Tuesday, January 3, 2017

Americans Can't Do The Basic Health Care Arithmetic

A minimum of $300 billion dollars saved.  That is what I thought could be achieved by eliminating insurance companies from the American health care system.  It turns out the savings are a lot bigger than that.  Just looking at countries where the per capita health care costs are at least $2500 and comparing the USA to Switzerland - the country with the next highest per capita health care costs we get the following equation:

$2640 (the difference) x 320 million (current population the the US) = $844.8 billion

That is what converting the US health care system to single payer would involve.  No more managed care companies (MCOs)  pretending to be efficient.  No more pharmaceutical benefit managers (PBMs) rationing medications in order to make profits.  No more outrageous Obamacare premiums that seem to be rising with no end in sight.  No more MCOs, and PBMs making your doctor's life miserable and burning him or her out.  The writing should be on the wall by now for all Americans.  The US Congress and their healthcare lobbyists fully intend to continue the unsustainable health care bureaucracy to every American until the last possible moment.  That is as true for Republicans as it was for Democrats.

What do I mean by unsustainable?  According to KFF.org in 2016 employer purchased health insurance policies averaged $18,142 per year ($12,865 paid by the employer and $5,277 paid by the employee).  For retirees the situation is even more stark.  I used the AARP calculator to look at estimated health care costs only in retirement for a theoretical couple retiring at 66.  The result was an estimated $225,463.  Of that total only $121,529 was covered by Medicare and that left a shortage of $103,934 in out of pocket costs.  To me that means the average Social Security dependent senior citizen in this country cannot cover their health care costs even with Medicare.  Some of them are telling me their supplemental policies are as high as $20,000 to $25,000/year.  For any couple trying to stay in their own home in retirement - health insurance premiums and property taxes will easily absorb most if not all Social Security income.  The gross estimate by this calculator varies from state to state but some sources have given the gross average amount for a retired couple to be about $260,000.

And where does all of that money go?  That is easy.  It goes to bad management.  In a country that has fewer doctors and fewer hospital beds than most countries in the above graph - it should be obvious that rationing medical care to make profits for Wall Street does not work.  Two recent experiences will illustrate the problem.  I heard a presentation given by a speaker from one of the major physician run medical clinics in the  US.  For some reason she started talking about the ratio of administrators to physicians in their organization.  The number given was 50 administrators to every physician.  That is an absolutely stunning number.  With that number of people in hospitals and clinics - it should raise the question "What are they doing there?" and "Why does it take this many people to administer the most accountable professionals in the US?" Not only that but what has all of this administrative oversight accomplished?  The answer is in the graph at the top of this page - the most expensive and most inefficient health care system in the world.  It is basically an expensive jobs program for managers and bureaucrats, and bad technology.

The second scenario was a physician talking with me about his speciality clinic of 5 physicians.  He recently learned that they were being administered by 15 mid level administrators reporting to a single higher level administrator.  When he questioned this practice, he was asked why he was concerned about the number of administrative staff.  I guess according to the previous estimate he was doing quite well with a ratio of 16 administrators for 5 medical staff.

The real impetus for this post occurred as I was doing some exercises at home before work this morning.  The Today show was playing in the background.  Matt Lauer and Katie Couric were interviewing Trump advisor Kellyanne Conway about a number of issues.  I heard the question: "Have they (Republicans) come up with something to replace Obamacare?"  Ms. Conway responded with the typical free market solutions - buying insurance across state lines, health savings accounts, etc, etc.  None of these are solutions to bad management and what is basically corporate welfare for the army of healthcare administrators in this country.  The only correct response to that question is:

Single-payer health insurance.

Get rid of the unnecessary managers and save a trillion dollars in mismanagement.

George Dawson, MD, DFAPA


The figure on per capita health care spending is from the Kaiser Family Foundation accessed on January 1, 2017 and this is their citation:

OECD (2016), Health spending (indicator). doi: 10.1787/8643de7e-en (Accessed on 01 January 2017).

 I have no affiliation with the Kaiser Family Foundation or the OECD and their graphic is used here per their terms of use for non-commercial, non-profit sites.

Supplementary 1:

I would be remiss in not pointing out the mountain of fake news that goes into getting Americans to believe that some kind of government led "reform" that concentrates market power into a few for-profit proxies is a good idea.  There is the associated fake news from both parties that just happens to leave the pricing power to private industries,  In that context the fake news by Ms. Conway this morning is all part of an unmistakable 30 years of nonsense stretching back to the Clinton administration and their idea about "managed competition".  We have had nothing but mismanaged competition ever since.  The dynamic in health care is an obvious parallel to the financial services industry and their guaranteed profits from the work of Congress.  In both cases, all Americans foot the bill.

Supplementary 2:

Let me remind the free market advocates that there is not now and there will never be a free market in health care or anything else in the USA.  It is (largely) a Republican fantasy.  The major markets in the US all depend on government intervention and the sector with the best lobbyists gets the most favorable deals.  It is the only way to explain a trillion in waste, just based on "free market management" not including other boondoggles like a highly regarded electronic health record that is less functional than 1990s database software and paying $300 for 29 cents worth of epinephrine.

1 comment:

  1. Single payor does little to reduce the frictional middlemen costs without a massive reduction of burden of hyperregulation.

    I would ban current EHR requirements (that benefitted Obama bundler Epic Systems) and any regulations that do nothing but give an advantage to large providers. That includes all but the most basic HIPAA, much of JCAHO. I'd also work in some type of medimal reform, with a provision that middlemen making decisions but claiming not to are making medical decisions and are on the hook for them legally.

    I don't think the insurance companies are necessarily doing a better job than single payor and given the preening but self serving commentary by do nothings like Kaiser head Robert Pearl MD in Forbes, I would mind seeing a few cronies on the unemployment line.

    If single payor is done, it needs to be done by the states as laboratories, the way the founders intended. I guarantee that single payor by Washington will only be worse. Remember these are the same clowns wrecking the food supply with the Farm Bill, making everyone sicker in the first place. That's far from a panacea as I am certain California will make a mess of things, but a few states will be practical and realistic setting the model.