alt Hacker NewsThe American Healthcare Conundrum
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I see a lot of the comments operating from an empirical framing. This is valid analysis and is good; we should want to understand the waste in the system as it stands.
However, that isn't enough. US healthcare is wildly inefficient because the paying customer is different than the serves customer. This has been known for sixty years, since Arrow published his paper (he identified four reasons, three of which are not exclusive to healthcare and seem to be mitigated well in other industries). I'm surprised people posting can't quite see this: when you go to the doctor, would you call the experience efficient? You check in, then wait, then are called back, tell the nurse or PA why you're there, wait, see the provider who asks you again why you're there, has a short exam, wait, finally get all the paperwork and sign out.
If you have labs or tests, you then wait again. And of course if you need a specialist, you wait again, sometimes for months. If you need any sort of "specialty" medication or equipment, then you REALLY wait, as specialty pharmacies, DMEs and the like jump in.
The whole system is woefully inefficient, and overhead is only a part of the explanation. No one knows what anything costs, and the people who pay (insurance providers, the largest of which is the US Government) want to believe they're not getting scammed - they still are, but at an acceptable level.
The question we ought to ask is how we can buy better health outcomes for people. And I think part of the answer is that in most cases, individuals and families themselves must allocate resources they control to make this happen.
Healthcare administrative overhead in the US is pretty huge and has been for a long time. Back in the early 90s I worked on claim processing software and I recall it being discussed as being around a third of healthcare costs.
Last year this podcast said that nobody wants to solve this because solving it is going to eliminate (IIRC) hundreds of thousands of jobs. Which is a point to consider.
In 2021, the U.S. spent $1,055 per capita on healthcare administration, while the second-highest country — Germany — spent just $306 per capita, Japan is $82. https://www.pgpf.org/article/almost-25-percent-of-healthcare...
Administrative spending accounts for between 15% and 30% of total medical spending, with lower estimates covering only billing- and insurance-related expenses, and higher ones including general business overhead such as quality assurance, credentialing, and profits. https://www.healthaffairs.org/do/10.1377/hpb20220909.830296/
The Center for American Progress estimates that health care payers and providers in the United States spend about $496 billion annually on billing and insurance-related (BIR) costs alone. https://www.americanprogress.org/article/excess-administrati...
The time burden on physicians is staggering — estimated at $68,000 per physician per year spent dealing with billing-related administrative matters. https://www.pgpf.org/article/almost-25-percent-of-healthcare...
I buy that the locus of American overspending is in fees charged by providers (my understanding is that a further principle component of that spending is in end-of-life care).
The problem, though, with going after pharma costs, and pharma benefit managers is that pharma is a relatively small component of overall spending; it's less than 10%. That is to say, you could make all pharmaceuticals entirely free, and we'd get at best a 10% discount on what we pay. I don't think any of us would be satisfied with that!
This is data from the most recent (as of last year) CMS NHE:
> 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.
This project reminds me of a book I highly recommend called An American Sickness. It sheds a lot of light on the same sorts of issues.
One underlying, perverse incentive behind many of the problems is that insurers are regulated based on percentages of spending rather than total costs.
The US passed laws meant to limit marketing and overhead that tied insurers economics to the size of the overall medical bill... which means as healthcare spending rises, the dollars they’re allowed to retain can rise too, which basically means they're incentivized to drive costs up rather than down.
Here's a link to the book: https://www.helmpublishing.com/products/an-american-sickness...
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.
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.
Huge chunk of the costs come from the fact that Doctors pay astronomical malpractice insurance rates in some states with no tort reform. Some have to spend more than 100k on insurance - 1/3 of their total pay. Since some states allows multi-million dollar judgments from juries that raises insurance everywhere, which raises not only prices for everyone but also dramatically contributes to more procedures and tests being done at even higher costs to avoid liability. The risks of having your entire livelihood wiped out chases out doctors from those states and reduces availability of care for patients as well. If you want objective cost comparison, compare Veterinary care which has similar consumables and training, but no insurance and liability impact on prices.
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.
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.
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...
When you really dig into the difference it's metabolic health that is driving most of it, and that will be fixed by agricultural and food regulation for the most of it, starting with going with the whitelist system that japan and the EU have for food additives & manufacturing processes vs. the wild west that is GRAS in the USA, and way more strict food quality / inspection standards than you would think.
> Japan spends ~$5,790 and has the highest life expectancy in the OECD
Is Japan's life expectancy because of its healthcare or culture? I'm pretty sure Americans would not live to the same age as Japanese even with Japanese healthcare because of our low nutrition high sugar diets...
Looking at this as a math problem is a bit navie.
Americans don't want cheaper healthcare.
We've collectively decided the nightmare of employer based health insurance is a good idea.
Single payer healthcare will never happen.
Imagine if you will an Apple farmer willing to supply an entire town for a set amount per person.
One town, call it NordicTown says this is a great idea. Everyone chips in.
Another town, Jamestown has lively debate on the issue, but half the population believes unworthy people will get apples.
Since it's the policy that if anyone who shows up at the apple market starving they'll always get an apple, the apple farmer figures out they can bill the town for whatever they want.
Jamestown then ends up implementing special taxes to pay for poorer people to have apples. They could actually extend this to cover everyone without raising taxes.
But this will never happen. Someone you consider lazy might get a free apple. So you gladly pay 3 times as much.
Everyone in America is a single expensive illness away from ruin. We like living in a dystopian nightmare where you have to pick between medicine, a car note and rent.
Did I mention Jamestown residents who relay on free apple programs regularly vote against free apples?
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.
It's great to see work being done to highlight an issue but I do wonder what background does the author have? Would recommend gestalt/cleveland as a good grounding, the visualizations is editorial rather than analytical.
Choosing US versus Japan, which Japan has the lowest cost and highest life expectancy in the OECD, it's cherry picking. I'd recommend showing the full distribution of OECD per-capita spending rather than just a single cherry picked comparison.
This also is troubled by McNamara Fallacy, we're looking at metrics that are qunatifiable but ignoring what can't be measured or overlooked, is speed of access being considered, how about innovation incentives, quality and outcomes variation across systems, patient choice and flexibility, in addition to workforce compensation (nurses and physicians in the US earn significantly more). Where are the trade-offs?
Summary Statistics can be dangerous. 254% of medicare is a single ratio summarizing enormous variation across thousands of hospitals and procedures. Median markup of 3.96x inherently hides the distribution, some hopsitals may be higher or lower, why is that?
I think the biggest one to me was the confirmation bias, the $3 trillion gap that represented 'fixable waste' was the conclusion. Every price difference is interpreted as waste rather than investigating the potential cost drivers, was there a null finding framework in place where US spending appears justified or is it all bad?
Overall, glad someone is looking into the data and pulling insights, please don't take this as discouragement just a comment from the peanut gallery.
> The US spends ~$14,570 per person on healthcare. Japan spends ~$5,790 and has the highest life expectancy in the OECD.
Ethnic Japanese in the US live have about the same life expectancy as Japanese living in Japan do (within 1 year). US GDP per capita is about 2.4x Japan's. So the numbers don't look nearly as bad when you adjust for that. The higher drug prices in the US are definitely part of it, part of it is our population is less healthy in general (fatter, worse diet, more drug and alcohol abuse), but part of it is Baumol's cost disease[0]. Biggest barrier to lowering healthcare costs in the US is it probably requires paying doctors, nurses, etc. significantly less and most of them work hard and feel like they deserve to be paid as well as they do.
[0]: https://en.wikipedia.org/wiki/Baumol_effect
Edit: to some extent high US drug prices are a public good that subsidizes healthcare for the rest of the world. I don't know the data but I would guess the US is responsible for a disproportionate share of new drugs.
The problem with healthcare is that it can have infinite cost. The question that each society tries to answer is how much are they willing to pay to prolong the life of each individual. There are no right answers unfortunately, as all of them lead to preventable deaths. But some of them at least promote the concept of a caring society.
Healthcare can only get you so long, if we're looking at life expectancy
If you're less active, eat worse, throwing more money at fixing the symptoms will not fix the underlying problem.
Not saying that Americans aren't paying outrageous amounts compared to others, but when comparing these things, I think it makes more sense to look at countries with population more similar to US.
> US pays 7–581x more than peer nations for the same drugs
This is what pays for future drug research for the world.
Interesting case study (video; ~2 min): https://www.tiktok.com/@thesephew/video/7476558168059809067
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.
Unregulate the insurance industries problem solved. Let people actually buy insurance for it's intended purpose. No insurance company would pay these rates willingly, they do it because of all the regulations. They aren't allowed to profit normally, so they find ways around it. Just let them operate normally, like all sorts of other insurance programs.
I think the problem is the system is designed to inflate what is being done to the point it's barely affordable. This new treatment requires more equipment and time? No problem, it's x% more effective, so it gets rolled out. And as medicine expands, the opportunities to make it marginally better also increase.
If what we defined as care was constant, it would get cheaper over time. But it doesn't stay constant.
This is an interesting way of presenting a topic, I like it. Especially if it’s got included datasets that allow others to mess with said topic. I don’t want to suggest bloating it up with any complicated UIs, but a Jupyter notebook could be nifty. Maybe not for this specific topic, but other data-heavy subjects.
From the top to just above bottom: waste, fraud and abuse and injustice.
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
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
As a non-American, I find it interesting that so many comments in the thread insist that "No, American healthcare is not that expensive compared to that of other countries; no, the costs of the American healthcare system are not high due to greed and capitalism; and no, the American healthcare system cannot be cheaper or better, it is not perfect, but it works as it is."
In health care everyone knows the exact problem because they live it and suggests a solution, mostly from opinion or other countries' systems. In the US the system is so bad primarily due to the holy national founding principles: the minimal public support pushes the prices to exorbitant levels due to loss of regulation that ends up to abject profiteering by providers. People try to hack the system so the price is reduced from exorbitant to very expensive. The naive but painful solution is to borrow and adapt elements from other systems and if the Sweden's feels too socialistic, let it be Portugal's or Greece's. The reform will do good to the whole nation, only a few jobs will be lost and some others will see less 6-figure income.
This might be rigth but I don't get a lot of confidence from the start comparing Japan's lifespans to the USAs and implying it's because of health care
Japanese, as a whole, have a vastly different diet than the average USAian. As a whole, they are far less obese, eat far less diary products, over eat less, eat less meat, etc... Again, not saying that's the reason but it's a possibility. USA = 2500 calories a day. Japan = 2000 calories a day. Japan = 3% obese. USA = 33% obese.
Next up is exercise. Sure, lots of people in the country live in rural areas and drive a car. But some large portion of the population does the majority of their commuting and shopping by walk/bus/train/bicycle. That means that on average, Japanese get more far more exercise than the average USAian. Japan gets ~25% more exercise on average
I'd suspect these 2 (3)? are the major reason Japanes live longer. (1) they get more exercise (2a) they don't over eat (2b) they eat healther foods.
Anyway, the point is, the post should arguably not be putting such a specious statement at the top. It suggests the rest is probably just as specious
No, they don’t. Medicare’s one of the better payers among major groups.
Source: owned a medical practice for over 20 years, and was staff engineer at a company that processed medical bills.
As a European I would think a large part of the problem is that Americans are just sick more seriously and often. Your car culture, quality of food, and general preventative healthcare accessibility seem all terrible there. The prevalence of obesity in younger population is staggering. In my (engineering) programme I see one very obese person and a couple fairly overweight, but that's about it.
There's so much culturally different here that blaming just the differences in the system of health care is effectively meaningless.
Yearly physical exams are much more thorough in Japan. Unless you are optimally fit, you will be prescribed lifestyle changes to make and there is a strong expectation that you will work hard on these. Your employer will be involved. There is _tremendous_ social pressure if you are overweight.
Healthy food options are ubiquitous there with healthy and cheap meals available 24/7. Combini food certainly has bad options but nothing compared to American fast food or the American diet generally.
There are other health problems that are significantly overrepresented in Japan compared to the western world. Alcohol, smoking and stress-related illnesses. Liver & Kidney diseases. Peptic ulcers, GI problems in general.
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/
It's neither capitalist nor socialist. If it were fully socialist you would have long wait lists but it would be free and there would be one payer. It is like this for Medicare and Medicaid which I've heard are a fantastic UX. But this is only the case for about half of Americans (the ones who don't pay for it).
On the other side, if it were fully capitalist you would be able to see the price and walk away if you didn't like it. This is what makes capitalism work. Your margin is my opportunity. Instead, the upper middle class, who pays for everything already, and is unable to use Medicaid, is forced to use a certain "network" of providers and never, ever sees the price upfront. This is the cornerstone of capitalism. Does the buyer like the price? If so, transact. It's completely not there. Instead, it's actively discouraged and banned, and the price is maximized post-hoc by the same entities who negotiate directly with the employee's employer. Ie, a quantitative shakedown.
Is the author GPT-5?
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.
> Issue #4 examines pharmacy benefit managers ...
I'm curious to read that. I worked for a PBM back in the 90s/early-2000s. When I was hired, it was just a job; I had no idea what the business did to make money. After working there a few years and learning - well, I would've felt better about myself if I had become an actual drug dealer, selling cocaine and meth. That's not a huge exaggeration.
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.
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-...
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 of 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.
It’s not a conundrum, it’s a stealth regressive tax. The people who could fix it don’t want it fixed, and there’s are massive commercial incentives to keep perpetuating it, wrapped up in arguments against socialism.
"We've negotiated special rates on your behalf."
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The problems are so vast it is difficult to even describe to outsiders. For example, if I purchase a particular medication at a local pharmacy, it costs $25. However, my insurer mandates that I purchase it via their Pharmacy Benefit Managers (PBM) Optum, which charges $125. Easy enough right, you price shop? Well then it doesnt count towards your deductible. The whole thing is an elaborate trap to not pay.
Sometimes it is easier to just pay cash without insurance altogether. You need the medication today and dont have two weeks to fight it out with letters and forms, then it definitely doesnt count towards your deductible (and also, what is the purpose of the pharmacy coverage insurance?)