
The True Cost of Healthcare in the US - felipellrocha
http://truecostofhealthcare.org/
======
zaidf
We invited a dozen physicians for brunch this past weekend and they all had
stories to share about how little they make per procedure compared to the
amount the hospital makes.

Example 1: A procedure costs $6,000 to be done at a hospital. It prices out
patients paying out of pocket. The doctor realized that he himself gets about
$700 from it. So the doctor reached out to another facility who agreed to do
it for $1,800 instead of $6,000 for the exact same procedure. You can imagine
how happy the doctor's patients are, particularly ones paying out of pocket.

Example 2: A patient got upset a doctor's office wanted him to pay copay. The
patient got the bill and felt the doctor already got paid $1,500. When the
office informed the patient that out of the $1,500 the doctor only got about
$300, the patient was shocked.

Really what we need is a doctor compensation to everything else index. When we
get that, we will realize the sham most of the efforts to reduce healthcare
cost is. Most healthcare cost efforts focus on paying the doctor a little
less, say $300 instead of $400. Problem is, bulk of the cost is not the
doctor's fees. It is the cost of the bed, breakfast, Tylenol etc. We need
regulation on those fees.

~~~
specialp
For example 1: The reason why the hospital charges so much is the fact that it
gets stiffed for a lot of emergecy patients without insurance. Many hospitals
are on the brink of bankruptcy especially in poorer areas. This does not
always reflect in the huge disparity in prices people pay, but is a big
factor. Hospitals try to offset their losses by charging paying customers
more.

The real problems here especially with emergency care are that hospitals are
forced to eat the cost of treating non insured patients, and that patients
have no idea what something costs when they are there or if the people
treating them will be covered by their insurance. Insurance companies spend a
lot of time negotiating rates and making them somewhat uniform for them, but
this is totally opaque to the patient. We need to make it more clear to the
people being treated what things cost, and who is "in network". There have
been times that I went to an emergency room "in network" and I was "balance
billed" by nearly every doctor there due to them not being in network. What is
a patient to do? Sit there with a book of providers and procedures?

~~~
Spooky23
That's also a symptom.

One root cause is that the Federal government (ie. Medicare) must get the best
deal. If you give anyone else a better deal than Medicare, you are committing
an act of fraud, and DoJ will go after you. This is known as a price floor.

Layer upon this the web of contractual arrangements surrounding different
insurance providers, and you get to a place where you need to mark up the MSRP
of a procedure to safely operate as a business.

The issue with poor areas having bankrupt hospitals is obviously complex.
Hospitals are good for emergencies, really sick people and procedures. Not so
good or profitable for primary care -- they are a lowest common denominator.
You cannot afford to scale up quality outpatient medical practices if you are
reliant on Medicaid to pay everything, and you can't operate small medical
practices effectively and deal with all of the compliance activity that
medicaid comes with.

~~~
JoshTriplett
> One root cause is that the Federal government (ie. Medicare) must get the
> best deal. If you give anyone else a better deal than Medicare, you are
> committing an act of fraud, and DoJ will go after you. This is known as a
> price floor.

Interesting; I don't see any obvious reason why other insurance companies
couldn't do exactly the same thing by contract.

Can you charge Medicare for things Medicare makes you do that other insurance
companies or individuals don't, such as billing them for time spent processing
their red tape?

> Layer upon this the web of contractual arrangements surrounding different
> insurance providers, and you get to a place where you need to mark up the
> MSRP of a procedure to safely operate as a business.

Sounds a lot like selling enterprise software: corporate purchasers expect to
receive a discount, so you can either antagonize them by not giving them what
they expect, or mark up the price enough that you can offer "discounts" back
to the real price.

------
ambiate
After visiting the ER with a 108F temp due to pneumonia, I can attest to the
fact that ER visits are a rip off. 3 unique doctor visits to the room + 1 IV +
phlegm sample + 1 $60 pill + 1 prescription = $4200 for 50 minutes of office
and 120 minutes of wait. Afterwards, I explained I did not have insurance. $60
pill was wrote off instantly. $4200 turned into $1200. Govt reimbursed 3/4ths
of the bill instantly to the hospital. $1200 got wrote off after 3 months
because it was not worth collecting...

Edit: The interesting thing was each doctor had an individual bill of $600
sent to me. These are still in collections. The phlegm sample cost $120 and
come from a separate clinical laboratories bill.

My wife's birth control has a package value of $130/mo. Health insurance ($600
for wife, and kid), had a copay of $40 for this medication. I called the same
clinic, requested generic and expressed my need to pay in cash. Instantly
brought the price down to $8/mo.

I did not sign up for health insurance this year. It is a complete waste. I
usually pay more than just asking for generic and paying with cash. The 'poor'
clinics here have a higher quality of care and staff, and are more affordable
than my co-pays.

~~~
phren0logy
Not having health care works if you don't have a catastrophic injury, and/or
you are willing to let the hospital write off services and pass the bills on
the the rest of us.

This isn't really a sustainable plan for the nation.

~~~
ambiate
There's a hidden truth in 'writing off'.

Insurance companies wager paying the bill too. They say "We'll pay 60% of that
$8000 ER visit."

Guess who covers 25% of that leftover 40%? In a majority of cases, the
government.

(Source: My aunt has worked for a hospital performing these write-offs the
majority of her 45 year life.)

------
bdesimone
I haven't read the whole site yet but I jumped to the topic I know fairly
well, medical malpractice. Just some additional notes to consider:

* 9 out of 10 physicians would discourage their children from becoming doctors.[3] There are many reasons for this. Malpractice insurance premiums are a factor. Not the only factor.

* California physicians have the lowest insurance premiums in the country. This is directly the result of tort reform, and caps on pain and suffering payouts. His survey of physicians he knows in the area is subject to this sampling bias. Malpractice _is_ a big issue in other states.[0] California is the model for tort reform for this reason, by not acknowledging this fact, he's missing a big aspect of the national (not just Californian) issues regarding healthcare.

* California physicians also have some of the lowest reimbursement rates in the country.

* As he indicated, internal medicine docs pay far less in premiums (as he noted) than other specialties. Surgeons pay much higher premiums. [1]

* The California Department of Insurance does a good job of keeping most premium information public. It's not a secret what your average doctor pays in insurance.[2]

[0] :
[https://en.wikipedia.org/wiki/Medical_Injury_Compensation_Re...](https://en.wikipedia.org/wiki/Medical_Injury_Compensation_Reform_Act)

[1] : <http://cl.ly/image/0m390m1F2D2D>

[2] : <http://www.insurance.ca.gov/0250-insurers/0800-rate-filings/>

[3] :
[http://www.thedoctors.com/ecm/groups/public/@tdc/@web/docume...](http://www.thedoctors.com/ecm/groups/public/@tdc/@web/documents/web_content/con_id_004676.pdf)

~~~
danielweber
Richard Thaler just had this op-ed in the NYT on ways to reduce costs, talking
some about tort reform:
[http://www.nytimes.com/2013/02/24/business/overcoming-
obstac...](http://www.nytimes.com/2013/02/24/business/overcoming-obstacles-to-
better-health-care.html?_r=2&);

I'm skeptical about tort reform as a panacea. However, lawsuits are incredibly
expensive, and so doctors take steps that we would otherwise call economically
unreasonable to avoid them.

The amount of tort reform I think is really necessary is whatever would allow
me to set up a private equivalent to the UK's NHS here. If someone thinks they
are getting denied care that they deserve to have, the decision needs to be
very cheap to adjudicate.

~~~
bdesimone
It's not a panacea. It's a part of the very complicated system that is
providing and paying for healthcare. How important are insurance premiums
relative to other factors? It depends. But there are costs to having uncapped
settlements, and lack of tort reform.

Also, insurance premiums effect practices of different sizes differently. I
personally think you can attribute the shift away from smaller private
practice groups towards larger groups and hospitals are for other reasons.
Insurance premiums are somewhat to blame, but I think the bigger driver is
that many of the government mandates are too expensive (n.b. this doesn't mean
it shouldn't be done) to take on for most smaller private practice groups.

I'm not sure how to respond to your comment about tort form if it get's us to
an NHS like system, because I disagree that's the best way forward. But that's
a topic for another day.

~~~
danielweber
Most opposition to tort reform comes from the left, and fans of European-style
health care also come from the left, so saying that we couldn't set up a
European style because of the legal climate is intended to cause cognitive
dissonance.

(I'm not advocating putting everyone into a government system run NHS-style
system. Surely, though, me and a few thousand of my friends ought to be able
to get together and attempt to emulate it if we wish.)

------
ender7
This Time article seems particularly apropos:

[http://healthland.time.com/2013/02/20/bitter-pill-why-
medica...](http://healthland.time.com/2013/02/20/bitter-pill-why-medical-
bills-are-killing-us/print/)

~~~
wiremine
Read it this weekend: I'd love to see a response from the health care industry
that wasn't hand waiving. If he's right on 50% of his facts, it is disgusting
how the system works.

~~~
Alex3917
"If he's right on 50% of his facts, it is disgusting how the system works."

There were only a handful of actual statistics in there. The one thing he is
wrong about though is that healthcare isn't "roughly 20% of the GDP", rather
it's about 17.9%. The furthest out cms.gov gives yearly projections is to
2021, and even then healthcare is only supposed to be 19.6% of the GDP. And I
think that might even include things like herbal supplements 'other non-
durable medical supplies', I'm not positive about that though.

Source: [https://www.cms.gov/Research-Statistics-Data-and-
Systems/Sta...](https://www.cms.gov/Research-Statistics-Data-and-
Systems/Statistics-Trends-and-
Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf)

~~~
Falling3
Facts are more than just statistics. There were numerous statements about
(what seems to be) gross, gross overcharging on everything from pens to
surgical gowns to diagnostic equipment. There were the exorbitant salaries and
let's not forget the chargemaster.

~~~
wiremine
Exactly: that's the part I'd like to see a rebutted (if there is a rational
rebuttal). The ad-hoc nature of their pricing model seems crazy.

------
dave48
Hi, My name is David Belk and I wrote the website. I noticed a lot of traffic
from here this Morning. I'd just like to say thank you and, are there any
questions I can answer? I'm having a busy Morning but I'll be free in about an
hour.

~~~
guylhem
One question : just how would you prioritize actions to turn heathcare into a
real market, or as close to it as possible ?

I would go for:

1) full price transparency

2) making price discrimination illegal

3) attacking the information asymmetry by providing a free, subsidized first
line triage

Whether treatment is taken or the patient decides to do without it, making
sure tests and diagnosis are performed could help proper self regulation of
consumption

It could also be made as a public service since it seems very close to a
natural monopoly (due to the subadditivity of the cost function - see for ex
<http://www.clt.astate.edu/crbrown/eleven1.htm> \- having big labs to process
blood test gives economy of scales but require high fixed costs)

It could therefore be politically defensible on grounds of efficient pricing
(ie pricing at the marginal cost, which requires subsidizing for natural
monopolies since average cost are above marginal costs), to avoid deadweight
loss.

The first line triage could then provide full price transparency (diagnosis ->
probabilistic DRG), from which the patient could either decide to "wait and
see", or to browse a catalog of hospital offering services (DRG -> prices)
knowing the price paid would be no different with or without insurance.

At that point, it might be possible to remove all price caps and floors, and
let the market work.

So basically, we could get a working market on the treatment side.

Traditional monopoly and oligopoly management (watching the HHI before
allowing fusions) could then keep it that way.

I'm a bit out of idea however to have integral pure and perfect competition,
at least until we get user-operable "all-in-one diagnosis devices" (like Star
Trek tricoders) to remove the information asymmetry.

My last rants on this topic were posted on
<http://news.ycombinator.com/item?id=5261137>

~~~
dave48
Price transparency is good but, what's also missing in health care is value
transparency. In other words, not only do most people (including most
physicians) not know how much anything in health care really costs, they don't
know how much anything should cost! The level of blindness in this business is
truly unprecedented. What's also needed are a number of consumer protection
laws that we take for granted in pretty much every other industry. Those alone
would go a long way toward correcting many of the problems we have in health
care.

------
cpeterso
Do other countries have employer-funded health insurance? Why doesn't my
employer pay for, say, my car insurance? This system discourages people from
leaving a job to start their own business because private health insurance can
be very expensive.

~~~
elemeno
In the UK, it's not unusual for employers to offer private health insurance
(or at least, it's pretty common for profesional jobs - I can't comment for
other types of jobs!). From their point of view, it's comparatively
inexpensive and the cost is probably easy recouped from their employees being
able to get health problems dealt with faster than they might on the NHS so
they're off work for less time.

Edit - Given that we've got the NHS as well, losing your private coverage
isn't such a big deal. It's nice to have, not a must have.

~~~
andrewaylett
I had private health insurance from a previous employer, and in my experience
it was almost completely pointless. I'm not inclined to rate its provision as
a substantial benefit for compensation purposes.

------
pstuart
That's my doctor's site! The real takeaway (to me) is that single-payer health
insurance would be the way to go.

~~~
thatswrong0
I think it's a bit more complicated than that. It's easy to look at other
countries and say, hey, that works there, therefore it will work here. But not
all governments are created equal. If the government in the U.S. had a better
track record, maybe it would be more palatable. But as is, I don't see single
payer being the solution to our problems.

~~~
pstuart
It doesn't solve everything but it should help to simplify matters greatly.

What would help too is ubiquitous electronic records management, e.g., any
records from a visit with one doctor should be usable by the patient at
another doctor.

Add to that cheaper testing and more AI / self-help and that should take it
even further.

Lastly, kill the corn lobby and get some real sense into people about how
their diet and lifestyle directly impact their health. What percentage of US
healthcare costs are going towards diabetes and any related illnesses? And
what percentage of that is directly related to obesity and a sedentary
lifestyle?

~~~
epmatsw
Electronic Health Records are harder to implement than you'd expect. HIPAA
sets really harsh penalties for violations that can occur much more easily if
hospitals and doctors provide open access to other facilities. Organizations
are also often reluctant to provide their data to other facilities because of
a perception that it will lead to a loss of competitive advantage. Add to that
the typical problems of cross-vendor interfacing between organizations.

That said, EHRs are definitely the way to go, and we'll see much more of them
in the future. Once Stage 2 of Meaningful Use[1] kicks in, you'll see a bunch
of hospitals scrambling to upgrade their IT infrastructure to make sure they
continue to receive the bonus Medicare/Medicaid payouts they're receiving now.

1\. [http://www.healthit.gov/providers-
professionals/meaningful-u...](http://www.healthit.gov/providers-
professionals/meaningful-use-definition-objectives)

------
mlguenther
The author missed a very important reason why hospitals are charging such high
fees. In 1986 Reagan passed the "Emergency Medical Treatment and Active Labor
Act". Since that time, hospitals are required to treat anyone, regardless of
whether or not they have insurance, as if they were a fully insured patient.
My wife, who is a physician in a busy hospital, consistently sees about 40% of
her patients have no health insurance and are receiving free healthcare from
that hospital. This may vary based on location, but I cant imagine by much.
Hospitals foot the bill in this situation, and that is why costs to the
insured are much higher.

Everybody seems to think they are smarter than everyone else when it comes to
healthcare reform, but in all of the "smoking gun" articles that are posted,
none of them have ever touched on this fact.

Even the new healthcare plan that passed does not address this directly, it
assumes that the people who do not have healthcare will use a state healthcare
exchange to get their own. I am a little pessimistic about this, and am
assuming that only a small percentage of those people will do this.

~~~
dave48
You should read my epilogue on why hospitals are going bankrupt:
<http://truecostofhealthcare.org/epilogue> Or watch the video:
<https://www.youtube.com/watch?v=LieVr0QvkME> No one is admitted to the
hospital these days who doesn't qualify by a rather strict set of criteria. If
you qualify and have nothing then, in most States, Medicaid picks up the tab.
If you have anything, the hospital gets it.Hospitals give free care the way
Heidi Fleiss gave free love.

------
ohwp
I'm not sure if this is true, but I heard that in some parts of China you only
pay for health care when you are healthy because when you are not health care
failed.

Ofcourse this raises a lot of questions about responsibility. But in our
society health care is making money when people are unhealthy. That is an
unhealthy situation.

------
mokash
Call me naive but why doesn't the US simply switch to a healthcare system
similar to the UK's NHS? I live in Britain and I live happy knowing that if I
get a scratch, I won't go bankrupt.

~~~
epmatsw
A significant portion of Americans don't trust their government to provide
efficient services. In general, we'll trust other citizens and corporations to
do a better job. On top of that, you have many people who are reasonably
insured and don't have to worry about it, many people who don't want to pay
for other people's healthcare, and many people who are scared of socialism.
Once you combine those groups, you end up with a pretty significant chunk of
the country that is opposed to single-payer for whatever reason.

That said, the US healthcare system's problems go much much deeper than just
single-payer vs private-public.

~~~
mokash
At the end of the day, my guess is it all boils down to your FREEDOM. right
guys?

------
pstuart
I pinged Dr. Belk about the dialog here and invited him to join this
conversation.

------
nirvana
Back when he was alive, Milton Friedman did a study of the costs of health
care in the US from 1900 to the 1970s. (I think the first study was in the
1970s, and it was updated in the 1990s)

What he found was that the funding mechanism of health care over that time had
shifted from patients paying out of pocket to government paying hospitals and
government incentivized (by making it a tax write off for employers) and
regulated (by preventing efficient pools of insured with state-by-state
regulations) insurance.

Consequently, not only did the availability of health care go down, but the
costs went up 26fold.

Or put another way, despite massive improvements in technology, medicine and
productivity over 70+ years, costs skyrocketed from what you could afford out
of pocket to what would bankrupt you. To put it in 2013 dollars, if you
hypothesize a $100,000 surgery, in 1970[1] it would cost you $100,000, and
you'd need insurance or go bankrupt, but in 1900 it would have cost you $3,846
(an amount you could put on credit cards today.)

Command economies don't work, and the change in health care over the last
century has been a centralization in control. I with Obamacare this has
dramatically ramped up and now there are boards to decide who gets what care
based on cost measures, rather than medical need.

Whenever someone talks about the need for socialized medicine because
"otherwise people would go bankrupt", remember it is the socialization of
medicine that caused costs to rise to the point where people would go
bankrupt.

[1] The study was originally done in the 1970s, but I'm using 2013 dollars
here so you can understand how cheap things would have been.

~~~
larrywright
One of the ideas I've heard discussed is that the only way we will ever get
the cost of health care down is if consumers are back in the drivers seat with
how the dollars are spent. Right now it's disconnected. I go in to have
something done, the doctor bills my insurance company, and I really don't know
(or care) how much it costs, unless I happen to look at the insurance
paperwork. The same goes for pharmaceuticals. Which pharmacy in your town has
the lowest price on that antibiotic that was just prescribed for your son's
ear infection? Who cares, right? It's a $15 co-pay no matter where you go, so
you go wherever is most convenient.

One solution that's been proposed is the increased use of HSAs + high
deductible policies. That way people are paying their expenses out of pocket
(for the day-to-day things at least), and are therefore more likely to shop
around.

I'm not hear to argue the merits of that, but it definitely seems like an
approach that might work. I fail to see how anything that takes control out of
the hand of the individual will fix this problem (short of regulating the
prices, which I wouldn't be a fan of).

~~~
nhashem
Unfortunately healthcare is not a market you often willingly participate in.
Some health needs can be anticipated, and doing more to encourage consumer
empowerment would definitely lower prices. Think about cosmetic surgery or
LASIK. Every participant in that market is voluntary, so all the providers are
motivated to do it cheaper and better.

But when you have a major health crisis, your "empowerment" is just
fundamentally limited. If you get into an accident with a loved one and
they're unconscious, you're not doing to be in a position to decide whether
you should go to the hospital 1 mile away, that may be X% more expensive than
the one 5 miles away. Your ability to price discriminate is also fundamentally
limited by your own knowledge of medicine. If you have a tumor and one doctor
suggests taking medicine A which costs $50,000, and medicine B which costs
$5,000, is A better than B? Is it 1000% better? If it's only 2% better, unlike
any other consumer product, are you trying to optimize for "value" or "not
actually dying"?

There's definitely things we can do in terms of government policy to encourage
more customer empowerment to bring down costs. But ultimately you have a
market with unvoluntary participation and opaque pricing, which means Adam
Smith can't really do his thing.

~~~
larrywright
You make some very good points, and I think you're spot on for the most part.
I think HSAs have more benefit for the lower end of the cost spectrum, such as
routine care, or minor medical issues (sprains, fevers, and the like). But I
don't know what percent of the total US healthcare spend is on those types of
items, vs cancer treaments and MRIs. So maybe it won't help as much as I'd
like to think.

------
huhsamovar
I am one of the lucky few who has insurance provided by their employer.
Unfortunately, if I am in a car accident and rack up $100,000 in bills, I am
bankrupt.

~~~
nicholasjarnold
> Unfortunately, if I am in a car accident and rack up $100,000 in bills, I am
> bankrupt.

...or you just have to haggle with the hospital and refuse to pay their
grossly inflated funny money prices.

I have a good friend who incurred 30K in bills for a 2 day stay related to a
broken femur. He has no insurance. Since seeing his bill, which wasn't
itemized at all, he's basically refusing to pay anything until he sees what
he's being charged for. In response to this demand the hospital reduced his
bill by about 12K, magically, and still providing no itemization.

He is still refusing to pay and only time will tell what the outcome will be.
It's very clear, however, that he was grossly overcharged and that the
hospital has no clue what they're really billing for. It's a game. Some people
roll over, others fight.

If someone really ends up with 100K+ in medical bills after adjustments then
it might actually make sense to take 7 years of 'bad credit' after a
bankruptcy. No easy answers here, but it's pretty clear we're all being
swindled.

~~~
lotharbot
The rule of thumb that I've heard (from a health cost sharing ministry [0]) is
that you should expect to be able to negotiate a discount of at least 40% if
you're a self-pay patient.

My sister shattered an ankle a while back, and was billed around $40,000.
Between reductions, writeoffs, and charities the hospital connected her to,
she ended up only paying about $5000.

[0] <http://www.chministries.org/whattodo.aspx> under "general information"

