“Look at the business model of an insurance company. It’s to bring in as many dollars as they can in premiums and to pay out as few dollars as possible for your health care. That leaves families with rising premiums, rising co-pays, and fighting with insurance companies to try to get the health care that their doctors say that they and their children need.” Elizabeth Warren, quoted by Jack Cassidy/New Yorker in The First Democratic Debate Shuns Donald Trump in Favor of Substance June 27, 2019
I’m going to concentrate on cutting health insurance spending, which consumes 75% of US healthcare expenditures: a whopping 2.6 trillion dollars a year. Some considerations…
RAND Corporation analyzed the cost of hospital care across 25 states and found that hospitals, on average, charged the privately insured 2.4 times what they charge Medicare patients. A separate study by West Health found that private insurers paid California hospitals more than two times as much as Medicare paid for similar services. Private non-profit hospitals charged the most for privately insured patients.
In 2016, US life expectancy was 78.6 years, compared to an average of 82.2 years for comparable high-income countries. Most of the difference is due to “excess” American deaths before the age of 40. By the age of 65, the disparity in life expectancy between the US and the other rich countries is just 1.6 years for women and 1 year for men.
Think about it: around 10% of non-elderly Americans are uninsured. That’s almost 28 million people. But US healthcare costs could be 25% lower if the above reforms were implemented. Then the US would have a healthcare system where everyone is covered and everyone’s paying less.
Fraud and waste is why US healthcare is so damn expensive. An estimated 10% of Medicare/Medicaid is lost to fraud. As for waste, at least 20% of US healthcare spending is unnecessary due to…Imagine if the US cut healthcare spending by a quarter. That would shave off almost a trillion dollars - enough to fund a healthcare system where everyone is covered and everyone’s paying less. All it takes is political will, including a willingness to face down the AMA.
Unfortunately, cheaper drugs and administration would not come even close to paying for Sanders’ Medicare-for-all plan. That’s because the high cost of US healthcare is driven by over-testing, over-treatment, overpriced procedures, and overpaid doctors. Check it out:
Why is it is so much easier to commit fraud against Medicare than against private insurance companies? Partly because the Medicare billing system is easy to game (see, for instance, “upcoding” and “inflated risk scores”) and partly because Medicare doesn’t require preauthorization as a condition of payment…
But what about those high administrative costs? According to The Commonwealth Fund, the share of hospital costs devoted to administration is 25% in the US, compared to 20% in The Netherlands, 16% in England, and just 12% in Canada. That sounds pretty damning, but it’s important to remember that administrative costs are often unrelated to insurance matters or are dual-purpose.
We want the pharma wolf to be healthy - not fat and not lean. Robust enough to survive inevitable dips in revenue. So how much could the US cut drug prices without undermining ongoing innovation in the industry?
Most Americans support “Medicare-for-all”, at least when described very broadly as "a publicly financed, privately delivered system with all Americans enrolled and all medically necessary services covered." But would they support Bernie Sander’s Medicare-for-all plan if well-informed of its details? Let’s look at some of those details, starting with what would be covered and how costs would be controlled. This straight from Bernie's online description…
Then again, Americans love their specialists – nothing soothes the soul so much as expensive displays of conspicuous compassion.
…a 31% cut would get us to Denmark, which is good enough for me. The revised goal, then, would be to reduce annual healthcare spending to $2.3 trillion. In other words, we're looking for savings of a trillion dollars. Let the calculations begin!
…3. Increase federal and state budgets for the detection and prosecution of fraudulent medical billing, such as upcoding. 4. Greatly expand the number of nurse practitioners working as "full practice" primary care providers and gatekeepers, a status that allows them to work independently of a physician's clinical oversight. 5. Institute a no-fault medical malpractice system, much like the very successful one in Denmark. …
Take MRI scans, which cost about $1500 in the US. In Japan, the fixed price for an MRI scan is around $100 (depending on body part). Now you'd think that Japanese doctors wouldn't do that many MRIs because they couldn't make any money off them. But no - just the opposite: Japan leads the world in MRIs. What happened is that Japanese doctors asked MRI manufacturers to develop an inexpensive MRI scanner. And they got a cheap machine so they can do cheap MRI scans and still make a little profit. Sometimes the heavy hand of regulation can be a spur to innovation. …I say this as a lover of capitalism, for whom the word "corporate" elicits a sigh of gratitude.
Between the government and private insurers, medical office personnel spend an inordinate amount of time processing bills. What is reimbursable, what is not? What type of documentation is required? What billing code should we use? How much can we charge? And that is one big reason the US spends so much on healthcare administration. Time is money.
Doctors typically get a cut of the profits and that provides incentives for expensive care and/or high premiums (in the case of HMOs). Add in the relative ease of gaming the billing system, and you've got a recipe for out-of-control healthcare spending. It doesn't matter if the medical bills are paid by Medicare or private insurers. If the system of payment can be gamed, it will be gamed.
Last post was about outpatient services, specifically how reimbursement rates and physician profit-sharing arrangements contribute to the cost of outpatient care in the US. This post will address the cost of pharmaceuticals…A recent JAMA study ( Papanicolas et al, 2018) found that annual per capita spending on pharmaceuticals in the US was $1443, compared to an average of $680 for ten other developed countries.
…Thus, if you want to understand why these procedures cost so much, follow the reimbursement rates. For instance, in 1997 Medicare raised reimbursement rates in certain parts of the country. On average, areas with a 2 percent increase in payment rates experienced a 3 percent increase in care provision. Physicians charge what they can, and then some.
Given that old people consume way more healthcare than anyone else, why do other rich countries spend so much less on healthcare than the US, when the US has comparatively fewer oldsters? Something is very wrong with this picture. What is all that money going? … A lot is paying for outpatient care and administration, which alone account for half of US healthcare expenditures