There is a significant gap in overhead costs between Medicare and private insurance, but it is not likely to be that large. Politifact has a good article that covers some of the differences in these numbers.
Primarily:
Medicare leverages the Social Security system for enrollment and payments
Some of the overhead for private insurance is to reduce costs by rejecting unnecessary claims or redirecting to lower-cost options (e.g. outpatient).
Medicare enrollees are older and more expensive which makes the overhead cost as a percentage lower. A better figure is cost per enrollee.
That’s not to say that we shouldn’t adopt Medicare for all; just that we shouldn’t over promise on the savings. The silver lining though is that a smaller gap in overhead means fewer gored oxen (to @DavidNRockies’ point).
People don’t want to discuss it, but the real answer is racism. America has deep racial divides and any attempt to improve the social safety net is immediately filtered through the lens of POC and immigrants getting to benefit, which causes a lot of resentment among white people.
When FDR enacted the new deal which dramatically expanded the social safety net, it had to be designed to exclude black people. Jobs black people worked (agricultural work and domestic servants (which made up 2/3 of jobs held by black people in the south) were excluded from the social security system so they wouldn’t benefit, and those jobs were only added in the 1950s. A lot of the new deal programs were meant to go through state governments so southern states could deny assistance to black people but give them to white people.
As far as universal health care, FDR and Truman wanted UHC but southern politicians opposed it for fear it would lead to health care for black people, integrated hospitals and the downfall of Jim Crow. Eventually a compromise was reached and the government wouldn’t provide health insurance to everyone, but it would provide insurance to people the private market didn’t want to cover. So we have a single payer program for the elderly (medicare) and a single payer program for the poor and disabled (medicaid) as a compromise.
Most of the modern states that haven’t enacted the ACA expansion are southern states.
Basically, 90% of what’s wrong with America politically and culturally can in one way or another be traced back to southern whites collectively being bad people. That’s just the reality of the country.
My understanding is most nations didn’t adopt nationwide UHC at once. Usually a province/state/region adopted it, it proved popular and it spread nationwide. Thats probably the path in the US. What’ll happens is some of the northeastern states, west coast states, southwestern states, etc will adopt meaningful UHC reform. It’ll prove popular and then 10-20 years later it’ll become national policy.
Van Baal and colleagues created a model to simulate lifetime health costs for three groups of 1,000 people: the “healthy-living” group (thin and non-smoking), obese people and smokers. The model relied on “cost of illness” data and disease prevalence in the Netherlands in 2003.
The researchers found that from age 20 to 56, obese people racked up the most expensive health costs. But because both the smokers and the obese people died sooner than the healthy group, it cost less to treat them in the long run.
On average, healthy people lived 84 years. Smokers lived about 77 years, and obese people lived about 80 years. Smokers and obese people tended to have more heart disease than the healthy people.
Cancer incidence, except for lung cancer, was the same in all three groups. Obese people had the most diabetes, and healthy people had the most strokes. Ultimately, the thin and healthy group cost the most, about $417,000 US, from age 20 on.
The cost of care for obese people was $371,000 US, and for smokers, about $326,000 US.
There are 2 major counterpoints to the idea that healthy living reduces health care costs
People in other developed nations have poor lifestyles too, but their health care costs are much less than ours. The obesity rate in Australia and New Zealand are about 32-35%, vs 41% in the US. Despite that, New Zealand and Australia spend closer to 10-11% of GDP on health care vs 18% in the US. A minor difference in the rates of obesity can’t explain why health spending is so much lower in Australia and New Zealand. People there have diseases of obesity too.
Smoking rates are higher in various other OECD nations vs the US, but their health spending is still less. France has a far higher rate of smokers than the US, but they spend 11% of GDP on health care vs 18% in the US.
Another point is that healthy living doesn’t reduce lifetime health care spending. It just changes when it happens. People with unhealthy lifestyles may spend more in their 40s, 50s, 60s and 70s. But they spend far less in their 80s since they don’t live as long. That study I posted earlier shows that healthy people generally lived to 84, while smokers live to 77 and the obese live to 80. You can incur a lot of health expenses in those extra 4-7 years at the end of your life.
The issue is people ‘want’ to believe that healthier lifestyle = less medical spending. That framework can be used to justify pressuring lifestyle interventions. But the data doesn’t support the claim. Lifestyle just changes where in your life you spend money on medical care, not whether you spend money or not. If anything, the opposite is true and the poorer your lifestyle, the less medical care you may spend. Someone who is obese, smokes, drinks heavily, etc but who dies of a quick heart attack in their 60s costs less than a vegan athlete who spends years in a nursing home in their 80s.
If you want an example of why health care costs so much more in the US, here is an example.
pyrimethamine is a generic drug used to treat toxoplasmosis and malaria. Normally generic drugs are cheap in the US, but when there is a small market for a generic drug, usually only one company will make it. This drug used to cost $13/pill until Martin Shkreli raised the price to $750/pill. Because the market is so small, other generic competitors didn’t enter the marketplace.
Meanwhile, while the drug went from $13 to $750 a pill in the US, you could buy the drug for $0.25 a pill in places like Australia or Switzerland. However because the US is a plutocracy, we aren’t allowed to buy drugs from overseas and import them here in bulk since domestic manufacturers don’t want the competition. You can treat 3000 people in Switzerland or Australia for the same price to treat 1 person in the US.
Stuff like that is a big part of why health care costs more here. A pill that costs $0.25 in Australia or Switzerland costs $750 in the US.
There is evidence of broken capitalism in my Explanation of Benefits (EOB’s). About 20 years ago, my son injured his ankle running up our front steps. We took him to the local ER where they did X-rays and concluded that it was a sprain. They made a splint and gave him a set of crutches. He used the crutches for maybe 2 or three days. They have been adding to clutter in the garage for about 20 years now.
The EOB showed that the hospital billed the insurance $1500. The hospital was in-network and had to settle for the $150 that the insurance said the visit should cost. Since ER’s are justifiably expensive, my guess at the fair price would be about the geometric mean, $400-$500. Either way, my co-pay was $100. Since it’s not my money, what the hospital actually gets is not something I’m supposed to worry about.
Blood work is another place where you see that 10:1 price ratio. The lab will bill about 10x what the insurance pays. Drawing blood is a skill not everyone has. The person who does it deserves a decent paycheck. The lab also needs to pay rent and utilities. The machine that processes samples is probably not cheap. Again the fair price seems like the geometric mean of the two prices you see on the EOB.
For normal shopping, looking around might save you about 20% over getting your item in the first place you look. Stores need to have competitive prices. That is how capitalism is supposed to work.
Any reason to pick the geometric mean? I’d always interpreted the “top line” number as an arbitrary large number picked solely so they can tell the insurance you’re getting a huge discount (and the insurance can tell you that you’re getting a huge discount because of how awesome they are). Then the bottom line number would be close to what they really expect to be paid with maybe a “normal” level of discount (like 10%) because they don’t have to chase you to pay.
In my estimation, any calculation of what the procedure “should” cost shouldn’t involve the top number at all. It’s just an accounting number they don’t expect anyone to actually pay.
In a study out of Taiwan, for example, the data went the other way:
Moreover, health-care spending is only one component of the overall societal cost of poor health, albeit it is the component on which the OP is predicated
I don’t want to distract from OP, and math isn’t something I’m good at. But if you look at table 3 from that paper, the lifetime expenditures don’t really seem to vary based on whether someone has 0 thru 5 healthy lifestyle factors (non-smoking, healthy BMI, eats fruits/vegetables, doesn’t drink excessively, exercises).
I’m open to the idea that I’m wrong, but it looks like its saying there isn’t much difference in lifetime spending, unless I’m reading it wrong.
It says lifetime spending for 0-1 healthy habits is 58,715, but lifetime spending is 60,667 for 4 healthy habits.
Also according to that chart from what I can tell, people who are physically active cost more than inactive people in lifetime spending, people who eat sufficient fruts/vegetables cost more than those who do not. Costs are about the same between excess drinkers and non-drinkers.
Annual health care costs go down with healthier lifestyles, but lifetime health spending doesn’t seem to.
The only group that seems to have more meaningful spending over a lifetime are the high BMI group vs healthy BMI group.
Lifestyle factors
Values, n
Lifetime health care expenditure, US $a (95% CI)
Cigarette smoking
Current or former smokers
6318
60,395 (56,018 to 68,054)
Never-smokers
13,575
58,821 (38,595 to 63,525)
Alcohol consumption
Excess consumers
3346
57,849 (51,399 to 65,353)
Infrequent or nonconsumers
16,547
57,737 (54,723 to 60,531)
Leisure-time physical activity
Insufficient active
13,174
56,733 (53,081 to 59,840)
Sufficient active
6719
60,828 (56,098 to 67,518)
Fruit and vegetable intake
Low or insufficient intake
2154
52,815 (46,193 to 59,625)
Sufficient intake
17,739
60,217 (58,016 to 63,905)
BMI group
Nonoptimal body weightc
7540
62,474 (56,549 to 68,844)
Optimal body weight
12,353
53,336 (49,394 to 55,884)
Number of low-risk lifestyle factors
0 or 1
1220
58,715 (43,229 to 78,470)
2
2929
53,414 (45,675 to 58,903)
3
5748
58,246 (40,663 to 63,068)
4
7183
60,667 (40,685 to 67,255)
5
2813
55,785 (47,896 to 64,346)
Living a healthy lifestyle is a good idea because it lets people live longer and healthier lives. I just don’t think it will save money. The US spends 18% of GDP on health care. If everyone stopped being obese, if we all exercised and ate healthy, if we all stopped drinking and smoking, etc. we would be healthier and live longer, but my impression is total health care spending would still be about 18% of GDP. We would just live longer and spend more in our later years.
Meanwhile in places like Australia, France, Japan, etc where people are also obese, drink too much, smoke, etc their health spending will still be 10-12% of GDP.
I think that the bottom line is, eventually, something is going to kill you. And whatever it is that’ll eventually kill you, that’s what most of your health care spending is going to be on.
It’s entirely possible that healthier lifestyles don’t dramatically reduce lifetime health-care expenditures because people live long enough to incur medical costs in old age. But I’m reluctant to evaluate the question using health-care spending alone, despite it being the foundational premise of the OP.
If healthier lifestyles buy people additional years of good function, independence, productivity, and enjoyment—even if some of those extra years eventually involve medical care—that seems like an enormous societal benefit. Health-care spending is an important metric, but I don’t think it’s the only metric worth optimizing.
How much other countries spend, to me, basically establishes that social determinants are but one factor in a hugely multivariate cost analysis of health care structure on a national level. It lives alongside of other factors, like:
payment systems
pharmaceutical pricing
administrative overhead
physician reimbursement rates
hospital pricing
litigation laws and environment
bargaining power
demographics
levels of technology adoption
That’s why I say that … the minute you explode (ie, drill down into) that 18% of GDP statistic, then – much as they always say about housing and the US auto industry – the tentacles are innumerable and far-reaching.
