US commercial insurers pay 254% of Medicare for the same hospital procedures
github.com187 points by rexroad 8 hours ago
187 points by rexroad 8 hours ago
Lots of people are saying nonsense here. The actual reason commercial insurers pay more is that's the only way to can make more profits.
Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money.
Several doctor friends have told me this as well.
In a vacuum sure. But insurance companies operate the only part of the healthcare system that is moderately competitive. In the end employers are the ones largely paying and they are professional negotiators enough to put price pressure on insurance plans. 20% of $0 is $0.
As such, as light of an incentive it is - it’s the only party in the entire system that is incentivized in any way whatsoever to keep costs down.
Insurance providers also rarely operate at the full freight 20% either way though. So they are at least at this time incentivized to control costs at some level since every dollar saved is a dollar added to the profit line. Otherwise they would not be known for denying claims so often.
This is ignoring a whole lot of very important complexities as well - such as self funded insurance plans that most major companies utilize. There the insurance company is simply a plan administrator getting paid the same either way.
It’s one of those tropes that has a source of truth behind it but the actual reality is far less satisfying of an answer. Makes for great sound bites and ability to shut down further thought on the subject though. The uncomfortable truth is that there is no simple fix and no one bad actor that is the cause of all the insanity.
What OP said is true. You’re forgetting that health insurers are just one organization in the corporate chart. They often work to own the providers as well to funnel money to parent corporations.
So if United is the insurer they’re owned by an umbrella, that umbrella takes 20% or less. However United makes special deals and steers people to providers owned by the Umbrella. So that the Umbrella makes more money as well. This is true for medicine as well. For example Cigna requires all maintenance medication be purchased through express scripts as a means to retain or increase profit.
United has a history of also squeezing organizations by forcing them into pre-payment review when they’re high volume. This causes the providers to basically not have no revenue for months on end until it gets sorted. Then they might get a chunk or settle out of court. Often they go bankrupt and are purchased by the umbrella.
In terms of Medicare/Medicaid another catch-22 is that insurance handles the claims for providers. The insurance can recode claims and pocket the difference without telling the provider. It’s on the provider to catch it.
There is a tremendous amount of dark money, shadow games, hidden corporate structures, Wyoming and NM LLCs with Anonymous owners, etc.
Insurance as a whole tries to own the entire feedback loop for healthcare. They don’t like you going out of their feedback loop.
Digi is correct here.
>For example Cigna requires all maintenance medication be purchased through express scripts
Important note: Cigna owns Express Scripts. Today the biggest "insurance" companies are actually massive conglomerates that own the clinics, the doctors and the pharmacies. United = Optum. Aetna = CVS + Caremark. Humana = CenterWell. Elevance/Blue Cross/Anthem/Carelon. Centene = Envolve
Once a giant like United gets big enough in a city, say ~40% of the population, they lower the reimbursement rates for independent doctors and if the doctor refuses the contract, they are kicked out of network and lose 40% of their patients. Go bankrupt or sell to Optum.
Digi is also right about Medicare upcoding. It is a well-documented $$billions scam where Medicare Advantage insurers comb through patient records to add diagnostic codes making the patient look sicker on paper than they actually are so the government pays the insurer a higher flat rate for that patient.
> part of the healthcare system that is moderately competitive.
That’s only half the story though insurance companies also try and reject way more claims, cover fewer people, and are just harder to get money from than Medicare.
This means hospitals can’t afford to give them cheaper rates as they just require vastly more work from staff for the same procedure.
The industry isn’t blind to this effect, but has little reason to change.
Hospitals and clinics can only take so many Medicare patients as a ratio to private pay because it’s very well known that Medicare and Medicaid is often provided at below cost. It’s of course area and demographic dependent but as a rule any private clinic has a cap on these patients they will accept overall. Hospitals cannot cap it realistically speaking, so looking at clinics is a good proxy.
Private insurance subsidizes Medicare and Medicaid even after you add in admin overhead.
That's true to an extent, and those minimal controls are why Medicare also wastes billions on paying fraudulent claims.
https://relentlesshealthvalue.com/episode/ep502-how-some-pre...
They waste billions on fraudulent claims because they don't fund the program well enough to have compliance enforcement or auditing.
Also, I'm not going to trust a podcast owned and operated by Stacey Richter, who also just so happens to be the co-president of Aventria Health Group and QC-Health.
> They waste billions on fraudulent claims because they don't fund the program well enough to have compliance enforcement or auditing.
These are synonyms for having higher overhead, right? If you pay a billion dollars in claims with ten million dollars in administrative costs then your "administrative overhead" is 1%, even if half the claims are fraud. If you increase "administrative costs" to a hundred million to get rid of the fraud, in practice you just saved 410 million dollars but now your "administrative overhead" is up to 20%.
Trust is irrelevant. You can verify all of the statements made by Brian Machut on that podcast with independent sources if you like.
Yes but the Medicare and Medicaid reimbursement rates are below breakeven so cash and insurance rates have to be above provider breakeven. The main cost frictions are administrative costs for billing on both the insurance and provider sides.
This isn't even close to true. Keep in mind that Medicare, together with Medicaid (which operates under much of the same administrative rules), account for nearly half of medical spending. So basically, if a provider doesn't want to play by their rules, they MUST deal with Medicare. That is, the government is nearly a monopsony in this industry.
There's a common, misleading, claim that Medicare is more efficient because they spend far less than commercial insurance on overhead like claims processing. This claim is true. But the impression that it gives is absolutely the opposite of reality. The reason that Medicare doesn't spend as much on admin is that they offload all of this work onto the providers. Every hospital in America has a "Medicare Reimbursement" team. A moderate-sized hospital is going to have something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid. And that's a lot more work than just filing the right forms for each case. There's a ton of additional work. Each spring they have to file a HUGE "Medicare Cost Report", requiring a couple of months of work to get all the data in place for it. (Source: my wife was "Director of Reimbursement" at various hospitals for quite a few years, before going into consulting.)
That Medicare Cost Report that I mentioned is, beyond a huge effort sink, the source of many other evils. Because of the amount of work that's needed to gather and collate all this data, hospitals naturally structure their Accounting around the way Medicare wants them to report. The thing is, that's largely orthogonal to the way a rational person would do cost accounting. The result is the common criticism about how widely varying the cost of a given specific line-item is between hospitals: they don't really know how much a given procedure costs because that's not how they track their expenses, so they apply some allocation heuristics, and every hospital does that a bit differently.
There are also various perverse incentives in the system. For example, Medicare is smart enough to know that it costs more to deliver care in NYC or SF and so forth. Every locale has a Cost Index that scales how much they expect to need to pay. This leads to hospitals needing to show that their expenses are higher so they should be classified into locale X rather than neighboring locale Y.
Another one my wife told me about her hospital: Medicare realized that a lot of UTIs were hospital-acquired, and they rationally said that they would no longer pay for UTI treatments unless the hospital could prove that they were not hospital acquired. Well, maybe that wasn't rational, because with Medicare/caid being such a huge portion of their business, they changed their policy to test for UTI for everyone at admission, so that they could furnish the proof demanded. Think of all that wasted lab work...
So no, Medicare is NOT more streamlined and efficient. It's absolutely, 180-degrees, the opposite of that.
> nearly half of medical spending
> something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid
2FTE’s vs what?
The question isn’t is this free, the question is how large is the total staff including price negotiations, doctors, and IT time spent handling billing issues, and is Medicare more or less than 50% of the total.
I am ware of one hospital and 2 medical clinics where the difference is very much in favor of Medicare.
2FTE’s vs what?
versus nothing. Hospitals don't have to maintain a whole team for UnitedHealth, or for Anthem, etc.
This is my point. Medicare cooks the books to look more efficient by offloading their administrative costs onto providers. Other payers can't do that because, even if huge, they don't operate at the same scale.
Think about it: we often hear on the news about disputes about contracts when a local hospital's agreement with some insurance company comes up for renewal. They play hardball, getting local news to run stories on how many people will be affected if they can't come to terms. But you'll never hear this in the context of Medicare/caid. Hospitals have leverage to negotiate with commercial payers, but not with the government.
Depending on the size of the health system it may not be a team of multiple FTEs but they absolutely do expend significant resources on managing differences between commercial payers. They all have different rules about covered services, step therapy, prior authorization, hospital admission, etc. Sometimes those differ significantly even between health plans offered by a single carrier.
Medicare has overhead, but you’re not saying whether it is more than commercial insurance. The admin expense/profit portion of commercial insurers also don’t take into account provider admin costs (not to mention the huge amount of time patients can deal with denials, appeals, etc.)
You're right that there's no single bad actor, and that's exactly the framing of this series. Each issue isolates one mechanism with one savings estimate. The 254% figure is RAND's. What I added is the HCRIS cost-to-charge analysis across 3,193 hospitals showing the variance by ownership type.
The surprise was nonprofit hospitals: median markup of 3.96x actual operating costs, versus 2.39x for for-profit and 1.87x for government hospitals. That's hard to square with the narrative that nonprofits deserve their tax exemptions ($28-37B/year) because they serve charitable purposes.
On the self-funded employer point — you're correct that self-funded plans have more negotiating latitude, and thousands of them already use reference pricing (capping hospital payments at a percentage of Medicare). That's actually the policy fix this analysis proposes. Montana Medicaid implemented it and saved $47.8M. The question is why it isn't the default.
> In the end employers are the ones largely paying and they are professional negotiators enough to put price pressure on insurance plans. 20% of $0 is $0.
That's assuming price is the only variable.
Suppose one insurance company is accepted by more providers, including ones that might be closer (but pay higher real estate costs) or have nicer rooms etc. Meanwhile employers are looking for cost/benefit rather than just cost. If they give employees a better insurance plan they could pay them less or provide less of some other benefit and still get people to work there.
So before the insurance company didn't really care if you got a $10,000 plan or a $20,000 plan if they both had a $2200 margin, or if anything would prefer the former because they make the same money with lower costs. The employer is likewise fairly ambivalent as long as the more expensive plan seems like it's buying something (even if the something is convenience/luxury). But now the insurance company isn't allowed to have a $2200 margin on the first plan and still is on the second, so that's what they market, and then what more employers choose, resulting in higher average costs.
> Insurance providers also rarely operate at the full freight 20% either way though.
There are only really two options, right? Either the market is actually competitive and then a margin cap has no effect because competition would prevent margins higher than that regardless and the rule should be gotten rid of as totally redundant, or the market is less than perfectly competitive and then it does something but the something is a bad perverse incentive to raise costs to cheat the rule and it should be gotten rid of as actively harmful.
It's such a small market that it's really not competitive. Further, because medicine is so expensive, it means there aren't going to be newcomers to the market who can shake thing up. It requires way too much startup capital to start a new insurance company. The agencies with the most negotiation power don't because it negatively affects their bottom line.
This is why there needs to be a real second option. A public option like medicare for all would be the way to go. Let everyone choose between either private insurance or public insurance. Then you'd actually see some real competition.
Insurance is really not the issue, it’s provider cost. And just the total cost entirely of the system of insanity. If you look closely into it there is no single (or few even) knobs you can tweak to fix the system. Not even Medicaid for all, at least as it’s currently designed.
No argument from me that insurance is not competitive enough. But they are almost all public corporations that are highly regulated so the numbers on profit and expense ratios are easy to get for yourself to prove the point. No need to take my, or anyone with an agenda word for it. Almost everyone wants a simple answer to a complex interdependent problem that does not have one.
If there was a single solitary answer of “what is the problem with US healthcare” I’d have to go with it being a principle agent problem. If everyone who consumed healthcare had to pay up front very few services would cost what they do. Even changing it so people were billed directly and then had to submit insurance claims later like how pet insurance or car insurance works would go a long ways. But even that doesn’t solve the problem entirely, as it leaves massive gaps. Second answer would be “administrative class bloat” like in all areas of the US today.
Single payer is certainly a major part of the answer, but in isolation it’d solve almost nothing and potentially make things even worse as all the inane cross-subsidy comes crashing down overnight.
Edit: the point is medical loss ratios, admin overhead, etc. is public information not hidden behind some private company firewall. The fact non profits haven’t captured 100% of the market by being crazily cheaper should be telling on its own.
Trying to understand why healthcare in the U.S. is so expensive is like trying to understand why building subway in New York is so expensive: https://www.nytimes.com/2017/12/28/nyregion/new-york-subway-.... The issues lend themselves to facile explanations ("insurance companies are greedy," "NYC's government is wasteful") but those are driven by ideology not analysis.
Many of the largest health plans are non-profit, not publicly traded corporations. This includes most of the Blue Cross Blue Shield Association licensees as well as some other large payers such as EmblemHealth.
This is the same problem with cost-plus contracts in the military. In theory, capping profit is meant to reduce profiteering. But in practice, if your profit is fixed at 6% of the cost to built a jet fighter then you're incentivized to make that jet fighter as expensive as possible. The way to maximize profit under a cost-plus regime is to maximize the cost.
I will piggy back off of your comment because I was going to say a very similar thing. In my state, electric utilities are guaranteed a rate of return on investment of approximately 12%, if I remember correctly. And so there's a lot of incentive for build out and maintenance that's high in total dollar amount and high in volume of work done. In some ways it's the system working as designed but the "cap" can incentivize erroneous build out, as you noted in the jet fighter example.
So you have an excessively built out electrical system... sounds like a win to me.
Absolutely not. The way to spend as much money as possible is to do intentionally inefficient repairs (e.g. last minute/reactive). The providers gain from grid unreliability since by causing problems, they get to justify spending money to "fix" them.
They said excessively expensive, not excessively robust. There is a difference.
It's a bit more complicated than that. First, most large health plans regulated under the Affordable Care Act are actually subject to an 85% minimum medical loss ratio. Some of the larger payers which also have their own providers as employees within the same parent corporation are able to shift money around with internal pricing agreements so that they make larger profits on the care delivery side.
But at the same time, the business is still pretty competitive with the employers and consumers who purchase policies or rent networks being price sensitive. Employers will switch carriers to get a significant cost savings so that holds down prices (and carrier profits) to an extent. Most large employers (and unions) are now self-funded so the "insurance" company isn't actually bearing much risk, they just set up a provider network and process the claims.
Most doctors are almost completely ignorant about the broader issues of healthcare financing and medical economics so take anything you hear from your friends with a grain of salt. (And to be fair, it's not something we should expect them to be experts in.)
So I happen to be in Costa Rica for the month. Just like every other 1st world country, it has managed to have universal health care that is better and cheaper without private insurance.
Even if you do get private insurance for quicker access, it’s still much cheaper than the US.
I just spoke to someone who flew down here to save $30K on dental work.
The problem isn’t the ACA, it’s the ass backwards American health care system. I was at a meetup of American ex-pats here and half of them said they established residency here to join CAJA - the health care system
ACA enshrined the worst parts of the American healthcare system for years to come. It is a politicized victory that is the best solution for no American citizens. Places I’ve been with fully privatized healthcare or single payer are both significantly better for consumers.
Insurance companies have raised prices to restore profit, were briefly a mandatory expense, and will exist for years to come.
> ACA enshrined the worst parts of the American healthcare system for years to come
before the ACA, insurers could deny coverage for pre-existing conditions
people have forgotten how bad things used to be
> Insurance companies have raised prices to restore profit, were briefly a mandatory expense, and will exist for years to come.
Why do their stocks underperform so badly?
Why would a 3-year stock chart be indicative of underperformance?
It is a 5 year chart, and the 10 year is not free on that website.
You can find out similar results for longer periods here:
There are other structural issues at work that you see across US government procurement generally, Medicare just being one example.
The unit costs of doing business with the US government are higher than with private companies even after accounting for economies of scale. The US government also requires that they pay the lowest price. Consequently, unit economics are usually worse when dealing with the government than when dealing with private companies.
The maths often don't math but the law doesn't care. Most inexplicable and bizarre pricing you see related to government procurement are structural tricks vendors use to indirectly fix the unit economics across their customers while technically staying compliant with bad regulations. Everyone else who is not the government is collateral damage of that byzantine theater.
Ideally, we would all drop the pretense that the US government deserves the lowest price just because they are very large, instead letting it reflect the true overhead cost.
I'd argue it's a subsidy/incentive problem. Since every subsidy works by raising a cost somewhere which is used to subsidize a cost elsewhere, I'm inclined to believe in the Bennett hypothesis. Our government mostly subsidizes demand, and does little to incentivize productivity/outcomes. You see high prices everywhere the government funnels money: in education, healthcare, even the military - as where's the incentive to lower costs if the government is on the hook and will fund it no matter the cost?
Most insurance is funded by employers who would switch insurers if they feel they're getting screwed by them.
> So insurance companies spend more so they can collect higher premiums.
This part is still true though. Insurers want you to consume more healthcare, so they'll happily pay for your chiropractor, acupuncturist, acne treatment, and Chanel gift bag [1]. Patients are happy with their benefits. Employers are happy with increasing employee retention in a tax advantaged way. Insurers are happy with the profit. Of course, you aren't going to see much health improvement from this though.
[1] https://nypost.com/2024/07/25/lifestyle/nyc-hospital-bills-3...
This isn't the whole story. There's a lot of "legal" self-dealing going on where insurance companies essentially own providers and then pay the providers which allows the insurance companies to circumvent the medical loss ratios.
More here:
https://healthcareuncovered.substack.com/p/self-dealing-ille...
These limits don’t apply to self-funded programs that are administered by big insurance companies (most large employers’ plans, then) or plans less than two years old (whether there are measures in place to prevent simply rotating plans often to exploit this, I do not know)
This is correct, but neglects the compounding effect.
Insurers are also adding some %+ increase on premiums every year, which is taken as a % of their yearly spend, ie 2-3%.
ie (1+inflation)^N*(base_prem+overpay_prem_increase) = new_premium. The compounding of $ returned is pretty big on this.
That being said underwriting risk, under the law and avoiding correlated risks, is tough.
This seems like we need similar price caps for healthcare providers, medical equipment providers, pharmaceuticals, etc. Done just in isolation for 1 part of the healthcare industry results in this obvious bad effect.
Removing the rule wouldn't help things.
That would break the system completely. The only reason any of this holds together at all is medical providers shift costs from one patient to another. Medicare doesn't pay enough for the care patients are provided, so hospitals charge private patients extra. If you introduced price caps either hospitals would start to go out of business or they'd stop accepting Medicare entirely.
Price caps always and everywhere cause shortages, including long queues for certain types of care. This may be acceptable but we need to understand the trade-offs when making any changes.
Electric utilities face price caps and there are not electricity shortages.
It depends on the level of market failure, but there are not a ton of hospitals to choose from regardless.
There are electricity shortages.
https://fortune.com/2025/11/10/nvidia-hometown-santa-clara-c...
Price caps create shortages when they are the rate limiting factor, which is always the case when imposed on a free market whenever the cap is below the market price, so this is an extremely accurate statement when dealing with things like lightly regulated commodities.
Whether they would be the rate limiting factor in health care remain to be seen, since health care is highly regulated with regulatory capture, licensing, and violence enforced market manipulations. As a thought experiment, in the extreme that health care were a pure monopoly, then I could envision some price caps somewhere between cost and price where the supply curve is relatively flat on either side thus creating minimal effects to supply.
You don't need to waste time with though experiments, you can just look around at various national healthcare systems. Wherever there are price caps, certain treatments have long queues or are simply not available at all. That's why affluent Canadians often come to the USA as medical tourists and pay cash for MRI scans or joint replacement surgery. Every system rations care somehow and price caps aren't necessarily the worst way to do it so let's just be real about the consequences.
You've identified a real issue with cost-plus pricing. But there's more to it than that. Commercial insurers have to pay more than Medicare, for the very simple reason that Medicare's pricing terms are that they get a discount beyond whatever the lowest price is that you charge anyone for the same thing.
(Is it a 60% discount? No; a 150% margin has to be explained in other ways. But the phenomenon is real and important.)
The problem is the market isn’t competitive due to hidden pricing and also anti competitive aspects like insurance. The supply of doctors is itself artificially low. There is a lot more regulation needed than something as simple as Obamacare.
I was under the impression that some companies that provide insurance also provide healthcare?
Ding Ding Ding. We have the correct answer. And this was a predicted consequence of that profit cap.
>So insurance companies spend more so they can collect higher premiums. That's how they make more money. >
If this is correct, then how come there are so many complaints about insurance denying payment for healthcare or the hoops they make patients and doctors jump through for pre authorizations?
If the path to more profit was spend more money, then there would be no reason to question a doctors’ orders? Nor threaten doctors and hospitals with leaving the network if they don’t agree to lower prices?
Yet, one often hears about so and so plan will not have so and so hospital system in network unless they come to an agreement.
> If this is correct, then how come there are so many complaints about insurance denying payment for healthcare or the hoops they make patients and doctors jump through for pre authorizations?
Because those anecdotes get reader and viewer engagement. Charts comparing how much U.S. insurers pay on average for common procedures compared to, say, the UK NHS, don’t drive forward the narrative.
You should interrogate the media sources you consume and ask why you’re fed so many stories like that, and investigate what the real data is. A few years ago my friend got a continuous glucose monitor for Type 2 diabetes. I looked at the coverage polices for continuous glucose monitoring (for Type 2) for my insurer and some of the other big ones. Turns out that most US insurers, Medicare, and Medicaid in 45 states+DC cover continuous glucose monitors for people who have type 2 even those that don’t use insulin. At the time, most Canadian provincial systems didn’t cover the technology except for Type 1 or people who take insulin. UK NHS was worse, covering it only for Type 1, or Type 2 with certain conditions (such as you’d otherwise need to do 8 or more pin prick tests a day). https://www.diabetes.org.uk/about-diabetes/looking-after-dia...
Complaints about denied claims or prior authorization requirements should generally be directed at employer HR departments. Most HN users in the USA probably have employer-sponsored group health plans, and often those are self-funded where the insurance company doesn't actually bear any risk but just administers the plan. Commercial insurers would be happy to sell plans that pay every claim that comes in at 100% with zero denials. It would be less work for them. But naturally employers don't want to pay for that, so the HR departments have the insurance carriers impose more restrictive coverage rules to hold down medical expenses.
You mean that there is a rule which prevents for-profit companies offering personal health insurance from pocketing more than 20% of revenue?
Those poor, benighted shareholders. What a socialist hellscape.
This. It's hard to believe that the Obama team could have been this financially incompetent.
It's easy with hindsight to believe you could have capped expense at 200% medicare but getting what we got passed was nearly impossible at the time. Before Affordable Care Act, insurers had every tool available to deny care, maximize profits, and skim more than 20% off the top. It's great we're getting closer to the point that it feels to you like incompetence that these things aren't fixed today but your anger with the medical lobby is clearly misplaced here.
Every major piece of legislation needs revisions to chase circumvention and we're well past due on updates but no legitimate bills have been presented that cover these topics and that's not a one-party issue.
Yup, pre-existing conditions, in particular, was a beast. The patient protection portion of the ACA is one of the better parts of the whole bill.
Private insurance companies still do not cover pre-existing conditions. How? By not writing insurance to individuals except during ACA open enrollment. I know this because I tried to get private insurance before going to Mayo Clinic, because my ACA insurance with Ambetter was out of network. When I got through to an insurance company sales person for individual coverage, they told me they don't cover pre-existing conditions for 6 months. When I challenged them and said that's illegal, they hung up on me. Most companies I called had a phone menu that, when I pushed the buttons for individual coverage, would lead me into a loop, hang up on me, put me on hold forever, etc. They simply won't write individual coverage outside a couple of months at the end of the year. This effectively allows them to not cover pre-existing conditions, at least for individuals. For company employees, yes, the coverage of pre-existing conditions is a win.
I ended up paying $12K to Mayo for a week of appointments. Private insurance, if I could have gotten it, would have been at least $1000/mo for premiums (in 2020) plus $10K deductible, so I actually saved money just paying Mayo instead of getting private insurance.
IMO the only reason insurance companies allowed the ACA to pass was the stipulation that everyone in the US was required to get insurance coverage or face a penalty. When the Supreme Court ruled that provision illegal, I'm sure the insurance companies were furious that they were duped.
That's how it was supposed to work though? There's an open enrollment period where anyone can sign up, pre-existing conditions or not. To prevent the adverse selection problem, which is where you don't sign up for insurance until you have a condition and then cost the insurance company a lot of money, you can only sign up at that time.
The thing you're trying to do - sign up for insurance to cover a specific procedure - is quite literally what the system is designed to prevent. You're supposed to have insurance all the time or none of the time. Did you try asking the clinic how much it would cost if you are uninsured and paid cash?
Your story is missing some pieces. Why didn't you sign up during ACA open enrollment? Those policies absolutely do cover pre-existing conditions. But not every provider organization will be in network for every health plan.
>Private insurance companies still do not cover pre-existing conditions. How? By not writing insurance to individuals except during ACA open enrollment.
Sorry I'm struggling to follow here. You think the open enrollment period effectively means that there's no prohibition on pre-existing conditions? Think you're kind of bending words outside of their normal usage because quite literally pre-existing condition policies are banned. The compensating counterbalance is a neutral open enrollment period so people don't just jump when they learn they have a health problem, it's a compromise to ensure financial sustainability.
You do understand that before this, it was worse right? One comment after another here is comparing the ACA to a magical fantasy, rather than the status quo that it improved upon.
It’s probably the single worst decision of the entire bill and one of the largest wealth transfers in history.
If you tell me you’re going to light your house on fire and then ask me for fire insurance, I should be able to say no.
Instead what we have is not insurance, but the world’s worst socialized health plan. Insurance is for managing tail risk, not for distributing the cost of healthcare. If we’re willing to pay a tax to subsidize the elderly, we should cut out the middleman and let the government fill that function.
Obamacare was totally subverted by the medical lobby during its creation. They had a lot of great ideas but there were way too many politicians in Congress who had sold out to the lobby (Lieberman, Baucus on the democrat side) and would block anything that would reduce cost.
And since then it has been a fight for survival without much chance for improvement. The republican refuse anything that could improve it but want to “repeal and replace” but are struggling a little with the “replace” part. And the democrats are too timid to make another push.
So we end up with the worst of all worlds. Super expensive, overall results not very good and super complex.
Obama had nothing to do with what's in the ACA. It was ideas from moderate Republicans (previously prototyped in Massachusetts under governor Mitt Romney), advanced on the basis that it would receive bipartisan support as a result. But it didn't, so it was heavily amended until John McCain provided the last vote to get it through.
It was the best they could do to get 60 votes because universal health care was too radical even though every industrialized country in the world does it.
It's almost as if no healthcare legislation gets passed before private insurers have figured out how to extract shareholder value.
(Which makes the system worse. The fiction of a fiduciary responsibility to extract top dollar from a business regardless of consequences is the opposite of "capitalism". Which derives its name from the practice of sound investment to build something of lasting value.
To say nothing of the social deviance of for-profit healthcare.)
I remember consulting for a healthcare company in .... 2003. Very short assignment so I never got deep into it, but anyways my consulting company made me read up an in house guide about ALR and MLR (Administrative or Medical Loss Ratios). Obamacare or not, such constraints already exists. Maybe they varied by state, maybe there were other loopholes such as not supporting pre-existing conditions, but IIRC there were restraints on pure profits, so even then the same perverse incentives existed. More revenue you can get more profits.
I am going by very old memory of a few days/weeks of work, but it will be good for a medical system historian to chime in.
Firey take, but health insurers are not the problem they are made out to be. They're on your team and benefit from lower prices just as much as you do. They don't make any money either, don't argue with me, buy their stocks if you are so convinced and see how that goes over.
Health care providers carry immense blame. It's full of passionless people in it for the outsized paychecks, who once inside will just seek whatever local minimum to stay employed.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD. That gap is roughly $3 trillion per year.
The difference in life expectancy will be influenced by multiple factors and may have more to do with diet and lifestyle than with healthcare.
Japan also spends less per capita than the UK, France or Germany. The US spends a lot more than any of those so the US system is bad value for money.
The US also has GDP per capita of $90k and Japan has a GDP per capita of ~ $35k.
Put another way, in both countries a hip replacement surgery is almost exactly 1/8 of someone's per capita GDP.
Japan also has the "Metabo Law" (aka fat tax). Do you think Americans would go for that?
I suspect you would see the exact same trend comparing Japan and the U.S. in transit, education, and many other services. The U.S. spends more per capita to get less.
The US is a wealthier country and wages are higher here than Japan.
The median equivalised household disposable income of a US household is over twice that of a household in Japan.
This is one of many reasons why it’s so misleading to compare prices across countries in a vacuum. All of the people doing the work for those education, transportation, and other services and all of their inputs aren’t going to work for Japan-equivalent pay when they’re living in the United States.
We in Germany copied a lot of the stupid stuff from America (including the stupid billing system for inpatient stays), so it's not that surprising that our system is also bad value for money.
PS: Outcomes here are not worse than those of rich people in the US, because I know some idiots will claim this to cope
https://jamanetwork.com/journals/jamainternalmedicine/fullar...
Germany didn't copy the US - they just happen to share similar roots.
Both historically had private hospital systems, and just so happen to implement pension/employer-based insurance programs very early on. German's just evolved in one direction and the US evolved in the other.
We copied the DRG reimbursement System from the US.
And no, we didn't had a historically significant share of private hospital systems, those came with the introduction of the DRG System, which forced many city/church owned hospitals into privatisation.
Before that, they had a "Fixed Price per Night" System, which also was a bit stupid, before that they got reimbursed their cost.
Medicare prices are too low to operate on. They generally factor in the bare minimum or slightly less for the variable costs of a procedure but severely under value the fixed costs of providing the same procedure. So those costs largely get pushed to commercial payors as those are the only ones who can shoulder it.
There’s plenty of arguements about waste and executive compensation but when I was a healthcare CFO we had our financials separated where I could see individual hospital performance and all the executive/corporate stuff was separate and it still was an issue as basic capex was hard to keep up with in a hospital that had a low % of commercial patients.
Challenge is the whole system is just a mess. Medicare probably lays too little. Commercial insurers have formed a mountain of red tape and bureaucracy and arguably pay too much, although individual bills (EOBs) are rarely logically defensible against any scrutiny.
Healthcare providers try and combat all this by literally just making up pricing and trying to negotiate something while also having bloated administrative structures that raise costs for all.
Nothing about the current state of the healthcare system makes much sense to anyone that tries to peel back the onion.
Does anyone here remember how health care was delivered before medicare and medicaid was enacted in 1965? It was not pretty. Prices were low then because it was all private pay and charity. Why do you think so many hospitals are named after saints? The church made a significant contribution to running healthcare. But when the govt got involved in 1965, the MBAs started salivating. Now we have a system that is built around govt style procurement that we cannot afford. As our population ages, as salaries continue to remain flat, we will have hard choices to make.
I like this. It'd be great to see such a table of the key issues with proposed solutions, to highlight how the waste isn't an insurmountable impossibility to solve. Having said that, federal lobbying by the healthcare industry was $750 million in 2024 [1], and this is the blocker that needs to be addressed first to be able to enact change.
[1] https://www.managedhealthcareexecutive.com/view/health-syste...
We rarely discuss the primary source of health care cost differences in the United States -- US doctors get paid a lot more than elsewhere. I haven't seen a credible proposal to address that. Most of the salary difference can be blamed on deliberately created shortages of doctors in many specialities. Not enough medical school slots (horror stories among my kid's friends of not getting accepted) and then also shortages of residencies that allow foreign trained doctors to work in the US. The only change in recent memory is replacing some primary care physician services with nurse practitioners.
I really don’t think doctor salaries are the primary difference when they make up less than 10 % of health care costs:
> However, new research by Stanford health economist Maria Polyakova and colleagues — using unique data on physician income — shows that physicians’ personal earnings account for only 8.6 percent of national health-care spending
https://siepr.stanford.edu/news/just-how-much-do-physicians-...
This is a more comprehensive survey that’s light on methods but from a respected industry watcher with similar conclusions:
https://www.commonwealthfund.org/publications/issue-briefs/2...
That’s the thing about American health care costs. We pay so much more than everyone else, but there’s no obvious single thing that costs more, or even a few factors together. It’s a ton of different things all adding up. Which means it’s very hard to fix, because there are so many different things you’d have to fix.
Idk why but I feel the need to add an empty “co-sign” comment. It is 100% this and I have so many stories from friends who are doctors and nurses that back up every detail.
One note: the doctors won’t agree or want to hear this, as they too are human, but listen to how they talk about nurses. Hit me once I had both a CRNA (advanced nursing degree in anesthesiology) and an anesthesiologist friend
Edit: glad I did add an empty cosign, right after replying, the parent is now downvoted to gray. And gets it much, much, better info than any other comment, and I read all of them. Last thing I’ll throw out to back it up is, check into who decides how many seats there are at med schools. Can’t remember the exact name but it’s basically the doctors union / professional organization. AMA?
Author here. The 254% figure comes from RAND Round 5.1. I built a Python pipeline on CMS HCRIS cost reports (FY2023, 3,193 hospitals) to compute cost-to-charge ratios by ownership type. The surprising finding: nonprofit hospitals have a median markup of 3.96x actual costs. All scripts are in the repo. Happy to discuss methodology.
Thank you for doing this analysis! I'd suggest adding some charts to better represent some of the issues you've found!
Interesting case study (video; ~2 min): https://www.tiktok.com/@thesephew/video/7476558168059809067
I recently had a preventive CT angiogram and the cash price was $500 and the price with insurance was going to be $1000. The system we are in makes no sense at all.
If you ever want to "sanewash" healthcare spending in the US, this random guy stood up an entire website to argue that per-capita healthcare spending in the US is more or less in line with expectations based on per-capita income:
https://randomcriticalanalysis.com/why-conventional-wisdom-o...
TL;DR: As people/countries get richer, a larger share of their money goes towards consumption. It's not just that Americans pay more for the same procedures (sometimes they do, sometimes it's just sticker prices) but we consume more healthcare the more money we make. So it skews costs up disproportionally. That wealth also enables chronic health and lifestyle problems that are expensive in their own right.
I'm not sure I'd buy the theory entirely, but it's very well argued and as a null hypothesis it makes a lot of sense.
My personal experience is that people in the US feel much more entitled to consume medical services than people in the country I came from (UK). They are richer, but there's a cultural difference too.
Having worked in for profit health care pricing and costing yup that makes sense.
The layering on of profit margins causes costs to grow exponentially
I recently travelled to Vietnam for dental work, it's really shocking how easy to it to shop around when dentists actually publish their price lists online for easy comparison/perusal. In my native country, dentists rarely if ever publish prices online, and it's hard to get prices over the phone.
If hospitals could be forced to publish price lists, it would be game changing, allowing patients to shop and compare quality/prices.
Trump vaguely mentioned he'd try to do something like this but it's not clear what he's attempting: https://www.youtube.com/watch?v=8PQ7l905aVM&t=10h57m30s
Maybe this? https://trumprx.gov/
Hospitals are forced to publish price lists (charge master).
https://www.cms.gov/priorities/key-initiatives/hospital-pric...
But at a consumer level it's still quite difficult to predict what your total out-of-pocket expense will be for the same course of treatment at two different facilities.
For a country that prides itself on CapItAlIsM, U.S. healthcare is the farthest thing from it.
- Doctors and hospitals don't compete on price
- Prices aren't just opaque, they are unknowable
- Shopping around is not possible
- Insurer incentive is to maximize billing (cost). They pass along cost as increased premiums to an employer. Employer passes along increased costs to employee as below-inflation wage increases
No debate about the viability of Medicare-For-All is made in good faith, at this point. The only valid debates are about implementation. No one should entertain any move conversations about whether we should go to a single-payer system, only how we should.
Why? I’m in favor of reform and making our system more like other developed nations. But single payer isn’t the only way it’s done, not even the most common way.
The US' refusal to move to a single-payer system, while refusing to accept a world where poor people just die if they can't afford healthcare, creates a lot of deeply weird side effects.
Not to hold the commercial insurers' balls here, but if I were a doctor, I'd probably demand more from them. The patient age distribution is not uniform. Most patients are going to be old. If medicare gives me peanuts, I just have to deal with it, for if I don't accept whatever crumbs medicare sends my way, I no longer have a practice. If a private insurer tries to throw me peanuts -- especially when that insurer's customers only make up a percent or two of my practice -- I can easily tell them where to shove those peanuts, so they had better pay well.
They are intermediary between buyers and sellers paid with percentage on the price.
They have every incentive for the price to be as high as possible.
Such entity can't be left to utilize market forces for the same reason cancer can't be left to utilize human physiology.
This is a believable result. Meta-analysis is 141-259% [1].
Three reasons:
1. Medicare has quasi-monopolistic negotiation power that private insurers can only dream of -- Medicare spend two-thirds of all the private insurers combined. That's why private insurers would combine in a heartbeat if the FTC allowed it.
2. Moreover, that Medicare volume is concentrated in a specific segment of the market. If many providers dropped expensive United contracts, the insured people/companies might move to a new insurer. But Medicare's base will never leave.
3. Since Medicare covers older individuals, often on a fixed income, there is natural discriminatory pricing. (Think of the "senior discount" at your local entertainment venue.)
[1] https://www.kff.org/medicare/how-much-more-than-medicare-do-...
Also, commercial insurers are essentially cross-subsidizing Medicare: the higher revenue from commercial insurers is partly why Medicare can be paid less. Similar dynamics exist with drug prices: the high US cost is a cross-subsidy to other countries. Maybe this is good (someone's got to fund R&D), maybe this is bad (it's a net wealth transfer to the elderly), but it's an important part of the dynamic either way.
Would like sources about the pharmaceutical sector being "subsidised" by the American system, heard it many times but haven't seen it substantiated.
If you want to understand the hidden cross-subsidies in the US healthcare financing system then a good place to start is the book "The Price We Pay: What Broke American Health Care--and How to Fix It" by Dr. Marty Makary.
Thanks for the meta-analysis reference. The 141-259% range tracks with what I see in the HCRIS data. The variance across hospitals is enormous — even within the same bed-size category, the P75/P25 ratio for cost-to-charge is 2.5-3.4x. Hospitals in the same peer group are charging wildly different amounts for equivalent services. All the scripts are in the repo if you want to dig into the hospital-level data: github.com/rexrodeo/american-healthcare-conundrum
Look at hearing aids. 50,000% markup or higher, even up in the 70k% range in some examples. Old people don't know what to be skeptical of, or at least haven't been nearly skeptical enough, and some industries are getting away with terrible exploitation, all blessed and sanctioned by the FDA.
Its called American Medical Association racket.
Agreed. As a spouse of a specialist doctor in the US, average folks don't include doctors when they blame the exorbitant prices of the US healthcare. Sure, big pharma, insurance companies, hospital admins and everyone in between play a part in this big profit-making machine.
But doctors (a lot of them, not all) are complicit in this healthcare complex. American Medical Association is one of the top lobbying groups in D.C. They gate-keep the production of US doctors artificially low by making the candidates go through longer years of education (4 years of college before another 4 years of med school is an overkill for most doctors) compared to other developed nations, resulting in high compensations for doctors AND longer wait-time for patients (due to doctor shortage). They also put up regulation barriers and it requires a lot of certification and exams to become a doctor, so whoever becomes a doctor has the best interest to keep the system (status quo) going.
Average US doctor gets paid a lot more than their counterparts in other developed nations.
The AMA may cause some problems but you can't reasonably blame them for this one. They are not a regulatory or accreditation body. State medical boards control provider certification. Some universities have combined BS / MD programs that cut education time down to 6 years.
Daily reminder that the United States spends more public money per capita on healthcare than any other country and it's not close[1].
If you want to know what socialized healthcare in the US would look like, you are lookin' at it right now bub.
[1] - https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...
Daily reminder to always check data definitions before interpreting statistics.
According to the OECD data, US 2023 healthcare spending was 28% by the government, 55% by private health insurance, 11% out of pocket, and 5% from other sources. OECD lists all US private health insurance policies under the "compulsory health insurance" heading. Apparently because there is no clear separation between compulsory and voluntary insurance, and because employer-paid insurance is not truly voluntary when it exists. (Because there is usually no option to take cash instead.)
And then the chart you linked to combines compulsory insurance with government spending. Mostly because if compulsory health insurance exists in an OECD member state, it is usually legally mandated, regardless of whether it is provided by public or private entities.
Total medical expense of any type per capita is far higher in the us - even as a percent of gdp - than anywhere else.
It is shocking to me that anyone still considers the US solution to be “too privatized” lol.
Healthcare and housing are simply too important to not allow the market alone to dictate.
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The end goal of AI + Robotics has to be robots doing surgery on humans, for a little more than the price of electricity.
I think this is a political and economic problem rather than a technological one.
I cannot think of a more important skill than surgery to continue training humans to do and to be wary of AI robotics replacing. Sure, some surgeries could likely be automated, but the entire point of specialist surgeons is to make choices and act in a timely manner in ambiguous situations with extremely high stakes.
What happens when the robot messes up? What happens when the internet is down, or the hospital is operating under abnormal circumstances? How do you teach, train, and collaborate with human medical workers and caregivers in a world where surgeons have been replaced by robots?
Most of the excess costs for healthcare and surgery aren't the humans doing the work. I think there's a lot of other areas we can optimize first, chief among those in healthcare being the cost structure around private businesses and insurers bloating the bill with administrative costs. There's a reason every other developed nation has a single-payer healthcare system and better outcomes, and I don't think an AI breakthrough is the only plausible solution to improving costs in the US. In fact, under the current system, an AI breakthrough in medicine would likely hurt the workforce more than it would improve costs.
2/3 of the costs are already wasted. Even if your robot is cheaper, the provider will hire more lawyers, admins, facilities staff, etc to keep the budget growing. Prices have been going up 15% yoy for 20 years do you think that will stop?
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