Comment by ETH_start
3 months ago
The root cause:
https://www.researchgate.net/figure/Healthcare-administrator...
"Healthcare administrator's growth in the US. Healthcare administrator's growth by 3200% between 1975 and 2010 compared to 150% Physician growth according to Athena Health analysis of data from Bureau of Labor Statistics, the National Center of Health Statistics, and the United States Census Bureau's Current Population survey in accordance to [26]. Admin: administration; HIPAA: Health Insurance Portability and Accountability Act; HITECH Act: Health Information Technology for Economic and Clinical Health Act; DRGs: diagnosis-related group's."
The only class of medical services that has become more affordable over the last 50 years is cosmetic procedures and laser eye surgery:
https://healthblog.ncpathinktank.org/why-cant-the-market-for...
What value addition do the administrators provide? It might be helpful to understand why competing hospitals still find it useful to employ these people even if the cost is so high.
If a competing hospital can provide equivalent service while also not spending so much on an administrator, why didn't they already do it?
The administrative overhead is necessary in order to get money from the insurance companies. Without the administrators too administrate and fill out copious amounts of paperwork, the hospital won't get paid by the insurance companies, and if the hospital don't get no money, they can't pay their staff, and staff tend to like getting paid.
This is how the world ends. Administrators on both sides being replaced by AI and consuming all the worlds available compute arguing with each other about healthcare bills.
Answering myself, apparently it is a fight between administrators on the hospital end and the administrators on the insurance company end.
The insurance administrators are fighting to provide as less reimbursement as possible and the hospital administrators are fighting to provide as much reimbursement as possible. The administrators are probably doing compliance work, negotiations.
I wonder whether regulations can be used to cap the role of administrators at the expense of slightly less efficient market - this might work if administrators are just adversarially interacting and reducing their scope can help the overall picture.
The actual problem here is the regulations that restrict insurance options to comprehensive ones and eliminate the option of getting catastrophic only insurance. This effectively leads to overconsumption of insurance. The other big problem is tax incentives that encourage people to get insurance through their employer.
To elaborate on that, when one gets health insurance from their employer, they effectively get a tax cut, and this in turn leads to larger proportion of employment compensation being paid through health insurance benefits than it needs to be, which translates to extravagant health insurance plans for those who are employed.
When people don't rely on insurance and pay out of pocket, generally prices go down over time and the industry as a whole becomes more efficient. The opposite trend has been in place in healthcare, with a growing percentage of healthcare spending being through insurance. And the result is the opposite of what's seen in more market-based industries: prices going up over time.
You assume that there is any meaningful competition. What we are seeing, across industries including education, is a type of indirect collusion that is keeping prices crazy, not competition. Over regulation is a big piece of what enables all this.
Some states require a "Certificate of Need" to open a new hospital so we ought to do away with those to promote competition. But beyond that, which specific regulations are harming competition?
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