Warren Buffett says health care costs are a bigger problem than corporate taxes | Hacker News Reader

Warren Buffett says health care costs are a bigger problem than corporate taxes

nytimes.com

249 pointswojt_eu336 comments

I’m not American, but I’ve been hearing about your health system for a several years. Ironically, I know more about it than my own country’s (Ireland).

Several years ago, there seemed to be a lot of talk about how much The US spends (private & public) per capita on health. It’s a lot more than everywhere else. This was usually presented in the context of the health care “regime” A UK-esque system, a Swiss-like system, etc.

Lately, that comparison seems to come up less. Obama-care, Trump-care or Bernie-care would mostly deal with who pays & how, not how much.

The “who pays” question is a favourite ideological one so politicians and commentators are comfortable with it. But, I think the “how much” question is probably the more important one, and the harder one to solve. If the US could get costs down to average European rates, then I’m sure a workable system could be found within the confines of most ideological frameworks.

The problem is that getting costs down is almost impossible. Costs are salaries of doctors & nurses, a giant pharmaceutical industry, thousands of radiologists, ultrasound technicians, the machines they use (far more frequently than europeans)…

Getting costs down to EU levels would be mean the medical industry shrinks like manufacturing shrunk two generations ago.

I don’t have a solution to suggest, but I do suggest toning down the ideological discussion. The problem is more of a technical one.

Is it technical? There is a reason the US is unique in the world in both its unsocialized healthcare and in its costs. While socialized medicine now may not reverse the out of control spending, we can observe that the lack of it was the most likely cause. In the semi-private market of American healthcare that has been around since the 70s, the incentives structure has been absurdly broken for so long it should be no surprise you pay more for mediocre results.

At this point though, going with the known working solution sooner rather than later is the technically most plausible way to stop the cost expansion. It is exactly like people debating about national debt - you can't complain or argue about how to pay it off until you stop adding to it every year, often with an increasing deficit (which is how republican administrations for the last 30 years have governed).

It is crazy to argue that in the moment your house is on fire to try this untested strategy of using giant fans to blow the fire out that nobody else has done versus going with the tried and true use a fire truck to extinguish the blaze. Experiment after everything isn't on fire.

The problem isn't necessarily that it's a semi-private market, it's that for the vast majority of people it's tied to their employer.

The only for most Americans to have a choice in their health insurance is when they get to pick between the plans from either husband's or the wife's employers.

The biggest disappointment of the Republican alternative to Obamacare was not coming up with a way to sever that tie.

> disappointment of the Republican alternative to Obamacare was not coming up with a way to sever that tie.

Since that tie is also maintained by large amounts of political donations, it's going to be a hard one to break.

But tying it to an employer allows for group rate bargaining with the insurance company. I'm no expert in insurance, but I imagine there's very few instances where an individual will be able to negotiate a better rate for comparable coverage than they would get as part of a group.

Sure it cuts down on individual choice, but it should theoretically be the most cost efficient method, both for the employees and the insurance company.

It's inefficient in the first place that groups are limited to employees within a given employer instead of entire insurance customer bases or broad product based policy groups. It is very much not a cost efficiency to introduce employer sub groupings of customers.

Employer-based plans typically have lower premiums because they are, by definition, groups of working-age and (in most cases) working people. They are younger and less sick, so insurance costs are lower. (Dependents are typically more expensive.) This is the reason that companies, once they reach a sufficient size, self-insure, because they are carving out their younger and healthier population from the broader population. Plus, there are savings gained from administrative costs as well.

Selection of plans or providers is not the problem, especially with the current popularity of PPO plans.

I have a really hard time believing that somehow companies self-managing healthcare administration is more efficient than a large group consisting of the entirety of an insurers customers let alone vs. nations with universal healthcare or even ones with single payer private healthcare. And that doesn't even address the many small businesses which need to pay for "individual" plans as if there weren't larger groups with which to distribute the risk.

Even the marketing act of splitting up all these groups up as you describe is a huge waste. Now you have to shop the differences, the companies have to explain the differences, and everyone (insurance co, health provider, patients) gets to track multiple different groups with different rules. It's all a waste compared to fewer larger distributed risk pools - which is the whole point of insurance.

High marginal tax rates incentivizes employers to offer health care benefits instead of salary. This is a main reason why health care has been so closely tied to insurance. Either tax the benefits at the marginal rate, or reduce the marginal rate to liberate health care from employment.

By technical I don't mean unrelated to the question of who pays. It's certainly related. But, I think it's a mistake to spend too much time on the macro-level "medical care as a right" or "free markets."

Most medical markets (including the US') have large free market & "social" elements. I don't think moving one way or another along that axis would move the needle in a predictable way. That would be decided by the more detailed points. That's what I mean by technical

Amen! I tend to be more Libertarian than either of the 2 major parties, but I would gladly pay personally for other people's health care if it was actually being done rationally. But I've had major problems every time I've seen a doctor my entire adult life, all related to the complexity of the billing, and it got to the point where my biggest health risk was the stress of fighting it. Go for an annual physical: $1200 bill for 2 physicals, blood tests I never got the results for, and a test they never performed. Not covered by insurance because the doctor's "wellness check up" wasn't the same as the insurance company's "annual physical". Time to resolve: 8 months. Resolution: I paid because the lawyer was going to be more expensive. That's not a system I'm willing to pay for, and it's got nothing to do with whether it's my social obligation or not.

Yes it seems the complexity of billing still has something to do with Who Pays.

I had a similar issue where I was billed for a physical that my insurance provider would not pay. My wife suggested I have the Dr. office re-code the bill. Not sure what that is but I contacted the Dr. office and explained that it was not a wellness check up but an annual physical that my insurance should cover. After arguing for about 10 minutes they finally agreed to re-submit to insurance under that code... and it ended up being covered by insurance after all.

Now, imagine how much is being lost by most people having to go through that, most of whom aren't perceptive enough to notice this...

The complexity of billing is strongly intertwined with who pays and how, and adding the third-party of your employer, who actually selects the health insurance company for many of us adds yet another layer on top of the already inefficient setup.

And that's what swings me to single-payer, despite my other political leanings. The incentives system is just so screwed up. Consolidating is would make solving the remaining problems so much simpler.

Healthcare costs have ballooned for much the same reason as university tuition. There are 2 university administrators for every professor vs 10 hospital administrators for every doctor.

http://www.chronicle.com/interactives/administrative_bloat https://hbr.org/2013/09/the-downside-of-health-care-job-grow...

And most of the people in the Army don't have a rifle in their hands, and most of the people at Google don't write software. By itself those ratios don't tell you anything.

The ratio itself isn't the problem, it's the assertion that we need a growing amount of administrative vs. procedural employees. We can talk in hand wavy abstractions all day long, but for every additional person you have to pay who isn't _writing software_, you need to now pay that much more for your marginal cost of obtaining the software. In almost every other modern domain I can think of as well, efficiency is moving in the other direction. (I think, if I'm trying to be formal here, some aspects of this would seem to be described in 'Baumol's cost disease')

If we're talking anecdotes, from what I've seen of administration in healthcare and military (family is in that business) and at bigCo (my business) we could likely handle a far more lean ratio of knowledge to support workers, but that often goes against leadership incentives/risk tolerance for less conventional strategic decisions. (although I think we're seeing vestiges in this through the pushes for e.g. devops and dev/test merges)

In the Army, yes. But "every Marine is a rifleman".

To state the data you've cited in another way, there are 10 non-clinical workers for every 7 clinical roles. I'm guessing you don't personally know anyone in a healthcare administrative role, but these people are certainly not sitting around all day looking for something to do. They are hiring so many of them because the arcane administerial requirements of our healthcare system are only growing.

Good points but important to point out that driving down costs may not be a net negative. From Buffett's comments in the video he seems to be indicating that business are more likely to make investment and hiring decisions on the basis of high and ever-increasing health coverage costs than a change in corporate tax.

Capping or reducing healthcare cost as a % of GDP may help many other sectors to expand. On this basis politicians should first try to get the support of corporations to reduce their insurance costs, and try to change the argument - sustainable healthcare for all. This kind of corporate backing would counter the inevitable lobbying of pharma/medical corporations who will put their resources into countering any legislation that reduces their profit margins.

The problem is that healthcare is more concentrated which always helps with lobbying efforts.

Pharmaceuticals are 5 large companies. The rest of the economy is 500. So let's imagine there is a bill that would reduce the cost of drugs by 50 billion dollars. Each non drug company would stand to save 100 million but each pharmaceutical company stands to lose 10 billion. This is a classic coordination problem, and free riding dictates the pharmaceuticals win everytime.

True. I think that if Buffett wanted to address this problem his best option would be to fund an entity that could lobby on this issue and match dollar-for-dollar pharmaceutical company donations for house reps and senators that were willing to push to reduce the cost of healthcare.

Tackling healthcare is one 'big issue' that could have a huge effect on the US economy and living standards. Seems a worthy 'legacy' project for Buffett to finance.

The Swiss spend about as much as the USA does on health care (as a percent of GDP) and have a similar mandated health insurance system, the main difference being that employers aren't allowed to provide health insurance as a benefit do there are no group policies (everyone is in the individual policy market).

The Swiss government spends about the same per head as the US government (and partly that's a currency problem).

However, US private spending is much higher, so the total cost of healthcare is higher.

The OECD numbers for 2013 put US per capita spending at $9,086 compared with Swiss spending of $6,325. The OECD median is $3,661.

It would be better to compare the USA with Canada, which has a universal healthcare system at a lower cost to the state ($3,974 vs $4,197).

I stand corrected, thanks! I actually liked the Swiss system when I was a part of it, even though I was a bit mad for having to pay for health insurance out of pocket at the beginning.

Switzerland also controls the max price of drugs as part of their gov't approval process.

"Drugs must be effective, cost-effective and appropriate to be listed in the positive drug list (SL/Spezialitätenliste). The federal government sets the maximal allowable public price for drugs in the SL."

https://www.ispor.org/HTARoadMaps/SwitzerlandPH.asp

It is also the most expensive of the european OECD nations...

A big problem is the U.S. is the level of profit enjoyed at the top tiers of the healthcare supplier verticals.

Which either demonstrates everything that is right or everything that is wrong with the world's leading free-market capitalist economy...

I echoed this idea in a comment yesterday.

The medical industry is the only industry with a broad anti-trust exemption. What this means is that they do not have to publish prices like all other industries.

How can one expect to control costs if you cannot even know how much things cost?

Removing this anti-trust exemption and allowing the public to see prices for the common procedures would be a good start.

> tmaly 10 minutes ago [-]

I echoed this idea in a comment yesterday. The medical industry is the only industry with a broad anti-trust exemption. What this means is that they do not have to publish prices like all other industries.

Could you elaborate on this? I don't see what publishing prices has to do with anti-trust, and certainly I have encountered "call for prices" elsewhere.

I don't know about the anti-trust aspect, but the situation in medicine goes far beyond "call for prices." It's often impossible, no matter what you do, to find out what a procedure will cost. Billing systems are so complicated that the hospitals themselves barely understand it, and the only way they can find the cost for many things is to go ahead and do it and see how it comes out.

They provider may not even be allowed to tell you due to contracts with insurance companies.

This kind of thing is outright criminal. We need transparent pricing regulation!

Would be hard to enforce legislatively, as you're essentially forcing private companies to disclose the previously confidential pricing agreements between them and insurance companies.

What will end up happening is the equivalent of MSRP in car sales - here's the list price, but since you're such a good guy, and we're running a promotion, you can get 5% off if you act today.

So instead you sign a contract to purchase a car (with no take backs!) and only then do you get told the must-pay MSRP? That's about how medical pricing works today.

Some states do require chargemaster transparency, e.g. https://www.oshpd.ca.gov/chargemaster/

Why would that be hard? I thought law takes precedence over contracts.

Even having the equivalent of car MSRPs would be a huge improvement. As it stands today, you often cannot get any price for a procedure beforehand, not even a "forget about insurance, I'm just going to pull out a wad of benjamins and start counting until you tell me it's enough" price.

Plus, car prices don't vary that much from MSRP. I can look up a car's MSRP and know that this is approximately what I'll pay. If I get a really good deal I might get away with paying 10-20% less. If the car is in extremely high demand, I might have to pay 10-20% more. But I can get a pretty decent idea. Medical pricing often varies by a factor of ten depending on whether you have insurance, and which provider it is.

I posted a link below, but some states already mandate chargemaster transparency. It's close to useless, as one quickly discovers that (a) pretty much any procedure costs a trillion dollars, but discounts apply and (b) the consumer's view of "procedure" and hospital system's view of "services provided" differ radically, as every gauze used up, every vital measurement, and every painkiller is a billing item in hospital's book (cost of goods and labor), but are integral part of the "procedure" the way the consumer sees it.

That some current laws are useless doesn't mean better laws couldn't be made. Mandate a final, guaranteed, all-inclusive price, or require disclosing every single discount made available to anybody, or even require charging the same price to everybody.

I think the real problem is that Americans mostly aren't willing to have their government going around telling businesses to cut out their shit or else.

I don't know if there are simple one-step solutions.

> Mandate a final, guaranteed, all-inclusive price

How would that work for something like birth? Depending on the amount of time spent in labor and a host of potential complications (some requiring presence of additional doctors like anesthesiologists or surgeons to perform a C-section) the costs will vary greatly.

> require disclosing every single discount made available to anybody, or even require charging the same price to everybody

That could work, as long as discounts don't evolve into kickbacks or rebates, but then why should an insurance company that signed up 10 customers receive the same discount as an insurance company that sent 100,000 people? The latter loses their leverage, which typically sends the prices up, not down.

It's definitely not simple, but I'm confident that it can be done. For something like birth, you'd have a baseline, then extras for various contingencies.

Why should an insurance company that signed up 10 customers get the same price as one that signed up 100,000? Because health care is fundamentally incompatible with free market capitalism (information asymmetry is extreme, demand curves are whacked, and there's often no competition due to time constraints) so allowing this sort of thing just leads to monopolies.

To put it another way, they should receive the same discount because if they don't, the smaller insurance company will go out of business and we'll ultimately be left with a few gigantic ones who use their market position to simultaneously squeeze hospitals and customers.

Aren't there single-payer systems where medical care is still private, and the government pays them for services? I doubt those systems would put up with "we'll tell you how much you have to pay when we're done" so I'm sure there are examples to follow.

The ACA required hospitals to publish prices in some contexts.

http://thehill.com/policy/healthcare/204868-new-price-transp...

https://www.bna.com/hospitals-required-price-n17179910723/

Karl provides more detail in his write up than I could cover, and he links to two US Supreme Court cases in regards to the price issue

https://market-ticker.org/akcs-www?post=231949

Interesting, if ranty, hard to follow, and possibly overstated.

For one, there seems a distinction to be made between "publishing" prices and individually receiving a quote in advance of work. If there's a technical sense in which the two are equivalent, I would recommend clarifying in casual conversation.

Those requirements also don't seem (though I could've missed something) to be a part of anti-trust law, per se. The requirement that prices be consistent is, in the cited Robinson-Patman Act (although that seems to only apply if you're crossing state lines?)

But knowing the price of a procedure doesn't change my need for it. If I need heart surgery, I still need it regardless of whether it's $10k or $100k.

In other words, demand is inelastic.

And, most people can't afford to pay 10k or 100k out-of-pocket. So, it's not like managing your household budget. The funds have to come from somewhere else (insurance).

Also, healthcare is not easy to evaluate for a layperson. If my doctor says that I need 'procedure X', I'm relying on their expertise. Healthcare recommendations are not fungible products. If I'm buying a car, I can read reviews about the different models, reliability, etc. But my doctor's recommendation for me is highly specific to my personal health history.

So, for a lot of healthcare spending, it's not me that's choosing a medical procedure. Instead, I'm choosing to trust a doctor's recommendation. The doctor is the one that's recommending the procedure.

I think the elasticity of the demand depends pretty heavily upon the urgency of the problem.

And the demand - as you pointed out - also depends heavily on trust. That said, most health problems aren't unique enough to require a completely bespoke solution.

So at least hypothetically, it's possible to shop around IF pricing and other data were available. But they are not, at least generally.

I found this book rather interesting -- https://www.amazon.com/dp/B01DRXKWRM/ref=dp-kindle-redirect?... -- where a company compiled their health care expenditures and made the data available to their employees.

In the US, who pays affects how much one pays.

Health insurance companies are able to negotiate lower prices for their subscribers due to leverage. Likewise, single payer would mean all subscribers would have their prices negotiated through a single entity.

Without consolidation of payment, the anti-trust exemptions for the healthcare industry means patients cannot effectively negotiate the cost for their care.

Single-payer would remedy that.

With all the leverage Medicare spending per capita (and that capita got a pretty huge boost with US population aging and baby boomers retiring) is still growing year-over-year. Their biggest claim to fame is to compare themselves to private insurers, where the growth is even more insane.

I agree with you -- the cost here is prohibitively high for many folks I know, and the politicians makes hay each election season switching groups that will take the most hit.

So HN, this field here is ripe for disruption. Like the kitchen remodeling stand at Lowe’s or Home Depot, why not a booth to connect people to competent doctors and medical specialists in Europe, Russia, or India with all medical records and diagnostics online, allowing people find the most competitive prices and options for their medical services.

Right now for a surgery if you need it, there are least three 14 hour non-stop direct flights daily to India or Dubai where well equipped hospitals and experienced surgeons will be available (added: at a fraction of the cost here)

This is a good point. If we could avoid massive expansion of arbitrary and innovation-killing biotech regulations, then the market will eventually correct the current shortcomings and will catch up and work within the current framework. This will lower costs and drive up quality of care. Silicon Valley potentially has an important role to play here.

You are just changing the problem, not solving it: the American health care would downgrade (less money to spend) and the people from that countries would complain that their access to health care got worse because of Americans.

> this field here is ripe for disruption

meaning what? that a VC funded startup should come in and start offering health insurance? what are you suggesting? what does disruption even mean in this context?

let's get away from those corner cases where it's even thinkable to fly to Dubai for surgery. that's a high cost intervention for specific (wealthy) individuals. that isn't solving the problem of providing health care for 300 million people. how do you propose we do that?

Nothing to do with insurance or VC. Think of a consumer service at Walmart or Home Depot, helping people get very competitive services at prices to fit people's need.

Yes, travel is not a total solution for all 300 million people, but think along the lines of many packaged tour companies in cities who cater for international travellers and can arrange such facilities very efficiently. (I once had dental work done in India, and people don't realize how easy it is, the same kind of thing that you get here.)

Walmart already provides a handful of services of the kind you're mentioning. They have low cost clinic services (at some locations) for flu-shots, eye exams, and prescription drugs. Expanding those services would require having MDs on staff and on location.

There are plenty of businesses trying to offer more accessible medical services also. Urgent Care clinics are becoming popular in New York City, where I live.

None of this is doing much about cost though. The Walmart style sells things cheaply that are allowed to be sold cheaply. They don't sell what they are prevented from selling due to regulations or due to non-viability of offering the service due to staffing limitations. The Urgent Care style is going through the private health insurance system like just about every other medical care provider.

So I suggested an insurance "startup" because the space that seems to lack innovation is the payment side of the health care industry.

I haven't seen a mechanism for lowering price without collective bargaining. That's why I see a single payer system as a must for the problem you've described here. I'd like to hear more alternative views on this though.

The cost of goods (computers, phones) went down without collective bargaining, and it seems like so did the cost of services (haircuts, plumbing projects, airline tickets). Opening up the supply side seemed to do the trick.

What would happen if US (a) lowered the bar for doctor certification or (b) automatically recognized foreign doctor and nursing diplomas from English-speaking (or Spanish-speaking, to accommodate some states) countries?

More lawsuits would happen for sure. And the rulers de jour do not want any more immigration.

The problem outta not on the supply side, but at the parasitic insurer and drug supply side.

Insurance companies have a statute limit on profit margins and are required to refund excessive premiums. And prescription drugs constitute only 10% of medical bills http://www.chcf.org/~/media/MEDIA%20LIBRARY%20Files/PDF/PDF%...

In other words, even if all Rx drugs were made free, current total healthcare cost growth rates would eradicate those savings in less than 2 years.

I agree with you completely that cost reduction is fundamental, but I disagree with you that the problem is more technical than ideological. Who pays is just as important as how much it costs, because under some regimes we get spectacularly unjust outcomes because of ideological constraints on who pays.

In other words, a privatized system will always fail to adequately cover certain groups of people: the poor, those with unusually expensive conditions, the unemployed, the elderly, etc. Providing coverage for those groups, motivated by humanitarian concerns, is the reason there is so much ideological debate. The system as it is currently constructed uses a combination of limited-scope public services (medicare for the elderly, medicaid for the extremely poor) and heavy-handed regulations (various acts of Congress) to cover those groups.

That is why we have so much ideological debate and why it needs to continue. Cost reduction alone won't solve the totality of issues in the system.

The National Association of Health Underwriters have this brief, non-partisan analysis of healthcare cost drivers in the USA and some proposed solutions. (PDF warning)

http://www.nahu.org/legislative/policydocuments/NAHUWhitePap...

Costs are also somewhat ideological too. A good for instance is the US belief in suing any time something bad happens. From what I can tell, 10% of every dollar spent on health care in the US goes towards malpractice insurance for doctors. A system that acknowledges that well-meaning doctors can make mistakes and shouldn't be unduly punished could cost almost that 10% less. America's health care system is designed for the %0.1 case literally at the expense of the %99.9 case.

Also, the lack of universal coverage here means that a lot of medical bills go unpaid, for many reasons including bankruptcy or even people giving the emergency room a fake name when they go in. The hospitals don't just eat that cost, they amortize it into the costs paid by patients who do pay their bills. Universal coverage would, therefore, lower the cost of care per individual by eliminating the costs of trying to collect from uninsured people who can't pay.

But the biggest ideological cost of health care in the US is our insistence on including the "free" market in paying for health care. Insurers have a ~25% profit margin. A single-payer system could be very inefficient and yet still come in far below that cost.

> From what I can tell, 10% of every dollar spent on health care in the US goes towards malpractice insurance for doctors. A system that acknowledges that well-meaning doctors can make mistakes and shouldn't be unduly punished could cost almost that 10% less.

There's no such thing as a free lunch. If you don't pay for the damage caused by doctor's mistakes, you are just offloading part of the cost of your healthcare system onto a few unlucky people. If you do pay for it but it's not paid for by the doctors, you just re-invented malpractice insurance but with a different source of funding.

Ahh...but what percent of malpractice payments are consumed by legal fees? Enough for many, many free lunches.

Also, if health care coverage were universal, we wouldn't need big medical settlements to cover future medical costs since those costs would already be covered.

But mistakes happen. How you deal with those mistakes is an ideological question. Do patients who suffer from those mistakes deserve large settlements to the detriment of the vastly larger amount of patients that receive quality care? The US system believes that while other countries choose to lower costs at the expense of those unlucky few.

I think cutting costs is the solution as well.

Wouldn't cutting down regulation, and reducing the AMAs monopoly on doctors help?

Less regulation = less costs.

More doctors drive costs down too.

Maybe. I don't know where the money goes to say what we can cut. Are wages our biggest cost? If so, I'd imagine salaries have to come down across the board but especially at the top. Sadly I don't know how.

The problem is not a technical one. It's about idealogy/belief.

The left believes that healthcare should be a right - that everyone should get care regardless of whether you are homeless, or a billionaire.

The right believes that it is not a right. That you should only get healthcare if you earn it. If you are homeless, too bad. You die.

Now, conservatives know that they can't come right out and say it that way, but ultimately, that's what a lot of people believe. They don't want to pay for someone else's care.

So, the arguments aren't really about 'what is the most efficient way to pay for everyone to get healthcare'.

The arguments are about the fact that half the population doesn't want to pay for healthcare for someone else.

That's certainly the standard left-wing perspective on it, yes. The problem with this is that just declaring something like healthcare a "right" doesn't give people it - you need vast numbers of doctors, hospitals, surgeons and medications and supplies, all of which have to be funded and organised somehow. You need some way of keeping the costs under control and the services operating effectively across something with hundreds of millions of customers. The American left has no more idea how to do this than the right, so they resort to emotional appeals instead.

> The problem is that getting costs down is almost impossible. Costs are salaries of doctors & nurses, a giant pharmaceutical industry, thousands of radiologists, ultrasound technicians, the machines they use (far more frequently than europeans)…

Those aren't the only costs though. A lot of the cost is on useless things like bureaucracy, middlemen and duplication.

For example, there are two very large hospitals within about a mile of my home solely because one of the insurance providers likes to build its own and providers don't like to share. You could cut costs significantly by simply demolishing one of the buildings and moving the staff to the other one.

That was basically the conclusion of the widely-circulated SlateStarCodex piece [1] -- that health care (and schooling, and housing) are becoming much more expensive with no clear reason why, and if it weren't so expensive, we would all be in much closer agreement on what problems need fixing and be able to reach a compromise.

SSC in particular noted that it was not any individual salaries that were the problem -- everyone's pay seemed about reasonable. Rather, what made the US so different was how much they had to spend in near-paranoid countermeasures against the dreaded "lawsuits".

That, I think, provided the clearest clue: in Europe, it's near impossible to "sue the school", "sue for malpractice" if they adhered to the regulations, and if you can, the loser pays. On top of that, the state automatically covers the injuries, so it's much less likely for resources to get lost in the black hole of litigation and discovery.

[1] http://slatestarcodex.com/2017/02/09/considerations-on-cost-...

HN Discussion: https://news.ycombinator.com/item?id=13613687

There are many, many problems with healthcare in the US. Off the top of my head, the big ones are:

* Endless number of middlemen and administrators. * Every player in the healthcare chain benefits from higher prices. * No price transparency. * Tacit collusion is rampant. * "Cost no object" mentality to treating the dying.

The last one, while insensitive, is true nonetheless, and it's alarming that over 50% of all healthcare spending takes place in the last two years of a person's life. We have basically decided that it's okay to spend literally any sum of money on a dying person in order to prolong life by an average of a few months. And the problematic word there is average, because some people do live a lot longer, and that's what we all look to. I realize this is grim and seemingly lacks humanity, but unfortunately that doesn't make it not true. Charlie Munger, who is on the board of Kaiser Permanente, said this same thing yesterday..."over-treatment of the dying" was the biggest problem they faced.

It's reminiscent of our approach to college education - justified at any cost. So we push millions of kids into a schooling system that's not right for them, and the result is a lot of crappy education, worthless degrees, student loans, etc. Once we flip the switch to "there is no price you can put on _____" things get sideways FAST.

Well, the argument here is that for example, there are types of cancer which have extremely low survivalability rate, like 1 out 10 people who get it survive it. But we still treat them, and sure, right now 90% of them die but the data is used to create new drugs which in the future might improve the odds. If we just straight up said "it's very unlikely this person will survive so we won't spend $$$ on trying treatment" then we wouldn't get anywhere with many different medicines.

Those are pharma dollars. Different pot of money.

Keeping people alive too long is definitely a really difficult problem. Having walked through many dementia floors in nursing homes, I'd prefer to have some reasonable way of opting for assisted suicide in my will. Maybe once a consortium of doctors verifies I'm at a specified stage of dementia. Assisted suicide is another tricky area but I think it is humane when administered properly.

Alternatively, we could consider a more strict "No heroic efforts" for people with dementia -- which means not spending tens to hundreds of thousands on resuscitation or surgical procedures for people with dementia if they are not in pain from their current ailment. Its obviously nuanced, but there is a hugely significant amount of savings to be made if we can get over the political obstacles.

Physical rehab has some of the highest Medicaid/care reimbursement rates and you should see how many dementia patients are getting pointless "rehab" to the maximum a facility can bill.

It's getting more common to get a DNR/DNI (Do Not Resuscitate / Do Not Intubate ) put into a "living will" that goes to into effect if you are in a situation where you will no longer be mentally cognitive.

Keep in mind US healthcare costs are almost %20 of GDP

Cutting the fat from that may mean a lot of folks lose livelihoods (and THEIR healthcare).

Besides being illogical (i.e. it's bad to eliminate waste), this exemplifies the problem with change. Any time there is a ANY constituency that is rendered worse off, no matter how justified it is, it is nearly impossible to effectuate change because the affected group screams bloody murder.

But, wouldn't you? More importantly, shouldn't you? If the people in your government are doing something that is not in your best interest then you SHOULD speak up against it. After all, the word "representative" is based on the word "represent". If they are not representing my interests to the government then I should make that known.

If I have ailment X and a bill is being pushed that pulls funding/ assistance away from ailment X, then I should make it known that I am unhappy about it. What if it is now guaranteed that I will die from ailment X? You're saying that I shouldn't kick and yell about it? I'm about to die!

However, if it is also helps people with ailment Y, Z, I, J, K, and L, then it is the government's job to recognize that maybe I am less important to the bigger picture. If enough people will be negatively impacted to the point that I will not be reelected, then maybe it doesn't truly benefit my constituency as much as I think it will.

Of course all of this is in an ideal world without accounting for the power of advertisement funding and the fact that most of the voting population isn't well educated about the issues.

Broken window fallacy.

https://en.wikipedia.org/wiki/Parable_of_the_broken_window

Edit: Which is not to say those impacted won't need assistance moving on to other things. But, cutting the fat should be a net benefit to society.

A great deal of jobs in US defense are completely bureaucracy and make-work programs in disguise while the political discourse makes it sound like our soldiers are so underfunded they're marching into battle with muskets and bayonets.

A ton of people in government related jobs only have equivalent roles in jobs at equally large and capital inefficient bureaucracies.

> A great deal of jobs in US defense are completely bureaucracy and make-work programs

Obamacare was actually a make-work program for taxi drivers, who were needed to take all those poor people to and from their medical appointments.

Unless there was a single-payer system that didn't tie healthcare to employment and provided basic cover for everyone.

That doesn't solve the problem of the growing politicization of healthcare, especially given new life extending tech and augmentation, and it may make it worse in some ways: Year 2090 and an elderly bureaucrat can afford to be more productive than a sick impoverished child, who gets the funding?

Basic cover is provided for everyone.

Individuals can then purchase separate private insurance for optional health procedures and for faster elective care.

Australia's healthcare system works on a similar model. Everyone gets basic free cover, but waiting lists for elective surgery can range from weeks to months.

If you optionally pay for private health insurance then you can get better, faster treatment, including for elective surgeries.

In your hypothetical 2090, the sick impoverished child gets their basic needs taken care of by the basic cover, and the elderly bureaucrat gets his life extending tech and augmentation paid for by the private insurance he's been paying in to his entire working life.

Once the sick, impoverished child recovers, they can return to school, graduate, get a good job and pay in to private insurance so that by the time they are elderly they can also afford life extending tech and augmentation.

Don't ignore the elephant in the room. There is a good reason the USA spends the most on medical and has less than stellar results. That is without glancing at the corporate tax evasion.

Unfettered profit at all costs capitalism isn't a glowing unicorn.

To your first points, the system exists as it does because each party can sort of displace the onus of overspending on another party.

1. Insurers are incentivized to seek out the minimum cost to achieve maintainable health.

2. Health care providers are incentived to reap as much as possible from insurers in return for acceptable (not always exemplary) health outcomes.

3. Patients, who on average are getting older and in need of more care, are pigeonholed (sometimes good, sometimes bad) into health care decisions by their providers and insurers.

4. Device/equipment manufacturers can charge ludicrous amounts because they capture very specific pieces of markets or gain preference from health care providers. However, the risk and cost involved in creating a new/competing product and entering a market can be staggering, and so high costs become inevitable (same argument drug developers can make).

As you said, 'justified at any cost' makes this whole shebang go, especially when no single party is capable of controlling the cost. We can't point to a boogeyman we all have a part in making.

As per 1- insurance companies justify their earnings as a percent of costs for care- so if they keep costs for care high, it actually helps them charge higher premiums. Of course, they have to ensure that costs are high for everyone.

If an insurance company were to announce record profits because they were able to better control costs than their competitors, there would be immediate pressure to lower premiums and not take the additional profits.

When it comes to health care, the idea that we have anything resembling a free-market and private competition to lower prices is a farce on a grand scale.

The law actually caps their profit margin[1] so it effectively forces the insurance to pay and charge more if it wants to increase its income. Ironically, this law is called "Affordable Care Act".

1. http://abcnews.go.com/Politics/obamacare-health-insurance-re...

I thought that was the case, but wasn't sure, so I did not include it in my original comment, so thanks for pointing it out and providing the link!

This would be more true if hospitals weren't allowed to bill patients for services that insurance refuses to cover.

But hospitals force patients to agree to be responsible for all bills their insurance doesn't cover.

So there are two large institutions, neither of which is entirely aligned with the interests of the individual dealing with them. Of course hospitals aren't trying to kill people, but good luck figuring out if the care they bill for is really necessary or not.

All correct...again, no price transparency, and every single party in the chain (other than the consumer) benefits from higher prices.

This has been a huge issue for me lately. Several times in the last year my family has been in the position of trying to decide whether to have a procedure done, and literally nobody can tell us how much it costs. Not the providers, not the insurance companies, not the hospital. "Probably less than $50k" is not a helpful answer. The best answers we were able to find came from other people who had already had similar procedures done at the same hospital, by the same providers. But even so, one quirk in the procedure, one extra diagnostic, one extra drug, can cost thousands of dollars. Once you've signed up for the procedure, it's very hard to say no to the extras. You might not even know they've been ordered until it's too late.

That phenomenon isn't unique to medical procedures. The answer to the question "how much is this lawsuit/software project/renovation going to cost?" is almost never going to be a definite number. (It's no surprise that people complain about bills in all these areas. But it's not your contractor's fault that your subfloor rotted and his $X quote for re-tiling now needs to include $Y for replacing the subfloor.)

But the contractor will at least give you an estimate and say, "this job will cost $2200 unless your subfloor is rotted out." And they can at least give you a verbal estimate of how much more it would cost if the subfloor is rotten. In the last year, I've dealt with this exact situation --- linoleum replacement with rotted subfloor. I'll take contractors over the medical industry any day for pricing transparency.

While discussion of death is a bit morbid, some towns in the US have experimented with death planning, led by care providers and counselors at local hospitals. It has led to significant savings without resorting to "death panels".

http://www.npr.org/sections/money/2014/03/05/286126451/livin...

That statistic about the percentage of spending being in the last 2 years of life may be a bit misleading, just like keys are always in the last place you look. Once someone dies, most healthcare spending on them stops. Auto accident that's fatal after surgeries and a few days? In that window. The same applies to plenty of things that may have excellent recovery chances but which are not 100%.

Edit: ObXKCD: https://www.xkcd.com/931/ (Lanes) Every one of those lanes going off to the right is the end of healthcare spending for someone, but you can't know going in which ones are going to turn off. Focusing on the "50% in the last 2 years" number is a lot like the the naive visualization at the top.

your point is well taken, but I feel like there is still a subset of "excessive spending at end of life" that we can discuss as being more obviously problematic, from a social spending point of view.

excluding trauma care for accident victims (that end up dying anyway), and excluding cases of early-in-life cancer, and excluding every other case we can think of where a spike of medical spending shortly before the person dies anyway is understandable as part of a good faith effort that had a reasonable chance of prolonging their life for many years, after all those exclusions are made we will still find many instances of cases where the end-of-life medical spending seems excessive.

The canonical example I can think of would be organ transplants for very elderly people. A new kidney for a 75 year old person in advanced renal failure is unlikely to prolong their life by very much.

This kind of stuff gets very emotional and very political though. This is what provoked the demagoguery about "death panels" when Obamacare was being debated in congress in 2009. We are both very uncomfortable allowing the government to make those decisions and also very uncomfortable allowing private insurers to make those decisions. We want to empower families to make those decisions and so remove cost from their consideration (via regulation, requiring insurers to pay) and then we become surprised when people who haven't made their peace with death are willing to spend any amount of money (which is a hidden cost from their point of view) to prolong end-of-life. It shouldn't be surprising. We set up a perverse incentive structure and locked it in place with regulations.

Freakonmics has an interesting episode where they cover the idea of offering a patient a bonus/rebate if they forego the standard end-of-life medical care. Quite a controversial suggestion but it does seem to have some though behind it

http://freakonomics.com/podcast/are-you-ready-for-a-glorious...

Saving peoples lives isn't a unique practice in the US. Doctors in the developed world are all bound by the Hippocratic Oath, and I'm not aware of any first world country that regularly judges the sick or old to die when doctors still have options available. They still pay a third as much in healthcare.

A lot of those countries have physician assisted suicide though, which greatly improves the humanity of late term care. That is an easy and obvious piece of the solution the US should have been able to get behind a long time ago.

End of life care i not physician assisted suicide, and it's unhelpful to conflate the two.

Six US states have end of life care that can include doctors prescribing fatal doses of medication.

https://en.wikipedia.org/wiki/Assisted_suicide

> The United States has authorized medical aid in dying in six states, which refers to a terminally ill person with 6 months or less to live taking a medication prescribed by a doctor

Here in the UK, when the NHS decides whether a treatment is covered they take the cost and divide it by the estimated quality-adjusted life years it will give the patients who have it. If it costs more than £20,000-£30,000 per QALY they won't offer it. That's simply the value of a year of human life according to the NHS.

The middleman role of insurance companies in American healthcare seems completely useless. They're not serving patients, doctors nor the national economy by siphoning off enormous profits from the 17% of GDP that gets spent on healthcare.

Getting rid of them would be extremely hard, of course, given how well entrenched they are thanks to lobbying and regulatory capture.

Insurance companies are a massive-scale version of the car dealerships that have managed to keep Tesla out of many US states by taking advantage of local legislation -- nobody would want to deal with a car salesman or an insurance company given the choice.

As with most politically-powerful entities: first shrink, then drown.

That, ultimately is how the tobacco industry was (mostly) quashed.

You have to be determined, not just determined, but Ralph Nader determined. If you are Ralph Nader determined, then in America there is no company or lobby that can stop you. That's in fact one of the best things about America, out of everything else. That activism can't be stopped. That free speech is for the most part respected. And if you are determined to get some truth heard, you will eventually succeed if you try hard enough.

> seems completely useless

Some people (not me) would argue that their existence and competition create better choices for consumers.

For example, in theory, a single-payer system could have a single price (via taxes) and a single level of coverage. By contrast, private insurance companies are able to offer many different products depending on someone's tolerance for risk.

I don't think the private, market-driven system for health care is better in that regard, but some people do.

1. You can have single payer with the option for private insurance. Many countries do that. From what I can gather, here (Norway) one can get quicker service with the private doctors. The national health plan still pays the private doctors the national rate, and you pay the difference.

Ironically, this happens in the US despite the private insurance system. It's the worst of both worlds.

If you want to be seen quickly and you're not literally dying, you have to go to an urgent care clinic and pay a much higher fee.

And even that is only available for very minor, primary-care issues. I recently took my girlfriend to the emergency room for a very serious illness, and we ended up being there for 12 hours. About 1 hour of that time involved actual treatment or seeing a doctor -- the other 11 hours were just waiting. The bill was $20,000.

That really isn't the same.

Urgent care is useless if you do not have the money to pay for it when you need it, even though insurers provide monetary incentives to go there (my insurance plans generally had a copay of $50-$75 for urgent care, but $100-$150 for the ER). You can still wait hours at these places, just like at the ER. And honestly, in such cases the care is likely similar.

You also have absolutely no coverage if you don't have private insurance or are poor enough/old enough for the government-run systems.

This system is more akin to visiting a doctor that charges more than the insurance's "customary charges" and expects you to pay the difference. You like the doctor, though, so you happily pay while the insurance still pays the portion they find to be a fair price.

It is more akin to finding out the specialists in your networks have a 6 month waiting list, but one outside the network only has a 3 month waiting list. The insurance pays a lower amount and you choose to pay the rest out of pocket for a shorter waiting time. The same thing for surgeries that aren't absolute emergencies (I do hear horror stories, but I heard horror stories in the states as well).

Above all, you are unlikely to wind up with such a bill afterwards.

The UK as well. Here there are fully comprehensive private healthcare plans that basically acts as "top up" over the public healthcare: You go to a NHS doctor first, and if they need to refer you for anything, you ask them to refer you privately.

So you pretty much pay to queue jump and get higher quality hospital rooms.

I think most people are fine getting rid of middlemen, but there is a deep divide over who should actually be paying the bills.

Personally, I think health insurance should be, you know, insurance. For catastrophic things you wouldn't wish on yourself and cannot save for. And there's a definite role for government to make sure that market is solvent and available to everyone.

For day-to-day healthcare, that should just be included in "cost of living" calculations. General-purpose welfare programs (or ideally a minimum income) would guarantee that people could afford checkups, birth control, etc.

Getting employers out of the business of all of the above is paramount and what businesses should be lobbying for. I believe the slow recovery from the recession has been affected by unintended (though not unpredicted) consequences of the ACA's failure to address this issue. The Republicans likewise seem happy to punt on the issue. It's this sort of thinking that is making the American electorate disgruntled with politicians and each other.

> Getting employers out of the business of all of the above is paramount and what businesses should be lobbying for.

Amen. I never quite understood what benefit (pardon the pun) it served, although I've got some idea of the origins of employer-provided health insurance.

The cynical part of me believes it's definitely a way for larger companies to hold more control over their employees, and they may lobby for this because it provides an extra advantage over smaller competitors.

I've known plenty of really sharp/talented folks whose talents may better serve the economy by taking those skills to other companies (sometimes in other parts of the country). "But I'll lose my health insurance" is almost always a primary reason why people've stayed in their job (however crappy it might be otherwise re: pay, commute, colleagues, boss, industry, etc). This seems like it's been a real drag on labor mobility for some time now.

I would have thought 'conservatives' would be all over a 'free market' where people make their own choices with their own money. They'll happily deride a "nanny-state" as fostering people who just want the govt to provide them with everything, but ... expecting people to need employers to provide access to basic services? Apparently there's no problem there whatsoever, and it doesn't even seem contradictory to many I talk to.

> what benefit... it served

Any regulation provides regulatory capture benefits to big players over small players, regardless of what the regulation is.

I'm not sure big business lobbyists were campaigning to stay in the health insurance business, but they weren't exactly campaigning to get out when all the players were at the trough back when the ACA passed.

Hopefully this is a start of a trend. Leaders like Buffet saying the baby tiger of "employer provided health insurance" has grown up to a maneater might help change some minds.

Employer-sponsored healthcare in the U.S. is an accident of history.

How we got to now: 1. Roosevelt chose to forego nationalizing healthcare when he introduced social security in the 30's, fearing it would doom both to failure.

2. The U.S. feared debilitating inflation during WWII. The legislature passed a bill to limit employers' ability to raise wages for workers who were battling for employees in a scarce labor pool.

3. Unintended consequences ensued. To attract workers, employers began to offer non-salary perks: employer-sponsored healthcare was one.

4. The economic and labor boom post-WWII entrenched employer-sponsored healthcare and has led us to where we are today.

Strangely enough--I knew a lot of people that worked for the government for that reason.

The obvious reason, which might be too obvious, but just in case:

Employment serves as a convenient risk pool that is too hard to join based only on a wish to get insurance.

The second half of _The Social Transformation of American Medicine_, by Paul Starr, covers a lot of the history of American healthcare in the WW1-to-1980 period. (There's an epub at mobilism.)

"For day-to-day healthcare, that should just be included in "cost of living" calculations. General-purpose welfare programs (or ideally a minimum income) would guarantee that people could afford checkups, birth control, etc."

That sounds reasonable, but is it efficient?

1. It discourages "routine maintenance" -- it's a lot cheaper to go to the dentist annually than to get a root canal every ten, yet there are many who if they only had catastrophic dental insurance would skip the annual.

2. This "cost of living" varies drastically based on age, sex, pre-existing conditions, et cetera. So it couldn't be covered fairly by a single fixed UBI. So you'd need bureaucracy to determine who is eligible for extra coverage

3. Every small doctor's office would need a billing department. In socialized healthcare countries, "billing" is not much more work than filling in a time sheet, and is often done by the doctor themselves.

It's cheaper, more efficient and more fair to cover day-to-day healthcare for everybody than to just cover only catastrophic care.

This is an argument for someone to pay for "day-to-day healthcare", but it's still not clear that someone should be an insurance company.

Except for the quoted paragraph, I agree completely with the parent and grandparent comments which make effective arguments that middleman insurance companies should be cut out. Should have made that clear, I guess.

Sure, we Chinese basically cover most of our medical bills, and rely on insurance for treatments of more vital diseases. Actually, people go to hospital more, because cold or other smallish issues cost no more than a good meal.

Clinics do fine. They charge more, and they have the hospitals as a reference for their prices, providing better service for a premium.

Likewise in India.

This creates a big problem though... the hospitals are incentivized to prescribe antibiotics when they are not needed (which they can charge for, the "doctor visit fee" is not remotely enough to cover the hospitals costs) leading to rampant over-prescription of antibiotics (leading to antibiotic-resistant bacteria).

> "1. It discourages "routine maintenance" -- it's a lot cheaper to go to the dentist annually than to get a root canal every ten, yet there are many who if they only had catastrophic dental insurance would skip the annual."

It's not quite fair to say that it discourages, when really it just doesn't encourage routine maintenance.

To that end, it would be interesting if there was a component that encourages routine maintenance. Every undocumented annual checkup results in <some percentage> of the claim being the claimant's financial responsibility.

Similar, I suppose, to an automobile warranty where a lack of documented regular maintenance can be grounds for voiding some portion or all of the warranty. The healthcare parallel being less extreme.

This is one of those citation needed moments. IIRC insurance companies paid 90% of their income as "medical loss ratio". Even if you made them NPO - the cost will drop some percent. US needs healthcare costs to drop times.

The Atlantic pointed out a few years ago that removing all the profit from health insurance companies would not make a significant dent in health care costs.

https://www.theatlantic.com/magazine/archive/2009/09/how-ame...

That was pre-ACA. Given the min 80% payout rule, it would seem the only way to increase profits is to increase the costs of everything, no?

Hence the laws prohibiting price negotiation!

> Hence the laws prohibiting price negotiation!

Insurers are not prohibited from negotiating prices. Quite the opposite.

Well if we stop calling products insurance that are not insurance it might be a step in the right direction. I think catastrophic medical insurance should exist and that earns the name "insurance". What most people perceive as insurance is really a service plan. You pay a fee to have services selected on the plan to be available when you want them and you get provided with a list of those who can deliver.

Still the real bogeyman is just like income taxes most people don't see the cost first hand or don't associate it with their income. They see the final check value and somehow disconnect the costs.

The step is getting name insurance off of products that are not insurance

The costs of the services in the bronze ACA plans isn't that high. They basically are catastrophic plans. The premiums and deductibles are expensive because medical care is expensive and a real medical catastrophe can have obscene costs.

Cheaper coverage can pretty much only be obtained by excluding people or limiting the benefit.

Which goes against all the evidence - every other first world country with universal coverage that also provides all the same medical services the US does, while paying a third as much per person.

The US pays more for a lot of reasons. It isn't a one trick pony:

* Americans are much, much more unhealthy than Europeans on average. Way more obesity, way more smoking and drinking for addiction rather than socialiation.

* The insurance apparatus imposes a ~20% overhead outright on expenses, and puts further money on top by moving costs out of the consumers hands. They control what doctors you see and what procedures and drugs you get, and often do so in ways that are locally beneficial to the insurer but are more inefficient than a universal system.

* Hospitals and doctors, by being decoupled from patient expenses by the insurers, run rampant on spending and salary and hospital administration gets as crooked as insurance bureaucracy. Your healthcare dollar quickly ends up going 60% to bureaucrats and institutionalized middle-men expenses and only 40% to actual care.

Solving #1 is something that has to be done over time, and the only way to do that is to have a healthcare system, any system, that stops disincentivizing people from seeing doctors except for during crisis. The ACA did very little to fix this (it basically only mandated that some routine preventative care came at no cost to patients) and until you can get the general unhealthiness of Americans under control you can't get costs under control regardless of healthcare system.

The other two, though? Single payer solves them either immediately or with the market pressure of the entire US populations healthcare needs. Every other developed country that adopted single payer was able to use its influence to get hospitals and private insurance in line. That is why the UK now has one of the best systems in the world.

The ACA did very little to fix this (it basically only mandated that some routine preventative care came at no cost to patients)

This is what I meant by services (and also things like birth control and so on that are mandated in the plans but "part of life" rather than related to a change in health or injury).

edit: and I think you were responding in part because the services are more expensive than they need to be. My meaning was that they don't drive up the premiums of the insurance all that much (and with the large deductibles, in many cases the annual premiums together are not the largest component of the patient's contribution towards a large medical expense).

Anecdotally in my case that is not true - this may be due to your age that you didn't see the difference, I was I think 47 when this switch happened. I had catastrophic health insurance for $135 per month in California pre - Obamacare with no prescriptions or treatment for pre existing conditions/maintenance of health. The minimum insurance on the CA marketplace was 350 per month for me then, now it's 440 a month.

Did the plan you had before have annual and lifetime spending caps?

Yes IIRC it did. Forgot to mention California's market place eliminated catastrophic insurance plans so residents of California kind of got burned by the promise of keeping one's current plan.

This may be a misconception. In other countries there are also insurance companies at work making good money managing premiums and payments. And yes, they are not liked there ether particularly when they find excuses not to pay. The US problems however run deeper.

One of the biggest US health insurer is UnitedHealth Group. In their last financial quarter report they published:

Revenues $48.7 billion

Earnings From Operations $3.4 billion

Net Margin 4.5%

These type of good and enviable stable profits are not enough to explain the inefficiencies in the US. Insurance may be lobbying but that is dwarfed e.g. by the marketing expenditure of the pharmaceutical industry (same level as their R&D). Yes health insurance is living well on the inefficiencies and their (in part unnecessary) middle man role but there are way bigger money leaks.

That is showing only official profits. There is so much else being siphoned off within the insurance companies as inefficiencies. I agree there are efficiencies external to the insurance companies though, but I am not sure how incentivized these companies are to minimize costs.

They spend 83% of premiums on medical care.

(they list both numbers on page 9 of http://www.unitedhealthgroup.com/~/media/CEBA762A544B44D19F1... )

Some of the 17% represents necessary administrative costs. Who knows how much.

It's irrelevant how much they spend on premiums, because they are the ones who set prices of procedures and drugs. There is no one to step in and introduce hard price controls, because it doesn't benefit anyone on the gravy train, just the consumer.

Imagine if there existed a company whose only job was to buy oil from OPEC and deliver it somewhere else. They could say "we spend 99% of our revenue on oil! look at how efficient we are!", ignoring the fact that OPEC is a cartel that sets prices, so not only can they be vastly overpaying, but the amount of oil purchased can be wildly inadequate to cover the needs.

It's a little relevant, they aren't capturing any more than the 17% of the premiums (and they aren't capturing all of it as profit, they do provide some necessary administration).

Yes, but if they are capturing 4% as profit on 17% of the premium, they have a perverse incentive to keep costs high, which is directly opposed to their customer's interests.

Sure. I was just pointing out that we have pretty clear information about the amount of money that ends up inside the insurance company and how much gets passed on to providers.

In a functioning market they would face competition for customers and try to lower premiums (and so try to lower costs). In our system they seem to look at provider prices in a region and decide if they can profit there or not (and in the case of non profits, if they can operate without losing money).

One of the provisions of Obamacare was a cap on the administrative costs of insurance companies at 20% of premiums, with any excess returned to the purchaser as a rebate. The first year it was in effect more than a billion dollars was returned. The deadweight cost of the private insurance industry over the years is pretty staggering.

In contrast, the Medicare program spends less than 2% of its budget on administrative costs.

>The middleman role of insurance companies in American healthcare seems completely useless. They're not serving patients, doctors ...

I think you're being too generous here. Insurance providers are not only useless, but of negative value to patients and physicians alike. They add yet another bureaucratic layer atop the healthcare system as a whole, and inundate physicians with red tape that interferes with care.

In my experience, insurance companies will actively go out of their way to fuck over patients on technicalities—even in life threatening situations—just to try and save a dime. The sheer indifference to humanity can be breathtaking at times.

Insurance companies are just cost control entities. Even in a single payer system that function has to exist.

Of course you can argue that having just one system is far more efficient than having hundreds of different ones as exists in the US today.

However, someone still has to say "no" to certain care. I know when i was in Canada that role was taken by the gov't.

Cost control should not involve denying care to seriously ill people on a routine basis.

Tell that to the NHS.[1]

[1]http://www.dailymail.co.uk/health/article-3222588/Thousands-...

"Getting rid of them would be extremely hard, of course, given how well entrenched they are thanks to lobbying and regulatory capture."

I always go back to when the Affordable Care Act was passed. At the time the amount of money being spent and the future money promised was enough for the federal government to buy every public health insurance company on the open market. If that decision had been made the argument for going to single payer, universal healthcare would have been over.

Yes, it would have been a rough transition, but at the time elapsed between now and then would have moved the USA into the rest of the world when it comes to healthcare.

That just covers the market cap of the company. You still have to pay for the healthcare. So that analogy isn't really valid.

> The middleman role of insurance companies in American healthcare seems completely useless.

It depends on where you are. There are areas of the country where insurance companies are fighting a cost war on behalf of patients against increasingly conglomerated and monopolistic hospitals.

This American Life had a great episode on this a while back. I went in thinking, "This problem's simple, it's all the fault of x." (For a few values of x.)

I left the episode thinking, "Wow, who knew health care could be so complicated?"

I have moved towards a Marxist philosophy on healthcare. Well, Groucho Marxist: I no longer trust any solutions to healthcare that non-experts like me could understand.

https://www.thisamericanlife.org/radio-archives/episode/391/...

Without clicking the link: is the hospital conglomerate HCA?

There are areas of the country where insurance companies are fighting a cost war on behalf of patients against increasingly conglomerated and monopolistic hospitals.

This seems like an unnecessary war. Are patients really being helped by a structure where multiple corporate entities -- the hospital and the insurance companies -- are battling each other to extract the maximum value from both the patient and the government actor paying for some part of the care?

If the hospital were not a regular for-profit corporation, they wouldn't turn into a monopolistic conglomerate... But of course it's practically impossible to undo these corporate structures and replace them with something with a whiff of socialism. It might even mean a pay cut for doctors, and then you'd have to restructure their education costs too... It's a very deep problem.

> This seems like an unnecessary war.

Especially insofar as it's a war, yes. In general, I like two strongly motivated and opposing advisors on my healthcare decisions, one advocating for the best possible care, and one team of actuaries arguing about what's least likely to be a waste of money.[0]

Anyway, that's just the ideal case where insurance and hospitals oppose each other, possibly motivated by financial incentives, and I benefit. Admittedly, things usually aren't ideal.

You might be able to restructure things where hospital incentives are tied to outcomes. Making them responsible for hospital-acquired infections was a step towards that.

But it's hard to pin them to long term outcomes, and weight that towards cost of procedures, which is apparently what we really care about judging by the outcomes / cost headlines.

You could assign people to a specific hospital for long periods of time to track long term health outcomes, make them responsible for your health full stop. But occasionally some hospitals face systemic challenges and become institutional failures over time.[1] It'd be horrible to chain people to a failing institution, especially the sole institution responsible for their health.

> It's a very deep problem.

Agreed 100%.

[0] Even if I'm not paying full costs directly, I don't want society to simply waste money on me. I've heard of plans that give you a weekly back massage from a chiropractor at a $10 copay. I'd feel terrible doing that, like I was stealing money from babies with cancer.

[1] e.g., https://en.wikipedia.org/wiki/St._Joseph_Medical_Center_(Hou...

Could some kind of distributed option-contracts (like insurance) be developed using Ethereum or other smart-contract blockchain.

Imagine if people with Ether (or other blockchain currency) could "reserve" ethers to serve as insurance spending for other people that buys the insurance contracts... something like crowdsourcing of insurance.

That would be really cool.

In the US the health care cost since 95 went from 13.1 to 17.1 while in Germany they went from 9.4. to 11.3. It is actually way worse than the article tells if one considers the age structure of the two countries where Germany has 21.7% over 65 vs. the US with 15.25%.

The non tangible cost are also non negligible. There is friction in the job market as changing job risks incurring a potentially catastrophic coverage gap. There are bizarre industries focused on renegotiating issued medical bills, collecting those or managing the health related bankruptcies.

Pricing of pharmaceutical usually generally defies the laws of gravity as the incentives of regulators, suppliers, distributors, doctors and insurers have been distorted beyond anything resembling a fair playing field. In such an environment playing games is superior than providing value and adhering to generally accepted rules. When it comes to pricing the costs of providing the service is often the least important input.

Steve Balmer recently: “If you look at these tax deductions for employer-provided health [...], they’re really subsidies to the affluent, which I guess I hadn’t thought about them.”

The biggest problem society faces at the moment is the vanishing middle class and lower qualified jobs that are still providing enough to subside. For the latter the cost of food, shelter, fuel and health are key. Lower the cost of living and there will be more jobs that are worth taking.

Yes, remove the tax deductions for employer-provided health care is good start. Employers should not decide what kind of health care you have access to, as little as for food.

That was one thing McCain had right in 2008. Removing employer health insurance would also remove a lot of political controversy like whether contraception should be offered. It's simply should not be the employer's business.

“If you go back to 1960 or thereabouts, corporate taxes were about 4 percent of G.D.P.,” Mr. Buffett said. “I mean, they bounced around some. And now, they’re about 2 percent of G.D.P.”

By contrast, he said, while tax rates have fallen as a share of gross domestic product, health care costs have ballooned. About 50 years ago, he said, “health care was 5 percent of G.D.P., and now it’s about 17 percent.”

It's interesting to consider what it really means for something to be a drag on the economy. I mean, every dollar spent on healthcare is literally part of the economy -- it's not siphoned off into some void. Companies make a lot of money in healthcare. Healthcare employee a lot of people. Folks like being healthy.

You're right it's not being siphoned off into some void, it's being redistributed from some groups of people to other groups. If healthcare was delivered efficiently so that it was affordable and kept people healthy then that would be ok.

There are so many inefficiencies with monopolistic practices such as inability to import drugs from outside US, healthcare networks, and on and on.

Monopolistic practices == industry protected from competition by government violence.

If the health industry wasn't, you'd have people making a killing importing 2 dollar generic antibiotics from overseas to compete with the 70 dollar generic antibiotics sold at CVS.

And then the scandals when it turns out these generics are fakes as happened in Africa with faked AIDS drugs or drugs with a nugatory amount of active ingredients

You'd also have people performance plastic surgery in their shed killing people.

There's obviously middle ground somewhere, it's just we as a country lately have a REALLY hard time accepting the fact that compromise isn't a four letter word. At least some of us...

That is true but the healthcare industry doesn't bring any money in from abroad. So for the average international competetiveness of American companies, it's bad.

Time and other resources are scarce. The more resources that are tied up in the healthcare the less available for other things.

Other countries are getting better health results for way less money which all other things equal makes Americans comparatively less well off.

When I pay $1500 and dozens of hours of time for something that costs $2 and 15 minutes in another country, I am less well off.

I like being healthy, but I'd rather be more healthy for less money than less healthy for more money.

You are right, the money isn't transferred off into a void, it is a wealth transfer from consumers to the healthcare industry.

Broken window fallacy.

Total Money spent on heath care has very poor correlation with outcomes. Largely because it includes things like medical billing and advertising which increases costs without providing any benefit. You also often do more dangerous and unnecessary procedures and give more drugs risking poorly understood interactions.

Something like 80% of the benefit of modern heathcare comes from the first 10% of spending. EX: Sanitation and quarantine are cheap and amazing tools to stop the spread of disease where hospitals are extremely expencive and gather sick people together to spread disease. A vaccine is vastly cheaper and more effective than dealing with outbreaks.

Bastiat for the win! https://en.m.wikisource.org/wiki/Essays_on_Political_Economy...

“In all, 86 per cent of the increased life expectancy was due to decreases in infectious diseases. And the bulk of the decline in infectious disease deaths occurred prior to the age of antibiotics. Less than 4 per cent of the total improvement in life expectancy since 1700s can be credited to twentieth-century advances in medical care.”

― Laurie Garrett, Betrayal of Trust: The Collapse of Global Public Health

https://www.goodreads.com/author/show/12627.Laurie_Garrett

The impacts are several-fold:

* Inefficiencies in delivery mean that those for whom low-cost interventions are most beneficial, most especially pregnant women, and infants and children, don't receive preventive and supportive care which offsets future problems.

* High healthcare costs translate directly to high labour costs, exacerbating the competitve disadvantages American labour faces relative to the rest of the world, and obviating much or all of the advantage of the greater efficiencies of such labour.

* What health care services as are offered are, counter to my first point, late and heroic measures which do little to extend life or its quality, but keep sick patients alive longer. They are delivered largely based on capacity to pay, rather than social need.

* Programmes to increase overall community well-being, ranging from vaccinations, education, and other public-health measures, to treatment of drugs and drink addiction as medical rather than criminal problems, aren't provided. Entire towns and states fall victim to epidemics of entirely preventible conditions: measles, mumps, cervical cancer, HIV/AIDS, alcoholism, drink driving, heroin and opoids additions, cocaine and meth addiction.

* I won't even talk about mental health services. They are a national embarassment and shame to all Americans.

Instead, a handful of insurers, hospitals, drugs manufacturers, equipment manufacturers, and service providers (look up medical transport for an eye-opener) are skimming off fat profits whilst delivering little of actual value, and actively eroding the competitive and health viability of the country as a whole.

The issue is relative efficiency. If I spend $500 more on treatment X in US vs. another country, that money is paying a healthcare employee, but the employee is also "paying" with their time. A more efficient system that needs less employees frees up other people to contribute to the economy in more ways. All of those extra people health insurance companies employ because they can get away with it would get other jobs and hence increase the total productivity.

The same argument applies to bloated costs of equipment. If a surgical sponge is $500 vs. $10 elsewhere, i doubt the added benefit justifies the extra $490. That $490 is coming out of someones pocket and its a complete waste.

This graph [1] also shows the same story. The return on investment measured by life expectancy in the US is pathetic. The extra money is just not helping... so its either being misused or stolen, probably both.

https://ourworldindata.org/the-link-between-life-expectancy-...

One difference is that the U.S. system gives a lot to the people who pay a lot. Rich people have access to the most advanced cancer treatments in world, for instance. But child mortality is relatively high among poor people (which is a shame on US.).

Of course, this is indeed bad for efficiency, if you consider health outcomes vs. spending. And inequality: wealthy people live longer. But then there are questions of fairness.

Elsewhere, in a so-called welfare state where I live, all children get very good care and child mortality is low, but for instance, when I consider myself - a fairly well-to-do person although not wealthy by US standards - I pay a lot to the system but it gives me very little attention. No regular health checks that are normal in the US for people who have a health insurance through employment, no screenings for cancer (women get several types of specific screenings but men do not).

(We use 9 % of GDP to public health, vs. 17 % in the US.)

I know that the care is quite good if I run into a life-threatening situation, but with smaller trouble such as broken bones or a pneumonia, I'll be prioritized down after drug addicts who have a more serious condition that they have inflicted themselves. And they never contributed to the system which tells me to go to a private clinic.

Fortunately the social problems resulting in non-contribution are still quite small, but an increasing number of people are not giving anything and are consuming more and more of the resources.

Men get prostate screenings. And why is a broken bone not 'self-inflicted'? Maybe a bad example.

"...an increasing number" - citation?

No screenings for men here.

There are a lot of good responses to your question, sibling comments, but let me provide an orthogonal view: consider how many innovative companies are NOT being formed because worried workers cling to their generous big-company insurance plans -- plans which are so costly to buy independent that they are not real options. This is a major concern for me as an entrepreneur and parent.

“If you go back to 1960 or thereabouts, corporate taxes were about 4 percent of G.D.P.,” Mr. Buffett said. “I mean, they bounced around some. And now, they’re about 2 percent of G.D.P.”

While I guess I have no problem with this statement specifically, it's a bit too close to "the top 1 percent of Americans will pay 45.7 percent of the individual income taxes" : http://www.cnbc.com/2015/04/13/top-1-pay-nearly-half-of-fede...

The problem with the latter statement is of course that it makes it sound like the top 1% is unfairly burdened by taxes, while hiding the fact that the richer they get compared to the rest, the larger a share of taxes they'll pay.

Taking it to the logical extreme, if all income went to the top 1%, they'd pay 100% of income taxes, while the lazy 99% contribute zero! Someone quickly give the rich a tax break!

Do you think the top 1% of Americans consume significantly more government services than an average 1% of Americans?

If not, why should consuming those services cost significantly more money?

It might feel right that rich people should pay more, but that's not how any other market works - why should government services be different?

EDIT: To all of the people saying rich people consume more government services than poor people: you're forgetting about welfare payments. In the UK this is the largest government expenditure, and it is consumed almost entirely by people who are not paying for it.

Because society is not a market. Markets are artificial constructs that serve society. Not the other way around.

I can think of three reasons, from least to most libertarian:

1) You're proposing a flat dollar amount be paid as tax by every citizen. This will be most painfully felt by the poorest. What sort of society do you think this leads to?

2) The rich do employ a lot of people, whose education and safety were provided for by taxes. Then there's all those road and water networks they use to deliver goods to the markets they own, and the large amount of property and contracts they have that are enforced by the state. So yes, I do believe they use more government services than the average person.

3) Plenty of markets work that way: https://en.wikipedia.org/wiki/Price_discrimination Furthermore, in a market, the seller sets the price, and the buyer is free to take his business elsewhere. And there's plenty of countries to choose from - so why should government services be different?

Yes they do consume a lot more government services.

Whole branches of government are set up to protect property in any forms. Outside of life and limb protection, the rich consume property protection more. Land, IP, bank accounts, shares, options, buildings, boats, freight... the rich have it because their property rights are protected by the government.

Because taxes aren't about market services? We, society as a whole, benefit from things that we don't consume. I'm not making use of social security, medicare, food stamps, WIC, or CHIP right now, but it benefits me to not have destitute people. Property owners pay school taxes regardless of if they have children in school because a well educated society is beneficial to everyone. I didn't own a car for over a decade, but my taxes still paid for roads and car-centric infrastructure.

Moreover, I detest that we even got involved in the wars in the Middle East, and was a strong supporter of NOT retaliating after 9/11. My taxes still pay for them.

Taxes have absolutely nothing to do with a market.

Because they benefit more from the society our "expensive" government has created. If they want capitalism without government, move your business to Mexico. What's that? There's a massive divide between the have's and have-not's and you'd never be able to make a profit?

I guess those taxes aren't so bad.

"Do you think the top 1% of Americans consume significantly more government services than an average 1% of Americans?" They obviously do consume more of about everything, including government services. Have you compared the cost to government of several McMansions versus a small rental appartment? Policing cost in an affluent neighborhood? The cost of people flying very often versus not or almost not? Of a heavy SUV versus a humble small car? I'm not even touching other externalities like environmental cost...

"If not, why should consuming those services cost significantly more money?" One doesn't even need the "if not". This can be a perfectly valid political choice.

"It might feel right that rich people should pay more, but that's not how any other market works - why should government services be different?" Because government services are not "any other market". To illustrate that, one could also turn this around and ask "It might feel right that everyone should pay the same, but that's not how government services work. Why should private markets be different?".

Good news is that the amount of health care spending is a choice. E.g. other western countries are running a health care cost to GDP ratio from 10%-13%, sometimes offering vastly superior and equitable outcomes than in the US.

The bad news is that this is a choice Congress and Senate are taking on behalf of the American people. And with the partisan divide and lack of agreement on fundamental values, things won't really change.

Add in a rapidly aging population, and being cognizant of the per capita health care spending steeply increasing at later stages of life, kicking the can down the road won't make the later adjustment any easier...

To bring us costs to western europe levels you need to have 1. Slash labor compensation 2. Slash medicine prices. 3. Reduce amenities in hospitals 4. Reduce medical student debt. 5. Reduce equipment cost 6. Reduce somewhat the freedom of patients to choose doctors and doctors to choose patients. 7. Outright kill hospital prices. 8. Reduce malpractice insurance. Reduce malpractice compensation. 9. Forbid direct medicine marketing to consumers and doctors.

Any of those is hard on its own. Combined - it is impossible.

Why suggest reducing malpractice insurance and reducing malpractice compensation instead of reducing malpractice?

First because reducing malpractice is a goal that does not depend on the way a system is funded. We should reduce medical errors full stop.

The two you mentioned give direct costs increase and indirect in the form of defensive medicine. UnNecessary treatments because the doctor is scared of potential lawsuits could event hurt patients since there is no such thing as procedure without risk or complications.

Considering the plague of lawyers with which USA is burdened, there is no reason to believe that reducing malpractice would reduce malpractice compensation or malpractice insurance.

It's only impossible because it's so had to get everybody to agree on a plan. To reduce healthcare costs, the USA really just needs a leader who's good at making deals.

That is the best subtle trolling I have seen this month. Well played sir.

The real problem with health care is that it's a gravy train for all involved. Doctors, who don't invent anything new and who just practice garden-variety medicine are wildly overpaid. They don't like it be known, but the average doctor earns a quarter-million a year. Totally unjustified.

Then there are the medical device manufacturers, big Pharma and the hospitals. They all are getting rich off the current system. That's what needs to change.

Doctors are so highly paid as a function of their scarcity, which is itself a function of the high barriers to entry (intense schooling, selective admissions, high costs). I think the first 2 barriers are necessary to keep quality high, but doing something about the 3rd could help lower costs by increasing the supply of doctors, and I certainly think that's a better solution than being mad at the doctors for accepting a high salary that's offered to them.

Schooling costs are high because of the length of the program - four years of pre-med, four years of med school. Compare in the UK - five years instead of eight, taking 2 years of pre-clinical courses and 3 years of clinical courses, subsidised to a good extent by the state. UK doctors seem equally skilled, and have minimal student debt.

Scarcity being a function of selective admissions is a tautology. To be useful, selectivity would need to be to some objective minimum standard, rather than enforcing an ever-changing standard that enforces the restriction of the profession to an arbitrary small number of entrants.

I believe that the big pharma and the insurance companies are certainly part of the problem, but rarely do we mention doctors as a contributing factor (albeit relatively small) to the high cost.

The American Medical Association (AMA) does its duty to restrict the supply of doctors [1]. Countries like India, which produces plenty of high quality doctors, does not require aspiring doctors to go through an additional (unnecessary) 4 years of undergrad education. That would hugely cut the cost down in training the doctors.

Secondly, doctors on average makes $200K/year [2] or more. I have four housemates, who were trained in Myanmar (went through five years of medical school there right after high school) and scored above 95th percentile or more in all three steps of their USMLEs, to get into the residency programs in the US. One of them is going into general practice (family medicine) in Virginia and her starting salary is: $210K/year. I have no doubt that she (or anyone who has been trained 5 years in a decent med school--without the 4-year undergrad prior to that) is more than capable of treating generic diseases and illnesses. But this shows that we can train doctors cheaper and that we can reduce their pay by quite a bit (no hard-working person in other profession--except maybe Banking--could easily earn $210K/year to do such a relatively uneventful--in my opinion--job).

I regret quitting med school in Myanmar in the third year. Then, I thought med school training involves too much rote learning (a lot of memorization in organic chem for example) and that I'd rather do something more 'exciting' like tech or math. I was wrong.

[1] https://mises.org/library/how-government-helped-create-comin... [2] https://www.theatlantic.com/health/archive/2015/01/physician...

We probably don't hear about doctors' salaries as part of the problem because they're not a huge problem. A cursory web search indicates theres about a million doctors in the US. If you cut each of their salaries by 100,000 (which probably isn't feasible) then you would save 100 billion.

Sounds like a lot, right? Until you note its just $300 out of $10,000 spent per person each year.

And what's the trade-off? Despite your opinion that it's boring or potentially not very challenging... there are pretty logical reasons why people would still want a relatively disciplined, intelligent and careful person as their doctor. The lengthy and onerous requirements for schooling are filtering for more than just the ability to perform a series of carefully defined procedures.

Americans unable to afford healthcare are just waiting in line to become bankrupt.

A study done at Harvard University indicates that this [medical costs] is the biggest cause of bankruptcy, representing 62% of all personal bankruptcies.

http://www.investopedia.com/slide-show/top-5-reasons-why-peo...

Healthcare costs create huge problems across the economy, increasing the cost of everything from manufacturing to higher education.

Between myself and my employer, it costs about $20,000 to insure my family a year. My employer shares much of the cost breakdown and it's interesting how goes to prescriptions and how much of that goes to specialty drugs to keep a handful of people alive.

$500 million dollar spend on healthcare.

$120 million goes to prescriptions.

$40 million of that went to specialty drugs, representing 1.7% of the prescriptions.

"The average ingredient cost of a single-source brand prescription increased by 14.9% in 2016 to an average $745 per prescription, mainly driven by high-cost specialty drugs. The average ingredient cost of multiple-source brand prescription increased by 49.5% to an average $585 per prescription. The average ingredient cost for a generic prescription decreased by 10.9% to an average cost of $34.04 per prescription. "

Drug prices are high in the US but drug spending overall is nothing compared to overall healthcare costs. With a handful of exceptions, even the most expensive drugs cost 10k a year.

In contrast a few weeks in the ICU can easily top 100k. A visit to the ER is usually 1500 just to walk in the door. Healthcare costs are largely a result too many middle men and overhead from extremely high healthcare provider salary.

> overhead from extremely high healthcare provider salary.

may be there isn't any competition (which could be because it's quite hard to establish a new healthcare clinic/hospital)? Also, are there limited supplies of health care professionals that cause their salaries to grow to such a high number?

'Healthcare costs create huge problems'

Yes, right, problem is abnormal cost of healthcare in US, that should be fixed first. But when only thing you do about this is letting wild free market put price tags as they want and let poor people be hopeless under costs, that is 'unhealthy' for the society.

Health care costs in the US did not start rising faster than the rest of the economy until the government got heavily involved in it in the 1960s.

The free market is not the problem.

> Between myself and my employer, it costs about $20,000 to insure my family a year.

Wow, that's an awful lot. What's the level of service like? For comparison when I lived in Switzerland my family, ie my wife and 2 kids, were about 750 CHF a month. All paid from my pocket.

The level of care was stunning though. That 750 was for single room care, and we had two babies by caesarean. Also the times I was in the emergency room there were zero other people in line. Almost wondered whether it was actually an emergency room.

You can get less comfy care, I think at about 500 per month, sharing a bedroom with one other patient.

By contrast the NHS in the UK is pretty stretched when you go there, but paid via taxes.

How was the deductible? But yes, Switzerland is basically the US system done right.

Though with the cost of education and all the mess around malpractice, it seems very hard to _fix_ the US system.

You know, I don't recall there being a deductible. Maybe there was, but most of the 7K or so expenses from the C-sections were paid by the insurance. Perhaps it was a few hundred, which I tended to hit regardless due to having various minor creme/inhaler/doctor appointment needs.

The system was that you'd pay for little things yourself, like asthma inhalers, and then send in a form to your insurer. So the deductible would have come out of the summary you got each month.

The most insightful and thought provoking analysis of health care I've seen in the last several years is this one:

https://randomcriticalanalysis.wordpress.com/2016/09/25/high...

It argues that the high cost of health care in the United States is explained by its extreme wealth and that health care is a superior good (https://en.wikipedia.org/wiki/Superior_good).

This is a much different explanation than what is given by either political party.

Anyone have any points in support of or against this argument?

Health care costs have an incentive and price transparency problem. If hospitals had to post their prices on the internet and people had an incentive to save money, the costs would go way down. There may be some truth to the argument, but the author ignores the ability of a market to drive down prices and improve products. As it stands, we have a market, but the lack of price transparency causes significant inefficiencies. The government should tweak the current system to require open data standards. This would allow a value-for-money comparison when people choose physicians/treatment and increase the efficiency of the system.

Obligatory Slate Star Codex Link:

http://slatestarcodex.com/2017/02/09/considerations-on-cost-...

Scott Alexander examines "cost disease" in the sectors of health care and education.

Strongly recommend the work on Random Critical Analysis linked to by SSC there.

Approx. zero people reading this will believe the conclusion, but RCA argues that the US is not really an outlier on healthcare costs.

There's a dizzying amount of data and statistics levied for the argument. It's a fascinating read even if you don't agree just because of how much is put into the argument.

https://randomcriticalanalysis.wordpress.com/2014/11/24/nati...

https://randomcriticalanalysis.wordpress.com/2016/09/25/high...

Incredible.

This blogger indeed uses a dizzying amount of graphs, but doesn't mention until the end that he has built his entire argument on the assumption that Americans "choose" to spend their higher income on health care.

That was mentioned at the very start of the 2nd link (see "superior good") and it's true virtually everywhere in the long run (especially in developed countries with reasonably reliable growth in disposable incomes and where we have pretty reliable data). If we want to identify systems that might allow us to contain costs on the margins knowing who spends least or the most is not informative in and of itself. Rather we should be interested in residuals with the best model, as in, who is furthest below trend (as a function of comprehensive consumption or disposable income), what plausibly explains this, and whether are we actually willing and able to implement those sorts of features in our system....

Incidentally these patterns are not only found in health care, the basket of goods has changed and continues to change as countries get richer: https://randomcriticalanalysis.wordpress.com/2017/05/09/towa...

It's his interpretation that people "chose" to spend more money as they got richer. Many other people interpret it differently, when the alternative to paying might be death.

Right, it's just a coincidence that disposable income correlates nearly perfectly with health expenditures at a national level in the long run (and quite well at a subnational level) and that when disposable income falls NHE tracks it and so on and so forth.

P.S., I wrote the blog post.

Perhaps that indicates how effective the healthcare industry in the US is at maximizing their revenue. If the choice is paying or dying, people will pay an unlimited amount.

Except the rich and poor spend pretty similarly in the US and elsewhere. The income elasticity > 1 occurs at a national level....

http://mason.gmu.edu/~rhanson/EC496/SOURCES/LUXURY.PDF

And the better data on price suggests US actually isn't unusually expensive for a high income country and so on and so forth. Much data points to higher volumes of health goods and services as we chase diminishing returns as a society.

I meant my comment about unlimited spending as an philosphical argument, not as a literal data point.

And yes, the biggest problem in the US is unneccessary tests, procedures, drug consumption, etc., and the cause of that problem is a system which is built around maximizing revenue instead of maximizing public health.

But if you look carefully you will find most of this behavior plays out similarly in those few countries with somewhat more comparable wealth (e.g., Norway). The issues that many people think of as being particularly "American" problems are problems that mostly have to do with our high material living conditions (as in, diminishing marginal utility attached to other forms of consumption and increasingly high values attached to human life). Overall health expenditures are increasing equally rapidly in these countries as a function of AIC, disposable income, etc and there is no evidence they are getting any more value for their money (having a healthier populations helps naive comparisons of life expectancy, IMR, etc a ton).

Here are some papers that touch on some of these more fundamental theoretical issues:

https://web.stanford.edu/~chadj/HallJones2007.pdf

http://mason.gmu.edu/~rhanson/showcare.pdf

By this argument, we should also be examining why we spend so much on education. In 2010, the United States spent 7.3 percent of its gross domestic product on education, compared with the 6.3 percent average of other OECD countries.

Surely spending dramatically higher amounts than other countries, with no better effects, is enough to drive us to consider how we can reduce the costs of education - and should make us think long and hard before considering proposals that we should throw even more money at this.

It's surely true that having a well-educated workforce improves productivity, but it's also true that having a healthy workforce does the same. I'm having trouble finding much difference between the two examples.

I really think health care costs in the US are a byproduct of Americans obsession with convenience. Most lifestyles can be lived without any physical activity - the whole country is designed around the car.

Traveling around a bit I've seen other cultures still require people to walk somewhat to get places and people will also just go on "walks" whereas Americans will go for a "drive"

Food culture is also responsible, just jamming food into your face as quickly as possible rather than enjoying a meal is for sure and American thing.

Add all this up and you get 60% obesity rates in adults and getting worse.

There are no sane constraints on the prices. Instead of "price is what the market will bear," it's "the market will bear whatever price." This creates an irrational drain on the rest of the system. Whoever is sucking on that drain is doing well, though.

My grandfather used to get a shot that was $12,000 a pop, and didn't do anything.

Looking from the outside, it seems to me that the root of the problem is not about the health care in US, but about the prices of health related services and products? Prices are so inflated, hospital and medication bills are huge compared to what the same things costs in Europe or elsewhere.

I had kind of hoped that Trump would stumble into single payer health care as a solution for healthcare needs of his base and would somehow get it passed through congress with support from democrats. Alas, nothing of that sort seems likely.

Health care costs would be lower, if more people were able to provide health care service. If the world focused less on rate my sandwich apps, and more on fixing humans, the prices would be much more affordable.

Yes, this is an academic article, but I can think of no better resource for a pretty sane discussion on all the insanities in our healthcare system: http://faculty.chicagobooth.edu/john.cochrane/research/paper...

The thing that is pretty remarkable is that you unfortunately realize just how far either political party is in addressing any of the issues brought in the piece.

Amazon could disrupt providing Health Care services in the US. Current price overhead versus over developed countries is huge, so an efficient provider could shock the whole HC market.

And entirely ignored seems to be the demand side of the question, why is that? Could expenses be higher than we want if we are less healthy that we should be? I see a lot of unhealthy habits associated with the subsequent associated costly interventions required. Just because we see no path forward to affect demand, leaving it out of the discussion will ensure the debate is framed only as which system can provide that volume of healthcare for a little more or a little less.

Question for y'all... Have your health care providers started being more conscious or out-spoken about cost? Mine definitely have, both for prescriptions and procedures.

Would it be a worthwhile idea to open up health care internationally? Maybe insurance companies could create global standards for medical procedures, so that clients could choose in which countries they want to perform a procedure and then receive or pay the difference with regards to the cost of a national procedure. This could introduce some level of competition without jeopardizing quality - or am I missing something?

The pharma industry should open up; it is dominated by corporatism and their monopoly patents driving up prices, which make individual spending on drugs rise till an unaffordable level for the lower income.

Frankly, I just stubbed my big toe and that's a bigger problem than US corporation tax.

Why the U.S. pays more for health care than the rest of the world

https://www.youtube.com/watch?v=gXBPKE28UF0

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