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Why healthcare is so expensive

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Masterhawk

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You may remember a previous thread called "Why is healthcare so expensive". I can't seem to find it but I'm the one who created that thread. I created it because healthcare costs have increased drastically in the past few decades. In a country of increasing productivity, it should be going down (like it did for TVs) but it's going up.

View attachment 67276711

Advocates of UHC often blame health insurance companies for price gouging and driving up administrative costs but profit margins are only 4-5.25%. Funny enough, the top players are fairing a bit better now than they were before the ACA.
What are insurance sector companies usual profit margins?
6: How Much Profit Are Health Insurance and Drug Companies Making? | HowStuffWorks

There is one chart that may help explain why.

You see, the number of healthcare administrators has skyrocketed in the past half century
View attachment 67276708

UHC proponents aren't wrong when they point to administration costs but it's not as if we had UHC 50 years ago. If it were the free market's fault, it would simply have always been this high to begin with. It was however around the time that Medicare and Medicaid were created. As it turns out, the need to comply with all of those regulations led to healthcare costs skyrocketing.
 
On the other side of the coin, the diagnostic chain has much to do with the extortionistic total cost of an 'encounter' with the medical machine. Used to be one went to the Dr. (back when General Practitioner meant a well rounded knowledge base and treatment skillset), the physician would actually touch patients while they looked down your throat, in your eyes and ears, Up your nose, rapped on your stomach, hammered your knees, listened to your chest, and stuck a finger up your hiney; then they would say you had a cold, brain tumor, gall stones, pregnant, or fine until next year. Then the Dr. would ask you if you wanted them to treat the condition if there was one, and handled what they could, usually up to and including basic surgery.

Now, a GP is little more than an end-user sales rep for the drug companies, or a traffic cop for every 'specialist' in the network, from Tonsildiatrist to Hemorhoidologist. Better order every lab test, CT, X-ray, and MRI in the book to make sure they get the spiff from the diagnostic lab before shipping you off, and setting up a follow-up appointment, just in case. Then, when you set up an appointment with the Ingrown Toenail Specialist, you must see a PA who screens the patient before seeing the actual Dr. (but the charge still costs the co-pay and office visit), then another co-pay and office visit charge if you qualify an actual consult (and subsequent treatment), or get sent back to the GP; so that's why they made a follow-up appointment! Healthcare has become a revolving door and medical maze, with generous billing and payments at every turn.

When ever a patient has anything done, especially if a hospital is involved, they should insist on a copy of the bill, both before and after the Insurance Company discount is applied. Read it sitting down, or the fall from passing out will cost another fortune for the trauma team, Orthopedic surgeon, Neurologist, numerous tests and X-rays, and of course, the GP again.
 
Masterhawk said:
In a country of increasing productivity, it should be going down (like it did for TVs) but it's going up.
Click to expand...

Or exactly the opposite. In a country of increasing productivity, you might well expect that our spending (and concentration of jobs) would rebalance over time toward industries that don't experience the same labor productivity gains as industries like manufacturing, etc. If that were the case, over time you might expect that more of our jobs and a larger share of our national dollar would wind up in things like health care and education. Which seems to be happening.
 
Some of it is a bit ridiculous. Our hospital now requires that you meet with a social worker to establish a "care plan" before discharge. I just remember my grandpa looking at her like she was crazy saying, "My plan is to go the hell home so write down whatever you have to write down and get me my damn clothes."
 
The Old Soul said:
On the other side of the coin, the diagnostic chain has much to do with the extortionistic total cost of an 'encounter' with the medical machine. Used to be one went to the Dr. (back when General Practitioner meant a well rounded knowledge base and treatment skillset), the physician would actually touch patients while they looked down your throat, in your eyes and ears, Up your nose, rapped on your stomach, hammered your knees, listened to your chest, and stuck a finger up your hiney; then they would say you had a cold, brain tumor, gall stones, pregnant, or fine until next year. Then the Dr. would ask you if you wanted them to treat the condition if there was one, and handled what they could, usually up to and including basic surgery.

Now, a GP is little more than an end-user sales rep for the drug companies, or a traffic cop for every 'specialist' in the network, from Tonsildiatrist to Hemorhoidologist. Better order every lab test, CT, X-ray, and MRI in the book to make sure they get the spiff from the diagnostic lab before shipping you off, and setting up a follow-up appointment, just in case. Then, when you set up an appointment with the Ingrown Toenail Specialist, you must see a PA who screens the patient before seeing the actual Dr. (but the charge still costs the co-pay and office visit), then another co-pay and office visit charge if you qualify an actual consult (and subsequent treatment), or get sent back to the GP; so that's why they made a follow-up appointment! Healthcare has become a revolving door and medical maze, with generous billing and payments at every turn.

When ever a patient has anything done, especially if a hospital is involved, they should insist on a copy of the bill, both before and after the Insurance Company discount is applied. Read it sitting down, or the fall from passing out will cost another fortune for the trauma team, Orthopedic surgeon, Neurologist, numerous tests and X-rays, and of course, the GP again.
Click to expand...

So much of that specializaton has come from the push at preventative medicine. Some of that care seems overdone to me at times. I make two regular scheduled visits a year to my GP and get basic health screening, blood test and such. Then I have a dermatologist I'm seeing for skin cancer and a urologist for prostate issues, I've had several biopsies,(not fun), all negative thank the Lord. It becomes a pain in the arse at times to maintain "good health".
What is aggravating it when I went back to my daily workouts and diet restrictions and lost 22 lbs I expected to get off a few of the medications I was on. Staton drug, daily low dose aspirin, BPH medication, (yeah I'm getting old) but nobody seems to think taking less meds is a good idea.
You follow doctors recommendations but sometimes it seems to be overkill. Of course the alternative may not be as good.;)
 
Masterhawk said:
You may remember a previous thread called "Why is healthcare so expensive". I can't seem to find it but I'm the one who created that thread. I created it because healthcare costs have increased drastically in the past few decades. In a country of increasing productivity, it should be going down (like it did for TVs) but it's going up.

View attachment 67276711

Advocates of UHC often blame health insurance companies for price gouging and driving up administrative costs but profit margins are only 4-5.25%. Funny enough, the top players are fairing a bit better now than they were before the ACA.
What are insurance sector companies usual profit margins?
6: How Much Profit Are Health Insurance and Drug Companies Making? | HowStuffWorks

There is one chart that may help explain why.

You see, the number of healthcare administrators has skyrocketed in the past half century
View attachment 67276708

UHC proponents aren't wrong when they point to administration costs but it's not as if we had UHC 50 years ago. If it were the free market's fault, it would simply have always been this high to begin with. It was however around the time that Medicare and Medicaid were created. As it turns out, the need to comply with all of those regulations led to healthcare costs skyrocketing.
Click to expand...

You're paying twice.

The hospital gets their money and you pay every single person that walked into your room or in anyway helped with your care.
 
The technology of health care has not been stagnant over the years. It is continuously changing. Health care at the family physician level is not that expensive. It is the advanced diagnostics, extensive use of laboratory testing and Radiology that begin to drive up the cost. Operating a modern hospital means sophisticated trauma centers, operating theaters with multiple robotic and electronic devices, Advanced radiological techniques, Intensive care units also with a plethora of sophisticated machinery and electronics. Plus you have medical professionals with multiple specialties requiring advanced training who are paid high wages for their expertise. Thousands of new medications have been and are being developed.

The fact is that hospital care costs a lot to provide. More than the average wage earner could ever afford in an unregulated market. Some form of communal cost sharing is the only way for an average wage earner to afford modern health care whether it be private or public insurance.

Medicare and Medicaid provides some 32% of the net revenue for most hospitals. If they lost that they would be out of business even though private insurance pays 68%.

The government pays for about half of all health care costs yet that administrative overhead is significantly less than private insurance. Administrative overhead for Medicare/Medicaid is around 2-5% of overall cost. It's 17% for private health insurance.

Taxpayers subsidize employer provided insurance through tax exemptions. Taxpayers subsidized much of the basic medical research. Taxpayers subsidize most medical schools. Taxpayers subsidize public hospital facilities.

The health care system is highly complex. Oversimplification of the problems presented is not useful. People need to educate themselves before they jump to absurd conclusions about the reasons for the high cost of medical care.
 
Drawdown said:
Some of it is a bit ridiculous. Our hospital now requires that you meet with a social worker to establish a "care plan" before discharge. I just remember my grandpa looking at her like she was crazy saying, "My plan is to go the hell home so write down whatever you have to write down and get me my damn clothes."
Click to expand...

People leave a hospital and don't take their medication. Some times the regimen is very complicated and they don't understand it. It is a major reason people end up back in the hospital. Hospitals are rated on their re-admission rates. Like it or not people who don't follow a treatment plan are not helping themselves, plus they drive up the cost for everyone else.
 
manofknowledge said:
People leave a hospital and don't take their medication. Some times the regimen is very complicated and they don't understand it. It is a major reason people end up back in the hospital. Hospitals are rated on their re-admission rates. Like it or not people who don't follow a treatment plan are not helping themselves, plus they drive up the cost for everyone else.
Click to expand...

You mean they drive down the profits of the hospital. Re-admissions didn't matter until it started costing the providers.
 
Drawdown said:
You mean they drive down the profits of the hospital. Re-admissions didn't matter until it started costing the providers.
Click to expand...

It always mattered and it always cost someone. Every time someone ends up in the hospital somebody pays for it. If it's private insurance then they add that to their overhead cost and en-corporate it into the premiums and charges that apply for a policy. If the government pays it drives up the cost to taxpayers. If no one pays the hospitals eat the cost and add it the fees they charge. Not to mention the fact that re-admission often results in more severe illness and more suffering by the patient.
 
Masterhawk said:
You may remember a previous thread called "Why is healthcare so expensive". I can't seem to find it but I'm the one who created that thread. I created it because healthcare costs have increased drastically in the past few decades. In a country of increasing productivity, it should be going down (like it did for TVs) but it's going up.

View attachment 67276711

Advocates of UHC often blame health insurance companies for price gouging and driving up administrative costs but profit margins are only 4-5.25%. Funny enough, the top players are fairing a bit better now than they were before the ACA.
What are insurance sector companies usual profit margins?
6: How Much Profit Are Health Insurance and Drug Companies Making? | HowStuffWorks

There is one chart that may help explain why.

You see, the number of healthcare administrators has skyrocketed in the past half century
View attachment 67276708

UHC proponents aren't wrong when they point to administration costs but it's not as if we had UHC 50 years ago. If it were the free market's fault, it would simply have always been this high to begin with. It was however around the time that Medicare and Medicaid were created. As it turns out, the need to comply with all of those regulations led to healthcare costs skyrocketing.
Click to expand...

Same as always, supply and demand. Demand is extremely high for a very highly valued product, and supply is relatively low do to a number of reasons. Maybe healthcare is actually cheap compared to its value.
 
manofknowledge said:
The technology of health care has not been stagnant over the years. It is continuously changing. Health care at the family physician level is not that expensive. It is the advanced diagnostics, extensive use of laboratory testing and Radiology that begin to drive up the cost. Operating a modern hospital means sophisticated trauma centers, operating theaters with multiple robotic and electronic devices, Advanced radiological techniques, Intensive care units also with a plethora of sophisticated machinery and electronics. Plus you have medical professionals with multiple specialties requiring advanced training who are paid high wages for their expertise. Thousands of new medications have been and are being developed.

The fact is that hospital care costs a lot to provide. More than the average wage earner could ever afford in an unregulated market. Some form of communal cost sharing is the only way for an average wage earner to afford modern health care whether it be private or public insurance.
Click to expand...

New products tend to cost a lot. This was the case with cars, computers, and televisions. Then the cost came down because there was an incentive to make versions that were more affordable. This has not happened with healthcare, probably due to all of the regulations. But it doesn't have to be this way. Much of the red tape in healthcare doesn't extend to cosmetic surgery. Breast augmentations typically cost around $3,000 while a simple appendectomy can cost tens of thousands of dollars. Lasik typically falls within the $1,000-3,000 range. The one thing those two things have in common is that insurance typically doesn't cover them and are paid out of pocket. Meanwhile, with healthcare, insurance covers most of the cost and the prices are hidden from the consumer. In universal healthcare, high costs are replaced with long waiting times.

I guess I'm thinking of something like this
 
Masterhawk said:
New products tend to cost a lot. This was the case with cars, computers, and televisions. Then the cost came down because there was an incentive to make versions that were more affordable. This has not happened with healthcare, probably due to all of the regulations. But it doesn't have to be this way. Much of the red tape in healthcare doesn't extend to cosmetic surgery. Breast augmentations typically cost around $3,000 while a simple appendectomy can cost tens of thousands of dollars. Lasik typically falls within the $1,000-3,000 range. The one thing those two things have in common is that insurance typically doesn't cover them and are paid out of pocket. Meanwhile, with healthcare, insurance covers most of the cost and the prices are hidden from the consumer. In universal healthcare, high costs are replaced with long waiting times.

I guess I'm thinking of something like this
Click to expand...


There is the problem with assuming correlation with causation. Yes.. lasik costs less.. and why? Because its now largely automated.

the same with television, etc.. costs went down because either the process was made cheaper through automation.. or production was outsourced to other countries with lower wages.

Its hard to automate your knee surgery.. and its hard to outsource healthcare. So you have two economic pushes toward increasing prices (as Greenbeard already pointed out)

and then you have a huge increase in demand.. with aging baby boomers. Which again.. demand increases.. costs increase.

A lot of costs that get blamed on regulation with healthcare.. really aren;t the result of regulation.. they are the result of how the insurance companies reimburse.

For example.. requiring you to get an x ray of your knee.. before you can get an MRI. when the I already know that the x ray isn;t going to show a thing, since I suspect its a torn acl and torn meniscus.. (neither of which will be seen on an x ray).
 
jaeger19 said:
A lot of costs that get blamed on regulation with healthcare.. really aren't the result of regulation.. they are the result of how the insurance companies reimburse.
Click to expand...

What costs are they reimbursing specifically? Another issue is why costs have increased so much in the past 50 years.
 
Masterhawk said:
What costs are they reimbursing specifically? Another issue is why costs have increased so much in the past 50 years.
Click to expand...

I gave an example. Like getting an x ray before getting an MRI.. when I know the x ray isn't going to show anything. I have had patients tell me.. oh yeah.. its because of government regulation.. cause someone told them that. Its really because of the insurance company.

The same with needing to see your primary physician when you already know that you need an orthopedic surgeon. Its due to the insurance company requiring a referral. But many folks think its due to government regulation.

Sometimes things get blamed on regulation..when really.. its due to reimbursement. For example, I have patients that have been told by the hospital this or that.. was done "because of Obamacare"...when really.. it was due to the hospital simply trying to make more money.
 
jaeger19 said:
I gave an example. Like getting an x ray before getting an MRI.. when I know the x ray isn't going to show anything. I have had patients tell me.. oh yeah.. its because of government regulation.. cause someone told them that. Its really because of the insurance company.

The same with needing to see your primary physician when you already know that you need an orthopedic surgeon. Its due to the insurance company requiring a referral. But many folks think its due to government regulation.

Sometimes things get blamed on regulation..when really.. its due to reimbursement. For example, I have patients that have been told by the hospital this or that.. was done "because of Obamacare"...when really.. it was due to the hospital simply trying to make more money.
Click to expand...

Yeah and really if govt and culture stopped pushing insurance to cover cradle to grave, costs would come down. Whats the actual cost of an xray without all the overhead from insurance and regulation? Lets say $200. Thats affordable without insurance.
 
jonny5 said:
Yeah and really if govt and culture stopped pushing insurance to cover cradle to grave, costs would come down. Whats the actual cost of an xray without all the overhead from insurance and regulation? Lets say $200. Thats affordable without insurance.
Click to expand...

Parallel a more recent development: The Insurance-ization of dental care. Around the turn of the century and before, dental care was much more affordable mainly because most care was patient pay, and care options and prices were discussed with the person in the chair, instead of an insurance company - a filling or extraction was under $100, and paid for at the time of service. Now, the DDS slides a co-pay under the patient's nose, and suddenly most everyone needs a crown, implant, and/or a root canal. Just try and find a cash-pay price under $200 (usually much more) for a simple extraction or filling, or even a dentist that actually wants to work on cash patients. Insurance has taken the same toll on dentistry that it has on healthcare using the same for-profit model, and is forcing policies on everyone by making cash-pay care unaffordable.
 
jonny5 said:
Yeah and really if govt and culture stopped pushing insurance to cover cradle to grave, costs would come down. Whats the actual cost of an xray without all the overhead from insurance and regulation? Lets say $200. Thats affordable without insurance.
Click to expand...

Yeah.. you don't get it. How much does removing the overhead from insurance and regulation reduce the cost of an X ray? Probably about one dollar. The cost of overhead from insurance and regulation is minimal especially compared to labor and technology costs. One of the biggest reasons for the cost of an x ray is because of cost shifting. As explained in another post. X rays are pretty common. Whats not common is ventilator use. So the cost of the ventilator that you MIGHT need one day.. is spread out to all the x rays. So you pay 400 for an xray that might actually cost 200(pure cost)… because 200 dollars is going to pay for ventilators and all the other equipment a hospital has to have and maintain and the labor to use it when needed.

Its why the hospital X ray is 600 dollars... and the same x rays at a free standing imaging facility is 250.
 
jaeger19 said:
Yeah.. you don't get it. How much does removing the overhead from insurance and regulation reduce the cost of an X ray? Probably about one dollar. The cost of overhead from insurance and regulation is minimal especially compared to labor and technology costs. One of the biggest reasons for the cost of an x ray is because of cost shifting. As explained in another post. X rays are pretty common. Whats not common is ventilator use. So the cost of the ventilator that you MIGHT need one day.. is spread out to all the x rays. So you pay 400 for an xray that might actually cost 200(pure cost)… because 200 dollars is going to pay for ventilators and all the other equipment a hospital has to have and maintain and the labor to use it when needed.

Its why the hospital X ray is 600 dollars... and the same x rays at a free standing imaging facility is 250.
Click to expand...

You dont get it. The point wasnt the cost of overhead, but rather the lack of need for insurance for many healthcare costs. You just proved my point.
 
jonny5 said:
You dont get it. The point wasnt the cost of overhead, but rather the lack of need for insurance for many healthcare costs. You just proved my point.
Click to expand...

No.. I did not prove your point. You went from regulation and insurance cost increasing costs to .. to segwaying into "lack of need for insurance for many healthcare costs".

Having insurance that covers an x ray... doesn't increase the cost of the x ray much if at all.

In fact.. people in general having insurance? DECREASES the cost of the x ray. .
 
jaeger19 said:
No.. I did not prove your point. You went from regulation and insurance cost increasing costs to .. to segwaying into "lack of need for insurance for many healthcare costs".

Having insurance that covers an x ray... doesn't increase the cost of the x ray much if at all.

In fact.. people in general having insurance? DECREASES the cost of the x ray. .
Click to expand...

No it increases it by cost shifting to others, just as you said.
 
jonny5 said:
No it increases it by cost shifting to others, just as you said.
Click to expand...

No it decreases the cost of the xray.. because when people have insurance... I get paid for that x ray...

When people don't have insurance.. and have an emergency that needs an x ray... I have to legally provide it without your ability to pay.. its law.

And because I eat that bill... that means that when you come in and CAN pay.. I have to get more from you.. to cover the people without insurance.
 
jaeger19 said:
No it decreases the cost of the xray.. because when people have insurance... I get paid for that x ray...

When people don't have insurance.. and have an emergency that needs an x ray... I have to legally provide it without your ability to pay.. its law.

And because I eat that bill... that means that when you come in and CAN pay.. I have to get more from you.. to cover the people without insurance.
Click to expand...

No, it increases costs by shifting others costs to you and inflation due to easy money.
 
Masterhawk said:
New products tend to cost a lot. This was the case with cars, computers, and televisions. Then the cost came down because there was an incentive to make versions that were more affordable. This has not happened with healthcare, probably due to all of the regulations. But it doesn't have to be this way. Much of the red tape in healthcare doesn't extend to cosmetic surgery. Breast augmentations typically cost around $3,000 while a simple appendectomy can cost tens of thousands of dollars. Lasik typically falls within the $1,000-3,000 range. The one thing those two things have in common is that insurance typically doesn't cover them and are paid out of pocket. Meanwhile, with healthcare, insurance covers most of the cost and the prices are hidden from the consumer. In universal healthcare, high costs are replaced with long waiting times.

I guess I'm thinking of something like this
Click to expand...


A modern operating theater is never going to be low cost or mass produced. An ICU is never going to be low cost.

Regulations are a product of risk which relates to liability. The risk in health care is extremely high and so is the liability. If you don't have high quality and precise procedures people suffer. If people suffer needlessly they seek to assign blame. Blame costs money but it also creates incentive for high quality and precise function. If you don't define what is acceptable then anything is acceptable. If anything is acceptable then everything is a potential liability.
 
manofknowledge said:
A modern operating theater is never going to be low cost or mass produced. An ICU is never going to be low cost.
Click to expand...

Then why do eye surgery and cosmetic surgery cost less?

If people suffer needlessly they seek to assign blame. Blame costs money but it also creates incentive for high quality and precise function.
Click to expand...

It seems like you just undermined your own point.
 
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