Are you not assuming an all-or-nothing approach here? You might consider a hybrid approach like the UK where we have the NHS but also have private healthcare on top. The NHS is very good for emergency situations, but if you can wait, you may well have to, because emergency cases take priority. In which case you turn to your private health insurance.
But I wonder how much of the problem of high healthcare cost in America is student debt? It costs a lot to become a doctor; it also costs a lot to train for many of the myriad other professions required to provide health care. That translates to high salaries. Might state assistance be of considerable help here? I vaguely remember a TV program about a doctor in Alaska who had had state assistance for his (her?) education.
There’s also the administrative overhead and executive salaries, not to mention the administrative costs for health offices juggling several different payment methods and providers, and HR departments shopping around for and arranging insurance for their employees. Which still doesn’t add up to 35%.
I’m thinking one factor is the same kind of conflict as with someone pricing a house to buy and the same someone pricing the same house to sell: same as “our house that we’re selling” tends to look more valuable than similar houses in the area, the main issue here is one of
patients (which sooner or later means the whole country), who want lower cost
vs
providers (insurance and pharma, but also doctors, nurses, investors in clinics…), who want to keep their income high.
The same people who want to pay as little as possible will, when it is them providing the service, want to be paid as much as possible.
How do you convince someone who went to medical school “to be rich” (sic, several of my Premed students) to change that mindset? And if someone moved to the US and jumped through a million hops specifically in order to make more money than they would back home for the same job, why should they now make less for the convenience of a ton of people they’ve never met? And if a company is in the medical field in any form, who wants to get less dividends? And why should someone who invested the time and money needed to become a medical admin lose her job?
On a different note, price comparisons based on direct monetary cost are always faulty: I agree that looking at it in terms of GDP, McD Dollars or something like that needs to be used. The US tends to have higher cost of living than many other countries, but also higher salaries; many people have moved to a high-salaries country and discovered they could eat chicken as often or even less often as they could back home, because the price of chicken had scaled up as well.
Taking everything you’ve posted as given, I think you’re grossly simplifying, and oddly choosing to absolve the insurance industry of any responsibility.
As a person who works directly and indirectly with doctors (GP-types, not sexy specialists) who are generally not hospital-affiliated, I see regularly how practices have to fight with insurance companies to comply with arbitrary rules in order to get paid (and hire staff just to navigate the complications of billing). And, not having the ‘buying power’ of hospitals, they take what they are given, and are often threatened indirectly and directly by insurance companies when they try to negotiate payment. These are doctors who, again, are not high-paid specialists, but who are generally earning ~$100 per visit (rather, that’s generating ~$100 for their practice per visit).
There is an adversarial relationship between doctors and insurance companies; it may well be that in some specialties/relationships the hospital has the power, but absolving the insurance companies while condemning the doctors is a pretty narrow reading of the problem.
That’s thinking about it from a market/insurance perspective. In Canada, that’s not really how it works - it’s a government program perspective.
Keeping customer service high: we’re not customers; we’re voters, with access to media and politicians. There is constant political pressure on the government to keep the health care system functioning well. And because of the structure of our political system, the government is responsible: the executive can’t blame the legislature for not providing the money, the legislature can’t blame the executive for mis-management, and both avoid responsibility. The Legislature and the executive are jointly controlled in a system of responsible government, and if there is not enough money or mismanagement, the government of the day is standing there taking the hit in the House and in public opinion. Governments can lose a seat over a hospital closing, and can lose an election over the health care system overall. That’s a strong incentive to keep the system running well.
Keeping prices low: In a single-payer system there is a strong incentive for the single-payer (the government) to keep prices low, because it’s all paid from tax revenue and no-one likes tax increases. That’s the driver, not market forces. For instance, hospitals are run by public agencies that do not have a profit motive. Right away, that helps to reduce prices, because they don’t need to build profit into each step. As well, the provincial governments each negotiate the payment schedules with the doctors on a regular basis. It’s the Wal-Mart principle: if you have the clout, you can ensure prices keep within a certain range. Doctors can’t extra-bill (require the patient to pay over and above what the provincial medical commission pays). As well, the provinces together have the purchasing clout to negotiate prices for drugs and keep them from skyrocketing. (Malthus can contribute to this discussion, as he knows a fair bit about it.)
Administrative efficiencies: something you didn’t mention is administrative efficiencies. There is only one payment schedule for the doctors and only one set of billing codes. That creates a major efficiency compared to a system where each doctor’s office has to deal with a number of insurers, each with their own billing system. Nor is there the nightmare of “Is it is my insurer’s network?” or “Does this doctor take Medicare/Medicaid?” which US posters on this board have discussed at length. As a patient, you aren’t restricted to a particular set of doctors, and you don’t have to worry that if you go in for a procedure, at some stage you’ll have a service from a doctor who is out of your network and not covered by your insurance. It’s all covered by the single-payer.
Are there issues? Sure, it’s like any other system, there is always room for improvement. Wait times for procedures that aren’t crisis-level can be an issue (which in turn is a constant pressure on the government; see above).
But bottom line is that I’ve never met someone who didn’t get the medical care they needed, and I’ve never heard of anyone going personally bankrupt from medical bills.
This is a good point from jtur88. The Canadian system is a mixture of overall principles set by the federal government, but administration by the provinces, who in turn delegate to local health regions. That decentralization of administration is a strong feature of the Canadian system, in my opinion.
(One minor quibble: RevCan doesn’t collect Quebec income taxes; Quebec does that themselves. All the other provinces do delegate tax collection to RevCan.)
Whatever problems the VA may or may not have, this is a completely irrelevant comparison because in most models of universal health care, the government is not the provider, it is the payer. This is a common misunderstanding about UHC and single payer. The health care provider sector can be as autonomous, diversified, and competitive as it is under private insurance. Indeed in the Canadian system, clinics and hospitals compete for patients, and hospitals even do marketing-style patient satisfaction surveys to find ways to improve the quality of the patient experience, because even though they are typically non-profits their revenues and capital grants depend on it.
Not an issue at all – see above. And obviously single payer has been much more successful at keeping prices low (Northern Piper addressed this in #25, just above). What can reduce the level of customer service is if there is a scarcity of providers and the provider sector becomes a non-competitive oligopoly, but that can happen in any kind of insurance/payer system that is poorly managed or poorly regulated. The free market alone is no guarantee of superior service or low prices – notice how everyone is always bitching about phone and cable companies.
Except, of course, the statement: “The provincial premiers issued a communiqué that the Federal government is not providing large enough transfer payments.” There is generally unanimity there.
I’m reasonably sure the equivalents from the Spanish Autonomías, US States, German Landers et al are in agreement too, even if they do refer to a different set of central authorities
A lot, because all the other developed nations have done it, and in many different ways. I’d recommend checking in with the countries that did it last, and ran big projects surveying all the systems out there to see what worked best, and which kinks to avoid. Taiwan would be a good start.
However, even the ones who have chosen to go the way of Beveridge systems, national healthcare models, do not have nationalized systems. I cannot offhand think of any developed nation that has nationalized its healthcare system.
A national system is not the same as a nationalized one.
Same way the US pays for its government healthcare systems, taxes.
The US runs a number of government funded healthcare systems, Medicare, Medicaid, VHA, Indians etc. They cover roughly 28 % of the population. They are in total somewhat more expensive per citizen than the single system the average developed country uses to cover 100 % of the population.
There are a myriad ways. I’ve read health care economists arguing that going to a Bismarck-style setup would be the easiest. That’s basically insurance-based healthcare with legislation to make sure everyone is covered. Its used in Germany, Switzerland, the Netherlands and I think Australia. Note that while not American-level costly, this tends to be the most expensive solution.
Other options are Beveridge-style systems such as the UK, Scandinavia and Iberia has, or National Insurance similar to Canada and Japan. Or mix and match like France.
If the costs could be assumed to be similar to the average of other developed nations, current government healthcare spending would drop by very roughly $ 1000 per American per year. So about 320 billion dollars saved. (Just over half the US military budget).
Hard to say. Probably reducing taxes on the middle classes. Although paying down the national debt and getting to grips with the lag in infrastructure maintenance might be good ways to allocate it.
In order to fund healthcare at the current cost, you would need to double the money generated from the income tax. Since this is not really possible, the most likely way would be the implementation of a value added tax. This is like a sales tax but it is added at every point along the way from raw material to final sale. This would mean a much higher burden on middle class taxpayers, similar to what they have in Europe.
It’s not as simple as that, either, but I agree that health insurers don’t have the same goal for low cost as a government entity like Medicare. But they do operate in a pseudo-competitive environment, so have some incentive to get costs down in their network, that’s the sort of thing that can differentiate them from other providers when being pitched to a big corporate HR department.
Private health insurers are definitely part of why our healthcare costs so much, but I don’t believe it’s due to their profit margin. The biggest impact they have is making healthcare costs “opaque”, which perverts the market and insulates providers from real market forces.
If you had a German style system where there was a non-profit, quasi-governmental “sickness fund” for each American state, that providers were not legally allowed to exclude, they would instantly have so much “buyer power” that they’d be able to command prices probably as low as Medicare.
The way we train doctors is definitely part of it. I think you’re usually about $250,000 in debt when you’re done with all your education. Doctors do a stint of a couple years as “residents”, in America, residents are functionally doctors, but are working in a residency program (where they’re doing real doctor work) before they can be cut loose into the world. During residency doctors only make about $60k or so, so they aren’t able to make much inroads on that student debt. The economics for most doctors who end up in the $200k salary range (i.e. non-specialists/non-surgeons) is they take about a decade to get out of debt, and then the country club memberships and BMWs start rolling in.
Another big issue is that we’ve increased the number of “spots” in medical schools hardly at all since the 1970s. The U.S. population wasn’t even 200m back then. Further, medicine was “simpler” then and there were less specialists per capita So we actually have a greater demand in total for doctors and a greater demand per capita for doctors than we did 40 years ago, but hardly any increase in the bandwidth of the doctor education system. The AMA is a major source of trouble here, they intentionally do not want to see new medical schools and expanded admissions for existing schools because this waters down the prices that members of the “guild” can command.
The inability to properly create new doctors at the appropriate levels is why so many states not give RPNs, PAs etc more power than ever to damn near do everything a doctor can do, with some limitations.
I’m not “absolving” anyone. I’m trying to focus attention on the biggest drivers of cost, and I don’t believe it’s the insurance companies. My favored plan is emulation of something like Germany’s system, because that’s the one we could most easily transition to from our current system. Such a thing would only leave a very small rump of the current for-profit health insurance company, so I’m definitely no ally of them.
In all I agree with the point of your various posts that the insurance companies are not the primary bogeyman for high costs.
But …
It’s invalid to look at the Medicare prices and assume the industry could survive if that price was expanded from 16% of customers to 100% of customers.
In my industry (airlines) we have silly price differentials between various people flying in identical seats on the same flight. At the same time, we would rapidly go broke if we sold every ticket at the price of the cheapest seat.
Yes, airlines have relatively high labor costs per worker. But if every airline employee worked for free we still couldn’t stay in business selling every seat on a flight at the lowest fare we sell some seat(s) on that flight. We rely on the cross-subsidy of must-fly flyers paying for some of the might-fly flyers. What the must-flyers get in return is a vastly increased daily schedule and destination set plus a large surge capacity.
Bottom line as it applies to the US medical industry: Medicare is underpaying the breakeven price and is being subsidized by the private payers being overcharged. The fact the private payers outnumber the Medicare payers about 6:1 implies the revenue-neutral average price is about a 15% discount off the private payer price.
Starting from that 15% discount we can begin to quantify excess costs and excess profits in the system and try to wring them out over the objections of whichever oxen will be gored. But that’s a far different thing from blithely asserting the current Medicare prices are the place to start from then negotiate (at gunpoint) down from there. That way leads directly to systemic failure.
This is also an important point to make. Nationalisation to my mind means the government takes over all the system and runs it itself, with all the staff being government employees.
That’s not how it works in Canada. While hospitals and hospital staff are public institutions, they’re not run by government directly. Administration is delegated to regional health authorities, staffed largely by health care professionals.
And doctors and their clinics are private operations. Doctors are not government employees. They own and operate their clinics, hire their own staff, and so on.
Not if it were done as it is in Canada (Quebec). We pay a lot for it, 47% of the Quebec expenditures are for medicare), but there is no copay and no deductible. The only thing a private insurer can do is insure the few things the province doesn’t: Chiropractic, footcare (which I need) and dentistry. There is a separate pharmacare, which is not optional unless you have private insurance. They negotiate prices with the drug companies (which congress, in its great wisdom, has forbidden the US government to do) and mostly cover 80% of the drug costs. Nearly all doctors are in the system, since the only alternative is to go completely private in which case they can serve only private patients, no public ones. The system was put in place by the federal government, by Trudeau I, after being tried in Saskatchewan.
Yes and no – it’s the old “true but misleading if you dig deeper”.
Clearly, there is a way that the health care industry could survive with much lower fees because it does exactly that in all other countries except the USA. A more apt analogy is that an airline couldn’t survive if all seats were sold at discount rates, but it turns out this is only because in this analogy their business model is so badly broken that half the passengers renege on their promise to pay the agreed fare or they stiff the airline completely, and even their credit card companies turn out to be unethical thieves who use every possible loophole to avoid paying the charged amounts. IOW, the only reason the airline couldn’t survive on cheaper fares in this hypothetical is because the cost of doing business is outrageously high due to artificial factors attributable to an incredibly stupid business model.
Yet the health care industry is broken in just this way, and the health insurance industry is primarily responsible, not because of any particularly huge profitability though that doesn’t help, but because the whole nature of private insurance necessitates a very high cost of doing business for the providers, due to cost of administration and collection, and the cost of being stiffed by deadbeat patients and profit-conscious insurers to whom any medical payout is a “medical loss” to be avoided rather than an obligation to be honored.
Martin Hyde quoted some costs earlier. Let’s look at this one – in this and in my comparison I’ve bolded the dollar amounts:
Hip Replacement Charge, Medicare: $13,195
Hip Replacement Charge, Negotiated Price: $24,046
Difference: $10,851
Here are some comparable costs in Canada, specifically in Ontario from the 2008 OHIP fee schedule that I happen to have handy – now granted, this is now 8 years out of date, but it does shed some perspective:
R440 Total hip replacement - acetabulum and femur . . . . . . . . . . . . . 8 - $696.00 - 8 total $893.12
R553 Total hip replacement with take down of fusion . . . . . . . . . . . . . 8 - $972.90 - 10 total $1,196.50
Revision total arthroplasty hip - one or both components
The middle number is the base cost for surgery, the digits 8 or 10 before and after are the number of time units chargeable for a surgical assistant and anaestheologist, respectively, which are used to multiply the unit amounts of $11.40 and $13.24, respectively, thus arriving at the total.
Now this doesn’t include the cost of the hospital stay itself – typically somewhere around $2,400 for the estimated 3 to 4 day stay, plus medications, diagnostic imagery, and lots of other stuff. Still, take the highest cost – $1,528.40 – add in $2,400 and generously another $1,000 for “miscellaneous” and you’re still not even up to $5,000. I’ve seen other estimates (presumably more recent) where the cost is said to be closer to about $6,700, but that still comes nowhere even close to the outrageous amounts charged in the US.
