Why does healthcare take up a lower % of GDP in developed countries other than the US

Great Debates
61

I read the same thing about medicaid and private insurance in an article within the past couple of days, though I don’t remember where I got the link.

Anyway, people saying that lawsuits and all these other things are responsible need to open your eyes. 25% of 1.55 trillion for administration as opposed to 10% or less is far and away the biggest reason healthcare is so expensive. Lawsuits and other things will only account for a fraction of the cost of administration costs.

Why is it so expensive here in the USA? For any of you that have had more than one insurance company (probably everyone), think about this. How many insurance companies used the same form? The answer is none. How difficult is it to fill out the forms? The answer is that it is much more difficult to correctly fill out the forms than it needs to be. They ask for all sorts of information they already have, for instance. Why do I need to put down my account number, name, address, who is the primary holder of the insurance, etc? They have all that information already! When I deal with companies for paying my bills all they need is my account number and name, generally.

It is pretty obvious why insurance companies do this. The more difficult it is to fill out your paperwork and get reimbursed, the longer the insurance company holds on to the money. It’s actually very similar to rebates, where they purposely make it difficult to collect money that is owed you. Even if you get the money in the end, the longer they slow you down, the longer the money stays in their coffers, adding to the bottom line, earning interest and being invested to make them more money.

There is a simple solution, which would be one universal claim form (or set of forms if need be) for all health insurance, but the insurance companies would fight it tooth and nail. It would save untold amounts of money in administrative costs to have every company use the same form, in addition to making it easier to fill out the form because you wouldn’t be asked for different information every time you switch insurance companies. It is not in the insurance companies’ interests, though, because they don’t want faster turnover on claims that are filed. The longer they hold onto the money, the better it is for their bottom line.

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But I’d bet you that the waiting list problem in Alberta is nowhere close to the problem in, say, Quebec. Money does help. As for availability to care in the US, if you live in the right place (large metro area with a good medical school and good insurance), you’re golden. If just one of those 3 things is missing, you’re not quite so lucky.

I know a lot of those 42% of the 10% here in Cleveland. The main reason they cite is research. There is a lot more research money available in the US, so if you are a doc who wants a practice and also dabble in a little research, the US is the place to be. Money (i.e. the stuff that makes it to your own pocket) is way down on the list – there’s more in the US, but the disparity isn’t as big as you imply and the headaches (and malpractice insurance) are bigger.

Another thing I’ve heard from a few doctors is the closed nature of Canadian residencies. I know an excellent British doctor who wanted to settle in Canada. He applied to residencies everywhere, from Vancouver to Newfoundland, and was turned down everywhere and was told that the only way he’d get a spot is if all Canadian medical students, even the worst one, had a spot. He moved to the US and got a residency at some little unknown place called “Harvard”.

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Administration is part of the problem, so is overcapacity, overdiagnosis, expensive technologies and drugs. Administration is very likely the largest single factor, but I’d hazard a guess that the others combined are bigger that Administration (sorry, I can’t find a cite with numbers).

You are right about lawsuits. As of 2000, they accounted for about $21 billion, which is about 1.5% of the 1.3 trillion spent on health care in 2000. However, growth rate in malpractice are double the overall growth rate in medical costs (cite: http://server.iii.org/yy_obj_data/binary/729103_1_0/Medmal.pdf page 15). It has only gotton worse since 2000. Growth in malpractice rates is astounding. In many specialties, malpractice has become a major cost. An ObGyn in Miami paid an average of $201,376 for malpractice insurance in 2002 (cite: http://www.facs.org/about/chapters/smarr.pdf page 31), up from $173,000 in 2001 (first cite, page 14). At the same time, medical malpractice companies are hurting (look at both cites).

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mm: Saying that healthcare in the United States is an example of a “market system” is not quite true.

Right, it’s just a convenient way of conveying that it’s more market-structured than what’s usually called “socialized medicine”.

The US federal government now spends 60% of all healthcare dollars in the country. This is less than most countries, of course, but it’s closer to being socialized than being pure laissez faire.

Most of that is due to Medicare (the publicly funded healthcare program covering (most) Americans 65 and older, for non-Americans unfamiliar with the term), which covers a whopping amount of the medical costs of older patients, who, as has been pointed out, generally have more expensive problems. So yes, I think it would be fair to say that there is socialized medicine in the US for senior citizens (along with parallel private coverage). And they like it that way, too.

Also, HMO’s were originally created by an act of Congress, and thus it is misleading to think of them as the fruit of a market-driven economy.

This I don’t quite get; after all, corporate charters and other conditions of business creation and operation are originally established by Congress too. HMO’s are privately owned for-profit companies, which I think makes it fair to describe them as part of a “market system” of health care.

The health insurance industry is not really a free market in the U.S. either. […] The industry is required by federal law to also cover me for almost all diseases and conditions, including ones I’m very, very unlikely to get. Thus, I find health insurance to be overpriced by law, and a waste of money.

Again, not sure how this substantially differs from other private-but-regulated sectors of the economy (such as the automobile industry, which is required by federal law to include a whole host of cost-increasing safety and fuel-efficiency measures in its products). It is true that we don’t have a totally laissez-faire market economy in any sector, but I’m not sure I’d agree with you that that is somehow especially true of health care.

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And it also says "A number of services provided by hospitals and physicians are not considered medically necessary, and thus are not insured under provincial and territorial health insurance legislation. Which is quite similar language to that found in my insurance contract. To wit some procedures may not be covered.

Sam has addressed the fact that other things influence availability besides funding. However, I would like to make the point that this little tidbit also means that you can’t simply compare the spending in Canada to that in the US and say that Canada spends less. Even when this is true, it may not be true that Canada is allowed by law to spend as much as it wants. That is, they may simply be spending less by providing less availabilty as you say.

While being too sick to work would certainly effect what I was able to afford, I don’t think it precludes any of the options I mentioned.

Well, to be fair, I agree that it can lead to perverse incentives. But I would put those alongside the governments perverse incentives any day. If a particularly perverse insurance company begins to deny large numbers of reasonable claims, they will find themselves in trouble for breach of contract. Before that, they will find themselves unable to sell insurance to new subscribers because of bad press. Given that there are plenty of other insurance comanies out there, most employers will have little trouble finding another provider. Can you say the same thing? If the government decided for some reason to cut medical spending over the next several years (as they did in England during the early nineties), what recourse would you have?

I’m not at all sure what you mean by this. What difficulty?

Since this is the third time (at least) you have claimed this, may I ask for a cite?

No, it doesn’t. As you said yourself, the goal is to have more healthy subscribers. This means many things. But one of the things it means is that an insurance companies interests are in line with good medical care for their subscribers.

I’d like to note that I am not proposing that private insurance is some magical wand which makes insurers do good deeds. I simply am trying to counter the argument that private insurance is a magical wand which makes them do bad deeds.

66

If you work for a large company, its no problem. However, if you work for a small company, it can be difficult. If you work for a very small company (i.e. yourself), it can be impossible. I looked at working independently and getting my own insurance, and I’ve found out that I’m essentially uninsurable. What health insurance is available is at an outrageous cost. I make a 6 figure income and my current health insurance costs (my company and me) $11k, so my idea of outrageous is probably outrageous for the vast majority of people out there.

Why am I uninsurable? I have a congenital medical condition that can range from a nuisance to a major problem. My wife has a different congenital medical condition that can also range from a nuisance to a major problem. We are both at the “nuisance” end of the scale. I take a fairly low dose of a common (for the condition) drug and see a specialist for a routine checkup a few times a year ($50 per visit), my wife needs to see a specialist once every five years ($200 per visit) and antibiotics (which cost almost nothing) before every dentist appointment. In terms of everyday life, it isn’t even noticeable. Neither of us have any medical restrictions on what we can do. I play hockey, for instance.

However, when you fill out a health insurance application form, you are asked questions about conditions you have. It’s basically a check-box, either you have it or you don’t. You can lie, but that’s not a smart thing to do, they’ll find out. If just one of us had a “condition”, we’d probably get a reasonable quote on insurance. But because we both have a “condition”, we’re uninsurable.

Difficulty in obtaining medical insurance acts as a barrier to starting a business. The only way we would be able to do it is if one of us started the business, and the other worked at a company with good insurance benefits.

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A bit off topic, but contributing to the fact that it is harder for self employed people to afford insurance is that the tax exemptions for health coverage for sole proprietors is far less than the tax exemptions for health coverage for incorporated businesses. Incorporated businesses not only get the benefit of lower cost through bulk-buying (for the large ones anyway) they also get to deduct far more of that expense than non-incorporated businesses (like contractors, as I am and it sounds like you are).

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Yes. It can be difficult. However, this is not what Gorsnak claimed. He claimed that switching insurance is difficult. I want to know if he means that it is difficult for most people, all people, or simply a significant proportion. Also I would like to know his evidence for such an assertion.

Additionally, aren’t your complaints more relevant to not being able to get insurance in the first place? This also was not part of Gorsnak’s claim. He tried to make the point that those who have insurance find it so difficult to change carriers that they are effectively forced to keep the one they have. I don’t have evidence to the contrary (with my own experience as the exception see below.) so I don’t think I will claim any need for extraordinary proof. However, a little proof is in order.

Meanwhile, I’ll see your anecdote and raise you one. I have never worked for a large company. I have been without insurance at times (expense savings more than anything else). I have also changed insurance many times. One company I worked for seemed to change insurance carriers every year (twice one year which was very odd).

So, I simply have no experience with this “hard to switch” situation.

69

Did you every buy your own insurance? That’s where “hard to switch” comes in. Let’s say you work for yourself. You buy insurance. While under this insurance you get diagnosed with some grave illness (well, at least it sounds grave). Now try to switch insurance companies. Good luck!

I have also worked for little companies. I’m working for one now, but they outsource their HR so their health insurance is through the oursourcer and is aggreagated with all other little companies that deal with the same HR outsource company, so health insurance is the same as if I worked for a big company. Smart move.

A previous small company (75 employees, grew to 500) I worked for did all their own HR. They get a nice initial deal, and when it runs out they shop around for another. This probably hurts insurance companies if commisions are structed anything like most other insurance products, as a lot of the commision cost is up-front. Sort of how credit card companies are hurt by people taking their “0% for 12 months” offer, then 11 months later transfering the balance to yet another card with “0% for 12 months”. I can’t say I blame little companies (or the people), though.

70

American health-care workers are fleeing our system in droves, as well. And the whole issue of health-care workers immigrating south has to be considered in the context of just how easy it is. According to this page, if you have a provincial nursing license you can get a TN visa at the border, and be immediately eligible to live and work in the US for a year. The TN visa also can be renewed indefinitely.

So it remains unanswered whether your health-care professionals are fleeing because of your system, or just because <<insulting comment re: freezing one’s nuts off in Canadian winters deleted>>

71

To be fair, I have not had my own individual insurance. I have, however, had insurance purchased through a company which was myself and 4 others. I also have not ever been diagnosed with a long term medical condition.

I should alos note, that I am certainly not claiming that everyone can easily switch insurance. Nor am I claiming that noone feels forced to keep their current carrier. I simply call bullshit on the claim that most people are trapped in their current insurance. Especially to the point where the insurance company is free to engage in many forms of nefarious activities without any consequences.

BTW, I don’t want to continue this particular highjack any longer than necessary, but have you looked into forming a corporation? There are forms of incorporation which provide many of the tax benifits while for other purposes looking very much like a small or sole proprietorship. At the very least you might be able to take advantage of a medical savings program.

Also, have you engaged insurance brokers? Sometimes they can find products from insurance companies which are otherwise hard to find.

Have you looked into any sort of prepay programs at any of the hospitals near you? I’ve heard of that as well.

I don’t want to completely derail this thread. So respond to my questions or not as you see fit. I’ll let our little anecdote hijack die (as enjoyable as it is). :slight_smile:

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Not to be rude or anything. But do you have good evidence of this? Thanks.

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Sure. Here’s one article that details problems with finding nurses in the Las Vegas area.

Oh, and here’s an article on what Canada could do, but isn’t doing, to fix the problems it has with declining numbers of doctors. And [Canada.Com | Homepage | Canada.Com]this]( [url) article talks about a new effort to repatriate Canadian doctors from the US:

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Thanks very much. It is a rare pleasure to get an on point cite so quickly after asking for one.

I notice that these are nurses leaving nursing, not nurses leaving to nurse elswhere. So in that respect it is not exactly apples to apples. But your point is taken. Nurses are overworked everywhere. Spend any time in a hospital and this is easy to see.

75

I’ll agree to let this hijack end, too, but I’ll answer the questions.

I’m employed, I have health insurance. I’ve considered at various times going off on my own, but health insurance is a major problem. I have talked to brokers (most recently about a month ago) about an MSA, and I was told the same thing as I was told a few years ago when I talked to a broker about a HSA (predecessor to MSA): forget about it. I haven’t bothered looking into prepay plans, as on the surface they don’t seem to be as good a deal as MSA + high deductable insurance. There is a unique insurance program for small businesses from the Cleveland Growth Association (aka Chamber of Commerce) that I might qualify for if I went off on my own. I had an employee (to watch my kids) and I looked into getting basic health insurance for her, but my situation did not fit with the Growth Association’s regulations.

Before I tried to get insurance on my own, I never even imagined that my wife or I could be considered high risk. We are in our mid '30s, active, not obese (ok, I’m on the high end of normal), don’t smoke, don’t drink to excess (wife doesn’t drink at all), and have no medical restrictions at all on our lifestyle. We don’t do dangerous things like race cars or fly planes (insurance companies don’t consider bicycle racing and hockey to be dangerous, both of which I have done). I’ve had a grand total of two surgeries in my life (tonsils when I was 5, broken ankle when I was 27), my wife has had none. Last physical I had, two years ago, everything was fine. If you asked me what a high-risk person was for medical insurance, I’d point to some fat slob smoking a cigarette. They might be high risk, but so am I, to the point where I can’t buy insurance at any reasonable price so I am effectively uninsurable.

The brokers I have talked to say its not my condition or my wife’s condition that is the problem, it is the combination of the two on one policy. We have 3 little kids, and that is not the problem.

76

I understand all the other concerns. However, it seems to me that one of the biggest unnecessary costs in healthcare, administration, would also be relatively easy to fix. It wouldn’t be that hard to bring down administration costs, but it is rarely mentioned because it is not sexy to talk about making forms simpler or claims easier to file. The media would much rather blame the lawyers and be able to trot out the sensationalist headline about the crazy person suing for no legitimate reason.

77

I agree that it is a big mess that, if fixed, would save a lot of money. However, if it were easy to do, it would already be done.

Medical billing is essentially all electronic, and has been for some years now. However, any hospital billing system I’ve ever encountered appears to me to be horribly complex. It is the classic symptom of a system that’s been around for too long and has had too many features added or changes made. This problem happens in a lot of areas (basically any place where computers have been relied on for a long time – insurance, banking, etc). Throwing it all out and starting over again is a laudible goal, but it isn’t often attained, and it takes a lot of effort.

On top of that, hospitals and insurance companies have opposing agendas. Hospitals want to bill for every last thing, insurance companies want to throw out all the charges as unneccessary. There’s often back-and-forth in claims, where the insurance company initially rejects a claim (or part of it), then the medical provider files additional information on the claim, then the insurance company rejects that, etc, etc. I saw one claim with my specialist that went back and forth 4 times. This over a $50 office visit.

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I quite honestly don’t know how to respond to this. I can hardly believe that you’re posting this seriously.

I mean, I took Intro Econ too. I understand how and why we like to assume that demand for any product is essentially infinite, albeit on a diminishing marginal utility curve, yada yada yada. Even on this assumption, your assertion that “people will consume every health care dollar available, and then some” is false, because as marginal utility drops, it quickly reaches a point where the opportunity costs for acquiring or owning the product is greater, and even if you’re giving the product away, no one will take it. Once you have a tv in every room you are apt to watch tv in, you don’t want another, even for free, because it will take up space. Or, to stick to the example at hand, even if we’re giving away visits to GPs, after a certain frequency the cost of taking an hour off work (or leisure time) and getting yourself to the clinic is more than you’re willing to pay. And, after all, since you no longer seem to be disputing that any Canadian can see a GP within a day now (actually within a couple hours here, and everywhere else I’ve lived in this country), it would seem that the market is saturated with GP visit opportunities, since the only cost Canadians incur for GP visits are the opportunity costs. They are being given away for nothing, and there are enough to go around. But for most medical procedures, even these simple economic assumptions fail.

For a generic consumer item, we ordinarily assume that if you’re not buying one, it’s because the marginal utility you’d receive from it would be less than the total cost of purchasing and owning it. But we assume that the marginal utility is positive, even if it’s so small as to be overwhelmed by trivial costs. This isn’t the case for most medical procedures. I mean, good god, you seem to be suggesting that the only reason everyone isn’t getting a hip replacement is because of the hassle of waiting in line for one for 6 months. And here I just can’t believe that you believe that “people will consume every health care dollar available, and then some.” There is a very, very finite demand for hip replacement surgery. And chemotherapy. And virtually everything done in a hospital. In the absence of medical need, all these things hava massive disutility, not merely a very low marginal utility.

Now, in terms of diagnostic procedures, your suggestion does have some merit, as we can certainly imagine that if, say, MRIs were virtually costless, they’d be used to diagnose a vast array of things where we don’t currently bother with them, because the increased diagnostic certainty they would provide isn’t worth the cost now. But your assertion is, with regards to therapeutic procedures, not merely false, but completely unbelievable.

79

Another anecdotal story about difficulty in getting insurance: When I was in grad school, the insurance policy they provided us with had a limit of something like $20,000 beyond which you would have to pay for the rest. A bunch of grad students got together and they organized to have one of the major insurance companies come and offer us a policy that covered up to $1,000,000 with a $20,000 deductable to supplement our policy.

When I went to see the agent, he asked about pre-existing conditions. I told him “kidney stones” and he said that would then have to be excluded as a pre-existing condition (for a couple years?). He then asked, “Just one time, right.” “Well, no actually I’ve had two stone passages.” He went to his book and looked it up and it came up “NCA” which means “no coverage available.” He told me that all he could do was write me an accidents-only health policy.

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pervert, perhaps I am in fact mistaken. However, when I was going to grad school at UMich, I had a very, very short list of insurance options, and all but one of them were simply variant plans from the same HMO (the other, iirc, was a generic Blue Cross plan that didn’t cover my primary medical needs). Other insurance companies had no way to compete for my business, since the cost of taking out medical insurance privately is several times higher than going through one’s employer, and moreover, I had zero chance of having my colitis covered through private insurance even if I could have afforded the much higher rates.

Perhaps other employers offer a wider array of medical benefit options which allow for meaningful consumer choice in the matter? I am unaware that this is the case, but if it is, then that would certainly mean that people under such circumstances would not face the difficulty changing insurers that I was saying existed. You may consider this a partial retraction, but I do question how many people are in such a situation.

As to what recourse people in the UK had when medical funding was cut in the 90’s, why don’t you ask John Major? I believe he used to have something to do with governing the UK. Used to.