petabyte of data. It's an absurd amount of data.
even taking your contrived example, you have to store it in the stupidest way possible to get that level of storage - even assuming your 1K of text is incompressible, you only have 1K unique values. The most basic compression algorithms will make easy work out of compressing the crap out of it, leave alone the advanced compression algorithms used for any big data storage formats.
While there are huge problems, I think the majority of the problem is people expect their health insurance plan to be like a prepaid maintenance plan.
If you crash your car today without insurance, you understand it won't be covered by getting insurance tomorrow.
Why people think they can finally get healthy "insurance" at 45 from company xyz, knowing they need this pill or that pill, and expect the new insurance company to pay for it I will never understand.
In the US, federal law requires the insurance company to offer any applicant insurance coverage and pay for necessary healthcare (after accounting for deductible/out of pocket maximums).
Yes, health insurance as expected by people has never made sense as "insurance".
Once an event goes from unlikely to likely, buying insurance for it turns into simply prepaying an amortized amount for future expenses. Not dissimilar to paying taxes for road maintenance.
Why wouldn't they expect it? If they need that medicine/treatment, they need it. If I don't have car insurance my organs won't shut down and I won't die. If I don't have medicine, they do and I will.
Right, but the government doesn't step in. I've voted for universal healthcare sorry supporting candidates at every local, state, and federal election.
I'm sorry that my illness is "annoying" you, but your anger is misplaced. Not that long ago I used to only have insurance for stitches too.
Your illness isn't annoying me. The fact that I need to pay for it via my health insurance premiums is.
If we want to pay for it via government mandate, fine. Raise taxes. That way during my lower earning years I dont need to artificially pay for it through health "insurance" that isn't really insurance.
I've been a designer for a number of hospitals (tech, and physical, some systems) but never in the billing, however I can attest that billing codes are complete BS (billing codes are basically a number for the procedure/system/resources used such that they can say 'Code 10 == $10,000" to simplify it...
Hospitals are usually 'health *groups*' and they work just the same as insurance companies - they have actuaries that do all the calc to determine what they CAN charge for a procedure, not what its summary cost actually is...
When youre in a hospital GROUP you have more negotiating power with the insurance companies - so the exact same procedure in one group may be significantly different than what another group charges you....
HOWEVER - and this is important, and they wont ever tell you this - you can "haggle" with hospital billing departments... NEVER pay a hospital bill once you receive it.
ALWAYS call and ask for more details about the bill, with a line item receipt for every single action, drug, interaction 'encounter' and you will generally see your bill reduced significantly.
-
As example, I went to the ER with chest pains. waited 2 hours for an MD to come see me, he didnt even touch me, take a BP, EKG, etc - then 'prescribed' me some motrin (over the counter) and then billed me $1,500 for a 4 minute interaction.
I refused to pay this and they tried to drop it to $900 - and I told them, that if they can drop it from $1500 to $900 with just me protesting, then they needed to pay me for the two hours I waited to speak to the MD
Hanlon's razor maybe applies. I have no way to know if they're trying to do what you say, but the article explains what's going on and it's not hard to see how a flawed schema and implementors going by the letter and not putting any effort into minimising the data volumes could result in this without any malice. Any individual company is presumably producing a fraction of the petabyte total and people are as astonishingly lazy with data sizes now as computers are astonishingly capable of handling them. I'm routinely seeing multi-gigabyte executables these days (don't get me started).
Also the article says the schema is published in github and CMS is responsive to feedback on it, so things will hopefully improve.
I thought this was a really good article. I wasn't expecting to read all the way through a blog about something that doesn't affect me in the slightest but I did.
The standard is excessively verbose. Instead of being able to represent a price of a range of procedure codes (as most of the rules engines define it), you have to list every single code individually when often the price is the same. How that standard was set is probably an interesting questions.
Hanlon's razor. Never attribute to malice what can be explained by stupidity.
The US healthcare system is a mess, but I don't think it's intentionally malicious. It is just a mash of a thousand different systems, creating one big stupid system.
It's absolutely intentionally malicious, despite the individual employees not having much say... have you ever tried to bounce between calls to get information for an insurer from a hospital billing department? they can make vogons look efficient
I've spent hours trying to get an estimate for a inpatient surgery only to find out afterwards that the surgeon used a different billing code than the billing department gave me
then the insurance company won't cover it because it's not the billing code they cover, and the hospital won't change the billing code
They made a ridiculously complex and obscure system because it was insanely profitable. It's not really stupidity or maliciousness that's responsible, but simple greed.
Even a stopped clock is right twice a day. Stupidity can't explain why everything is wrong. The American healthcare system is so totally broken, and broken in ways which so consistently benefit the rich at the expense of everyone else, that I can't see any way it could come about by accident.
(Plus we have seen some of the corruption that goes on inside insurance companies.)
There rarely are systems designed in a malicious way. Most malicious systems slowly get shaped actors to their advantage. In some cases (insider trading or corruption) the government steps in and stops the abuse by laws and regulation. In the healthcare system they aren’t doing this and are letting profit oriented players shape the system.
I don't think the billing system is malicious. But at the end of the day, each "provider" is given incentives to bill. They get promotions based on this. So the maliciousness is a distributed system that does not get codified at all.
It's the exact same thing as cops getting incentives for speeding tickets. Then you start getting more speeding tickets for 5 over instead of 10 over.
The amount of human labor involved in the US healthcare system, that has nothing at all to do with medical professionals helping patients, is astonishing.
Never attribute to malice that which is adequately explained by stupidity. In this case stupidity is not adequate - obviously insurance companies know how to make this data usable, otherwise they couldn't exist. They have just chosen not to make the public format usable.
Gotta wonder how other countries with functional healthcare store and calculate pricing. There has to be a better way. This looks like denormalizing a huge number of small tables such that the resulting list of prices is like n^n growth for any possible addition.
That's exactly what it is, because as another comment pointed out the legislation currently doesn't allow them to just publish a [human,machine]-readable rules engine for calculating price, so they must publish this asinine amount of data every month in perpetuity until someone who's taken a math class in the last 70 years ends up in Congress.
This does seem to be machine readable, but inefficient. Given the fight the insurers have put up about publishing this, I would expect any allowance of "rules engine" to allow them not to publish anything, or to just play the same game again.
For instance, my "rules engine" is to look up the price contained in my db table (proprietary, of course) and multiply by another record in a different table. Or if a court forces us to provide both tables, we find that the structure is similarly unusable as this one. So best case is to get the same garbage.
Basically, I'd rather force them to be as explicit as possible, even if it's difficult to sort through, than to allow a loophole that might allow them to not publish prices.
Oddly enough, despite all the problems in Communist Cuba, they have been able to keep much of a modern health care system going with absolute minimum resources. It appears that empowering doctors to make decisions is a big part of that. Controversial to be sure, but also interesting if only for the extreme scale of contrast.
> The data is further ballooned because it includes rates for many medical services that can never occur. For example, an insurance company may have a contract that says they pay $180,000 for a heart transplant. The payer follows the rules and publishes that price for the list of “all doctors in this hospital.”
This looks like intentional sabotage by malicious compliance. "Yes, we published our prices, good luck making any sense out of it".
I dove a bit into the data, and the dashboard with an account works much better than the front page search.
Are there any good use cases for this data? It looks like this company (turquoise.health) is already targeting price comparisons ("rate sense"), contract negotiations for people/companies who purchase health care ("clear contracts") and other parts of the value chain. Are there any other parts of the value chain left? I can't think of anything...
It also feels like these codes are also closer to stated preference data than revealed preference data. “Given this permutation of factors, we’d choose to bill X, but insurance companies dictated we actually paid Y.”
Would be neat to see both kinds of rates with billing codes and actual billed procedures. Guessing there aren’t petabytes worth of actual procedures either.
How much of this is just to bury everyone in useless data, similar to how in discovery for lawsuits, one tactic is to just send hundreds of boxes of paper in the hopes that nobody will find the actually bad stuff?
They are mathematically the most corrupt industry according to open secrets all time lobbying data.
Physicians are the richest profession in the US, and limit their supply by weaponizing the ACGME/AMA.
Hospitals/clinics make so much money. We own one, and while it was slow to start, the profits are insane. Marketing is the hardest thing, once a patient comes in the door (and they don't have medicaid) its pure profit. Don't let anyone in healthcare let you think margins are slim.
Pharma... we all know pharma.. (And pharmacists in 2023? Heck ML/AI will always be better than trusting that a pharmacist is on their game 100% of the time)
Insurance, I have no idea how they waste so much money and have slim margins. Anyway they are weirdly allies most of the time because they will adjust a $400 bill down to $125. But they also suck with how expensive premiums are... again. what the heck is going on with their slim margins? Maybe its their ultra fancy buildings.
Aren't there laws that require insurance companies and utility companies to have specific margins? They could in theory just print infinite money so they need to be reigned in by governments.
The ACA caps insurer profitability at 20% by requiring 80% of premiums to go towards healthcare costs. Administrative / operational / marketing costs and profit come out of the remaining 20%. So, if you’re an insurer who wants to increase nominal profits, then you’re ok with spiraling healthcare costs.
> So, if you’re an insurer who wants to increase nominal profits, then you’re ok with spiraling healthcare costs.
Not just okay, but actively incentivized to cause it, because then you get 20% of a bigger number.
Laws like that are some of the most expensive of the perverse incentives created by naive idealists (or cynical opportunists, since the lobbyists for the medical providers know exactly what that would do).
In reality, there is sufficient competition such that the 7 largest publicly listed health insurance companies have 4% or less profit margins, and one has 6%.
I always find it funny when people on this forum act like a certain business is so powerful when it can only earn low single digit profit margins, yet tech company employees work for companies so powerful they can earn 20%+ and 30%+ profit margins for years and years.
You haven’t done anything but prove the GP’s point.
Their margins are necessarily low, so they should want total medical costs to increase in order for their gross profit to increase. And in fact, just checking one of them from your links, it has:
Nominal profits are more work to analyze since you have to figure out if UHC is selling to 5x as many customers in 2020 as they were in 2010, and then also adjust for inflation and a bunch of other stuff. It is simpler to just look at profit margin.
I agree with AnthonyMouse that a business might be incentivized, but only if the business has so much market share that they can singlehandedly drive those prices up. Or if there is collusion between all the businesses.
But the fact that there are so many publicly listed companies, and they have such similarly low profit margins, indicates they have very little pricing power.
There are actual figures that don't include admin overhead and are only claims paid out vs premiums collected. It's called medical loss ratio, and just from eyeballing the charts it looks like it's around 85% for insurance companies as a whole.
That's basically what you'd expect to see if they're using the 80% as a target. They're not going to hit it exactly and it's politically disadvantageous to come in on the wrong side of the line, or for that matter to come in exactly on the line.
Much more advantageous to raise premiums and therefore profits by 400% and then be able to say that they're at 15% vs. the permitted 20%, even though the 15% would be 60% if they'd kept claims from going up.
Health insurance company executives are though, aren't they? Their compensation is the "administrative overhead."
And a lot of the administrative overhead is proportional to expenses. Commissions are commonly a fixed percentage. How much it's worthwhile to spend on fraud prevention is in proportion to the size and amount of claims. So when premiums and claims costs go up, actual administrative costs go up, but shareholders and executives still prefer that to making less profit and compensation once you take lowering claims costs off the table as a way to make more money.
>Health insurance company executives are though, aren't they? Their compensation is the "administrative overhead."
Yes, and considering they health insurance company executives are not all the richest people in the US, there must exist some pressure to contain their compensation.
>once you take lowering claims costs off the table as a way to make more money.
This is a pretty big assumption. Surely, UHC/Elevance/CVS/Cigna/Humana risk losing clients if they let their costs go up compared to competitors, and hence their premiums go up, and then a competitor offers their customers lower premiums.
> Yes, and considering they health insurance company executives are not all the richest people in the US, there must exist some pressure to contain their compensation.
Sure there is. But they're also not poor, so there must be some pressure to keep shareholders from paying them minimum wage.
And if they make the shareholders more money, the shareholders will be willing to pay them more. If the way they do that is by making the same margin on a higher cost base, that also allows the shareholders to pay them more. So the incentives all line up to have higher medical costs.
> Surely, UHC/Elevance/CVS/Cigna/Humana risk losing clients if they let their costs go up, and hence their premiums go up, and then a competitor offers their customers lower premiums.
But their competitors have the same incentives.
Suppose you could lower your costs. One thing you could do is keep charging the same amount of money and just make more money, but now that's prohibited. So already we have a disincentive to lower costs right there. Maybe we don't care about this one, but this one is often combined with the second one, and the incentive to achieve the cost reduction is what enables them to do the one we actually like.
Which is to lower prices to try to get more customers. So let's say they lower their premiums by 20% and that gets them 10% more customers. If their absolute profit per customer stays the same, now they're making 10% more money -- great. But now their absolute profit per customer isn't allowed to stay the same. It has to go down by the 20% their costs went down. Meanwhile the lower premiums only got them 10% more customers, so they're losing money on net. Why would they do that?
It's like when people complain about "greedflation" and point to grocery stores gouging food prices, but then you look at the books for grocery stores and realize that they are basically running a charity the margins suck so bad.
What do you think happens when a company has limited margins? Hint: almost all companies try to make a profit (which is fine). If the margins are unrestricted, the company can cut costs to increase profit, which is a good thing. If the margins are limited, the company must raise revenue to increase profit. For an insurance company (or a utility, and California has exactly the same broken rule for private utilities), this means raising rates or premiums.
It gets worse. If an insurer raises rates, they are required to spend 80% of that money! They are required to be inefficient! If the insurer reduces their outflows by 5% by doing a good job, they lose 5% of their profits by law. So they are basically required to do a bad job.
I don't think it's a _bad law_* as much as it's an _incomplete law_. I don't know what the complete version looks like, but it would include both customer cost controls and reward innovation-based efficiency gains. Alternatively, some places have taken the approach that these are mutually exclusive and just generally removed profit from the picture entirely by socializing it.
* Health care costs were growing out of control before these laws, which seem to have slowed that trend short-term but not long-term as the industry pivoted.
IMO the most effective consumer cost control is competition. An actual, non-corrupt, free market where customers are not locked in and there are more than just a handful of providers generally results in low prices.
We do not have this in healthcare. Providers form cartels - at least in Northern California, this is so bad that the state AG is investigating (not very effectually) [0]. Customers generally can't even tell what a provider charges, so there is no price competition. There aren't many insurers, and they compete on so many incomprehensible dimensions that customers can't usefully choose. (And the most useful thing customers can look at is the network, but see the above issue with provider cartels.) Pharmacy benefits are highly corrupt and incomprehensible.
[0] We have Sutter Health, UCSF, Stanford, and Kaiser. There is very little in the way of independent providers left. Sutter Health in particular has aggressively merged with any available competition.
We do have this in a way with healthcare.gov, since the marketplace allows consumers to view multiple insurers rather than those tied to their jobs. However these plans are still pricey, I put in some dummy data with a higher than average income (60k) and got plans at 280 per month at the bottom of the barrel. Seems to me like it's a good step in the right direction but the marketplace doesn't have an actual market driving force to reduce prices even with the 11 million plans selected for 2023. Having worked in healthcare billing processing software, this lines up, insurance companies really don't give a shit about reducing prices to compete since consumers at the point of billing are always a captive audience (if you don't have it and you have an emergency, you're fucked)
Wouldn't a free market eventually lead to all these insurance companies combining into 1-2 even more mega insurance companies until there is no competition again? At least if all their profits are capped there is no reason to merge.
I know someone that worked for BCBS and they had the nicest parking garage and a park on top of the building. Always renovations being done. I believe they even bought buildings nearby in the dense part of the city. I also think this person talked about getting a bonus.
They had some high tech security along with low tech security. It was pretty impressive at the time. 24/7 security, got to use their parking garage to for some sports game on a sunday.
Or a competing insurer takes their customers by offering lower premiums. There is a reason the health insurance business earns anemic profit margins, even though they can legally earn more.
This screams pads and buffers. As in, the administrator adds random line-items to things as long as the name of the service is "similar enough" so that they can justify whatever amount they want in the end.
It reminds me of the auto industry. I've been replacing transmission selonoids, serpentine belts, brakes, fluids, etc... last 3 years ( I bought a dodge ram 3500 and if you don't do these things yourself you end up owing the cost of the truck 3 times over during its lifetime).
And I have to say, when I replace something it costs me 45 minutes + part cost. The repair shop instead lists it as "Transmission Flush Service" and charges $1500 when in reality it's running the engine for a minute with the pan off, then refilling it with about $200 in new transmission fluid.
Again, the repair shop is banking on no one wanting to fix their car. I can say the same thing about healthcare and specific supplements instead of getting superfluous EKGs and other "med junk science" or worse actually dangerous drugs that the doctor is getting paid to prescribe to you. However even I would get a cast put on by a doctor, just as I would have my break calipers replaced and my tires rotated simply because that service is much more highly competitive, and regular. I would also, of course opt for a heart transplant just as I would buy a new cummins engine if mine went out. (The joke about ram is that the engine is the only thing that will hold up, while the rest of the truck falls apart all around it 4 times over)
Insurers paying a negotiated X% of the original bill is a common feature of the bizarre US health care market. This has all the knock-on effects you would expect, like the original bill being then massively inflated so that the healthcare provider doesn't go out of business when they're only paid 44.8% of it.
There's a price to slap on a bandaid.
There's a price to give someone a Tylenol.
Hell, W61.61XA is the medical code for "Bitten by duck, initial encounter." Presumably, this means there's also a code for "Bitten by duck, again."
Medical billing is broken, and it's no surprise that the amount of data is overwhelming.