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What's driving rising business costs?

libertystreeteconomics.newyorkfed.org

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Re: What's driving rising business costs?

#51

Post by metaphor »

labcomputer wrote: post #24
epistasis wrote: post #9

We really need to switch to a National Health Service style of administration of health costs. Right now we have Medicare which makes unilateral cost determinations, and doctors and hospitals end up accepting below-cost reimbursement that because how could they turn away all the retired people, but they end up subsidizing these unilateral decisions with money from private insurance payors (namely everybody who's work…

The dirty little not-so-secret is that we pay doctors too much in the US. To the tune of several times as much as other large developed countries, like Germany, France and England. Medical care in the US will never ever be as cheap as those countries as long as the providers here earn 2x or 3x. That's partly because we have a doctor shortage here (medical schools collude to limit the number of new doctors created eac…

> The dirty little not-so-secret is that we pay doctors too much in the US.

Doubt.

> That's partly because we have a doctor shortage here (medical schools collude to limit the number of new doctors created each year).

Now explain this trend[1].

[1] https://fred.stlouisfed.org/graph/?g=1T22Y

Re: What's driving rising business costs?

#52

Post by nradov »

rayiner wrote: post #32
epistasis wrote: post #9

We really need to switch to a National Health Service style of administration of health costs. Right now we have Medicare which makes unilateral cost determinations, and doctors and hospitals end up accepting below-cost reimbursement that because how could they turn away all the retired people, but they end up subsidizing these unilateral decisions with money from private insurance payors (namely everybody who's work…

Yes, and that national administration has to include national standards of care. The government should set cost-effective standards of care for various scenarios. Then doctors should have immunity to lawsuits as long as they followed the standard of care. You shouldn’t be able to sue a doctor and get some expert up there saying he should have run these additional tests or tried this additional treatment.

You can sue anyone for anything. That doesn't mean you're going to win. It's already extremely rare that a physician who actually followed an established standard of care to be found liable in a malpractice case. We should be hesitant to prevent anyone from seeking redress through the courts.

I'm also skeptical about putting the federal government in charge of establishing standards of care. We already see that some medical conditions have been heavily politicized by certain patient interest groups. And while evidence-based medicine is great, we still have nowhere near enough data to establish clear clinical practice guidelines for medically complex patients.

Re: What's driving rising business costs?

#53

Post by nradov »

stego-tech wrote: post #16
alephnerd wrote: post #12

Earlier quoted context omitted.

Yep! Both private and public insurance funds are nickel and diming wherever possible to make up for losses during the COVID pandemic which went on for 3 years. Edit: can't reply > This started decades before COVID, and has been summarily ignored for the entire time. We’re still insuring properties in areas we known sea level rise and climate change make uninsurable It's not property insurance that's causing the issue…

This started decades before COVID, and has been summarily ignored for the entire time. We’re still insuring properties in areas we known sea level rise and climate change make uninsurable, we still refuse to let the government negotiate with or dictate rates, we still tie healthcare to employment, and we still let manufacturers sell top-tier/unrepairable vehicles while constantly discontinuing anything remotely affor…

How much has the sea level actually risen? Our most expensive flood in terms of insurance losses was the Great Flood of 1993 which had nothing to do with sea levels.

Re: What's driving rising business costs?

#54

Post by lotsofpulp »

Sevii wrote: post #50
rayiner wrote: post #33

Earlier quoted context omitted.

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

The problem is that health insurance companies squander immense amounts of money on adjudicating claims. Huge amounts of GDP are spent on fights between insurers and providers over what is covered.

You can deduce that cannot be true using the medical loss ratios, which is money flowing out to healthcare providers. At roughly 85% or so, that means 15% is left for the entirety of the rest of the business, including adjudication.

https://www.kff.org/private-insurance/medical-loss-ratio-reb...

https://www.oliverwyman.com/our-expertise/insights/2023/mar/...

That is not to say the adjudication process is done well. In fact, it is hugely wasteful, either intentionally or unintentionally, and the problem is that the government does not audit the insurance companies often enough, nor does it levy penalties sufficient to incentivize proper and efficient adjudication.

The government should be doing constant random checks on claims to see if they were processed and adjudicated in a timely and efficient manner with a sufficiently low error rate on behalf of the adjudicators, and the government is basically doing none of that.

Re: What's driving rising business costs?

#55

Post by metaphor »

kxyvr wrote: post #39
nradov wrote: post #34

Earlier quoted context omitted.

The shortage of physicians has nothing to do with medical schools. The immediate bottleneck is a shortage of residency slots. Every year, students graduate from medical schools but are unable to practice medicine because they don't get matched to a residency program. (Some do get matched the following year.) This is primarily due to limited funding from Medicare, although some residency slots are funded from other so…

That's not true. You can look at the residency match for 2025 here: https://www.nrmp.org/match-data/2025/05/results-and-data-202... While many specialties are fully filled, we need pediatricians, family medicine, and internal medicine docs. They're generalists and where the largest shortage is. There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the…

> There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the applicants; it's not the slots.

You lost me...from your cite[1]:

  | Specialty         | Positions | Applicants | Matches | App/Pos | Deficit |
  |-------------------|-----------|------------|---------|---------|---------|
  | Pediatrics        |     3,135 |      3,998 |   2,988 |    128% |    4.7% |
  | Family Medicine   |     5,357 |      7,337 |   4,552 |    137% |   15.0% |
  | Internal Medicine |    10,941 |     17,131 |  10,584 |    157% |    3.3% |
I'm curious what conditions merit a "match".

Aren't a lot of these shortages scattered around rural areas where young doctors really don't want to move to? I understand from a buddy who is currently in med school that there are all sorts of incentive carrots being deployed to attract doctors to these underserved communities.

[1] https://www.nrmp.org/wp-content/uploads/2025/05/Main_Match_R...

Re: What's driving rising business costs?

#56

Post by nradov »

metaphor wrote: post #55
kxyvr wrote: post #39

Earlier quoted context omitted.

That's not true. You can look at the residency match for 2025 here: https://www.nrmp.org/match-data/2025/05/results-and-data-202... While many specialties are fully filled, we need pediatricians, family medicine, and internal medicine docs. They're generalists and where the largest shortage is. There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the…

> There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the applicants; it's not the slots. You lost me...from your cite[1]: | Specialty | Positions | Applicants | Matches | App/Pos | Deficit | |-------------------|-----------|------------|---------|---------|---------| | Pediatrics | 3,135 | 3,998 | 2,988 | 128% | 4.7% | | Family Medicine | 5,357 | 7…

That's largely a separate problem. Most teaching hospitals aren't located in rural areas.

Re: What's driving rising business costs?

#57

Post by kxyvr »

metaphor wrote: post #55
kxyvr wrote: post #39

Earlier quoted context omitted.

That's not true. You can look at the residency match for 2025 here: https://www.nrmp.org/match-data/2025/05/results-and-data-202... While many specialties are fully filled, we need pediatricians, family medicine, and internal medicine docs. They're generalists and where the largest shortage is. There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the…

> There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the applicants; it's not the slots. You lost me...from your cite[1]: | Specialty | Positions | Applicants | Matches | App/Pos | Deficit | |-------------------|-----------|------------|---------|---------|---------| | Pediatrics | 3,135 | 3,998 | 2,988 | 128% | 4.7% | | Family Medicine | 5,357 | 7…

There's a video as to how the match works here:

https://www.nrmp.org/intro-to-the-match/how-matching-algorit...

Basically, you interview at a bunch of programs and then rank them. The programs (hospitals) rank applicants and then the algorithm does its magic to "match" applicants to programs. Now, if one doesn't match with any of them, there's something called the scramble where a med student works with their program to match into a program somewhere in some specialty that has room. This is non-ideal, but can work out.

Generally speaking, the match algorithm is setup to guarantee all U.S. medical school graduates a match somewhere in something. In may not be what you want, but you will have a job. Then, preference is given to things like the island schools (affiliated medical schools in the Carribean, which are very expensive, but somewhat easier to get into), and then to other international medical schools. Somewhere in there are also foreign physicians who want to work in the U.S., but are forced to redo residency.

I don't know everything about how it works, but that's the general idea. To that end, I don't fully understand the stats you pulled from the reference. That doesn't mean they're not valid, but I don't know.

And, yes, often times, there are open slots at some program in the middle of nowhere. As much as there can be incentives such some debt relief by working in rural hospitals, the jobs are not a good fit for a lot (most) people. I mean, someone just worked extremely hard for 10 years or more and you want them to go live in a town of 10k people. It's not that it's not important, but you can't force people to do it and it takes a particular personality to be happy there. A lot of highly educated people want to live in urban centers with amenities. Not all, but probably most.

Places like Canada use their foreign docs to fill this rural gap. A not small number of the rural docs are foreign born and trained and they essentially work this crappy jobs until they have permanent residency and then they move to more desirable markets. It's a trade, I guess, but there's not a small amount of resentment about it.

Re: What's driving rising business costs?

#58

Post by metaphor »

rayiner wrote: post #33
shimman wrote: post #30

Earlier quoted context omitted.

Doctor salaries alone do not account for the hundreds of billions in profit that health insurance companies extract from us. You are right there is not a competitive market place because the US government cannot provide a universal plan for anyone. We all know the insurance companies would fold overnight as government welfare programs are extremely popular (just look at how much corporations love government welfare).…

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

Hmm...sniff test sampling:

- HCA[1]: FY25 profit margin = 9.0%

- UHS[2]: FY25 profit margin = 8.6%

- THC[3]: FY25 profit margin = 6.6%

Yeah, a bit of disaggregation is likely needed here, but in these companies, labor expense as a percentage of revenue is on a declining YoY trend while revenue continues to grow.

What's the prevailing ballpark ratio of doctors to all other hospital staff again? And what details are buried in that ever so opaque and increasing "other operating expenses" line item?

[1] https://www.sec.gov/Archives/edgar/data/860730/0001193125260...

[2] https://www.sec.gov/Archives/edgar/data/352915/0001193125260...

[3] https://www.sec.gov/Archives/edgar/data/70318/00000703182600...

Re: What's driving rising business costs?

#59

Post by metaphor »

kxyvr wrote: post #57
metaphor wrote: post #55

Earlier quoted context omitted.

> There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the applicants; it's not the slots. You lost me...from your cite[1]: | Specialty | Positions | Applicants | Matches | App/Pos | Deficit | |-------------------|-----------|------------|---------|---------|---------| | Pediatrics | 3,135 | 3,998 | 2,988 | 128% | 4.7% | | Family Medicine | 5,357 | 7…

There's a video as to how the match works here: https://www.nrmp.org/intro-to-the-match/how-matching-algorit... Basically, you interview at a bunch of programs and then rank them. The programs (hospitals) rank applicants and then the algorithm does its magic to "match" applicants to programs. Now, if one doesn't match with any of them, there's something called the scramble where a med student works with their program…

Appreciate the perspective.

> A not small number of the rural docs are foreign born and trained and they essentially work this crappy jobs until they have permanent residency and then they move to more desirable markets.

Not sure that I follow how "rural" necessarily begets "crappy" though. Is the working quality of life somehow that much worse, or is it the relative social isolation and/or lack of recreational options while off duty, or is it really just a case of urbanite out of their accustomed habitat?

Re: What's driving rising business costs?

#60

Post by [deleted] »

metaphor wrote: post #59
kxyvr wrote: post #57

Earlier quoted context omitted.

There's a video as to how the match works here: https://www.nrmp.org/intro-to-the-match/how-matching-algorit... Basically, you interview at a bunch of programs and then rank them. The programs (hospitals) rank applicants and then the algorithm does its magic to "match" applicants to programs. Now, if one doesn't match with any of them, there's something called the scramble where a med student works with their program…

Appreciate the perspective. > A not small number of the rural docs are foreign born and trained and they essentially work this crappy jobs until they have permanent residency and then they move to more desirable markets. Not sure that I follow how "rural" necessarily begets "crappy" though. Is the working quality of life somehow that much worse, or is it the relative social isolation and/or lack of recreational optio…

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