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The American Healthcare Conundrum

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Re: The American Healthcare Conundrum

#71

Post by rexroad »

phil21 wrote: post #42
Retric wrote: post #37

Earlier quoted context omitted.

> part of the healthcare system that is moderately competitive. That’s only half the story though insurance companies also try and reject way more claims, cover fewer people, and are just harder to get money from than Medicare. This means hospitals can’t afford to give them cheaper rates as they just require vastly more work from staff for the same procedure. The industry isn’t blind to this effect, but has little re…

Hospitals and clinics can only take so many Medicare patients as a ratio to private pay because it’s very well known that Medicare and Medicaid is often provided at below cost. It’s of course area and demographic dependent but as a rule any private clinic has a cap on these patients they will accept overall. Hospitals cannot cap it realistically speaking, so looking at clinics is a good proxy. Private insurance subsi…

The MLR incentive question is one I'm digging into for a future issue. The short version: the ACA's 80/85% MLR floor was supposed to constrain overhead, but vertical integration changed the math. When UnitedHealth's Optum division provides services to UnitedHealthcare's members, those internal payments count as "medical expenses" for MLR purposes. The money stays in-house but reports as care delivery. On the denial rate point: 15-17% initial denial rate, 80%+ overturned on appeal, but less than 1% of patients actually appeal. That gap between the overturn rate and the appeal rate is where the profit lives. If you deny 100 claims and only 1 patient appeals, you've effectively reduced payouts on 99 claims at the cost of processing 1 appeal. I'll have the numbers on this in a later issue.

Re: The American Healthcare Conundrum

#72

Post by rybosworld »

For a country that prides itself on CapItAlIsM, U.S. healthcare is the farthest thing from it.

- Doctors and hospitals don't compete on price

- Prices aren't just opaque, they are unknowable

- Shopping around is not possible

- Insurer incentive is to maximize billing (cost). They pass along cost as increased premiums to an employer. Employer passes along increased costs to employee as below-inflation wage increases

Re: The American Healthcare Conundrum

#73

Post by scotty79 »

They are intermediary between buyers and sellers paid with percentage of the price.

They have every incentive for the price to be as high as possible.

Such entity can't be left to utilize market forces for the same reason cancer can't be left to utilize human physiology.

Re: The American Healthcare Conundrum

#74

Post by rexroad »

paulddraper wrote: post #4

This is a believable result. Meta-analysis is 141-259% [1]. Three reasons: 1. Medicare has quasi-monopolistic negotiation power that private insurers can only dream of -- Medicare spend two-thirds of all the private insurers combined. That's why private insurers would combine in a heartbeat if the FTC allowed it. 2. Moreover, that Medicare volume is concentrated in a specific segment of the market. If many providers…

Thanks for the meta-analysis reference. The 141-259% range tracks with what I see in the HCRIS data. The variance across hospitals is enormous — even within the same bed-size category, the P75/P25 ratio for cost-to-charge is 2.5-3.4x. Hospitals in the same peer group are charging wildly different amounts for equivalent services. All the scripts are in the repo if you want to dig into the hospital-level data: github.com/rexrodeo/american-healthcare-conundrum

Re: The American Healthcare Conundrum

#75

Post by kshacker »

timtim51251 wrote: post #7

Lots of people are saying nonsense here. The actual reason commercial insurers pay more is that's the only way to can make more profits. Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money. Several doctor friends have told me this as well.

I remember consulting for a healthcare company in .... 2003. Very short assignment so I never got deep into it, but anyways my consulting company made me read up an in house guide about ALR and MLR (Administrative or Medical Loss Ratios). Obamacare or not, such constraints already exists. Maybe they varied by state, maybe there were other loopholes such as not supporting pre-existing conditions, but IIRC there were restraints on pure profits, so even then the same perverse incentives existed. More revenue you can get more profits.

I am going by very old memory of a few days/weeks of work, but it will be good for a medical system historian to chime in.

Re: The American Healthcare Conundrum

#77

Post by pixl97 »

glenstein wrote: post #52
Manuel_D wrote: post #43

Earlier quoted context omitted.

This is the same problem with cost-plus contracts in the military. In theory, capping profit is meant to reduce profiteering. But in practice, if your profit is fixed at 6% of the cost to built a jet fighter then you're incentivized to make that jet fighter as expensive as possible. The way to maximize profit under a cost-plus regime is to maximize the cost.

I will piggy back off of your comment because I was going to say a very similar thing. In my state, electric utilities are guaranteed a rate of return on investment of approximately 12%, if I remember correctly. And so there's a lot of incentive for build out and maintenance that's high in total dollar amount and high in volume of work done. In some ways it's the system working as designed but the "cap" can incentivi…

So you have an excessively built out electrical system... sounds like a win to me.

Re: The American Healthcare Conundrum

#78

Post by Retric »

CWuestefeld wrote: post #58
Retric wrote: post #37

Earlier quoted context omitted.

> part of the healthcare system that is moderately competitive. That’s only half the story though insurance companies also try and reject way more claims, cover fewer people, and are just harder to get money from than Medicare. This means hospitals can’t afford to give them cheaper rates as they just require vastly more work from staff for the same procedure. The industry isn’t blind to this effect, but has little re…

This isn't even close to true. Keep in mind that Medicare, together with Medicaid (which operates under much of the same administrative rules), account for nearly half of medical spending. So basically, if a provider doesn't want to play by their rules, they MUST deal with Medicare. That is, the government is nearly a monopsony in this industry. There's a common, misleading, claim that Medicare is more efficient beca…

> nearly half of medical spending

> something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid

2FTE’s vs what?

The question isn’t is this free, the question is how large is the total staff including price negotiations, doctors, and IT time spent handling billing issues, and is Medicare more or less than 50% of the total.

I am ware of one hospital and 2 medical clinics where the difference is very much in favor of Medicare.

Re: The American Healthcare Conundrum

#79

Post by ropable »

timtim51251 wrote: post #7

Lots of people are saying nonsense here. The actual reason commercial insurers pay more is that's the only way to can make more profits. Because of Obamacare requiring 80% of the money they collect to be spent, the insurance companies just get to keep 20%. So insurance companies spend more so they can collect higher premiums. That's how they make more money. Several doctor friends have told me this as well.

You mean that there is a rule which prevents for-profit companies offering personal health insurance from pocketing more than 20% of revenue?

Those poor, benighted shareholders. What a socialist hellscape.

Re: The American Healthcare Conundrum

#80

Post by underlipton »

No debate about the viability of Medicare-For-All is made in good faith, at this point. The only valid debates are about implementation. No one should entertain any move conversations about whether we should go to a single-payer system, only how we should.
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