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  #1  
Old 09-13-2009, 04:05 PM
Sage Rat Sage Rat is offline
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Health Care: Where does the Money Go?

Lots of people believe that they know where health care spending goes (i.e. why American spending is roughly double that of any other modern nations.) You probably believe you know. Most likely, though, you are wrong.

So first, let's get rid of some myths. (PPPY = Per Person Per Year)

- 1 --
Universal Health Care Cuts Spending

If you look at this image from the NY Times, you will see that of 30 nations, their year-to-year spending increase has been largely consistent. Several of these nations have changed to UHC during the period of time that is shown, but there is no way to tell from looking at this graph which nations these were, nor at what time it was that they changed their system of health care. If UHC changed the course of health care spending, you would be able to see that in this graph.

- 2 --
Private Insurance Explains Our Spending

Firstly, both Israel and Switzerland rely on private insurance and their spending is in range of other European nations.

Now let's look at actual administration costs of private insurance. Numbers vary; this survey says that average health care administration costs are about $1000 PPPY in the US, and about $300 per person in Canada. This review (PDF), however, lists Medicare administrative spending as 5% of revenue and private insurance as at about 9%. Medicare revenue is about $6600 PPPY, so this would be $330 in administration cost. Calculating private insurance cost from what information is in the document is a bit more difficult. Assuming a similar $6600 per person value at 9%, cost would be ~$590 per person. Assuming 160 million people covered by private insurance and a total administrative cost of $85 billion, administrative costs of private insurance per person would be ~$530. This table from the Canadian National Health Expenditure Database puts administration costs as wavering around 3.6% of total costs per year. This table, gives total spending as $3300CA or ~$3000US, which would be only $100US per person.

Really about all we can say is that somewhere between $200 to $700 can theoretically be saved in there, so we'll average that to $450.

Since the US pays about $3000 more in health care than any other nation, even saving that $450 wouldn't bring us to norm (nor would the $700).

I will also note that the likely reason for private insurance administration costing more is due to scale. Many more, smaller organizations have to spend more on administration than one large organization. Switzerland, for example, has 85 private insurance companies and a relatively small population. Both of these probably are factors in its spending being higher than most other nations in Europe.

- 3 --
The US Pays More for Pharmaceuticals

We do (PDF). The OECD average is about $366 dollars per person per year. The US is at about $728. So theoretically, we could save maybe $200 spending PPPY.

Again, this isn't nearly enough to bring us down by $3000.

- 4 --
The US Has Too Many Cases of Elective Surgery

This one you might not have heard of. The idea is that countries who don't have wait lines for health care have fewer cases of elective surgery. This does appear to be true (PDF). However, outside of heart bypass surgery, the US actually seems to generally come in below other countries without waiting lines. (Here's another chart of just plastic surgery.)

- 5 --
Preventative Medicine Costs Less

More likely it doesn't change the cost in any meaningful way:

http://www.nytimes.com/2007/08/08/bu...erland&emc=rss
http://content.nejm.org/cgi/content/full/358/7/661

- 6 --
Uncapped Malpractice Awards Mean Higher Doctors Fees

The idea, with this one, is that if doctors and hospitals have to pay less in malpractice insurance, they will have to charge less. A more thorough discussion can be read here, but personally I would have to agree that the amount of health care spending which goes towards malpractice insurance is sufficiently small that it's largely unrelated to our discussion here.

# POSSIBLY NOT MYTHS ##

- 7 --
Uncapped Malpractice Awards Mean Defensive Medicine

The idea is that doctors, fearing lawsuit, order an excessive number of tests and hence waste a lot of money that isn't justified by the actual odds of there being some, more rare condition.

The answer: Dunno

If people could help search for answers to this one (e.g. how many tests are run PPPY and how much that costs on average, by nation), it would be very helpful.

http://www.kaiserhealthnews.org/Stor...lth-costs.aspx

- 8 --
The US Buys the Newest, Bestest Stuff

Similar to the idea that we pay more for pharmaceuticals in the US, possibly we also buy most of our equipment for a higher price.

Again, if people can try and find information on this, it would be helpful.

http://www.kaiserhealthnews.org/Stor...lth-costs.aspx

- 9 --
The US Tries to Keep Old People Alive Longer

I can't find where I saw this. Basically, supposedly the US tries to keep people who are dying on artificial support more often and for longer than other nations.

Again, I would be interested in verifying and quantifying this.

------

Some further items that I have checked: The number of doctors per person is roughly equivalent between the US, Canada, and the UK. ~2.2 per person. The average yearly wage of a doctor is about the same between the US, Canada, and the UK. I don't have cites for these because this is the third time I've started this thread without completing it, and I've since lost cites for this information. I don't feel like looking it up again, but it's true.

Since we can quantify items 1-6, for the most part, we can say for certain that at most we could save maybe $700 through any of these, leaving another $2300 to make up. 7-9 are possibly culprits of this. I have a feeling like I forgot a #10 that I intended to include. Ideally we could focus on these items or any further theories.
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  #2  
Old 09-13-2009, 04:12 PM
Sage Rat Sage Rat is offline
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This document seems to deny that we spend more on medical equipment, but I will need to look for the OECD data they are using to see what their definition of equipment is.
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  #3  
Old 09-13-2009, 04:23 PM
gonzomax gonzomax is offline
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Doctors have to have a large staff to deal with health care and government billing procedures. They do not provide any addition to health care . They are a waste of money.
Insurance companies should not be part of the solution. They are the problem.
To get a universal system in place would end the need to waste millions on lobbyists , political donations and bribing politicians.
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  #4  
Old 09-13-2009, 04:26 PM
gonzomax gonzomax is offline
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http://www.harp.org/hmoexecs.htm You could save a few bucks here too. This is just HMO exec salaries. The execs suck billions out of health care.
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  #5  
Old 09-13-2009, 04:34 PM
gonzomax gonzomax is offline
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The medical equipment falls under a category of durable goods. Medicare spends much more for wheel chairs, crutches ,pap machines etc. than you could buy them for. However congress refused to allow competitive bidding. They can not face up to those who give big donations.
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  #6  
Old 09-13-2009, 04:41 PM
Wesley Clark Wesley Clark is offline
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According to budget director Peter Orszag, about $700 billion in medical spending has no real benefits that we know of. There is a spending curve, and after a certain point more money either makes no difference or makes things worse. In some parts of the country the spending per medicare beneficiary is twice what it is in other parts of the country (15k vs 7.5k), but outcomes are the same.

http://www.youtube.com/watch?v=q4POIiNaG1M

http://www.newyorker.com/reporting/2...a_fact_gawande

Orszag said it was because of a lack of transparency when it came to offering treatments, and that we do not have an idea about which treatments are most effective in some situations. So he supports comparative effectiveness research, which we got in the stimulus bill. The bill devoted $1.1 billion to comparative effectiveness.

Last edited by Wesley Clark; 09-13-2009 at 04:41 PM..
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  #7  
Old 09-13-2009, 04:51 PM
Wesley Clark Wesley Clark is offline
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Single payer combined with negotiation power can save $300-400 billion a year. So the concept that UHC doesn't cut costs isn't something I agree with.

http://www.pnhp.org/facts/single_payer_resources.php

That is on the nationwide level. On the statewide level California could save $344 billion over 10 years with single payer and Illinois would save $17 billion a year.

http://www.pnhp.org/facts/single_pay...ost.php?page=3

http://www.healthcareil.org/


So a well run UHC program can cut costs, at least in the US.
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  #8  
Old 09-13-2009, 04:55 PM
Sage Rat Sage Rat is offline
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gonzo, mind providing cites from decently reputable sources?
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  #9  
Old 09-13-2009, 06:34 PM
hobscrk777 hobscrk777 is offline
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Quote:
Originally Posted by Sage Rat View Post
- 1 --
Universal Health Care Cuts Spending

If you look at this image from the NY Times, you will see that of 30 nations, their year-to-year spending increase has been largely consistent. Several of these nations have changed to UHC during the period of time that is shown, but there is no way to tell from looking at this graph which nations these were, nor at what time it was that they changed their system of health care. If UHC changed the course of health care spending, you would be able to see that in this graph.
How do you explain that the slope of the US curve is much steeper than any of the others?
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  #10  
Old 09-13-2009, 06:35 PM
njtt njtt is offline
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There is a huge amount of waste in the bureaucratic inefficiencies of the U.S. private insurance system. I do not have numbers on this, but I have many years of experience of the British NHS and various American insurance plans. The average consumer of NHS Health care has a trivial amount of bureaucratic hassle to deal with.

In America:
1. Every time I go to a new doctor's office, or hospital, I have to fill out a thick wadge of forms and the office has to verify my insurance.

2. Every time my coverage changes, because of a job change, or because an employer switches plans, there is a whole lot more form filling and verification to be done.

3. Presumably because the rules about what is covered are so complex, various from plan to plan, and ever changing (not to mention the inherent financial incentives to deny claims whenever possible), legitimate claims are disputed on a regular basis, leading to a lot of back and forth to get things set right (if they ever are).
Now, my point is not just that this all wastes a lot of my and my family's time, but that it also must be wasting very much more of the time of the staff of the doctor's offices, employer's Human Resources Departments, and especially the staff of the insurance companies. In a universal system this bureaucracy could be cut to a tiny fraction of what it is now, because there simply would not be nearly so many bureaucratic tasks needing to be done. (And this would remain true even if it really were true - which I very much doubt - that American government bureaucracy is always significantly less efficient than corporate bureaucracies.) In a universal system, the rules are the same for everybody, and coverage does not need to be checked and verified all the time.

Actually, to my mind about the only legitimate argument against introducing UHC in the U.S.A. (the only argument that is not easily refuted by comparisons to other countries*) is that rather a lot of the current healthcare bureaucrats will, through no fault of their own, be thrown out of work. It is not an insuperable problem, but it is a real one. (I trust I do not have to explain why the anti-healthcare lobby - yeah, that is the right name for them - does not want to use it.)

_______

*Incidentally, I already debunked that graph of yours, from the New York Times, in another thread. It does not support your claims. First of all, it only goes back to 1970, and certainly many of the countries (including, but not limited to, all the former Communist countries) had UHC well before then. For several countries shown, it does not go back that far: For some, only to 1990. The burden is on you to tell us which, IF ANY, of the countries shown introduced UHC during the period over which their spending levels are shown. Then we can look to se if there is an inflection point hidden in the spaghetti.

In any case, the reason for introducing UHC in most countries was not primarily to bring costs under control, but to benefit the people. What the graph does show is that, at least by comparison with the U.S., costs never have been out of control in the rest of the world. Costs everywhere have been rising steadily at about the same rate since 1970, except that from about 1980 onwards the U.S. costs (already higher than everyone else's) start rising much more steeply than those of all the places that have UHC. That is what needs to be reversed (quite aside from considerations such as treating the people of your nation decently.)
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Old 09-13-2009, 06:56 PM
Mr. Duality Mr. Duality is online now
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The OP gives an estimate for administrative costs of insurance companies, but not for doctors' offices. Much of that is due to the cost of different paperwork for each of hundreds of different insurance companies. I thought that probably added 30% to total overhead, but then I spoke with a lady who is in the business of providing billing services for medical practices. She said it's about 50%! Hard to believe, I know, but there you have it.

Have insurance company profits been mentioned yet? That's got to be 10 or 20%.

Last edited by Mr. Duality; 09-13-2009 at 06:57 PM..
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  #12  
Old 09-13-2009, 06:59 PM
The Controvert The Controvert is offline
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Everything is more expensive in some parts of the world than in others. Maybe paying the US doctors more has something to do with it? If we reduce the requirements, (i.e. require fewer years of expensive medical school or allow certification from foreign countries), then there would be more doctors and they wouldn't charge as much.
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Old 09-13-2009, 07:06 PM
the first supraliminal the first supraliminal is offline
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In my experience, the hospitals are huge luxury boxes. Everything inside is expensive. Beds cost more than cars. Bedpans are made of platinum. Tongue depressors and Q-tips are individually wrapped and later tossed into high-cost biowaste disposal bags, and billed to the insurer at $1 each. (I'm guessing).
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  #14  
Old 09-13-2009, 07:06 PM
Wesley Clark Wesley Clark is offline
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Originally Posted by The Controvert View Post
Everything is more expensive in some parts of the world than in others. Maybe paying the US doctors more has something to do with it? If we reduce the requirements, (i.e. require fewer years of expensive medical school or allow certification from foreign countries), then there would be more doctors and they wouldn't charge as much.
The number of physicians in the US is controlled by the AMA. There is talk of expanding the powers of physician assistants and nurse practitioners to do the work of physicians.
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  #15  
Old 09-13-2009, 07:11 PM
Sage Rat Sage Rat is offline
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I'll just note again that I'm not seeing a lot of cites in this thread, njtt, Duality, Controvert, supraliminal.

Quote:
Originally Posted by njtt View Post
*Incidentally, I already debunked that graph of yours, from the New York Times, in another thread. It does not support your claims. First of all, it only goes back to 1970, and certainly many of the countries (including, but not limited to, all the former Communist countries) had UHC well before then. For several countries shown, it does not go back that far: For some, only to 1990. The burden is on you to tell us which, IF ANY, of the countries shown introduced UHC during the period over which their spending levels are shown. Then we can look to se if there is an inflection point hidden in the spaghetti.
http://boards.straightdope.com/sdmb/...9&postcount=39

Quote:
Originally Posted by hobscrk777
How do you explain that the slope of the US curve is much steeper than any of the others?
Trying to determine that is the goal of this thread.

Last edited by Sage Rat; 09-13-2009 at 07:13 PM..
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  #16  
Old 09-13-2009, 07:22 PM
Sage Rat Sage Rat is offline
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Single payer combined with negotiation power can save $300-400 billion a year. So the concept that UHC doesn't cut costs isn't something I agree with.

http://www.pnhp.org/facts/single_payer_resources.php
That's a quantity of $1000 PPPY, which is about how much I calculated ($700 plus or minus a few hundred either way). Like I said, there's still at least $2000 missing.

And I'll note that you're simply looking at the economies of scale. If insurance companies are allowed to cross state lines and merge, they'll be able to achieve a similar price, and probably this will allow the insurance companies to shed workers at a rate the market can bear.

Last edited by Sage Rat; 09-13-2009 at 07:23 PM..
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  #17  
Old 09-13-2009, 08:03 PM
RingsOfPylon RingsOfPylon is offline
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Originally Posted by Sage Rat View Post
Lots of people believe that they know where health care spending goes (i.e. why American spending is roughly double that of any other modern nations.) You probably believe you know. Most likely, though, you are wrong. {snip}
Okay, I'll start out assuming I'm wrong (*wink*), but I would add a "10" to the list -- taxes.

My state, like many others, taxes health insurance premiums. As much as 10% off the top, but more like 3-5% for most plans.

Then we tax all doctors' visits, lab tests, copays, etc. at 9.63%. Someone is paying that, whether it's you or your insurance company or the provider. The only time you don't have to pay this tax is if you are uninsured. If you're paying your deductible, or are insured and "fronting" the costs, you'll be hit with a 9.63% sales tax. Otherwise, the insurance company or the provider pays it.

My state also says that health insurance is not tax deductible, so it's taxed again as income. For the middle class, that would be another 5 or 6% tax on health insurance premiums. Suddenly, it becomes easy to see why health care is so much more expensive per person than in other countries.

These additional taxes must add into the per person costs, it would seem. Of course, I'm still trying to figure out exactly what goes into the figures that get tossed around.

Does the state tax Medicare and Medicaid payments at the same rate? I don't know, but would tend to doubt it. It's not so easy to get this information, though.

Anyhow, it would seem that the state is addicted to the tax money, which brings up a separate issue (not to hijack) -- would a public option be subject to the same state, local, and income taxes that other residents have to pay?

If so, it would erode those so-called cost cutting mechanisms pretty quickly.

Cheers.
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  #18  
Old 09-13-2009, 09:33 PM
Isamu Isamu is offline
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This link

http://money.cnn.com/magazines/fortu...ed_Care/1.html

shows the top 12 US private health insurance financials (2006). Take a look at the profits column.

Pretty impressive huh? Those profits are money being spent on health insurance but which do not end up being used to pay for any health care. That's a huge drain right there. Surely that money could be better spent, you know, actually paying for health care, right?

Last edited by Isamu; 09-13-2009 at 09:36 PM..
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Old 09-13-2009, 09:52 PM
Mr. Duality Mr. Duality is online now
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Here's a cite putting insurance company profits at nearly 20%.

Don't have time to find the rest.
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  #20  
Old 09-13-2009, 09:52 PM
gonzomax gonzomax is offline
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Originally Posted by Sage Rat View Post
gonzo, mind providing cites from decently reputable sources?
http://whirledview.typepad.com/whirl...rs-mccain.html Bingo.
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  #21  
Old 09-13-2009, 10:11 PM
Mr. Duality Mr. Duality is online now
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Wikipedia says "An oft-cited study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31% of U.S. health care dollars, or more than $1,000 per person per year, went to health care administrative costs, nearly double the administrative overhead in Canada, on a percentage basis.[124]"

So there.
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Old 09-14-2009, 05:33 PM
RingsOfPylon RingsOfPylon is offline
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Originally Posted by Isamu View Post
This link

http://money.cnn.com/magazines/fortu...ed_Care/1.html

shows the top 12 US private health insurance financials (2006). Take a look at the profits column.

Pretty impressive huh? Those profits are money being spent on health insurance but which do not end up being used to pay for any health care. That's a huge drain right there. Surely that money could be better spent, you know, actually paying for health care, right?
The information is a couple of years old, but the average profit margin is just under 6%. Health insurance is not a high profit industry.

It is good to have some profits, as the companies need to have money in reserve in case of things like flu epidemics, or a bad year the following year(s) where payouts exceed revenues. After all, they're not like the government and can't print up funny money to cover costs of a sudden surge in claims.
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Old 09-14-2009, 07:50 PM
hobscrk777 hobscrk777 is offline
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Originally Posted by Sage Rat View Post
Trying to determine that is the goal of this thread.
My point was that, based on the steepness of the US curve as compared to the curves of other countries with UHC, it would appear that UHC does indeed have a positive impact on reducing the long-term increase of health care costs. This was in response to your OP, in which you said:

Quote:
Originally Posted by Sage Rat View Post
If UHC changed the course of health care spending, you would be able to see that in this graph.
My interpretation of this is that you were asserting that UHC had no impact on health care spending. Clearly, though, (based on the graph you provided) it does.
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Old 09-14-2009, 08:40 PM
Isamu Isamu is offline
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Originally Posted by RingsOfPylon View Post
The information is a couple of years old,
I specifically indicated the year for that data - 2006, so don't act like I'm trying to pull a fast one.

Quote:
Originally Posted by RingsOfPylon View Post
but the average profit margin is just under 6%. Health insurance is not a high profit industry.
Forget percentages. Look at the raw numbers:

10,318,000,000 dollars in profit. And that's just for the top 12 insurers. That's money that people like you and your employer paid for health care insurance but instead went to pay for insurance company executive beach homes.

Quote:
Originally Posted by RingsOfPylon View Post
It is good to have some profits, as the companies need to have money in reserve in case of things like flu epidemics, or a bad year the following year(s) where payouts exceed revenues. After all, they're not like the government and can't print up funny money to cover costs of a sudden surge in claims.
10,318,000,000 dollars.
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Old 09-14-2009, 10:43 PM
Sage Rat Sage Rat is offline
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Originally Posted by Mr. Duality View Post
Wikipedia says "An oft-cited study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31% of U.S. health care dollars, or more than $1,000 per person per year, went to health care administrative costs, nearly double the administrative overhead in Canada, on a percentage basis.[124]"

So there.
Which study is in fact cited in the OP, if you bothered to read it.
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  #26  
Old 09-14-2009, 10:44 PM
Sage Rat Sage Rat is offline
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Quote:
Originally Posted by hobscrk777 View Post
My point was that, based on the steepness of the US curve as compared to the curves of other countries with UHC, it would appear that UHC does indeed have a positive impact on reducing the long-term increase of health care costs. This was in response to your OP, in which you said:

My interpretation of this is that you were asserting that UHC had no impact on health care spending. Clearly, though, (based on the graph you provided) it does.
Except for that, like I said, several nations have gone from non-UHC to UHC in that graph without any reduction nor visible change in the slope of spending.

Last edited by Sage Rat; 09-14-2009 at 10:44 PM..
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Old 09-14-2009, 10:46 PM
Sage Rat Sage Rat is offline
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Originally Posted by RingsOfPylon View Post
The information is a couple of years old, but the average profit margin is just under 6%. Health insurance is not a high profit industry.

It is good to have some profits, as the companies need to have money in reserve in case of things like flu epidemics, or a bad year the following year(s) where payouts exceed revenues. After all, they're not like the government and can't print up funny money to cover costs of a sudden surge in claims.
6% profits would only add another $400 or so per year, still leaving $1600 to $1900 left unexplained.
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Old 09-15-2009, 12:42 AM
Wesley Clark Wesley Clark is offline
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Originally Posted by hobscrk777 View Post
My point was that, based on the steepness of the US curve as compared to the curves of other countries with UHC, it would appear that UHC does indeed have a positive impact on reducing the long-term increase of health care costs. This was in response to your OP, in which you said:

My interpretation of this is that you were asserting that UHC had no impact on health care spending. Clearly, though, (based on the graph you provided) it does.
The thing is, different nations implemented national UHC at different times, and all still kept medical costs at $2000-4000 per person, and about 8-11% of GDP while the US shot up radically to 16% of GDP and nearly $7000 per capita.

For example, the NHS in Britian was started in the late 1940s. Australias nationwide system was introduced in the 70s. The netherlands didn't have UHC until a few years ago. Israel's UHC system didn't start until the 1990s. But all have far lower health care costs than we do both in per capita and as a % of GDP. So it didn't matter when every country other than the US implemented UHC (the 40s, 70s, 90s, etc), they still spend far less on health care than we do.

Last edited by Wesley Clark; 09-15-2009 at 12:43 AM..
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  #29  
Old 09-15-2009, 10:01 AM
lee lee is offline
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There are unbelievable wastes out there in hospitals often due to shortsighted cost cutting and political maneuvering. One example: When I worked at a hospital we had racks and racks of modems talking to terminals which were being replaced slowly by other systems or moved. The connections to the terminals were through phone lines which were billed, not internal networks. Instead of having enough people to actually manage the documentation along with the removal and keep track so the phone line could be canceled, they reduced tier 1 support to a skeleton crew. They also could have hired a couple of temps, explained how to track down what modems were in use and which were not, and covered their cost in the first week of reduced phone bills. They did not do it partially because to do so would admit they did not have enough people to keep up before cutting the support staff. Also, they had to pay overtime because they did not retain enough people to cover adequately. I worked over a years worth of hours in 8 months, and I had only been working overtime in the last 5 months. They could have had an extra person for all the money they wasted in overtime.

Reducing support staff meant that it was no longer possible to actually clean the machines on schedule, which lead to fires which ruined the equipment. Twice I had to call someone asking if their terminal was still on fire when I came on shift. Once the Pentium I was using to write a report on caught fire due to dust in the case. Hospitals are very dusty places with all the linens being changed everyday and cleaning IT equipment periodically is necessary, more so than in most business environments.

I could attribute the waste I saw often with particular individuals trying to gain political advantage. I hear that it is pretty typical. I don't know that any health care reform will address this, but it is one place health care dollars go needlessly.
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Old 09-15-2009, 12:54 PM
Mr. Duality Mr. Duality is online now
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Originally Posted by Sage Rat View Post
Which study is in fact cited in the OP, if you bothered to read it.
So why did you ask for a cite from me?

In the OP you made it seem as if you were only including administrative costs of insurance companies in your total.

Last edited by Mr. Duality; 09-15-2009 at 12:56 PM..
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  #31  
Old 09-15-2009, 10:54 PM
RingsOfPylon RingsOfPylon is offline
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Originally Posted by Isamu View Post
I specifically indicated the year for that data - 2006, so don't act like I'm trying to pull a fast one.
Well, I wasn't trying to be snarky; I was thinking that those figures were pre-recession. I think the average profit projection is more like 2.2%, according to an article I skimmed in Forbes while waiting for the dentist.


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Originally Posted by Isamu View Post
Forget percentages. Look at the raw numbers:

10,318,000,000 dollars in profit. And that's just for the top 12 insurers. That's money that people like you and your employer paid for health care insurance but instead went to pay for insurance company executive beach homes. 10,318,000,000 dollars.
If 20 million people get H1N1 and half of them, or 10 million, seek treatment that costs $1000 each -- not an unreasonable figure -- that's $10 billion right there. Either way, the executive still gets a beach home because it's illegal to not pay employees their agreed-upon salaries, but the company itself must have some cash reserves for worst case scenarios.

Generally speaking, health insurance itself is not a high profit business.

Perhaps one solution would be to make all the health insurance companies private, taking them off the stock market. Then they don't have to spend time, money, and effort pleasing shareholders or trying to lure new buyers.
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Old 09-16-2009, 01:00 AM
Isamu Isamu is offline
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Originally Posted by RingsOfPylon View Post
Well, I wasn't trying to be snarky; I was thinking that those figures were pre-recession. I think the average profit projection is more like 2.2%, according to an article I skimmed in Forbes while waiting for the dentist.




If 20 million people get H1N1 and half of them, or 10 million, seek treatment that costs $1000 each -- not an unreasonable figure -- that's $10 billion right there. Either way, the executive still gets a beach home because it's illegal to not pay employees their agreed-upon salaries, but the company itself must have some cash reserves for worst case scenarios.

Generally speaking, health insurance itself is not a high profit business.

Perhaps one solution would be to make all the health insurance companies private, taking them off the stock market. Then they don't have to spend time, money, and effort pleasing shareholders or trying to lure new buyers.
I see what you're saying, but whether or not health insurance is a high profit or a low profit industry is kind of dodging the issue: 100% of zero is still 0, and 1% of a trillion dollars is still 10,000,000,000.

Whatever profits are being made via payments for health insurance, is money that I consider better spent on health care. But I could be wrong.
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Old 09-16-2009, 07:25 PM
RingsOfPylon RingsOfPylon is offline
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Originally Posted by Isamu View Post
I see what you're saying, but whether or not health insurance is a high profit or a low profit industry is kind of dodging the issue: 100% of zero is still 0, and 1% of a trillion dollars is still 10,000,000,000.

Whatever profits are being made via payments for health insurance, is money that I consider better spent on health care. But I could be wrong.
Well, I understand what you're saying, but there are quite a few factors to consider.

Right now the government does not pay claims itself (it delegates that work to private insurers), it does not have an infrastructure for doing so, and it doesn't have to underwrite risk and comply with 50 different sets of requirements from 50 different states. Insurers in NYS have to report to 239 separate regulating agencies at both the federal and state level. That takes people, and those folks don't work for free.

Abolishing health insurance companies would also remove a lot of taxes, both corporate and payroll, from the system. Those companies have to pay corporate taxes. They also pay local property taxes where they physically reside. Their employees have to pay federal, state, local, and Medicare taxes. That's a lot of money to take out of the system.

Just trying to be practical here and consider various angles that you don't often hear about.

There certainly are reforms that need to be made. I agree with that. We just have to make sure those reforms don't come back to bite us. :-)
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  #34  
Old 09-17-2009, 01:14 AM
Sage Rat Sage Rat is offline
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Originally Posted by Mr. Duality View Post
So why did you ask for a cite from me?
Because I was ignoring the actual text of any posts that didn't include a cite. This thread is about discovery of reality, not perceptions nor things "I have heard". For that to happen, there has to be cited evidence. It was more worth my time to tell people to get citing than argue about a bunch of posts that had nothing of substance in them.

Last edited by Sage Rat; 09-17-2009 at 01:15 AM..
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  #35  
Old 09-17-2009, 05:05 PM
gonzomax gonzomax is offline
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http://www.huffingtonpost.com/2009/0..._n_289841.html Here's where some of the money goes. it goes to law suits for rescinding care on made up pre -existing conditions. The insurance companies are driven by profits only, not trying to provide health care.
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  #36  
Old 09-17-2009, 05:32 PM
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Originally Posted by Mr. Duality View Post
Have insurance company profits been mentioned yet? That's got to be 10 or 20%.
Cite?

A friend of mine works for a major UK health insurer. He has told me that they actually run at a slight loss based on pure premiums. They make their money on interest and other investment income from premiums.
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Old 09-19-2009, 09:05 AM
Mr. Duality Mr. Duality is online now
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Originally Posted by Quartz View Post
Cite?

A friend of mine works for a major UK health insurer. He has told me that they actually run at a slight loss based on pure premiums. They make their money on interest and other investment income from premiums.
That's probably true in the UK. Upthread, US insurance company profits were pegged at 6%. Profits plus overhead is nearly 20%.
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Old 09-19-2009, 10:48 AM
Sage Rat Sage Rat is offline
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Originally Posted by gonzomax View Post
http://www.huffingtonpost.com/2009/0..._n_289841.html Here's where some of the money goes. it goes to law suits for rescinding care on made up pre -existing conditions. The insurance companies are driven by profits only, not trying to provide health care.
I would imagine that this is lumped under "overhead" among insurance companies, which has already been quantified several times in this thread. Unless you're contending that this explains the missing $2000 PPPY ($700,000,000,000 total), it's not really relevant to our discussion. I severely doubt that, since it would mean that insurance companies would be paying double to four times the amount on law suits as they pay to employ their entire work force and not noticing that this wasn't terribly profitable.
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  #39  
Old 10-02-2009, 04:50 PM
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Originally Posted by Sage Rat View Post
- 9 --
The US Tries to Keep Old People Alive Longer

I can't find where I saw this. Basically, supposedly the US tries to keep people who are dying on artificial support more often and for longer than other nations.
Alright so I finally felt like doing some more research, and this item seemed like the one which could be proven or disproven most easily.

Here are spending figures as broken down by age for the US, Japan, Canada, and New Zealand respectively:

http://healthcare.ncpa.org/images/figure10.jpg
http://www.mhlw.go.jp/english/wp/wp-...ges/f1-4-1.gif
http://secure.cihi.ca/cihiweb/products/nhex_2008_en.pdf (PDF)
http://www.treasury.govt.nz/publicat...p06-01-037.gif

America spends about $2000 PPPY for this age group. I'm sorry I couldn't find a better graph or data set than this. (There's this one from 1995 and this more official data which separates things into age groups so wide as to be meaningless.)

The Japanese graph appears to break things down into 5 year groups and states the total spending for that five year period. The 25-29 age group takes Y500,000 or about $5000US. Per year, that's $1000US PPPY for people aged 25-29 on average.

Canada appears to spend about $3,800CA which is probably for the full 5 years so it's about $760CA or about $700US.

New Zealand appears to spend about $1000NZ or about $700US.

Now, if life support was a significant factor of health spending, we would expect to see two things:

1) Health spending in the US for young people with no particular need of health care would cost no or little more than other nations.

2) The quotient of spending between those who would be on life support (i.e. the elderly) and the young would be greater in the US than other nations.

Item #1 has already been shown to be false, so it looks like there isn't too much point in looking at #2. Moreover, I can't seem to figure out how to convert between one graph and another. But either way my estimation would be that this is a myth as well. I doubt that life support is playing any significant factor in our overall spending.
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  #40  
Old 10-02-2009, 07:33 PM
GIGObuster GIGObuster is offline
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http://content.healthaffairs.org/cgi...t/full/22/3/89

So, where does the money go?
Quote:
It’s The Prices, Stupid: Why The United States Is So Different From Other Countries
http://content.healthaffairs.org/cgi...t/full/22/3/89
Quote:
Public versus private health spending. Private spending in the OECD data falls into the broad categories of (1) out-of-pocket spending for deductibles, coinsurance, and services not covered by health insurance; and (2) premiums paid by families and individuals for private health insurance. As shown in Exhibit 1Go, the share of total health spending that is privately financed varies considerably across the OECD countries. The median country finances 26 percent of its health care from private sources. The range is as high as 56 percent in the United States and Korea to as low as 7 percent in Luxembourg and 9 percent in the Czech Republic. As a percentage of GDP, the OECD countries spent 0.4–7.2 percent of GDP on privately financed health care in 2000, with an OECD median of 2.0 percent. The United States was the highest at 7.2 percent. U.S. private spending per capita on health care was $2,580, more than five times the OECD median of $451.

In most OECD countries the privately financed share of total health spending increased during the 1990s (Exhibit 1Go). The private share tended to increase more rapidly in countries with lower shares of private health spending in 1990. The explanation for the increase varied from country to country. For example, the level of cost sharing increased in Sweden, while private insurance coverage increased in Switzerland.9 Countries with the largest share of private financing in 1990—the United States, Mexico, and Korea—had a decreasing private share of financing during the 1990s (Exhibit 1Go).

Although the percentage of the health care dollar financed from public sources in the United States is low compared with other OECD countries, the absolute amount is relatively similar to other OECD countries. Public sources in the United States accounted for spending of 5.8 percent of GDP in 2000, very close to the OECD median of 5.9 percent. In fact, on this measure of public spending, the United States is virtually identical to the United Kingdom, Italy, and Japan (5.9 percent each) and not much smaller than neighboring Canada (6.5 percent). Finally, U.S. public sources spent $2,051 per person in 2000; this places the United States among the top four countries listed in Exhibit 1Go, just behind Luxembourg ($2,510), Iceland (2,202), and Germany ($2,063). On that measure, the United States ranks far above the OECD median of $1,502, Japan’s $1,542, and the United Kingdom’s $1,429.

Furthermore, as Steffie Woolhandler and David Himmelstein pointed out recently in Health Affairs, the OECD data (and the U.S. national health accounts on which the OECD database draws) actually understate the role of the public sector in health care. These researchers measured the public sector’s share of total health spending not by who ultimately paid the providers of health care, but by the fraction of health spending that originated in households in the form of taxes. On that measure, close to 60 percent of total U.S. health spending in 1999—7.7 percent of GDP—was financed through taxes.10
Quote:
In the U.S. health system, for example, money flows from households to the providers of health care through a vast network of relatively uncoordinated pipes and capillaries of various sizes. Although the huge federal Medicare program and the federal-state Medicaid programs do possess some monopsonistic purchasing power, and large private insurers may enjoy some degree of monopsony power as well in some localities, the highly fragmented buy side of the U.S. health system is relatively weak by international standards. It is one factor, among others, that could explain the relatively high prices paid for health care and for health professionals in the United States.

In comparison, the government-controlled health systems of Canada, Europe, and Japan allocate considerably more market power to the buy side. In each of the Canadian provinces, for example, the health insurance plans operated by the provincial governments constitute pure monopsonies: They purchase (pay for) all of the health services that are covered by the provincial health plan and used by the province’s residents.

Even a pure monopsonist, of course, is ultimately constrained by market forces on the supply side—that is, by the reservation (minimally acceptable) prices of the providers of health care below which they will not supply their goods or services. But within that limit, monopsonistic buyers enjoy enough market clout to drive down the prices paid for health care and health care inputs fairly close to those reservation prices. It can explain, for example, why Fuchs and Hahn found that "U.S. fees for procedures are more than three times as high as Canadian fees [and] the difference in fees for evaluation and management services is about 80 percent."34
Quote:
In 2000 the United States spent considerably more on health care than any other country, whether measured per capita or as a percentage of GDP. At the same time, most measures of aggregate utilization such as physician visits per capita and hospital days per capita were below the OECD median. Since spending is a product of both the goods and services used and their prices, this implies that much higher prices are paid in the United States than in other countries. But U.S. policymakers need to reflect on what Americans are getting for their greater health spending. They could conclude: It’s the prices, stupid.
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  #41  
Old 10-02-2009, 07:52 PM
gonzomax gonzomax is offline
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Originally Posted by RingsOfPylon View Post
The information is a couple of years old, but the average profit margin is just under 6%. Health insurance is not a high profit industry.

It is good to have some profits, as the companies need to have money in reserve in case of things like flu epidemics, or a bad year the following year(s) where payouts exceed revenues. After all, they're not like the government and can't print up funny money to cover costs of a sudden surge in claims.
http://girldujour.wordpress.com/2009...make-you-sick/ Health insurance profits look smaller because they pass so much onto their execs. They pay their staffs tons of money making it appear they are not as profitable as they are. In these days of creative accounting ,you can not believe them.
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Old 10-02-2009, 07:57 PM
gonzomax gonzomax is offline
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http://www.heritage.org/research/healthcare/wm1959.cfm This is why we waste money on durable goods. You can buy things that medicare provides for a lot less money. There should be a law mandating competitive bidding for every thing the government buys.
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Old 10-03-2009, 01:35 PM
Mr. Duality Mr. Duality is online now
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http://www.nytimes.com/2009/09/28/us...2&pagewanted=1"only 60 percent of the cost of individually sold policies goes to paying for health care; the rest is for overhead, marketing and profits."]only 60 percent of the cost of individually sold policies goes to paying for health care; the rest is for overhead, marketing and profits.[/URL] that says "only 60 percent of the cost of individually sold policies goes to paying for health care; the rest is for overhead, marketing and profits."

So marketing is separate from overhead and profits?

Last edited by Mr. Duality; 10-03-2009 at 01:39 PM..
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  #44  
Old 10-03-2009, 01:42 PM
Sage Rat Sage Rat is offline
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Originally Posted by GIGObuster View Post
Oh my god! I never would have realized that our spending is considered so high compared to others because we spend more and get less out of it! I'm glad you told me this! (Or no actually I'd read it before. Darn.)

About the only thing that article says of any practical value is that the course of the money is labyrinthine, which is itself probably a source of money loss. That is however unquantified and speculative. Assuming it to refer to the excess administration of having many, small insurance providers and corporate profit, these are both quantified.

Consistently insisting that the unresolved $2000 PPPY sits on private insurance like so:

Quote:
Health insurance profits look smaller because they pass so much onto their execs. They pay their staffs tons of money making it appear they are not as profitable as they are. In these days of creative accounting ,you can not believe them.
This is just silly. Crying conspiracy is almost guaranteed to be the wrong answer for any question. Provide actual numbers from a decent source and I'll consider them. But as yet, I've seen nothing which indicates anything other than that private insurance costs roughly $1000 PPPY between administration and profit.

Quote:
http://www.heritage.org/research/healthcare/wm1959.cfm This is why we waste money on durable goods. You can buy things that medicare provides for a lot less money. There should be a law mandating competitive bidding for every thing the government buys.
And so this is in support of item #8. It's essentially the equipment-side of #3. Unfortunately, and including your article, I haven't seen anything quantifying this. Saying that we spend double the amount for a hospital bed only matters if European nations pay the halved price and if hospital beds are a significant percentage of all spending.

This paper indicates that spending on "medical devices" is only 6% of all spending (~$360 PPPY). It looks like the UK spends $132 PPPY, so we are again spending in excess, but even if we manage to buy cheaper stuff or offset the cost of new technology onto other nations, this only gives us another ~$180.

Our current tally:

Multiple Private Insurance -> Single Payer Public = -$700
Pharmaceuticals No Bidder -> Pharmaceuticals Lowest Bidder = -$200
Supplies No Bidder -> Supplies Lowest Bidder = -$180

$6000 - $700 - $200 - $180 = $4920

So we still have $1920 to find.
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Old 10-03-2009, 11:59 PM
GIGObuster GIGObuster is offline
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Originally Posted by Sage Rat View Post
About the only thing that article says of any practical value is that the course of the money is labyrinthine, which is itself probably a source of money loss. That is however unquantified and speculative. Assuming it to refer to the excess administration of having many, small insurance providers and corporate profit, these are both quantified
And then you go to your numbers, but that is becoming the silly part. You are assuming and low balling to keep your numbers from ever reaching a destination. (I would be willing to say that getting exact numbers is hard, but I question the idea that therefore we should minimize or ignore the research)

I'm beginning to feel that we are like Achilles and the tortoise in a paradox by Zeno. You are hopping that just by not reaching the total that you are making a point, but in reality everybody knows that Achilles reaches the tortoise in real life (Countries that switched to UHC cover all people and still pay less per GDP). Likewise, enough has seen by many here and around the world to see what works and what does not.

http://dms.dartmouth.edu/news/2005_h...sirovich.shtml

http://dms.dartmouth.edu/news/2003_h...3_fisher.shtml

http://www.mckinsey.it/idee/mckinsey...pend-more.view

Last edited by GIGObuster; 10-04-2009 at 12:03 AM..
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