Consumers do not see it because it's typically off-site from the main hospital care facilities, but believe me, the administrative savings potential is real.
The current US healthcare system has very little to do with "free markets"!
Sure, the US health care system is certainly not governed by wide open competition, transparent pricing or similar things. But it certainly has something to do with the "free markets".
The system is basically "what you get when you realize you have to insure and regulate but you never, ever do it in a centralized rational way, 'cause that would be socialism - plus you never, ever separate an 'entrepreneur' from a real or potential stream profits". Which indeed, builds the worst of all possible systems, sending risks to the consumer and profits to the investor/rent-seekers.
And from here, we could go forward to actual socialized, state-run medicine as functions adequately in most industrialized economies or back to a "wild west" system, where costs are lower, treatment is often OK and the heroin runs in large rivers as due the fatal scams(as was the US' 19th century health care reality).
The amount of administrative overhead is just absurd: a common and believable number is about 15%. This does NOT include the "shadow labor" that everyday people have to deal with, like being on hold with a billing department or insurance company, the merry-go-round of "prior authorization hell" for procedures or prescriptions, etc.
It's TERRIBLE that someone like me--conversant in business practices, ICD/CPT codes, and clinical practice in general--struggles to interpret a bill. It's literally worse than buying a car.
I can make lots of choices in life, but one of them isn't health care: if I need it--especially urgently--I'm not in a position to game out every scenario possible to minimize costs because the ecosystem is non-transparent and labyrinthine.
Which is to say that even in the most optimistic case, where single-payer forces everyone into a perfectly efficient system where nobody has to waste any time on coding or paper-shuffling and everything is perfectly streamlined, we still won't have meaningfully fixed the problem. The amounts we'd save would be a grocery-store-sale discount.
Other studies looking at only hospital costs put it at 1.43% of GDP. https://www.commonwealthfund.org/publications/journal-articl...
But we don't have to litigate this in the context of the Lancet article. That article derives much higher savings from pharmaceutical price reductions than from administrative savings. We know with some certainty what percentage of overall spending comes from pharmaceuticals, and it is a low number.
It's massive. Healthcare is byzantine on purpose. It's opaque to patients so that providers can prevent shopping around and adjust charges per patient, and it's opaque to providers from insurers to help prevent having to pay claims.
The fee schedule and structure is much more defined, simpler, and easier to abide by. So much so that software can calculate it out of the box at the time of ordering. There isn't the negotiation and level of dispute handling that private insurance companies create in their profit-maximizing behavior.
- Every visit to a doctor is a game of cat and mouse. I am never sure what bill to expect and how many bills to expect.
- Price is always inflated due to the fact that insurance company has to make money on every visit to the doctor.
- Every visit requires a Claim. Claims get filed incorrectly. Fun and games trying to call a bunch of different "departments" trying to understand the claim and why am I being charged ?
- In network/out of network game. Ohh, I am sick and unconscious but I have to make sure that the person seeing me is "in network" so that I don't get a million dollar bill. Sorry, bad luck. While you were unconscious, we called a doctor who was "out of network" and not our problem. Have fun fighting wit the insurance company.
- Why does every visit require me to show insurance ? I just wanna talk to my damn doctor. Can I not just give you some money directly ?
- I visited the doctor. Doctor has to file a claim for $x while the insurance company only allows $y. So the doctor inflates the amount of initial claim knowing that they will be reduced anyway by the insurance company. Cat and mouse game continues and finally, poor me is left with a bill that I now have to figure out. Have I already paid enough (copay, deductible, out of pocket limit) ? Lucky me.
- My employer changes my insurance company. Oh, I have to redo the entire paperwork with al my doctors. Ok I did it. Oops the doctor office still filed a claim with my previous company. I am now fighting to get that sorted.
- Doctors have no idea how much anything costs.
- Pricing has nothing/little to do with the actual cost of providing a service.
In fact medicare/medicaid have an even better mechanism to route out fraud. They can jail the medical provider for doing so.
Your last claim about fees for collecting tolls is unrelated.
Which is still less incentivization than what profit-maximizing insurance companies have.
The nice thing about the government is they are completely open and transparent with what they will pay and for what, so disputes are much less common.
Likewise, total billing and insurance related (BIR) administrative costs are ~$500 billion.[2] (Year unknown.) Or roughly 15% of total healthcare expenditures. And that's up from $471 billion in 2012[3], even though the ACA capped insurance provider administrative overhead and instituted many other reforms intended to address these costs.
Plus, it's odd that people on both the left and the right who are convinced that lobbyists control Washington will simultaneously hold the notion in their head that either a public option or single-payer would be able to consistently cap reimbursements and contain costs. If they're right then it's a miracle Medicare and Medicaid do as it as much as they do, and impossible for it to do so once the Federal government is directly reimbursing the majority of healthcare expenditures. Indeed, if it were possible then defense expenditures would be more efficient and a fraction of what they currently are.
These rosy estimates are ridiculous. We have over 10 years of direct experience with substantial and serious healthcare reform. Obamacare attempted and does enact a variant of almost every concrete reform imaginable. Whatever you think of Obamacare, you can't deny that it has provided mountains of empirical data about the difficulties and promises of containing costs. And yet Obamacare opponents on both sides--those who want to return to the pre-Obamacare system, and those who want a public option or single-payer--willfully ignore the evidence, unchastened by reality.
A California congressional committee looked at the potential costs for single-payer in the state and it would have required an additional $200 billion/year in tax revenue even after accounting for diverting existing private and Federal expenditures. That's what a cold, hard, realistic examination of the facts looks like even by those predisposed to enacting it. Maybe that $200 billion would be worth it; from a moral perspective it certainly seems so. But to deny the costs is to invite failure and financial ruin as not even a majority of Californians, let alone Americans, are willing to make that sacrifice.
We need to figure out how to better solve the cost problems before we continue to wade further into the waters. Otherwise we're just going to drown. If you look at all the other healthcare systems around the world with both better outcomes and lesser costs, neither single-payer nor a public option are defining characteristics. Rather, they run the gamut from mostly private to mostly public. It we can't lower costs with Obamacare, which has both substantial public and private components (and thus opportunities for exploring structural efficiencies across the spectrum), switching to single-payer or a public option won't move the needle.
[1] https://www.cms.gov/Research-Statistics-Data-and-Systems/Sta...
[2] https://www.americanprogress.org/issues/healthcare/reports/2...
What you say is true about the public option, because it incentivizes insurance companies to dump expensive patients onto the public dole, while charging ever increasing premiums for those who either don’t need healthcare or are self-rationing because of things like co-pays or high-deductibles. Obamacare and Medicaid in tandem also don’t work for the same reason.
It’s not true for single payer systems, who across the world pay less than what we pay in the US. Without special pleading, you have to explain why they’re able to do it and we cannot, otherwise it seems that you’re ignoring the evidence. State-level examples don’t really count here either, because their underlying costs are being determined by prices pressures in the entire US market.
(Also, CAP takes money from pharma, the insurance industry, and hospital conglomerates, so they’re not a reliable source on any of this).
It's also not true for systems with public options, like Germany. You're making a hypothetical claim about the abstract economic incentives of a public option. But like many such economic arguments, without accounting for the technical realities these arguments have exceptionally poor predictive power.
The cost problem isn't about public or private. That much should be clear. Even domestically, if you look at the best run and widely loudly HMOs (e.g. Kaiser, Mayo), which also are more heavily burdened by low-income and sicker patients, their costs are still much greater than what optimists claim can be achieved.
Prescription drugs and administrative fees account for at worst 25% of expenditures. The real costs are in the practice of medicine in America: compensation, structure of surgical units, organization of hospitals, treatment recommendations, manufacturing industry, FDA regulations, etc. Single-payer doesn't address any of this directly--at best indirectly, and only if you're really optimistic. Obamacare reforms did try to address some of this (it's why it's gargantuan), but with mixed and often poor success. If you want to fix healthcare, it's these unsexy, complex, and hidden things that need to be addressed.
The debate over single-payer is a debate among armchair pundits, which often includes healthcare professionals. (Just like software programmers cargo cult poorly supported ideas about improving the software industry.) Maybe, after accounting for technical realities, an all-private, public option, or single-payer system may be marginally more efficient in the United States. But nobody is making such arguments. The debate is far too abstract, with unsupported, sweeping claims about comparative efficacy.
It’s not at all abstract, you’re just obfuscating. If your concern is costs, we should have a fully nationalized model like the UK because that has lower expenditure per capita than single payer or mixed public-private systems. Or, if we can’t have that, have single payer, because it too still has lower costs than the mixed systems in the developed world.
It’s not cargo cultism by way of arguments from analogy. It’s Americans irrationally clinging to their exceptionalism in the face of stark counter examples while their people die in the streets, ration care, and go bankrupt.
THIS. I don't know why this isn't being said more openly, more often and more widely. It's absolutely the crux of the matter. Yes, it will be great if we get M4A or somethng similar, but it's not going to solve the cost issues, which are bigger (or under any conditions, at least as substantive) than the insurance system itself.
Can you explain why this is supposed to be true? The benefit of a "public option" is supposed to be that it would theoretically reduce costs by eliminating insurance company profits. The government insurer would presumably still charge premiums and set them based on actuarial risk, so why would it disproportionately attract high risk patients? It's not as if private insurers would be allowed to cancel your policy after you get sick and dump you on the public insurer.
> It’s not true for single payer systems, who across the world pay less than what we pay in the US. Without special pleading, you have to explain why they’re able to do it and we cannot, otherwise it seems that you’re ignoring the evidence.
The explanation is simple. With single payer the government is a monopsony buyer, so it "negotiating prices" is really just equivalent to price controls. Price controls can certainly lower prices, but they do so by creating shortages.
In medicine the primary cost isn't the unit cost of manufacturing the pill, it's the R&D cost of developing it and performing clinical trials. So the shortage is of medical R&D. Price controls reduce the supply of new medicines -- that is what other countries do to have lower costs. They piggyback on all the money paid by patients in the US and used to develop new medications that are then used all over the world.
So the US pays more for drugs because the rest of the world isn't paying their fair share of the R&D and we're subsidizing them.
Many drug prices are too high but 80% of rx in the US are generic, and US is middle of the pack in terms of drug spend as a percent of HC spend compared to OECD countries
Drug prices "feel" higher bc copays are higher for drugs than office / hospital visits. If the goal is to reduce actual costs rather than perceived costs, we should look at hospital and provider costs, not just drug costs. But hospitals are huge employers with lots of political power, not to mention large lobbying budgets
Is there a summary of the findings that gets to the root causes of why healthcare is so expensive in the US? And likewise for the difficulties? It would be a useful read for me. :-)
Compare with a doctors office today.
I tend not to because he’s so cheap it’s not worth the hassle.
I have a family friend who lost his job, lost his insurance and couldn't afford to take his meds which would have prevented the massive stroke that paralyzed him 3 weeks later.
This was 10 years ago and his rehabilitation is still ongoing. His wife can't work and is his full-time caretaker. Multiple lives destroyed because we as a society can't get a system together where it makes rational sense to provide this man with the couple cents worth of pills that would have prevented this calamity.
It's the same story with every other chronic disease and health care issue - just massive amounts of human suffering that could be avoided.
> Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy.
That doesn't strike me as unlikely at all. Maybe their extrapolation is aggressive, but there are people at nearly every practice who spend a large portion of their day just managing the billing of cases to insurance companies.
The amount of work that goes into billing a case to insurance companies is really insane. It tends to be a very manual process, because every insurance company is different.
I wrote a specialized service dealing with Medicaid in a handful of states and it was even worse than normal. The incompetence at Medicaid is dangerous. Formularies, eligibility, reimbursements changed randomly with reimbursement changes retroactive to some random date. I have zero faith in any part of gov to get it close to right.
Well, first of all, because there's no medical billing in M4A. It's free at point of service, so I'd hope they do better at billing considering they don't need to bill at all.
If there is no billing, do they work for free?
https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...
From the paper: "In addition to savings on overheads, a comprehensive database of health-care charges would facilitate detection of fraud, which extracts $85·7 billion every year. Following the transition to a single-payer system in Taiwan, an 8% reduction in overall national expenditure was attributed to the reduction in fraud. By moving from a fragmented health-care payment system to a unified system, irregularities in provider claims can be more easily detected. For example, under the fragmented system excessive claims for physician time can be spread across patients with several different insurance providers. However, acknowledging that improvements have been made in fraud detection since Taiwan's transition, we conservatively assume that the improved fraud detection would garner savings amounting to half that observed in Taiwan, corresponding to 4% of total health-care expenditure."
https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
Aside from decreased executive pay and decreased fraud, many jobs will be eliminated.
From the paper: "Improvements in system efficiency, such as reductions in billing tasks, will involve a contraction of the workforce. Although the country will benefit from lower costs, 936 000 administrative positions and 746 600 positions in the health-care insurance industry are estimated to become redundant. However, detailed transition plans have suggested either funding for early retirement options, extensive severance, retraining programmes, and relocation expenses for all workers in these sectors. Implementation of such a plan is estimated to cost $61·5 billion annually over 2 years, a sum which would be recouped within the first year by the health-care savings estimated here."
https://www.thelancet.com/journals/lancet/article/PIIS0140-6...
I just wanted to emphasize this point from your quote:
>funding for early retirement options, extensive severance, retraining programmes, and relocation expenses for all workers in these sectors. Implementation of such a plan is estimated to... a sum which would be recouped within the first year by the health-care savings estimated here."
Even if we provided a generous 2 years of severance for people to transition into other roles, we still save in the long term.
Rather, I'd like to point out something that I haven't seen discussed. Maybe someone here can knock it down.
Health care spending increases drastically and nonlinearly after age 55. Medicare's admin overhead is in part a consequence of the cohort of patients it serves: they receive more medical services than everyone else, and so more of their medical spending goes to services relative to administrative costs.
Conversely, younger patients receive relatively few medical services, and the services they receive are much less expensive. Compared to that lower amount, fixed administrative costs are a higher percentage of their medical spending. Some admin costs scale directly with the costs of services rendered, but others don't.
As a result, it seems pretty clear that Medicare's admin overhead ratio would necessarily be higher if it covered everyone, and that any result taken by extrapolating current administrative overhead to the whole population would be dubious.
I don't think that's more likely to explain the cost saving than the sheer scale advantages of having a unified bureaucracy rather than countless of small insurance agents.
I will dig the source out when I'm home but (I think it was Paul Krugman) who went over the administrative overhead in one of his blog posts. Medicare and Medicaid both have administrative costs of less than 1% of their budget, the private industry clocks in at more than 15-18% IIRC. I have trouble believing that this is mainly fraud detection considering that it's consistent across other countries with consolidated healthcare sectors.
A single large administration can simply streamline these processes better than thousands of individual companies. To be frank the insurance industry seems mostly like an employment program for the middle class white collar sector.
With a universal system, those costs (and jobs) would evaporate to the tune of millions per year in salaries alone.
For the employees, each of them could quickly retrain or just shift into other departments as needed as most staff did when the company was acquired and IT admins moved to PM or lead roles in other departments.
#2 exists and would have a huge impact not only on the industry but your time and mine. I've spent maybe 8 hours this year already just working with medical billing groups to pay up and already spent close to $2000 between my partner and I with an estimate $4-6000 before the end of the year without doing a sleep study which I greatly need.
Universal is definitely cheaper. All we have to do is compare ourselves to just about every other western democracy to see ow.
Many friends in healthcare have pointed out (correctly it seems) that medicare has lower overhead because medicare shifted that cost onto the existing admin, and many places lose money on medicare, but are forced to take it. So it's simply not possible to extrapolate that to all hospitals without bankrupting many.
Here's a WaPo article with ample links to peer reviewed papers on the issue. (Note the part WaPo rates as false is that ALL hospitals would close; WaPo does admit with cited sources that there is ample evidence Medicare pricing would cause less service and less capacity from many fronts).
https://www.washingtonpost.com/politics/2019/07/03/would-med...
Teams eliminated or dramatically reduced:
* VOB, verification of benefits, they fight with the insurance company just to determine what coverage the patient has, and it is purposefully not automated. If it were automated, it would be easier for us to know what they'll pay. By making it a manual process (or at least only partially automated) we have a greater chance of making a mistake they can reject a claim over. We also have a greater chance of simply getting someone on a bad day and refusing to cover things preemptively, required it to be elevated to our Appeals department.
* Coding, people whose jobs it is to make sure the notes left in the record by medical staff (doctors, nurses, techs, etc) is properly translated to ICD10 codes.
* Billers, people whose job it is to bundle up claims and records, make sure they're properly sorted for each insurance company, and submit the claims.
* UR, utilization review, the group that reviews how accurately we're tracking the treatment guidelines of the INSURER so they don't deny the claim for missing a comma. Our UR group missed a small technicality on some claims and we had to submit paper copies of every claim for 6 months to the insurer, in addition to the electronic requests as a "remediation and verification step", aka, punishment. We would literally print out the electronic claim, and mail it, so it's going to be identical to the electronic claim, but we had to do it for 6 months for one facility to one insurer.
* Collections, the people who call up the insurance company to demand payment for claims they approved but haven't paid on. This is a much larger group than you'd think, as most insurers will happily make you wait for payment until you complain.
* Appeals. They address complains made by insurers over rejected claims, either fixing the issue with the charge, or going to the insurers appeals department to tell them why it's correct. They also talk to insurers over patients that are rejected at the VOB stage.
* Out Of Network, these folks do nothing but deal with insurers we're not in-network with, collecting payments, negotiating Single Case Agreements, etc.
VOB and OON would be gone completely. Coders, UR, Bilelrs would have a lot less to do because there would be one insurer to deal with, so we could have fewer people. Medicare pays promptly and without hassle on approved claims, so does Tricare, so we'd need a lot fewer people in collections. We'd need fewer appeals people too due to one set of rules for everyone.
Healthcare in the USA is REALLY messed up, it's the worst sausage I've ever seen being made.
Plus we already have Medicare, and do that pretty well.
I wonder why this paper didn't contemplate effect of Medicare for all on hospital and provider spend?
It seems like the physician shortage will only continue to worsen. https://www.aamc.org/news-insights/press-releases/new-findin...
Edit: Basically, I think a lot of people will still be left without adequate health care in minor cases, but at least the most urgent cases will be taken care of without leaving people bankrupt.
1. Decrease in pharmaceutical costs as a result of better bargaining power.
2. Decrease in administrative overhead, calculated by extrapolating the overhead in medicare to the entire US healthcare economy.
I don't have an informed opinion on either of these estimates, but my intuition is that #1 seems reasonable while #2 seems unlikely. The justifications they give include lower executive salaries and decreased fraud. From what I have been told by healthcare professionals, medicare has less incentive to negotiate cost, less incentive to investigate fraud, and therefore lower administrative cost.