Comment by brandonb
2 days ago
I'd like to believe this, but the study makes a bunch of really hasty assumptions.
The authors derive the $1T number from $1.3T in total cost savings and $304B in incremental spend (incremental spend is due to insuring more people). The $1.3T in cost savings come from five big buckets: lower pharmaceutical prices, Medicare-level payments to providers, reduced administrative overhead, less fraudulent billing, and fewer avoidable emergency department visits and hospitalizations.
The buckets themselves don't necessarily survive much scrutiny.
Take "Medicare-level payments to providers". Hospitals have an operating margin of 2-5%. Medicare pays 50% less than private insurance. So doing this would require either layoffs, cutting salaries for doctors/nurses/etc, or both. This may well be the right decision for society as a whole--that's a big part of the debate here--but there's no free lunch.
The line item of "fewer avoidable emergency department visits and hospitalizations" assumes greater insurance coverage leads to greater access to primary care. It's true that great primary care prevents hospitalizations, and can be a net cost saving under certain assumptions [1]. But, we're actually in a primary care shortage. Existing insurance payments for primary care are low enough that private practices are going out of business and fewer residents are going into family medicine. Cutting rates (the paragraph above) would make this worse.
For "less fraudulent billing," a lot of people in the industry believe that Medicare has a large amount of undetected fraud. That's unfortunately the flip-side of reduced administrative overhead. The authors assume an 8% savings here, but the 2003 paper they cite uses the word "fraud" only twice and doesn't give a number.
Healthcare reform is hard.
[1] Reasonable breakdown on the economics of advanced primary care models: https://olearykm.medium.com/the-cost-equation-for-new-primar...
>> Medicare pays 50% less than private insurance. So doing this would require either layoffs, cutting salaries for doctors/nurses/etc, or both. This may well be the right decision for society as a whole--that's a big part of the debate here--but there's no free lunch.
You arent considering
1. Hospitals eating the cost of the uninsured, which this would solve
2. Hospital spending tons on administrative duties fighting with insurers on coverage, which this would reduce
> Hospital spending tons on administrative duties fighting with insurers on coverage, which this would reduce
Would this go away, though? Instead of fighting with insurers they would be fighting with the government insurer?
I am very pro universal healthcare, I just don’t want to pretend there aren’t still going to be fights over what should be paid for.
No matter what, there are going to be disagreements on what medical procedures should be paid for and who needs them, as well as how much they should be billed for.
The way a lot of other countries deal with this is that the government calculates out a benefit vs cost assessment for every new treatment and only covers ones that come out ahead. But, that ends up with things like new targeted chemotherapies being unavailable for years after their initial release, vs in the US where they are available to much of the population once the right prior auth is filed. There is also more top down management of costs, such as long term life support for people in vegetative states.
All of this was branded as "death boards" in the American healthcare debate.
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> Instead of fighting with insurers they would be fighting with the government insurer?
1. I'd rather fight the non profit-motivated entity 2. We can probably compare to VA and Medicare and even other countries to see what the fight will be like. I'm willing to bet it will be a big improvement.
> No matter what, there are going to be disagreements on what medical procedures should be paid for and who needs them, as well as how much they should be billed for.
Government insurance has a service motive. Private insurance has a profit motive.
Those are two real effects, but together they wouldn't compensate for the rate cuts.
About 8% of the population is uninsured. The uninsured population skews younger, with less healthcare utilization (Medicare already covers everyone 65 and older).
Another comment in this thread estimated billing overhead at 8.5%. Medicare for All would eliminate some, but not all of this, since Medicare is still a claims-based system. You would remove a lot of overhead around prior auths, which I agree is a good thing, but could be achieved with more focused legislation.
> .. 8% of the population is uninsured. .. this is Bogus, one of the first argument hospitals make for inflated pricing is that they have to cover the cost of uninsured. if the uninsured doesnt exist then the whole line of BS argument falls.
> 2. Hospital spending tons on administrative duties fighting with insurers on coverage, which this would reduce
This layer won't go without a fight. Maybe it _is_ the layer we're fighting against. The owners will still make profit, the providers still have jobs.. but the middle layers are useless bloat. They don't have skills to provide care, they don't operate at the capitalist layer. They are useless today, and even more useless tomorrow.
And that is likely useless layer is millions? of jobs.
What hospitals makes has nothing to do with physician pay - those are separate categories. Hospitals aren’t going to magically start giving some of their profit to doctors to help cover their lower fees.
OP makes a good point. The studies assumes two diametrically opposed things will happen - doctors will take a 50% pay cut but access to primary care physicians will increase.
Why would we solve the primary care physician shortage by cutting their pay?
Allow/force medical schools to grow, increasing the provider pool, thereby reducing their pay?
How would this change solve: "Hospitals eating the cost of the uninsured..."?
Wouldn't it just transfer the cost from the hospitals to the universal coverage agency? This would make the financial picture even worse for the proposed system.
>>> Hospitals have an operating margin of 2-5%. Medicare pays 50% less than private insurance.
The hospital can be paid less without reducing their margin if they can remove a cost from their balance sheet. It does not make the system cheaper overall, but it means the hospital does not have to bear those costs directly. They may not have to bear them at all, because hospitals are not the only things in the system.
No, because that cost is included in the $300 billion increase in spending that is part of the calculation they do.
Think about corps merging to save cost on back office. Here is the same idea. With AI, it would even cut additional order of magnitude of cost.
A lot of the reason hospitals have to charge so much is that they take massive losses on uninsured people in emergency rooms. Medicare for all means they don't have to treat anyone for free.
They are not taking any losses; they just charge the regular price with a very tiny profit margin. US healthcare costs are heavily inflated. Insurance is a scam that lets the rich get richer. All insurance should be non-profit.
We all contribute to the pool at a time when we don't need it so we can use the money when we do, not to make CEOs or stockholders rich. That is how an insurance pool should work. Any excess money at the end of the year should be moved to the pool for the next year, not as a bonus on CEOs' 100m+ salary.
It doesn't matter what they charge if the patient doesn't pay it; which is what often happens with uninsured people showing up at the ER.
> Any excess money at the end of the year should be moved to the pool for the next year, not as a bonus on CEOs' 100m+ salary
Under the ACA, excess money in the pool must be rebated to policy holders. In practice, this worked for a few years, but eventually insurance companies ended up increasing cost in order to increase the absolute amount they were allowed to keep. Maybe this is still good (more claims approved), but it is counter productive to the goal of reducing healthcare costs.
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> All insurance should be non-profit.
Aren't their profits regulated regardless? If all insurance companies became non profit and let's say total prices dropped by 3-5% that still wouldn't change the situation dramatically?
There are many factors, e.g. amongst other things American doctors are better paid than just about anywhere else in the world.
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No. Under EMTALA, hospitals are required to treat anyone who shows up to the ER regardless of ability to pay; this is an unfunded mandate.
"Insurance is a scam that lets the rich get richer. All insurance should be non-profit." Such empty platitudes never made for a good argument.
I'm not necessarily opposed to making all health plans non-profit, but that's kind of a red herring. Many of the largest insurers, like most Blue Cross Blue Shield Association members and EmblemHealth, are already non-profit. They generally don't charge plan members any less than their for-profit peers.
> They are not taking any losses;
Not really accurate if you look at the closure of rural and smaller city healthcare facilities. They don't have the base to charge "regular price" to make up for the aging, less healthy, rural populations.
We all pay for it, but some pay heavier costs than others.
No, this absolutely does not explain the US's wildly off-base per-capita expenditure because uninsured people still go in the denominator of the per-capita figure! I'm sure the per-insured-capita figure is worse but that's not what we are comparing!
Americans are constantly trying to exclude uninsured people from their statistics (and, worse, from the care itself) but the comparable countries don't do this so it is utterly ridiculous to propose that the correct statistical comparison is one in which the US excludes the undesirables while other countries don't.
https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...
The fun part is when you break those numbers down between government and non-government expenditure. You’ll find that US governmental spending on health care per capita is higher than every other country’s entire (gov and non-gov) spending per capita.
https://www.oecd.org/en/publications/health-at-a-glance-2025...
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That claim is at odds with the working paper's methodology, which gets a good chunk of the $1T in savings it discussed by assuming very sharp cuts to practitioner compensation.
A lot of the rest of the reasons are carrying the deadweight of administering regulation, and dancing with the existing and prospective malpractice suits that randomly benefit the system sometimes, but always cost everybody, and warp the practice of medicine and patient healthcare experiences.
So what's the solution? Some states have already limited malpractice liability but that hasn't done much to hold down costs. When patients are harmed by preventable medical errors they should be compensated.
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Uncompensated care attributable from uninsured patients is ~2–3% of operating revenue/costs. So it's there but not massive.
It also means that emergency rooms can be used just for emergencies and ongoing and preventative care can happen in clinics. Cheaper to operate and preventing preventable emergencies lowers the load.
Here's what happens in my locale. If you show up in an ER, they quickly decide whether you need emergency care, or regular urgent care, delivered in the same facility. And medicine is anything if not statistical, so they know the amount of each kind of service that they need to plan for.
Usually tied to employer coverage contracts, and with strictly limited menu of offerings for patient health needs.
Healthcare reform isn’t actually hard. Every advanced country has done it bar the United States.
In every case costs have gone down and outcomes have improved.
You always build on what you have because you can’t pause healthcare for very obvious reasons.
Hence a lot of different systems all with the same aim. Controlled costs and universal coverage.
The idea the US is somehow different and cannot make the change is the result of propaganda and a mistaken belief that the current Us system is the worlds best despite its costs.
Healthcare reform is easy and there is an ocean of prior art.
Yeah, and they all generally get there by paying practitioners much less than the US does (by integer multiples). Single-payer, which this working paper equates with "universal coverage", is in fact not the norm among universal systems; besides using Medicare to ration the supply of practitioners, the original sin of our system is employer-based coverage, not payer structure.
Health care is an absolutely massive industry (everywhere, not just in the United States), and slashing compensation in a massive industry by top-down fiat is in fact not an especially easy thing to do.
Why do doctors need to be paid integer multiples more in the US than every other country on earth? This is not rhetorical, I mean it sincerely.
And I’m aware that medical debt is a big issue, but it seems like a chicken-or-the-egg type problem. Of course you can charge $500k for a medical degree when the doctor can make it back and then some in 5-10 years.
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Funny how one of the arguments against Medicare in the 60s was that providers wouldn’t accept it.
Turns out when you have the choice of accepting lower payment per patient for Medicare or having a lot fewer patients, you choose the lower payment per patient.
I would expect the same situation here. Doctors would grumble, but no one would force them to accept patients on whatever “Medicare for all” would be called. Nothing other than market forces.
A number of things would probably have to change, including the cost of medical school. But the system right now is expensive and essentially unsustainable. So change is inevitable.
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>In every case costs have gone down and outcomes have improved.
this isn't really true though, if you look at survival rates of many diseases.
Can you give any examples?
I think for the math to work you have to consider the bigger bulk of work that could be eliminated by universal healthcare: the payer industry. Insurers, PBMs, and all the smaller sectors that support them. The utility provided to society is fairly low — basically, just selective claims denial.
Any model that gets rid of these frees up a huge swath of capital and work from society, and can use that work elsewhere. Of course, that is easier said than done.
Truly. Aetna, United Healthcare, Anthem, etc are examples of industry that does not need to exist, and exist only to serve the status quo.
Each of those are companies worth billions of dollars that could be instead used to lower the individual cost of providing health insurance.
As you say, this would of course be unsavory in some respects as those companies employ a lot of people. It's not a very economically productive industry though, the main output seems to be consuming patients' and doctors' time, causing financial anguish, and causing stress among people as to whether or not if their condition will be covered.
They do perform one useful service: forcing a hospital that tries to issue a $100,000 bill that should be $10,000 to reissue it, and not leave the patient saddled with a giant debt.
(Medicaid & Medicare claims processors do the same thing. Medicaid claims processing is mostly handled by private, third-party insurers now, and seems to be able to do so more efficiently and cheaply than when it was being run directly by states; the savings is mostly in the area of catching fraud.)
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> Hospitals have an operating margin of 2-5%
Very curious where this comes from and how accurate it is. For example the $37 a provider charges for an Aspirin seems like more than 2-5% margin.
You can search for more reports, because they do vary based on methodology. But the median hospital in the US makes between -1% (yes, negative, they lose money, because a huge percentage are non profits) and 4% depending on the source.
When the hospital charges you $37 for an aspirin, that singular pill might have a crazy profit margin in isolation. But your entire treatment could very well be losing the hospital money.
In my own anecdotal experience, the one hospital I know enough details about to comment on specifically, had something like 85% of patients costing the hospital more money than the hospital made. It was entirely funded by the relatively small number of people who had the “right” insurance and had the “right” procedures done.
Eg Kaufman: https://www.vizient.com/insights/reports/national-hospital-f...
It is a system where all prices and costs are so far detached from reality for multiple reasons, that looking at any current profit margins is not going to be very realistic either.
Really need to step back and start from first principles.
When I go to urgent care I get 15 minutes with a doctor who on average makes about $300K and maybe another 15 minutes with a nurse assistant who might be making $100K (or less). So that is less than $50 in doctor+nurse salary. Of course there are then all the overhead of rent, utilities, etc, etc but those are not so different from any other business in the same strip mall. So let's say total cost for my visit is maybe $100. But I'm charged $500-$600 for the visit. Someone is pocketing a lot of money and it is not the doctor nor the nurse.
We could do the same exercise for surgery, the costs for surgeons and anestethicians is much higher, but you'll be hard pressed to find any realistic scenario where the cost of a two hour surgery is more than $100K.
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The old saw about the engineer who says that the $100,000 bill was $1 for the bolt, and $99,999 for knowing which bolt it was... that's just funny AND true!
But if it's a team of nurses, doctors, and other healthcare specialists rushing around doing checklist work to make sure you get that aspirin, that's just evil.
The principle is only applicable to our industry and closely adjacent industries.
fyi: Your link returns a 404 for me.
Oops! We can't find the page you're looking for
It's the salaries. That's where all the money is going. So that 37$ asperin, the profits... most of it is going to pay salaries. Not just of the doctors but administrators and all that.
Not buying any of this when the world is now full of dark patterns¹ and the ultimate result is that people in charge keep getting richer, faster.
¹ https://en.wikipedia.org/wiki/Hollywood_accounting
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Audited financial statements of all kinds of hospitals, both non-profit and for-profit. Here’s data from Moodey’s a credit rating agency: https://www.chartis.com/insights/hospital-margins-trend-high... (“This month, Moody’s credit rating agency released its annual not-for-profit and public healthcare median financial report for 2024, showing that overall hospital performance continues to improve. The median operating margin increased from 0.5% in 2023 to 1.5% in 2024.”).
The $37 for an aspirin offsets huge costs elsewhere for (non-NP) nurses, receptionists, janitors, orderlies, etc., who can’t bill directly to medicare.
Insurance pays the higher of their negotiated rate or the billed charge. Medical facilities set their billed rates so high that they’re guaranteed to be higher than all negotiated rates, ensuring that they get paid.
When you see $37 aspirin on the line, nobody actually pays $37 for it. The billed amount is replaced with whatever insurance rate is allowed for that. If someone is cash paying they get a large discount.
The billed items also have to cover everything. It’s not directly $37 for the aspirin, or the $5 or whatever allowed coverage it ultimately gets billed it. That had to cover the facilities, the salaries of the pharmacy staff who reviewed the request and dispensed it, the staff who inventory and order the medications, and the cost of billing insurance.
The only part that nationalized health care would change are the allowable billed rate and maybe the administrative overhead of billing different insurances. Even nationalized health care systems have admin overhead though.
You can think of it like when you have to pay $11 for a single glass of wine from a bottle that the restaurant paid $10 for. You’re not just paying for the liquid, you are paying into a big bucket of charges that all need to add up to more than the cost of the supplies, staff, building, and everything that goes into running it. The margin on individual products doesn’t make the entire operation profitable.
It almost seems like obscurity is the goal with the current system. Basically, job security (for admin, insurance) via obfuscation.
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> The billed items also have to cover everything. It’s not directly $37 for the aspirin, or the $5 or whatever allowed coverage it ultimately gets billed it. That had to cover the facilities, the salaries of the pharmacy staff who reviewed the request and dispensed it, the staff who inventory and order the medications, and the cost of billing insurance.
That's the same as any? CVS charging $5 for aspirin has to cover their staff who stocked and checked out the item, the shelf space, the marketing, and the looting.
The comparison you make between a bottle of wine vs a glass is not the right one. It's two different stores selling the same product. What's different about hospitals?
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On the occasions that I’ve watched a hospital go through the actual process of selling a small amount of inexpensive medication for a large amount of money, there is a ridiculous amount of ceremony involved. I can easily imagine that it costs that hospital 2 cents for the pill, $5 in amortized capital plus operating expense for the facility that stores that pill, plus $25 in labor and IT expenses to get that pill to the patient.
My wifes a doctor and i can assure you they are gouging you. What it is is that the insurance companys are really in the purchase processing business. So what they do is institute fees on every possible charge and the hospitals in our area mark everything up as a result. Thats part of the problem.
I, too, can invent numbers from nothing.
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Hospital billing practices are often terrible or even fraudulent, but stories about the $37 aspirin are generally misleading. Most hospital claims and bills are actually coded around day rates and DRGs, so even if the aspirin shows up as a line item it doesn't actually impact the patient's financial responsibility or the amount allowed by their health plan. (I'm not trying to defend such a confusing system, just explaining how it works.)
To be clear, they are billing for all the coded line items at the listed prices, it is just that the agreements with the insurance company will disallow many of the line items in favor of other ones. They bill everything, because they may accept some insurance that has not negotiated a day rate, and in that case, the day rate code would be disallowed and some of the other line items will be paid at relevant negotiated rates instead (with others still likely disallowed). It needs to be the same bill in both cases, so they need to include everything, and the list prices need to be greater than or equal to what any insurance would pay, or they might lose out on the difference.
This is one of the areas where more standardization would certainly help. If there were more standardization of which codes disallow which other ones (which can currently vary wildly by plan even with the same insurer, must less across insurers), then a lot of line items could actually get removed as truly redundant, vastly simplifying the bill.
I have the best health plan available (as a lifelong heart patient) from my provider, which owns the hospital. I've been charged 250$ for a covid vaccine, which was administered when I was recovering from a surgery to stop Sepsis. My hospital bill was itemized and I called to verify it.
I would be able to dispute a double room billing, but I was sedated and dying so I took whatever they offered, assuming good faith.
>Most hospital claims and bills are actually coded around day rates and DRGs, so even if the aspirin shows up as a line item it doesn't actually impact the patient's financial responsibility or the amount allowed by their health plan. (I'm not trying to defend such a confusing system, just explaining how it works.)
Yep. Hospital "bills" are a fiction. On one occasion I was presented with an "Explanation of Benefits" for a hospital stay where I was "charged" for being in two hospital rooms at the same time. As if that weren't enough I was also "charged" with having a "Pap smear"[0], even though I don't have a cervix.
I complained bitterly and after making a big stink was informed by the hospital my insurer that the items weren't actually "billed". Rather, the insurance company paid $1500/day regardless of the treatment provided.
It's disgusting!
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It comes from the fact that lots of the charges they bill (both of the patient share billed to insured patients and of all costs billed to uninsured patients) end up written down or off because they are uncollectable.
The margin built into the prices bulled is not the actual margin the hospital ends up with.
Medicare has been playing a shell game with reimbursements for decades. They cut the base rate for an office visit or hospital stay to below the cost of the actual service, but allow for separate charges for various things that make up the difference so that doctors don't just stop accepting Medicare in mass. That's why you get billed $37 dollars for aspirin, $15 for drug administration, $50 for IV placement, $10/bag for saline drips, $75 for vitals checks, etc. That way the hospital can make up the money lost from the actual visit charge, this also requires more administration overhead, to both keep track of all the additional charges, and to make changes as the rules change.
You understand that hospitals have more costs than just aspirin, right? Depreciation, amortization, utilities, rent, taxes, maintenance, salaries, etc...
Its all coming out of revenue.
Ever hear of loss leaders? Some parts of a typical hospital make money while others lose it hand over fist. The overall margin isn’t across the board, it’s after everything hopefully balances out.
ER’s for example are money pits, but society really needs them.
https://www.definitivehc.com/resources/healthcare-insights/h...
Exactly this. They need to offset the areas where they lose money. And we have federal laws (justifiably so, IMHO) that ERs must provide stabilizing services regardless of insurance and ability to pay.
And while that law is obviously humane and reasonable, my only gripe is that the rest of our system is so backwards that it increasingly forces people to leverage that. There was a story about a woman who needed dialysis but had no insurance. So basically, she had to wait every couple weeks until she started breaking down, go to the ER, get emergency dialysis, get sent home. Rinse, repeat.
I don't blame her but really just the system that made this her best possible option.
https://kdvr.com/news/local/every-week-this-woman-nearly-die...
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That's true, but obscuring the true costs through hidden cross-subsidies isn't helping anyone in the long run. We would probably be better off with state and local governments setting requirements for ER capacity in each region, and then running an annual reverse auction system where hospitals can bid on maintaining that capacity in exchange for cash payments.
This is because a whole swath of people are getting the aspirin for free (uninsured) so they need to gouge the payers for the aspirin.
Also, then, of course, we need to cover the United Healthcare guy's salary, which decreases margins.
Hospitals, now that private equity is involved, do this weird cost shifting accounting BS with shell companies etc, as such their books aren’t straight forward and the 2-5% thing is likely greatly underestimated given the amount of understaffing PE has driven in that space and how much gouging there is from PBM etc.
Hand-waving numerous details, but - That $37 isn't the price in the hospital's gift shop. It's n=1 pricing, hand delivered to your bedside by a nurse with a whole hierarchy of higher-level medical & admin staff behind her, and documented out the wazoo. Aspirin could be free & unlimited at the hospital pharmacy's receiving dock, and it wouldn't affect the @bedside price.
... and in other countries, medical administrative costs are far lower because they don't need to build entire divisions around correctly coding the same condition and procedure 11 different times before insurance approves it, because the insurance is universal and self-consistent by comparison to our private fractured mess.
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Even if universal health coverage lost money it would be better than the current system that is based on a "causing cancer is better for the GDP than curing it" mentality.
The US has top-tier cancer survival-after-diagnosis outcomes. We spend too much to get there, and other countries in our cohort would "argue" that we get those numbers in part by diagnosing earlier and that our outcomes are broadly similar, but if you're going into these debates with "the US private health care system causes cancer deaths", that's a pretty rebuttable argument.
That overlooks the 27 million uninsured Americans. Uninsured cancer patients are more likely to be diagnosed at a late stage, less likely to receive treatment, and have substantially higher mortality than insured patients.[1] They also have worse survival, even after accounting for cancer stage.[2] So excellent U.S. outcomes among those who access care don't rule out preventable deaths caused by barriers to accessing it.
[1] https://pubmed.ncbi.nlm.nih.gov/25092774/ [2] https://doi.org/10.3322/caac.21732
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This is a cherry picked statistic. We still have lower life expectancy, high infant mortality rates, and one of the highest rate of preventable and treatable deaths among developed countries
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I think the parent comment was a reference to the famous “Economists must learn to subtract” commercial that AdBusters ran.
Some good news is that ISH diagnostics manufacturing can go through 510(k) instead of PMA on Sep 16 onward, which should make those diagnostics 10x cheaper and twice as fast to get through.
>The US has top-tier cancer survival-after-diagnosis outcomes.
"Airplanes that get shot in the wing always survive" logic. People _do not get diagnosed and die_ because the US healthcare system is inaccessible to close to 50% of your population. A diagnosis easily reaches a few hundred dollars for the best cases (and several thousand if you need multiple tests/blood tests/operations like colonoscopies). And when you do get diagnosed, then you've just entered a world of having to pay hundreds of thousands of dollars.
>we get those numbers in part by diagnosing earlier and that our outcomes are broadly similar
lmao no you simply don't diagnose people and they just "die of natural conditions" early because they couldn't afford the treatment even if they were diagnosed.
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There is a ton of ideology baked into naive-level analysis of this stuff.
I am constantly told how much less Europeans pay for better health outcomes and all I can think about was the obesity crisis I grew up around in Texas.
Socializing healthcare isn’t going to get an huge portion of the population out of their cars and get them walking as a primary or secondary mode of transportation. Not when it’s 100° and the grocery store is five miles away.
Americans, in no small part, have worse health outcomes because we have dramatically worse lifestyles. I support German-style universal healthcare, but I’m not going to pretend it will suddenly give us German health outcomes.
>Socializing healthcare isn’t going to get an huge portion of the population out of their cars and get them walking as a primary or secondary mode of transportation
You would think so but once healthcare cost becomes a government policy issue people complain about its spending and they are forced to try and bring that cost down. One of the ways they did that in my country was to promote biking to work and build bike ways.
Did I mention the 100° summers or the fact that people usually live 20+ miles from where they work?
I agree with you generally on the incentives, but it took us 70 years to paint ourselves into this corner, and we’re not going to get out of it because of a third-order incentive.
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Europeans do pay much less (though: for roughly the same outcomes --- probably the same outcomes if you control for wild SES variance across the US).
Right… my exact point is that it’s not a like-for-like comparison.
Take Europeans, put them in Kansas. Fund their healthcare as though they were in Europe, and watch their health outcomes take a nosedive because the environment here is non-trivially worse for you health.
Unless I’m wildly misunderstanding these studies, it makes sense that we would need to spend more for the same outcomes because we are starting from a more unhealthy position, so the same results require more resources.
We need to at least be controlling for the 10%+ differences in obesity rates, and the enormous differences in UV index. That’s before even considering weekly exercise minimums that most European get when just walking to a bar.
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One wonders what the lowered stress vis a vis healthcare concerns that a reformed system would take care of would do for our ability, as an electorate, to make better decisions in other arenas.
> Hospitals have an operating margin of 2-5%
I'm curious where you got this figure, because it doesn't track with my own experience.
I used to work for a place that worked closely with hospital clients (and prospective clients) to resolve billing issues with a particular EMR system, and we regularly discovered that a given hospital was losing hundreds of thousands to millions of dollars weekly due to missing charges. The problem was, so much money was sloshing around that the hospitals were virtually always unaware of the missing charges, and many CIOs were more interested in saving face by shutting down further discussion than in walking through the collected data, how to fix the charging issues, and even claw back some of the lost charges (which you can generally do up to several months after the fact).
Not the parent, but here's one source: https://www.vizient.com/insights/reports/national-hospital-f...
There are many others as well.
FWIW, your experience doesn't seem contradictory to the operating margin claims.
Your experience seems to be that hospitals are run very inefficiently, implying that if they were run efficiently that their operating margins would be much higher than 2-5%. That may be the case, but that still means the Yale paper's claims don't make sense (unless they also propose some mechanism by which to suddenly force all hospitals to start operating efficiently).
But I'm also skeptical of your claim that hospitals are leaving a huge amount of operating margin on the table. IME, very little can be explained by "everyone is stupid." Would I be surprised if a given hospital was run very inefficiently or if a given hospital had a particular poor CIO or administrator? Not in the slightest. Would I be surprised if ALL hospitals were run by idiots who were leaving 10% operating margin on the table? Yes, I would be.
To be fair, my experience has been exclusively with hospitals running a specific EMR with a relatively new-ish (at the time) and difficult to configure billing system. Still, we were expecting to see shortfalls nearly an order of magnitude smaller than what we found.
That the hospitals didn't seem to notice the problem, and upon being told of it, often pushed back against moving to fix the problem, is what gave the impression that they must be running on much larger margins than advertised.
> Hospitals have an operating margin of 2-5%
I don't spend any healthcare money at the hospital. It's all all providers office, private clinic, etc.
It costs $300 for my primary care doctor to see me for about 7 minutes. An assistant takes my blood pressure, he asks me a few questions about my habits and diet, and then I come back next year.
If I actually need any services, I go to much more expensive specialist, or urgent care facility. A visit there is about $100 and then a couple bucks for whatever prescription they give me.
"Healthcare reform is hard."
People tackle hard things for nothing, never mind billions in savings.
Yes, but there's a difference between finding out whether P=NP and some of the brightest geniuses in the country actively opposing you.
Hospitals have an operating margin of 2-5%
How does this work when many/most US hospitals operate as non-profits? Quick search shows the for-profits have operating margins nearly triple your figures. And the non-profits are beholden to the community to provide some level of "freebies" to maintain their status, right? IE, they're aren't really all operating on razor thin margins.
I don't think a price transparency reform would be hard. Other than in terms of political will. We did go part of the way there a few years ago, though it's not common knowledge yet.
There’s essentially zero doubt that universal healthcare would save over $1T per year.
How do we know? The experiment has been done multiple times, all over the world. In the worst case (Sweden), healthcare is a bit short of $5K per capita per year, or around $1.7T. We’ve actually got a nice margin to achieve $1T, even if we remain the worst.
I agree health care reform is hard, though. We have a clear roadmap on how it can work a lot better. But what’s the political path forward?
As someone who’s actually fiscally conservative, single-payer universal healthcare is an absolute no-brainer, but, ironically, the people who call themselves fiscal conservatives will fight it to the death (well, not that ironic — at this point we all understand that, in politics, what groups purport to believe and what they actually believe have little to do with each other).
If universal healthcare just made access simpler with less paperwork it would be a major improvement.
The flipside to fraudulent billing is that people that need care are denied. The fraudulent billing was perpetrated by the insurer.
No, fraudulent billing is the natural predator of insurance companies. You have this backwards.
I thought that is what I’m saying.
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Yes, these cost savings would be a deflationary event. Most layoffs will come from insurance companies and administration necessary to satisfy them in hospitals.
One reason hospitals have such low margins is many people simply can't pay. If you have a payment guarantee like a medicare for all system, this will increase the stability of hospitals. In fact likely bring back some hospitals in places that didn't make sense like rural areas, which have been struggling via hospital closures.
If you are worried a low cost system will reduce doctors and hospitals per capita you don't need to, as countries that have universal healthcare often have more per capita.
https://worldpopulationreview.com/country-rankings/doctors-p...
> Take "Medicare-level payments to providers". Hospitals have an operating margin of 2-5%. Medicare pays 50% less than private insurance. So doing this would require either layoffs, cutting salaries for doctors/nurses/etc, or both. This may well be the right decision for society as a whole--that's a big part of the debate here--but there's no free lunch.
I mean, admin costs at hospitals are ~25%, around half of that is directly linked to billing. Administrative costs in the US (because of course you have the same costs on the other side in the insurance side) are around 30% of cost in general, which is pretty insane.
The lack of regulation around pricing transparency and generally the lack of one-price-per-code (which the government uses to its "advantage" to get lower medicaid/medicare rates for sure) is what has caused this stupid arms race on both sides.
Billing and insurance ("BIR") is reported at around 8.5% of revenue --- admin isn't just BIR, as you note. But replacing private insurance with Medicare doesn't drive BIR to zero; Medicare is also a claims-based system. Estimates are that you'd cut BIR by somewhere around 30-40% (of 8.5%).
Most of the savings in these kinds of reports simply comes from paying doctors less (or delivering fewer procedures, which is also a problem we have.)
Physician/nurse salary is not the major driver of the cost of healthcare. It's around 12-15% spending, depending on the methodology. Even if you force doctors to work for free, it won't meaningfully affect the cost.
It's really the overhead costs that are so Byzantine that they can't be quantified properly. Hospitals have teams of coders, insurance companies have teams of counter-coders, physicians have to waste their time on calls with insurance companies, etc.
"Medicare for all" would alleviate a _lot_ of this. It already works for the elder population, and pretty much every senior has health conditions. So extending it for everybody would result in savings. This is a no-brainer from a purely fiscal point of view.
Another way to fix the mess is to lean on the free market side: prohibit employer-sponsored insurance. Completely. All the health insurance plans must be sold on the open market to everyone.
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What do you recommend?
>"fewer avoidable emergency department visits and hospitalizations" assumes greater insurance coverage leads to greater access to primary care.
This is a hoot. There is an entire cohort of people who use the emergency room as their non-urgent clinic. This is not a small demographic, it must be at minimum tens of millions of people, if not going above the nine digit mark. They do this because their parents did it, and it's the only thing they know, and their parents did it because it's the only thing they knew, and they did it because their parents did the same. It is a culture that no amount of education and public service announcements will ever change.
Heaping one perverse incentive after another on top of this mess won't change it either, but will almost certainly make things worse for everyone.
>For "less fraudulent billing," a lot of people in the industry believe that Medicare has a large amount of undetected fraud.
My grandpa when he was still alive would have one new fraud story with every visit to the doctor, and he wasn't in great shape towards the end, so this was too many to count, every year for the last few. Diabetic, they ordered him compression socks at one point... a dozen show up instead of the two pair that was ordered. He'd come home and wait for a bill in the mail, and a few days later would see itemization for tests and procedures he never underwent. Over and over and over. He was sharp, argumentative, and as far as I could tell, less confused than most his own age. His experience, I think, wasn't atypical.
As the article said - it has not been peer reviewed
Why is the United States the only country on Earth where free healthcare doesn't work?
Good old American Exceptionalism.
People wouldn't be externalities if healthcare costs money. Next thing you know you would have to pay attention to the environment or god forbid the food. It would eat away the budget for overthrowing countries and bombing children. Watch them elect a democrat to do the bombing next round and a new republican after that. It sounds like a joke but it isn't funny.
The US' healthcare model is not unique, and almost no countries have zero-cost-to-consumer healthcare systems (and none of them are free -- they're just paid by taxpayers instead of consumers). "Free" healthcare is the exception rather than some kind of international norm you incorrectly make it out to be.
The first step to reforming US healthcare is actually understanding it, and understanding some international designs. Lying about it doesn't help.
Not a single soul on earth thinks single payer healthcare is free. 8 billion people, not one of them thinks it.
They mean “free to the consumer at time of service”, which it is. Nobody is lying, everyone agrees, it’s just you who doesn’t understand.
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>Hospitals have an operating margin of 2-5%.
I don't see you complaining that the US military has a low operating margin, so maybe we can just agree that some things are just normal expenses for a population. Which therefore leads to step 2: nationalize every single hospital.
>cutting salaries for doctors/nurses/etc
Considering that over 50% of the money that goes into healthcare is just siphoned off by middlemen, no, just getting rid of these means that your health workers do not have a worse salary.
>But, we're actually in a primary care shortage.
Because people do not even go see their GP since there's a chance it leads to life ruining expenses.
> fewer residents are going into family medicine.
Because they're going where money is. Remove that from the equation, and all you have is a public service with public servants.
>a lot of people in the industry believe that Medicare has a large amount of undetected fraud.
Aside from the fact that "people in the industry" have a financial interest in making you believe Medicare is a net negative, there's a great thing that comes from making healthcare a public service: there's no longer any fraud. And those "fraudulent" expenses you used to have that were costing you millions anyways have just had their costs cut in half.
>Healthcare reform is hard.
It's the easiest thing in the world when you have the amount of money the US does. Healthcare reform isn't a financial or infrastructure problem, it's a political one. Cuba has a working healthcare system despite being under US embargo. Botswana has a working healthcare system. Rwanda has a working healthcare system. Azerbaijan, Sri Lanka, Turkey, Serbia, and the list goes on.
Once you grow the balls to nationalize everything, even a first year economy student could make a plan that works.
Every country with nationalized healthcare systems has lower wages for clinicians. So the notion that this wouldn't lower salaries is just ludicrous. That might be an acceptable trade-off but let's not pretend it doesn't exist.
In practice what we would see under a single-payer system is that many doctors would opt out and shift to a cash payment model. So the shortage of doctors would get even worse for patients who can't afford to pay out of pocket.
Those countries also just have lower salaries for all sectors. The USA is just exceptional in salaries for many professionals. Just look at software engineers pay in Europe Vs US....
> Hospitals have an operating margin of 2-5%
There's no way a Chairman/CEO would ever reduce the operating margin by just giving themselves and their buddies a raise is there?
Are you saying that most hospitals have 50% profit margins, of which 90% are paid to the chairman leaving only a thin margin? That seems difficult to believe.
They may have 4.2% margins knocked down to 4% by exec comp but I don't see that how that fact would change OPs point.
I'm saying if you think that administrative expenses (among others) can't be inflated for a profitable company, I would like to run your company and demonstrate what executive compensation can include:
- Base salary
- Bonuses
- Stock options
- Perquisites (perks) like company cars or private jet usage
Just to be clear - I like my private jet(s) on call in case I want to get away for the weekend. TYSM
Yeah, if the hospital is part of an HMO, it wouldn't even be legal. The ACA sets a floor on medical loss ratio.
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You can quibble with the specific projected savings, or the projected lives saved. But it kinda doesn't matter? If we can have net savings of half what this paper said, or a quarter, and still have more lives saved, that would still be a strong argument to do it.
Somewhere there's a pareto-optimal frontier where one can't possibly save more lives without spending more, or spend less without more people having negative health outcomes ... and the question is whether universal health coverage would be a step towards that frontier (b/c we're all pretty sure we're far from the frontier today). And the fact that plenty of countries have both lower costs and better outcomes through such a system is highly suggestive that it is a more efficient policy regime.
Maybe the big quibble is whether the American penchant for creating corporate givewaways to powerful organizations that lobby politicians would create an especially toxic public-private-partnership monopoly in which the biggest existing private healthcare networks are granted regional monopolies and set crazy prices (or some other dystopian warping of an initially reasonable idea) so costs actually balloon. I do think that would be a risk and so we need to be careful about the specifics of how we implement this.
Yes, I consider big numbers like this to be red flags.
The GDP of the US is $32T. Saving $1T will essentially make 3% of the US economy vanish. You don't vanish 3% of an economy without wide ranging repercussion, it would be a crisis similar in scale to that of 2008.
With such numbers we are not "saving money", these are about rebuilding an entire economy, a painful process. So either the effect will be much smaller than that, or there will be riots.
This is broken window fallacy. The $1T not wasted on healthcare inefficiencies would be spent/invested on other things, creating jobs there. Yes, there would be churn because a good number of people involved in the bureaucracy of private health insurance would lose their job and possibly their career. But these things get smoothed out. Social supports (should) exist to dampen the effects of such churn and keep the economy agile.
At least the laid-off workers would have healthcare.
Only the American mind can comprehend leading to the deaths of tens of thousands of your own people for the sake of 3% of your economy. As long as the line goes up.
If we're taking the $1T figure seriously, let's take the other figure seriously too. Let's slash it to be more conservative while we're at it and say it would only save 90k lives. Do you think 3% of your economy is worth sacrificing to prevent the equivalent of 30 9/11s? And that's before considering that other people here already explained how these 3% are offset by other gains - if not completely then still substantially.
The US spends more than 16% of GDP on health. The UK around 11%.
Shrinking US health expenditure by 3% of GDP while roughly maintaining health outcomes is eminently, obviously doable.
Sure, it's possible in principle. But the US also has a much higher GDP per capita than the UK. The UK is a (relatively) poor country and is increasingly being left behind.
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> these are about rebuilding an entire economy, a painful process.
"Sorry kids, can't turn off the Orphan Grinder 9000, there's a whole supply chain behind it that would have to restructure."
The money doesn't vanish. It stays in the hands of people. People who would spend it on other things, feeding it into the wider economy instead of the pockets of a small number of corporations. There's zero reason to think this would result in anyone rioting except maybe insurance company CEOs.
Well it wouldn't "vanish". The $1T savings (if produced) that were once spent on healthcare would instead be spent on anything else.
Yes, it will, but think about the supply side. If people spend $1T less on health, health professionals will earn $1T less, it means, as GP said, layoffs, cutting salaries, etc... Not just doctors and nurses but also drug researchers, medical equipment manufacturers, etc...
These people will now have to do the "something else" that will be spent on, let's say gardening. But you don't turn a nurse into a gardener just like that, that's the kind of "wide ranging repercussions" I mentioned, and the painful transition period where nurses become gardeners. "Nurse to gardener" is just a random example, it can be "drug researcher to petrochemist", and some transitions we may be happy to see, like "health insurance lawyer to burger flipper", but overall, many good people will suffer in transition, many powerful people too, which make such transition unlikely.
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We're quick to want to automate trucking, manufacturing, even knowledge jobs and say "ooh but the horse shoe maker became the tire installer" but the pointless middleman jobs making everyone's health worse seems to be the line in the sand for job automation.
You can't touch the legions of people who exist to make things more expensive.
This seems a lot like the parable of the broken window but for inefficiency rather than destruction per se.
I mean there's flavors of contributions to gdp. Spending money on make work for people digging holes still counts. I wouldn't mind 1 trilly being freed up for more effective use. I imagine we could get pretty good returns on it just paying it against the debt as a simple idea, effectively a tax cut.