Great charts! The one showing the percentage of federal outlays going to healthcare may actually understate the problem. As a percentage, outlays look to have plateaued over the last 10 years, but, in absolute terms, outlays have increased dramatically as federal spending took off.
You touched on the "default to yes" in the article. Indeed, it seems that the most important aspect of any government subsidized system is who gets to say no. Being perceived as the no-sayer can be life threatening in today's United States.
Reform of the US system has been stalled largely over whether and how to incorporate supply and demand into it. Providers have studiously resisted all efforts to make prices available. So far Americans are mostly shopping based on the out of pocket price signals that reflect their employer's insurance offering more than any actual total cost. I had such a great experience with the replacement of an arthritic joint that I went on to have five more done at a relatively young age because the expected (and eventually realized) benefit was so much greater than the cost to me.
Medical technology (including pharmaceuticals) incentivized by profits has incentivized progress. It has the downside of driving incremental improvements at the end of the company's patent monopoly. I'd love to see research in the effects of patent policy and profits to amortize research, development and approval costs on this progress. If the entire world were buying pharmaceuticals at government-set prices, how much would progress slow down?
We have generally decided we prefer not to ration health care on the basis of ability to pay or even individual behavior that risks health. Still, we have some treatments that are not generally covered until they become part of the norm. A lot of that seems to be pushed by patient and doctor demand expressed politically on government and private insurers. I wonder if there is a way to use well-heeled early adopters to help bring the price of new treatments down before the government or mainstream insurance plans start paying. Maybe the most expensive new treatments are provided by lottery between approval and price normalization.
Your data on administrative costs make me question the notion that Medicare for All could reduce total cost of health care in the US as much as its proponents suggest. Could that be looked into?
Okay too many thoughts from an uninformed mind. Thanks for the work you're doing and your transparency.
I think an essay on admin costs would be pretty interesting. The numbers quoted here are for insurer-side admin, which is the likely m4a savings. But provider-side admin costs are far larger than that of insurers, from the estimates I've seen. It's far less clear that there'd be meaningful savings on the provider side given that Medicare itself imposes a lot of the compliance burden. One notable exception would be prior auths, at least in theory... Medicare just recently started piloting a version of prior auths for some frequently abused services. M4a would unleash a wave of demand that would have to be rationed somehow. So it's entirely possible that under m4a, Medicare would actually adopt similar prior auth practices to that of private insurers. Either that or draconian wait times.
The Medicare vs private insurance admin cost comparisons are also interesting to dig into. Medicare's ultralow admin cost percentage benefits from seniors spending so much (higher denominator), not accounting for revenue collection (social cost of collecting taxes), and very permissive utilization/fraud controls. Financing lots of expensive, wasteful care doesn't necessarily mean it's an efficient program just because it spends very little trying to rein in that waste!
revealing progress in technology and pharmaceuticals have been quite expensive. physician compensation as a percentage of each dollar spent, is reported to be between 8.6% and 17%( includes other “providers”) Physician compensation has decreased every year since 1997 based on the RVU “conversion” factor. i would argue that administrative burden have contributed substantially to cost. With health insurance companies required to spend 88% of revenue on health care, they have cleverly vertically integrated, dramatically increasing profits while continuing to raise premiums—- not exactly as integration systems are supposed to work
This is a very complex issue, but one that has to be solved. It is a mixed system where price/reimbursement controls are oppressive( physicians) and uncontrolled for other players ( drug prices, PBM ‘s , illogical insurance denials)
On the physician comp point - I have a hypothesis that Congress just finds this the easiest political group to screw over. The hospital/insurer lobbies are more powerful than some grumpy physicians! Also politically easy to cut physician pay given their high salaries, even though that ignores the frequently heavy student loan burden + the years of residency working for basically minimum wage while that debt accumulates further.
I think the most important line in the article is that cost is not an factor in some decisions, especially at the end of life.
I'm all for people living a great, long life, but extending an elderly person's suffering for six months at the cost of younger families is immoral. If you want to rot in a hospital bed, do it on your own dime.
Healthcare is the one industry I can think of that the majority of spending is someone else's dime. And that's a problem.
If people had to pay for their own healthcare, living the consequences of their own lifestyle and actions, then costs would go down. However, this is illegal. We have a "socialized" system as is.
I think there's an interesting national conversation to be had on dignified dying, including whether that can include physician-assisted suicide.
A lot of people die in the hospital getting invasive treatments until the very end, which probably isn't a great use of societal resources. If that's what someone wants and is willing to pay for, by all means - but when it's the taxpayer paying, the taxpayer should have a say.
So focusing on margins for health insurance in the US is kinda misleading because loss ratio or the percentage that can be spent on not medicine is fixed by law for health insurers in the United States, thus the only way that the health insurers can make more money is by inflating the monetary value of care, or “20% of 100 is about the same as 10% of 200 but the latter might be more legal”
I agree about MLR; it clearly drove consolidation which has been shown to raise prices. I think the underlying problems predate MLR though, since healthcare spending was already 18% of GDP before the ACA. That % hasn't changed a ton since 2010.
Great charts! The one showing the percentage of federal outlays going to healthcare may actually understate the problem. As a percentage, outlays look to have plateaued over the last 10 years, but, in absolute terms, outlays have increased dramatically as federal spending took off.
Brilliant summary; the best I've seen on this topic.
You touched on the "default to yes" in the article. Indeed, it seems that the most important aspect of any government subsidized system is who gets to say no. Being perceived as the no-sayer can be life threatening in today's United States.
Reform of the US system has been stalled largely over whether and how to incorporate supply and demand into it. Providers have studiously resisted all efforts to make prices available. So far Americans are mostly shopping based on the out of pocket price signals that reflect their employer's insurance offering more than any actual total cost. I had such a great experience with the replacement of an arthritic joint that I went on to have five more done at a relatively young age because the expected (and eventually realized) benefit was so much greater than the cost to me.
Medical technology (including pharmaceuticals) incentivized by profits has incentivized progress. It has the downside of driving incremental improvements at the end of the company's patent monopoly. I'd love to see research in the effects of patent policy and profits to amortize research, development and approval costs on this progress. If the entire world were buying pharmaceuticals at government-set prices, how much would progress slow down?
We have generally decided we prefer not to ration health care on the basis of ability to pay or even individual behavior that risks health. Still, we have some treatments that are not generally covered until they become part of the norm. A lot of that seems to be pushed by patient and doctor demand expressed politically on government and private insurers. I wonder if there is a way to use well-heeled early adopters to help bring the price of new treatments down before the government or mainstream insurance plans start paying. Maybe the most expensive new treatments are provided by lottery between approval and price normalization.
Your data on administrative costs make me question the notion that Medicare for All could reduce total cost of health care in the US as much as its proponents suggest. Could that be looked into?
Okay too many thoughts from an uninformed mind. Thanks for the work you're doing and your transparency.
I think an essay on admin costs would be pretty interesting. The numbers quoted here are for insurer-side admin, which is the likely m4a savings. But provider-side admin costs are far larger than that of insurers, from the estimates I've seen. It's far less clear that there'd be meaningful savings on the provider side given that Medicare itself imposes a lot of the compliance burden. One notable exception would be prior auths, at least in theory... Medicare just recently started piloting a version of prior auths for some frequently abused services. M4a would unleash a wave of demand that would have to be rationed somehow. So it's entirely possible that under m4a, Medicare would actually adopt similar prior auth practices to that of private insurers. Either that or draconian wait times.
The Medicare vs private insurance admin cost comparisons are also interesting to dig into. Medicare's ultralow admin cost percentage benefits from seniors spending so much (higher denominator), not accounting for revenue collection (social cost of collecting taxes), and very permissive utilization/fraud controls. Financing lots of expensive, wasteful care doesn't necessarily mean it's an efficient program just because it spends very little trying to rein in that waste!
revealing progress in technology and pharmaceuticals have been quite expensive. physician compensation as a percentage of each dollar spent, is reported to be between 8.6% and 17%( includes other “providers”) Physician compensation has decreased every year since 1997 based on the RVU “conversion” factor. i would argue that administrative burden have contributed substantially to cost. With health insurance companies required to spend 88% of revenue on health care, they have cleverly vertically integrated, dramatically increasing profits while continuing to raise premiums—- not exactly as integration systems are supposed to work
This is a very complex issue, but one that has to be solved. It is a mixed system where price/reimbursement controls are oppressive( physicians) and uncontrolled for other players ( drug prices, PBM ‘s , illogical insurance denials)
thanks for this discussion
On the physician comp point - I have a hypothesis that Congress just finds this the easiest political group to screw over. The hospital/insurer lobbies are more powerful than some grumpy physicians! Also politically easy to cut physician pay given their high salaries, even though that ignores the frequently heavy student loan burden + the years of residency working for basically minimum wage while that debt accumulates further.
I think the most important line in the article is that cost is not an factor in some decisions, especially at the end of life.
I'm all for people living a great, long life, but extending an elderly person's suffering for six months at the cost of younger families is immoral. If you want to rot in a hospital bed, do it on your own dime.
Healthcare is the one industry I can think of that the majority of spending is someone else's dime. And that's a problem.
If people had to pay for their own healthcare, living the consequences of their own lifestyle and actions, then costs would go down. However, this is illegal. We have a "socialized" system as is.
I think there's an interesting national conversation to be had on dignified dying, including whether that can include physician-assisted suicide.
A lot of people die in the hospital getting invasive treatments until the very end, which probably isn't a great use of societal resources. If that's what someone wants and is willing to pay for, by all means - but when it's the taxpayer paying, the taxpayer should have a say.
So focusing on margins for health insurance in the US is kinda misleading because loss ratio or the percentage that can be spent on not medicine is fixed by law for health insurers in the United States, thus the only way that the health insurers can make more money is by inflating the monetary value of care, or “20% of 100 is about the same as 10% of 200 but the latter might be more legal”
I agree about MLR; it clearly drove consolidation which has been shown to raise prices. I think the underlying problems predate MLR though, since healthcare spending was already 18% of GDP before the ACA. That % hasn't changed a ton since 2010.