Confusing? Yes! It is why pickpockets work crowds.
6
This article shouldn’t have been on the front page of the NYTimes, not buried in the online section. There is something very wrong when a business, healthcare, requires 30% of its “profits” to cover administrative costs.
5
@Eileen let me correct my typo: this article SHOULD have been on the front page.
5
Let us not beat around the bush. The genius of American capitalism has realized a real gold mine when our health care became essentially about profit over the last several decades.The massive shift in inequality in our nation follows pretty closely the upward graph of health care costs. Of coarse, the creation of an American plutocracy was not only about health care. Just to mention a few the Great Recession and the gaming of our housing and banking systems, the Savings and loan fiasco of the 80s, the trillions of dollars in subsidies to oil companies (with their headlong pursuit of global warming in which we all may meet our demise)and it must be mentioned the virtual endenturing of this generation of college students with high cost high interest loans (the only type of loan which cannot be relieved by bankruptcy) . This article would seem to say there is some legitimacy in health care’s labyrinthine administration. There really is not. Prior to the big shift in wealth there were reasonable regulations of the nation’s economic life. Now ,essentially , you have tiny number of creditors chasing a nation of debtors .......to their grave
13
for profit healthcare makes money in two ways -- by denying care and by decreasing reimbursement. it is a business that profits from illness. end it.
9
As biologic and technologic expertise has advanced. we have allowed health care to become an industry. This industry has defended itself well against all attempts at "universal coverage" for obvious monetary reasons. Extrapolating from the crude estimates cited in this article almost $1 trillion per year goes toward administrating the system. But, really, A THOUSAND-BILLION DOLLARS". Three times the defenses budget, for comparison.
The scale of this waste alone warrants a solution. How about cutting just 50% from this "overhead". Think of another way to add $500 Billion each year to the budget.
Some grouse about their taxes going to the "unworthy" in the form of assistance but don't understand that at least these administrative costs are the equivalent of taxation, call it an example of corporate taxation, and added without representation.
The resulting loss of jobs would be significant. But as this 50% cut is made the pain should be graduated, like the tax it represents. More from the top jobs and fewer from working staff.
6
Perhaps to understand the american economy, one should watch television and note the amount of time spent selling snake oil. A relentless deluge of falsehood and scamming. Anything that is good for you, carrots, for example is not promoted by advertising. Are we really so vulnerable that the only way to survive is to lie, cheat and steal. (Of course, only when it is absolutely necessary.)
4
The health care industry is the biggest employer here on Long Island. Ideally, transferring health care to a single payor system would save billions, but what would happen to the millions of people now employed to handle administrative processing of claims? I'm not suggesting that a wasteful and inefficient system is worth preserving for this reason, but any cold-eyed analysis would have to acknowledge that many employees would lose their jobs if single payor were adopted. What would happen then? Has anyone studied this aspect of the issue?
5
One elephant in this room is that private insurance companies assume the unspoken right to take the time of doctors (or the administrative assistants they must hire) without paying for it in some manner. The time consuming phone trees and convoluted protocols that must be navigated in order for providers to be reimbursed necessarily decrease productivity and increase costs. Perhaps if doctors were allowed to unionize, they would be able to request reasonable compensation for the administrative costs that insurance companies impose on medical practices for their own profit.
10
the author claims a distinguishing feature of American healthcare is choice. I think he has got it wrong...
A recent study by the OECD showed that Americans have less or similar choices on healthcare insurance than this living in other developed nations. The apparent plethora of choice due to a free market is severely limited by cost and by the chased offered by those who are insured through their workplace. workplace insurance usually offers a limited set of options. Other, non subsidized health insurance options are way too expensive.
So theoretically, there is more choice when cost is not factored in.. If you have $100,000 t spend on healthcare insurance you have great choices...
8
Americans only think they have choice, until they need to use their insurance....that is when they realize how dysfunctional our system truly is.
The reason Trump thinks healthcare is easy, is because he has had the fortune of not being sick (yet), and he has the money to go wherever he wants.
6
Said this from the dawn of Obamacare: you cannot cut costs by adding layers of bureaucracy
3
Just another indication of the inegalitarian nature of the USA. The biggest problem in health care is inability to recognize the following:
1. Americans have a relatively short life span compared with most developed countries. Ditto child mortality.
2. Doctors contribute to the costs by having the highest average salary in the developed world.
3. While demagogues on the right and left bemoan drug costs, they actually amount to ca. 10% of health care costs while hospital and clinical service amount to over 50% of cost.
4. Repeating and repeating that "we have the best health care system in the world" (often done by elected politicians who have excellent health care) to an ill-informed electorate is genuine "fake news".
5. The first step to improving the system is inform the electorate, as this article has done. We can and must do better or it will get worse. There is no standing in place in a rapidly changing world.
5
@Pessoa
Two points to consider:
1. Physician compensation accounts for a small fraction of the U.S. healthcare budget, as discussed here:https://economix.blogs.nytimes.com/2008/11/14/do-doctors-salaries-drive-...
2. In other countries where physician pay is lower, medical education is subsidized by the state so physicians are not burdened with the same staggering educational debt that U.S. physicians must repay.
12
For most people, choice means finding a plan that one can afford and not the plan that is actually suitable. Essentially it means that there aren't real choices. I am sure that the time of physicians and other health professionals feel that their time is wasted on the unnecessary paperwork.
6
single payer would save 30 percent off the top for everyone
6
@true patriot this is category THE false conclusion that single payers advocates want you to believe. The reality is that healthcare costs (and any analysis of them) is incredibly complex and very difficult to unpack to get easy sound byte answers. You should be very suspect at anyone who claims otherwise: For example:
1. When you look in the amount of overhead in health insurance, much of it is due to a staggering amount of government regulations (much of it fractured and redundant) that is imposed on the industry. These, while often benign or beneficial rules, when they are implemented in a haphazard way greatly reduce administrative efficiency. Dozens of agencies at the state and federal level get to "add a field" add a form or add a rule and the industry has to chase its tail to comply. A single payer system doesn't change that.
2.EVERY pundent cites US health care costs when compared with the RODW. Frankly, it is an idiot comparison from an insurance analysis point of view:
- we have a much more unhealthy population. Health insurance doesn't make healthy people. Living a healthy life makes healthy people. Comparing our population with eats eating habits to a Japanese or Nordic country is silly.
The US foots nearly the entire pharmaceutical industry costs (for good or bad) that alone, with the pricing differential accounts for 10-12pct of the higher expenses. The ROW has been living off of our RnD spending for generations.
1
Look at hospitals and you will see the problem. There are more and more administrative types than hands-on clinicians. I want an RN who knows how to care for me, understands and implements treatment plans and uses professional judgement. Instead, we have a bunch of clipboard toting nurses running around with their checklists and never get their hands on a patient. I have been there as a professional and a patient. The system is broken and will not be fixed by more adminstrivia.
9
This beast called "medical care" has become unwieldy. A half a century ago it was so much easier and efficient.
Our family doctor worked out of a brownstone on Bushwick Avenue in Brooklyn. (so did our dentist) My mother would bring us in for shots and paid cash. There wasn't a separate charge for administering the shot, it was part of the office visit. We did pay for the shot. He even took my tonsils out in the office ( I can still remember the smell of the ether) and my mother carried me home.
Once he made a house call. My brothers and I all had mumps and he came to see us. Then he called the Board of Health and a lady came out to put a quarantined sign on our window and the door to our apartment.
Insurance was for when you went to the emergency room. With 8 kids in the family we had no end of broken arms, legs, a nose(mine) and a few fingers. And lots of stitches. It's good that Wyckoff Heights Hospital was on the next block.
It seems this all got complicated when people started expecting insurance to pay for non-emergency care like checkups and vaccinations. It made health insurance and medical care more expensive and destroyed the doctor-patient relationship.
10
A healthcare system that spends $11K+ a year PER PERSON PER YEAR is UNSUSTAINABLE.
We have had a tech crash, a real estate and financial crash and a commodity price crash.
Maybe it is time for a healthcare crash. It certainly is overdue.
9
This is very good news. Very good. Health Providers of America: raise these costs higher, harder, faster. Crush us; line those pockets. Only then will Americans understand this inefficient profit-grab is unaffordable and we will finally have single payer healthcare like the rest of the Western world.
7
After an accident and a follow-on heart attack, my husband died last March. Since he was in two hospitals and one nursing facility, the bills were understandably numerous. (Thank God for Medicare!) What was less understandable was the UNBELIEVABLE COMPLEXITY of the billing. Some bills from one group arrived quickly, yet more bills from the same group much, much later. Some bills arrived without having been submitted to Medicare and had to be returned with a special form. Some were accurate to the penny; others, not. My daughter (who once worked in medical billing) wrote an angry note to one doctor about the incompetence of his billing service. It will soon be August, and even now I'm not sure we're finished. Not only was this complexity exceedingly annoying, it must have been quite costly. SIGH.
16
" A distinguishing feature of the American health system is that it offers a lot of choice, including among health plans."
Is that why so many millions of people have no choice at all and for those that do, most of the choices are very expensive and becoming more so?
If anything it would be more true to say (especially compared to every other developed country):
A distinguishing feature of the American health system is
that it offers a lot of very expensive costs, including among
any half decent health plans which cost so much it leaves
consumers little choice to be able to find affordable Health
Care...
8
One of the big cost-savers with the ACA was having a specified package that all insurers had to cover. In physical rehabilitation, we knew exactly what was covered, and were able to save a bunch of time for therapists, and eliminate some of the people who would contact each insurers for each policy and see what was covered. But, now with the high deductible plans, parts of services have been eliminated - some cover rehabilitation, some don't cover specific services, some don't cover some disciplines, so for each patient, we have to spend time figuring out how to meet their needs. It takes a lot of time and communication, and makes providing services more difficult. I'm sure that for physicians it is even more challenging.
5
It's not complicated, my fellow Americans. There is a very simple solution, entitled Medicare for all, which many countries around the world have in place, as we do for people over 65 years of age.
19
Yet so many people in this country still believe that our current system would cost them less than one without this administrative morass -- not to mention DTC drug marketing, etc. Rising health care and insurance costs are a burden to ordinary Americans and many businesses of all sizes. But if the average voter (typically a Republican voter) still believes the threat of the "bogeyman" -- socialized medicine! -- that is perpetuated by the powerful entities who profit from the status quo.
16
If you are going to write an article about the current state of administrative costs in medicine, it needs to be more than a "fluff" piece, and this is from an academic, no less.
You need to BREAK IT DOWN... the impact of health insurance companies and billing and coding requirements and the impact of electronic medical records and government policies such as facility fees which pay hospital systems a ridiculous premium above and beyond what a physician would get for the same service provided outside of the hospital...
10
Americans, who keep talking about the efficiency of the free market, have been hoodwinked into thinking that they practice free market healthcare, and that their system is superior to the rest of the world. The truth could not be more different. The basic prerequisite of a free market is transparency and free information flow, which does not exist in the US system. The other is competition, which also does not really exist as what you have is a cartel of insurance companies, pharmaceutical companies and health providers. The results are clear - one of the most inefficient and expensive systems, with maximum profit going to the cartel owners and outcomes predicted on ability to pay outrageous sums. The sooner the US admits their system is rubbish, the faster they can start to adopt something that is proven to work better for more people, at a lower cost: single payer.
24
@7GreenLions How about serve as they come? If folks do not have insurance for the simply fact that doNOT qaulify for free, although poorcould get temp medical?
What about executive compensation? These CEO's running a healthcare company are earning 17 million to 28 million dollars a year while the head of the Social Security Administration only earns about $200,000. https://www.axios.com/the-sky-high-pay-of-health-care-ceos-1513303956-d5......
It's once again nothing more than good old American corporate greed.
19
@Jim Tagley And the head of the Social Security Administration runs a far larger outfit than let's say the CEO of Aetna or Cigna. So let's have national healthcare. Let all American citizens have the same healthcare that Congress has, get rid of all the fat, bloated healthcare CEO's and their lackey executives with their ridiculous salaries, and we'll save money in the long run.
17
More substance-free content from the NYT and the VA...
Subtle rationalizations throughout this useless piece to justify the current status quo in healthcare.
Current healthcare is a chaotic, opaque con scheme run by hospitals, insurance and pharmaceutical companies with the tacit complicity of the federal government. Period.
It must end.
10
The high cost of health insurance is dictated by the profit wanting companies. We all pay a bunch, then the out of pocket is horrible. European citizens have insurance, there are only three major insurance companies. Their CEOs don't make in the millions. Everyone there has insurance, gets prescriptions, hospitalization and excellent medical care. The physician decides what the patient will receive, not the insurance. We all need to get together and start protesting our current insurance practices. I was told by a senator that a "single payer" health care plan will not work in the US. What the H is Medicare then? Time to get rid of the lobbyists and some of the idiots in government who won't even look at a decent coverage plan without breaking the bank.
17
@Laurie you hit on the most important point, the only thing that thing that can move us to solution- coming together!!! True we have other, minor, issues/differences, but we all must agree that the system is rigged for the wealthy/powerful and unite against the status quo. They know this, and that is why they want to keep us fighting/distracted over race, gender, sexual orientation, religion and class. We have to stop pitting one issue against the other, as though 'my issue' is the most important and acknowledge that all of our issues are important and most, if not all. can be addressed simultaneously. We have to stop fighting over the crumbs and waiting on others to bless us with their "trickle down", by demanding a larger piece of the pie so everyone benefits. We will continue to be taken advantage of until we wake up and come together to serve our collective best interest(s). Disengaging with government (not voting) will not force change, it only makes it easier for us to be taken advantage of. Make demands of your representatives, stay engaged and informed/educated on the issues, and VOTE!
12
The idea of health care for profit is the antithesis of how such a system ought to be configured. We are told how terrible a government run healthcare system can be, but when the insurance industry inserts itself into the equation, costs skyrocket. In addition getting clearance for various procedures can take months. But the bottom line is that any system that puts shareholders ahead of patients is both morally and ethically upside down. Doctors must control healthcare not a bunch of greedy Grinches.
14
I went to an orthopedist recently for the first time. At the reception desk, there were five people checking people in to the practice. Checking in meaning giving my name, and getting several pieces of paper to complete, in spite of the fact that this practice is affiliated with hospital/physician network that I use for the majority of my medical care. The next step was to go have a visit with a different person in a back office to verify my name, insurance coverage, sign more papers; saying I would pay for the expenses my health insurance carrier didn't pay, sign a release for medical records and a notification that I'd received the HIPPA notice. Some forms were paper, others were electronic. I had to wait about 15 minutes to see the doctor, who made a diagnosis in less than 5 minutes and referred me to physical therapy. What a huge waste!! And yes, I've already gotten a bill from the practice, asking for the amount my carrier didn't cover.
12
@Kay - many specialty physician offices require my co-pay before I go back if they know the procedure I'm having done. And I could be wrong, but I don't think the physicians' fees/pay are the problem. I agree with all the comments about insurance, and while I like the idea of single-payer for administrative simplification, we keep hearing about Medicare fraud; it still might be cheaper than what we have.
It's also hard to tell what the real fee should be for a procedure since all of them seem to be discounted in some way if covered under Medicare or medical insurance.
I did like the feature of a list of procedures that all insurance policies must cover; it gave the consumer the ability to compare policies and benefits. That part may have been simpler for doctors and hospitals as well; they only had to question the reimbursement amount and not the coverage.
If all the coverage amounts were the same, a patient would be able to choose their doctor based on the desirability to work with that doctor and his/her office, AND how much they were willing to pay; having the doctor contract for an amount less than what he/she feels is fair-market-value for the service provided only requires them to make up the difference somewhere else. Is this fixable?
1
There are so many other factors as well. For example, we pay more (in some cases, much more) in the U.S. for our drugs because the lack of a universal system means no single entity has enough leverage to negotiate lower rates. If a drug company wants to sell their drug in the UK, for example, they have to negotiate with the NHS. There's no other point of entry for that market. But here in the U.S., everyone is on their own, which results in higher costs for patients and providers, and - you guessed it - more administrative costs. Ironically, many of the drugs developed and made right here in the U.S. cost considerably less in Europe than they do here at home.
8
@Scott
" Ironically, many of the drugs developed and made right here in the U.S. cost considerably less in Europe than they do here at home. "
That is due to the greed and profit mongering U.S Drug companies can get away with in the U.S market versus the prices they have negotiate with virtually every other country in the world who will not tolerate excessive and rampant profiteering at the expense of the sick.
What IS ironical, is the fact that every single U.S Drug company readily accepts the much cheaper price that they sell their drugs in these countries for (not just Europe , but in Hong Kong, Singapore, New Zealand, Australia, Canada, India & many others)because they still make a decent profit from them, but not at an indecent profit as they are freely allowed to do in the U.S...and so they do.
12
One positive aspect of this situation is that those costs provide jobs for a lot of people who, were the administration more steamlined, would do what, exactly? But unfortunately, as corporations swallow up more and more health care systems, a lot of this money is simply going into the pockets of the 1%. Also, I don't know the percentage, but a great number of physician practices are now owned by hospitals.
3
One of the hospital systems in my area just spent around $1 billion to switch to a new electronic records system. The striking thing is that the new system doesn't really improve patient care- it just changes the way some of the administrative tasks are handled. Few, if any, patients will see a functional difference as a result of the mammoth expense. It's all part of the overhead that is incapacitating out system.
8
@Roger
"One of the hospital systems in my area just spent around $1 billion to switch to a new electronic records system"
You are aware that the electronic records keeping is a mandate of the ACA? The old system may have not been compliant with the mandate.
There is another "administrative" cost that is not mentioned - marketing.
Hospitals in particular spend a significant amount of money on advertising and sponsorships, and a staff to administer them.
I'm not saying that these expenses are all wrong, but they seem excessive.
11
@John:
Marketing, AND lobbying. Insurers & the the pharmaceutical industry maintain armies of lobbyists not only in Washington, but in state capitals. And marketing is done not just for products, but for policies and laws.
13
You're right, not sure why it does not stop. The burn-out and fatigue from this aspect of healthcare from staff to physicians is real. We are entering a phase for billing where how you word what you did for the patient matters more than how the patient actually does. Not sure when/if/how a breaking point occurs.
8
@beskep
The ICD has been around since forever. The codes cover every type of statistic needed for billing and collecting statistics. The people who collect these statistics want to know how you broke your left arm. Climbing a tree? Auto accident? Wrestling match?
what part of the arm? Surgery needed?
International Statistical Classification of Diseases and Related Health Problems (ICD), a medical classification list by the World Health Organization (WHO).
1
The cost of health care in the US is outrageous. When people say an office visit is expensive in Japan, they're talking 3000 yen per visit, an equivalent of about $30. My husband sees a doctor at an integrative clinic of a hospital and we pay $500 per office visit. Yes, we have health insurance, but it doesn't kick in until we pay $3500 out of pocket. We think twice before we go to the doctor. In Japan people don't understand why people don't go to the doctor when you have the slightest cough. For people with insurance there, an office visit costs 2 or 3 dollars. And yet we're the lucky ones...
10
@Momo,
In Australia it costs almost everybody nothing to visit the doctor, no matter how often a person may go to see a GP.
Not to mention the cost of almost all prescription drugs is limited in cost to a maximum of $39 for a months supply ($ 6 for seniors, unemployed and welfare recipients) and that all blood tests and X-rays are also free.
And of course, ALL Australians are covered for health Care.
8
Smaller practices have higher overhead as well. The US historically has had a high number of solo or small group practices, and each one of those small practices has a number of people who do billing.
The math is pretty straight-forward.
3
A Canadian physician told me there is one admin person for every 7 physicians in Canada. In the US it is one admin person for every 2 physicians. This is one reason costs are high in the US. But another is that US physicians earn much higher salaries than Canadian.
5
From "beckers hospital review". Since 1975 the number of practicing physicians has increased 150%. The number of hospital administrators has increased 3200%. I challenge anyone to show this astonishing statistic has lead to even a tiny increase in better patient outcomes or efficiency. Combined with other things like EMRs, you get spectacularly increased costs, burned out, frustrated doctors and worse pt care. Someone has to pay for this bloated overhead.
16
The most distinguishing feature of the US system is Medicare’s rushed mandate to use interoperable Electronic Medical Records. The EMR systems were designed to capture billing information and not designed around healthcare provider friendliness. Just ask a healthcare provider who has to use Epic and then ask a doctor abroad. Doctors ascribe this cumbersome time to billing and not medical care - because that’s the fact. Touted as administrative efficiency, current EMR mandates are the opposite.
11
We have a great model for simplified or universal health care right here: Kaiser Permanente Health Care. We use it all the time, and it's a marvel of efficiency. The doctors have total access to records, images, test results at their fingertips. They can spend almost 100% of their valuable time with patients. But we're too dumb and paralyzed politically to use their model.
13
@Psyfly John I belong to KP here in Georgia. It does seem better in many ways. I am able to spend a lot of time with my physicians at any office visit. My internist can pull up my test results from a recent OB/gyn visit, so my care is more "integrated."
3
When I was in solo private dermatology practice (I did no cosmetic work, nor Mohs or flaps, and used no extenders when seeing patients) my overhead was almost 40%. I practiced for 40+ years, and I retired in 2015.
I was more than delighted when I charged something (my most expensive fee was about $200+ for an in office skin cancer removal) and got reimbursed even half of what I sent in.
I worked like crazy to keep costs down for my practice, and my patients. It was hard to do so, and today it would be untenable.
12
I pay for these costs personally as I am a self-employed, solo practitioner in Internal Medicine. But is this a bug, or is it a feature, of the US healthcare system? Given our more problematic demographics than Japan or Western Europe, we have about the same outcomes, but employ many more people. Many of those here who object to our system are probably in favor of a universal basic income. So, throw these people out of work and pay them to sit at home? I'm not sure that is better. The problem with our healthcare system is the enormous disparity in access to care. Suck it up, spend more money, and get everyone proper care. Stop threatening the jobs of millions of Americans.
2
@Epistemology. Doc, people employed unproductively in make work jobs is not good. Better to have them do something useful and fulfilling. Whether we need 325 million people and should be importing even more in a world of permanent over supply of people and labor is another question. We should address that one as well...
5
The utter scandal that is the American Health Care System : To allow the illegitimate gaming of this system for profit.
To illustrate: To squeeze the last penny's from sick people who are often deathly ill and need only help. This is beyond disgusting. Criminal is ,perhaps, more accurate.
The nexus of collusion between our lawmakers and the insurance industry and the quote unquote managed health care industry has metastasized into what might be likened to a cancer in which profit eclipses all other concerns . This cancer of greed afflicts all of us as the nation approaches bankruptcy due to its unchecked growth.
14
Universal health care! My Canadian relatives have a longer life expectancy than I and no trouble getting an appointment with their doctor. The taxes that would pay for the universal care would undoubtedly be less than we now pay for premiums in private insurance which not only pays for part of one's own health care but also helps cover the expenses of the uninsured.
14
@Eleanor Yep. I work in healthcare (more or less. Long story), and whenever someone here in the U.S. tries to say that we can't afford universal health care, articles like this come along and help me point out that, in actuality, we pay for it already, only in the most expensive, inefficient way possible.
6
@Eleanor Until costs are controlled, universal health care will bankrupt everybody, from the patient to the entire economy of the US. Then when the system collapses, only the extremely rich will be able to afford health care, which is the path Obamacare put us on. Stupid decisions end with disastrous results. Make health care affordable, then universal health care will be acceptable - don't put the cart before the horse.
@fudfighter I’m afraid you have it backwards. A single-payer system that eliminates for-profit health insurance is the only way to save enough money to provide universal health coverage. And keep health care providers sane at the same time, not to be dismissed.
2
Most of the Pundits commenting here would most probably overcharge and over bill in their industries of work given half the chance but want to shortchange the healthcare industry. Wall St makes a killing, realtors do too, Plumbers and electricians charge an arm and a leg for showing up and so on and so forth and that’s ok because all of us are living in a bubble, so do lower the tenor of your sanctimonious diatribes against the healthcare industry.
Many of the big academic institutions train the next generation of physicians and nurses. No one pays the doctors for that. There are many other intangibles in healthcare that are of great value but cannot be ascribed a number value when it comes to monetization. All of you that sit on your high horses and talk about the costs of healthcare in America (that incidentally attracts the best scientific talent in the world) come over and do our jobs, walk in our shoes, feel our stress and pain and then talk.......
6
Don't forget the Kylie Jenners or Justin Biebers of the world raking in millions. I guess THATS not a hideous waste of money.
1
With insurers whether government or private begrudging every dime that physicians or hospitals bill the whole system is geared to fantasy charges and fantasy payments.
During my practice days I chose an academic then a large clinic to practice in because I did not want to spend time on administration.
But as a patient advocate a lot of time was spent explaining to people working for an insurance company who had zero medical knowledge why a patient needed to be in hospital needed a certain drug or procedure. The clinic eventually hired people to do that.
Now I am retired. My wife recently had a total knee replacement on Medicare. It went well with a good result. When we received the bill Medicare paid 33% of the total charges which were accepted by the providers.
Could you imagine going to car dealership and offering $30,000 for a car listed at $90,000 and having it accepted?
9
This should not come as a surprise to anyone who works in health care. Frankly I am shocked by the headline of this article as this is hardly a secret---but maybe if you don't work directly in health care you really aren't aware of how much is expended on this. Administrative costs for filing insurance claims/billing, chasing down insurance payments, verifying coverage, etc requires people to do this, which requires money, which has to come from somewhere. No two insurance companies are alike in regard to administrative chores either. This is why a one payer system would be so attractive as it should cut down on excessive administrative costs related to dealing with multiple insurers. Get that under control and reduce the enormous salaries of CEO's, CFO's, etc and we may start making a dent in heath care costs.
15
My experience of admin costs gone crazy was a bill from my doctor for 25 cents due to a mismatch betwwen insurance estimates and actual reimbursement, which cost 50 cents to mail to me... not to mention the cost of printing, paper, envelope, admin time etc. The doctor's office didn't quite know what to do with the quarter I gave them on my next visit!
9
One reason medical bills for co-pays are delayed is that the consumer often has little idea who is requesting payment. I have often medical and am often faced with: who is this practitioner? I don't know the name.
3
Here is the story from Canadian healthcare costs.
Single payer is the primary reason for admin cost differential.
Unpaid invoices results in a loop of invoice chasing compounding the added admin costs reflects to the complexities of the insurance system. In Canada, the consumer accrues zero bills! As Canadians, the first time a family member went to a US MD and received a simple swab resulted in 2 bills and 3 communications... even though we had insurance. It was insane! I can imagine the 20-50 bills a family receives for a more complex hospital visit. The volume and complexity of bills is enough to avert bill payment compliance. Is the swab covered? Is the catheter covered... I thought it was covered last time?
On the other hand, admin costs also include quality control and quality improvement programs embedded in the ACA and ACOs. Although Canadian hospitals have QC and QI standards, the evaluation, reporting, accountability framework undergoes less scrutiny and the level of standardization is much less than the US.
Canadian physicians have much less required QI or QC than ACO offices in the US. Fee-for-service system tenders generous autonomy. In the ACA world, studies should aim to look at how added admin costs can offset the waste in the system with scant QC and QI. As a patient, I would rather pay a bit more knowing my health provider is active in QI and QC programs through the ACO.
So, in America, costs are high, but patients may reap benefits.
2
@Green The only catch is that not all patients reap the benefits. Yes, U.S. healthcare is the best in the world overall, but our system of access is far from equal. And the problem is, the way the system works now, it's those with less options for care that end up costing the system the most (ex. people on Medicaid or the uninsured who pretty much have to use the ER as a primary care doctor. Naturally, they don't turn up at the hospital until their condition can't be ignored anymore. And by that time, something that would have been cured with a pill had they had access to primary care now requires an expensive hospital stay). It's an extremely expensive and inefficient way to provide care. And unless we literally bar uninsured people from coming to the hospital and let them die in the streets, it's not fixable without a pretty significant overhaul.
2
And don't forget the hidden cost of profits going to shareholders of the for-profit insurance companies. Not trivial, and of no benefit to those who pay the premiums.
14
There is a complexity in having a lot of choices, but there's also complexity that is designed to obscure price comparisons. Try asking how much any medical procedure will cost. If you get an answer, it's either a useless range (between $1,000 and $2,500, for example) or it's wrong. I was once told a mammogram would cost $95, but they forgot to mention that reading the mammogram would be $275. What's the use of an unread mammogram?
But often, no one can tell you the cost, because it depends on the details of your insurance. Which of these 25 to 30 Aetna plans for your state do you have? Why should the price of a given procedure at a given hospital vary so much? The cost doesn't.
24
The other huge hidden cost of American health care is the extraordinary amount of time individuals have to spend arguing with their insurers and/or health care providers about improperly billed costs or refusals to pay for what should be covered costs. Time is money and lost productivity.
23
Before the Affordable Care Act, insurance companies usually kept 30 to 35% of the premium dollar for their own administration. The Affordable Care act limited this to 25%, but compare that to the cost of administering Medicare and Medicaid at about 3% of premiums. Therefore, that amount is spent on administration before insurers pay reimbursement to hospitals and doctors etc. Much of this article describes the provider costs. But you have to add them together to get the right picture.
Primary care doctors have it the worst. Over the years Medicare and commercial insurers pay specialists 2 to 4 times as much as primary care physicians, but primary docs are supposed to staff up to create systems in their offices to manage specialist costs and practice patterns. Supposedly they earn incentive payments to do so, but I have never seen an insurance model that paid primary care docs enough in incentive payments to cover the additional cost of staffing up to manage specialists. The only thing that makes sense is for primary docs to work as employees of big organizations, lock in reasonable salaries, and let someone else bear the costs of managing specialists. Yet specialists get paid so much more than primary docs.
Single payer is the only thing that would diminish these problems.
21
Health/Medical care is not a monolith. I see Four important elements each of which costs more.
Health Care is what I do for me - diet, exercise, avoiding threats to health like intoxicants and high-risk behavior.
Health management involves a professional who reviews examination and test results with the individual to assist in Health Care.
Intervention is where highly skilled medical professionals to deal with medical problems that cannot be self-managed or treated with Health Care practices.
Crisis intervention is the result of an unforeseen incident like an accident or a basic health problem that has been ignored.
Health Care is cheap while crisis intervention is expensive. In reality most of our health/medical care needs can be handled by non MD's at a reasonable cost.
We use over-trained resources for the most basic things that we should be doing for ourselves.
We will always need MD's but not for the majority of our needs.
6
@George N. Wells - Good observations but as I understand the situation - now from afar - the administrative excesses would not change much if MDs were less relied upon..
I had two free gastroscopies a few months ago, one done by an MD the other by a nurse with the extra training to carry out and explain. Both with no anesthesia or pain control
Both were done well but the RN+ explained much more carefully what I could see on the monitor and much more carefully afterwards and why she took tissue samples. End result good.
The paper work aspect might be of interest. No papers involved at check in - simply show photo ID. Report from both presented orally and then in print available by logging in att 1177.se to see my journal and printing it if I wanted to.
Not at all like what we read about in The Upshot.
Only-NeverInSweden.blogspot.com
Citizen US SE
1
What a great health care system we have! People who need care can’t get, people who can get it can’t afford it and in the name of alleged capitalism the system jacks up the price administratively, then bills for it. Of course that isn’t capitalism, its crony corporatism. Ridiculous but a trump and GOP favorite. And why not, now we see how Tom price enriched himself as HHS Secretary.
16
“guy in the UK is a state employee”
Sorry, that’s a very simplistic take - the reality is a lot more complicated than that. In the UK GP’s are private, some hospitals are owned by private companies and pay differently, some Doctors flip between private and public depending on patient, some NHS hospitals cater for private patients (they get a better telly and food, but the same treatment). A catch-all description of a Doc as a “state employee” is just vague, lacking nuance and inaccurate.
2
The American health care/wealth care system has a lot of choice for employers, not employees and not those who are on their own. We have to accept whatever our employer offers us or we have to purchase what we can afford which does not always line up with what we need.
We need a health care system not the current wealth care system that is putting health care beyond the reach of all but the richest Americans. The burden for communication should not be put upon patients and their families. It's incumbent upon the providers to communicate the pertinent information about patients between themselves. And it's time to stop treating health care like auto repair in one very important respect: patients are not all alike and what works for most may not work for some. Stop penalizing people for being different.
We'd save plenty of money if we eliminated health insurance and took that money and put it towards establishing a real health care system where patients can go to their local doctors, local hospitals, get referrals without needing to go through layers of red tape. Then there's the constant stress of not knowing how much we have to pay, how often we'll have to fight to get legitimate claims paid, and if we can afford the care for, say a simple fracture or cancer treatment.
11
There are three major issues identified. All of them are quite fixable:
1. Too many payers. OK, reduce the number of payers. Like, say, to just one? (remember, single payer does not necessarily mean single provider; this does not mandate "socialized medicine")
2. Too many small bills to chase patients for. OK, stop the nickling and diming of patients.
3. A lack of coordination among providers and payers on standards and procedures for billing and collection. OK, develop a set of common standards and make everybody follow them (easy if you have a single payer, but also doable under a German/Swiss kind of model).
None of these fixes involve any kind of rocket science. Just a little political backbone. Just do it already!
24
@FJP My simple comment links very well to yours. Nothing could be simpler than going to the doctor in Swedish Universal Health care.
http://www.nytimes.com/2018/07/16/upshot/costs-health-care-us.html?comme...
Citizen US SE
6
For all of you in love with single payer or Medicare for all, the unanswered (and sometimes unasked) questions are who will pay for it and who will decide how that money is used. Medical care is, or will necessarily be, a zero sum game. The high costs are not really driven by physician salaries or administrative overhead. We use too many services, many of which have no value. But value is a subjective quality. Someone will have to decide what gets covered and what does not. Are you comfortable with Donald Trump or even Andrew Cuomo making those decisions. Do you truly believe that putting, for example, all the health care in N.Y., in the same hands that run the subway system is a good idea? Or would you prefer it to be controlled by the Federal Government such as it currently is in Washington. That is what single payer means. No other options. Single payer sounds good, but think about it.
9
@Jake You need to do more than think about, Jake. You need to experience it but not on a visit but over time, for me 22 years in Sweden.
http://www.nytimes.com/2018/07/16/upshot/costs-health-care-us.html?comme...
Since the USA is so big and with regons that differ so dramatically perhaps we need to divide the US into regions, or maybe let Texas and California secede.
Only-NeverInSweden.blogspot.com
Citizen US SE
4
Yes, I do prefer the Health care to be controlled by the Government that I could punished in election year, rather to be controlled by greedy individuals who could not be hold accountable.
15
@yulia
We have seen gov't health care in some places since WWII. There is no consistent pattern of people voting primarily over health issues;
but you DO see thousands of people in Britain simply allowed to drift away without food & water so that the local hospital can stay within its budget.
What I find remarkable is what this article omits:
- How many practices no longer accept insurance due to these hassles, ie, concierge primary care, seemingly all outpatient psychiatrists and psychologists in the NYC and Philadelphia metros
- Administrative costs on insurers’ side. These estimates pertain to the provider/hospital side.
Not a criticism of this very informative piece, but a request for a follow up!
8
Your lead-in picture says it all...
The equivalent amount of information in an Amazon or Facebook or Google datacenter - about a hundred feet of shelving, capable of holding 5000 healthcare files of about twenty pages each - would be housed in a single memory chip...
Not much different from the memory sticks hanging by the checkout counters at pharmacies - and costing about the same...
~$5...
And accessible/searchable in less than milliseconds by a processor not much different than the one in your smartphone - and costing about the same...
~$50...
In datacenters, they'll put a dozen or two of these on a single chip - that's the reason those chips cost ~$500...
The irony...
For MRI images - of which one may have as much data as these entire walls of text/chart pages - everything from the archiving to the analysis is state-of-the-art...
https://www.nytimes.com/2013/01/15/science/how-are-images-from-x-rays-an...
…and this is from five years ago
See - the objective for the radiologists is for them to see and understand as much information as possible, in the shortest possible time...
For patients, it's - by design - the opposite...
3
The excessive cost of U.S. health care is unsustainable, and it doesn't even cover all those in need. Steven Brill is an author who wrote about it, worth reading his impression. We can do better but without a universal healthcare system, it may take a long time, too long for those already in trouble. And politicians, mostly of the republican variety, do exercise cruelty gratis by denying assistance to those least able to afford it, with lame excuses such as denying Medicaid to enter 'red states'. Shameful and stupid, as prevention is so much efficient and cheaper that having to treat actual disease. Oh well, we do not seem to appreciate our health...until we lose it. Did I mention stupidity is in the mix?
13
A big factor is the incompetence of the insurance companies. When they're not arbitrarily denying coverage, they lose patient data needed to process claims. Back in the days of paper the hospitals spent untold amounts of money copying and re-copying files to send to the insurers, who would "lose" them and ask for replacements.
Now, I suppose it's all online and idiot proof, is it? Reading the tales of so-called competent people interacting with computers, I highly doubt that.
2
@Daedalus Are you sure it's incompetence rather than malice? They make a lot of money by "losing" paperwork and denying claims.
2
Dear The United States
This has been obvious to the rest of the world for years. Are you only catching on now?
Your friends
The Rest of the World
29
@KS
They may be catching on, but since Americans have been haggling about healthcare since Harry Truman was President, they don't want to do anything about it. The sad "never ending fact" remains that Americans want a lot of "stuff"(better healthcare, education, infrastructure, etc. etc.), but, the moment it means raising their taxes a few dollars they don't want any part of it, yet, they just continue to whine that there are ongoing problems and ask "why can't they be fixed"?
Perhaps in the next 242 years and if America still exists as a nation, they will finally start electing people that will actually do something about it.
5
@KS "You can always count on Americans to do the right thing - after they've tried everything else."
How much of the costs are due to government regulations?
And the liberal lemmings here want MORE government interference. Good God, when did people get so stupid?
3
@George Orwell very few actually. its mostly due to the invent of managed care. insurance companies hired armies of people to deny claims, so health systems responded in turn, hiring their own armies. its a human arms race.
when this is compared to other countries with a single payer system (think a simplified Medicare/Medicaid) the administrative costs go down substantially, and so does the cost of care.
I'm a free market believer, but having spent 10 years in health system consulting working through managed care negotiations on behalf of hospitals, the free market (and power of the insurance companies) is really the primary driving force behind the increasing costs and complexity.
13
30% to administrative plus they all have to make a profit of what 10 - 20 % ... so maybe half of what you pay is basically wasted. Yea sure ... let's run some more "Centrist" candidates will will leave everything the same
12
If you think it is ridiculous NOW, just wait until all the clarks and admimistrators are federal employees. I would expect admin costs & waste to double every 4-5 years.
4
Grazie mille L'osservatore in fair Verona. Can you elaborate on what basis you assert your prediction?
Just saying - the free market is great - but every product sold by private enterprises carries sales/marketing/administration costs as well. And more - it carries the cost of failures and bankruptcies. Nothing wrong with this. But true apple-to-apple comparisons of costs of private services and public (federal) services are difficult to find. Intuitively you likely see product/services delivered by public employees cheaper in some areas of the economy.
I cite two example -
1) Electricity distribution: remember the electricity distribution industry and the ill fated attempt of Enron.
2) Defense: few examples or private armies hired by countries are known. Would be interesting to see how sourcing defense from private entities work. What we know from Afghanistan - it is not cheap.
In case of the healthcare industry: Highly regulated markets in Europe deliver cheaper healthcare with better outcome (as measured by average life expectancy). At least this is an unassailable fact. It would follow that its administration cost is lower.
8
No just hold on there a minute NYT. We were all told by a community organizer with no experience that if we liked our plan we could keep our plan and that everyone's healthcare was going down $2,500 per family. Are you saying this isn't true?
8
Anyone who has been in a hospital for even a relatively simple operation knows the truth of this!
After a straightforward, uncomplicated operation - - and though armed with an M.S. - - I needed a spreadsheet ~ 3 feet long, with ‘providers’ across the top & ‘payers’ down the side to try to keep track.
By adopting a greatly-simplified system, I have little doubt our country could take care of EVERYONE - - as other civilized countries do! - - with ZERO net increase in cost.
7
Part of the compelling argument for Universal Health Care based on a Single Payer Plan which could be based on Medicare for All is the unification, and simplification, of the claims billing and processing and payments.
Employees of hospitals, private offices and companies that provide both of those services, including balance billing to patients, would still be employed. There would still be same number of claims to process.
The jobs lost would be the highest paid insurance company administrators -- and I say good riddance to their over-priced and profit centered bussinesses that contributes to high cost of health care insurance costs.
It is likely there would be less need for bill collectors for unpaid bills --- I am not lamenting the losses in this industry as they are aligned with the dominating and gouging insurance companies.
Under a Single Payer System the American people WIN with less complex, more simplified and transparent insurance coverage that is not dependent on where they are employed or in which state they reside.
The time has come for articles such as this and national debates about the merits of single payer plans in other countries who have them, and how this would work in the U.S.
The group who knows how these plans work is
Physicians for a National Health Program - pnhp.org.
Read their website. Invite them to talk in Washington to Congress. In 2009 when the ACA was being discussed, pnhp doctors were not allowed to speak.
Give PNHP a voice now!
11
With a (well-run) single payer system (e.g., Medicare for all), administrative costs would be greatly consolidated & reduced. Think of it this way: all the redundancy in the current U.S. health insurance industry (LOL!) would be consolidated into a single governmental or quasi-governmental agency. Almost the entire health insurance industry would disappear. All those redundant workers could go off to make their livelihood in other economic sectors.
8
When my husband and I retired from teaching public school, we could not afford the "benefit" of healthcare provided to retirees.
Fortunately, we have an outstanding VA hospital. My husband, who has many combat related issues, receives all of his care there and it is equal or superior to any care previously available under the expensive healthcare insurance options provided to teachers by the county.
My only wish about the VA healthcare system? I wish that I could receive it, too!!!!!!!!!
4
This article points out what most people appreciate as obvious - that high administrative costs inflate the cost of healthcare in the United States.
What the article doesn't mention, and what should also be reported on and discussed, is the fact that high provider costs - specifically high physician salaries and other costs of healthcare professionals, overwhelmingly drive our all-in cost of care in this country.
Want single payer healthcare that is "affordable?" After you whack the industry CEO salaries, don't stop there. You need to whack the physician and nurses salaries and pensions too. Ask a doctor in the UK what he gets paid vs. his peer here. No comparison, as the guy in the UK is a state employee. Whacking CEO salaries is the easy part - the tough part is your cardiologist. Good luck with him.
2
@Chris where is your data showing that physician salaries drive the costs? That's not true. Look at this article and chart: https://fee.org/articles/the-chart-that-could-undo-the-us-healthcare-sys... Also - yes we can lower physician salaries, as long as we lower the cost of their education and make their loan payments tax deductible. Young physicians are graduating with student loan debt from $200k and up, some with $400k. Without tax relief on those payments.
6
@Chris. Physician pay is 10% of u.s. Health care spending. Are some over paid? Definitely, but most are not, Administrators and ceo usually make far more than most mds and contribute little to nothing to your care. Start there.
2
Can we pay in blood? Can't they just take it out of our bodies and resell it for however many thousands of dollars a pint or whatever amount it is that they want to sell it for?
First born sons? What are they worth? Hospitals can't even tell you how much they'll charge you for anything, not even an aspirin. They just make up prices or add extra zeros on to stuff.
Instead of that being 100 let's just make it an even 1000, who's gonna notice? Make sure those non-skid socks are charged for 75 a pair or is it 150? Because there are two socks.
8
Forty years ago an X-ray was forty bucks and a TV four hundred. Now its like the opposite. Every technology has become cheaper but the common X-ray.. Its not the insurance that is the problem its the cost. Health care is the biggest scam ever.
7
Any numbskull could point to the deficiencies in our health care system, but it would take an economic genius to figure out how to transition it to a sensible system without a major disruption to our economy. Millions of people — our neighbors and friends — work for insurance companies and hospital billing departments and doctors’ offices handling all the paperwork and claims and prior authorization requests, etc. It’s all kind of ridiculous, because a single-payer system would deliver the same quality so much more efficiently, but how do we get there without throwing Joe and Jane down the street out of work?
1
@Haenabill
The answers are out there. Prior to the late 1960's Canada in particular had "for profit" healthcare system much like that in America. ANY universal system does not include everything, so even insurance companies that will no longer be directly involved still sell individual supplemental plans not covered in the overall system and are also involved in various such plans with employers. The insurance companies went on to sell and be involved in other products.
They didn't go out of business, in fact. those companies that were once involved in selling health insurance, today, are larger than they ever were.
2
@Haenabill
There would be a disruption to the economy, certainly.
But I'm not sure why I owe Joe or Jane a permanent job.
6
Speaker of the House Paul Davis Ryan has been on the government benefits including health care and employment welfare dole ever since his father died when he was a teen. Ryan contends that other human beings with his pedigree are moral degenerate lazy takers.
Ryan has never been bravely honorable and patriotic enough to volunteer to wear the military uniform of any American armed force. Ryan has never been humble humane and empathetic enough to volunteer to perform any community civil human rights service.
Health care in America is a for profit business that seeks to deny and limit care as a privilege for the few healthy and wealthy. Instead of providing quality affordable health care as a human right for all.
11
@Blackmamba - Very fine comment, stating the key elements so well.
Larry L.
4
Private Insurance ...which works to deny coverage and avoid costs ... is the problem.
Medicare is the efficient system.
Single Payer is the solution.
Better, more cost effective healthcare for all Americans.
8
Having spent years helping seniors unable to navigate the EOB's, bills and notices from their Medicare, providers and 3rd party insurers, I submit that administrative costs are often an absurdity. Administrators hire folks who are often ignorant of medical care and simply apply rules without regard to facts underlying the case. Those of us trying to unravel the absurdity spend hours with "administrators" trying to reconcile fact with fiction.
Having spent several of my own years in a health insurance system not related to my favored HMO, I can add that "administrative cost" is related to undoing, straightening out, talking to both insurance administrators and physicians, both of whom are following "rules" for how to code, bill, "allow" necessary medical procedures.
We do not have a health care "system". The layers of providers, hospitals, corporate and religious ownership, (both for and "not for" profit), insurance companies have bankrupted us all.
4
Corporate health care is not care and it is not healthy.
7
Remember: your expense is someone else's income. So don't think it will be so easy to cut it.
2
duh. We spend twice as much per capita... for markedly less health care. That money has to go somewhere.
6
So much opportunity here to correct a system which is broken by design. Apple could step up and make an “app for that” intuitive, simple, in the cloud. Cut out multiple layers of middlemen between you and your physicians and you and your pharmacist. Maybe then we could afford to include every person in this great first world nation in a fair and level healthcare system. And while Apple is at it they could write and App for participatory democracy which allows citizens to vote directly on their devices - voting directly on laws yea and nay - and for or against lawmakers. This app would ideally cut out the middlemen (in this case the US Congress and the Russian Intelligence Services). But this would all be progress and recently America has demonstrated that we are in no way a progressive nation but extreme and reactionary.
4
Lots of folks are blaming the insurers. Yes, they are guilty as charged. But every player is our health care system has figured out how to game the system. They are all equally guilty. Why are there run-of-the-mill doctors making a million dollars or more (I am not talking about the top few doctors in the US)? Why do I get a bill from UCSF for a routine checkup for over $600 plus a Facility Fee of $200. Is that crazy or what?
For all the justified blame insurers deserve, they also function as a brake on health care costs - a bill for $300 can be reduced to $30 which I pay before meeting my deductible. That is something I can credit the insurers for doing.
1
@Bruna Please provide evidence that run-of-the-mill doctors are making a million dollars or more (a year, I assume you meant?). https://www.forbes.com/sites/jacquelynsmith/2012/07/20/the-best-and-wors...
A bill for $300 costs $300 primarily because of the added on administrative cost created by your insurer so that it looks like the insurer is doing something to deserve a few hundred a month from you.
5
My friend who is a physical therapists went to a seminar about medical billing. What she found out is many insurance companies hand their cases over to a bill collection agency. The agency calls the doctors office or the patient and tells them the insurance company improperly paid the claim and they need to send the money back. These people are quite persistent and insistent and threatening. A properly paid bill does not have to be repaid. She said a woman who managed her husband's practice had mistakenly sent back $50K last year. The agency is just trying to recover a small percent of the money the insurance company paid in claims, they get a percentage and the rest goes back to the insurance company. Its a terrible scam.
6
Germany, France, Portugal, Spain, Italy, Austria, Switzerland,Holland, Denmark, Belgium, Sweden, Norway, Finland, tell me if I missed a country; all have cheaper and better health care systems. Articles like this one are written every once and a while, lamenting the expensive and inefficient system in the USA. Yet no one, no one, does anything about it. When?
4
@Jean Louis Lonne
Ireland
2
@Jean Louis Lonne
And don't forget Taiwan also providing better and cheaper health care for all.
2
Canada
1
From one who lives in two worlds, 11 months in Sweden and about one in New England + Albany there is only one thing to say: If you are a One Country American and still believe the USA is an advanced country you are suffering from delusions..
Here in Sweden if I need care I simply walk to my local clinic or in emergency get to "akuten" show my photo ID and health care begins. No papers, nothing.
Universal Health Care for all, no matter SES status,
America is on one front after another (1) dystopia.
Only-NeverInSweden.blogspot.com
Citizen US SE
(1) Dystopia exemplified: 26 June Greyhound bus Albany-Newton demeaning, degrading, 3d world in every way.
4
As the article suggested, coordinate a set of standards for billing, payment and collection while still offering choice. Use examples of countries that have done this successfully as models.
Pay out of pocket for all medical costs up to a manageable deductible based on income. Beyond the deductible cover everyone with a national medical back up plan that pays on excess cost over deductible, not based on a complex coding system. The average Dr. will be able to manage with a cash register rather than a complex billing system and administrative costs will drop like a stone!
3
So here is another problem.
The admin costs supporting medical care perform the many different tasks needed for the system to continue to work. Americans have those jobs.
So, can we reduce those admin costs by reducing the number those admin jobs or reducing the wages of those workers. Is there any other way?
The truth is that our medical care economy currently needs both the admin jobs as well as lower admin costs. Which need can be met? Can both?
@Dick M The admins can get different jobs. If we want to subsidize income, adding inefficiencies to our health care system is not the way to do it.
6
@Dick M So you're saying that medical administrator jobs (and insurance company profits) are actually a welfare program?
2
follow up on Boston Doc's comment
average real (accounting for inflation) salaries of physicians in the US have DECREASED https://www.erieri.com/PDF/TrendsAmongMedicalProfessionals.pdf Moreover, this doesn't even account for rising student loan debt--now nearly $200,000 https://www.studentdebtrelief.us/news/average-medical-school-debt/
So, Bostondoc actually seems to be right on point. Based on comparable ability, education, expertise, MDs are generally UNDERPAID.
9
@scientist --No disrespect meant for all the hard work and years of training preparation, but it is much more accurate to say that SOME physician specialties are underpaid relative to other specialties. Pediatrics, family practice, and psychiatry historically have been compensated far less generously by insurance companies than other more lucrative specialties.
A $200,000 debt to most of those physicians is a much higher burden to pay off. And lets not pretend that doctors are the only Americans who leave university with massive debt, some for only a bachelor's degree.
There are other highly trained professionals who would be thrilled to receive a physician's salary as a reward for their many years of education and similar debt loads. Examples are clinical psychologists, Ph.D.s in the natural sciences and most any doctoral trained individual who spends their career in government service. Some of these spent more years in graduate school than M.D.s .
So the real question is whether M.D.s are underpaid compared to other careers requiring long, arduous preparation. Also, WHICH medical specialties are underpaid compared to other physicians.
2
@Obie Doctors are paid less than their inflation-adjusted salary in 1976 across the board. https://babel.hathitrust.org/cgi/pt?id=umn.31951d00827889m;view=1up;seq=93
https://www.dollartimes.com/inflation/inflation.php?
The rest of us are, too, though.
After retirement, we could not afford health insurance, my husband began receiving healthcare through the VA. As I do not qualify for care at the VA, I ended up choosing a "health share" option. I pay for all costs under $500, and I am reimbursed for all in excess of that.
This has given me an interesting vantage point to see the gross waste in our healthcare system. Because I "self pay," I receive a 50% discount at my primary care physician. I have had mammograms and bone density scans at a fraction of their "costs." Likewise, my prescriptions are vastly discounted.
It is truly amazing what can be saved when you cut out the bloated "insurance industry."
Am I in favor of single payer healthcare? YOU BET!!!!
17
Babs, do you think your doctor and pharmacist would give every patient the same 50% discount if we eliminated the insurance industry? Or maybe some of those high-price billings subsidized the discount you got.
That is a possibility, but I do not qualify for their “patient assistance” program. Because I just write them a check, they do not have to employ someone to bill the insurance company!
The existing US healthcare system, for those not on medicare, is unsustainable. And this includes the ACA, which is built on for-profit insurance companies. (What crazy system guarantees free health diagnosis and then permits the system to charge a fortune for treatment?) As this article shows, too many people and practices are being paid as a tax on healthcare. The symptoms and trends include: premiums and out of pocket expenses (copays, deductibles, coinsurances, etc.) go up significantly every year; coverages (for those insured) go down each year; and the number of uninsured is once again marching towards 50M. This suggests we will end up with many people having disaster policies and the rest uninsured. The poor and sick cannot save enough (through HSAs) to care for themselves. Reducing the federal role/involvement, the obsession of Congress, does not reduce the need for healthcare; it just passes it on to states and individuals. The only rational, efficient, effective system is single payer, probably Medicare For All. Everyone in, everyone pays, overhead low, risk is spread, negotiate and standardize prices.
10
I have been a medical biller for over 20 years. There is needless complication built into the medical system. Every insurer has their own fee schedule and their own rules for referrals and/or authorizations. This requires extra staff to wade through and make sure everyone is covered, and that every patient has the proper referral and authorization. If we had Medicare for All, everyone would have the same rules and running a medical office would be much simpler, and require fewer individuals to run things.
25
@JaneM Why do the insurance companies get to set the rules for what they will pay rather than the doctor's office sending the bill and letting the insurance company take on the task of understanding/interpreting doctor's bills?
What value are the insurance companies adding that covers the cost of medical billers' salaries? It seems the insurance company is the one that should be paying the salaries of medical billers rather than doctor's offices and hospitals.
3
"Medicare as a choice for all" would leave it to the market to decide (in areas where there were other options) if this was the best option. In areas where there were not other options, it would provide an opportunity for people to have health insurance. Beyond that, it seems to me that hospital administrators are, as a class, one of the most over-paid groups in the country.
12
Excellent article. Key takeaway for me was: “One can have choice without costly complexity,” said Barak Richman, a co-author of the JAMA study and a professor of law at Duke. “Switzerland and Germany, for example, have lower administrative costs than the U.S. but exhibit a robust choice of health insurers.”
The political reality is that single payer is a non starter in the US. Anyone that thinks a giant Federal bureaucracy offers the answer to efficiency and effectiveness has never dealt with the government. But that doesn't mean we should give up on reform. Offering choices from non profit organizations makes a lot of sense.
Would love the NYT to explain / contrast the German system in detail.
4
There will simply come a time when the insurance burden is unsustainable by businesses and individuals alike. Many people I know are going without insurance. Some have gone bankrupt on medical debt. If you have a system where doctors feel that 400k per year is their due, and insurance executives feel 500k per year is their due and drug companies feel it's ok to hit consumers $300 for a daily dose of whatever, this whole ponzi scheme will at some point go off the rails.
17
Americans should be demanding a single-payer health care system. This should be an important election election issue this November and in 2020. Bernie Sanders had it right in 2016. Single-payer is the only rational, cost effective, and efficient way to provide decent health care to all. The current dysfunctional, high-priced, and convoluted health care system provided through insurance companies is broken. Isn't high time to remove the atavistic notion of having employers provide health care insurance to their employees? A universal health system would free workers who no longer have to stay tethered to bad jobs. And forget the propaganda that a single-payer or universal health system is socialism. Just ask someone who is on Medicare who has paid into this program his or her whole life.
16
Because large numbers of Americans would rather suffer than support a program that might also benefit people with darker skin, this will never happen.
5
There has been additional administrative burden on the health care providers due to the insurers requirements. As well as the opioid problem causing more checks and balances. Does not matter that most are electronic, there is still much to sift through.
Unfortunately there will always be those that just do not pay their share sending the bill to collections. It is a debt without interest added, so a payment plan can be set up~any amount would help.
As with all businesses the highest cost is employees. Especially those that do not directly add to the profits. I feel for the private practice physicians, they care a huge default of non payment from patients.
This article suggests that significant cost reduction may be found simply by standardizing the forms used by insurers. Sounds to me like a worthwhile incremental step forwards, and one that won't offend any significant constituency. Not a panacea, but an improvement, and a doable one.
So why not?
2
the forms are standardized already. the rules and requirements of each insurer for filling out the forms in such a way as to get paid fairly is the issue.
5
This is all true, but there is a disincentive built into the structure of
most health insurance. If 80% of premiums have to be paid in claims,
as many systems require, it's still 80% whether or not the administrative
piece increases or decreases.
There's no profit for insurers in saving on admin costs.
It's a nightmare for doctors. if we had one single standard for all record
keeping, billing, and claims -- still with a lot of different policies-- we
could save 10%-15% percentage points of premiums right there.
This issue has be under-appreciated for decades. There is no admin efficiency
lobby -- if there were, it would be all the patients, doctors, and taxpayers who
end up losing from the present system.
Mr Frakt makes a terrific contribution just by putting some light on a meaningful
but often-ignored issue.
10
These costs are NOT hidden from view.
I see them clearly every month, as $821. is deducted from my checking account to cover my health insurance premium.
That's just for me. 58 and single.
6
Re : Physician Salaries (follow up on Boston Doc)
Numbers please
2017 Annual Average Earnings is $ 294 000
Primary Care $ 217 000
Specialties $ 316 000
Income trend, average annual earning, physicians
2011 $ 206 000
2012 $ 220 000
2013 $ 240 000
2014 $ 249 000
2015 $ 263 000
2016 $ 279 000
2017 $ 294 000
Annual increase, 2011 to 2017 : 7.1 %
Unlike middle class and lower , the earnings of physicians are increasing well above inflation. And yes, these increases do increase the cost of health care
As I noted in other economic posts, salaries in the US of those exposed to global competition, outsourcing, and importation of cheaper labour are stagnant, those not exposed increase are increasing.
Data
https://www.medscape.com/slideshow/compensation-2017-overview-6008547#3
6
sorry to burst your bubble, but average real (accounting for inflation) salaries of physicians in the US have DECREASED
https://www.erieri.com/PDF/TrendsAmongMedicalProfessionals.pdf
Moreover, this doesn't even account for rising student loan debt--now nearly $200,000
https://www.studentdebtrelief.us/news/average-medical-school-debt/
SO, Bostondoc actually seems to be right on point. Based on comparable ability, education, expertise, MDs are generally UNDERPAID.
3
@Woof
Okay, they have increased for 2011 to 2017. They are still well below inflation-adjusted salaries of doctors for 1976. https://babel.hathitrust.org/cgi/pt?id=umn.31951d00827889m;view=1up;seq=93
https://www.dollartimes.com/inflation/inflation.php?
2008 changed everything. Look at 2007 salaries.
2
All of the studies cited are old and pre-ACA. It would be interesting to see the impact ACA and the resulting use of electronic health records has had on administrative costs.
The failure to end and replace the ACA has forced Trump and his Republican minions to offer some such alternative health insurance plans that encourage the market demanded out of pocket expenses that are beyond the capacity of the common man and deny coverage for the preexisting health conditions coverage, while crippling the state assisted Medicaid healthcare acees to the poor.
5
Then we shouldn't adopt Medicare for All, or else many middlemen, paper pushers, and debt collectors will have to find a new job.
8
@G.Janeiro We can subsidize income (provide new jobs and training) without adding it to the costs of health care (creating make work jobs that add to cost without providing significant benefits).
1
I'm just blown away at how many people who read and write and don't have a clue how Medicare operates administratively and somehow think single payer will be a national plan managed/administrated by two employees in a government back room.
No natural curiosity to learn, just one liners repeated from some rally in 2016 no doubt.
11
There is very little, if any, transparency in how healthcare costs are set, by whom and why. Sure Medicare's Fee Schedule is used as a weapon by insurers to limit the amounts they are willing to pay hospitals or doctors, but if you argue that we must then use Medicare to negotiate medicine prices, you have all sorts of accusations of socialism and thwarting of medical research and progress.
We need to come to terms with reality - when the Medical Insurance idea was setup, it was a fringe benefit and most of the folks receiving it did not use it much. Since then, in part thanks to billions spent in medical research via the NIH, we have excellent technologies and treatment protocols that can be put into use for diagnoses and treatment of very advanced ailments. However, the ethics and economics side of the equation have not been explored or studied as honestly and extensively. So you have cases of rationing care while denying it is being done. You also have disproportionate spending on keeping older people from dying in order to live up to some religious standard (which they had not practiced until now anyway) and also the ego needs of the patients and their families.
There is a need for stoicism and unflinching honesty in setting expectations and management of illness in society. Religions have failed to do their bit, and have actually been a nuisance at each turn. We need to update our mindsets to the new reality - we do not have infinite resources or lifespans.
13
Separating admisntative cost by type is useful but the solution to our high costs is not possible without basic changes to the way our system has evolved over time. When hospitals were charitable, as they were when founded and for many years, they had no such costs. Nor did cocotros who cared for patients and who were paid directly. Third party payment means all kinds of problems from deciding what services are covered to negotiating prices and controlling usage. There is profit in all of these overlapping organizations as they pass the records back and forth, review them and argue about them.
The solution is simple but impossible for us to do. It is to nationalize health delivery as a public service, where care is provided as needed without reference to documents beyond medical records. You employ the personnel and finance the facilities, drugs, etc as needed not as sold by television ads and would strength control of inappropriate usage. It would reduce our costs by a minimum of 20 percent and minimize waste and inefficiency. The model exists in several countries but we are frozen in place with all of the players seeking their own wellbeing not that of our economy or our failure to truly care of citizens. America is a health care lottery and it is fixed in the interest of profits not service.
14
There is so much money sloshing around American health care, there is not much incentive to be efficient. This is in addition to all the unnecessary paperwork and approvals of our dysfunctional system.
16
Mr. Frakt - As noted by the first of your studies cited - 1999 - this could have been written (and probably was) 20-30 yrs ago. Nothing substantial has changed but for the tightening grip of health-care industry management upon the throats and wallets of Americans.
Still surprised that as the GOP that long ago crafted the meme of "government death panels," Dems did not from the beginning counter with the much more accurate accusation of private and largely anonymous for-profit "health-industry death panels" which it seems will remain long into our future a lucrative government-sanctioned swindle.
5
"Because insurers and public programs have not coordinated on a set of standards..."
I'm neither an economist nor a healthcare practicioner, but from the cheap seats, it's looked like a lot of the ACA friction may be associated with the industry being at odds with the public agencies making its rules.
Assume hypothetically that insurance companies were trying to provide an important service while balancing the demands of expertise in a huge technical industry, fundamental economics, and basic human decency. If the federal government were to abruptly dictate new rules for how they must conduct business, the might reasonably revolt.
Without condoning any revolting behavior by the insurance industry, one may ask whether all the stakeholders were brought to the table. Were all parties on the same page when the rules were revised?
2
@John Sure, they would revolt over not being able to write their own rules. However, are their interests greater than our interest in a healthy citizenry? If they revolt, other ambitious people will step in to create insurance companies that will happily follow the rules set by OUR representatives... the ones that are not bought with the excess funds of insurance company lobbyists whose interest is in creating excess funds for the insurance company so that it can pay the lobbyists higher salaries.
1
Until recently, the VA was a shining example of a health care organization that relied upon the latest computerized medical records and the ability to engage in hard-nosed negotiations with specialists and other providers to get the lowest prices for services and procedures. Those days are over with the Trump effort to partially privatize the VA.
Admin costs are just another way for companies who don't actually provide medical care to squeeze profits out of the system. Are you surprised? Not me.
14
@GjD
From our perspective, the V.A. system IS a shining example of what can happen when "government" provides healthcare.
My husband (an combat Vietnam veteran) receives ALL of his healthcare at our local V.A. His care and caregivers are excellent. The doctors and staff at the VA are underpaid compared to their colleagues in private practice, but WOW are they extraordinary in their knowledge, concern, and competence. Every service needed is provided, but an effort is made to work together. If the primary care physician needs blood taken, it is combined with the lab work the neurologist needs because NO ONE IS MAKING MONEY OFF OF EXTRA TESTS or medicines.
If I could get my healthcare at Richmond's McGuire's V.A. Medical Center, I would do it in a heartbeat.
7
Strange that the experts are surprised about any of this. We, the patients, have been saying this for years.
Now I'm looking in my crystal ball and the next thing I foresee is that the electronic record regime that's supposed to be such a time/effort/money saving program is costing us another fortune.
The one thing I can't see is how long before our expert class realizes.
9
This was painfully obvious to me by the early 1990s. My primary care physician had a staff of less than two FTEs: a receptionist/bookkeeper along with a shared nurse who managed exam rooms and a shared R.N who performed in-house basic labs in the 1970s and much of the 1980s. The other two MDs in this group shared a receptionist/bookkeeper. Thus three doctors had a total of four full time staff.
By the 1990s insurance companies had made admin overhead so complicated this group required an additional nurse to stand guard whenever a patient removed any article of clothing, caused the lab R.N. to retire as all labs had to be done at a separate business (usually not in the same building), two insurance claims specialists and 1.5 accountants were hired and the receptionists became cashiers.
By the time my MD retired in the mid 2000s this group of three doctors had to move to much larger offices and had a staff of nine to cope with the insurance bureaucracy.
14
Single payer would be great, but the real difference in the US vs. the rest of the 1st world countries is government regulation of prices. Some of the world that has universal care is single payer, but many others countries have different systems. What they share is government regulation of prices. Their docs make a lot less, but then they don't start their careers with mountains of debts, and they don't think of themselves as entrepreneurs who own medical equipment they want to refer patients to. Their hospitals aren't palaces run for profit, but rather places of comfortable healing. They don't have exorbitant administrative costs because the government doesn't allow it with cost controls. They don't pay two or three times as much for drugs, because their governments negotiate drug prices. They don't allow the drug companies to spend money on a large percentage of the advertisements on TV and elsewhere. But no country in the world that has universal healthcare has a system that approaches the benefits that Bernie Sanders ran on. Medicare doesn't approach it, paying about 80% of healthcare costs. The rest of the single payer world is about the same. The healthcare industry in the US is huge and it has a lot of money to resist change. 72% of Americans get their health insurance through employers. 71% are satisfied but worried about cost increases. The ACA was a huge first step we need to build on with public options and drug negotiation, and increased Medicare coverage.
31
You do not need to have slide rules or be any kind of expert in economics to know that if you put a profit motive between you and your doctor, that everything is going to cost more, because there is a simple common denominator to squeeze out as much out of the system - and as an extension, the patient.
There are inflated costs everywhere, (when many of the costs are hidden with no oversight), especially when you have inserted (again between you and your doctor) an entire administration or mid level of management solely to ''process'' claims for insurance - which means deny as many as possible, putting the onus, costs (and particular stress) on patients to fight back.
Health care should not be an adversarial system, but in reality it is because suits are very much a common occurrence. (even further inflating the costs, because they have to be recouped somewhere - from you, the patient)
This is all excluding the massive costs of not being able to negotiate drug prices in bulk - which all other Single Payer systems in most every other industrialized nations do.
Isn't it time that America joins them and not only saves a massive amount of money, but lives as well ?
Isn't that what it is all about ? Saving lives ?
17
@FunkyIrishman Malpractice claims 100,000 to 200,000 lives a year, and causes vastly more temporary and lasting damage with attendant costs. Malpractice suits are the only control, given the code of silence among practitioners, hospital administrators and insurance companies. Read "The Medical Malpractice Myth" by Tom Baker.
2
Funky, you left out the other side of the distortion, and that is the patient seeking as much "medicine" as he or she can get. In our current system, where insurance still pays most of the bills, people have little motivation to be frugal. So while I agree that when insurance companies fight claims and providers and administrators inflate costs, these actions lead to increased spending, so does most patient behavior.
If we can't have better healthcare with single payer -- where administrative costs would be one half to one third of what we now pay private insurers -- just imagine what could be done with that money -- promoting wellness for a start. The idea that health care insurance benefits from competition is delusional. Health insurers make their profits by denying people care, not by providing it.
9
@rosany
Health insurance companies do want people to be healthy - they are the ones that started wellness plans starting about 2006 or so. And preventative care started then too; treating the disease when it is treatable. It all showed up on a spreadsheet one day - but not many private insurers got on board right away. And yes - a claim paid is a loss - which is why wellness and preventable care is in their ($) interest and, in ours as patients.
1
I’m surprised this article neglects to mention the astronomical costs of electronic medical records (EMRs), which all hospitals are required to use by Medicare. EPIC, the leading EMR, charges an average of $25-50 million to build and install their EMRs to hospitals. Who pays? Patients.
8
Medicare does not require hospitals use electronic medical records. Medicare does incentivize use of electronic medical records.
1
@XLER My wife has worked as a medical records coder for a long, long time. The last 10 years have been a struggle... new programs every year, IT people who struggle to make the programs run, less IT people period, outsourcing to other coders out-of-area who have no idea about the doctors they are coding for. When coders retire, they don’t replace them. A little nugget... when they save money by these means, do you really believe these cost savings trickle down to customers? Happy days for wifey... in a couple of years she will be retired.
@Susan Fowler
penalizing reimbursement 15-20% for not adopting EMR is essentially requiring it
This is why "Medicare Part E" - for Everyone - remains the solution that makes the most sense.
It is a system that is tried, true, tested, and long used. there aren't any surprises - and administrative costs are much lower than those of health insurers.
23
@Jake
The logistics to deploy Medicare for all exists - just not the political will, and, many people have no understanding how the plan is administered today.
3
The Economist has several articles on this topic
The two I recommend are
1. "American health insurers: Fit as fiddles"
Key finding US health insurance companies pre
tax profits increased from $ 16 billion in 2009
to 25 billion in 2015
https://www.economist.com/finance-and-economics/2015/12/05/fit-as-fiddles
2 ."Which firms profit most from America’s health-care system"
Key finding: "The most controversial source of excess spending, though, is rent-seeking by health-care firms. This is when companies extract outsize profits relative to the capital they deploy and risks they take. Schumpeter has estimated the scale of gouging across the health-care system. Although it does not explain the vast bulk of America’s overspending, the sums are big by any other standard, with health-care firms making excess profits of $65bn a year"
https://www.economist.com/business/2018/03/15/which-firms-profit-most-fr...
RE: "“Switzerland and Germany, for example, have lower administrative costs than the U.S. but exhibit a robust choice of health insurers.”
Numerous studies have shown that these systems function better than single payer, because the contain an element of competition. They key to their success is that they are well regulated NON-FOR-PROFT organizations.
Germany introduced Universal Health Insurance in 1883. With Teutonic exactitude, it improved the system for 135 years . Time to copy what works
27
Woof
"They key to their success is that they are well regulated..."
There really is nothing else to say.
Regardless of the kind of system, regardless of who pays, the idea that healthcare providers, health insurance companies, pharmaceutical and device manufacturers can be trusted to manage their own markets is, basically, insane. As is the idea that health care is a market at all.
Every major theorist of capitalism and free markets agrees: robust government oversight and a legal system as skeptical of business as it is of individuals are essential components of an efficient economic system.
Our "business does everything right, get government off my back" ideology is just foolish, and built to create corruption and massive inequality.
1
@Woof — of course German doctors are even less satisfied with their careers than American doctors ... at the bottom of the developed world.
It has something to do with dealing with a multiplicity of payers, none of which benefit health. "Teutonic exactitude" isn't a characteristic I'd look for in my physician, my hospital, or their treatment of me. For an auditor, it might be good.
I challenge you that "these systems function better than single-payer" ... but I gather you do agree that all of them (single-payer, mixed public/private, highly regulated private) ALL work better than what we have.
I would also point out that countries that have recently made dramatic improvement in their healthcare systems moved to single-payer ... e.g., Taiwan.
1
Don't forget to mention that a large portion of the AMA's income is licensing medical "codes", and that there is a pretty large industry of people paid to maximize revenue by arbitraging those "codes" vs. the myriad payer idiosyncrasies. Any politician attempting to improve efficiency in that area will be hounded by lobbyists and attack ads.
8
I work for a major healthcare company with up to 10k employees. When I walk up to my office every morning I often think “if we had a single payer system, none of us would have a job.” And I would be just fine with that.
101
@FM
then I would say you don't know your business very well or anything about administrating plans. A single-payer plan does not remove administrators (people that work in health insurance companies).
Think the government is going to have two people in a back-office running national or state plans and everything that encompasses?Think Medicare and think how and who administers that plan in each state.
1
Just watch what you hold in securities in your retirement account. There would be repercussions that could have a large effect on your future.
@Mary I found the insurance company lobbyist..
Good luck trying to convince people that Medicare is not better than anything else the average human can access for medical coverage.
What I see is the problem with most people's thinking about medical reform is they don't understand that we can't change to England's NHS system next year. A change in the medical system, and a lot of change is certainly needed, has to be gradual. We aren't just going to eliminate the insurance companies in a year. What we need is to start making incremental practical changes that can be modified when they don't work. The ACA tried to do some of this, but didn't get the authority to work on reducing costs. Unless we can start to reduce costs nothing will work.
2
Perhaps some progressive state (e.g. California, New York) could take the lead and implement single payer themselves. That way the country would discover how much money we would save and how almost everyone would be covered. Then the whole country could switch over to single payer.
13
not sure the insurance companies would go along with that....
@RandyJ
How about New Mexico for this sure to fail experiment?
@RandyJ ACA was based on https://en.wikipedia.org/wiki/Massachusetts_health_care_reform
For some reason, the successes/failures of the Massachusetts plan were not a part of the ACA discussion... I wonder why not...
The problem is quite evident. Insurers put up an ever-changing set of hurdles for providers to jump through - which - with autoadjudiction costs the insurers almost nothing. Meanwhile providers have to add staff and time to try to get what they are contractually entitled to....which by the way, the insurers have the right to change at any time. Don't believe me? Read the standard contract between a physician and an insurer. The provider is locked in for a year - the insurer can adjust payments at any time "as warranted."
The healthcare administrative bureaucracy is a significant economic driver. As waste of money, yes. But a driver nonethless.
Unfortunately, it will be difficult to find enough politicians who are willing to put their district through a potential recession in order to set things right.
6
Austin Frakt helps to explain one reason why the US has the most expensive health care yet ranks last in quality, access and outcomes compared to 11 countries that have single-payer. Teddy Roosevelt was the first President to advocate for single-payer. Unfortunately we have a government in the pockets of the insurance and drug industry. We need to elect political leaders with the intelligence and integrity similar to that of Teddy Roosevelt. Premiums for insurance will unsustainably rise with our corrupt Congress. Prices for drugs will also rise. Our new Secretary of Health, Mr. Azar, was CEO at Eli Lilly and under his watch the price of insulin tripled! Lets hope that a blue wave this November will bring in a Congress that represents constituents, not corporations.
12
One of the points of insurance is we don't have a choice about what or when we will need medical help. Until we have that choice, the idea of having choice of insurance plans makes no sense or cents.
Medicare for all. And let us have sensible drug coverage.
23
Medicare has places onerous burdens on physicians with regards to coding and reporting so I don't think thats the solution.
This overlooks the fact that each of us that struggle with getting our insurance companies to pay, spend hours trying to satisfy their onerous paperwork demands and writing appeals for things that should have been paid in the first place. None of our hours are paid and that is a cost, even if it does not expressly appear as dollars spent. I spent most of Saturday trying to write an appeal for my husband who is disabled. My time is worth something even if it isn't compensated. The "choice" we all allegedly want, is not free--it costs us plenty.
47
Medicare for ALL. Economy of scale, real negotiating power with Big Pharma and other Suppliers. It’s the right thing to do, and with save money, in the long run. 2020: it’s TIME.
23
choice?? really? there is LITERALLY ONE dental care provider for the ENTIRE COUNTRY
and when I had acute renal failure how am I supposed to excersise CHOICE from barely conscious self already in a hospital bed!!
Lets cut the BS. American doctors make TOO MUCH and the insurance agencies profit is 30% of the bill on top of that..
good god.. When will we be done with the analyzing..single payer is the ONLY WAY!!
12
Are you serious?
MDs are UNDERPAID, particularly ones in non-procedural based specialties, based on their education, skillset, and economic barriers/cost to reach that level.
I worked harder and achieved more academically than just about any of my peers in high school and college, went to a top medical school, paid for my education through school loans, and work at a top hospital doing a large amount of pro-bono work and get paid less 15 years later than my college roommates earned a couple years after graduation.
Although I agreed a single payer plan would ultimately be more efficient, it has been definitively proven that MDs are underpaid and NOT the cause of high healthcare costs.
47
@BostonDoc, sorry you are overpaid.
https://economix.blogs.nytimes.com/2009/07/15/how-much-do-doctors-in-oth...
Just because the medical system makes you work hard at chemistry does not mean you work harder than engineers or architects. Doctors, in my experience, would do well to work less and pay more attention to human beings, isntead of treating us like automobiles - and that goes triple for surgeons, the highest paid and the most insensitive, arrogant non-communicative humans in the world.
Plus lets stop the artificial limitations on the number of doctors in the US - more schools, more admittances, and maybe the rest of us will be able to have medical care where we are not in the abused child role, waiting like handmaidens for five seconds of a n unfamiliar doctors (read mechanics) time, which the doctor will then bill as 'more than 30 minutes' , without ever taking another ten minutes to remember us, go over our records, allow us access to OUR OWN records!!!(another pet peeve) No Boston Doc, you feel entitled and overworked, just like the rest of you all. No you don't deserve it, you are NOT better than us, and we don't deserve doctors who treat us like car uphholstery, the system needs to change.
Choice is actually more limited than the author suggests, at least where individuals are concerned. Employers have some choice, depending on location.
Not mentioned is the explosive growth of administrators in healthcare, not just billing personnel.
While doctors’ time is mentioned briefly, the increasing documentation required to maximize billing is both an unaccounted cost and the source of several unintended consequences, including high rates of MD burnout, time pressures that lead to unnecessary referrals and fragmented care.
5
I agree with Frakt, the administrative costs of health care and the cost of contracting out our health care to health insurance companies is the reason why we are spending less on actual care then on the health insurance. Why is it that since Obamacare was introduced the health insurance company stock has sky rocketed and still most Americans don't have optimal affordable health care? Cost of health care could have been more manageable if there was a public option for those without private insurance covered by medicaid (spends a billion dollars a day).
3
@Girish Kotwal
you say stock sky rocketed - I don't know about that but we do know that more people participated in health insurance plans than ever did before - paying premiums. So, a lot of people paid in. Some used the system a lot, some used it a little and some, didn't use it all all (they were not ill). That is insurance.
... you do know about the ACA rule that requires insurers pay back premiums in rebate checks (The Affordable Care Act requires health insurance companies to maintain a Medical Loss Ratio (“MLR”) of at least 80 percent for Individual and Small Group plans and 85 percent for Large Group plans. )?
High administrative costs have multiple causes. One is billing. Another is greed--by the people who run the healthcare providers and health insurance operations.
I have directed two hospital-based addiction treatment programs and several others. All were nonprofit. But nonprofit doesn't always mean no surplus. My hospital programs were specifically designed to be profit centers meant to offset loss centers like cardiac and cancer treatment.
The first program was in the black after only 8 months in operation, though to be fair, the cost of the building we used was attributed to the psychiatric day hospital already operating there.
I have no problem with one treatment program subsidizing another if that means more local treatment for various illnesses, but people should be aware of it.
5
The focus here is on the cost of processing the claim. I would focus on the cost of negotiating the price points for each insurer for each service. The administrative simplicity of the Canadian system is that you bill (a) the government plan, (b) Workers Compensation, or the patient for 100% of the cost. Patients pay for a note from the doctor, driver medicals, summer camp medicals, insurance medicals, and cosmetic procedures. There is one set of negotiations for each of the government plan and the workers compensation. Two sets of negotiations; not hundreds. Exit negotiators and coders. Physicians can handle billing codes themselves because they usually bill only a few codes.
7
Years ago I worked at a large, famous healthcare system in Baltimore, and back then they pegged the true administrative overhead costs at 38%.
18
One source of added costs must be what I call Hospital Holding Companies. Here in the mid-Atlantic we have Sentara that has bought up one of the two major hospitals in Charlottesville and scores of clinics and walk-ins throughout Virginia and North Carolina.
Do we need this added layer of administration?
14
I would rather pay higher income taxes for Medicare for All kinds of systems than the private insurance system we have today. At least the money would go for health care rather than big salaries for insurance CEO's.
Now our citizens must breathe dirtier air and drink toxic water so that coal and big oil can can keep their CEO's happy. I would rather pay taxes for new employment and training programs for those who lose their jobs. At lease the money would go to people rather than corporations. --our system is nuts!
59
@Diane B — I would, too.
But single-payer, funded by general progressive taxes saves so much that we could cover EVERYONE with BETTER benefits and still save money.
So said the Congressional Budget Office and the General Accountability Office, the two non-partisan Congressional watchdogs in 1993.
Why wouldn’t we want better healthcare … for everyone … leading to better public health and productivity — while saving money and stimulating our ecomony.
Our current healthcare system? Its 30% waste means that 6% of our GDP is non-productive. It means that a big chunk of our federal debt helps pay the multi-million dollar salaries of Big Pharma and Big Insurance executives.
1
I have both studied the system here and work within it as a bachelors trained nurse (do you understand the difference between an LPN, RN, BSN, MSN, DNP, NP, PhDRN??) -- I ask because we do not even equip people with the knowledge of who they should be seen by and what role each clinical plays in their care.
Most of my patients do not understand the difference between Medicare and Medicaid (no thanks to the political ridiculousness of the past 10 years). People do not know, nor does this article mention, that both have administrative costs consistently below 3%. The time we waste arguing over socialism and choice makes no difference in the care or outcomes of care in the U.S.
This country has a problem accepting that when each of us makes a choice, that choice has consequences that ripple and affect others. You choose to smoke, that increases my costs, either insurance costs, or care costs at the clinic. You ride a motorcycle without a helmet, that increases my costs. You are overweight, yep---you guessed it.
We are under the impression that individuals are 'free' to make their own choices because they only affect ourselves. We are not. If we care about our spouses; children; cousins; neighbors; we will start to see ourselves as part of a larger community that could be helped and be more financially stable if we understand that we are not islands of one.
81
So, Lissa, are you about to suggest that once we completely socialize health care funding, we also socialize and proscribe behavior? I can imagine that in the quest for lower costs we will then have to outlaw all the things that most people enjoy.
Add to the list of details in this article the unjust hidden costs charged to some patients for going to an ER. Hundreds, even thousands, of dollars can be charged to patients who were not aware of the enormous price of just crossing the threshold of an ER or discovering after the fact that the doctor who attended to them was not listed by their insurance company. What injustice!!
9
They charge even more if the patient died.
3
The Centers for Medicare & Medicaid Services (CMS) is driving the billing complexity.
2
The government is shutting down the database of health care costs this month. This prevents researchers from identifying excess costs or making risk-based public health analysis. It also protects those administrative costs. See https://www.ahrq.gov/research/data/dataresources/index.html
13
It is also important to point out that complexity may benefit payers. Most large insurance companies are publicly-traded entities and, thus, have a strong inclination toward quarterly earnings. In a business where the only way to make money is to take in higher premiums than claims paid (or deny claims outright), it would incentivize these companies create myriad complexities that would delay those payments. So while patients, providers and health care institutions spend an inordinate amount of time on administrative activities, the insurance company allows the revenue from premiums to earn interest through the market- not to mention the percentage of people or providers who abandon efforts to recoup payment over time. Essentially allowing the insurance company to keep it.
16
It's even more than that. When health care costs rise, insurance companies apply for and get rate increases, which increase their total profits. Thus insurers profit from ever higher costs.
The Big Question: can insurance company payment policies create higher costs?
(Consider- billing complexity, setting 'allowable' charges based on submitted charges from previous year thus creating massive inflation, disallowing services that reduce total costs, reducing payment for primary care which reduces access, which creates more ER visits and hospital admissions...yes?)
Do wild bears sleep in the woods?
6
This the same issue with the field of education, among others.
8
@Tony Frank
This is a really good and important point. There are certain things that simply do not lend themselves to automation. Health care is one and teaching is another. You can do telemed and maybe some on line course work, but the real value is in one-on-one interactions. Which we all (rightly) believe that we and our families deserve.
Contrast that with other work. When I started in business, everyone who was a manager had an assistant (or shared her (yes, always her)) with one or two other people. Someone had to type the memos, answer the phone, schedule meetings, arrange travel, etc. Those jobs are LONG gone (just as an aside, no one tried to save the steno pool like some people are trying to save coal miners. Just sayin'.) Today I use email, my travel is arranged on my smart phone using an app, meetings are scheduled over interconnected systems, and dictation! I thought I would ALWAYS be able to get a job knowing Gregg shorthand!
Some jobs are easy to automate; some are hard. The ones that are hard have had costs go up dramatically over inflation. Maybe the rise is actually "normal" but with "deflation" from the automated jobs (checkout at an self check out lately?) they just look really out of whack.
Agreed! Now let's perform the same administrative/processing costs for schools, colleges, universities, and what we euphemistically call a "system of justice."
Clear the costs of waste, inefficiency, and ineffectiveness from these sectors of society and the QoL as well as the Sol for the majority of Americans would materially advance.
8
There are estimates that as many as 1 in 8 jobs in the US are in healthcare, but at the same time we are facing critical shortages of both doctors (especially specialists) and nurses. The biggest actual barrier to single payer system or at least a more efficient and cost effective healthcare/insurance system is the administrative bloat that is basically just revenue sucking middlemen. Private practices and hospitals are forced to hire more administrative workers to deal with the multiple layers of administrative requirements of insurance companies.
Think about it. How many insurance agent, customer service agents, medical billers, pharmacy benefit managers, policy administrators, HR benefits jobs would be lost by moving to a single payer system? It's not the drs and nurses who are terrified of a single payer system. It's the C-suite of the major health insurance companies, especially the ones who have experienced record increases in stock prices.
Aetna : 192.29
United Healthcare Oxford: 257.73
Wellpoint/Anthem/Blue Cross: 249.25
Cigna: 173.11
Besides the administrative costs, the real culprit in our for-profit system is record profits by health insurance companies who keep increasing our premiums and deductibles because of government sanctioned greed.
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It is simply incorrect to blame administrative costs as the major culprit in high US health care costs. This situation is due to many factors, each with it's own special interest constuency. Compare our situation to that in France:. In US, the majority of hospitals are largely tax-exempt profit centers; in France, these are government owned cost centers. In France, hospital surgical and medical staffs are salaried employees (with exceptions). Our medical and surgical staffs are paid "by the piece", and comp levels are several times higher than in Europe. In France, the public sector provides about 74% of care; In the US, private care is dominant.
French government-operated hospitals do not resemble our VA system.
The US system enriches many groups. That is why things are the way they are.
14
@wcdessertgirl
some jobs would be lost, but Medicare for All would need more employees to deal with the added workload.
We are soon to experience the medical tsumani of the baby boomers aging so NOW is the time to fix this broken system.
5
@L. Finn-Smith I agree. I am a baby boomer who, along with my retired husband, is just making it on a very slim retirement income. I can read the writing on the wall and have already decided not to drain any of my relatives' bank accounts to get healthcare as I age. In 20 years I'll be 90 years old and have already taken a stance of non-cooperation with the present system.
Finally, the "hidden" costs of the US healthcare system are beginning to surface. The reality is the US healthcare system as it presently--and expensively--functions is that it's a jobs program much more than a medical care delivery system.
It is also for-profit, which everyone enjoys claiming is the reason the cost-per-person is so high. It certainly contributes. But the real driver is the people cost.
Which also drive nearly 20% of the US economy.
Where are the proposals to dislocate millions of American workers from these jobs by moving into a VA-like system? Bernie's proposals hardly pay lip service to it. That would be social engineering to a degree never seen in American history, and one that I'm not sure is amenable to the rugged-individualist American character.
It's been fun watching the American delivery of medical care evolve from the independent practitioner to corporate management; it's about to get really interesting as the desire to reduce cost and out-of-pocket expenditures run smack dab into millions (literally) of American jobs.
15
To be exact regarding “administrative “ cost it would be imperative to look at what CEO’s and other high level administration for our private insurers collect in compensation salary, bonus and stock options)- exponentially higher that the Doc(healer!) who is caring for you.
15
@Lesl
But remember that the ACA limits insurance companies' administrative expenses (and that is everything other than payment of medical claims) to 20% of the premiums that it receives. Moreover, even if you have hundreds of top level insurance company executives making millions of dollars each, that is still an infinitesimally small percentage of the nearly $3 trillion spent on health care each year.
What value do healthcare CEOs provide except becoming rich from a rigged system?
AN average of about $28.5 million per CEO and a median of about $17.3 million per CEO. The median household income in 2015 was $56,515, which the average health care CEO made in less than a day. Pharmaceutical and drug-related company CEOs made up 11 of the top 20 highest earners..
Each year thousands of young graduates, eager to gain a foothold in the "growth" sector join administrative ranks. The system is no longer about delivering health - it is about delivering profits to Wall St while millions struggle.
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And with single-payer like Taiwan's, those insured can use their IC chipped insurance card at the licensed public or private provider of their choice. To pay, just present the card plus $15 or less for the standard copay ($22 for the ER). This is what real access to good healthcare looks like.
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European private plans such as those in Switzerland and the Netherlands have very little similarity to private plans in the United States since they are very tightly regulated. Changing our fragmented system of public and private plans into a system of highly regulated private plans would be about as disruptive as improving Medicare and providing it to everyone. But the efficiencies of an improved Medicare for all would be much greater (lower administrative costs), and the financing would be more equitable, not to mention that there would be a multitude of other advantages to an improved Medicare for all.
It's clear that we can't continue with the same dysfunctional system. If we are going to change it, we might as well do it right.
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@Don McCanne
I agree with you and would like to see single payer. But the problem is a political one: who is going to pay more and how much will they pay? Even if you cut the costs of medical care by 1/3rd (a highly optimistic assumption) that still requires about $2 trillion in new taxes (or about a 50% increase in taxes over what the federal government now collects). And while for many you can swap out insurance premium costs for new taxes and not notice much of a difference there are still many, many millions of people that pay little or nothing in insurance premiums (particularly at the higher income levels) who would find hefty five figure tax increases (whether in the form of income or payroll tax). Additionally, we would have to impose some type of national VAT to raise enough revenue but this would adversely impact working and middle class citizens.
Single payer is necessary but let's not overlook the political issues/ problems of raising money to implement it.
1
Excellent article.
Just one quibble: the high administrative costs of health care have long been obvious to almost everyone who actually uses the system on a regular basis, or who helps family and friends navigate the system. The real mystery is why it has taken health care "experts" so long to see what is in front of their noses.
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Why? $$$
Few even consider improvement efforts, they insist single payer is a silver bullet. It is not! It would cost even more and be ineffective.
2
Question #1: What is the cost of collecting when turned over to collection agencies. What percentage of costs collected are eventually returned to the care provider and what goes to the bill collector? Where is the break even number beyond which sending a bill out for collection becomes a net loss ? Briefly, how much return does the biller actually get when sending out a $90 bill to collection?
Question #2: How much have care provider admin costs increased over the last ten in the category of senior executives and overall admin staff not directly tied to patient care?
Question #3: Do we really need the number of specialized and targeted health care facilities, including doctor's private practices and group care providers we currently support? Would it not be a cost saving to consolidate and modernize billing and other admin costs rather than supported office staff for every 3 MDs who want their own Medical Corporation? Seems to me that there is a minimum base cost associated with every entity providing care that can be reduced if all entities were of a size that reduced admin costs. One accountant with up to date apps and equipment can probably do more than one providers paperwork with some organization.
That old "economy of scale" that used to be so popular before we turned to "boutique" care.
2
#3: You aren't keeping up with the field if you have to ask this. Individual practices and even smaller health networks are increasingly being purchased by conglomerates. In my primarily rural region (about 5 counties or so), I can easily list three specialty practices (ortho, peds, etc) and one hospital that have been purchased in the past year without health admin being my area of work. There are two more hospitals (each with outpatient and specialty services) and two facilities that are long-term care with a few higher level beds that I expect will also be purchased within three-five years. However, if you expect an average accountant to successfully bill insurance companies, I wish you good luck getting paid. It's a multi-step process with very specific rules for each plan. Not each company, each plan. Your boutique practices are now cash only.
8
The hidden costs? Good lord, anyone with half a brain could see that administering such a cumbersome "system" would be massively inefficient including wasteful and expensive. Those pounds of flesh gotta get sliced off all over the place. Worst.System.In.The. World
22
I don’t consider these “ hidden costs”, actually they are glaringly obvious, in particular if you can stomach reading about the pay of not only Insurance Honchos without retching, but the associated areas participating in the ripoff of Americans; from the hedge fund owned hospitals and Doctors groups to the Wall Street owned drug makers. A glance through high end housing publications paints a clear picture, the people living in all those mansions or muti million dollar condos are excessively weighted to finance or “ healthcare executives”. We are being fleeced at every turn in our winner take all society.
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@Ted The US "Medical Care System" is a very rich and appealing pie, and many many entities would like a generous helping of all it offers. The primary interest of these entities is to continue to "bloat" the pie so they and others can continue to feed off the largesse it offers.
Since those it serves (i.e. who bake the pie - this includes taxpayers and of course the entire patient population) have no other options, and nowhere else to go, and are never even afforded transparency of costs, the "bottom-feeders" mentioned above are free to continue to play G-d with human lives, rape our economy, create widespread disparities in our society, all while providing the very most mediocre health care to all but a lucky few.
IMO the buck stops with those with an MD title, because it's their signature that unleashes the hell-fury of the pharmaceutical industry, and all the false science, false representation and false advertising it embodies. If doctors had more moral fiber or real education, they would seek sounder treatments or better educate their patients, who often deserve blame for being naive BTW. Failing that, they should walk away from the table in order to maintain their status as human beings.
The law that rules this land is, don't bite the hand that feeds you. G-d forbid someone should come along someday and knock down their whole house of cards.
I see different types of administrative costs for physicians and hospitals.
Non-procedural physicians are paid for each visit at 5 different levels, dependent on exam complexity. To increase income, physicians wish to bill higher levels and to fight this, Medicare and insurance companies require physicians to document this level using complex formulas in several categories. This documentation can take more time than the exam. It then goes to the poor billing persons, who must have knowledge of the requirements of multiple insurance companies. For each company there are incompatible codes and different covered services.
At the hospital level, many of the costs are imposed by government in the interest of safety. Multiple committees to address mishaps and prevent future ones. Reportable surveys of patient satisfaction analyzed at committees. Every hospital must have its infection control personnel and policies with enforcement. Rebuilding hospitals to comply with seismic laws. And even nonprofit hospitals have CEOs who earn millions.
Above the administrative costs, there are the competing interests of the insurance companies to pay less and providers to increase their reimbursement. Physicians leave small practices and join hospital systems with more market and bargaining power.
And then there are ridiculous pharmaceutical costs which are completely uncontrolled.
It all leads to the highest cost system in the world, but also the one I would choose for my own care.
5
When you attempt to build any product or system from two opposing entities (congress) who are in constant confrontation, throwing in the influence of billion dollar industries outright buying congessional members (and those industries being only interested in profit, and actually develop the system to optimize making more money pushing testing and pharmaceuticals not necessary or overpriced). Combine this with an amazing amount of social dysfunction (which is at the core of much of our society's problems but no wants to face or no one wants to heal because that would stop a lot of people from profiting from the dysfunction). If this system was used to build an airliner... Would you choose to fly?
Imagine developing a medical system that would actually attend to our mental and physical woes. As of now the US medical system is rated 36th in the world but the most expensive... Profit by chaos.
9
"As patients are required to pay more money out of pocket, providers devote more time and resources to collecting it." This is yet another reason that health care for all is our only reasaonable solution when it comes to bringing down the cost of healthcare in the United States.
8
Health care in USA is disorganized and often chaotic. Who benefits from this ? Insurance companies and Big Pharma. Medicare is most popular and trusted to administer health care. (non profit system ).Make Medicare for All the rallying cry for 2018 and 2020.
US pays almost twice as much for healthcare as single payer countries and gets worse results. We are being ripped off daily. Funny that Trump ,who seems to understand being , "ripped off " does not mention this.
15
Few even consider improvement efforts, they insist single payer is a silver bullet. It is not!
2
My wife recently had multiple visits to various departments in the same hospital, all part of the same health issue. Every time she went to a new department she had to fill in paper forms that provided the same information. When I questioned why this was necessary I was told that each department had their own database that was not shared. Not only does this waste our time, but it needs someone to enter this data into the computer system. Duplication costs money and also provides opportunity for errors in patient information.
The endless form filling required when getting medical care in the US does not occur in health care in other counties where I have lived, France and England
13
Your point about the unshared databases is a good one, but one that presents its own set of problems to solve, not least of which is cost. I worked for a large life insurance/annuity/retirement plan provider, and we had multiple systems that required entering client information over and over. When a bid request to consolidate those systems when out, the lowest bid to be received was $25 million. You read that right--25 million dollars. And, by the time the project was completed, very likely parts, or all of it would be already outdated. Obviously, ours was not the only industry struggling with this issue.
3
These costs are not hidden at all in that they're right there in the astronomical bills. Their latest trick, as I have experienced it, is to hide the details -- one has to request a detailed bill in addition to the bill they send with just the final number. So yeah, there will be delays paying because a lot of the charges are bogus or up-coded procedures that need to be cut back down to size. They play a game (in the economic sense) where the onus is on the patient to file complaints and reviews to get it revised down. Then they complain about the complexity.
The other cost is the over-education of these administrators. I'm sorry but I don't think you need a nursing degree to administer paperwork, much less an advanced nursing degree, and even less an MBA on top of the advanced nursing degree, one that is paid for by a hospital system through tuition reimbursement. These expenses, multiplied over and over across the system, all wind up eventually in our bills.
8
The bottom line isn't how much workers paid for health care ,rather than disproportionate expenditures over salary. Nevertheless, higher cost of living could escalate unless there's a reasonable gross domestic product .
3
Medical expenses and HEALTH CARE represent two distinct issues. Each of us should execute responsible behavior (diet, exercise, vice avoidance, etc.). That responsibility should account for most of our health care.
Medical expenses often result because most Americans do not adopt habits of responsible self care. Admin costs absurd, on that I agree. But the largest "hidden" factor contributing to high medical expenses undoubtedly relates to lack of self care. (End of life expenses also contribute an outsized proportion of medical costs.)
4
What is good self care is always debatable. In the 80s, block margarine was considered healthier than butter. Now the wisdom is that margarine/trans fats are among the worst things you can consume! And we now embrace the science behind healthy fats which include butter. Most health problems are genetic rather than diet related. Stop blaming people! Let's see the research that unequivocally proves that the highest cost of medical expenses relates to non-genetic factors and lifestyle choices! Even the experts are clueless! As for end of life costs, that is part of health care. If your 5 year old was at end of life you'd want the right kind of care for her I'm sure!
5
Two personal examples out of many:
On my first visit to a specialist here in 1993, after 17 years in Africa, I expressed my shock at what I, an uninsured patient, was being asked to pay. She quickly explained that she was paying huge malpractice premiums and a billing clerk, which pushed up her fees.
Following my later return to Africa, to a country with no orthopedic care, I had minor out-patient hand surgery while home on leave. I tried to pay my co-pay in full but the estimate I was given was short by $11. That bill then chased me for months as we had no postal service, it couldn’t be paid online, and late fees were applied each time my attempted payments were delayed.
Both situations highlighted the irrationality and cost of a system based on private insurers.
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@Kate
I hope they didn't wreck your credit rating over the $11.
In Germany and France, the doctor collects payment across his desk after he provides service. What a contrast to the phalanxes of administrators in an American medical practice!
15
Medical systems reflect the overall culture in which they operate. In the United States, practically everything is more complicated and costly than anywhere else. Much of our human energy is wasted, or causes harm. In my own microcosm as a physician, I see more energy devoted to administration than to direct provision of care. Those who directly provide care must spend more time documenting what they do than doing it. A relatively simple activity like giving some IV fluids and antibiotics to a patient with an infection becomes a complicated labyrinth which defies logic. At its root, the waste in health care reflects a cultural malady that consists of lack of forethought and a fixation on profit, technology and legal matters. Actual care of the patient unintentionally become relegated to a lower priority. Does that make sense?
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@Dr. T, amen. I also must wonder why Americans have such an infatuation with complexity. Our "system" of weights and measures, anyone? As with this article, I wish someone would do a serious analysis of how much that rat's nest costs industry and individuals in time, errors, and possibly lives lost.
Doc: I KNEW it was lawyers’ fault. Damn their eyes for watching out for your medical malpractice. How dare they. — It’s well known malpractice costs are deminimus and the driving force behind US escalating costs is profit. Your profit.
Why don't we have a single-payer system? Because we would be knocking a leg out from so many people's income. The problem is not just inflated CEO salaries, shareholder profits or labyrinthine payment systems. It is also the many, many insurance agents, billing processors and our neighbors and families who are only trying to make a living. Unfortunately this tangle of insurance companies and unnecessary administration hurts all of us.
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Can't we find something more productive for these insurance agents and bill processors to do? Making a living through inefficiency is a drain on the economy.
These aren't dream jobs, either. "When I grow up, I'm going to be a bill processor!" said no child, ever.
Let's reform the health insurance system, and put former paper pushers to work comforting the sick, making art, or mentoring needy children. If we're just going to throw money at people to keep them busy, let's at least get something for it that makes someone, somewhere, happy.
6
@Jerie Green — Yes, people in the 1% (like healthcare CEOs all earning above $15M per year) and reimbursement admins (who earn barely above minimum wage) and insurance benefits customer service reps (many of whom work in non-US call centers) will be out of work. I feel sorry only for the admins, a career that has high turnover because of low pay and high stress. Insurance brokers can focus on property, liability, fire, and automobiles.
Single-payer programs, like NY Health, include extended unemployment benefits, job training, and priority on hiring for displaced employees. Possibly even more valuable to such employees: they won’t lose their healthcare when they lose their jobs so they won’t lose their savings (and maybe their houses) when someone in their family gets really sick or in a car accident.
But wait, there’s more! Eliminating all that wasted effort on paperwork and arguing about benefits will produce an estimated $45B savings per year per New Yorker — and that will create an additional 200,000 jobs, none of which will have “job-lock” where employees stay only to get insurance.
So don’t feel any sorrier for insurance employees than you did for secretaries and typists, bank tellers, elevator and telephone switchboard operators. At least they provided services that all of us needed, rather than generating and responding to paperwork that only costs us money and delays needed healthcare.
I do the billings for my spouse who is a clinic-based subspecialist in Ontario, Canada.
It now takes me about 45 minutes to complete and submit billings to the single-payer system.
That's 45 minutes per MONTH, for the entire practice.
The single-payer system always pays in full and has never made an error (unlike me!).
Admittedly this is an outlier. I am able to write computer code that helps - not every physician spouse can do this. And there were maybe 10-15 hours of preparation time over the years to hone the system I have developed.
This is also not to say that the overall system in Ontario is flawless. In health care you have: comprehensiveness, access, and cost. If two of these are high, the other one must be high, no matter what. Make your choice.
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@ngm
I am a long term care physician in Ontario. Bought a billing system 15 years ago - one time fee. Spend less than an hour a month doing my own billings.
4
This article kept talking about choice... "American health system is that it offers a lot of choice..." "whatever the benefits of choice". What choice are we talking about? As a payer of individual insurance I feel the only choice I have is one of extortion, either pay or get burned. I don't have a lot of choice of providers. There is very little public information for me to be knowledgeable to negotiate procedures, service providers, alternatives, etc. About the only thing I've been able to negotiate is paying cash when something isn't covered by insurance. I tend to be offered a 4-5% discount for not using a credit card. How about a 25% discount for not having to file an insurance claim?
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@KathyG Indeed. Your "choice" of your health care provider is pretty much made for you when you sign up for insurance.
1
Cash is untaxable and untraceable.
The other issue in health care costs n the US when compared to other countries is the compensation paid the doctors and other health personnel because in theUS they have paid for their own education at the university and graduate level, where as in most other countries this education is paid for by the state.
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@Ned Martin
That's an excellent point. Although it's hard to compare, I think it's not unreasonable to say that doctors in Western Europe are paid about half what U.S. doctors earn. (Very roughly, about $150,000 per year in Western Europe and over $300,000 in the U.S.). Then you add the much higher hospital costs and you get a sense about why it's so difficult to bring prices more in line with other single payer systems.
1
@Ned Martin
we can fix that , in fact Medicare contributes to Dr education currently.
Also we can make full use of Nurse Practitioners and Nurse Midwives especially in rural areas. We can manage chronic illnesses eg Diabetes , Heart disease , Renal Failure , with regular checks at Community Clinics instead of high cost ER visits. Also MORE MONEY for Planned Parenthood who do such excellent work in reproductive health care and cancer prevention and STD prevention and treatment in our community.
1
Am I wrong in thinking that the U.S. has the worst system for paying for health care in the world? Don't we pay twice as much as anyone else on either a per capita or percent of GDP basis for outcomes that are worse than most countries? This article on administrative costs seems to be adding a little detail to the "whys", but doesn't do much to change the picture. It appears to me that the myth of a "market" in health care and the reliance on an insurance model--works for car wrecks, not health care--are our real problems.
26
In addition to the factors identified in this article and in comments is the reality that insurance companies maintain their profitability by making it complex and difficult to file a claim and getting it paid. Even within a particular insurance company, one would find incompatible claim systems resulting from non-standard system implementations over time and industry consolidations. The "free market" in healthcare has bred an extremely inefficient system, paid ultimately by policy holders, taxpayers, and patients, who have very little ability to not only reward the efficient Healthcare actors, but not even to know who they are. Unless we can make the system truly a "free market" system where efficiencies and outcomes can be known by those who pay for the service, a governmental (state or federal) model may be the only answer. We only have to look around the free world to see where efficient healthcare is provided. Unfortunately, you will not find the American system high on that list.
15
Insurance companies in partnership with Congress created this industrial complex nightmare. It can be fixed by streamlining and ridding the system of the insane level of paperwork (no other country has this level of complexity), but doing so would put a LOT of people out of work which is most likely Congress has stalled in really dealing with the heart of the issue. My father is a retired physician. His practice used to employ one part-time person to handle insurance claims and paperwork and it was less than 15% of his practice's expenses and his time. By the time he retired, he had 4 four full-time employees and it was close to 50% of his time and expenses. All of that excess meant he couldn't see more patients, but in order to meet the increasing costs and paperwork demands, he routinely worked 10+ hour days.
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@JKennedy — Thank you for this. There is a reason most physicians support single-payer healthcare. The Canadian experience (like US Medicare in 1965) shows doctors are actually better off under a single-payer universal program.
Consider NY Health, poised to be passed next spring.
It will raise reimbursement fees so all providers receive what for-profit insurance typically pays — doctors will no longer take a pay cut every time they treat a patient who make less than median income.
Doctors will no longer have insurers interfering with their doctor-patient relationship — changing diagnoses, refusing tests, denying authorizations for treatments and medications. The average MD will save 6-8 hours per week.
Doctors won’t be forced to work for hospitals, HMOs, and clinics because administrative costs are so high — the average office overhead will be cut by 25%. And medical malpractice will costs will decrease when lifetime medical bills are no longer a liability.
And career satisfaction: Doctors are happier seeing and serving patients. American MDs rank with the least satisfied in the world, an estimated 10% of ER and primary care so burned out they suffer suicidal ideation. People who choose to become MDs don’t want to spend their time on computers and arguing with insurers — it’s a misery when patients cannot afford the medications and treatments.
NY Health has much to recommend it.
1
@JJ
Canadia doctors routinely complain about the rationing and frustrations of the Canadian system. There were threatened strikes in some provinces just last year, for example.
Healthcare now represents over 18% of the total national economy, thus, based on the estimate presented here administrative costs amount to 5-6%. The overall size is staggering, and makes reform politically difficult, to the point of being almost impossible.
But is the present situation sustainable? Probably not...
9
The complexity of the system doesn't "come with costs" it is a tool that bad actors use to hide those costs and enrich themselves with taxpayer funds.
35
Fingers crossed Amazon can get in there and change things - cut costs and make things more efficient. I don't care if they take over the world - if they come up with a better model for healthcare in the US they will have done so much for society!
(PS I live in Seattle but I do not work for Amazon! I just pay my father's medical bills for his Alzheimers care which are outrageous.)
19
One of the factors that keeps such a system is the power the people running and participating in it acquire is used to maintain the status quo.
Trump promised better healthcare for less cost. Why isn’t the fourth estate asking where the plan for that is? I’m done reading stories about his golfing or Tweeting, why are you not asking what they are doing about healthcare?
Or why are you not asking ask him to step on a scale or admit he is obese? Every day.
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add to this the astonishing price of medications and medical instrument!
7
For many years I have used my bank's bill payment service to pay my bills. No checks to write, no stamps, and an easy to look up digital record as backup and proof of payment make the service work well.
Unfortunately, the system breaks down when it comes to medical providers and testing labs. The payments go to dozens of different addresses with dozens of account numbers. In the good old days a name or social security number might link the payment to the service but identity theft prevents the use of the social security number. I would even be happy to pay up front with a credit card but no one can compute the insurance discounts and payments in advance to enable a pre-payment.
Maybe we need a uniform medical ID that that has no value to anyone that might want to steal it. Better yet, a medical credit card might contain a hidden ID (or IDs for the whole family) and only medical providers who provided a service to an authorized medical ID would be able to be paid with it. That would make the card of little use to unauthorized users.
CVS, Wallgreen, Visa, United Health Care, Northwell Health, Quest Diagnostic, etc.: are you listening?
5
Just one reason why unlike our peer countries and most of the civilized world we are the only one with a de facto criminal health care system where the wealth of the big Phrama/HMO exec. comes ahead of the patient.
55
I frequently get mailings after a doctor visit which is full of cost breakdowns but are marked "This is not a Bill". And I remember, which administering an estate for a deceased relative, coming across hundreds of not-a-bills and wondering what to do about them. How much does it cost to produce these things, which are to be duplicated later in the real bill?
I also remember getting a large bill, then realizing that they hadn't checked with my insurer to see if the procedure was covered (it was). So they had to talk to my insurer and recalculate it. The same thing happened to a friend of mine. More costs. If the patient hadn't raised a fuss, they would have paid inflated charges. More cost of health care.
51
Each of those letters cost $5. That is what Aetna and Cigna were charging Tracor, a self-insured company, in Austin TX. Every time the insurance company sent out a "This is not a bill" letter, they sucked $5 out of the health care for the employees and provided NO service. Moreover, they were not paying the healthcare providers for over a year after the service was provided ! ! !
7
When my husband died in a hospital, I was immediately deluged with bills from every imaginable service provider. Bills for 11 dollars, 23 dollars, 19 dollars, etc. I received phone calls demanding I set up payment plans for these dollar amounts. My husband was on Medicare and also BCBS. These bills were all covered by insurance but it took about 60 days for Medicare and BCBS to pay. Then all the service providers issued me refund checks for 11 dollars, 23 dollars, 19 dollars, etc. What a colossal waste of time and money. I received two refund checks for 1 cent because some error had occurred in a previous billing. The hospital was the only entity that waited until Medicare and BCBS had time to process the claims and pay what they owed. I got one bill from the hospital and paid it.
3
Where have you been? Every doctor I know has been complaining about the ever rising administrative costs for the last 20 years. Why do you think all the one person family practices are gone.
Primary Care doctors are all now in groups because the paperwork is over whelming.
Federal government should not be in the health care insurance business,; it should be creating legislation to that will bring down the cost of healthcare and streamline regulations. We could only hope for some tort relief, but then we'd taking food from the mouths of all those rare and precious trial lawyers.
15
Actually, the only way to bring the costs down is to do away with the Insurance companies and let the government run it. The whole concept of big government being a problem came about because big business didn't want to be regulated. Without regulations we will find ourselves back in 1910, dying form the crap we eat and the air we breathe and the water we drink because there are no regulations to ensure our safety.
10
Federal Government SHOULD be in the healthcare business- how else can we control costs and assure access to life saving health care and medicine?
Medicare Medicaid and VA system are examples of GOOD HEALTH CARE that is administered WELL. The cost of life saving drugs , insulin and narcan have skyrocketed , this is IMMORAL .
4
I imagine the form filling had more to do with the BILLING of each test or else that hospital had no computer based system.
Up to date computer system save all information for each health encounter and so should only require confirmation or updates , eg allergies or new prescriptions.
When reading about the high costs of health care in the U.S., one inevitably wonders why we are so much less efficient than other Western countries. The problem is more easily understood if one recognizes that "costs" for the American public are "revenues" for many large and powerful industries and corporations. Thus, lowering costs in the interest of greater efficiency is a direct threat to the revenue base of these industries, and since election campaigns are increasingly paid for by these same companies, it becomes unachievable.
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@Tom
I see this in my work, where healthcare systems pressure clinicians to skate through "efficient" but superficial encounters in order to maximize revenue for the organization. The result is sloppy patient care that overlooks critical information, misses diagnoses and fails to address treatment complications.
However, since complications and missed diagnoses ultimately generate revenue for the system, there is limited interest in addressing the systematic issues that lead to poor patient care.
Of course, none of this is articulated, but it's there.
The main problem is resistance of doctors and hospitals to standardization. They think they will make more revenue under the existing system, and they are right.
18
@Jonathan — Actually most doctors — particularly young doctors — support single payer.
For-profit hospital systems, huge because of M&A activity so they can balance the power of huge insurers, don't like it. Their business model has been designed for financial cage-fights with other profit-seeking behemoths.
Don't confuse doctors and hospitals ... or even for-profit and non-profit hospitals.
1
@JJ
You're 100% wrong there. Doctors with any degree of experience are usually skeptical of single payer working well based on their experience with existing analogs (MEdicare, MEdicaid, the VA). It's no panacea
Question: do Germany and Switzerland have a set of standards for not only pricing, billing, and collection but also for health care plans (i.e., what is covered)?
6
Yes, there are a few stock insurance plans. All doctors must take all plans, and they all pay the same for the same procedures. The only difference is what the insurance companies charge the customers.
11
I might be misunderstanding you- but if the only difference between companies is the price they charge the customers , how do the more expensive companies get any customers?
As private practice becomes unattractive to new MDs - in part due to crushing overhead costs required for billing- the alternative becomes salaried positions ( as in Kaiser HMO and hospital employment). This is not medicare4All but a system that diminishes the continuity of doctor/patient long term relationship, personal accountability & better individualized care.
Medicare4All would give maximum choice- via HMO or fee for service care.
Claims that healthcare costs could be reduced through managed care have been proven false as costs rise, benefits are reduced & out of pocket charges increase. For profit systems have only added to administrative costs like CEO salaries, larger profit margins (with lower quality of care) and marketing budgets stealing clinical dollars.
Now Trump unravels the risk pools that make insurance solvent with no alternatives offered. GOP plans to destroy Medicare are being proposed under the con of vouchers which will leave most patients holding the bag.
Homeland security involves more than a military budget. It requires protection of Americans healthcare access and a system less like a high volume assembly line and more like efficacious individualized meticulous care. Perhaps there is no bigger issue in 2018....along with gun reform, pollution safeguards, financial regulations, reproductive rights and secure safety nets.
76
My mother worked for a team of radiologists that formed their own billing company, to save money and make more money billing for other practices. Billing cost if I am correct, 8-10% off the gross income and required lots of computer programmers, staff etc.
2
Admin doesn't get cut until profits are affected.
The system is extraordinarily complex. Some of it is necessary - hospitals and providers need to be able to treat almost any condition, and need the equipment and personnel to do so. Fixing people is more complex than fixing a car or a washing machine.
BUT - we have added complexity that is unnecessary. Large companies are self insured and have their own plans, administered by an insurer. Medicare had multiple providers with multiple terms, and a plethora of supplementary providers. Other insurance - the smaller group market and the individual market - have a vast array of plans with varying terms, some dictated by the ACA and some not. And then we have Medicaid. Medicare and Medicaid come with government regulation on top of all.
This is solvable, but we don't have the political willingness to attack it. And cutting my cost means cutting someone else's paycheck. Usually that means we fire a thousand lower level workers and replace them with one zillionaire executive, for a net gain in misery, but no net gain in containment.
25
The numbers of people in a large hospital in the US who just are in the billing office compared to those in a large Canadian hospital is an interesting comparison. The difference in costs are telling.
One reason is that in the Canadian system there is only one payer to bill.
Single payer anyone?
198
This, of course, is also part of the reason why changing the US system is so difficult.
Although it's easy to complain about greedy insurance companies requiring exorbitant amounts of time for clinicians and staff to fill out requests for payment, there are many not-so-highly-paid individuals both in the clinical practices and at the insurance companies who currently make their living performing these tasks.
However more efficient a single-payer or other systems might be, we need to find ways to transition that don't lead to massive economic disruption for those lower-level employees. We don't want to repeat the type of mistake made when globalization of the economy was encouraged without taking those losing their jobs into account.
5
" .. Single payer anyone?
https://www.nytimes.com/elections/results/colorado-ballot-measure-69-sta...
Colorado defeated that, 79% to 21%.
They knew that "free" is expensive and quality-lousy --
https://www.ft.com/content/dfd41b72-785b-11e8-bc55-50daf11b720d
2
@Marc I support a single payer system, but I think the impact to the jobs market with would be terrifying. A large number of back office jobs - such as billing, claims administration, etc - are held by women. I've worked on the provider side and the insurance side, and ~70% of the jobs are held by women.
I would hate to see women lose these types of roles that allow them to be part of a productive economy.