This is probably better suited to Great Debates.
Colibri
General Questions Moderator
Updated article from NY Times relating to ER costs. It was depressing.
The idea behind the exchanges is to reduce information asymmetry problems and market efficiency problems in the health insurance market. In theory, reducing these problems should lead to greater competition which will reduce costs. The idea seems to work well enough in Switzerland, but the Swiss have a lot of additional regulations, so it remains to be seen how much in cost-savings the exchanges should be able to wring out.
Additionally, Obamacare includes basically every suggestion that economists have proposed for reducing costs. These include things like:
- An independent payment advisory board, with authority to make recommendations to reduce costs and increase quality.
- Changes in payment structures, such as moving to capitation and bundled-payments for certain types of treatments.
- Outcome-based payment incentives for Medicare providers.
- A new agency which is charged with evaluating innovations and quickly expanding them throughout the system.
- Information campaigns to provide consumers with information to make better or more cost-efficient choices regarding their health care.
- Increased funding for comparative effectiveness research (to determine which procedures have the best cost/benefit outcomes).
- Increased emphasis on wellness and prevention.
How well these will work over time is uncertain, but the cost-curve for Federal spending has started bending. It’s unclear exactly why it’s started to bend, but Obamacare is one possible reason.
And your cite for this claim is…?
“The median operating margin for 200-bed hospitals and above was slightly negative (-0.7%) last year. That means the money that was brought in from patients fell short of what they needed to spend on staff, equipment, buildings and other items.”
(note that this story lists a relatively small number of hospitals that do make large profits, and that this circumstance typically relates to being in a relatively non-competitive market and having a high proportion of well-insured patients.
Something also worth noting: while hospital charges for procedures and drugs frequently look obscene, it’s a far cry from what the government and insurance companies actually pay them. It’s a game in which they jack up charges to insured patients, and hope enough of it gets reimbursed to cover the cost of treating uninsured patients.
Bottom line: Americans as a whole are responsible for the expense of American healthcare - physicians, patients, hospitals, politicians etc., tempting as it is to point fingers at anyone but ourselves.
Sorry, cost for what and bending which way?
The aforementioned Bitter Pill article.
Perhaps my article was just relating anecdotes. I read it last spring. So, on average, hospitals operate at a loss? I don’t hear about a lot of hospitals closing (not that I have my finger on the pulse of the industy), so are they being subsidized?
Thanks,
Rob
Here’s the layman’s explanation…
We have a department called the CBO which projects government spending in the future. The CBO has been projecting increased spending on health care for a long time now. Recently, they’ve been projecting that costs will continue to grow, but the rate at which they will grow has slowed down. That’s what bending the cost curve means. I’ll have to look up the reports to get exact figures, so this is just made up for illustration, but it’s like saying that we used to think health care spending would grow at 10% each year, and now we think that it will grow at 6% each year. Does that make sense?
There was a terrific article in Time Magazine about it, that explains the issues in great detail.
Sorry, but you’ll have to subscribe or log in. You can get a one-week digital pass for $5. Worth every penny, IMO. I actually bought the hard-copy issue of Time just for this article and kept it.
Because it’s the most successful contrick in the post-was period in all the developed world - it’s so good for 50 years it’s been anti-American to suggest alternatives: that’s just beautiful.
A mix of a few things
Our administration costs are way higher
We do not have negotiation (esp government backed negotiations) or transparent pricing
Our system isn’t designed to be efficient, it is arguably designed to be expensive.
Medicare for all is touted as a solution, and its a good idea, but it would only cut $400 billion in expenses a year in a best case scenario. Medical costs would go from 18% of GDP down to 16%, still far higher than what they spend in places like the UK or germany.
The reason for that is time: The doctor writes the order or gives it to the nurse, it gets sent to the pharmacy, which processes and fills the order and then sends it to the floor, where it must be administered and charted by the nurse.
A lot of it is the lengths insurance companies and others will go to get out of paying, instead of just paying what’s owed in the first place. :mad:
But part of the reason for things like the ten-dollar aspirin tablet is because the hospital isn’t going to get paid by some patients, mostly the uninsured and poor. So we really would be better off with universal health coverage.
Lets see if I can figure out how to post a chart on the infernal device:
No, clearly I can’t. There is a chart here. It is from 1996, the Stanford study of defensive medicine. The dollar amounts are much higher now, but the percentages are as far a I know much the same.
A California physician has been investigating and blogging a bit about the subject.
The rate of closures seem to have slowed down lately, but there were lots in the aughts. See:
http://www.phc4.org/dept/dc/hospitalchanges.htm
This is offset by the far fewer number of new hospitals, and the tremendous volume of construction at the existing hospitals as they try to become more dominant.
While estimates vary greatly, I think there is something to the idea that defensive medicine is a big cost. This gives an idea of the widely ranging estimates:
One problem with blaming defensive medicine for high US costs is that lots of scientifically dubious care is likely provided in almost every country. This describes the situation in Canada:
A lot of defensive medicine is so irrational that it’s hard to blame it on lawyers. Here is a Canadian view of the US situation:
Here is one commentator describing how the variance between US and European health care costs apparently arose between about 1978 and 1990. Before then, US health care spending was only slightly higher than that of much of Western Europe (the UK has always been significantly lower), and the rate of growth was quite similar. During the 1978-90 period, US costs continued to rise significantly, while cost increases in Western Europe slowed, so by the end of this period, US expenditures were much higher.
Since 1990, the rate of growth in health care spending in the US has been roughly comparable to that of Europe, as a percentage (a graph of the increases in OECD health care spending from 2004-10 is here). The problem is that the US percentage increases are upon a much higher cost base, i.e., the hangover of the 1978-90 spending binge.
One consequence of this history (assuming it’s accurate; I can’t vouch for the numbers) is that many of the differences between US and European health care that people have identified in this thread existed back in the 1970s as well, and yet they didn’t lead to a wide cost disparity back then. Something apparently happened in the 1980s, but it’s not clear what.
So ultimately, the market is horribly and hideously distorted, and a lot of the usual market mechanisms that would come into play are thwarted by the twin presences of insurance companies and indigent people who don’t pay their bills.
This sounds like a recipe for strange and inflated pricing to me.
If people had to pay for everything out of pocket, prices would drop like stones, but when I have to pay a $25 co-pay on a visit with a list price of $350, and the doctor charges the insurance $200 for the visit, I don’t really care - it cost me $25 as far as I was concerned, the insurance company saved $150, and the Dr. gets his $200, so why should he care? Where it all breaks down is when an uninsured person goes in for that same visit and gets charged $350 for the same visit up front (that $200 was the insurance co. negotiated rate). Of course that person can’t afford to pay, or it’s a major hardship.
A major cost control aspect of the ACA is limiting Health Care Insurer’s administrative fees to I believe something like 20% and any income taken in over that must be reimbursed to all the insured.
I also believe the nonprofit Federal Government operates Medicare and Medicaid with an administrative fee of around 5%. That is why single payer would be much less costly than the pre-ACA status quo as well as the ACA itself. It is our political anti-government attitude from the center to right of American political ideology that forces us to spend therefore roughly fifteen percent of administrating health insurance costs across the board that also left unemployed and self employed with pre-existing conditions etc out of position to be able to afford health care.
I also believe that medical services are truly not an overall free-market, invisible hand (Adam Smith) driven commercial activity, such as buying toilet part as something all consumers need. If you hit a tree while engaged in skiing down a wooded slope and break a leg or ribs you are in no position to shop around for the best and cheapest doctor to put your broken bones back in order. You go with the first available ambulance and emergency room doctor that society tries to spread evenly about the populated areas of the country.
So many factors allow for out of control health care costs but one we could fully fix to cut costs would be to eliminate the private insurance industry’s access to the for profit ATM they’ve enjoyed by taking cash from millions of folks who can’t make an economic decision when they need medical treatment.
The ACA is a decent start in that direction but could go further just by giving people a choice that forces private insurers to compete with the Fed insurance system commonly well liked by consumers known as Medicare.
The private’s don’t want to compete with five percent administration costs and zero profit, becsuse they would seek to exist.
Yes and the CBO has drastically lowered it long term projections for health care costs by hundreds of billions of dollars. And the economists are saying 3/4’s of lower costs are due to the 2008 recession and the ACA having an impact within the remaing 25%.
But guess what? The way politics works in this country of ours the ACA will politically get the lion’s share of the credit for slowing the growth of health care costs rather than the Great Bush recession of 2008.
A third distortion is that you literally cannot shop on price, because most providers can’t tell you what your final price will be: they might be able to tell you their portion, but they can’t tell you what the lab fees, hospital fees, other doctor’s fees will be.
There are two medical fields less distorted by these things: plastic surgery and fertility treatments. And they do seem cheaper. Yes, IVF can be $7-$10K, but so is a routine delivery of a baby. The later seems more skewed to me than the former.