The problems are so vast it is difficult to even describe to outsiders. For example, if I purchase a particular medication at a local pharmacy, it costs $25. However, my insurer mandates that I purchase it via their Pharmacy Benefit Managers (PBM) Optum, which charges $125. Easy enough right, you price shop? Well then it doesnt count towards your deductible. The whole thing is an elaborate trap to not pay.
Sometimes it is easier to just pay cash without insurance altogether. You need the medication today and dont have two weeks to fight it out with letters and forms, then it definitely doesnt count towards your deductible (and also, what is the purpose of the pharmacy coverage insurance?)
Prescriptions are a total racket. A good portion of actual medication literally costs a few dollars at most. Then there’s layer upon layer of bloat and bureaucracy that add no value but drive the cost up 10x or more. It’s totally bonkers.
When these Rx cards and Marc Cuban CostPlus drugs came out where you just pay cash and a fraction of the price I thought there must be some catch or scam here. But turns out no, they’re just cutting out all the middleware bloat and selling you the meds at a defensible markup plus their logistics costs. Love what these guys are doing.
The fact that something like that even exists highlights how corrupt and broken the health insurance companies have become. It’s their job to get better prices at scale and yet somehow they manage to sell at prices far worse that Joe Blogs off the street can get with cash.
In many ways the quality of care in the US is far better than what folks get elsewhere, which in part is probably why there isn’t a total patient rebellion, but the US’s challenges are all rooted in massive administrative overhead. If we got rid of that and had a lean system where healthcare providers can do their job without interference there would be plenty of money to go around for amazing care at lower cost.
Health care is so broken that I think it will unbreak itself.
You can eliminate most of the problem by mandating true cost billing by hospitals (get rid of their insurance mandated 500%+ markups to make it look like your insurance does anything at all besides make your care as costly as possible).
As you said, it's oftentimes cheaper to buy drugs without insurance.
The average person would quickly find out that insurance doesn't pay for anything at the hospital (most of the time).
~80% of healthcare spending is already at the tail end, and the state already covers most of that through Medicare and Medicaid.
The bottom ~50% of spenders (healthy people) only spend ~3% in total of healthcare (~$900 per year per person, about 1 month's PREMIUM).
Health insurance is a MASSIVE tax on the bottom ~3% of spenders (~50% of the population), when the state ALREADY covers the vast majority of people that need covered for tail end expenses.
Think about this: the MEDIAN adult in the US pays <$1k in personal income tax! Yearly health care premiums (that do nothing) are 3x that! 75%+ of the median person's true tax is going to health insurance that does NOTHING for them.
We already have the European model. Health insurance as it is is a tax. It just could not be designed to function more poorly than it does for the average healthy worker.
It benefits literally no one besides the health insurance industry which does not employ that many people, and is not strategically important for national security.
If the state completely covered the tail, and we had true billing at hospitals, almost no one would need or want insurance besides people that already have it through Medicare and Medicaid.
Another example, I needed to rent some medical equipment which was pretty inexpensive. But for some unfathomable reason the insurance required that if that was rented, I also had to rent some other equipment that was like 20x as expensive that I didn't need at all. As well as purchase some disposable stuff, that I would not use, and could not be returned or used by someone else. And paying for just the things I actually needed myself without insurance wasn't an option.
There’s so much rampant profiteering in the US healthcare system it’s unbelievable. Other countries look at it from afar in utter disbelief. I’m glad I had no serious health problems when I lived there 25 years ago (and I had health insurance via my employer).
In the UK prescriptions are effectively capped at about USD125 per year:
I recently collected 4 prescriptions from my local pharmacy (3 for temporary conditions, the other one was ADHD meds which I’ll be on for the foreseeable future) and the pharmacy didn’t even want to see proof of my prepayment certificate, I just said I had one and they ticked the relevant box and handed me the prescriptions.
(The implication is that the NHS will check this and come after me if I was lying.)
Don’t get me wrong, there’s lots wrong with the UK healthcare system but the access to regular medication has very few barriers.
try being diabetic ugh. I am constantly grinding against made up barriers. 150$ in strips and about 500-700$ for insulin. Meanwhile I meet a friend and he's just buying the base insulin from walmart for about 50$ a vial.
Your example captures two distinct extraction mechanisms in one transaction. The $25 to $125 gap is spread pricing: the PBM pockets the difference between what they pay the pharmacy and what they bill the plan. The deductible non-application is a separate mechanism: by routing through their own mail-order or in-network channel, the PBM ensures that cost doesn't reduce your out-of-pocket maximum, extending your exposure for the year.
The FTC's 2024 Interim Report documented $7.3B in specialty drug markups from the Big 3 PBMs (CVS Caremark, Express Scripts, OptumRx) in a single year. The Ohio Auditor found PBM spread pricing extracted $224.8M from one state's $2.5B Medicaid drug budget annually. This is the subject of the next issue being released this Sunday.
Your example captures two distinct extraction mechanisms in one transaction. The $25 to $125 gap is spread pricing: the PBM pockets the difference between what they pay the pharmacy and what they bill the plan. The deductible non-application is a separate mechanism: by routing through their own channel, the PBM ensures that cost doesn't reduce your out-of-pocket maximum, extending your exposure for the year.
The FTC's 2024 Interim Report documented $7.3B in specialty drug markups from the Big 3 PBMs in a single year. The Ohio Auditor found PBM spread pricing extracted $224.8M from one state's $2.5B Medicaid drug budget annually.
Oh you must have United Healthcare. Yeah they do this with IVF drugs too, and I’m sure with chemotherapy drugs. Plus it all has to be shipped so if you’re mid-cycle and the doctor orders a different medication you either waste the benefits or pay out of pocket. And they structure all their pricing so the fertility benefit covers a cycle but the medications aren’t fully covered so you pay out of pocket in medication that’s 3-4x as expensive as the cash price would be at a pharmacy like Alto.
I pay cash for a medication because the insurance won't pay for the 90 day supply and it's a hassle to deal with it every month. It's $70 for me to pay for 90 days out of pocket versus paying a $20 deductible each month. I'm only paying $10 extra to avoid the hassle. Worth it.
Healthcare administrative overhead in the US is pretty huge and has been for a long time. Back in the early 90s I worked on claim processing software and I recall it being discussed as being around a third of healthcare costs.
Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider.
Administrative spending accounts for between 15% and 30% of total medical spending, with lower estimates covering only billing- and insurance-related expenses, and higher ones including general business overhead such as quality assurance, credentialing, and profits. https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/
I see a lot of the comments operating from an empirical framing. This is valid analysis and is good; we should want to understand the waste in the system as it stands.
However, that isn't enough. US healthcare is wildly inefficient because the paying customer is different than the serves customer. This has been known for sixty years, since Arrow published his paper (he identified four reasons, three of which are not exclusive to healthcare and seem to be mitigated well in other industries). I'm surprised people posting can't quite see this: when you go to the doctor, would you call the experience efficient? You check in, then wait, then are called back, tell the nurse or PA why you're there, wait, see the provider who asks you again why you're there, has a short exam, wait, finally get all the paperwork and sign out.
If you have labs or tests, you then wait again. And of course if you need a specialist, you wait again, sometimes for months. If you need any sort of "specialty" medication or equipment, then you REALLY wait, as specialty pharmacies, DMEs and the like jump in.
The whole system is woefully inefficient, and overhead is only a part of the explanation. No one knows what anything costs, and the people who pay (insurance providers, the largest of which is the US Government) want to believe they're not getting scammed - they still are, but at an acceptable level.
The question we ought to ask is how we can buy better health outcomes for people. And I think part of the answer is that in most cases, individuals and families themselves must allocate resources they control to make this happen.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD. That gap is roughly $3 trillion per year.
The difference in life expectancy will be influenced by multiple factors and may have more to do with diet and lifestyle than with healthcare.
Japan also spends less per capita than the UK, France or Germany. The US spends a lot more than any of those so the US system is bad value for money.
I buy that the locus of American overspending is in fees charged by providers (my understanding is that a further principle component of that spending is in end-of-life care).
The problem, though, with going after pharma costs, and pharma benefit managers is that pharma is a relatively small component of overall spending; it's less than 10%. That is to say, you could make all pharmaceuticals entirely free, and we'd get at best a 10% discount on what we pay. I don't think any of us would be satisfied with that!
This is data from the most recent (as of last year) CMS NHE:
This project reminds me of a book I highly recommend called An American Sickness. It sheds a lot of light on the same sorts of issues.
One underlying, perverse incentive behind many of the problems is that insurers are regulated based on percentages of spending rather than total costs.
The US passed laws meant to limit marketing and overhead that tied insurers economics to the size of the overall medical bill... which means as healthcare spending rises, the dollars they’re allowed to retain can rise too, which basically means they're incentivized to drive costs up rather than down.
Challenge is the whole system is just a mess. Medicare probably lays too little. Commercial insurers have formed a mountain of red tape and bureaucracy and arguably pay too much, although individual bills (EOBs) are rarely logically defensible against any scrutiny.
Healthcare providers try and combat all this by literally just making up pricing and trying to negotiate something while also having bloated administrative structures that raise costs for all.
Nothing about the current state of the healthcare system makes much sense to anyone that tries to peel back the onion.
Medicare prices are too low to operate on. They generally factor in the bare minimum or slightly less for the variable costs of a procedure but severely under value the fixed costs of providing the same procedure. So those costs largely get pushed to commercial payors as those are the only ones who can shoulder it.
There’s plenty of arguements about waste and executive compensation but when I was a healthcare CFO we had our financials separated where I could see individual hospital performance and all the executive/corporate stuff was separate and it still was an issue as basic capex was hard to keep up with in a hospital that had a low % of commercial patients.
Author here. The 254% figure comes from RAND Round 5.1. I built a Python pipeline on CMS HCRIS cost reports (FY2023, 3,193 hospitals) to compute cost-to-charge ratios by ownership type. The surprising finding: nonprofit hospitals have a median markup of 3.96x actual costs. All scripts are in the repo. Happy to discuss methodology.
Lots of people are saying nonsense here. The actual reason commercial insurers pay more is that's the only way to can make more profits.
Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money.
Huge chunk of the costs come from the fact that Doctors pay astronomical malpractice insurance rates in some states with no tort reform. Some have to spend more than 100k on insurance - 1/3 of their total pay. Since some states allows multi-million dollar judgments from juries that raises insurance everywhere, which raises not only prices for everyone but also dramatically contributes to more procedures and tests being done at even higher costs to avoid liability. The risks of having your entire livelihood wiped out chases out doctors from those states and reduces availability of care for patients as well. If you want objective cost comparison, compare Veterinary care which has similar consumables and training, but no insurance and liability impact on prices.
Am I completely tripping out or does rexroad's profile use a template where they were supposed to fill in a blank but forgot? "Former [your background if relevant]".
Really opens my eyes to all the other politics posting accounts that have a similarly constructed profile description .. But of course, they'll never be banned and instead they get front page of HN and hundreds of upvotes.
I saw Jim Clark (founder of SGI, Netscape, Healtheon) talk one time about entrepreneurship. He said something that compactly explains a lot of issues humanity faces in general: "One person's inefficiency is someone else's bottom line."
A lot of the things that the original post shares has this characteristic. Sure, things in US healthcare are wildly inefficient, but that's how a lot of these companies make a lot of money. And they will lobby and fight to the death that cash flow.
Until we eliminate for-profit health insurance companies, i will never be convinced this isn't anything other than a massive scam to over-inflate costs, and inflate insurance margins as much as the people can tolerate.
Im sure big-pharma has an interest in over-medicating too, but that should be solved by transparent pricing.
It still blows my mind i cant window shop hospital procedures.
The opaque-ness of medical billing in the US only further favors the for-profit insurance company margins.
Burn it all down. Single-payer for all. I really have zero sympathy for insurance companies who pride themselves on denying their paying clients life-saving care in favor of shareholder returns. It's such a crazy moral hazard that really highlights a sickness in America.
Public perception is that the US is not willing to pay for universal healthcare. However, the US spends enough money, it just spends it inefficiently.
The US spends ~$900 Billion a year on Medicaid [1] and ~$1.1 Trillion a year on Medicare [2]. If the US spent this money as efficiently as Japan (or UK [3], ...) it could pay for Universal Healthcare without increasing its budget.
There's so much culturally different here that blaming just the differences in the system of health care is effectively meaningless.
Yearly physical exams are much more thorough in Japan. Unless you are optimally fit, you will be prescribed lifestyle changes to make and there is a strong expectation that you will work hard on these. Your employer will be involved. There is _tremendous_ social pressure if you are overweight.
Healthy food options are ubiquitous there with healthy and cheap meals available 24/7. Combini food certainly has bad options but nothing compared to American fast food or the American diet generally.
There are other health problems that are significantly overrepresented in Japan compared to the western world. Alcohol, smoking and stress-related illnesses. Liver & Kidney diseases. Peptic ulcers, GI problems in general.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD.
Ethnic Japanese in the US live have about the same life expectancy as Japanese living in Japan do (within 1 year). US GDP per capita is about 2.4x Japan's. So the numbers don't look nearly as bad when you adjust for that. The higher drug prices in the US are definitely part of it, part of it is our population is less healthy in general (fatter, worse diet, more drug and alcohol abuse), but part of it is Baumol's cost disease[0]. Biggest barrier to lowering healthcare costs in the US is it probably requires paying doctors, nurses, etc. significantly less and most of them work hard and feel like they deserve to be paid as well as they do.
Edit: to some extent high US drug prices are a public good that subsidizes healthcare for the rest of the world. I don't know the data but I would guess the US is responsible for a disproportionate share of new drugs.
Doctors and other providers bill for each individual thing they do. But that means that their incentive is to do as much as possible, so they can quickly rack up billable codes.
It's like if developers billed their employer per line of code they wrote: the incentive is for churn, when it should be for slowing down and thinking about quality.
I like this. It'd be great to see such a table of the key issues with proposed solutions, to highlight how the waste isn't an insurmountable impossibility to solve. Having said that, federal lobbying by the healthcare industry was $750 million in 2024 [1], and this is the blocker that needs to be addressed first to be able to enact change.
> Japan spends ~$5,790 and has the highest life expectancy in the OECD
Is Japan's life expectancy because of its healthcare or culture? I'm pretty sure Americans would not live to the same age as Japanese even with Japanese healthcare because of our low nutrition high sugar diets...
Firey take, but health insurers are not the problem they are made out to be. They're on your team and benefit from lower prices just as much as you do. They don't make any money either, don't argue with me, buy their stocks if you are so convinced and see how that goes over.
Health care providers carry immense blame. It's full of passionless people in it for the outsized paychecks, who once inside will just seek whatever local minimum to stay employed.
I'm curious to read that. I worked for a PBM back in the 90s/early-2000s. When I was hired, it was just a job; I had no idea what the business did to make money. After working there a few years and learning - well, I would've felt better about myself if I had become an actual drug dealer, selling cocaine and meth. That's not a huge exaggeration.
This is a believable result. Meta-analysis is 141-259% [1].
Three reasons:
1. Medicare has quasi-monopolistic negotiation power that private insurers can only dream of -- Medicare spend two-thirds of all the private insurers combined. That's why private insurers would combine in a heartbeat if the FTC allowed it.
2. Moreover, that Medicare volume is concentrated in a specific segment of the market. If many providers dropped expensive United contracts, the insured people/companies might move to a new insurer. But Medicare's base will never leave.
3. Since Medicare covers older individuals, often on a fixed income, there is natural discriminatory pricing. (Think of the "senior discount" at your local entertainment venue.)
Does anyone here remember how health care was delivered before medicare and medicaid was enacted in 1965? It was not pretty. Prices were low then because it was all private pay and charity. Why do you think so many hospitals are named after saints? The church made a significant contribution to running healthcare. But when the govt got involved in 1965, the MBAs started salivating. Now we have a system that is built around govt style procurement that we cannot afford. As our population ages, as salaries continue to remain flat, we will have hard choices to make.
It's great to see work being done to highlight an issue but I do wonder what background does the author have? Would recommend gestalt/cleveland as a good grounding, the visualizations is editorial rather than analytical.
Choosing US versus Japan, which Japan has the lowest cost and highest life expectancy in the OECD, it's cherry picking. I'd recommend showing the full distribution of OECD per-capita spending rather than just a single cherry picked comparison.
This also is troubled by McNamara Fallacy, we're looking at metrics that are qunatifiable but ignoring what can't be measured or overlooked, is speed of access being considered, how about innovation incentives, quality and outcomes variation across systems, patient choice and flexibility, in addition to workforce compensation (nurses and physicians in the US earn significantly more). Where are the trade-offs?
Summary Statistics can be dangerous. 254% of medicare is a single ratio summarizing enormous variation across thousands of hospitals and procedures. Median markup of 3.96x inherently hides the distribution, some hopsitals may be higher or lower, why is that?
I think the biggest one to me was the confirmation bias, the $3 trillion gap that represented 'fixable waste' was the conclusion. Every price difference is interpreted as waste rather than investigating the potential cost drivers, was there a null finding framework in place where US spending appears justified or is it all bad?
Overall, glad someone is looking into the data and pulling insights, please don't take this as discouragement just a comment from the peanut gallery.
I recently had a preventive CT angiogram and the cash price was $500 and the price with insurance was going to be $1000. The system we are in makes no sense at all.
When you really dig into the difference it's metabolic health that is driving most of it, and that will be fixed by agricultural and food regulation for the most of it, starting with going with the whitelist system that japan and the EU have for food additives & manufacturing processes vs. the wild west that is GRAS in the USA, and way more strict food quality / inspection standards than you would think.
Author here. Issue #4 is now live — pharmacy benefit managers.
Three companies process 80% of US prescriptions. The FTC spent two years
investigating them and documented $7.3B in specialty drug markups at
PBM-owned pharmacies alone. Ohio's state auditor found $224.8M in spread
pricing extracted from one state's Medicaid program in a single year.
Six mechanisms, $30B/year booked conservatively. Running total across
four issues: $128.6B.
We've collectively decided the nightmare of employer based health insurance is a good idea.
Single payer healthcare will never happen.
Imagine if you will an Apple farmer willing to supply an entire town for a set amount per person.
One town, call it NordicTown says this is a great idea. Everyone chips in.
Another town, Jamestown has lively debate on the issue, but half the population believes unworthy people will get apples.
Since it's the policy that if anyone who shows up at the apple market starving they'll always get an apple, the apple farmer figures out they can bill the town for whatever they want.
Jamestown then ends up implementing special taxes to pay for poorer people to have apples. They could actually extend this to cover everyone without raising taxes.
But this will never happen. Someone you consider lazy might get a free apple. So you gladly pay 3 times as much.
Everyone in America is a single expensive illness away from ruin. We like living in a dystopian nightmare where you have to pick between medicine, a car note and rent.
Did I mention Jamestown residents who relay on free apple programs regularly vote against free apples?
You and I look with dismay at the high prices, but remember that a million hospital administrators are high-fiving themselves. So ideas like "just cut waste" are opposed by a large group with a lot more skin in the game.
"Our high spending is overwhelmingly a product of our high incomes and if other OECD countries had our exceptionally high material standard of living most of them would be spending very similarly, with similar utilization, similar intensity, similar prices, and otherwise not obviously better overall outcomes."
Not to hold the commercial insurers' balls here, but if I were a doctor, I'd probably demand more from them. The patient age distribution is not uniform. Most patients are going to be old. If medicare gives me peanuts, I just have to deal with it, for if I don't accept whatever crumbs medicare sends my way, I no longer have a practice. If a private insurer tries to throw me peanuts -- especially when that insurer's customers only make up a percent or two of my practice -- I can easily tell them where to shove those peanuts, so they had better pay well.
Correction on ownership breakdown: A CMS cost report expert flagged that my CTRL_TYPE mapping in the HCRIS processing script was wrong — I had for-profit and nonprofit hospital categories swapped. The corrected figures: for-profit hospitals have a 4.11x median markup (highest), nonprofits 2.46x, government 2.22x. The 254% commercial-to-Medicare finding ($73B savings estimate) is unaffected — that's from RAND, not my HCRIS analysis. Corrected code and a full audit report are on GitHub. This is exactly why the code is open-source.
I think the problem is the system is designed to inflate what is being done to the point it's barely affordable. This new treatment requires more equipment and time? No problem, it's x% more effective, so it gets rolled out. And as medicine expands, the opportunities to make it marginally better also increase.
If what we defined as care was constant, it would get cheaper over time. But it doesn't stay constant.
As a European I would think a large part of the problem is that Americans are just sick more seriously and often. Your car culture, quality of food, and general preventative healthcare accessibility seem all terrible there. The prevalence of obesity in younger population is staggering. In my (engineering) programme I see one very obese person and a couple fairly overweight, but that's about it.
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Sometimes it is easier to just pay cash without insurance altogether. You need the medication today and dont have two weeks to fight it out with letters and forms, then it definitely doesnt count towards your deductible (and also, what is the purpose of the pharmacy coverage insurance?)
When these Rx cards and Marc Cuban CostPlus drugs came out where you just pay cash and a fraction of the price I thought there must be some catch or scam here. But turns out no, they’re just cutting out all the middleware bloat and selling you the meds at a defensible markup plus their logistics costs. Love what these guys are doing.
The fact that something like that even exists highlights how corrupt and broken the health insurance companies have become. It’s their job to get better prices at scale and yet somehow they manage to sell at prices far worse that Joe Blogs off the street can get with cash.
In many ways the quality of care in the US is far better than what folks get elsewhere, which in part is probably why there isn’t a total patient rebellion, but the US’s challenges are all rooted in massive administrative overhead. If we got rid of that and had a lean system where healthcare providers can do their job without interference there would be plenty of money to go around for amazing care at lower cost.
You can eliminate most of the problem by mandating true cost billing by hospitals (get rid of their insurance mandated 500%+ markups to make it look like your insurance does anything at all besides make your care as costly as possible).
As you said, it's oftentimes cheaper to buy drugs without insurance.
The average person would quickly find out that insurance doesn't pay for anything at the hospital (most of the time).
~80% of healthcare spending is already at the tail end, and the state already covers most of that through Medicare and Medicaid.
The bottom ~50% of spenders (healthy people) only spend ~3% in total of healthcare (~$900 per year per person, about 1 month's PREMIUM).
Health insurance is a MASSIVE tax on the bottom ~3% of spenders (~50% of the population), when the state ALREADY covers the vast majority of people that need covered for tail end expenses.
Think about this: the MEDIAN adult in the US pays <$1k in personal income tax! Yearly health care premiums (that do nothing) are 3x that! 75%+ of the median person's true tax is going to health insurance that does NOTHING for them.
We already have the European model. Health insurance as it is is a tax. It just could not be designed to function more poorly than it does for the average healthy worker.
It benefits literally no one besides the health insurance industry which does not employ that many people, and is not strategically important for national security.
If the state completely covered the tail, and we had true billing at hospitals, almost no one would need or want insurance besides people that already have it through Medicare and Medicaid.
There’s so much rampant profiteering in the US healthcare system it’s unbelievable. Other countries look at it from afar in utter disbelief. I’m glad I had no serious health problems when I lived there 25 years ago (and I had health insurance via my employer).
In the UK prescriptions are effectively capped at about USD125 per year:
https://www.nhsbsa.nhs.uk/help-nhs-prescription-costs/nhs-pr...
I recently collected 4 prescriptions from my local pharmacy (3 for temporary conditions, the other one was ADHD meds which I’ll be on for the foreseeable future) and the pharmacy didn’t even want to see proof of my prepayment certificate, I just said I had one and they ticked the relevant box and handed me the prescriptions.
(The implication is that the NHS will check this and come after me if I was lying.)
Don’t get me wrong, there’s lots wrong with the UK healthcare system but the access to regular medication has very few barriers.
The FTC's 2024 Interim Report documented $7.3B in specialty drug markups from the Big 3 PBMs (CVS Caremark, Express Scripts, OptumRx) in a single year. The Ohio Auditor found PBM spread pricing extracted $224.8M from one state's $2.5B Medicaid drug budget annually. This is the subject of the next issue being released this Sunday.
The FTC's 2024 Interim Report documented $7.3B in specialty drug markups from the Big 3 PBMs in a single year. The Ohio Auditor found PBM spread pricing extracted $224.8M from one state's $2.5B Medicaid drug budget annually.
Insurance is (should be) addressing the risk of unexpected expenses that you cannot afford. Not predictable, small expenses that everyone has.
Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider.
In 2021, the U.S. spent $1,055 per capita on healthcare administration, while the second-highest country — Germany — spent just $306 per capita, Japan is $82. https://www.pgpf.org/article/almost-25-percent-of-healthcare...
Administrative spending accounts for between 15% and 30% of total medical spending, with lower estimates covering only billing- and insurance-related expenses, and higher ones including general business overhead such as quality assurance, credentialing, and profits. https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/
The Center for American Progress estimates that health care payers and providers in the United States spend about $496 billion annually on billing and insurance-related (BIR) costs alone. https://www.americanprogress.org/article/excess-administrati...
The time burden on physicians is staggering — estimated at $68,000 per physician per year spent dealing with billing-related administrative matters. https://www.pgpf.org/article/almost-25-percent-of-healthcare...
However, that isn't enough. US healthcare is wildly inefficient because the paying customer is different than the serves customer. This has been known for sixty years, since Arrow published his paper (he identified four reasons, three of which are not exclusive to healthcare and seem to be mitigated well in other industries). I'm surprised people posting can't quite see this: when you go to the doctor, would you call the experience efficient? You check in, then wait, then are called back, tell the nurse or PA why you're there, wait, see the provider who asks you again why you're there, has a short exam, wait, finally get all the paperwork and sign out.
If you have labs or tests, you then wait again. And of course if you need a specialist, you wait again, sometimes for months. If you need any sort of "specialty" medication or equipment, then you REALLY wait, as specialty pharmacies, DMEs and the like jump in.
The whole system is woefully inefficient, and overhead is only a part of the explanation. No one knows what anything costs, and the people who pay (insurance providers, the largest of which is the US Government) want to believe they're not getting scammed - they still are, but at an acceptable level.
The question we ought to ask is how we can buy better health outcomes for people. And I think part of the answer is that in most cases, individuals and families themselves must allocate resources they control to make this happen.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD. That gap is roughly $3 trillion per year.
The difference in life expectancy will be influenced by multiple factors and may have more to do with diet and lifestyle than with healthcare.
Japan also spends less per capita than the UK, France or Germany. The US spends a lot more than any of those so the US system is bad value for money.
The problem, though, with going after pharma costs, and pharma benefit managers is that pharma is a relatively small component of overall spending; it's less than 10%. That is to say, you could make all pharmaceuticals entirely free, and we'd get at best a 10% discount on what we pay. I don't think any of us would be satisfied with that!
This is data from the most recent (as of last year) CMS NHE:
https://nationalhealthspending.org/
One underlying, perverse incentive behind many of the problems is that insurers are regulated based on percentages of spending rather than total costs.
The US passed laws meant to limit marketing and overhead that tied insurers economics to the size of the overall medical bill... which means as healthcare spending rises, the dollars they’re allowed to retain can rise too, which basically means they're incentivized to drive costs up rather than down.
Here's a link to the book: https://www.helmpublishing.com/products/an-american-sickness...
Healthcare providers try and combat all this by literally just making up pricing and trying to negotiate something while also having bloated administrative structures that raise costs for all.
Nothing about the current state of the healthcare system makes much sense to anyone that tries to peel back the onion.
There’s plenty of arguements about waste and executive compensation but when I was a healthcare CFO we had our financials separated where I could see individual hospital performance and all the executive/corporate stuff was separate and it still was an issue as basic capex was hard to keep up with in a hospital that had a low % of commercial patients.
Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money.
Several doctor friends have told me this as well.
Really opens my eyes to all the other politics posting accounts that have a similarly constructed profile description .. But of course, they'll never be banned and instead they get front page of HN and hundreds of upvotes.
A lot of the things that the original post shares has this characteristic. Sure, things in US healthcare are wildly inefficient, but that's how a lot of these companies make a lot of money. And they will lobby and fight to the death that cash flow.
Im sure big-pharma has an interest in over-medicating too, but that should be solved by transparent pricing.
It still blows my mind i cant window shop hospital procedures.
The opaque-ness of medical billing in the US only further favors the for-profit insurance company margins.
Burn it all down. Single-payer for all. I really have zero sympathy for insurance companies who pride themselves on denying their paying clients life-saving care in favor of shareholder returns. It's such a crazy moral hazard that really highlights a sickness in America.
The US spends ~$900 Billion a year on Medicaid [1] and ~$1.1 Trillion a year on Medicare [2]. If the US spent this money as efficiently as Japan (or UK [3], ...) it could pay for Universal Healthcare without increasing its budget.
[1] https://www.kff.org/medicaid/medicaid-financing-the-basics/#...
[2] https://usafacts.org/answers/how-much-does-medicare-cost-the...
[3] https://www.bbc.com/news/articles/cwy7zvp5xrqo
Yearly physical exams are much more thorough in Japan. Unless you are optimally fit, you will be prescribed lifestyle changes to make and there is a strong expectation that you will work hard on these. Your employer will be involved. There is _tremendous_ social pressure if you are overweight.
Healthy food options are ubiquitous there with healthy and cheap meals available 24/7. Combini food certainly has bad options but nothing compared to American fast food or the American diet generally.
There are other health problems that are significantly overrepresented in Japan compared to the western world. Alcohol, smoking and stress-related illnesses. Liver & Kidney diseases. Peptic ulcers, GI problems in general.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD.
Ethnic Japanese in the US live have about the same life expectancy as Japanese living in Japan do (within 1 year). US GDP per capita is about 2.4x Japan's. So the numbers don't look nearly as bad when you adjust for that. The higher drug prices in the US are definitely part of it, part of it is our population is less healthy in general (fatter, worse diet, more drug and alcohol abuse), but part of it is Baumol's cost disease[0]. Biggest barrier to lowering healthcare costs in the US is it probably requires paying doctors, nurses, etc. significantly less and most of them work hard and feel like they deserve to be paid as well as they do.
[0]: https://en.wikipedia.org/wiki/Baumol_effect
Edit: to some extent high US drug prices are a public good that subsidizes healthcare for the rest of the world. I don't know the data but I would guess the US is responsible for a disproportionate share of new drugs.
Doctors and other providers bill for each individual thing they do. But that means that their incentive is to do as much as possible, so they can quickly rack up billable codes.
It's like if developers billed their employer per line of code they wrote: the incentive is for churn, when it should be for slowing down and thinking about quality.
[1] https://www.managedhealthcareexecutive.com/view/health-syste...
> Japan spends ~$5,790 and has the highest life expectancy in the OECD
Is Japan's life expectancy because of its healthcare or culture? I'm pretty sure Americans would not live to the same age as Japanese even with Japanese healthcare because of our low nutrition high sugar diets...
Health care providers carry immense blame. It's full of passionless people in it for the outsized paychecks, who once inside will just seek whatever local minimum to stay employed.
> Issue #4 examines pharmacy benefit managers ...
I'm curious to read that. I worked for a PBM back in the 90s/early-2000s. When I was hired, it was just a job; I had no idea what the business did to make money. After working there a few years and learning - well, I would've felt better about myself if I had become an actual drug dealer, selling cocaine and meth. That's not a huge exaggeration.
Three reasons:
1. Medicare has quasi-monopolistic negotiation power that private insurers can only dream of -- Medicare spend two-thirds of all the private insurers combined. That's why private insurers would combine in a heartbeat if the FTC allowed it.
2. Moreover, that Medicare volume is concentrated in a specific segment of the market. If many providers dropped expensive United contracts, the insured people/companies might move to a new insurer. But Medicare's base will never leave.
3. Since Medicare covers older individuals, often on a fixed income, there is natural discriminatory pricing. (Think of the "senior discount" at your local entertainment venue.)
[1] https://www.kff.org/medicare/how-much-more-than-medicare-do-...
https://en.wikipedia.org/wiki/Maryland_hospital_payment_syst...
Choosing US versus Japan, which Japan has the lowest cost and highest life expectancy in the OECD, it's cherry picking. I'd recommend showing the full distribution of OECD per-capita spending rather than just a single cherry picked comparison.
This also is troubled by McNamara Fallacy, we're looking at metrics that are qunatifiable but ignoring what can't be measured or overlooked, is speed of access being considered, how about innovation incentives, quality and outcomes variation across systems, patient choice and flexibility, in addition to workforce compensation (nurses and physicians in the US earn significantly more). Where are the trade-offs?
Summary Statistics can be dangerous. 254% of medicare is a single ratio summarizing enormous variation across thousands of hospitals and procedures. Median markup of 3.96x inherently hides the distribution, some hopsitals may be higher or lower, why is that?
I think the biggest one to me was the confirmation bias, the $3 trillion gap that represented 'fixable waste' was the conclusion. Every price difference is interpreted as waste rather than investigating the potential cost drivers, was there a null finding framework in place where US spending appears justified or is it all bad?
Overall, glad someone is looking into the data and pulling insights, please don't take this as discouragement just a comment from the peanut gallery.
Three companies process 80% of US prescriptions. The FTC spent two years investigating them and documented $7.3B in specialty drug markups at PBM-owned pharmacies alone. Ohio's state auditor found $224.8M in spread pricing extracted from one state's Medicaid program in a single year.
Six mechanisms, $30B/year booked conservatively. Running total across four issues: $128.6B.
github.com/rexrodeo/american-healthcare-conundrum
Americans don't want cheaper healthcare.
We've collectively decided the nightmare of employer based health insurance is a good idea.
Single payer healthcare will never happen.
Imagine if you will an Apple farmer willing to supply an entire town for a set amount per person.
One town, call it NordicTown says this is a great idea. Everyone chips in.
Another town, Jamestown has lively debate on the issue, but half the population believes unworthy people will get apples.
Since it's the policy that if anyone who shows up at the apple market starving they'll always get an apple, the apple farmer figures out they can bill the town for whatever they want.
Jamestown then ends up implementing special taxes to pay for poorer people to have apples. They could actually extend this to cover everyone without raising taxes.
But this will never happen. Someone you consider lazy might get a free apple. So you gladly pay 3 times as much.
Everyone in America is a single expensive illness away from ruin. We like living in a dystopian nightmare where you have to pick between medicine, a car note and rent.
Did I mention Jamestown residents who relay on free apple programs regularly vote against free apples?
https://randomcriticalanalysis.com/2018/11/19/why-everything...
If what we defined as care was constant, it would get cheaper over time. But it doesn't stay constant.