Oldie but goodie: Why Does US Health Care Cost So Much? (Part II: Indefensible Administrative Costs)

[marmar]

from the NY Times Economix blog:



November 21, 2008, 10:34 am
Why Does U.S. Health Care Cost So Much? (Part II: Indefensible Administrative Costs)

By Uwe E. Reinhardt
Uwe E. Reinhardt is an economist at Princeton.


In my previous blog post, I showed that America suffers from “excess spending” in its health care system. Here I will discuss one factor that drives up that spending: indefensibly high administrative costs.

To review: “Excess health spending” in this context refers to the difference between what a country spends per person on health care, and what the country’s gross domestic product per person should predict that that country would spend. (The prediction is based on trends in other countries in the Organization for Economic Cooperation and Development.) The word “excess” here should not be taken as “excessive” unless one could demonstrate that what the other O.E.C.D. nations spend is appropriate and what we spend is ipso facto wasteful.

The United States spends nearly 40 percent more on health care per capita than its G.D.P. per capita would predict. Given the sheer magnitude of the estimated excess spending, it is fair to ask American health care providers what extra benefits the American people receive in return for this enormous extra spending. After all, translated into total dollar spending per year, this excess spending amounted to $570 billion in 2006 and about $650 billion in 2008. The latter figure is over five times the estimated $125 billion or so in additional health spending that would be needed to attain truly universal health insurance coverage in this country.

.....(snip).....

One of these is an earlier McKinsey study explaining the difference in 1990 health spending in West Germany and in the United States. The researchers found that in 1990 Americans received $390 per capita less in actual health care but spent $360 more per capita on administration.

A second, more recent study of administrative costs in the American and Canadian health systems was published in 2003 by Steffie Woolhandler and David Himmelstein in The New England Journal of Medicine in 2003. The study used a measure of administrative costs that includes not only the insurer’s costs, but also the costs borne by employers, health-care providers and governments – but not the value of the time patients spent claiming reimbursement. These authors estimated that in 1999, Americans spent $1,059 per capita on administration compared with only $307 in purchasing power parity dollars (PPP $) spent in Canada. ...........(more)

The complete piece is at: http://economix.blogs.nytimes.com/2008/11/21/why-does-us-health-care-cost-so-much-part-ii-indefensible-administrative-costs/

[varelse]

1. Doesn't this more or less answer the perennial question

"Universal health care sounds great, but how will we pay for it?"

[marmar]

2. Yes....Everytime I hear someone say that, I say...WE'RE ALREADY PAYING MORE THAN THAT

.... and getting a crappy product in return. Why pay more to rehab an old, broken down car when you could pay less and get a new one?

[varelse]

6. Hell

some of us pay the price and never even get near the damn car!

[Wapsie B]

3. Talk to many hospitals in this country about administrative costs

and they'll look at you like you're from another planet. Unless a facility is woefully top-heavy with administrators nothing is done. Cuts in those ranks are all too rare. Normally it's caregivers and ancillary staff feeling the blade of the ax. And if anything were to happen in the white-collar ranks clerks and secretaries would be those to go.

[MichiganVote]

4. Same with education. Too much money at the top in all areas.

[warren pease]

5. The medical loss ratio and how to find it...

It's hiding somewhere among the various line items that include off-the-charts exec compensation; shareholder return; obsessive paper pushing; outside investments in such things as real estate and stocks and bonds; motivational junkets to the Bahamas for execs and their girlfriends; salaries and perks for armies of actuaries and claims "adjusters" (whose real job is to "adjust" your claim down to zero via technicalities or, if they can't find any, just make shit up); and so much more... none of which has anything whatsoever to do with performing the job their corporations are chartered for: paying medical claims to health care providers for their subscribers. That's their only job, and they manage to fuck it up, refuse to do it and pervert it until it's unrecognizable.

Naturally, when they're polled on this subject, a super-majority of respondents say they want some kind of national health care system that's driven by patient needs rather than insurance company profits.

A system in which they and their doctors are in control of all medical decisions instead of some goddamned cadaver of an accountant. A system that doesn't force them to subsidize Viagbrex and Clarivitra commercials by paying outlandish prices for drugs that sell for, say, the equivalent of $9.00 in the UK. And a real health care system that doesn't impoverish them if some repressed asshole finds an undotted "I" or a comma used in place of a semi-colon.

So in 2007 and 2008, here comes this guy running for president who's advocating exactly such a plan. The only one of the entire bunch, the other original eight frauds yammering about "expanded coverage," which is just code for let's subject another 10 or 20 million people to these parasites and vampires, and all for the greater glory of the sacrosanct free market, which doesn't actually exist anyway except as yet another patch in the great American creation myth quilt.

So what do the rubes do? They watch TV to learn the truth, where they're taught to obsess about his height, his wife's tongue stud, his "gnome-like appearance, his UFO experience, his record of opposing his party's leadership -- like that's supposed to be a bad thing -- and all these weird positions he takes.

Not only are Americans uniquely enthusiastic about repeatedly shooting themselves in the foot, the entire country seems overstuffed with gullible nitwits who always go for the big con, believe the most impossible nonsense and willingly get sucked into ponzi schemes with eyes wide open and frontal lobes tied behind their backs.

It's like the timid soul of Don Knotts fused with the brain of Homer Simpson, combined to produce a bit of primordial slime with the wimpiest and the dumbest characteristics possible, cloned itself endlessly, then slipped the clones down 300 million auditory canals, from where they slid undetected right on into the American collective consciousness. D'oh... And the result is...

An entire country of undefended targets for big biz -- hyper-consumers trained by television to believe advertisers and predators rather than the contrary evidence sitting right in front of their noses. They're so completely invested in the candy-apple red American fantasy machine that every time one of those distinctive Publishers Clearinghouse envelopes shows up, they figure that $10 million is in the bag so they keep the porch light on all night just in case Ed McMahon's ghost got stuck in traffic and couldn't make it before sundown.

Sorry for the lengthy rant. I just couldn't stop once things got rolling.


sf

[uberblonde]

7. No one mentions where they hide all the money.

It's in third-party administration firms (TPAs), which are often front firms for the politically-connected. That's where they hide all kinds of kickbacks - that's why no one wants to talk about it.

[warren pease]

10. Are TPAs companies like Watson Wyatt and other HR function outsourcing parasites?

Their website tag line is: "Watson Wyatt is a global consulting firm focused on human capital and financial management."

Please post more on this. I've never even considered this particular genre of vampires before.


Thanks,

sf

[WillowTree]

11. No. TPAs are companies that only administer insurance plans.

Insofar as medical insurance is concerned, a TPA provides the administrative functions for companies and organizations that self-insure according to the way the company or organization has set-up their plan, such as claim payment and COBRA administration. In other words, they just do the paperwork.

[warren pease]

14. Got a few names? I'd like to take a close look at a couple. Thanks... n/t

[cbdo2007]

16. Sure - BCBSKC is a TPA of many Medicare and Medicaid plans

Medicare/Medicaid provide the benefits and the customers, BCBSKC manages the benefits and pays the claims. In fact I think they pay the claims through another TPA.

[warren pease]

17. Thanks a lot. I appreciate it. n/t

[Ewellian]

15. Not just companies

and organizations...also the government. Medicare and Tricare for example are administered by TPAs. The large insurance companies all handle this type of business.

[OHdem10]

8. It is a for profit system. Companies will do what they must in order

to be able to post profits and earnings every quarter.

If this means deny Rx, or increase prices, so be it.

[warren pease]

9. Might as well try to get a Bengal tiger to renounce life as a predator and go vegan instead...

It's just the nature of the beast.

Why would anyone think that inviting for-profit insurers -- by far the most destructive element in the current disaster/extortion scam -- to participate in anything labeled "reform" would result in a system that looks any different than the prevailing profits uber alles corporate shakedown racket?


sf

[Vinca]

12. It all boils down to the strips you pee on when you go to the doctor.

They cost about 50 cents each, but I've never seen the test billed for less than $20. Oh . . . wait . . . I forgot the $10 aspirin tablets. Let's face it. There are profits and then there are PROFITS.

[Wednesdays]

13. K&R

:kick: