Look how much rent seeking is built into protect providers with certificate of need. 35 states have them and big hospitals use them all the time to stop new clinics and small hospitals from upgrading their equipment.
"In June 2023, a Tennessee administrative law judge blocked the opening of a new hospital in Rutherford County by Vanderbilt University. The state had initially approved the hospital and granted it a certificate of need. But three existing providers intervened, claiming that there was not a need for another facility in the area.[13] The 42-bed hospital has been in the works since 2020, with a tentative opening in 2026, if not for the existing providers' objection to the new facility's construction."
Actual individual consumption is so far ahead in the US that it likely actually does explain practically the whole difference. But beyond that a large issue is that hospital systems create local monopolies at the governments blessings. To establish a new clinic you have to prove that it is "necessary", and to prove this you have to go up against a board of people belonging to the hospital systems holding literal monopolies.
Americans consuming more healthcare does not explain the difference in healthcare spending between us and the rest of the world (see Anderson GF, Reinhardt UE, Hussey PS, Petrosyan V. It's the prices, stupid: why the United States is so different from other countries. Health Aff (Millwood). 2003 May-Jun;22(3):89-105. doi: 10.1377/hlthaff.22.3.89. PMID: 12757275). Americans simply pay more for health services than other countries. If you believe there is a serious quality difference that accounts for the value added, there’s certainly an argument to be had, but this “quality difference” doesn’t seem to be borne out in population health metrics.
There is a pricing power issue in health care markets. Provider concentration and insurer fragmentation lead to uncompetitive pricing. Healthcare is not a normal good. Many of the conclusions about a market behavior drawn from a competitive market model do not apply.
"but this “quality difference” doesn’t seem to be borne out in population health metrics."
Because population health metrics are much more about lifestyle than medical treatments, the US is top-rate when you look at what actually matters for healthcare outcomes.
For treatable mortality rates and preventable mortality rates the U.S. performs worse than OECD average. I understand that in the counterfactual we could be doing even worse, but when examining metrics that try to isolate healthcare effectiveness (like treatable mortality rates), it doesn’t seem like the U.S. is performing better.
"treatable mortality and preventable mortality" includes the lifestyle differences I talked about, like drug abuse, obesity and violence (traffic too). You'd have more success affecting this by changing consumer culture and urban design.
The metrics I'm talking about are:
Acute hospital treatment outcomes
Cancer screening and cancer survival rates
Care process metrics - "Care process looks at whether the care that is delivered includes features and attributes that most experts around the world consider to be essential to high-quality care. The elements of this domain are prevention, safety, coordination, patient engagement, and sensitivity to patient preferences."
You get access to new drugs much faster than the rest of the world
Contrary to online-ideas, americans are much more satisfied with the healthcare they get
+ Most medical innovation comes from US payers, something you export to the rest of the world.
Do you know what treatable mortality means? “Treatable and preventable deaths are those that may be avoided by timely and effective care or interventions.” Treatable mortality is specifically not about lifestyle. On treatable mortality, we are below average in OECD.
You’re correct about frontier innovation. But healthcare reform doesn’t require dismantling innovation incentives entirely.
Your original point was that U.S. healthcare expenditures are due to measurable quality differences and also because we consume more(?) This doesn’t entirely explain higher prices Americans pay for similar or the same procedures, unless you think the innovation premium is passed onto every single cost in healthcare.
Changing consumer culture is not a policy. Consumer culture is not the reason Americans pay so much for healthcare. You are delusional.
You clearly have no idea what you are talking about.
"treatable mortality" is measured as deaths per 100 000 people, it does not look at any case fatality among people who actually have the disease. A country where the population is extremely obese will obviously have much higher incidences of diabetes, chronic kidney disease and heart disease. It's a measure that doesn't adjust for how SICK the population is to begin with.
The fact that the US performs at the absolute top for INDIVIDUAL CASES of acute fatality and cancer is what you EXPECT to see if the difference is in incidence instead of care quality.
You don't even understand that AIC means you consume more of everything. American healthcare professionals are paid american wages. You literally sent an article that goes into the fact that US spending is high because you're an extremely rich country. You aren't an outlier in prices, you're an outlier in wealth.
“Actual individual consumption is so far ahead in the US that it likely actually does explain practically the whole difference.”
Which difference? The first chart Noah provided is about the share of the cost that is paid out of pocket vs by insurance, not the sum total. The second one is about the expenditure per person, but I think we’d need a more detailed analysis to distinguish the relative weights given to “Americans pay more per visit/per health issue” and “Americans just go to the doctor more often” as potential stories explaining the disparities. Is it really the case that Americans just go to the doctor twice as often as Europeans?
The Certificate of Need stuff you are talking about does seem like a huge issue. Niskanen has a great report about all the ways abundance in the healthcare industry is restricted by such giveaways to already-existing special interests.
I don't think the right question is whether Americans literally go to the doctor twice as often as Europeans. They don't. The point is that Americans consume far more overall, and health care is one of the clearest examples of a high-income, high-tech consumption good.
AIC matters here because it already includes the value of “free” and subsidized public services. It is probably the best single measure for comparing household material welfare across countries. And on that measure the United States is far ahead of Europe: roughly 50% above the EU, and still around 30–35% above the richest European countries depending on the comparison.
So if the United States is massively ahead in actual consumption, and health care is one of the most income-sensitive and technology-intensive sectors, then it is not very surprising that spending is much higher. The premium is not “Americans visit GPs twice as often.” It is that they consume a much more expensive health-care bundle: more specialists, more diagnostics, more drugs, more devices, more hospital-based care, more aggressive treatment, and more access to frontier medicine.
I also do not think “prices” and “high-tech” can be cleanly separated. A high-tech, specialist-heavy system will show up as higher spending and higher prices. There are also pure price and market-structure problems, especially hospital consolidation, opaque reimbursement, insurance distortions, and Certificate of Need laws restricting entry, but that is downstream of the broader point: America is much richer, consumes far more, and health care is exactly where you would expect that to show up. Higher standards of living create much higher demand for the premium experience.
Higher standards of living create much higher demand for the premium experience, and in health care that means specialists, diagnostics, drugs, devices, shorter waits, more aggressive treatment, and access to frontier medicine.
TLDR: Americans paying more per visit is largely a result of Americans being much richer and placing much higher demands on what health care should provide.
Reading it instantly gave me the heebie-jibbies, especially the third-to-last paragraph with the “The premium is not “Americans visit GPs twice as often.” It is that they consume a much more expensive health-care bundle: more specialists, more diagnostics, more drugs, more devices, more hospital-based care, more aggressive treatment, and more access to frontier medicine” part.
So I ran it through Pangram (which boasts a remarkably low false positive rate), and it gave me “high confidence this is 100% AI-generated.”
Frankly, I’m not particularly interested in engaging with it if it is. I don’t believe all AI-written stuff is inherently slop, but how can one have a dialogue and conversation with an interlocutor who is just copying stuff from AI? It is so darn easy these days to get reasonable-sounding arguments for all sides just by typing in “write me a reasonable response arguing for my thesis, countering what this comment said: [COPY-PASTE MY COMMENT ABOVE].”
AI writing is not testimony, as Tsvi ably described a few months ago (you can look up the post, it’s great). And especially when it’s not labeled as such, using it strikes me as kind of a bad move in terms of conversational norms.
Oh boy, as if the grammar-police weren’t bad enough, now we have to deal with the AI police. You say you’re not interested in engaging with it, then you engage with it.
First of all, that’s paywalled. Secondly, it’s ironic you are once again offshoring your thinking and reasoning to someone else instead of at least summarizing the points you want to make.
And finally, are you actually denying your comment was AI-written? It has literally all the hallmarks of it, and I find myself extremely skeptical it was written my a human.
And jumping to name-calling immediately is not a good look for you.
It's easy to hate health insurance companies. For *decades* as a provider--much of it before electronic billing--I had to deal weekly with their bullshit: regularly denying claims for no reason at all, underpaying pretty much all the time, almost always paying >90 days out. And forcing me to waste hours weekly navigating the most maddening and byzantine of phone trees. All of which is why, if I could've afforded it, I would've entirely gone for a 100% cash practice.
Noah's calculations thus fail to take into account the incredible inefficiencies caused by every single hospital and doctor's office having to hire highly skilled staff/services to deal with the fucking insurance companies. Dunno how you'd quantify such waste; but getting rid of these fucking middlemen would be doing the universe a great service.
Yet Noah makes a pretty strong case that although they may be tapeworms deserving only the hottest fires of hell, Health Insurers are eating pretty low on the hog. And can't be blamed for most of why we pay double, but get only half, of the healthcare value enjoyed by citizens of pretty much every other industrial democracy.
But to blame hospitals as the truest villains also doesn't fully add up either. Especially when >300 of them will likely go bankrupt in the next few years due to GOP cuts in the 2025 BBB.
Which leaves the next largest stakeholders: providers, Big Pharma--and our obese, junkfood-swilling populace. Let's see how Noah sinks his teeth into them apples.
And my point was that he doesn't even attempt to quantify the enormous drag on the system in terms of staff and a shit-ton of man-hours providers are forced to spend dealing with them.
So much of the frustrations and paperwork you blame on insurance companies come from the business and practice models that providers insist upon. Prepaid group practices with doctors on salary like Kaiser Permanente don’t have those problems
Done a lot of insurance billing, have you? My frustrations date from c. 2000-2015. As time has progressed, the industry has gotten more efficient at processing claims, as has the quality of billing software for providers/billers. But it's still a system where Adjustors bonuses are contingent upon denying claims, and so they do. With the same byzantine phone trees and long wait times.
A large hospital that hires a top-notch billing company to bill claims, *can* get a lower percentage of denials and CPT low-balling. Economies of scale, and all.
The cost to providers to bill is currently 4-10% of your take, with specialty services on the high end. Which doesn't include the added costs associated with billing disputes, or up front costs to establish accounts.
Kaiser is unique, in that they're both insurer and provider. Exactly how they reconcile the two is unknown.
I don’t think it’s unknown; it’s just not adversarial. It’s easier to implement best practices when you take the sum out of zero sum. There’s no billing
Of course there's billing; just that no cash changes hands. They're an insurance company with a hospital. The insurance end needs data to construct rate plans and premium increases. The hospital end needs it to determine copay amounts, staffing hiring, etc.
This is a vertically integrated enterprise that works through budgets, not billing. Sometimes an internal charge system for tracking purposes but it doesn’t work the same way as insurer payments to providers: no cash changing hands makes for a big difference.There is some contracting but they avoid it whenever they can. In many places they have their own hospitals
I've been a Kaiser member for years, and really like them. In CA, and now in HI. Although their HI administration is incredibly dysfunctional compared to CA.
This is so true. I'm Board Chair of a small foundation that runs a health insurance plan that covers research fellows at a large Federal research institution. We work to break even every year and it is a real challenge to provide good benefits at a reasonable price point. The cost drivers are specialty pharmaceuticals and OB/Gyn costs. We do carry risk insurance that kicks in when a single cost event goes above $350K and that is expensive. The majority of our costs are driven by 15% of those insured. Our insured population is mainly between the ages of 24-35 years of age and generally healthy. However, we do have occasional claims that run close to $1M for a covered individual.
It's not the insurance providers who are the cause of the problem. Costs for routine care, hospitalization and pharmaceuticals are rising much faster than inflation.
I'll buy Noah's argument on cost, but I think he's seriously underweighting the frustration from operational inefficiency.
My wife recently fell and tore her MCL. Her doctor said she needed an MRI. It took 2.5 weeks just to get it approved, while she was in extreme pain, stuck in bed, and unsure what was wrong or whether the wrong movement could make it worse.
She eventually had to spend days personally chasing doctors, insurers, and the imaging company to make sure the right things were being faxed around. This was after 20 days of the system failing at a routine thing. It left us furious at everyone involved.
I mention this because it's recent, not because a knee injury is uniquely serious.
With single payer, I imagine the doctor would know immediately whether the MRI was covered, and she could book it right after the appointment. I also imagine everyone could be on the same platform instead of faxing documents back and forth and these frictions could be resolved much sooner.
That's fair. The end result was not bad, it was just that the experience of getting the approval process itself was extremely frustrating. If we had been told "3 weeks" in the beginning it would've saved us a lot of that.
Looking online it seems that the US has an average wait of 2-3 weeks which is in the better end of things, and only the UK achieves similar results. Canada seems down to 10.6 weeks (according to the Frase Institute).
The fastest is Japan with a 1 week average. They have the highest density of MRI machines per capita (60 per million) vs 40 per million in US and 10 per million in Canada. In Japan many towns, even out in the countryside have at least one small clinic or hospital with an MRI unit, and big cities have very many.
They also have the best healthcare insurance system I know of which is run by the government, but paid through employers (or privately if self or in employed) with no claims - you just go to the doctor (many don’t take appointments, you just walk in) and pay the 30% copay (20% for children and 10% for low income seniors over 75). There is an out of pocket cap for monthly expenses based on your income. No prior authorization needed for MRIs or mostly anything except trying to use large hospitals instead of clinics (which as I said, sometimes have MRI machines.
Japan is odd. They technically have 5 different insurance schemes. There are private insurers individual to each big company. There is one big insurer that insures everyone who works for smaller companies. There is an insurer for self employed and unemployed. There is an elderly specific scheme. And finally there is a set of sector specific health insurances for categories that were set in the 1890's, like "fisherman."
Also, I lived in Taiwan for 5 years. I had 5 MRIs there, never had to wait more than 2 weeks for them.
You touched on something I was going to mention, what about the pain and suffering we as patients have to go through when trying to get bills paid? Not only is there anguish, is our time not worth something?
Whenever I hear discussion of health costs, I think of my wife's experience a couple years ago with a well-regarded university hospital. Her home nurse and her specialist agreed that she needed to be re-admitted to the hospital about a week after post-surgery release, in order to deal with a very narrow, defined problem.
But hospital policy requires re-admission go through the emergency room. And emergency room admission led to a totally new set of doctors who ordered up a whole new set of tests, some very expensive. They were polite but had no interest in either our defining what we were there for, nor for our referring to the specialist. As we were told in no uncertain terms, we were under their care, not the specialist's care.
I don't know that this was good medicine, but I can see that it was good business. First, no one could possibly claim in court that they did not do their due diligence, in case my wife took a turn for the worse in the days ahead. And maybe more to the point, some very expensive medical equipment got some billable hours. (I noticed that there was a long wait for a real hospital bed but not for these tests.)
Final score: They found nothing unexpected. They never treated the problem that she was readmitted for. My wife got Covid while under their care, which I then caught. A six week convalescence stretched out into a sixty week coalescence. And the insurance company -- which can be infuriating to communicate with over petty stuff -- paid every penny without comment.
An anecdote does not make a substitute for analysis of data, but it does make me think about what sorts of data I suspect would be enlightening.
I lived in Europe for 10 years, and have experienced both the US and European health care systems. What's clear to me is that a big driver of the excess provider costs is simply the salaries that doctors expect. If you go look at a random hospital parking lot, you can be sure that all the biggest and most expensive cars are driven by doctors. That simply isn't true in Europe. Doctors don't expect to be the richest family on the block, and their salaries are far less than in the US.
Noah, I generally like reading what you write. However, I feel that you need to stop writing about the health care system. You clearly do not understand why the American healthcare system is so expensive and ineffective. Health insurers are a LARGE part of the problem. They spend ridiculous sums of money on real estate, advertising, and executive compensation. Additionally, they alone get to pick winners and losers in the distribution of health care expenditures. As much as you demonize providers, the industry is already moving towards lower cost alternatives. In many cases, patients now see "cheaper" mid-level providers instead of "expensive" doctors for their care. Health care providers are experiencing remarkable levels of burnout, job dissatisfaction, and crushing educational debt. The solution to medical bankruptcies is not finding even lower cost providers (as you seem to suggest). The solution is removing or regulating the expensive middle men who skim too much money off the top of the collective health care premiums we Americans pay.
This doesn’t provide evidence for why they are a “large” part of the problem with healthcare costs in particular, which is what Noah’s article is about. The “ridiculous sums of money” are not so ridiculous when you look at profit margins, as Noah did. They are just big corporations, and big corporations have a lot of money in total.
What does it mean to say “they alone pick winners and losers” in the distribution of expenditures? If it were up to them, doctor salaries would be a hell of a lot lower, as would the prices for all medical procedures (because then the insurers would then pay much less for those procedures for insured consumers).
The whole point of looking at profit margins and price mark-ups is to quantify the extent to which market power exists. And to do so in a rigorous fashion that uses numbers and math instead of vibes and ideology.
All in all, there is a lot of rhetoric and little substance in your comment. The ultimate conclusion might well be correct (getting rid of insurance companies or at least limiting their impact on the system) could well be a great policy. But the epistemics here are poor.
Nowhere in this piece does Noah dig into the costs of pooling premiums and acting as a third party payer to hospitals. There are a ton of countries which accomplish the same task for far cheaper, (and not just GDP adjusted cheaper, I mean actually cheaper)
Even from Noah's chart from the KFF, it shows that administration is costing 900$ out of 7500$ per capita health spending.
Ok, so let's say that removing private insurers and switching to a public one, (Like is the case in many other countries) saves 500$.
That would be a 6.67% savings.
Is that not worth pursuing?
Imagine you had a friend who had a household budget where he set aside 500$ to literally light on fire every month.
Sure, that amount is a lot less than his rent or food or car payment, but that doesn't mean that he shouldn't stop burning the money.
Yeah, seems worth pursuing, conditional on those numbers being correct (with no other changes to the system that would counteract these positive changes). As I said, the underlying policy conclusion may well be correct.
But I am responding to a comment that said insurers are a “LARGE” (all-caps) part of the problem and made other suspicious claims about them. My points are about local validity of argument only.
They are a LARGE part of the problem. The multiplicity and individual negotiations necessitated by having a whole bunch insurance companies means that providers need to have massive billing departments to keep track of the paperwork and legal agreements. Private insurers impose costs on other parts of the system, not just themselves.
How many bankruptcies where most of the debt is unpaid medical bills are a result of insured people not being able to pay for the out of pocket expenses vs people who are not insured? Expanding Medicaid further or allowing people to buy into Medicaid might be a more effective method if it's the latter.
2) outdated Medicare reimbursements for specialities (eg over-rewarding orthopaedists vs, say neurologists or brain surgeons)that set the basis for the whole industry
If one looks at the negotiated reimbursement rates doctors are actually getting from insurers it is not excessive for GPs and most specialties
If one looks at pharma, it is only 15 pct of total expenses. Cut it in half and it basically saves just the next year or two of overall health price increases.
If one looks at US hospitals and their outpatient “facilities”, there is nowhere else on earth where hospital charges are as outrageous, and a (sadly successful) intent of Obamacare was to increase their monopoly power by restricting competition from doctor-owned facilities.
This dynamic is easily understood from a poltical perspective. Which party do hospital administrators, nurses unions and SEIU aides, custodians and techs support? Are hospitals key urban employers?
On the other hand, most doctor specialities and pharma companies and insurers tend to support Repubs.
No surprise that Bernie focused on pharma and insurers while ignoring those $100k hospital bills and outrageous “facility fees” for what used to be ordinary doctor’s office visits before Obamacare eliminated much of private practice.
Anyone who thinks Democrats universal care is going to do anything other than coddle hospitals and their bureaucrats and unions (see also NHS) at the expense of both taxpayers and care quality is fooling themselves.
The whole system needs to be blown up and made more competitive.
My gripe with insurers is the opaque bureaucracy of it all. It makes government, including the DC permitting monster, seem like the height of transparency and efficiency. For example, I have both health and dental insurance from Blue Cross. I have to first submit any dental claims to my health insurance Blue Cross as the primary insurer, obtain the inevitable denial, and then submit that to my dental insurance Blue Cross before I get reimbursed. If the government required citizens to first get a denial from one agency (with the understanding that it denies the request 100% of the time) prior to then submitting a request to another agency (which will generally approve the request), Congress would be up in arms.
Then Blue Cross also requires paper submissions only (even DC allows electronic permit requests). A good 25% of my claims appear to disappear into the mailroom, but there's no way to know until I call in months after submission and have to resubmit. Then even those claims that do make it through are at times rejected because of allegedly missing information. The information is in the supporting documents, but I guess I have to highlight the darn thing with a highlighter for the company's staff to see it. All this and sometimes I still get a rejected claim for vague and confusing reasons because the standardized language isn't always clear as to what is going on.
I'd be far less upset with the insurance industry if they didn't make claim processing such a hellish process (but I guess they're doing everything they can to reject claims hoping that I give up).
Noah, I think that you dismiss Bruenig's argument a bit too cavalierly given that each inefficiency is doubled.
For example, in high school I worked in a doctors office calling and waiting on hold hours to deal with all the auto-rejections that UHC would unilaterally file after 89 days.
But of course, I needed a human on the other end to talk to about all of this. So, 2x the costs just on the human side (not to mention the carrying costs of not getting paid for 120 days or so).
Any inefficiency implemented by the insurance companies generally then has to be matched by the providers.
This is one reason that the medical billing market is growing at a large rate; its an arms race between providers and insurers, and they're both competing their profits away in this billing arms race of inefficiency. But if they don't play the game, they go out of business.
I think margin is the wrong metric to look at for health insurance contribution to the extraordinary US healthcare costs. Margins are essentially capped by law, so how do insurance companies make more money? Insurance companies have an incentive to have higher health care costs in the long run precisely because they earn a percentage. Higher costs and a fixed percentage is higher income. Insurance companies are incentivized in exactly the opposite direction of the public good.
I think you missed some of my point and are mischaracterizing the larger issue.
I never argued that private health insurance was the biggest source of US costs. I argue that it is an entirely wasteful and unnecessary part and it is worth getting rid of.
In a later comment on that same post, I wrote
"There are so many sources of bloat beyond just private insurance. Fixing the private insurance issue would help a lot, but not enough.... the AMA is a cartel which limits the supply of doctors in order to keep salaries high. That's just 1 of dozens of reasons our costs are so high."
Tackling drug prices would help costs, allowing more medical personnel to immigrate to the US would help, more transparency in pricing would help.
I was explicitly not arguing that they are the sole reason our costs are high.
I was arguing that they were useless middlemen. Now, you have reposted an old post about how they are relatively cheap (compared to providers) useless middlemen so stop being so mean.
Nowhere in this post have you argued against the useless middlemen part.
The only area you say is that insurers provide a useful service being the paid bad guy.
That is a useful service, people rail against the NHS all the time and I am sure some people in the UK government would love if they could have a private company that the British could yell at for all the health problems instead of NICE, but that's not the issue.
The issue is that you have ubiquitous sector in American Healthcare who are adding no value.
As you say in the preamble, "Private insurers may be an unnecessary middleman."
That was the point. That was the sum total of the point I was making.
American private insurers are unnecessary middlemen that do not save money or improve patient outcomes.
So I ask you, Noah Smith, 2 questions:
1. If eliminating American private health insurance shaves only 500$ off of America's 7,500$ per capita bill, isn't that still worth doing?
2. If everyone hates insurers, doesn't that also make it a lower hanging fruit politically for tackling costs?
If health insurers are useless middle men and were replaced by government workers in a single payer system , would you expect the government to blindly accept all claims filed by all doctors for any amount? The reason for prior authorizations and denials are not for padding insurance companies profits, they are to prevent fraud and spending on unnecessary drugs and procedures, something a government would also need to do or incur huge costs, which is a problem unless you’re a believer in MMT and unicorns.
Single payer insurance, of course, doesn't accept all claims. There are prior authorizations and denials as well. It's just much cheaper overall than a private system.
Interesting. I guess Canadian health care costs are lower because it's a monopsony... the provincial health agency ruthlessly grinds costs down, and by "costs" I mean, among other things "salaries of health care providers". (of course there's a limit to how much Canada can do that, doctors and nurses always have the option of emigrating next door to the US, and sometimes they do).
Since the majority of American workers have insurance that is self-funded, which means the employer is in charge of the plan, I find it interesting that all the backlash is toward the insurance companies and not the employers who are in charge of denials in these plans. Do the self-funded plans deny at a lower rate?
Amen to this article. I have been pounding the table on this. Insurance companies are essentially price takers. Because they are who consumers touch and partially understand we hate them. Kill the messenger.
If we want to solve this problem then we need to throw open the doors and shine a light on the underlying costs. In Vermont our largest insurer, BCBS of VT, is under threat because of the underlying costs - we are a poor, old and expensive state. It risks becoming insolvent. This would be a disaster. Transparency is the first order of business, but a lot of powerful interests don't want this, possibly including Democrats who should be pounding the table on this. I am curious why they are not.
Progressives getting the bad guy wrong is a symptom of their larger pathology. MAGA too of course, but we already know that and unfortunately MAGA is winning and in control at the moment.
Question:
If 10% of dollars are being allocated to private insurer operating costs, do you suspect this is more or less than what we could expect from a government run program where private insurance doesn't exist? My guess is less because businesses actually have to be efficient and solvent and politicians have almost no accountability, but I don't really know. Someone has to administer and if a private company makes a little profit, but costs everyone less overall, then sign me up. Best to start with the costs and the root issue first and work up the stack to figure out admin.
"If 10% of dollars are being allocated to private insurer operating costs, do you suspect this is more or less than what we could expect from a government run program where private insurance doesn't exist? My guess is less because businesses actually have to be efficient and solvent and politicians have almost no accountability, but I don't really know."
We do know this, actually. Medicare has something like 2-3% operating costs.
Taiwan's NHI (a national single payer public insurer) is similar 99% of Taiwanese people covered. 2-3% of premiums on administration.
Most countries spend very little money when it comes to the administration of their insurance schemes.
Yeah, because it is covering the sickest and least healthy part of the population.
Basic medical risk pooling and actuarial math. You have a population of 100 people. They all pay into insurance. 10 of them get sick, those 10 get medical care paid out. The risk is pooled across 100 people.
In other systems, everyone pays some money to the health system in the form of MANDATORY private insurance or taxes or a single payer premium. When someone gets sick, the care is covered. They try to risk pool across the entire population.
So yeah, a 22 year old dutch person pays more in than they will probably get out, while 82 year old Dutch person is probably getting more out in care than they paid in premiums.
The risk of covering old, poor, or unhealthy people is balanced by the inclusion of young, healthy, and wealthy people.
In the US, we have two government insurers. Medicare, for old people, and Medicaid, for poor people. Government covers old (expensive) and poor (expensive) leaving the young, healthy, and wealthy to the private insurers.
Look how much rent seeking is built into protect providers with certificate of need. 35 states have them and big hospitals use them all the time to stop new clinics and small hospitals from upgrading their equipment.
"In June 2023, a Tennessee administrative law judge blocked the opening of a new hospital in Rutherford County by Vanderbilt University. The state had initially approved the hospital and granted it a certificate of need. But three existing providers intervened, claiming that there was not a need for another facility in the area.[13] The 42-bed hospital has been in the works since 2020, with a tentative opening in 2026, if not for the existing providers' objection to the new facility's construction."
https://en.wikipedia.org/wiki/Certificate_of_need
Actual individual consumption is so far ahead in the US that it likely actually does explain practically the whole difference. But beyond that a large issue is that hospital systems create local monopolies at the governments blessings. To establish a new clinic you have to prove that it is "necessary", and to prove this you have to go up against a board of people belonging to the hospital systems holding literal monopolies.
Americans consuming more healthcare does not explain the difference in healthcare spending between us and the rest of the world (see Anderson GF, Reinhardt UE, Hussey PS, Petrosyan V. It's the prices, stupid: why the United States is so different from other countries. Health Aff (Millwood). 2003 May-Jun;22(3):89-105. doi: 10.1377/hlthaff.22.3.89. PMID: 12757275). Americans simply pay more for health services than other countries. If you believe there is a serious quality difference that accounts for the value added, there’s certainly an argument to be had, but this “quality difference” doesn’t seem to be borne out in population health metrics.
There is a pricing power issue in health care markets. Provider concentration and insurer fragmentation lead to uncompetitive pricing. Healthcare is not a normal good. Many of the conclusions about a market behavior drawn from a competitive market model do not apply.
"but this “quality difference” doesn’t seem to be borne out in population health metrics."
Because population health metrics are much more about lifestyle than medical treatments, the US is top-rate when you look at what actually matters for healthcare outcomes.
Can you name the metrics you’re referring to?
For treatable mortality rates and preventable mortality rates the U.S. performs worse than OECD average. I understand that in the counterfactual we could be doing even worse, but when examining metrics that try to isolate healthcare effectiveness (like treatable mortality rates), it doesn’t seem like the U.S. is performing better.
"treatable mortality and preventable mortality" includes the lifestyle differences I talked about, like drug abuse, obesity and violence (traffic too). You'd have more success affecting this by changing consumer culture and urban design.
The metrics I'm talking about are:
Acute hospital treatment outcomes
Cancer screening and cancer survival rates
Care process metrics - "Care process looks at whether the care that is delivered includes features and attributes that most experts around the world consider to be essential to high-quality care. The elements of this domain are prevention, safety, coordination, patient engagement, and sensitivity to patient preferences."
You get access to new drugs much faster than the rest of the world
Contrary to online-ideas, americans are much more satisfied with the healthcare they get
+ Most medical innovation comes from US payers, something you export to the rest of the world.
Americans were never asked if they wanted to be spending 45 out of every 100 Global Medical dollars despite having only 4.3% of world population.
You didn't ask to be obscenely rich either, but here we are.
Do you know what treatable mortality means? “Treatable and preventable deaths are those that may be avoided by timely and effective care or interventions.” Treatable mortality is specifically not about lifestyle. On treatable mortality, we are below average in OECD.
You’re correct about frontier innovation. But healthcare reform doesn’t require dismantling innovation incentives entirely.
Your original point was that U.S. healthcare expenditures are due to measurable quality differences and also because we consume more(?) This doesn’t entirely explain higher prices Americans pay for similar or the same procedures, unless you think the innovation premium is passed onto every single cost in healthcare.
Changing consumer culture is not a policy. Consumer culture is not the reason Americans pay so much for healthcare. You are delusional.
You clearly have no idea what you are talking about.
"treatable mortality" is measured as deaths per 100 000 people, it does not look at any case fatality among people who actually have the disease. A country where the population is extremely obese will obviously have much higher incidences of diabetes, chronic kidney disease and heart disease. It's a measure that doesn't adjust for how SICK the population is to begin with.
The fact that the US performs at the absolute top for INDIVIDUAL CASES of acute fatality and cancer is what you EXPECT to see if the difference is in incidence instead of care quality.
You don't even understand that AIC means you consume more of everything. American healthcare professionals are paid american wages. You literally sent an article that goes into the fact that US spending is high because you're an extremely rich country. You aren't an outlier in prices, you're an outlier in wealth.
https://randomcriticalanalysis.com/2018/11/19/why-everything-you-know-about-healthcare-is-wrong-in-one-million-charts-a-response-to-noah-smith/#rcatoc-these-measures-enjoy-substantial-theoretical-support
“Actual individual consumption is so far ahead in the US that it likely actually does explain practically the whole difference.”
Which difference? The first chart Noah provided is about the share of the cost that is paid out of pocket vs by insurance, not the sum total. The second one is about the expenditure per person, but I think we’d need a more detailed analysis to distinguish the relative weights given to “Americans pay more per visit/per health issue” and “Americans just go to the doctor more often” as potential stories explaining the disparities. Is it really the case that Americans just go to the doctor twice as often as Europeans?
The Certificate of Need stuff you are talking about does seem like a huge issue. Niskanen has a great report about all the ways abundance in the healthcare industry is restricted by such giveaways to already-existing special interests.
I don't think the right question is whether Americans literally go to the doctor twice as often as Europeans. They don't. The point is that Americans consume far more overall, and health care is one of the clearest examples of a high-income, high-tech consumption good.
AIC matters here because it already includes the value of “free” and subsidized public services. It is probably the best single measure for comparing household material welfare across countries. And on that measure the United States is far ahead of Europe: roughly 50% above the EU, and still around 30–35% above the richest European countries depending on the comparison.
So if the United States is massively ahead in actual consumption, and health care is one of the most income-sensitive and technology-intensive sectors, then it is not very surprising that spending is much higher. The premium is not “Americans visit GPs twice as often.” It is that they consume a much more expensive health-care bundle: more specialists, more diagnostics, more drugs, more devices, more hospital-based care, more aggressive treatment, and more access to frontier medicine.
I also do not think “prices” and “high-tech” can be cleanly separated. A high-tech, specialist-heavy system will show up as higher spending and higher prices. There are also pure price and market-structure problems, especially hospital consolidation, opaque reimbursement, insurance distortions, and Certificate of Need laws restricting entry, but that is downstream of the broader point: America is much richer, consumes far more, and health care is exactly where you would expect that to show up. Higher standards of living create much higher demand for the premium experience.
Higher standards of living create much higher demand for the premium experience, and in health care that means specialists, diagnostics, drugs, devices, shorter waits, more aggressive treatment, and access to frontier medicine.
TLDR: Americans paying more per visit is largely a result of Americans being much richer and placing much higher demands on what health care should provide.
Was your comment written by AI?
Reading it instantly gave me the heebie-jibbies, especially the third-to-last paragraph with the “The premium is not “Americans visit GPs twice as often.” It is that they consume a much more expensive health-care bundle: more specialists, more diagnostics, more drugs, more devices, more hospital-based care, more aggressive treatment, and more access to frontier medicine” part.
So I ran it through Pangram (which boasts a remarkably low false positive rate), and it gave me “high confidence this is 100% AI-generated.”
Frankly, I’m not particularly interested in engaging with it if it is. I don’t believe all AI-written stuff is inherently slop, but how can one have a dialogue and conversation with an interlocutor who is just copying stuff from AI? It is so darn easy these days to get reasonable-sounding arguments for all sides just by typing in “write me a reasonable response arguing for my thesis, countering what this comment said: [COPY-PASTE MY COMMENT ABOVE].”
AI writing is not testimony, as Tsvi ably described a few months ago (you can look up the post, it’s great). And especially when it’s not labeled as such, using it strikes me as kind of a bad move in terms of conversational norms.
Oh boy, as if the grammar-police weren’t bad enough, now we have to deal with the AI police. You say you’re not interested in engaging with it, then you engage with it.
I imagine that comment sections everywhere will soon be flooded, (if they are not already) with industry lobbyist AI chatbots.
https://www.theatlantic.com/technology/2026/05/pangram-ai-detection-accuracy/687381/
You may just be slightly too stupid.
First of all, that’s paywalled. Secondly, it’s ironic you are once again offshoring your thinking and reasoning to someone else instead of at least summarizing the points you want to make.
And finally, are you actually denying your comment was AI-written? It has literally all the hallmarks of it, and I find myself extremely skeptical it was written my a human.
And jumping to name-calling immediately is not a good look for you.
It's easy to hate health insurance companies. For *decades* as a provider--much of it before electronic billing--I had to deal weekly with their bullshit: regularly denying claims for no reason at all, underpaying pretty much all the time, almost always paying >90 days out. And forcing me to waste hours weekly navigating the most maddening and byzantine of phone trees. All of which is why, if I could've afforded it, I would've entirely gone for a 100% cash practice.
Noah's calculations thus fail to take into account the incredible inefficiencies caused by every single hospital and doctor's office having to hire highly skilled staff/services to deal with the fucking insurance companies. Dunno how you'd quantify such waste; but getting rid of these fucking middlemen would be doing the universe a great service.
Yet Noah makes a pretty strong case that although they may be tapeworms deserving only the hottest fires of hell, Health Insurers are eating pretty low on the hog. And can't be blamed for most of why we pay double, but get only half, of the healthcare value enjoyed by citizens of pretty much every other industrial democracy.
But to blame hospitals as the truest villains also doesn't fully add up either. Especially when >300 of them will likely go bankrupt in the next few years due to GOP cuts in the 2025 BBB.
Which leaves the next largest stakeholders: providers, Big Pharma--and our obese, junkfood-swilling populace. Let's see how Noah sinks his teeth into them apples.
This whole post is "they may be a useless tapeworm, sure, but a small one"
My point, which he missed, was, "Why do we have this useless tapeworm at all? Relative size notwithstanding"
And my point was that he doesn't even attempt to quantify the enormous drag on the system in terms of staff and a shit-ton of man-hours providers are forced to spend dealing with them.
So much of the frustrations and paperwork you blame on insurance companies come from the business and practice models that providers insist upon. Prepaid group practices with doctors on salary like Kaiser Permanente don’t have those problems
Done a lot of insurance billing, have you? My frustrations date from c. 2000-2015. As time has progressed, the industry has gotten more efficient at processing claims, as has the quality of billing software for providers/billers. But it's still a system where Adjustors bonuses are contingent upon denying claims, and so they do. With the same byzantine phone trees and long wait times.
A large hospital that hires a top-notch billing company to bill claims, *can* get a lower percentage of denials and CPT low-balling. Economies of scale, and all.
The cost to providers to bill is currently 4-10% of your take, with specialty services on the high end. Which doesn't include the added costs associated with billing disputes, or up front costs to establish accounts.
Kaiser is unique, in that they're both insurer and provider. Exactly how they reconcile the two is unknown.
I don’t think it’s unknown; it’s just not adversarial. It’s easier to implement best practices when you take the sum out of zero sum. There’s no billing
Of course there's billing; just that no cash changes hands. They're an insurance company with a hospital. The insurance end needs data to construct rate plans and premium increases. The hospital end needs it to determine copay amounts, staffing hiring, etc.
This is a vertically integrated enterprise that works through budgets, not billing. Sometimes an internal charge system for tracking purposes but it doesn’t work the same way as insurer payments to providers: no cash changing hands makes for a big difference.There is some contracting but they avoid it whenever they can. In many places they have their own hospitals
I've been a Kaiser member for years, and really like them. In CA, and now in HI. Although their HI administration is incredibly dysfunctional compared to CA.
This is so true. I'm Board Chair of a small foundation that runs a health insurance plan that covers research fellows at a large Federal research institution. We work to break even every year and it is a real challenge to provide good benefits at a reasonable price point. The cost drivers are specialty pharmaceuticals and OB/Gyn costs. We do carry risk insurance that kicks in when a single cost event goes above $350K and that is expensive. The majority of our costs are driven by 15% of those insured. Our insured population is mainly between the ages of 24-35 years of age and generally healthy. However, we do have occasional claims that run close to $1M for a covered individual.
It's not the insurance providers who are the cause of the problem. Costs for routine care, hospitalization and pharmaceuticals are rising much faster than inflation.
I'll buy Noah's argument on cost, but I think he's seriously underweighting the frustration from operational inefficiency.
My wife recently fell and tore her MCL. Her doctor said she needed an MRI. It took 2.5 weeks just to get it approved, while she was in extreme pain, stuck in bed, and unsure what was wrong or whether the wrong movement could make it worse.
She eventually had to spend days personally chasing doctors, insurers, and the imaging company to make sure the right things were being faxed around. This was after 20 days of the system failing at a routine thing. It left us furious at everyone involved.
I mention this because it's recent, not because a knee injury is uniquely serious.
With single payer, I imagine the doctor would know immediately whether the MRI was covered, and she could book it right after the appointment. I also imagine everyone could be on the same platform instead of faxing documents back and forth and these frictions could be resolved much sooner.
With single payer, as it exists now, in Canada, the median wait for an MRI in 2025 was 18 weeks.
That's fair. The end result was not bad, it was just that the experience of getting the approval process itself was extremely frustrating. If we had been told "3 weeks" in the beginning it would've saved us a lot of that.
Looking online it seems that the US has an average wait of 2-3 weeks which is in the better end of things, and only the UK achieves similar results. Canada seems down to 10.6 weeks (according to the Frase Institute).
The fastest is Japan with a 1 week average. They have the highest density of MRI machines per capita (60 per million) vs 40 per million in US and 10 per million in Canada. In Japan many towns, even out in the countryside have at least one small clinic or hospital with an MRI unit, and big cities have very many.
They also have the best healthcare insurance system I know of which is run by the government, but paid through employers (or privately if self or in employed) with no claims - you just go to the doctor (many don’t take appointments, you just walk in) and pay the 30% copay (20% for children and 10% for low income seniors over 75). There is an out of pocket cap for monthly expenses based on your income. No prior authorization needed for MRIs or mostly anything except trying to use large hospitals instead of clinics (which as I said, sometimes have MRI machines.
Japan is odd. They technically have 5 different insurance schemes. There are private insurers individual to each big company. There is one big insurer that insures everyone who works for smaller companies. There is an insurer for self employed and unemployed. There is an elderly specific scheme. And finally there is a set of sector specific health insurances for categories that were set in the 1890's, like "fisherman."
Also, I lived in Taiwan for 5 years. I had 5 MRIs there, never had to wait more than 2 weeks for them.
You touched on something I was going to mention, what about the pain and suffering we as patients have to go through when trying to get bills paid? Not only is there anguish, is our time not worth something?
Whenever I hear discussion of health costs, I think of my wife's experience a couple years ago with a well-regarded university hospital. Her home nurse and her specialist agreed that she needed to be re-admitted to the hospital about a week after post-surgery release, in order to deal with a very narrow, defined problem.
But hospital policy requires re-admission go through the emergency room. And emergency room admission led to a totally new set of doctors who ordered up a whole new set of tests, some very expensive. They were polite but had no interest in either our defining what we were there for, nor for our referring to the specialist. As we were told in no uncertain terms, we were under their care, not the specialist's care.
I don't know that this was good medicine, but I can see that it was good business. First, no one could possibly claim in court that they did not do their due diligence, in case my wife took a turn for the worse in the days ahead. And maybe more to the point, some very expensive medical equipment got some billable hours. (I noticed that there was a long wait for a real hospital bed but not for these tests.)
Final score: They found nothing unexpected. They never treated the problem that she was readmitted for. My wife got Covid while under their care, which I then caught. A six week convalescence stretched out into a sixty week coalescence. And the insurance company -- which can be infuriating to communicate with over petty stuff -- paid every penny without comment.
An anecdote does not make a substitute for analysis of data, but it does make me think about what sorts of data I suspect would be enlightening.
I lived in Europe for 10 years, and have experienced both the US and European health care systems. What's clear to me is that a big driver of the excess provider costs is simply the salaries that doctors expect. If you go look at a random hospital parking lot, you can be sure that all the biggest and most expensive cars are driven by doctors. That simply isn't true in Europe. Doctors don't expect to be the richest family on the block, and their salaries are far less than in the US.
Noah, I generally like reading what you write. However, I feel that you need to stop writing about the health care system. You clearly do not understand why the American healthcare system is so expensive and ineffective. Health insurers are a LARGE part of the problem. They spend ridiculous sums of money on real estate, advertising, and executive compensation. Additionally, they alone get to pick winners and losers in the distribution of health care expenditures. As much as you demonize providers, the industry is already moving towards lower cost alternatives. In many cases, patients now see "cheaper" mid-level providers instead of "expensive" doctors for their care. Health care providers are experiencing remarkable levels of burnout, job dissatisfaction, and crushing educational debt. The solution to medical bankruptcies is not finding even lower cost providers (as you seem to suggest). The solution is removing or regulating the expensive middle men who skim too much money off the top of the collective health care premiums we Americans pay.
This doesn’t provide evidence for why they are a “large” part of the problem with healthcare costs in particular, which is what Noah’s article is about. The “ridiculous sums of money” are not so ridiculous when you look at profit margins, as Noah did. They are just big corporations, and big corporations have a lot of money in total.
What does it mean to say “they alone pick winners and losers” in the distribution of expenditures? If it were up to them, doctor salaries would be a hell of a lot lower, as would the prices for all medical procedures (because then the insurers would then pay much less for those procedures for insured consumers).
The whole point of looking at profit margins and price mark-ups is to quantify the extent to which market power exists. And to do so in a rigorous fashion that uses numbers and math instead of vibes and ideology.
All in all, there is a lot of rhetoric and little substance in your comment. The ultimate conclusion might well be correct (getting rid of insurance companies or at least limiting their impact on the system) could well be a great policy. But the epistemics here are poor.
Nowhere in this piece does Noah dig into the costs of pooling premiums and acting as a third party payer to hospitals. There are a ton of countries which accomplish the same task for far cheaper, (and not just GDP adjusted cheaper, I mean actually cheaper)
Even from Noah's chart from the KFF, it shows that administration is costing 900$ out of 7500$ per capita health spending.
Ok, so let's say that removing private insurers and switching to a public one, (Like is the case in many other countries) saves 500$.
That would be a 6.67% savings.
Is that not worth pursuing?
Imagine you had a friend who had a household budget where he set aside 500$ to literally light on fire every month.
Sure, that amount is a lot less than his rent or food or car payment, but that doesn't mean that he shouldn't stop burning the money.
Yeah, seems worth pursuing, conditional on those numbers being correct (with no other changes to the system that would counteract these positive changes). As I said, the underlying policy conclusion may well be correct.
But I am responding to a comment that said insurers are a “LARGE” (all-caps) part of the problem and made other suspicious claims about them. My points are about local validity of argument only.
They are a LARGE part of the problem. The multiplicity and individual negotiations necessitated by having a whole bunch insurance companies means that providers need to have massive billing departments to keep track of the paperwork and legal agreements. Private insurers impose costs on other parts of the system, not just themselves.
Again, this is an assertion of the conclusion without bringing in specific evidence for it.
How many bankruptcies where most of the debt is unpaid medical bills are a result of insured people not being able to pay for the out of pocket expenses vs people who are not insured? Expanding Medicaid further or allowing people to buy into Medicaid might be a more effective method if it's the latter.
Good re-post!
In my uneducated view:
1) hospitals
2) outdated Medicare reimbursements for specialities (eg over-rewarding orthopaedists vs, say neurologists or brain surgeons)that set the basis for the whole industry
If one looks at the negotiated reimbursement rates doctors are actually getting from insurers it is not excessive for GPs and most specialties
If one looks at pharma, it is only 15 pct of total expenses. Cut it in half and it basically saves just the next year or two of overall health price increases.
If one looks at US hospitals and their outpatient “facilities”, there is nowhere else on earth where hospital charges are as outrageous, and a (sadly successful) intent of Obamacare was to increase their monopoly power by restricting competition from doctor-owned facilities.
This dynamic is easily understood from a poltical perspective. Which party do hospital administrators, nurses unions and SEIU aides, custodians and techs support? Are hospitals key urban employers?
On the other hand, most doctor specialities and pharma companies and insurers tend to support Repubs.
No surprise that Bernie focused on pharma and insurers while ignoring those $100k hospital bills and outrageous “facility fees” for what used to be ordinary doctor’s office visits before Obamacare eliminated much of private practice.
Anyone who thinks Democrats universal care is going to do anything other than coddle hospitals and their bureaucrats and unions (see also NHS) at the expense of both taxpayers and care quality is fooling themselves.
The whole system needs to be blown up and made more competitive.
My gripe with insurers is the opaque bureaucracy of it all. It makes government, including the DC permitting monster, seem like the height of transparency and efficiency. For example, I have both health and dental insurance from Blue Cross. I have to first submit any dental claims to my health insurance Blue Cross as the primary insurer, obtain the inevitable denial, and then submit that to my dental insurance Blue Cross before I get reimbursed. If the government required citizens to first get a denial from one agency (with the understanding that it denies the request 100% of the time) prior to then submitting a request to another agency (which will generally approve the request), Congress would be up in arms.
Then Blue Cross also requires paper submissions only (even DC allows electronic permit requests). A good 25% of my claims appear to disappear into the mailroom, but there's no way to know until I call in months after submission and have to resubmit. Then even those claims that do make it through are at times rejected because of allegedly missing information. The information is in the supporting documents, but I guess I have to highlight the darn thing with a highlighter for the company's staff to see it. All this and sometimes I still get a rejected claim for vague and confusing reasons because the standardized language isn't always clear as to what is going on.
I'd be far less upset with the insurance industry if they didn't make claim processing such a hellish process (but I guess they're doing everything they can to reject claims hoping that I give up).
Noah, I think that you dismiss Bruenig's argument a bit too cavalierly given that each inefficiency is doubled.
For example, in high school I worked in a doctors office calling and waiting on hold hours to deal with all the auto-rejections that UHC would unilaterally file after 89 days.
But of course, I needed a human on the other end to talk to about all of this. So, 2x the costs just on the human side (not to mention the carrying costs of not getting paid for 120 days or so).
Any inefficiency implemented by the insurance companies generally then has to be matched by the providers.
This is one reason that the medical billing market is growing at a large rate; its an arms race between providers and insurers, and they're both competing their profits away in this billing arms race of inefficiency. But if they don't play the game, they go out of business.
I think margin is the wrong metric to look at for health insurance contribution to the extraordinary US healthcare costs. Margins are essentially capped by law, so how do insurance companies make more money? Insurance companies have an incentive to have higher health care costs in the long run precisely because they earn a percentage. Higher costs and a fixed percentage is higher income. Insurance companies are incentivized in exactly the opposite direction of the public good.
I appreciate you writing this.
I think you missed some of my point and are mischaracterizing the larger issue.
I never argued that private health insurance was the biggest source of US costs. I argue that it is an entirely wasteful and unnecessary part and it is worth getting rid of.
In a later comment on that same post, I wrote
"There are so many sources of bloat beyond just private insurance. Fixing the private insurance issue would help a lot, but not enough.... the AMA is a cartel which limits the supply of doctors in order to keep salaries high. That's just 1 of dozens of reasons our costs are so high."
Tackling drug prices would help costs, allowing more medical personnel to immigrate to the US would help, more transparency in pricing would help.
I was explicitly not arguing that they are the sole reason our costs are high.
I was arguing that they were useless middlemen. Now, you have reposted an old post about how they are relatively cheap (compared to providers) useless middlemen so stop being so mean.
Nowhere in this post have you argued against the useless middlemen part.
The only area you say is that insurers provide a useful service being the paid bad guy.
That is a useful service, people rail against the NHS all the time and I am sure some people in the UK government would love if they could have a private company that the British could yell at for all the health problems instead of NICE, but that's not the issue.
The issue is that you have ubiquitous sector in American Healthcare who are adding no value.
As you say in the preamble, "Private insurers may be an unnecessary middleman."
That was the point. That was the sum total of the point I was making.
American private insurers are unnecessary middlemen that do not save money or improve patient outcomes.
So I ask you, Noah Smith, 2 questions:
1. If eliminating American private health insurance shaves only 500$ off of America's 7,500$ per capita bill, isn't that still worth doing?
2. If everyone hates insurers, doesn't that also make it a lower hanging fruit politically for tackling costs?
If health insurers are useless middle men and were replaced by government workers in a single payer system , would you expect the government to blindly accept all claims filed by all doctors for any amount? The reason for prior authorizations and denials are not for padding insurance companies profits, they are to prevent fraud and spending on unnecessary drugs and procedures, something a government would also need to do or incur huge costs, which is a problem unless you’re a believer in MMT and unicorns.
Single payer insurance, of course, doesn't accept all claims. There are prior authorizations and denials as well. It's just much cheaper overall than a private system.
Interesting. I guess Canadian health care costs are lower because it's a monopsony... the provincial health agency ruthlessly grinds costs down, and by "costs" I mean, among other things "salaries of health care providers". (of course there's a limit to how much Canada can do that, doctors and nurses always have the option of emigrating next door to the US, and sometimes they do).
Since the majority of American workers have insurance that is self-funded, which means the employer is in charge of the plan, I find it interesting that all the backlash is toward the insurance companies and not the employers who are in charge of denials in these plans. Do the self-funded plans deny at a lower rate?
Amen to this article. I have been pounding the table on this. Insurance companies are essentially price takers. Because they are who consumers touch and partially understand we hate them. Kill the messenger.
If we want to solve this problem then we need to throw open the doors and shine a light on the underlying costs. In Vermont our largest insurer, BCBS of VT, is under threat because of the underlying costs - we are a poor, old and expensive state. It risks becoming insolvent. This would be a disaster. Transparency is the first order of business, but a lot of powerful interests don't want this, possibly including Democrats who should be pounding the table on this. I am curious why they are not.
Progressives getting the bad guy wrong is a symptom of their larger pathology. MAGA too of course, but we already know that and unfortunately MAGA is winning and in control at the moment.
Question:
If 10% of dollars are being allocated to private insurer operating costs, do you suspect this is more or less than what we could expect from a government run program where private insurance doesn't exist? My guess is less because businesses actually have to be efficient and solvent and politicians have almost no accountability, but I don't really know. Someone has to administer and if a private company makes a little profit, but costs everyone less overall, then sign me up. Best to start with the costs and the root issue first and work up the stack to figure out admin.
"If 10% of dollars are being allocated to private insurer operating costs, do you suspect this is more or less than what we could expect from a government run program where private insurance doesn't exist? My guess is less because businesses actually have to be efficient and solvent and politicians have almost no accountability, but I don't really know."
We do know this, actually. Medicare has something like 2-3% operating costs.
Taiwan's NHI (a national single payer public insurer) is similar 99% of Taiwanese people covered. 2-3% of premiums on administration.
Most countries spend very little money when it comes to the administration of their insurance schemes.
This is actually a solved problem worldwide.
And yet, US medicare runs a deficit of over $600 billion a year, while only covering seniors.
Yeah, because it is covering the sickest and least healthy part of the population.
Basic medical risk pooling and actuarial math. You have a population of 100 people. They all pay into insurance. 10 of them get sick, those 10 get medical care paid out. The risk is pooled across 100 people.
In other systems, everyone pays some money to the health system in the form of MANDATORY private insurance or taxes or a single payer premium. When someone gets sick, the care is covered. They try to risk pool across the entire population.
So yeah, a 22 year old dutch person pays more in than they will probably get out, while 82 year old Dutch person is probably getting more out in care than they paid in premiums.
The risk of covering old, poor, or unhealthy people is balanced by the inclusion of young, healthy, and wealthy people.
In the US, we have two government insurers. Medicare, for old people, and Medicaid, for poor people. Government covers old (expensive) and poor (expensive) leaving the young, healthy, and wealthy to the private insurers.