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Medicare administrative costs are around 2% of total program spending [1] compared to typically >10%. While what you're saying on the surface may be true from the numbers you are comparing, the fact of the matter is that healthcare costs are becoming more and more expensive during a time when many are experiencing a cost of living crisis.

The US gets a bum deal on costs and outcomes and while we can argue on which specific changes will move which specific needle I think it's clear that one of the major differences compared to the rest of the world is that running healthcare as a for profit enterprise has failed to deliver on the promise of good outcomes for as affordable a price as possible both on an individual and country wide level.

[1] https://www.politifact.com/factchecks/2017/sep/20/bernie-san...

> While what you're saying on the surface may be true from the numbers you are comparing, the fact of the matter is that healthcare costs are becoming more and more expensive during a time when many are experiencing a cost of living crisis.

Which has almost nothing to do with the amount of profits derived from private health insurance - that's only ~1.2% of spending.

Maybe it used to be ~0.8% - that delta is not moving the needle.

But has everything to do with the need to take a closer look at the entire system and how we can do things better.

I feel like focusing on this part of my comment vs. the bum deal part is disingenuous since non-US countries have figured out how to do it for cheaper with better outcomes without the main focus being the up and to the left drive for profit that our current system mandates.

> But has everything to do with the need to take a closer look at the entire system and how we can do things better.

People do that literally everyday.

If there was a silver bullet, we'd take it.

If there is a silver bullet, the first step would be getting rid of the for profit mechanisms.

Instead, because despite data linked in this thread that profit margins are only a few percentage points, Healthcare is an incredibly lucrative field that extracts a lot of money into the private market without delivering results commensurate with the cost to the public.

Add to that lobbying making it incredibly simple and cost effective to influence policy (which comes out in the P&L as a cost of doing business and so isn't tracked as profit FWIW), we are stuck with this situation despite overwhelming evidence that it's a bad deal.

Kaiser Permanente, Providence Health, all the insurers in the BCBS franchise except Elevance, and many others are non profit.

Yet they are unable to provide lower premiums than UNH/Elevance/CVS/Cigna/Humana/Centene/Molina.

Kaiser is a full vertical, you buy insurance from them, you see their doctors and nurses in their outpatient clinics and hospitals, you get medicine from their pharmacies. So why is everyone not choosing Kaiser?

Edit to respond to below since posting limit hit:

UNH had $371B in revenue, not profit, therefore it is irrelevant. If the claim is UNH is excessively profiting, then profit margin is the only metric relevant to the discussion.

Kaiser's managed care organization IS non profit, so it is relevant here. It clearly shows that the managed care portion of the business is not sucking out outlier amounts of profit, because Kaiser's premiums are not different to UNH or any other MCO's premiums. Also, Kaiser's annual revenue is $100B or so, not $4B.

https://about.kaiserpermanente.org/news/press-release-archiv...

If a managed care organizations being for profit or non profit was the straw that was breaking the camel's back, then it would show up as non profit managed care organizations being able to offer much lower premiums.

>say that for profit is the way to go because if Kaiser can't do it then nobody can.

I am not claiming for profit is the way to go (or the opposite). I am saying, within the confines of the US healthcare system, for profit managed care organizations are not THE source of higher healthcare costs.

Kaiser had an income of 4.1B in 2023 vs. UHG's 371.6B in an industry of 4.8T [1]. I'm not sure the point you're trying to make or why it's relevant unless you're asking me to read between the lines on the efficacy of Kaiser as a non-profit vs. their for-profit counterparts (which is what seems to be the case).

edit: I think I missed the last part of your comment in an edit, so to attempt to answer my own questions, it's not a fair comparison beyond just the almost 100x size difference to compare a different business model and scope, provider network, risk pool and geographic presence yet ignore every other developed country in the world and say that for profit is the way to go because if Kaiser can't do it then nobody can.

[1] https://www.reuters.com/business/healthcare-pharmaceuticals/....

I think this is a statistical artifact. Medicare preferentially selects the cohort of customers most likely to demand services from providers (that's the premise of the program). Fixed fees in, floating costs out. If you extended Medicare to 30 year olds, that 2% would, mechanically, soar; the same inputs from customers, but drastically lower service delivery.

The same statistics are similar for Medicaid too but also missing the forest for the trees in that for profit seems to be the main differentiator with the US vs. other parts of the world. There are plenty of models around the world that show this works and it works well.

First it's the government can't do this, then it's the government wouldn't do this because of this reason while ignoring that the US healthcare system is spending more than any other country and missing the mark on outcomes. Every other developed country in the world has figured this out. While not perfect, they're paying less and broadly getting better outcomes.

This is my issue with M4A: it seems clear from the numbers that the problems in our system --- and I think they're grave --- are almost entirely on the provider-side, and Medicare has, if anything, locked us into those cost structures. If anyone's curious why there's a scarcity in physician care hours in the US: Medicare rate limits the number of new doctors allowed into the system every year, through the residency funding system.

Agree that it's not perfect, but I do feel that we could take 60-80% of the money we're currently spending and fix this and any other issues that come up and get in the way of improved outcomes like the rest of the world does.

I don't know why what you're describing happens, but my money would be on some triage that needs to happen due to limited funding since so much of our spending goes into private healthcare solutions.

I really just have two things to say on this subthread:

* Medicare would not have 2% overhead if it served 30-year-olds.

* Medicare is in fact the primary constraint on the supply of doctors in the US system.

Fair, don't think I disagree with you on these points. I just believe we can do significantly better. In a similar vein, I believe:

* For profit motives get in the way of cheap, effective healthcare. Maximizing shareholder value leads to higher prices, overutilization of expensive proceedures and prioritization of profit generating services vs. preventive care or basic health care needs and improved outcomes.

* Incentives are currently heavily skewed to the point that providers and insurers are more likely to treat symptoms rather than address root causes or preventive measures leading to a cycle of chronic illness and higher long term costs.

* Access to healthcare should not be tied to socioeconomic status. Employer sponsored insurance and high out of pocket costs create significant barriers for lower income individuals and families, dragging the average down (i.e. the system is fine if you can afford it).

* Administrative complexity in the current system massively inflates cost. The fragmented nature of private insurers, billing systems and out of network shenanigans results in massive inefficiencies and expenses that contribute nothing to patient outcomes. I am confident this comes out to more in savings than the %age profit that is referenced in other places in this thread.

  Medicare would not have 2% overhead if it served 30-year-olds.

Swing and a miss. Medicare does cover 30 year olds, you just have to be sick enough to qualify. So in fact Medicare covers the least profitable young folks.

Edit since responding to your prolific bad faith arguments got me throttled:

Your argument is that younger people would magically add to the overhead incurred by Medicare. My point is that Medicare's low overhead already includes younger people who are more likely to use expensive modes health care more frequently than the typical younger person. And even then Medicare denies claims at a much lower rate than for-profit insurance companies.

But somehow, adding more, healthier younger folks to Medicare would add to the overhead?

Nah.

Edit since I might as well address another bad faith argument:

  Medicare rate limits the number of new doctors allowed into the system
  every year, through the residency funding system.

Congress controls that funding. Medicare is the administrator. At best your phrasing is disingenuous.

I don't think this point is helping your argument the way you think it is.

I think the issue here is that you don't understand my argument. Fixed prices, floating costs. Do the math. Your point would make sense if 30 year olds paid something differently than 65-year olds.

Honest question as someone who prefers single payer but acknowledged it's not a silver bullet: how much of the costs are nurses and doctors vs. admin? It seems to me there's a lot of overhead in passing the bills around to get paid. I just had my appendix out last year and got billed 8 times by 8 different firms, each with payment portals, call centers, billing providers, etc. I assume there's a lot of inefficiency internally too.

~40-60% is direct healthcare - not including admin or insurance labor costs.

Pharmaceuticals is ~9%.

Health insurance profits are 1.2%.

Other profits are x%.

Medical equipment, devices, hospital rents, etc are y%.

Most of the remainder is admin & insurance costs - only about ~2% of which is private health insurance operating costs (largely labor).

You're ignoring the fact that all of the large insurers are increasingly also the healthcare providers.

UnitedHealth Group is the owner of both United Healthcare (the largest insurer in the country) and Optum (the largest healthcare provider in the country).

Part of UHG's low profit margin is its liberal use of intra-company eliminations, where transactions between Optum and United Healthcare get zeroed out and don't count toward profit despite it ultimately generating more dollars in the parent company's coffers.

I have good news! If you move it to the public sector, you will effectively pay doctors less money for the same work. That's because the way it works currently is that the doctors have to deal with private insurance bureaucracy. By freeing them from this responsibility, they have more time to take care of patients, which should effectively gets you more medical bang for your buck.

You're describing the federal system being massively more efficient - which is theoretically possible - but rarely happens in practice.

It is already established fact that Medicare is more efficient than private insurance. https://www.healthaffairs.org/do/10.1377/forefront.20110920....

Assuming that your numbers are correct:

You eliminate ~1.2% of total healthcare spending on private insurance profits.

Then you eliminate ~37% of ~14% of ~27% total healthcare spending on insurance labor costs = ~1.5%.

* Article states medicare is ~37% more efficient.

* Insurance companies are required to spend AT LEAST 80% of premiums on actual patient care (~6% of the remaining ~20% are profits - already taken out in the previous ~1.2% of total health care spending).

* ~27% of total US healthcare spending is on private insurance premiums.

You end up with ~2.7% cheaper healthcare in the ABSOLUTE best case.

That's not moving the needle.

You are absolutely ignoring the fact that you don't just get cheaper care (and lets also remember that spending is inflated by the bullshit of insurance "negotiation"), but oh, now everyone has healthcare, not just those employed with a decent employer who provides it.

- That literally moves the needle. You don't want your healthcare to cost 2.7% cheaper? If you were buying a TV and Best Buy sold it for $1000 but Costco sold it for $973 you wouldn't buy it from Costco?

- Insurance companies being required to spend at least 80% of premiums on patient care logically incentivizes them to keep patient care costs high, because if costs go down then profit goes down. If your MRI costs $1000 then the insurance company is allowed to make $200 in profit. If your MRI costs $2000 then the insurance company doubles their profit to $400.

- Removing private insurance would give public healthcare far more negotiating power on costs. While there is a limit to profit margins made by insurance companies, there is no limit to the profit margins made by medical suppliers, pharmaceudicals, etc.

- Removing non-paying patients would reduce prices charged by hospitals. Hospitals are essentially sub-prime lenders making loans out where no assets are involved. They have to charge insurance companies more money to cover everyone else who doesn't pay. Moving to healthcare paid for automatically completely removes the issue of unpaid bills, collections, medical bankruptcies (how much do the salaries of bankruptcy courts, judges, lawyers remove from the healthcare system?).

- You're arguing against the established fact that all other countries besides the United States spend less on care. If the United States tried anything else it would be likely to reduce costs.

The federal system already runs a much more efficient enterprise as evidenced in medicare and medicade since their establishment in the 60s.

It seems to me like centralized governments have had a rise that whether impressive or just typical of an average country, was thought to be impossible for them. Couldn't the past performance be down to the absurd costs of data collection and management in the past and the lack of scaling benefit when centralizing gigaflops of secretaries or the costs of doubling a very small number of bytes of information on every household at that time?

It is already established fact that Medicare is more efficient than private insurance: https://www.healthaffairs.org/do/10.1377/forefront.20110920....

6.1% profit margins is a lot when it should not be for-profit in the first place. Why is anyone making a profit off of administering necessary services?

What is the operating profit of your local firefighter brigade?

What is the operating profit of the interstate highway system?

What is the operating profit of your local water/sewer department?

Not a single person in this country doesn't need healthcare at some point. It's not an optional for-profit good.