It’s the Insurance Companies, Stupid

I want the free market to transform healthcare.  Direct Primary Care is part of it.  And I believe prices will come down….to a certain point.   You see, there is one elephant in the room that needs to be exposed, the good old insurance companies. As this article in Bloomberg points out:

  • But the thing that few people talk about, and that no serious policy proposal attempts to fix—the arrangement that accounts for much of the difference between health spending in the U.S. and other places—is the enormous administrative overhead costs that come from lodging health-care reimbursement in the hands of insurance companies that have no incentive to perform their role efficiently as payment intermediaries.

It’s like the cost of colleges.  Since I went to UVa thirty years ago the tuition for out-of-state students went up 600% or more.  That’s not inflation, folks.  That’s greed and it’s not coming back down.  Since Obamacare started the premiums for people who actually pay went up 40% to 300%.  Do you think that’s coming back down?  Are you kidding more? More from the article:

  • More than 20 years ago, two Harvard professors published an article in the prestigious New England Journal of Medicine showing that health-care administration cost somewhere between 19 percent and 24 percent of total spending on health care and that this administrative burden helped explain why health care costs so much in the U.S. compared, for instance, with Canada or the United Kingdom. An update of that analysis more than a decade later, after the diffusion of managed care and the widespread adoption of computerization, found that administration constituted some 30 percent of U.S. health-care costs and that the share of the health-care labor force comprising administrative (as opposed to care delivery) workers had grown 50 percent to constitute more than one of every four health-sector employees
  • Because insurers are paid a fixed percentage of the claims they administer, they have no incentive to hold down costs.

Unless there is some plan to break these insurers monopoly and create competition then overall healthcare costs will still hurt the common man.

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  9 comments for “It’s the Insurance Companies, Stupid

  1. March 18, 2017 at 5:31 pm

    Yep. We can’t trust the insurance companies, and we don’t trust the government
    (because “government” means a lot of things, all confounded, we each get to distrust
    smething different.) – we COULD have an easier
    and better Medicare system that could be morphed into a single-payer system, but we
    don’t. Why not? It’s the Republican’s fault (wanting to starve the beast, wanting to
    unsubsidize the poor and not so poor alike, forcing rules that are penny-wise and
    pound-foolish as the price of compromise), and it’s the Democrat’s fault (agreeing to
    compromise, not having our best management experts help design the systems,
    so everything about healthcare for both the well and the sick is a hassle, and everything for
    doctors is a hassle, never having eoough power to cut out insurance companies ).

    How do you think we should do “it”, Doug? Is there a country that has
    gotten it mostly right?

    As I see it, the problem with Government-funded health care, or Government-provided
    health insurance (same thing), is the distrust of patients and of doctors
    that breeds bureaucracy, and second is the unwillingness or inability to spend the
    necessary amount of money; what can we do about this?

    (Note the problem with private healthcare is also the inability to spend
    the necessary amount of money (for many).

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    • Pat
      March 19, 2017 at 9:56 am

      Gary, we are $20 TRILLION in debt, in large part due to Medicare. Medicare has NEVER been actuarially sustainable, has never, ever been “self-funding” despite the lies coming from both sides of the aisle.

      How would you pay for all of this?

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      • March 20, 2017 at 6:13 pm

        I’d not worry about it right now – I’d “print” the money, until
        that doesn’t work and then I’d raise taxes.

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        • Pat
          March 22, 2017 at 10:26 am

          So you would put the entire economy at risk for the sake of a universal health care that would only guarantee rationing, shortages, and cost overruns. You are right that bureaucracy grows from a distrust of doctors: your approach will worsen that. You lament the inability to spend the ‘necessary’ amount of money for many, yet the great majority of those employed in the health care industry cannot even dispense a Tylenol. Proponents of ObamaCare claim that mess created “2 million new jobs” in the health care industry, yet not a single new nurse or physician. Your approach would only be used to great more gov’t health drones shuffling meaningless data, and further constraining actual medical personnel – not an improvement!

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    • Doug Farrago
      March 20, 2017 at 6:39 am

      How was it so affordable 50 years ago? The free market with certain safety nets. Keep reading the blog. I have been answering your question for 15 years.

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  2. Gene Frank
    March 16, 2017 at 8:16 am

    The solution is single payer. Insurance companies are a parasite that consumes resources without providing comparable economic value. S

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    • Doug Farrago
      March 17, 2017 at 7:35 am

      Can only agree with your second thought about insurance companies. You know what is almost as bad? Having the government in charge of healthcare. Single payer is moronic and will not work here.

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    • Pat
      March 19, 2017 at 9:57 am

      Gene, how would you pay for all of this?

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  3. Gerard Mazza
    March 15, 2017 at 12:54 pm

    I have a small practice, myself, a PA, and a FNP. Our costs just to do the billing is $97,000 a year. That is outrageous. In the US approximately 20% to 25 % of the health care dollars go into the billing process. If we were at 5% like most other nations, we could take that extra and cover all of the uninsured. Why does it take someone with a degree in medical billing to be able to figure out how to fill out the invoice i.e. Insurance claim form so we can get paid. Why is it that complicated? I doubt there is a physician in this country that would have the knowledge to fill out the. I’ll for their own service that they provided. And to “help us out” ICD 10 just added 40,000 new diagnosis codes. I have not heard a single politician ever address this issue. When Obama was running for office and made the comment that he was going to cut costs by getting rid of the waste in medicine, I told my wife that 95% of the waste in our office was caused by having to comply with useless government regulation.

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