"The over-spenders are us. We go for too many expensive tests that rarely make a difference to our lives. We get surgeries and take drugs for ailments that people used to just live with."
I think this is 100% true, but (and maybe I'm reading too much moralizing into your statement) I am not sure that we can "blame" them. We-the-patients indeed are over-spending, but it is because we actually cannot ascertain "expensive" or "makes a difference" or "how to ameliorate our ailments."
If a child goes to a candy store with no listed prices, and his parents tell him "we will buy you anything you want" and "did you know that gold-leaf macarons are very healthy?" and he snatches up a thousand dollars of treats, it is .... true... that he is the over-spender, and that his actions were the cause of the massive bill. But if we are trying to FIX the problem, we need to look at the system his parents created.
Well, yes, it's "us", but in medical school doctors are taught that they should do everything they can for a patient, and that they should not worry about cost. In fact, it may well be "unethical" to even know what something costs.
They are also given a somewhat optimistic view of exactly how much they can make things better.
And since they're the "experts", most people just go along with what they recommend.
I paid less than $500 for my last surgery 3 years ago. Insurance paid slightly over $150k. Physical therapy afterwards cost me $1000 and insurance paid about 5x that. I probably did twice as much paid PT as was cost effective. (I've done many times more PT on my own.) Here again, I would have done little or none if paying for it myself and in hindsight at least the first third of visits were easily worth paying full price myself. They made a huge difference in ways I could never accomplish on my own.
I would have never paid that much myself for surgery except in hindsight. It would have been worth it. This time.
This is not a criticism of you at all, because there's no way you could know - but those 2 numbers are the "amount you paid" and "the amount insurance said it paid; honest." That's very different than "what did it cost"?
"I would have never paid that much myself except in hindsight. "
Right! But how can you determine the answer to that cost-benefit analysis for yourself without knowing the actual cost - the cost, the amount of money that you would have been required to fork over to the surgeon - no more, no less - in order to convince him to do your surgery? We should not be surprised to see "over-spending" in a world where the customer cannot even predict what it costs!
What's the story you hear about the guy who goes to the fancy watch store, and wonders where all the price tags are? "If they don't tell you the price ahead of time, it's too much."
Actually, they gave me an estimate before surgery. Not sure what that means but it was $100k. I think the difference was the surgeon decided last minute to use the robotic assist. I didn't ask if that was what added to the cost.
I am a physician. Been one since 1979. The system rewards procedures and is financed by healthcare being delivered in “units” rather than outcomes. The HMO system with primary care gatekeepers was introduced to fix this and was crushed in the 1970’s by insurance companies, healthcare systems where administrators are paid exorbitant sums of money and are allowed to spend money on things like DEI initiatives rather than health care, and lobbyists and medical specialists who benefit from those procedures rather than delivering “health.”
Once a system relies heavily on 3rd-party payments, there is no perfect way to compensate physicians. Every system can be gamed. Delivering "health" can be gamed by selecting patients who do not present difficult problems. And as you point out, compensation by procedures encourages excessive use of procedures, up-coding, and other unhelpful behavior.
Which reinforces all the points I am trying to make, which is that the system is gamed towards spending money rather than being managed by rational entities. Healthcare spending should not be consumer driven to be efficient. Just because I have a headache and want an MRI is not rational. Physicians are taken out of the loop on both ends. Insurance companies make decisions based on cost savings and consumers make decisions on fear and convenience. Neither is “good medicine” or scientific.
HMOs got crushed by the public not liking them. They hated getting referrals and out of network and all the rest. There was no conspiracy to eliminate them.
Did they like the cost savings? Sure, maybe even enough to put up with things they don’t like…if they are the ones saving the money.
But they aren’t. Someone else is always paying most of the premiums and often the cost shares. In such an environment people are going to choose more care and convenience.
So I always go back to the people. Faced with a tradeoff they got third party payers to foot the bill.
You are certainly welcome to that opinion, but HMO’s got crushed by big money. You always go back to the people. I always go back to “follow the money.”
Don’t believe me. Read Alain Enthoven’s article in The Commonwealth Beacon, April 10, 2005 “The Rise and Fall of HMOs shows how a worthy idea went wrong.” The truth is that the system was “gamed” to enroll sick people in HMOs and keep healthy people in traditional plans. It’s just the facts. Those plans were torpedoed not by consumers, but by organizations that wanted to retain money and power. Then specialty physicians piled on and said “no PCP is going to be a gatekeeper that threatens my income.” Health systems started buying out doctors and then the medical profession became employees. End of story. Of course consumers were dissatisfied. They were buying into a corrupt system that promised them cost savings and a PCP. Instead they got no savings and no PCP, just siloed specialty care.
I'm not sure if I can fully accept the "better way, but crushed by greedy corporations" account.
If for-profit insurance companies were charging excessively high premiums in order to pump up those profits, wouldn't they be out-competed by mutual insurance companies and non-profits, which could presumably offer the same sort of services at lower prices? Wikipedia's article on Blue Cross Blue Shield tells us that BCBS Arizona, New York, and Wyoming are non-profts; BCBS Louisiana, Michigan, and Mississippi are mutuals. (This isn't an exhaustive list; I didn't follow all the links, nor did I check any insurance providers other than BCBS, so there're probably more NPs and mutuals.)
I have both HMOs and PPOs in my portfolio and it’s the complete opposite of what you say.
PPOs have the sicker members because they are willing to pay a premium to have access to a wider variety of providers and the convenience of not needing referrals.
HMOs are generally cheaper and healthier. They are also favored by the government (they get better stars scores and it’s easier to upcode at the PCP).
My employer health plan is the same story. A cheaper HMO and a more expensive PPO.
I am just quoting the Stanford professor of Medical Economics. Your experience is your experience. PPO’s didn’t even start until the 1980’s, long after the first HMO’s had been started and failed.
I suspect what you say is true except I doubt it explains much of the expenditure on healthcare. Same goes for what AK says on his comment here. Same goes for Forumposter's comment. We spend so much for healthcare mainly because more of our healthcare dollars go to end of life care and chronic conditions care.
More details:
1 We spend more at end of life because the patient and family want that here more than most other countries. It's the same reason we keep people on life support alive longer.
2 We spend more on chronic care because we have more people with lifestyle caused conditions and we are better at keeping them alive.
2a We spend less time and attention on avoiding lifestyle related chronic conditions. The extent to which this is the fault of the healthcare system is debatable.
2b We spend more time and effort on treating "big" conditions like cancer and heart failure. We have more success at this too but it's expensive.
A friend working in US had a dad in Canada with cancer who wouldn't get treatment for 9 months, which was a death sentence. Instead he brought his dad to US and they paid out of pocket with success. I've read of many similar situations.
3 Maybe this is the smallest reason but it should be on the list. We pay more for drugs and I'm almost as certain we pay more per worker hour for healthcare.
The healthcare sector doesn't have to compete for the customer's dollar. When employers made a Faustian bargain during the age of wage controls and latched onto "fringe" benefits as a means of attracting labor, the amount of stuff to spend healthcare dollars was small (think back to what a hospital looked like in WWII). That problem was hardened in cement when certain "fringe" benefits were designated for preferred payroll tax treatment. Medicare and Medicaid came along in the 60's and gave defined benefits to what at the time was a small demographic of the total population.
The entire sector benefits from having had the government say "here is money that can only be spent for this specific stuff". What would cinema look like if the government said: old people you can go to the movie theatre for free at anytime (or for a $1 copay); poor people, you can go to crappy B movies anytime you like for free; working people, you can go to any movie your employer says is okay and pay for using 10% of your wages instead of take home pay.
Economic competition doesn't just mean competing with other vendors in the same industrial segment. Competition means separating the customer from his/her hard earned dollar from the get go. The healthcare sector doesn't have to make its case against things like food, housing, entertainment, savings, education. The healthcare sector doesn't have to make its case to millions of individual customers, it merely has to make its case to cartels of predetermined consumers.
Healthcare, as a sector, is fat and lazy. Kinda like the population it serves.
The US is wealthy enough to have the luxury of spending a lot on health. Vendors want to tap the US market and most of the western world free-rides on the innovation of vendors tapping into the us market.
But... what we don't see is the lost opportunity of the advancements that MIGHT (likely??) would have happened in a truly free market where health had to compete for customer dollars rather than pre-allocated spend.
Might we have had home dialysis a decade sooner? Might telehealth scaled more quickly? How many other creative solutions (and efficiencies) were missed because healthcare industry just didn't have to?
Many like to say "healthcare is too important to leave to free market". Personally, I think just the opposite... it's too import NOT to leave it to free market innovators.
The Germans launched a V2 into space in 1944. US landed a man on moon in 1968. It took another 55 years for Elon Musk to give us a rocket returning to Earth and landing like it's out of the pages of Buck Rogers (1929). What are healthcare's missed opportunities cause they don't have to compete for customer dollars???
It does sort of seem like the formula, surprisingly to some of us, turned out to be "bread and colonoscopies". And in truth, so many of the things the medical sector does - or learns - are, in fact, "amazing".
I'm a natural Luddite and do not use modern medicine, but I have to admit - everybody I know really loves the care they seek and get. They love it more than all the other things ...
I don't get it. When I was a child, I didn't like going to the doctor, and I still find dealing with the medical profession to be an unpleasant experience, even if it is only an office visit without any procedures. Fortunately, I've had only a few very minor surgeries, nothing very invasive (inside the body cavity), but even these minor surgical procedures have knocked me out, and that was when I was much younger. I can't imagine enduring a more invasive procedure unless it was a matter of life and death, or essential to quality of life. The transgender thing is particularly puzzling. When I read about the horrific procedures people who 'identify' as the opposite sex endure, especially the 'bottom surgeries,' I can only conclude that these people must be mentally deranged. The phenomenon you describe of everybody you know loving the care they get also seems to me to be a mental illness, rooted in the belief that it is somehow prolonging their life or doing them some good. People still wearing masks or getting the latest Covid booster is another example. I'd rather buy a cookie.
It's true people grouse about having to go to the doctor (or have the health aide scheduled to come to them, or the PT or whatnot) - but they just keep lining up for more. I don't know anyone who reduces their doctoring as time passes.
And they don't love being kept in the hospital. For instance, my parents sometimes have gotten stuck there, because my father's blood pressure won't go down or something, so as to discharge him. I remember once Mother must have been in tears, making a scene, because someone finally let them go after midnight even though he hadn't been "cleared".
It becomes an obsession, perhaps - a sort of hobby - perhaps especially when your mind has too little else to think about.
Actually, now that I think about it, it's a little like a job.
Anyway, so much for the mind?body distinction. I guess that was pretty stupid anyway.
Or perhaps part of it is that we are in fact getting better medicine on the whole than Europeans are. If you reach 60 (I believe) the US has the best life expectancy in the world from then on.
Also, as I always emphasize when this issue comes up, the information gained from diagnostic and prognostic tests is valuable even when it doesn't lead to better health. At least people have a revealed preference for getting this information.
I have read that some conditions have much better survival rates in the US (heart disease, some cancers). The counter-argument would be that the US does more testing and detection, where lots of people with few symptoms wouldn't be counted as having the disease in other countries.
For illustration, consider a disease that has no treatment or cure, and is always fatal 6 years after it starts. If the US does lots of testing and detects cases 6 months after start, they'll have a 100% survival rate after 5 years. If Canada does less testing and only detects cases 2 years after start, they'll have a 0% 5 year survival rate. Even though the actual conditions of patients are the same in both countries.
What about the higher relative pay rates of healthcare professionals in the US vs those abroad? What about the administrative burden created by the 3rd Party payment system? Do these factors just pale in comparison to the overconsumption problem?
No, Baumol could account for higher absolute pay, but not higher relative pay. For that you need barriers to entry, and the US has them in spades. You can't practice medicine in the U S unless you've done a residency in the US, and the number of those is tightly controlled. Even highly qualified foreign doctors cannot practice here. There's a reason why medical tourism is thriving.
I'd argue both are true. We have higher wages for skilled workers throughout our economy, not just healthcare. Also, I'd bet our semi-skilled healthcare workers where entry barriers are low have higher wages too.
Also, also - while our median wage is higher, we have more with supersized wages so our average wage is even more divergent. This has nothing to do with supply restrictions.
Iirc, I read back in the 90s, from registered nurses on up, US was highest paid for industrial countries. And Nurse's Sides and Licensed Practical Nurses have had decent wage increases since then.
I hate when people observe a fact and define it as a "problem" without explaining precisely why it is a problem, and not a natural result of informed choices.
So, people observe that the US spends a larger percent of its GDP on health care than any other country, and they define this as "overspending." But the US healthcare system also gets much better results on many measures than other countries, and many of these results are tied directly to the "overspending."
US doctors, nurses, and medical technicians are paid more than their counterparts in other countries, but this attracts many of the smartest and most ambitious people to the medical field, which likely means we get better care, more research, and more new and effective treatments.
US medical facilities have and use more expensive imaging processes, but this often results in quicker and better diagnoses, which can save lives and alleviate suffering.
Surely, the US healthcare system has many problems; some of these could likely be improved by better policies. But I see no reason to think that reducing healthcare spending should be the primary objective.
Another thing I hate is people who claim a "crisis" where no crisis exists, in order to seize the rhetorical high ground and create a false urgency for action: the "homeless crisis," "opioid crisis," "climate crisis," etc.
Russ Roberts: "Right now, policy subsidizes demand while restraining supply--a recipe for high prices. People enjoying a subsidy don't notice. People who don't are brutalized. Better system: give people skin in the game for aspirin, routine care, etc, but cushion blow of catastrophic outcomes."
I think the most important issue is the lack of true pricing signals brought about by way too much third party control and then obfuscation of the price signal that "comprehensive" insurance coverage provides. Really no different than if auto insurers were forced to cover all potential car services. A great idea in theory: preventative maintenance of cars is a fundamental right of cars and will extend all their lives! Therefore, as part of our "social contract" with cars, oil changes should be covered and "free".
What do we think happens to the true price of oil changes in this scenario?
I was thinking of this in connection with a kindly family friend, 89 years of age though he was much more active than my father, who was his junior ...
He was advised by his doctor to get a "stent" procedure, which would prolong his life, I guess, or prevent stroke (? - I don't know anything medical, but of course the thought of stroke is fearful) or just make him healthier. The doctor said it was not urgent - he could do it in fall after he returned from his summer home. But as it was described as so routine - I'm not sure he was even to spend the night in hospital - he scheduled it for a couple days before he left.
And the device tore one of his elderly fragile vessels, and he died.
My parents heard that two others in their social orbit had died that month, during stent procedures.
Because of recent experience, with the essentially constant doctoring of my own parents, eager participants, eager to prolong life - I thought that it was interesting that we collectively should pay, finally, to get people killed in this way.
All of that previously described, and I also wouldn't discount the fact Americans are grossly obese, they have lousy diets and unhealthy habits, don't exercise enough, wildly increasing cannabis consumption, etc., etc. I live in Wuhan, PRC. There's no "health care system" here, but people pay serious attention to diet because they know there's no one coming to help them if they have a problem. The only lousy diets are the kids of "wealthy" people, meaning middle/upper middle class and the truly rich, which is still a small percentage of the population. "Dessert"...isn't really part of the Chinese diet.
Stu (see below) is on the right track, imo. Based on my decade plus leading provider and healthcare staffing firms, I'd list the following factors:
1. Obesity: Americans lead the world in BMI and nothing good comes of it.
2. Chronic Disease: A handful of diagnoses associated with the elderly drive a huge share of cost.
3. Medicare/Medicaid: A torrent of subsidy for >50% of the volume that pays quickly (by legislation) then disputes and sets off later.
4. Prices: 50% higher than other countries the last time I checked since even major employers have low bargaining power with the carrier oligopoly that prices off Medicare.
4a. Tax deductibility for both employees and patients.
4b. Physicians can't know the prices even if they wanted to, since company A likely has a different fee schedule than company B even with the same carrier.
4c. Monopolies (whether patents or licensure or school places) for training, drugs, devices, prescribing, teeth cleaning, etc.
4d. Fraud, waste, and abuse -- very real at every level from home health PTs over-serving under pay-per-visit to public company billing practices (e.g., buy a practice and instantly raise revenues by billing under the hospital's contract or bill separately to unbundle hospital charges -- with no value added)
5. Overserve & overcharge: Patients have had little incentive or knowledge to push-back or negotiate, although both are changing with employers passing more and more cost onto employees and Dr Google -- ask practices about their "frequent flyers" or elderly patients who are abundantly cautious, hypochondriacs, very sick, or all three.
6. Insurance that is not insurance but a group discount plan: We need to shift to insuring against heart attack or cancer, and paying out of pocket for check-ups and broken arms (Econ 101: finance a shock, adjust spending for a permanent change).
7. Malpractice lawyers and defensive medicine (10x the lawyer fees according to some).
The sole practitioner has been put out of business due to payer pressure, becoming an employee of the hospital system, which has a local monopoly thanks to Certificate of Need barriers to entry. So the rich get richer and many patients postpone or forego care -- hang onto your doctor! Healthcare is a cascade of agency and free rider problems, like everything else that is a "system," a word that indicates government is involved and messing things up.
I'd note that the patient pays elective markets (e.g., lasik, cosmetic surgery) tend to work just fine.
Here's an unpopular opinion: we don't "over-spend" on health care. To the extent we do, it's one of the few things we are right to spend on.
We have it driven into our head that De Gustibus Non Est Disputandum. Nobody bats an eyelash if someone buys an outlandish (to our tastes) car or house or piece of jewelry.
We feel quite comfortable saying...
> The over-spenders are us. We go for too many expensive tests that rarely make a difference to our lives. We get surgeries and take drugs for ailments that people used to just live with.
But... life matters. Additional life, and improved quality of life is supremely valuable. That's exactly why people are willing to spend on high-risk, low reward stuff.
As a society, we should favor that, because we shouldn't be sociopaths. Maybe we don't value someone else's grandpa living an extra year in relative comfort, but most of us value our own. And most of us will get old. Promoting the best, longest lives for everyone is about the most basic good thing that a society can do.
Now, you might say that the "overspending" viewpoint is only there because of third party payments. We're spending on someone else's longer life. And that's true to an extent, but it's inconsistent to me that people are so concerned about overspending on health care when they show little to no concern about similar subsidization of education or housing. But the marginal benefits of more education or a bigger house are just as private and often even more apocryphal than that of extra life and health. But just as costly.
Yet it's perfectly acceptable to say we spend "too much" on keeping people alive and healthy. And it gets you the stink-eye to say we shouldn't spend so much on education or give tax breaks for McMansions.
I feel similar concern for education and housing. Perhaps two reasons for the willingness to complain about "overspending" in "health care" is that it is such a big part of people's spending and that it just keeps going up and up.
This issue will not likely be resolved without a crisis, so I say prepare your best ideas on this topic; get them sufficiently ready to implement, and then wait for the crisis to emerge. If and when the opportunity emerges, “press implement.” This way we won’t have to waste further energy debating this one.
What other issues shall we add to this “wait-for-crisis” strategy? Higher education, public K-12…
A huge issue, almost always undiscussed, is so few doctors, because so few Medical Schools. We need more doctors more than we need more lawyers.
There should be more info available on cost breakdowns for care: doctor hours, nurse hours, tech hours (MRI+), admin hours; capital costs & operating costs, costs for each procedure.
“Little benefit” is doing too much work, too vaguely. How much to pay for a 40% chance of some life extension? 20%, 10%, 5%, 1%? We pay because we want to feel “we’ve done all we can”? Especially at end of life.
I recall a $180,000 / month medical bill for 18 months for Ted Kennedy’s brain tumor. Was that too much? For his family? For a median wage American? Maybe save $2 million and die after 4-8 months—as decided by a Death Panel. The accurate but very uncomfortable truth about saving money, the person about to die without treatment does die sooner, tho even with expensive treatment, also usually dies within 1 or 2 years. Especially at over 60, more so over 70, and much more so over 80.
Rich folk pay more for potential benefits, and more Americans are rich.
"The over-spenders are us. We go for too many expensive tests that rarely make a difference to our lives. We get surgeries and take drugs for ailments that people used to just live with."
I think this is 100% true, but (and maybe I'm reading too much moralizing into your statement) I am not sure that we can "blame" them. We-the-patients indeed are over-spending, but it is because we actually cannot ascertain "expensive" or "makes a difference" or "how to ameliorate our ailments."
If a child goes to a candy store with no listed prices, and his parents tell him "we will buy you anything you want" and "did you know that gold-leaf macarons are very healthy?" and he snatches up a thousand dollars of treats, it is .... true... that he is the over-spender, and that his actions were the cause of the massive bill. But if we are trying to FIX the problem, we need to look at the system his parents created.
Well, yes, it's "us", but in medical school doctors are taught that they should do everything they can for a patient, and that they should not worry about cost. In fact, it may well be "unethical" to even know what something costs.
They are also given a somewhat optimistic view of exactly how much they can make things better.
And since they're the "experts", most people just go along with what they recommend.
Definitely also a factor.
I've had at least five surgeries that were completely elective.
Two seemed unsuccessful but I don't know how I would have faired without them.
Two seemed successful but again, I don't know how I would have faired without them.
The last one was successful beyond my wildest expectations despite being in a prior state I surely could have lived well with.
We don't know this going in. I've had lesser treatment for many orthopedic issues and I'm constantly surprised by when it does and doesn't help.
Certainly, that's natural uncertainty. Medicine is not a precise science.
But now, an additional question for you: what did those surgeries cost?
I paid less than $500 for my last surgery 3 years ago. Insurance paid slightly over $150k. Physical therapy afterwards cost me $1000 and insurance paid about 5x that. I probably did twice as much paid PT as was cost effective. (I've done many times more PT on my own.) Here again, I would have done little or none if paying for it myself and in hindsight at least the first third of visits were easily worth paying full price myself. They made a huge difference in ways I could never accomplish on my own.
I would have never paid that much myself for surgery except in hindsight. It would have been worth it. This time.
This is not a criticism of you at all, because there's no way you could know - but those 2 numbers are the "amount you paid" and "the amount insurance said it paid; honest." That's very different than "what did it cost"?
"I would have never paid that much myself except in hindsight. "
Right! But how can you determine the answer to that cost-benefit analysis for yourself without knowing the actual cost - the cost, the amount of money that you would have been required to fork over to the surgeon - no more, no less - in order to convince him to do your surgery? We should not be surprised to see "over-spending" in a world where the customer cannot even predict what it costs!
What's the story you hear about the guy who goes to the fancy watch store, and wonders where all the price tags are? "If they don't tell you the price ahead of time, it's too much."
Actually, they gave me an estimate before surgery. Not sure what that means but it was $100k. I think the difference was the surgeon decided last minute to use the robotic assist. I didn't ask if that was what added to the cost.
I am a physician. Been one since 1979. The system rewards procedures and is financed by healthcare being delivered in “units” rather than outcomes. The HMO system with primary care gatekeepers was introduced to fix this and was crushed in the 1970’s by insurance companies, healthcare systems where administrators are paid exorbitant sums of money and are allowed to spend money on things like DEI initiatives rather than health care, and lobbyists and medical specialists who benefit from those procedures rather than delivering “health.”
Once a system relies heavily on 3rd-party payments, there is no perfect way to compensate physicians. Every system can be gamed. Delivering "health" can be gamed by selecting patients who do not present difficult problems. And as you point out, compensation by procedures encourages excessive use of procedures, up-coding, and other unhelpful behavior.
Which reinforces all the points I am trying to make, which is that the system is gamed towards spending money rather than being managed by rational entities. Healthcare spending should not be consumer driven to be efficient. Just because I have a headache and want an MRI is not rational. Physicians are taken out of the loop on both ends. Insurance companies make decisions based on cost savings and consumers make decisions on fear and convenience. Neither is “good medicine” or scientific.
Yes...I remember when HMO's were going to fix everything. Your description of them perfectly matches my experience.
HMOs got crushed by the public not liking them. They hated getting referrals and out of network and all the rest. There was no conspiracy to eliminate them.
Did they like the cost savings? Sure, maybe even enough to put up with things they don’t like…if they are the ones saving the money.
But they aren’t. Someone else is always paying most of the premiums and often the cost shares. In such an environment people are going to choose more care and convenience.
So I always go back to the people. Faced with a tradeoff they got third party payers to foot the bill.
You are certainly welcome to that opinion, but HMO’s got crushed by big money. You always go back to the people. I always go back to “follow the money.”
Don’t believe me. Read Alain Enthoven’s article in The Commonwealth Beacon, April 10, 2005 “The Rise and Fall of HMOs shows how a worthy idea went wrong.” The truth is that the system was “gamed” to enroll sick people in HMOs and keep healthy people in traditional plans. It’s just the facts. Those plans were torpedoed not by consumers, but by organizations that wanted to retain money and power. Then specialty physicians piled on and said “no PCP is going to be a gatekeeper that threatens my income.” Health systems started buying out doctors and then the medical profession became employees. End of story. Of course consumers were dissatisfied. They were buying into a corrupt system that promised them cost savings and a PCP. Instead they got no savings and no PCP, just siloed specialty care.
I'm not sure if I can fully accept the "better way, but crushed by greedy corporations" account.
If for-profit insurance companies were charging excessively high premiums in order to pump up those profits, wouldn't they be out-competed by mutual insurance companies and non-profits, which could presumably offer the same sort of services at lower prices? Wikipedia's article on Blue Cross Blue Shield tells us that BCBS Arizona, New York, and Wyoming are non-profts; BCBS Louisiana, Michigan, and Mississippi are mutuals. (This isn't an exhaustive list; I didn't follow all the links, nor did I check any insurance providers other than BCBS, so there're probably more NPs and mutuals.)
I have both HMOs and PPOs in my portfolio and it’s the complete opposite of what you say.
PPOs have the sicker members because they are willing to pay a premium to have access to a wider variety of providers and the convenience of not needing referrals.
HMOs are generally cheaper and healthier. They are also favored by the government (they get better stars scores and it’s easier to upcode at the PCP).
My employer health plan is the same story. A cheaper HMO and a more expensive PPO.
I am just quoting the Stanford professor of Medical Economics. Your experience is your experience. PPO’s didn’t even start until the 1980’s, long after the first HMO’s had been started and failed.
HMOs big heyday was the 1990s.
I suspect what you say is true except I doubt it explains much of the expenditure on healthcare. Same goes for what AK says on his comment here. Same goes for Forumposter's comment. We spend so much for healthcare mainly because more of our healthcare dollars go to end of life care and chronic conditions care.
More details:
1 We spend more at end of life because the patient and family want that here more than most other countries. It's the same reason we keep people on life support alive longer.
2 We spend more on chronic care because we have more people with lifestyle caused conditions and we are better at keeping them alive.
2a We spend less time and attention on avoiding lifestyle related chronic conditions. The extent to which this is the fault of the healthcare system is debatable.
2b We spend more time and effort on treating "big" conditions like cancer and heart failure. We have more success at this too but it's expensive.
A friend working in US had a dad in Canada with cancer who wouldn't get treatment for 9 months, which was a death sentence. Instead he brought his dad to US and they paid out of pocket with success. I've read of many similar situations.
3 Maybe this is the smallest reason but it should be on the list. We pay more for drugs and I'm almost as certain we pay more per worker hour for healthcare.
The healthcare sector doesn't have to compete for the customer's dollar. When employers made a Faustian bargain during the age of wage controls and latched onto "fringe" benefits as a means of attracting labor, the amount of stuff to spend healthcare dollars was small (think back to what a hospital looked like in WWII). That problem was hardened in cement when certain "fringe" benefits were designated for preferred payroll tax treatment. Medicare and Medicaid came along in the 60's and gave defined benefits to what at the time was a small demographic of the total population.
The entire sector benefits from having had the government say "here is money that can only be spent for this specific stuff". What would cinema look like if the government said: old people you can go to the movie theatre for free at anytime (or for a $1 copay); poor people, you can go to crappy B movies anytime you like for free; working people, you can go to any movie your employer says is okay and pay for using 10% of your wages instead of take home pay.
Economic competition doesn't just mean competing with other vendors in the same industrial segment. Competition means separating the customer from his/her hard earned dollar from the get go. The healthcare sector doesn't have to make its case against things like food, housing, entertainment, savings, education. The healthcare sector doesn't have to make its case to millions of individual customers, it merely has to make its case to cartels of predetermined consumers.
Healthcare, as a sector, is fat and lazy. Kinda like the population it serves.
The US is wealthy enough to have the luxury of spending a lot on health. Vendors want to tap the US market and most of the western world free-rides on the innovation of vendors tapping into the us market.
But... what we don't see is the lost opportunity of the advancements that MIGHT (likely??) would have happened in a truly free market where health had to compete for customer dollars rather than pre-allocated spend.
Might we have had home dialysis a decade sooner? Might telehealth scaled more quickly? How many other creative solutions (and efficiencies) were missed because healthcare industry just didn't have to?
Many like to say "healthcare is too important to leave to free market". Personally, I think just the opposite... it's too import NOT to leave it to free market innovators.
The Germans launched a V2 into space in 1944. US landed a man on moon in 1968. It took another 55 years for Elon Musk to give us a rocket returning to Earth and landing like it's out of the pages of Buck Rogers (1929). What are healthcare's missed opportunities cause they don't have to compete for customer dollars???
It does sort of seem like the formula, surprisingly to some of us, turned out to be "bread and colonoscopies". And in truth, so many of the things the medical sector does - or learns - are, in fact, "amazing".
I'm a natural Luddite and do not use modern medicine, but I have to admit - everybody I know really loves the care they seek and get. They love it more than all the other things ...
I don't get it. When I was a child, I didn't like going to the doctor, and I still find dealing with the medical profession to be an unpleasant experience, even if it is only an office visit without any procedures. Fortunately, I've had only a few very minor surgeries, nothing very invasive (inside the body cavity), but even these minor surgical procedures have knocked me out, and that was when I was much younger. I can't imagine enduring a more invasive procedure unless it was a matter of life and death, or essential to quality of life. The transgender thing is particularly puzzling. When I read about the horrific procedures people who 'identify' as the opposite sex endure, especially the 'bottom surgeries,' I can only conclude that these people must be mentally deranged. The phenomenon you describe of everybody you know loving the care they get also seems to me to be a mental illness, rooted in the belief that it is somehow prolonging their life or doing them some good. People still wearing masks or getting the latest Covid booster is another example. I'd rather buy a cookie.
It's true people grouse about having to go to the doctor (or have the health aide scheduled to come to them, or the PT or whatnot) - but they just keep lining up for more. I don't know anyone who reduces their doctoring as time passes.
And they don't love being kept in the hospital. For instance, my parents sometimes have gotten stuck there, because my father's blood pressure won't go down or something, so as to discharge him. I remember once Mother must have been in tears, making a scene, because someone finally let them go after midnight even though he hadn't been "cleared".
It becomes an obsession, perhaps - a sort of hobby - perhaps especially when your mind has too little else to think about.
Actually, now that I think about it, it's a little like a job.
Anyway, so much for the mind?body distinction. I guess that was pretty stupid anyway.
Or perhaps part of it is that we are in fact getting better medicine on the whole than Europeans are. If you reach 60 (I believe) the US has the best life expectancy in the world from then on.
Also, as I always emphasize when this issue comes up, the information gained from diagnostic and prognostic tests is valuable even when it doesn't lead to better health. At least people have a revealed preference for getting this information.
"If you reach 60 (I believe) the US has the best life expectancy in the world from then on."
Do you have a source for that? The WHO says we rank kind of average, behind most of Asia and Europe, but ahead of China and the United Arab Emirates.
https://www.who.int/data/gho/data/indicators/indicator-details/GHO/life-expectancy-at-age-60-(years)
Maybe it's controlling for some things, or it's age 65 or something. It came up in a recent podcast Peter Attia did with a health insurance exec.
I have read that some conditions have much better survival rates in the US (heart disease, some cancers). The counter-argument would be that the US does more testing and detection, where lots of people with few symptoms wouldn't be counted as having the disease in other countries.
For illustration, consider a disease that has no treatment or cure, and is always fatal 6 years after it starts. If the US does lots of testing and detects cases 6 months after start, they'll have a 100% survival rate after 5 years. If Canada does less testing and only detects cases 2 years after start, they'll have a 0% 5 year survival rate. Even though the actual conditions of patients are the same in both countries.
Pogo was right.
What about the higher relative pay rates of healthcare professionals in the US vs those abroad? What about the administrative burden created by the 3rd Party payment system? Do these factors just pale in comparison to the overconsumption problem?
The higher pay would probably exist anyway to some extent due to Baumol cost disease.
No, Baumol could account for higher absolute pay, but not higher relative pay. For that you need barriers to entry, and the US has them in spades. You can't practice medicine in the U S unless you've done a residency in the US, and the number of those is tightly controlled. Even highly qualified foreign doctors cannot practice here. There's a reason why medical tourism is thriving.
I'd argue both are true. We have higher wages for skilled workers throughout our economy, not just healthcare. Also, I'd bet our semi-skilled healthcare workers where entry barriers are low have higher wages too.
Also, also - while our median wage is higher, we have more with supersized wages so our average wage is even more divergent. This has nothing to do with supply restrictions.
Iirc, I read back in the 90s, from registered nurses on up, US was highest paid for industrial countries. And Nurse's Sides and Licensed Practical Nurses have had decent wage increases since then.
Sounds right. I bet it's true for the people on the administration side too.
Thanks, that makes sense.
I hate when people observe a fact and define it as a "problem" without explaining precisely why it is a problem, and not a natural result of informed choices.
So, people observe that the US spends a larger percent of its GDP on health care than any other country, and they define this as "overspending." But the US healthcare system also gets much better results on many measures than other countries, and many of these results are tied directly to the "overspending."
US doctors, nurses, and medical technicians are paid more than their counterparts in other countries, but this attracts many of the smartest and most ambitious people to the medical field, which likely means we get better care, more research, and more new and effective treatments.
US medical facilities have and use more expensive imaging processes, but this often results in quicker and better diagnoses, which can save lives and alleviate suffering.
Surely, the US healthcare system has many problems; some of these could likely be improved by better policies. But I see no reason to think that reducing healthcare spending should be the primary objective.
Another thing I hate is people who claim a "crisis" where no crisis exists, in order to seize the rhetorical high ground and create a false urgency for action: the "homeless crisis," "opioid crisis," "climate crisis," etc.
Moral hazard - build it, insurance, and they will come.
Russ Roberts: "Right now, policy subsidizes demand while restraining supply--a recipe for high prices. People enjoying a subsidy don't notice. People who don't are brutalized. Better system: give people skin in the game for aspirin, routine care, etc, but cushion blow of catastrophic outcomes."
https://x.com/EconTalker/status/1191030612699885568
https://www.slowboring.com/p/a-bold-plan-to-fix-health-care
I think the most important issue is the lack of true pricing signals brought about by way too much third party control and then obfuscation of the price signal that "comprehensive" insurance coverage provides. Really no different than if auto insurers were forced to cover all potential car services. A great idea in theory: preventative maintenance of cars is a fundamental right of cars and will extend all their lives! Therefore, as part of our "social contract" with cars, oil changes should be covered and "free".
What do we think happens to the true price of oil changes in this scenario?
I was thinking of this in connection with a kindly family friend, 89 years of age though he was much more active than my father, who was his junior ...
He was advised by his doctor to get a "stent" procedure, which would prolong his life, I guess, or prevent stroke (? - I don't know anything medical, but of course the thought of stroke is fearful) or just make him healthier. The doctor said it was not urgent - he could do it in fall after he returned from his summer home. But as it was described as so routine - I'm not sure he was even to spend the night in hospital - he scheduled it for a couple days before he left.
And the device tore one of his elderly fragile vessels, and he died.
My parents heard that two others in their social orbit had died that month, during stent procedures.
Because of recent experience, with the essentially constant doctoring of my own parents, eager participants, eager to prolong life - I thought that it was interesting that we collectively should pay, finally, to get people killed in this way.
All of that previously described, and I also wouldn't discount the fact Americans are grossly obese, they have lousy diets and unhealthy habits, don't exercise enough, wildly increasing cannabis consumption, etc., etc. I live in Wuhan, PRC. There's no "health care system" here, but people pay serious attention to diet because they know there's no one coming to help them if they have a problem. The only lousy diets are the kids of "wealthy" people, meaning middle/upper middle class and the truly rich, which is still a small percentage of the population. "Dessert"...isn't really part of the Chinese diet.
Stu (see below) is on the right track, imo. Based on my decade plus leading provider and healthcare staffing firms, I'd list the following factors:
1. Obesity: Americans lead the world in BMI and nothing good comes of it.
2. Chronic Disease: A handful of diagnoses associated with the elderly drive a huge share of cost.
3. Medicare/Medicaid: A torrent of subsidy for >50% of the volume that pays quickly (by legislation) then disputes and sets off later.
4. Prices: 50% higher than other countries the last time I checked since even major employers have low bargaining power with the carrier oligopoly that prices off Medicare.
4a. Tax deductibility for both employees and patients.
4b. Physicians can't know the prices even if they wanted to, since company A likely has a different fee schedule than company B even with the same carrier.
4c. Monopolies (whether patents or licensure or school places) for training, drugs, devices, prescribing, teeth cleaning, etc.
4d. Fraud, waste, and abuse -- very real at every level from home health PTs over-serving under pay-per-visit to public company billing practices (e.g., buy a practice and instantly raise revenues by billing under the hospital's contract or bill separately to unbundle hospital charges -- with no value added)
5. Overserve & overcharge: Patients have had little incentive or knowledge to push-back or negotiate, although both are changing with employers passing more and more cost onto employees and Dr Google -- ask practices about their "frequent flyers" or elderly patients who are abundantly cautious, hypochondriacs, very sick, or all three.
6. Insurance that is not insurance but a group discount plan: We need to shift to insuring against heart attack or cancer, and paying out of pocket for check-ups and broken arms (Econ 101: finance a shock, adjust spending for a permanent change).
7. Malpractice lawyers and defensive medicine (10x the lawyer fees according to some).
The sole practitioner has been put out of business due to payer pressure, becoming an employee of the hospital system, which has a local monopoly thanks to Certificate of Need barriers to entry. So the rich get richer and many patients postpone or forego care -- hang onto your doctor! Healthcare is a cascade of agency and free rider problems, like everything else that is a "system," a word that indicates government is involved and messing things up.
I'd note that the patient pays elective markets (e.g., lasik, cosmetic surgery) tend to work just fine.
Here's an unpopular opinion: we don't "over-spend" on health care. To the extent we do, it's one of the few things we are right to spend on.
We have it driven into our head that De Gustibus Non Est Disputandum. Nobody bats an eyelash if someone buys an outlandish (to our tastes) car or house or piece of jewelry.
We feel quite comfortable saying...
> The over-spenders are us. We go for too many expensive tests that rarely make a difference to our lives. We get surgeries and take drugs for ailments that people used to just live with.
But... life matters. Additional life, and improved quality of life is supremely valuable. That's exactly why people are willing to spend on high-risk, low reward stuff.
As a society, we should favor that, because we shouldn't be sociopaths. Maybe we don't value someone else's grandpa living an extra year in relative comfort, but most of us value our own. And most of us will get old. Promoting the best, longest lives for everyone is about the most basic good thing that a society can do.
Now, you might say that the "overspending" viewpoint is only there because of third party payments. We're spending on someone else's longer life. And that's true to an extent, but it's inconsistent to me that people are so concerned about overspending on health care when they show little to no concern about similar subsidization of education or housing. But the marginal benefits of more education or a bigger house are just as private and often even more apocryphal than that of extra life and health. But just as costly.
Yet it's perfectly acceptable to say we spend "too much" on keeping people alive and healthy. And it gets you the stink-eye to say we shouldn't spend so much on education or give tax breaks for McMansions.
I feel similar concern for education and housing. Perhaps two reasons for the willingness to complain about "overspending" in "health care" is that it is such a big part of people's spending and that it just keeps going up and up.
This issue will not likely be resolved without a crisis, so I say prepare your best ideas on this topic; get them sufficiently ready to implement, and then wait for the crisis to emerge. If and when the opportunity emerges, “press implement.” This way we won’t have to waste further energy debating this one.
What other issues shall we add to this “wait-for-crisis” strategy? Higher education, public K-12…
https://substack.com/profile/39148689-scott-gibb/note/c-81897782
A huge issue, almost always undiscussed, is so few doctors, because so few Medical Schools. We need more doctors more than we need more lawyers.
There should be more info available on cost breakdowns for care: doctor hours, nurse hours, tech hours (MRI+), admin hours; capital costs & operating costs, costs for each procedure.
“Little benefit” is doing too much work, too vaguely. How much to pay for a 40% chance of some life extension? 20%, 10%, 5%, 1%? We pay because we want to feel “we’ve done all we can”? Especially at end of life.
I recall a $180,000 / month medical bill for 18 months for Ted Kennedy’s brain tumor. Was that too much? For his family? For a median wage American? Maybe save $2 million and die after 4-8 months—as decided by a Death Panel. The accurate but very uncomfortable truth about saving money, the person about to die without treatment does die sooner, tho even with expensive treatment, also usually dies within 1 or 2 years. Especially at over 60, more so over 70, and much more so over 80.
Rich folk pay more for potential benefits, and more Americans are rich.