The American Healthcare Conundrum

rexroad

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.

cmiles8

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.

paulddraper

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.) [1] https://www.kff.org/medicare/how-much-more-than-medicare-do-...

timtim51251

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. Several doctor friends have told me this as well.

notfried

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. [1] https://www.managedhealthcareexecutive.com/view/health-syste...

rimbo789

Having worked in for profit health care pricing and costing yup that makes sense. The layering on of profit margins causes costs to grow exponentially

conductr

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.

graemep

> 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.

etchalon

The US' refusal to move to a single-payer system, while refusing to accept a world where poor people just die if they can't afford healthcare, creates a lot of deeply weird side effects.

rybosworld

For a country that prides itself on CapItAlIsM, U.S. healthcare is the farthest thing from it. - Doctors and hospitals don't compete on price - Prices aren't just opaque, they are unknowable - Shopping around is not possible - Insurer incentive is to maximize billing (cost). They pass along cost as increased premiums to an employer. Employer passes along increased costs to employee as below-inflation wage increases

scotty79

They are intermediary between buyers and sellers paid with percentage of the price. They have every incentive for the price to be as high as possible. Such entity can't be left to utilize market forces for the same reason cancer can't be left to utilize human physiology.

underlipton

No debate about the viability of Medicare-For-All is made in good faith, at this point. The only valid debates are about implementation. No one should entertain any move conversations about whether we should go to a single-payer system, only how we should.

profsummergig

The end goal of AI + Robotics has to be robots doing surgery on humans, for a little more than the price of electricity.

legitster

If you ever want to "sanewash" healthcare spending in the US, this random guy stood up an entire website to argue that per-capita healthcare spending in the US is more or less in line with expectations based on per-capita income: https://randomcriticalanalysis.com/why-conventional-wisdom-o... TL;DR: As people/countries get richer, a larger share of their money goes towards consumption. It's not just that Americans pay more for the same procedures (sometimes they do, sometimes it's just sticker prices) but we consume more healthcare the more money we make. So it skews costs up disproportionally. That wealth also enables chronic health and lifestyle problems that are expensive in their own right. I'm not sure I'd buy the theory entirely, but it's very well argued and as a null hypothesis it makes a lot of sense.

krautburglar

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.

qwertyuiop_

Its called American Medical Association racket.

nomilk

I recently travelled to Vietnam for dental work, it's really shocking how easy to it to shop around when dentists actually publish their price lists online for easy comparison/perusal. In my native country, dentists rarely if ever publish prices online, and it's hard to get prices over the phone. If hospitals could be forced to publish price lists, it would be game changing, allowing patients to shop and compare quality/prices. Trump vaguely mentioned he'd try to do something like this but it's not clear what he's attempting: https://www.youtube.com/watch?v=8PQ7l905aVM&t=10h57m30s Maybe this? https://trumprx.gov/

nomilk

Interesting case study (video; ~2 min): https://www.tiktok.com/@thesephew/video/7476558168059809067

Sanctuary8542

Not in Maryland https://en.wikipedia.org/wiki/Maryland_hospital_payment_syst...

bawana

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.