> 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 reason to change.

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phil21 3 hours ago | parent | next [-]

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 subsidizes Medicare and Medicaid even after you add in admin overhead.

	▲	rexroad 2 hours ago \| parent [-]
		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.

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nradov 3 hours ago | parent | prev | next [-]

That's true to an extent, and those minimal controls are why Medicare also wastes billions on paying fraudulent claims.

https://relentlesshealthvalue.com/episode/ep502-how-some-pre...

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da_chicken 2 hours ago | parent | next [-]

They waste billions on fraudulent claims because they don't fund the program well enough to have compliance enforcement or auditing.

Also, I'm not going to trust a podcast owned and operated by Stacey Richter, who also just so happens to be the co-president of Aventria Health Group and QC-Health.

	▲	AnthonyMouse 2 hours ago \| parent \| next [-]
		> They waste billions on fraudulent claims because they don't fund the program well enough to have compliance enforcement or auditing. These are synonyms for having higher overhead, right? If you pay a billion dollars in claims with ten million dollars in administrative costs then your "administrative overhead" is 1%, even if half the claims are fraud. If you increase "administrative costs" to a hundred million to get rid of the fraud, in practice you just saved 410 million dollars but now your "administrative overhead" is up to 20%.
	▲	nradov 2 hours ago \| parent \| prev [-]
		Trust is irrelevant. You can verify all of the statements made by Brian Machut on that podcast with independent sources if you like.

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Projectiboga 3 hours ago | parent | prev [-]

Yes but the Medicare and Medicaid reimbursement rates are below breakeven so cash and insurance rates have to be above provider breakeven. The main cost frictions are administrative costs for billing on both the insurance and provider sides.

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nradov an hour ago | parent [-]

That's true to an extent, but some provider organizations manage to survive with patient populations that are almost entirely Medicare / Medicaid. Many provider organizations are just badly managed and haven't taken steps to optimize their finances through automation or participation in value-based care programs.

	▲	lupire 26 minutes ago \| parent [-]
		See the above comment about fraudulent billing for non-existent illnesses that don't need treatment.

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CWuestefeld 2 hours ago | parent | prev [-]

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 because they spend far less than commercial insurance on overhead like claims processing. This claim is true. But the impression that it gives is absolutely the opposite of reality. The reason that Medicare doesn't spend as much on admin is that they offload all of this work onto the providers. Every hospital in America has a "Medicare Reimbursement" team. A moderate-sized hospital is going to have something like 2 FTEs focusing just on the reimbursements from Medicare and Medicaid. And that's a lot more work than just filing the right forms for each case. There's a ton of additional work. Each spring they have to file a HUGE "Medicare Cost Report", requiring a couple of months of work to get all the data in place for it. (Source: my wife was "Director of Reimbursement" at various hospitals for quite a few years, before going into consulting.)

That Medicare Cost Report that I mentioned is, beyond a huge effort sink, the source of many other evils. Because of the amount of work that's needed to gather and collate all this data, hospitals naturally structure their Accounting around the way Medicare wants them to report. The thing is, that's largely orthogonal to the way a rational person would do cost accounting. The result is the common criticism about how widely varying the cost of a given specific line-item is between hospitals: they don't really know how much a given procedure costs because that's not how they track their expenses, so they apply some allocation heuristics, and every hospital does that a bit differently.

There are also various perverse incentives in the system. For example, Medicare is smart enough to know that it costs more to deliver care in NYC or SF and so forth. Every locale has a Cost Index that scales how much they expect to need to pay. This leads to hospitals needing to show that their expenses are higher so they should be classified into locale X rather than neighboring locale Y.

Another one my wife told me about her hospital: Medicare realized that a lot of UTIs were hospital-acquired, and they rationally said that they would no longer pay for UTI treatments unless the hospital could prove that they were not hospital acquired. Well, maybe that wasn't rational, because with Medicare/caid being such a huge portion of their business, they changed their policy to test for UTI for everyone at admission, so that they could furnish the proof demanded. Think of all that wasted lab work...

So no, Medicare is NOT more streamlined and efficient. It's absolutely, 180-degrees, the opposite of that.

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Retric 2 hours ago | parent | next [-]

> 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.

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CWuestefeld 2 hours ago | parent [-]

2FTE’s vs what?

versus nothing. Hospitals don't have to maintain a whole team for UnitedHealth, or for Anthem, etc.

This is my point. Medicare cooks the books to look more efficient by offloading their administrative costs onto providers. Other payers can't do that because, even if huge, they don't operate at the same scale.

Think about it: we often hear on the news about disputes about contracts when a local hospital's agreement with some insurance company comes up for renewal. They play hardball, getting local news to run stories on how many people will be affected if they can't come to terms. But you'll never hear this in the context of Medicare/caid. Hospitals have leverage to negotiate with commercial payers, but not with the government.

	▲	nradov 2 hours ago \| parent [-]
		Depending on the size of the health system it may not be a team of multiple FTEs but they absolutely do expend significant resources on managing differences between commercial payers. They all have different rules about covered services, step therapy, prior authorization, hospital admission, etc. Sometimes those differ significantly even between health plans offered by a single carrier.

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mwwaters 2 hours ago | parent | prev [-]

Medicare has overhead, but you’re not saying whether it is more than commercial insurance. The admin expense/profit portion of commercial insurers also don’t take into account provider admin costs (not to mention the huge amount of time patients can deal with denials, appeals, etc.)