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.
“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.
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."
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 policies 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.
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).
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.
Canadian here. I wonder about that 54B in "operating costs". That partly goes for the roomful of lawyers looking for reasons to deny your claim. Of course, the way the system is set up, a private company needs such a room, but we don't have that here.
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?
Bit late to the party but last week you mentioned Spirit Airlines bankruptcy. Organized Money did a great in-depth podcast on what went wrong. The most interesting aspect was the merger or lack there of had very little impact on whether the company survived or not. From an antitrust point of view the big airlines were able bleed them dry on competitive routes. The y also discussed the need to regulate the industry, which in itself was quite interesting.
What would be interesting is comparing the market in the US to Europe where, despite the best efforts of the Green to kill it*, low cost airlines are thriving.
*Germany basically banned short haul flights within the country didn't help the trains and in smaller airports Lufthansa cut regional flights, much to the dismay of the business community, and instead focused on flights to tourist destinations within Europe, Spain Canary islands etc.
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.
“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.
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
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 policies 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"
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).
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.
Canadian here. I wonder about that 54B in "operating costs". That partly goes for the roomful of lawyers looking for reasons to deny your claim. Of course, the way the system is set up, a private company needs such a room, but we don't have that here.
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?
Bit late to the party but last week you mentioned Spirit Airlines bankruptcy. Organized Money did a great in-depth podcast on what went wrong. The most interesting aspect was the merger or lack there of had very little impact on whether the company survived or not. From an antitrust point of view the big airlines were able bleed them dry on competitive routes. The y also discussed the need to regulate the industry, which in itself was quite interesting.
What would be interesting is comparing the market in the US to Europe where, despite the best efforts of the Green to kill it*, low cost airlines are thriving.
I can show you how to test it quickly
Organized Money <https://youtu.be/xfcblxvb12g?si=YaaJ8PLVKoKkSbf->
*Germany basically banned short haul flights within the country didn't help the trains and in smaller airports Lufthansa cut regional flights, much to the dismay of the business community, and instead focused on flights to tourist destinations within Europe, Spain Canary islands etc.