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Comment by throwawaysea | Hacker News Reader

The entire health insurance industry makes ~$25B in profits a year, correct? That doesn't seem overly large considering it is the entire insurance industry.

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It’s not only profit. They also cause a lot of administrative overhead. For example if doctors had to deal only with one insurer or at least one coding system they wouldn’t need four billing assistants as I have seen. In essence insurance companies do a lot of unnecessary stuff. Their profit is only a small part of that cost.

There are two coding systems (ICD - for diseases, and CPT for procedures) that are mandated to use by medicare/medicaid and all the insurance companies use them as well. Most of them even accept the same forms. They need those billing assistants for other reasons.

”They need those billing assistants for other reasons.”

Whatever it is they do exactly it deals with insurance companies. Germany also has private doctors but they have much smaller staff and dealings with insurance are very straightforward. American insurance companies cause a lot of friction. I don’t know exactly why but they do.

Insurance companies are mainly trying to combat fraud. They kick back claims if they are formatted wrong (why did you code an operation on the left knee when the right knee was the problem), or they deem that the work done was improper, unnecessary or does not fit the standard of care. Billing staff also handle accounts receivable and collections.

The biggest problem IMO is how we structure payment for health services in the USA. The fee for service model is highly inefficient and disincentivizes preventative care. All of the current proposals for universal healthcare do not address this fundamental problem, and so long as this remains in place we will continue to have the highest costs in the world. (disclosure, I am working to try and solve this problem)

If you were to pick countries to emulate, I would pick Singapore, Japan, the Netherlands, and Switzerland instead of Canada and the U.K.

Much of the administrative stuff insurers do to prevent healthcare providers from doing unnecessary stuff. In a taxpayer funded system, there would still have to be an entity to double check healthcare providers’ billing.

Such an entity already exists. They're substantially more efficient at it.

https://www.healthaffairs.org/do/10.1377/hblog20110920.01339...

> According to the Kaiser Family Foundation, administrative costs in Medicare are only about 2 percent of operating expenditures. Defenders of the insurance industry estimate administrative costs as 17 percent of revenue.

That’s government. We all know that private companies are always more efficient. Right?

Yes, I agree. I don’t see why Medicare should only apply to those 65+. But until it applies to everyone, insurance companies have to serve that purpose. I worded it confusingly, but I meant to imply that insurance companies’ work is not all waste, since they’re doing a task that someone has to do, even if all healthcare was taxpayer funded.

On the other hand: since automation is eating the useful jobs and we're not getting UBI any time soon, maybe that's for the better?

And the ACA only puts a lid on insurer administrative overhead, not hospital admin overhead....

You can pay execs $100mm a year and have that not be profit. This is why they lobby so hard.

Yes because shareholders love paying executives tons of money so they don't have to collect it themselves... /s

A lot of insurers are non-profits without shareholders, dividends, etc.

We don't need to argue what hypothetical shareholders would do, we have hard facts that health insurance CEOs are getting paid billions, and receiving yearly pay increases that outpace most Americans[1].

[1] https://www.axios.com/the-sky-high-pay-of-health-care-ceos-1...

And another 9% of their revenues is for useless administration (relative to a single payer system). They estimate that if administration and premiums get cut (and thus no profits) as a result of a single payer system, then we would save $615B per year.

https://www.peri.umass.edu/publication/item/1127-economic-an...

The money isn't being pissed away into insurance industry profits.

It's being pissed away when the hospital, and the insurer spend 2 hours arguing over how to bill a $500 procedure. Net cost? $640. $500 for the procedure, $35/hr * 4 hours for the paper-pushers.

Net benefit to the patient? Minus $100, out of their premiums. Would you like to pay cash, or discuss with us a financing plan?

It's being pissed away when the hospital buys bus ads, and the insurer buys superbowl ads. I've not seen a single hospital ad in Canada... Because the hospitals weren't competing for my business.

It's being pissed away when a hospital tries to sneak in a $100 bill for two aspirins, and justifies it by citing how much they spend on charitable care. (Hint: That charitable care is the hospital writing off some other poor bastard's $100 bill for two aspirins.)

That's not large at all. It's about $7 per citizen.

I think you missed a zero. About $80 per citizen. Still a negligible part of premiums though.

The problem with health insurers isn't their profits (though that's a popular political talking point), but rather it is the part they've played in creating/enabling all the inefficiency in the current bureaucracy.

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