Comment by bhupy | Hacker News Reader

Comment by bhupy | Hacker News Reader

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I work in this industry (on administration, no less) and sometimes even adjust claims myself, so I can speak to this with experience.

1/3 of US healthcare spending is absolutely not from administration fees. Here is a more concrete breakdown of all of the cost components, compared with the same in peer countries: https://www.healthsystemtracker.org/brief/what-drives-health...

If you look at the breakdown, the vast majority of the cost difference comes from just the raw cost of inpatient and outpatient care. Even if you were to completely zero out the administrative costs per capita, you'd hardly make a dent in bridging the gap.

> The free market is not a solution to the problem of healthcare spending. Consumers do not have enough information, they aren't in position to refuse treatment if it's too expensive, and hospitals aren't in a position to turn someone away if they can't pay.

It depends on what you mean by "healthcare". "Healthcare" is way too broad to have useful conversations. What constitutes "healthcare"? Getting the flu? Vaccines? Annual physicals? Routine treatments? Brain surgery? Cancer? It's a spectrum. There are some parts of healthcare that are highly predictable and fungible, and some that aren't. Whether or not a market can provision predictable/plannable healthcare is quite debatable.

Also, what we have in the US is nowhere close to a free market in healthcare, so making this argument is a bit of a non sequitur.

> The rest of the developed world has figured this out but we're too stubborn to adopt what is undoubtedly a better system.

The rest of the developed world isn't a monolith. Singapore, Switzerland, the UK, Denmark, Germany, and the Netherlands all have wildly different healthcare systems, but all produce fairly good outcomes! All have dramatically different levels of privatization, market mechanisms, and welfare generosity.

> The rest of the developed world isn't a monolith. Singapore, Switzerland, the UK, Denmark, Germany, and the Netherlands all have wildly different healthcare systems, but all produce fairly good outcomes! All have dramatically different levels of privatization, market mechanisms, and welfare generosity.

This is why I'm interested why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it.

> why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it.

I'm not only not obsessed with the idea, but I'm not sure that would be a desirable way to go. That said, the healthcare system in the US is way beyond broken, and I don't see how it can possibly be fixed by half measures. Something really drastic is required. It's not hard to see why some people reach the "burn it all down" position.

Depends on what you mean by "half measures". One way we can dramatically improve the status quo is by decoupling health insurance from employment (effectively bringing the US to parity with Switzerland).

Tactically speaking, it could conceivably be achieved by enacting a series of what some might consider "half measures":

- Simply getting rid of the Federal employer mandate as well as the payroll tax deductibility for group health insurance premiums could go a long way. A lot of employers really don't want to be in the business of hiring monster HR teams that spend the majority of their time becoming health insurance experts...

- Expanding ICHRAs (https://news.ycombinator.com/item?id=22527102) can also go a long way.

Making it illegal for health insurance companies to discriminate based on employment status would be a good first step. This includes not being allowed to giving rebates to company plans. Such a law would have popular support, but probably will never be done since politicians are friends with the insurance companies who needs the costs to be opaque.

What is broken about it really? Having been insured my whole life, I've never dealt with hospital issues, and we've had several major medical events (complicated pregnancies mainly, lots of time in the emergency room, etc). For the most part, I pay the max out-of-pocket every year, and then I pay nothing more. It's not particularly difficult to deal with.

The only annoying part is after your first ER / doctor visits each year, you end up with a bunch of different random charges from people that you have to pay separately. It's an annoyance, but hardly one that requires us to 'burn it all down'.

This year I have an HDHP and an HSA, so I have more of those, but I also have an HSA.

As an example, my wife's first pregnancy probably cost about $200k nominally, but I paid... $2000-3000 at most.

The only real 'issue' I see is the tying of health insurance to employment, but there are straightforwards ways to get around that (federal incentives to purchase your own health insurance, and then employers can pass along savings so employees can purchase themselves). For me, I've never been unemployed longer than COBRA so it's not been an issue.

There are a lot of good things about America's system. My wife's pregnancies are extremely complicated. Many doctors said to give up. However, we searched and searched for a doctor to help, and we figured out what works. Basically, for unknown reasons (although many plausible ones that cannot be confirmed), she needs to take an expensive blood thinner during pregnancy or the baby dies. Since her tests don't come back for the 'standard' conditions this works for, it is difficult finding a doctor willing to prescribe. In fact, we didn't even know it was an option, until we went all over the country to various experts. Due to the free market, we were able to get to these experts in a matter of weeks. Similar experts in countries with socialized systems have long queues.

When it comes to the medication, due to the fact that we are the ones that pay (via insurance), not the government, as long as we can pay, we can continue to live our lives and have our children. Based on our conversations with other women in my wife's position in countires with socialized medicine, they have to really advocate for themselves in ways we do not in order to get their government to even provide the medication or pay for it. Many wait months before they are able to get someone. Every once in a while the government revokes access because some bureaucrat says it's not medically indicated. We've never had that. Should her doctor decide to do that and sentence our child to certain death, we have several backup doctors willing to prescribe the medication. Some moms in other countries we're in contact with have been cut off from the medication and subsequently had miscarriages in the second or third trimester. This is insane. I'm glad to live here.

We recently moved, and just scheduled a bunch of appointments and asked the doctors point blank whether they'd consider it based on her history. Some said no, others said yes. In a few weeks, we figured out what her friend over in Canada took many, many months to figure out. When it comes to pregnancy, months matter. 24 months of waiting can drastically change the spectra of outcomes in a women's pregnancy, especially given the age at which many women have children these days.

Same with things like surgeries and such. My relatives in countries with socialized care are waiting many months for things Americans get in a few days.

You're part of the (I would guess) about 25-30% of the US population where the stars align perfectly and you receive a mostly positive experience from the US healthcare system. You are employed full-time, with an employer that provides a generous health plan, have had no long interruptions of employment/coverage, and you don't appear to have any serious chronic issues.

You're still being robbed of a ton of money (US healthcare procedure costs, i.e. pregnancy, have no actual bearing on what it costs to provide that service), but the system is so opaque and convoluted that there's no personal benefit for you to track down how much. You and I and many others live in more or less ignorant bliss about how much money is being redirected from our pockets to parasites in the insurance/provider system because we don't know any better.

We're still losing in this situation, it just doesn't feel as acutely painful to us as it does to those who are outside the upper middle class bubble.

I'm not sure how I'm losing. My employers contribution plus mine is less than what I get out.

Obviously, some healthy man or woman somewhere is making up for me, but that's the nature of insurance.

Anyway, you said the system doesn't work and is broken. If it works for 1/3 of people, the system works and the question is how to make it work for everyone.

If it only works for 1/3 of people, it's broken and needs to be repaired.

Repaired? Sure.

Replaced? Not so sure.

I'm with you about that. As I mentioned upthread, I'm not in the "burn it all down" camp -- that strikes me as being along the same lines as declaring that a problematic but huge piece of software should be fixed be rewriting it from scratch.

But the status quo isn't acceptable.

> I'm not sure how I'm losing. My employers contribution plus mine is less than what I get out.

That's because of inflated provider costs. We are drastically overpaying for each medical visit and it's coming out of all our of pockets, to the benefit of a small few.

Well, insurance is but one broken aspect. The health care system is broken in many other ways.

I'll give a couple of ancedotes about insurance, though. I've had two family members suffer major medical problems, both fully insured with what was considered excellent insurance. The struggles they had with the insurance companies rivaled the struggles they had with their conditions, essentially doubling their misery and requiring them to make very difficult (and intentionally hard to understand) decisions at exactly the time when they're least able to.

In both cases, they ended up bankrupt because of medical bills -- exactly the sort of thing that, if nothing else, insurance should prevent. Both now express that in hindsight, the insurance companies did more harm than good.

But there's also the problem of quality of care. If you have the money, the quality of care you get in the US is extremely good. If, however, you aren't wealthy, then the quality of care you get is, generally speaking, substantially lower than what you get in most other modern nations. This is not because doctors and nurses here suck, but it's because they're overworked. Which ties into another issue...

There's a shortage of doctors and nurses. Here, I can give my own personal story: I've been trying to find a primary care physician since before the pandemic (I did pause for most of the last year, but started again a couple of months ago) Apparently, there isn't a single one in my general area that is accepting new patients. Even though I have better-than-average health insurance, if I need to see a doctor, my only option is urgent care or the emergency room.

And the pricing is simply crazy. Another meaningless anecdote: A coworker had a dental emergency in Taiwan and had to have a crown replaced. The dentist there was very apologetic that he had to charge my coworker (because he's not a citizen and so isn't covered by their health care system). The thing is, he still paid substantially less for the new crown, and the quality of the work and the crown itself amazed him. He remarked that if you need two crowns done, you'll save money by flying to Taiwan and having them done there, and you'll end up with a better end result.

Now, I'm not saying that you can't have really excellent experiences in the US health care system. I am saying that they aren't the norm.

You have to burn down the current system no matter which other system you have your eyes on as a desirable goal. The reason is simple: the system fights change.

Since everyone else seems to do better chances really high that burning it and just doing anything at all would be better than what we have today.

"This is why I'm interested why so many people are obsessed with the idea that we need to completely burn down our system and start anew to improve it."

I don't see how the current system can be reformed realistically. There are way too many well funded groups who benefit from the current situation and will fight any kind of change tooth and nail.

In my view Medicare for All is the only realistic path. It works already and could be tweaked to accept more people. Unfortunately Biden doesn't want it so that opportunity is gone for the next decades probably.

> In my view Medicare for All is the only realistic path.

> Unfortunately Biden doesn't want it so that opportunity is gone for the next decades probably.

These two sentences are at odds with one another.

Why are they at odds?

Because it’s obviously not the most realistic path if it has no hope of passing “for the next decades”.

There are clearly other more realistic paths, in that case.

Wow, it's a good thing you caught that or else people may have been mislead. Phew. Crisis averted. We're lucky there are people as pedantic as you around.

It’s a path that has a very realistic implementation because all the systems are there already.

Name another more realistic path besides leaving things the way they are and keeping f…ing over the country with outrageous costs.

> All the systems are there already

And all the systems are there already to implement a Swiss-style system (universal private healthcare with an individual mandate, sliding cost subsidies, and protection for pre-existing conditions). The only difference between Switzerland and the US is that the health insurance is predominately purchased on the individual market and is decoupled from employment.

That’s the realistic path: decoupling health insurance from employment. In fact, all the systems are there already.

“That’s the realistic path: decoupling health insurance from employment. In fact, all the systems are there already”

That’s one thing we can agree on. Employer based health insurance needs to go.

I also work in the industry, specifically in claims processing and you're wrong. In the link that you sent they are not including administrative costs from providers:

> Administrative costs include spending on running governmental health programs and overhead from insurers but exclude administrative expenditures from healthcare providers

Yes, and that's because administrative expenditures from healthcare providers (specifically in claims processing, again I do this every day for a living) amortized per capita like it's done in this study is negligible. There's an upfront cost to setting up EHR systems to facilitate claims processing, and there's a variable cost to handling claims disputes, but they're a drop in the bucket compared to the actual patient costs, which we know to be in the tens of thousands of dollars per capita.

There are a bajillion different reasons why raw costs are so high, but admin overhead isn't one of them.

That's simply not true. Administrative costs account for 25% of a hospital's budget and 1.43 of GDP:

https://www.commonwealthfund.org/publications/journal-articl...

In the study that you sent they would be included under the inpatient and outpatient costs rather than administrative.

Yeah but you're mixing up denominators. The question is how you factor in 25% of a hospital's budget to the per capita cost of healthcare provision in the link that I included, which includes all other costs. Those other costs are so high that that even zeroing out the administrative cost doesn't do much to bridge the gap.

I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries.

Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either.

The link that I spent specifically mentions hospital admin costs per capita and per GDP:

>"Hospital administration costs ranged from 1.43 percent of gross domestic product (GDP) in the United States ($667 per capita) to 0.41 percent of GDP ($158 per capita) in Canada."

> Reducing U.S. spending on a per capita basis to Canada’s level would have saved $158 billion in 2011

They are a significant expense. They're certainly not the only expense in healthcare and there is no single area that is driving up costs. There is substantial waste throughout the system.

> Keep in mind that the "in-patient and outpatient costs" and prescription drug costs do NOT include provider office costs either.

How are you so sure of that? I see no indication in the study that provider administration wouldn't be lumped under the provider costs.

> They are a significant expense. They're certainly not the only expense in healthcare and there is no single area that is driving up costs.

They are certainly a "significant" expense, but zeroing it out isn't going to bridge the gap.

> How are you so sure of that? I see no indication in the study that provider administration wouldn't be lumped under the provider costs.

Because they say so:

"inpatient and outpatient care, which includes payments to hospitals, clinics, and physicians for services and fees such as primary care or specialist visits, surgical care, and facility and professional fees (see Methods for more details)"

The fee-for-service model makes it easy to isolate this amount. For every CPT/CDT code, there's a charged amount, an allowed amount, and a paid amount, and they're specific to the medical procedure.

Combining the two links, it looks like this:

> I'll try to describe it in a different way. In the link that I provided, the US pays (on average) $8,021 per capita on non-admin costs, while peer countries pay $3,602 per capita on non-admin costs. Even accounting for the fact that 25% of a hospital's revenue is administrative, it 1) is not at all the case that admin costs are in the same ballpark as the difference between the two ($4,500 per person), 2) doesn't do much to bridge the non-admin gap, which forms the lion's share of the cost difference, since if you zero out the admin costs, even the costs that provider offices pay (25% of their total revenue), you're still left with the fact that the US pays over 2x peer countries.

Isn't a useful analysis.

The admin costs in the US are roughly $937 + ($8,021 * 0.25) = $2942.25—and possibly worse, depending on how much of the stuff from other categories might fall under "hospital budget", though that may be evened out by the difference between budget and revenue (which is the biggest unknown factor here, trying to combine the info from the two links).

Hospital admin costs in comparable states seems to be 20% in the worst case plus that $201 of non-hospital admin costs. Worst case, $201 + ($3,602 * 0.20) = $921.40

How is that not a very large part of the difference in costs? It looks like ~40% of the difference in total per capita spending, in fact. I'm sure that's a little off, but where am I going wrong that allows it to become negligible in your analysis?

> The admin costs in the US are roughly $937 + ($8,021 * 0.25) = $2942.25—and possibly worse, depending on how much of the stuff from other categories might fall under "hospital budget", though that may be evened out by the difference between budget and revenue (which is the biggest unknown factor here, trying to combine the info from the two links).

This is incorrect, the inpatient and outpatient costs do not include the hospital admin fees. That figure only includes the fee-schedule payments per procedure. The fee-for-service model makes it rather easy to isolate that amount.

That's why your statement here:

> How is that not a very large part of the difference in costs? It looks like ~40% of the difference in total per capita spending, in fact. I'm sure that's a little off, but where am I going wrong that allows it to become negligible in your analysis?

doesn't quite make sense. You can't take that 25% and apply t against the in-patient and out-patient costs, because it's not at all clear that it fits into that bucket.

> doesn't quite make sense. You can't take that 25% and apply t against the in-patient and out-patient costs, because it's not at all clear that it fits into that bucket.

Well, if it's not accounted for in that figure then where is it? There's another amount somewhere around $3k just not accounted for, then? I don't see anywhere anything like that much could be hiding in the rest of the data.

I mean, these are from the link:

> inpatient and outpatient care, which includes payments to hospitals, clinics, and physicians for services and fees such as primary care or specialist visits, surgical care, and facility and professional fees (see Methods for more details)

and

> Administrative costs include spending on running governmental health programs and overhead from insurers but exclude administrative expenditures from healthcare providers.

So... where is it if not in the "inpatient and outpatient care" bucket? Sure, maybe minus whatever portion of that represents profit, OK, but that can't be so much as to render it anywhere near being negligible.

Or is the 25% figure from the other link off by, oh, 5x or more?

> So... where is it if not in the "inpatient and outpatient care" bucket? Sure, maybe minus whatever portion of that represents profit, OK, but that can't be so much as to render it anywhere near being negligible.

> Or is the 25% figure from the other link off by, oh, 5x or more?

No, the 25% figure from your link isn't off at all, it's that you're mixing up denominators. You can't take the 25% figure from hospital costs, the $10,637 from the per capita figure, and then conclude that hospital admin s 25% of $10,637. If you want to insert your number into my number in an apples-to-apples way, you have to actually look what hospitals pay per capita. There's a huge normalization step that you just skipped.

Fortunately, your own link does this work:

"Hospital administration costs ranged from 1.43 percent of gross domestic product (GDP) in the United States ($667 per capita) to 0.41 percent of GDP ($158 per capita) in Canada."

$667 per capita is a drop in the bucket. If I were to guess, the reason why the analysis I linked didn't factor it in was because it doesn't change its conclusion:

"The U.S. also spends more on administrative costs, but perhaps not as much as people think, and spends significantly less on long-term care."

This is in line with my observation on the ground as well, especially the observation that admin costs typically involve extremely high upfront costs (setting up EHR systems, EDI integrations, book-keeping systems), but lower variable costs from an operating standpoint especially relative to the sheer cost of care itself (doctors, equipment, maintenance, etc etc etc).

> You can't take the 25% figure from hospital costs, the $10,637 from the per capita figure, and then conclude that hospital admin s 25% of $10,637.

I didn't—I multiplied 0.25 times the inpatient and outpatient costs, which is why it wasn't even higher (though, when added back with the $937 other-admin costs, it did come very close to 25% of the total, true)

> "Hospital administration costs ranged from 1.43 percent of gross domestic product (GDP) in the United States ($667 per capita) to 0.41 percent of GDP ($158 per capita) in Canada."

Ah, I see—hospital admin costs, only, plus government and insurance admin costs, being $667 + 937 = $1604, which comes very close to 10%[edit: wow, I swollowed a number when I glanced at these: it's 15%] of total ($10,637) per-capital healthcare expenditure in the US, not ~25%. Left unaccounted for are all non-hospital, non-insurance, and non-government-program admin costs (non-hospital healthcare office & facility admin costs, that kind of thing), and who knows what those are. But with just what's in front of us, ~10%[edit:15%] of the total per-capita cost. So we could save perhaps 6%[edit:10-11%] of total per-capita healthcare spending by bringing those in-line with other developed states.

(I did verify with your link's OECD source that all provider administration is included in the prices paid to them—$6,624 does include hospital, doctor's office, outpatient support, et c., admin costs, somewhere in it, so this article's conclusions about the role of admin costs are... not particularly thorough, according to its own source—the above of 10%[edit:15%] is surely closer to correct, though still lower than the actual % of total spending that's admin costs)

> so this article's conclusions about the role of admin costs are... not particularly thorough

You seem to be in aggressive agreement with it, though. From your own calculation here, the per capita savings amounts to about ~10%, which isn't a whole lot given that peer nations pay ~50% less all-things-considered (and nowhere close to the 1/3 figure from the original reply). And that's if you were to zero out admin costs, which even among peer nations is impossible to do — it's a real part of COGS no matter what

The thesis and conclusion remains: Solving the admin cost problem hardly makes a dent (and don’t get me wrong, it’s certainly worth solving!). The lion's share of the variance in healthcare costs between the US and peer nations is in the price of healthcare, not administrative costs. There are a lot of reasons for this, and it's a whole debate in and of itself.

Several things have excess costs amounting to 5-10% of the total. The whole reason it's so hard to fix this problem is that there isn't one source of excess or unnecessary expenses. Insurance? "Well, sure, but that's only 5-10% of the cost". Other admin? "Well sure, but that's only 5-10% of the cost". Too-high doctor salaries? "Well sure..." and so on.

Taking the per-capita admin costs from ~$1600 to a closer-to-normal ~$600 is a major win. It is not negligible. Further, all the data have shown so far is that admin costs aren't under 15% of the total. More categories of admin costs (any from health care providers that aren't hospitals, notably) still lurk somewhere in that inpatient/outpatient care block.

Actually, the single highest leverage cost reduction measure is to reduce the raw cost of care, which is 5x higher than peer nations. Once you do that, the 5-10% here and there no longer matters.

If you spend much time in this industry, you’re bound to hear the phrase “bending the cost curve”, because that’s where the primary focus is right now.

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