They are not solely responsible, but of course they bear some responsibility. ACA has a Medical Loss Ratio that requires insurers to spend 80% or 85% of premium revenue on medical services "thereby limiting administrative costs and profits to the remaining 15-20 percent."[1] In other words the only way for them grow profits is to increase cost.
What you wrote seems fully consistent with the blogpost. Unless you are suggesting that health insurance companies collude with providers to raise the cost of medical service?
It doesn't require collusion, just misaligned incentives.
"Perversely, with the MLR requirement capping profit margins and administrative costs, insurers are discouraged from containing health plans’ premium increases. Economists have noted that the MLR requirement effectively turns health insurers into “cost-plus” businesses: If insurers’ predicted premiums are less than the actual medical care spending on claims, it can lead to higher MLRs and less profits, within MLR restrictions. Professor Scott Harrington warned early on that MLR requirements could reduce insurers’ motivation to control premium increases. Prior research has found that the MLR requirement is associated with stronger financial performance for insurers, since they can raise premiums to cover higher claims and still comply with the MLR threshold."
After the ACA passed it's really hard for insurers to differentiate on policies because so much is mandated. They're essentially all identical products that are going to have similar prices.
The insurance company that provides your ACA plans gets money from the government for doing so. How much money they get is tied to a few things (not an exhaustive list):
1. On average, how healthy is your group of ACA plan holders? If the group has a bunch of chronic conditions, they get more subsidy money to offset the increased care costs. Going to the PCP allows them to have official medical evidence of those conditions.
2. The government gives these plans quality ratings to help people compare them to each other. These ratings are partially based on how often patients get their annual screenings and patient satisfaction. A gift card for a PCP visit accomplishes both aims.
There are also more practical concerns. Preventative care is cheaper than an acute incident for the company. You'd rather catch an arrhythmia at a PCP appointment than pay for the cost of a heart attack.
I had an ACA "marketplace" plan back for my family back in 2017 when I was self-employed. My premiums were >$15K / year for a >$10K deductible and no tax credits (because of my income).
There are all sorts of perverse incentives in play. Many plans won't pay for weight loss drugs (obviously GLP-1s, but even beyond that) but will happily pay for gastric bypass, for one simple example.
> the only way for them grow profits is to increase cost.
And, of course, things like spurious denials drive up costs for them and for the providers. More direct costs, more costs at the provider they have to cover...
From the insurance company perspective, it's a win-win!
Anecdote is not the singular of data, but when my late wife was dying of cancer, the oncologist was attempting to follow standard care procedures. Preauthorizations were denied even after physician consultation with the insurance company.
My research showed me that the insurance companies contract with other companies (who they may or may not own) to handle the dirty work. It was only after learning the magic incantations to directly contact the "third-party" company that I was able to get traction.
"We do not believe this treatment is warranted."
"Well, her doctor believes it, so she's going to get the treatment. The only question is whether you pay now, or after I file a small claims case."
It was miraculously authorized at that point. It's the same fucking thing with car insurance. The poor people who can't fight really get screwed.
By failing to provide adequate treatment early in a disease course, further exacerbations and comorbidities can appear, and these can become their own chronic conditions requiring further ongoing treatment.
By adding tons of paperwork and time and effort. When a denial happens, often the doctor himself has to communicate with the insurance company via phone, instead of, you know, doctoring.
This often proceeds over multiple rounds. And then either the company eventually pays, or the consumer has to pay and try to get reimbursed later.
You asked this question 30 minutes after even a casual reading of my other comment, and a little thinking about it, would have fully answered it.
I would like to assume good faith, but your other comments indicate a high probability that you are an insurance company shill.
And in response to your other question about collusion, no there doesn't have to be collusion. Insurance companies putting onerous bogus requirements on providers will automatically drive up the costs.
I am deeply offended by your allegation. Not everyone who disagrees with you is a shill. I would not make the same accusations about you, nor would I act as if I can estimate the probability that you are. HN's commentary guidelines address this.
You can consider my mistake to be in conceptualizing the cost of "medical services" too narrowly, as just the medicine, and not the providers' surrounding administration. To that end I take your point. In theory, at least. Do you know how much this has? In particular, you refer to the back-and forth negotiation of claims--on what do you base this claim?
Be offended all you want. It's a free country, but, to be perfectly frank, you are still making it difficult to believe you are writing in good faith, as I will show.
> You can consider my mistake to be in conceptualizing the cost of "medical services" too narrowly, as just the medicine, and not the providers' surrounding administration.
Which is fine, except that my very first comment that you responded to explicitly explained "More direct costs, more costs at the provider they have to cover..."
So I already explained that which you said you missed, before your first comment questioning it.
> Do you know how much this has? In particular, you refer to the back-and forth negotiation of claims--on what do you base this claim?
When I wrote "You asked this question 30 minutes after even a casual reading of my other comment, and a little thinking about it, would have fully answered it." I was serious.
You still asking this question, instead of looking at that comment, indicates that at best you are completely unserious. For your edification, here is a link to that comment:
It’s not a matter of profit. It’s a matter of costs.
From the graphic the insurers take in $371.6b and pay out $241.9b in medical services costs.
That’s $130b on a pointless activity that uses up physical resources that would be better deployed elsewhere in the economy.
Healthcare needs to be provided as a matter of course, and “competition” won’t improve it or control it because there is always a supply side shortage of provision.
That’s a difficult problem to solve, but solving it by forcing a huge bill on expectant mothers and cancer victims, etc in a futile attempt to control demand is not the way.
Which is why the rest of the world charts a different path.
It’s neither a matter of profits nor costs. It’s a matter of incentives. The basic principle of capitalism can’t work if the buyer doesn’t have a choice, if the buyer is not the one who usually pays, and if the payer has a way of avoiding responsibility to pay. The privatized health insurance system is truly and completely fucked up.
By definition a free market in healthcare requires forcing some people to die from a treatable injury or condition to discover the optimal price. That's part of the definition.
Because the supply is constrained I feel like that's the case regardless of how the system is financed. (There are only so many providers, facilities, etc.)
It seems like the core problems with US "system" come from having a "shadow" socialized system (by way of EMTALA[0]) that offloads costs onto the "free market" (read: patients or insurers who can pay) and a shocking inability to have a mature public conversation about how care will be rationed. (That conversation still happens but it's between providers and insurers and not subject to public scrutiny.)
Free market usefully means both sides can choose to participate in transactions which means price is how they do that. It is a useful concept but it doesn't cover everything, like what you mentioned and things like if emergency patients are shopping around hospitals or if the average consumer is capable of being well informed in such a market.
The buyer and sellers are frequently wrong. The buyer isn’t the patient, it’s the employer. The insurer is either charging a premium for risk or servicing work for a self-pay employer.
The biggest buyer is the Federal government and by law they are required to get the best deal, the government also restricts the supply of providers. It’s not a capitalist system at all. It’s a weird hybrid command economy with a consolidating cartel of providers and administrators.
Because the American Medical Association artificially restricts residency spots in hospitals. There's really not much more to it. This explains the proliferation of NPs, PA-Cs, etc acting as GPs. In reality, we simply need more doctors, so we should uncap the # of spots.
This can't be stated enough. I should have my comment w/ citations on standby, but I don't.
The AMA was concerned in the 90s re: "oversupply" of doctors and the impact on doctor salaries, lobbied the Republicans (around the "Contract with America" timeframe) and got language limiting NIH-funded residency slots codified.
The AMA is backpedaling on that stance now but the damage is already done.
A reasonable compromise would be a scheduled increase in the number of slots until it is eventually uncapped. Yes, this will reduce doctors salaries in the long-term. You know what else reduces doctor salaries? Importing medical doctors from foreign countries with worse wages and working conditions, and then grinding these individuals to the ground under the threat of immigration. The market finds a way, whether the AMA wants it or not. As Americans get richer, many are even just going to foreign countries to get treatment. I know several 'third world' countries have fairly good medical care available for very cheap.
Doctors salaries should be reduced, as should nurses and dentists. We pay them nearly twice as much in the US as in countries with socialized medicine.
The rest of the world has private healthcare on top of the public ones because the public ones are often inadequate.
Just go look for the local debate in any country with government healthcare and look for the parties who are pushing for change and their complaints.
Then ask yourself if you really would want the current administration in charge of your healthcare... if you'd like every four years to be a coin toss for how your healthcare was going to be for the next four years.
People arguing for public health care, are you ready to say you want Donald Trump to be in charge of your health insurance instead of a private provider? (because we're not in a magical fairy land where government is efficient and agrees with everybody's priorities)
The fact that a single person is "in charge" of the government, with the other two branches largely deferring all power to that one person, is a recent aberration from the norm in the USA. I'm for a single-payer health system that is administered by a well-checked regulatory apparatus and institutions that are not subject to wild policy swings at the whim of a single king-like leader.
>I'm for a single-payer health system that is administered by a well-checked regulatory apparatus and institutions that are not subject to wild policy swings at the whim of a single king-like leader
And I want to win the lottery, marry a princess, and for my childhood dog to come back to life.
We all want things.
When we're advocating for government changes we need to be realistic and make good choices. Right now throwing an enormous amount of power at a dysfunctional government (public health care) is an insane bid completely disconnected from reality.
We need people to care about the basic functionality of government and for it's various pieces to do their duty. They aren't, so maybe let's shelve the idea of handing over control of our healthcare to them until they can deal with their cowardice in front of an aspirational king.
At least elected governments are in theory accountable to the public through voting. Insurance companies and healthcare providers are not in any way accountable to the public, and the public has zero power (outside of regulation) to affect their actions. Just because public [X] is currently a bad choice doesn't make private, corporate [X] always a better choice.
Who cares about theory when the reality is a corrupt insane government was elected. We're not dealing with theory. Healthcare is too important to propose major changes based on theory instead of reality.
You DO have healthcare choices now. Consider the healthcare option provided when accepting a job is on the table, provide feedback to your employer about their chosen provider (i.e. say NO to United Healthcare). Even though it involves big life choices with private healthcare there ARE options on the table instead of what the electorate chooses every 2/4/6 years.
And people are pretty misguided. The typical HN crowd person would STILL HAVE private health insurance on top of the public care in almost any country today that has the public option. The public option is bad, slow, and has a habit of denying care. You'd be rich, you'd still want better care than what was available.
Public healthcare in the US can work. Most seniors on traditional Medicare like it. Make that available to more people, and bob's your uncle.
I propose allowing buy into medicare at 5 years before regular eligibility. And a long phase in of lowering the eligibility age. Drop it by 6 months every year for 10 years, then 1 year every year for 10 years, then 2 years every year until everyone with work credits is eligible.
At the same time, start covering all kids up to some age with Medicaid (after all, kids tend to have no income, so if eligibility was based on their own income instead of household income, they'd qualify). First year, kids get covered until 6 months, next year until 1 year, etc.
When the Medicare and Medicaid ages meet, we have universal health care. It would take a long time to get there on my schedule, but it would be gradual, so everyone could adapt. And if future legislation could adjust the timeline as needed.
Also, clearly someone needs to add more residency slots.
Do you want Donald Trump to be in charge of public healthcare? Please stop suggesting we make all of those changes unless you're willing to say you want him to be in charge of it.
I'm also thinking longer term and am not so optimistic that he's just going to go away and the pattern he created won't be taken up by someone else (and the thing to be afraid of is someone else who isn't quite so stupid).
The dam may well be broken, Congress has proven to be full of cowards and the next aspirational autocrat might well win and do better.
There are so many more options than a 4 year administration being hostile to the people it's supposed to represent. Corruption will undermine any collective action amongst honest collaborators regardless of what color their party flag is.
Also, having a baseline of public care and then private as an option on top doesn't sound like the boogeyman this is pitching it as to me. That seems like a great way to reduce the scope of what the state needs to be in charge of.
If the take is that government cannot possibly work for the people no matter what then yeah, all policy is bad.
Before we go pushing money into private insurance, we need to define why. We need to understand why the public ones are inadequate and who/what drove those decisions.
A public health care system should be independent of politics. Unfortunately, as the latest administration has shown, even if you designed it to be independent, such as the CFPB, it doesn't matter with an autocrat in charge. On the other hand, private industry does not have all that good a reputation for not effing with your healthcare.
When arguing that health insurance isn't that inneficient he talks about "But when we look at United Health Group’s operating costs in the diagram above, they’re only 22.6% of the actual cost of medical care.". 22.6% for a middleman is not insignificant! Also providers have to spend a lot dealing with insurance so it's certainly an undercount of their total cost. This makes the burden of insurance seem like a huge % of the total medical costs in the US, which seems like the opposite of what he's trying to argue.
Overall, there are lots of nitpicks with this article but my personal takeaway is: if this is the best defense people can make for the US medical insurance system then that shows how bad it really is.
I don’t like the current system at all, but is insurance really just a middleman? Like part of their function is being a middleman, but they also apply some kind of cost smoothing that is outside what a pure middleman would do.
I don't think it's odd for a middleman to have some functions in a market (as long as they aren't actually producing anything) but also the definition of a middleman is unimportant to me. I am just highlighting how he glides over a lot in this article (some of which are actually common progressive critiques of the insurance system) and I don't come away from it sympathetic to medical insurance companies at all.
22% isn't bad to remove the need for me, personally, to negotiate prices for services. I wouldn't know where to begin on how to price a bone marrow transplant, but UNH does.
I've worked in the healthcare space for a decade and I have asked some tough questions of my leadership and I got a response I'll never forget: "Everyone in healthcare is a little bit evil"
That's a an honestly upsetting statement. My wife is a pediatric critical care physician and there is not an evil bone in her body. She works her tail off, is (in my opinion) underpaid (like most pediatricians), and her job takes huge emotional toll. The same is true for all of her partners. Maybe I'm reading this wrong and you mean administrative or insurance or something else. But at least in my orbit, that statement is not true.
> Yep, for-profit healthcare is a bad idea. It's the main reason our USA healthcare costs so much.
And yet it still exists in the rest of the world. But people tend to think of it only as for rich people as opposed to covering things the rest of the world ignore. I'm not saying the US is perfect, but having lived under both kinds of healthcare, cost and quality are two reasons I'm in the US.
Are you paying for the same thing? I can see a doctor or specialist usually within a week. Less if it's urgent. I think wait times in these countries are never mentioned. Paying for a service tomorrow vs paying for one a few months from now are entirely different classes of goods.
Depends on the urgency and the specialist, but generally yes, I can get an appointment in a week. Mental health is the only specialty where I’ve seen multiple months wait times. For a specialist you generally first go through a generalist who gives you a voucher for your insurance. But you can also go directly and pay yourself if you want to skip that step.
Even if you have slightly more wait time, the cost is still way lower. Unless you have a US employer that pays the whole insurance for you (I don’t know if that’s possible)
I'm not familiar with the german system... is it private or public insurance?
As for US employers paying for everything... yes it's common. It used to be that they'd just cover everything via a 'PPO' plan with minimal 'co-pays'. Usually you'd pay $5-15 for a GP, ~$50 for urgent care, and ~$100 for an ER visit.
These days, many have switched to a 'High Deductible' plan, where the insurance comes with a 'max out-of-pocket'. After you've paid that amount, then everything is fully covered, but nothing is covered until you hit the deductible.
My current company has this plan, but puts the entire 'max out of pocket' value in what's called an 'HSA' (healthcare savings account). This money grows tax free and will eventually turn into a retirement account. So, if you have no health issues, then this becomes a free income stream. If you do have health issues, then you just spend this money every year and then insurance takes over and pays for the rest. This is common in the tech world these days... not sure about other industries TBH.
Germany has mandatory health insurances, with both a private and public system. By default you’re in the public system and can opt into private insurances if you have a high income (the threshold increases every year, moving more people to the public system over time).
When you have to pay a co-pay it is 5€ per prescription. You don’t pay for generalists, and do not pay for specialists if you get a recommendation from a generalist first.
There is no deductible.
Not everything is covered though, dental care often has limited coverage (only for the most basic services), so you end up paying yourself.
I never heard of a healthcare saving account, that’s an interesting and strange concept
> I can see a doctor or specialist usually within a week
That might be true to your specific location and set up, but I have some experience and family in healthcare, both in the US and outside of it, and it is definitely not like that for much of the US.
I've lived for many years each in the UK, Australia and the US. I've worked as a healthcare provider for many years in the US.
I would dearly love to know what "costs" of healthcare you are looking at when you say the US is preferable enough to actually move to/be in/stay in the US.
Because when I can have higher end insurance from my employer, and still be out $9K for a kidney stone after insurance, I'm not seeing it. That is an outlier, for me, I'll acknowledge, but it's still nearly five digits that had to come out of my pocket after my employer paid thousands, I paid premiums, for insurance (that is insurance-in-name-only).
It has always been pretty clear to me.
Same medical equipment, infrastructure, education elsewhere in the world is often 30-50 times cheaper. The providers just charge as they want because people will pay their fortune to live, just like lawyers.
I am not sure providers are entirely blameless. My daughter had an annual checkup, when we were asked if there were other issues, we asked about a bug bite. They charged us for a second emergency visit, what the hell is the point of an annual visit if we can't ask about issues? Insurance company okayed it. So they are both at fault for this insanity.
The most efficient medical experiences I have had have both been ones where there were no insurance involved:
1. A USCIS surgeon, that was like 80 years old, running his own office, everything via check, on paper. Guy put more patients through per day then the big hospital systems special immigrant medical services did.
2. A specialized Eye Surgeon who did my wife's ICL eye surgery (which insurance wont cover). Ended up being the most efficient practice I've seen, every follow up and pre-surgery meeting was not separately billed. Just the surgery was. Eye Doctors / Surgeon spent a ton of time with you. And they had massive amounts of flexibility. But even the out of pocket surgery was probably less than an insurance covered surgery at a hospital.
> It’s not hard to understand why people hate health insurers. When you interact with the U.S. health care system, the providers — the hospital staff, the doctor, the nurses, the technicians — all just take care of you.
> Your interaction with the health insurer, on the other hand, feels like a struggle against an enemy who wants to destroy you.
Exactly, the big factor driving healthcare costs is that people like expensive providers. They like the fancy plan that covers their doctor, that doesn't limit them to a community hospital. Any choice that involves retaining even the slightest market leverage is a deal breaker for many people. I think all the clever stuff we do to optimize costs and increase transparency is worth doing and helpful, but like, it will still be expensive. We want that!
Meanwhile it is not really better to go to an expensive doctor, in terms of health outcomes. So the public health problem is to stop people (and employers) from voluntarily wasting their money on healthcare, so we can use it for better stuff.
The problem is that people knee-jerk blame the one who they are giving money to. People think the teams are "Me and doctor vs. greedy insurance" whereas the reality of the situation is much more "Me and insurance vs greedy doctor".
It is certainly true that providers charge more in the US. However, it's hard to disentangle this from the insurance issue because of the way that providers and insurers are intertwined in a gordian knot of insanity.
The article mentions one example of this, which is that part of "provider costs" is actually paying for the provider to wrangle with the insurer. But even apart from such direct costs, the care is distorted in various ways in order to comply with the insurer's whims. One you hear about a lot is doctors ordering tests that likely aren't really necessary, simply to avoid having the insurer deny something later because they didn't go through all the required motions.
Another reason that "profit margin" is grossly inadequate as a measure of cost or inefficiency is that it doesn't count the actual "work" done by the companies, even though a lot of it simply doesn't need to be done. There are thousands of people with jobs in insurance companies that simply do not need to exist because most of what the industry does simply doesn't need to be done. The leeching is not just a matter of shareholder returns or executive salaries. All the salaries of everyone working for insurance companies are a form of waste. (Okay, probably not all, since even with a saner system some bookkeeping would need to be done, so if you look at the net difference it's not a total waste. But it's more than just shareholders and executives.)
"But when we look at United Health Group’s operating costs in the diagram above, they’re only 22.6% of the actual cost of medical care."
A 22% decrease and a return to providers having to consider the cost implications to their patients would be a good thing.
("Return" I know a 95 year old doctor who said he still carries some guilt from keeping a poor guy in the hospital an extra night back in 1955 days because he couldn't get some blood tests done quickly enough. $5. "We only need medical insurance because we have medical insurance" ain't too far wrong)
Of course, it wouldn't be a 22% decrease, it might be an 11% decrease if we assume optimistically that operating costs are cut in half. I don't know if administrative efficiency is exactly a strength of the government, either.
Many problems with this article, but no time to pick them apart; needless to say, Noah's argument is thin.
I will say this: profit margin % is not the yardstick by which we should measure whether insurance companies are responsible for high health care costs in the US.
Seems like a pretty good yardstick to me. Ultimately, it shows (partially) how much money is going through an insurer vs to an insurer. The revenue flow graph is included for UnitedHealth Group, for example, and about 2/3 is going through the company to medical providers.
Any good hacker is familiar with Amdahl's Law, and the same principle applies here. You can optimize the insurance providers all you want and maybe recover about 1/6 the total cost of care. At the very least, the first place we should be looking is the biggest expense, which is also clearly not the insurance.
OTOH, this is a world where many people get yelling-and-cursing angry with a bottom-tier Post Office clerk in (say) Podunk, Montana over the latest increase in the price of 1st Class postage stamps. When that decision was made by a bunch of executives in Washington DC. Whose names the clerk doesn't even know.
They are not solely responsible, but of course they bear some responsibility. ACA has a Medical Loss Ratio that requires insurers to spend 80% or 85% of premium revenue on medical services "thereby limiting administrative costs and profits to the remaining 15-20 percent."[1] In other words the only way for them grow profits is to increase cost.
This guy is way out of his depth.
[1] https://www.rand.org/pubs/external_publications/EP71133.html
> This guy is way out of his depth.
It's literally Noah Smith, what did you expect?
What you wrote seems fully consistent with the blogpost. Unless you are suggesting that health insurance companies collude with providers to raise the cost of medical service?
It doesn't require collusion, just misaligned incentives.
"Perversely, with the MLR requirement capping profit margins and administrative costs, insurers are discouraged from containing health plans’ premium increases. Economists have noted that the MLR requirement effectively turns health insurers into “cost-plus” businesses: If insurers’ predicted premiums are less than the actual medical care spending on claims, it can lead to higher MLRs and less profits, within MLR restrictions. Professor Scott Harrington warned early on that MLR requirements could reduce insurers’ motivation to control premium increases. Prior research has found that the MLR requirement is associated with stronger financial performance for insurers, since they can raise premiums to cover higher claims and still comply with the MLR threshold."
They can grow profits by capturing a larger share of the market.
After the ACA passed it's really hard for insurers to differentiate on policies because so much is mandated. They're essentially all identical products that are going to have similar prices.
> This guy is way out of his depth.
He does that a lot, tbf
I'm on ACA. I get between $100 and $150 on a gift card to do my annual PCP visit even though my premium is $0/month.
Why? Obvious if you know about the perverse incentive tqi mentions
The insurance company that provides your ACA plans gets money from the government for doing so. How much money they get is tied to a few things (not an exhaustive list):
1. On average, how healthy is your group of ACA plan holders? If the group has a bunch of chronic conditions, they get more subsidy money to offset the increased care costs. Going to the PCP allows them to have official medical evidence of those conditions.
2. The government gives these plans quality ratings to help people compare them to each other. These ratings are partially based on how often patients get their annual screenings and patient satisfaction. A gift card for a PCP visit accomplishes both aims.
There are also more practical concerns. Preventative care is cheaper than an acute incident for the company. You'd rather catch an arrhythmia at a PCP appointment than pay for the cost of a heart attack.
You must have very little income.
I had an ACA "marketplace" plan back for my family back in 2017 when I was self-employed. My premiums were >$15K / year for a >$10K deductible and no tax credits (because of my income).
Could you elaborate?
There are all sorts of perverse incentives in play. Many plans won't pay for weight loss drugs (obviously GLP-1s, but even beyond that) but will happily pay for gastric bypass, for one simple example.
> the only way for them grow profits is to increase cost.
And, of course, things like spurious denials drive up costs for them and for the providers. More direct costs, more costs at the provider they have to cover...
From the insurance company perspective, it's a win-win!
> things like spurious denials drive up costs for them and for the providers
Spurious denials? Or improperly filed claims?
Spurious denials.
It's easy to find documentation of this. For example:
https://pmc.ncbi.nlm.nih.gov/articles/PMC10391242/
https://phrma.org/blog/70-denied-how-insurance-denials-are-d...
https://www.forbes.com/sites/joshuacohen/2026/05/04/independ...
Anecdote is not the singular of data, but when my late wife was dying of cancer, the oncologist was attempting to follow standard care procedures. Preauthorizations were denied even after physician consultation with the insurance company.
My research showed me that the insurance companies contract with other companies (who they may or may not own) to handle the dirty work. It was only after learning the magic incantations to directly contact the "third-party" company that I was able to get traction.
"We do not believe this treatment is warranted."
"Well, her doctor believes it, so she's going to get the treatment. The only question is whether you pay now, or after I file a small claims case."
It was miraculously authorized at that point. It's the same fucking thing with car insurance. The poor people who can't fight really get screwed.
How would spurious denials drive up the cost of medical service?
By failing to provide adequate treatment early in a disease course, further exacerbations and comorbidities can appear, and these can become their own chronic conditions requiring further ongoing treatment.
This is a great answer.
By adding tons of paperwork and time and effort. When a denial happens, often the doctor himself has to communicate with the insurance company via phone, instead of, you know, doctoring.
This often proceeds over multiple rounds. And then either the company eventually pays, or the consumer has to pay and try to get reimbursed later.
You asked this question 30 minutes after even a casual reading of my other comment, and a little thinking about it, would have fully answered it.
I would like to assume good faith, but your other comments indicate a high probability that you are an insurance company shill.
And in response to your other question about collusion, no there doesn't have to be collusion. Insurance companies putting onerous bogus requirements on providers will automatically drive up the costs.
I am deeply offended by your allegation. Not everyone who disagrees with you is a shill. I would not make the same accusations about you, nor would I act as if I can estimate the probability that you are. HN's commentary guidelines address this.
You can consider my mistake to be in conceptualizing the cost of "medical services" too narrowly, as just the medicine, and not the providers' surrounding administration. To that end I take your point. In theory, at least. Do you know how much this has? In particular, you refer to the back-and forth negotiation of claims--on what do you base this claim?
> I am deeply offended by your allegation.
Be offended all you want. It's a free country, but, to be perfectly frank, you are still making it difficult to believe you are writing in good faith, as I will show.
> You can consider my mistake to be in conceptualizing the cost of "medical services" too narrowly, as just the medicine, and not the providers' surrounding administration.
Which is fine, except that my very first comment that you responded to explicitly explained "More direct costs, more costs at the provider they have to cover..."
So I already explained that which you said you missed, before your first comment questioning it.
> Do you know how much this has? In particular, you refer to the back-and forth negotiation of claims--on what do you base this claim?
When I wrote "You asked this question 30 minutes after even a casual reading of my other comment, and a little thinking about it, would have fully answered it." I was serious.
You still asking this question, instead of looking at that comment, indicates that at best you are completely unserious. For your edification, here is a link to that comment:
https://news.ycombinator.com/item?id=48480873
When you wrote your first comment in reply to mine, there were already two comments there -- that one and its very short parent.
It’s not a matter of profit. It’s a matter of costs.
From the graphic the insurers take in $371.6b and pay out $241.9b in medical services costs.
That’s $130b on a pointless activity that uses up physical resources that would be better deployed elsewhere in the economy.
Healthcare needs to be provided as a matter of course, and “competition” won’t improve it or control it because there is always a supply side shortage of provision.
That’s a difficult problem to solve, but solving it by forcing a huge bill on expectant mothers and cancer victims, etc in a futile attempt to control demand is not the way.
Which is why the rest of the world charts a different path.
It’s neither a matter of profits nor costs. It’s a matter of incentives. The basic principle of capitalism can’t work if the buyer doesn’t have a choice, if the buyer is not the one who usually pays, and if the payer has a way of avoiding responsibility to pay. The privatized health insurance system is truly and completely fucked up.
By definition a free market in healthcare requires forcing some people to die from a treatable injury or condition to discover the optimal price. That's part of the definition.
Because the supply is constrained I feel like that's the case regardless of how the system is financed. (There are only so many providers, facilities, etc.)
It seems like the core problems with US "system" come from having a "shadow" socialized system (by way of EMTALA[0]) that offloads costs onto the "free market" (read: patients or insurers who can pay) and a shocking inability to have a mature public conversation about how care will be rationed. (That conversation still happens but it's between providers and insurers and not subject to public scrutiny.)
[0] https://en.wikipedia.org/wiki/Emergency_Medical_Treatment_an...
Only if free means pure or academic here.
Free market usefully means both sides can choose to participate in transactions which means price is how they do that. It is a useful concept but it doesn't cover everything, like what you mentioned and things like if emergency patients are shopping around hospitals or if the average consumer is capable of being well informed in such a market.
The buyer and sellers are frequently wrong. The buyer isn’t the patient, it’s the employer. The insurer is either charging a premium for risk or servicing work for a self-pay employer.
The biggest buyer is the Federal government and by law they are required to get the best deal, the government also restricts the supply of providers. It’s not a capitalist system at all. It’s a weird hybrid command economy with a consolidating cartel of providers and administrators.
> “competition” won’t improve it or control it because there is always a supply side shortage of provision.
Why is there always a supply-side shortage?
Because the American Medical Association artificially restricts residency spots in hospitals. There's really not much more to it. This explains the proliferation of NPs, PA-Cs, etc acting as GPs. In reality, we simply need more doctors, so we should uncap the # of spots.
This can't be stated enough. I should have my comment w/ citations on standby, but I don't.
The AMA was concerned in the 90s re: "oversupply" of doctors and the impact on doctor salaries, lobbied the Republicans (around the "Contract with America" timeframe) and got language limiting NIH-funded residency slots codified.
The AMA is backpedaling on that stance now but the damage is already done.
A reasonable compromise would be a scheduled increase in the number of slots until it is eventually uncapped. Yes, this will reduce doctors salaries in the long-term. You know what else reduces doctor salaries? Importing medical doctors from foreign countries with worse wages and working conditions, and then grinding these individuals to the ground under the threat of immigration. The market finds a way, whether the AMA wants it or not. As Americans get richer, many are even just going to foreign countries to get treatment. I know several 'third world' countries have fairly good medical care available for very cheap.
Doctors salaries should be reduced, as should nurses and dentists. We pay them nearly twice as much in the US as in countries with socialized medicine.
Because human labor is supply side constrained.
There's only so many doctors, only so many MRI machines, so many valve stents, so many syringes.
Everything on earth is supply constrained.
> That’s $130b on a pointless activity that uses up physical resources that would be better deployed elsewhere in the economy.
No, it's much worse than that. How much time and money is spent by medical providers dealing with the billing?
Arguably at least twice as much -- the insurers have economy of scale that providers can't match.
And that's before you even get to the direct time and stress impacts on the consumer from bullshit denials.
The rest of the world has private healthcare on top of the public ones because the public ones are often inadequate.
Just go look for the local debate in any country with government healthcare and look for the parties who are pushing for change and their complaints.
Then ask yourself if you really would want the current administration in charge of your healthcare... if you'd like every four years to be a coin toss for how your healthcare was going to be for the next four years.
People arguing for public health care, are you ready to say you want Donald Trump to be in charge of your health insurance instead of a private provider? (because we're not in a magical fairy land where government is efficient and agrees with everybody's priorities)
The fact that a single person is "in charge" of the government, with the other two branches largely deferring all power to that one person, is a recent aberration from the norm in the USA. I'm for a single-payer health system that is administered by a well-checked regulatory apparatus and institutions that are not subject to wild policy swings at the whim of a single king-like leader.
>I'm for a single-payer health system that is administered by a well-checked regulatory apparatus and institutions that are not subject to wild policy swings at the whim of a single king-like leader
And I want to win the lottery, marry a princess, and for my childhood dog to come back to life.
We all want things.
When we're advocating for government changes we need to be realistic and make good choices. Right now throwing an enormous amount of power at a dysfunctional government (public health care) is an insane bid completely disconnected from reality.
We need people to care about the basic functionality of government and for it's various pieces to do their duty. They aren't, so maybe let's shelve the idea of handing over control of our healthcare to them until they can deal with their cowardice in front of an aspirational king.
At least elected governments are in theory accountable to the public through voting. Insurance companies and healthcare providers are not in any way accountable to the public, and the public has zero power (outside of regulation) to affect their actions. Just because public [X] is currently a bad choice doesn't make private, corporate [X] always a better choice.
Who cares about theory when the reality is a corrupt insane government was elected. We're not dealing with theory. Healthcare is too important to propose major changes based on theory instead of reality.
You DO have healthcare choices now. Consider the healthcare option provided when accepting a job is on the table, provide feedback to your employer about their chosen provider (i.e. say NO to United Healthcare). Even though it involves big life choices with private healthcare there ARE options on the table instead of what the electorate chooses every 2/4/6 years.
And people are pretty misguided. The typical HN crowd person would STILL HAVE private health insurance on top of the public care in almost any country today that has the public option. The public option is bad, slow, and has a habit of denying care. You'd be rich, you'd still want better care than what was available.
Public healthcare in the US can work. Most seniors on traditional Medicare like it. Make that available to more people, and bob's your uncle.
I propose allowing buy into medicare at 5 years before regular eligibility. And a long phase in of lowering the eligibility age. Drop it by 6 months every year for 10 years, then 1 year every year for 10 years, then 2 years every year until everyone with work credits is eligible.
At the same time, start covering all kids up to some age with Medicaid (after all, kids tend to have no income, so if eligibility was based on their own income instead of household income, they'd qualify). First year, kids get covered until 6 months, next year until 1 year, etc.
When the Medicare and Medicaid ages meet, we have universal health care. It would take a long time to get there on my schedule, but it would be gradual, so everyone could adapt. And if future legislation could adjust the timeline as needed.
Also, clearly someone needs to add more residency slots.
Again, you're disconnected from reality.
Do you want Donald Trump to be in charge of public healthcare? Please stop suggesting we make all of those changes unless you're willing to say you want him to be in charge of it.
I'm thinking much longer-term than Donald Trump. I intend to outlive that orange cretin by a good number of years.
(You are, of course, free to be as myopic as you wish -- just as everyone else is.)
I'm also thinking longer term and am not so optimistic that he's just going to go away and the pattern he created won't be taken up by someone else (and the thing to be afraid of is someone else who isn't quite so stupid).
The dam may well be broken, Congress has proven to be full of cowards and the next aspirational autocrat might well win and do better.
I intend to live long than that potential outcome, too.
There are so many more options than a 4 year administration being hostile to the people it's supposed to represent. Corruption will undermine any collective action amongst honest collaborators regardless of what color their party flag is.
Also, having a baseline of public care and then private as an option on top doesn't sound like the boogeyman this is pitching it as to me. That seems like a great way to reduce the scope of what the state needs to be in charge of.
If the take is that government cannot possibly work for the people no matter what then yeah, all policy is bad.
Before we go pushing money into private insurance, we need to define why. We need to understand why the public ones are inadequate and who/what drove those decisions.
A public health care system should be independent of politics. Unfortunately, as the latest administration has shown, even if you designed it to be independent, such as the CFPB, it doesn't matter with an autocrat in charge. On the other hand, private industry does not have all that good a reputation for not effing with your healthcare.
hard to take you seriously when you think we have an autocratic system.
When arguing that health insurance isn't that inneficient he talks about "But when we look at United Health Group’s operating costs in the diagram above, they’re only 22.6% of the actual cost of medical care.". 22.6% for a middleman is not insignificant! Also providers have to spend a lot dealing with insurance so it's certainly an undercount of their total cost. This makes the burden of insurance seem like a huge % of the total medical costs in the US, which seems like the opposite of what he's trying to argue.
Overall, there are lots of nitpicks with this article but my personal takeaway is: if this is the best defense people can make for the US medical insurance system then that shows how bad it really is.
I don’t like the current system at all, but is insurance really just a middleman? Like part of their function is being a middleman, but they also apply some kind of cost smoothing that is outside what a pure middleman would do.
I don't think it's odd for a middleman to have some functions in a market (as long as they aren't actually producing anything) but also the definition of a middleman is unimportant to me. I am just highlighting how he glides over a lot in this article (some of which are actually common progressive critiques of the insurance system) and I don't come away from it sympathetic to medical insurance companies at all.
Well said. If this is the steel man then it's worse than I thought.
22% isn't bad to remove the need for me, personally, to negotiate prices for services. I wouldn't know where to begin on how to price a bone marrow transplant, but UNH does.
I've worked in the healthcare space for a decade and I have asked some tough questions of my leadership and I got a response I'll never forget: "Everyone in healthcare is a little bit evil"
That's a an honestly upsetting statement. My wife is a pediatric critical care physician and there is not an evil bone in her body. She works her tail off, is (in my opinion) underpaid (like most pediatricians), and her job takes huge emotional toll. The same is true for all of her partners. Maybe I'm reading this wrong and you mean administrative or insurance or something else. But at least in my orbit, that statement is not true.
Is she really underpaid? The average pediatric critical care physician in the US makes $262K-$440K a year according to Glassdoor.
This is twice what the same role pays in most European countries. Unless she is well below that range for some reason, she is likely overpaid.
Everybody in healthcare, from the nurses to the hospital CEOs, makes far far more in the US than they would in a country with socialized medicine.
Yep, for-profit healthcare is a bad idea. It's the main reason our USA healthcare costs so much.
"Stay 'til 2300 codepounding or watch your child die of a medieval disease" seems to work really well for productivity, though.
Oh, no, people stopped having children. Whatever could be the reason.
> Yep, for-profit healthcare is a bad idea. It's the main reason our USA healthcare costs so much.
And yet it still exists in the rest of the world. But people tend to think of it only as for rich people as opposed to covering things the rest of the world ignore. I'm not saying the US is perfect, but having lived under both kinds of healthcare, cost and quality are two reasons I'm in the US.
Because you wanted to pay more? Or are you saying it is cheaper in the US? If the latter, could you be more specific?
I pay the maximum possible in Germany for my health insurance and from what I understand I still pay less for healthcare than I would in the US.
Are you paying for the same thing? I can see a doctor or specialist usually within a week. Less if it's urgent. I think wait times in these countries are never mentioned. Paying for a service tomorrow vs paying for one a few months from now are entirely different classes of goods.
Depends on the urgency and the specialist, but generally yes, I can get an appointment in a week. Mental health is the only specialty where I’ve seen multiple months wait times. For a specialist you generally first go through a generalist who gives you a voucher for your insurance. But you can also go directly and pay yourself if you want to skip that step.
Even if you have slightly more wait time, the cost is still way lower. Unless you have a US employer that pays the whole insurance for you (I don’t know if that’s possible)
I'm not familiar with the german system... is it private or public insurance?
As for US employers paying for everything... yes it's common. It used to be that they'd just cover everything via a 'PPO' plan with minimal 'co-pays'. Usually you'd pay $5-15 for a GP, ~$50 for urgent care, and ~$100 for an ER visit.
These days, many have switched to a 'High Deductible' plan, where the insurance comes with a 'max out-of-pocket'. After you've paid that amount, then everything is fully covered, but nothing is covered until you hit the deductible.
My current company has this plan, but puts the entire 'max out of pocket' value in what's called an 'HSA' (healthcare savings account). This money grows tax free and will eventually turn into a retirement account. So, if you have no health issues, then this becomes a free income stream. If you do have health issues, then you just spend this money every year and then insurance takes over and pays for the rest. This is common in the tech world these days... not sure about other industries TBH.
Germany has mandatory health insurances, with both a private and public system. By default you’re in the public system and can opt into private insurances if you have a high income (the threshold increases every year, moving more people to the public system over time).
When you have to pay a co-pay it is 5€ per prescription. You don’t pay for generalists, and do not pay for specialists if you get a recommendation from a generalist first.
There is no deductible.
Not everything is covered though, dental care often has limited coverage (only for the most basic services), so you end up paying yourself.
I never heard of a healthcare saving account, that’s an interesting and strange concept
> As for US employers paying for everything... yes it's common.
Hmm, I think it's better to use a percentage than a fuzzy word like "common":
https://www.kff.org/health-costs/health-policy-101-employer-...
Figure 8
12% of covered single workers and 3% for families have the employer cover their premiums in full
> I can see a doctor or specialist usually within a week.
What kind of Northern Exposure bullshit is this?
> I can see a doctor or specialist usually within a week
That might be true to your specific location and set up, but I have some experience and family in healthcare, both in the US and outside of it, and it is definitely not like that for much of the US.
That's true of any medical system? Still we can look at the data on Canadian v American health care wait times and the data tell the story.
I've lived for many years each in the UK, Australia and the US. I've worked as a healthcare provider for many years in the US.
I would dearly love to know what "costs" of healthcare you are looking at when you say the US is preferable enough to actually move to/be in/stay in the US.
Because when I can have higher end insurance from my employer, and still be out $9K for a kidney stone after insurance, I'm not seeing it. That is an outlier, for me, I'll acknowledge, but it's still nearly five digits that had to come out of my pocket after my employer paid thousands, I paid premiums, for insurance (that is insurance-in-name-only).
It has always been pretty clear to me. Same medical equipment, infrastructure, education elsewhere in the world is often 30-50 times cheaper. The providers just charge as they want because people will pay their fortune to live, just like lawyers.
I am not sure providers are entirely blameless. My daughter had an annual checkup, when we were asked if there were other issues, we asked about a bug bite. They charged us for a second emergency visit, what the hell is the point of an annual visit if we can't ask about issues? Insurance company okayed it. So they are both at fault for this insanity.
The most efficient medical experiences I have had have both been ones where there were no insurance involved:
1. A USCIS surgeon, that was like 80 years old, running his own office, everything via check, on paper. Guy put more patients through per day then the big hospital systems special immigrant medical services did.
2. A specialized Eye Surgeon who did my wife's ICL eye surgery (which insurance wont cover). Ended up being the most efficient practice I've seen, every follow up and pre-surgery meeting was not separately billed. Just the surgery was. Eye Doctors / Surgeon spent a ton of time with you. And they had massive amounts of flexibility. But even the out of pocket surgery was probably less than an insurance covered surgery at a hospital.
> It’s not hard to understand why people hate health insurers. When you interact with the U.S. health care system, the providers — the hospital staff, the doctor, the nurses, the technicians — all just take care of you.
> Your interaction with the health insurer, on the other hand, feels like a struggle against an enemy who wants to destroy you.
Exactly, the big factor driving healthcare costs is that people like expensive providers. They like the fancy plan that covers their doctor, that doesn't limit them to a community hospital. Any choice that involves retaining even the slightest market leverage is a deal breaker for many people. I think all the clever stuff we do to optimize costs and increase transparency is worth doing and helpful, but like, it will still be expensive. We want that!
Meanwhile it is not really better to go to an expensive doctor, in terms of health outcomes. So the public health problem is to stop people (and employers) from voluntarily wasting their money on healthcare, so we can use it for better stuff.
> They like the fancy plan that covers their doctor
The fancy plan.
Yeah, because it covers all the doctors. It is literally the same as saying you will pay any price. It is a luxury good.
This has been an open secret for 15+ years now.
The problem is that people knee-jerk blame the one who they are giving money to. People think the teams are "Me and doctor vs. greedy insurance" whereas the reality of the situation is much more "Me and insurance vs greedy doctor".
It is certainly true that providers charge more in the US. However, it's hard to disentangle this from the insurance issue because of the way that providers and insurers are intertwined in a gordian knot of insanity.
The article mentions one example of this, which is that part of "provider costs" is actually paying for the provider to wrangle with the insurer. But even apart from such direct costs, the care is distorted in various ways in order to comply with the insurer's whims. One you hear about a lot is doctors ordering tests that likely aren't really necessary, simply to avoid having the insurer deny something later because they didn't go through all the required motions.
Another reason that "profit margin" is grossly inadequate as a measure of cost or inefficiency is that it doesn't count the actual "work" done by the companies, even though a lot of it simply doesn't need to be done. There are thousands of people with jobs in insurance companies that simply do not need to exist because most of what the industry does simply doesn't need to be done. The leeching is not just a matter of shareholder returns or executive salaries. All the salaries of everyone working for insurance companies are a form of waste. (Okay, probably not all, since even with a saner system some bookkeeping would need to be done, so if you look at the net difference it's not a total waste. But it's more than just shareholders and executives.)
"But when we look at United Health Group’s operating costs in the diagram above, they’re only 22.6% of the actual cost of medical care."
A 22% decrease and a return to providers having to consider the cost implications to their patients would be a good thing.
("Return" I know a 95 year old doctor who said he still carries some guilt from keeping a poor guy in the hospital an extra night back in 1955 days because he couldn't get some blood tests done quickly enough. $5. "We only need medical insurance because we have medical insurance" ain't too far wrong)
Of course, it wouldn't be a 22% decrease, it might be an 11% decrease if we assume optimistically that operating costs are cut in half. I don't know if administrative efficiency is exactly a strength of the government, either.
Many problems with this article, but no time to pick them apart; needless to say, Noah's argument is thin.
I will say this: profit margin % is not the yardstick by which we should measure whether insurance companies are responsible for high health care costs in the US.
Seems like a pretty good yardstick to me. Ultimately, it shows (partially) how much money is going through an insurer vs to an insurer. The revenue flow graph is included for UnitedHealth Group, for example, and about 2/3 is going through the company to medical providers.
Any good hacker is familiar with Amdahl's Law, and the same principle applies here. You can optimize the insurance providers all you want and maybe recover about 1/6 the total cost of care. At the very least, the first place we should be looking is the biggest expense, which is also clearly not the insurance.
The incentives are all fucked up all the way down
Bullshit
True.
OTOH, this is a world where many people get yelling-and-cursing angry with a bottom-tier Post Office clerk in (say) Podunk, Montana over the latest increase in the price of 1st Class postage stamps. When that decision was made by a bunch of executives in Washington DC. Whose names the clerk doesn't even know.
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