They are not taking any losses; they just charge the regular price with a very tiny profit margin. US healthcare costs are heavily inflated. Insurance is a scam that lets the rich get richer. All insurance should be non-profit.

We all contribute to the pool at a time when we don't need it so we can use the money when we do, not to make CEOs or stockholders rich. That is how an insurance pool should work. Any excess money at the end of the year should be moved to the pool for the next year, not as a bonus on CEOs' 100m+ salary.

No, this absolutely does not explain the US's wildly off-base per-capita expenditure because uninsured people still go in the denominator of the per-capita figure! I'm sure the per-insured-capita figure is worse but that's not what we are comparing!

Americans are constantly trying to exclude uninsured people from their statistics (and, worse, from the care itself) but the comparable countries don't do this so it is utterly ridiculous to propose that the correct statistical comparison is one in which the US excludes the undesirables while other countries don't.

https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...

    Total health spending per capita in PPP$
    
                    2024    2023    2022
    United States   14,885  13,818  12,898
    Switzerland      9,963   9,301   9,089
    Norway           9,393   8,909   8,533
    Germany          9,365   8,503   8,652
    Netherlands      8,436   7,615   7,517
    Austria          8,401   7,697   7,700
    Luxembourg       8,087   7,173   6,854
    Sweden           7,871   7,364   6,977
    Ireland          7,813   7,027   6,748
    Belgium          7,750   7,178   6,906
    Australia        7,469   7,015   6,907

That claim is at odds with the working paper's methodology, which gets a good chunk of the $1T in savings it discussed by assuming very sharp cuts to practitioner compensation.

A lot of the rest of the reasons are carrying the deadweight of administering regulation, and dancing with the existing and prospective malpractice suits that randomly benefit the system sometimes, but always cost everybody, and warp the practice of medicine and patient healthcare experiences.

It also means that emergency rooms can be used just for emergencies and ongoing and preventative care can happen in clinics. Cheaper to operate and preventing preventable emergencies lowers the load.

Yeah, and they all generally get there by paying practitioners much less than the US does (by integer multiples). Single-payer, which this working paper equates with "universal coverage", is in fact not the norm among universal systems; besides using Medicare to ration the supply of practitioners, the original sin of our system is employer-based coverage, not payer structure.

Health care is an absolutely massive industry (everywhere, not just in the United States), and slashing compensation in a massive industry by top-down fiat is in fact not an especially easy thing to do.

>In every case costs have gone down and outcomes have improved.

this isn't really true though, if you look at survival rates of many diseases.

Truly. Aetna, United Healthcare, Anthem, etc are examples of industry that does not need to exist, and exist only to serve the status quo.

Each of those are companies worth billions of dollars that could be instead used to lower the individual cost of providing health insurance.

As you say, this would of course be unsavory in some respects as those companies employ a lot of people. It's not a very economically productive industry though, the main output seems to be consuming patients' and doctors' time, causing financial anguish, and causing stress among people as to whether or not if their condition will be covered.

You can search for more reports, because they do vary based on methodology. But the median hospital in the US makes between -1% (yes, negative, they lose money, because a huge percentage are non profits) and 4% depending on the source.

When the hospital charges you $37 for an aspirin, that singular pill might have a crazy profit margin in isolation. But your entire treatment could very well be losing the hospital money.

In my own anecdotal experience, the one hospital I know enough details about to comment on specifically, had something like 85% of patients costing the hospital more money than the hospital made. It was entirely funded by the relatively small number of people who had the “right” insurance and had the “right” procedures done.

Eg Kaufman: https://www.vizient.com/insights/reports/national-hospital-f...

On the occasions that I’ve watched a hospital go through the actual process of selling a small amount of inexpensive medication for a large amount of money, there is a ridiculous amount of ceremony involved. I can easily imagine that it costs that hospital 2 cents for the pill, $5 in amortized capital plus operating expense for the facility that stores that pill, plus $25 in labor and IT expenses to get that pill to the patient.

Audited financial statements of all kinds of hospitals, both non-profit and for-profit. Here’s data from Moodey’s a credit rating agency: https://www.chartis.com/insights/hospital-margins-trend-high... (“This month, Moody’s credit rating agency released its annual not-for-profit and public healthcare median financial report for 2024, showing that overall hospital performance continues to improve. The median operating margin increased from 0.5% in 2023 to 1.5% in 2024.”).

The $37 for an aspirin offsets huge costs elsewhere for (non-NP) nurses, receptionists, janitors, orderlies, etc., who can’t bill directly to medicare.

Insurance pays the higher of their negotiated rate or the billed charge. Medical facilities set their billed rates so high that they’re guaranteed to be higher than all negotiated rates, ensuring that they get paid.

When you see $37 aspirin on the line, nobody actually pays $37 for it. The billed amount is replaced with whatever insurance rate is allowed for that. If someone is cash paying they get a large discount.

The billed items also have to cover everything. It’s not directly $37 for the aspirin, or the $5 or whatever allowed coverage it ultimately gets billed it. That had to cover the facilities, the salaries of the pharmacy staff who reviewed the request and dispensed it, the staff who inventory and order the medications, and the cost of billing insurance.

The only part that nationalized health care would change are the allowable billed rate and maybe the administrative overhead of billing different insurances. Even nationalized health care systems have admin overhead though.

You can think of it like when you have to pay $11 for a single glass of wine from a bottle that the restaurant paid $10 for. You’re not just paying for the liquid, you are paying into a big bucket of charges that all need to add up to more than the cost of the supplies, staff, building, and everything that goes into running it. The margin on individual products doesn’t make the entire operation profitable.

It comes from the fact that lots of the charges they bill (both of the patient share billed to insured patients and of all costs billed to uninsured patients) end up written down or off because they are uncollectable.

The margin built into the prices bulled is not the actual margin the hospital ends up with.

Hospital billing practices are often terrible or even fraudulent, but stories about the $37 aspirin are generally misleading. Most hospital claims and bills are actually coded around day rates and DRGs, so even if the aspirin shows up as a line item it doesn't actually impact the patient's financial responsibility or the amount allowed by their health plan. (I'm not trying to defend such a confusing system, just explaining how it works.)

Medicare has been playing a shell game with reimbursements for decades. They cut the base rate for an office visit or hospital stay to below the cost of the actual service, but allow for separate charges for various things that make up the difference so that doctors don't just stop accepting Medicare in mass. That's why you get billed $37 dollars for aspirin, $15 for drug administration, $50 for IV placement, $10/bag for saline drips, $75 for vitals checks, etc. That way the hospital can make up the money lost from the actual visit charge, this also requires more administration overhead, to both keep track of all the additional charges, and to make changes as the rules change.

You understand that hospitals have more costs than just aspirin, right? Depreciation, amortization, utilities, rent, taxes, maintenance, salaries, etc...

Its all coming out of revenue.

This is because a whole swath of people are getting the aspirin for free (uninsured) so they need to gouge the payers for the aspirin.

Also, then, of course, we need to cover the United Healthcare guy's salary, which decreases margins.

Ever hear of loss leaders? Some parts of a typical hospital make money while others lose it hand over fist. The overall margin isn’t across the board, it’s after everything hopefully balances out.

ER’s for example are money pits, but society really needs them.

https://www.definitivehc.com/resources/healthcare-insights/h...

Hospitals, now that private equity is involved, do this weird cost shifting accounting BS with shell companies etc, as such their books aren’t straight forward and the 2-5% thing is likely greatly underestimated given the amount of understaffing PE has driven in that space and how much gouging there is from PBM etc.

Hand-waving numerous details, but - That $37 isn't the price in the hospital's gift shop. It's n=1 pricing, hand delivered to your bedside by a nurse with a whole hierarchy of higher-level medical & admin staff behind her, and documented out the wazoo. Aspirin could be free & unlimited at the hospital pharmacy's receiving dock, and it wouldn't affect the @bedside price.

The US has top-tier cancer survival-after-diagnosis outcomes. We spend too much to get there, and other countries in our cohort would "argue" that we get those numbers in part by diagnosing earlier and that our outcomes are broadly similar, but if you're going into these debates with "the US private health care system causes cancer deaths", that's a pretty rebuttable argument.

>Socializing healthcare isn’t going to get an huge portion of the population out of their cars and get them walking as a primary or secondary mode of transportation

You would think so but once healthcare cost becomes a government policy issue people complain about its spending and they are forced to try and bring that cost down. One of the ways they did that in my country was to promote biking to work and build bike ways.

Europeans do pay much less (though: for roughly the same outcomes --- probably the same outcomes if you control for wild SES variance across the US).

Not the parent, but here's one source: https://www.vizient.com/insights/reports/national-hospital-f...

There are many others as well.

FWIW, your experience doesn't seem contradictory to the operating margin claims.

Your experience seems to be that hospitals are run very inefficiently, implying that if they were run efficiently that their operating margins would be much higher than 2-5%. That may be the case, but that still means the Yale paper's claims don't make sense (unless they also propose some mechanism by which to suddenly force all hospitals to start operating efficiently).

But I'm also skeptical of your claim that hospitals are leaving a huge amount of operating margin on the table. IME, very little can be explained by "everyone is stupid." Would I be surprised if a given hospital was run very inefficiently or if a given hospital had a particular poor CIO or administrator? Not in the slightest. Would I be surprised if ALL hospitals were run by idiots who were leaving 10% operating margin on the table? Yes, I would be.

Yes, but there's a difference between finding out whether P=NP and some of the brightest geniuses in the country actively opposing you.

Are you saying that most hospitals have 50% profit margins, of which 90% are paid to the chairman leaving only a thin margin? That seems difficult to believe.

They may have 4.2% margins knocked down to 4% by exec comp but I don't see that how that fact would change OPs point.

Billing and insurance ("BIR") is reported at around 8.5% of revenue --- admin isn't just BIR, as you note. But replacing private insurance with Medicare doesn't drive BIR to zero; Medicare is also a claims-based system. Estimates are that you'd cut BIR by somewhere around 30-40% (of 8.5%).

Most of the savings in these kinds of reports simply comes from paying doctors less (or delivering fewer procedures, which is also a problem we have.)

No, fraudulent billing is the natural predator of insurance companies. You have this backwards.

The US' healthcare model is not unique, and almost no countries have zero-cost-to-consumer healthcare systems (and none of them are free -- they're just paid by taxpayers instead of consumers). "Free" healthcare is the exception rather than some kind of international norm you incorrectly make it out to be.

The first step to reforming US healthcare is actually understanding it, and understanding some international designs. Lying about it doesn't help.

Good old American Exceptionalism.

People wouldn't be externalities if healthcare costs money. Next thing you know you would have to pay attention to the environment or god forbid the food. It would eat away the budget for overthrowing countries and bombing children. Watch them elect a democrat to do the bombing next round and a new republican after that. It sounds like a joke but it isn't funny.

Every country with nationalized healthcare systems has lower wages for clinicians. So the notion that this wouldn't lower salaries is just ludicrous. That might be an acceptable trade-off but let's not pretend it doesn't exist.

In practice what we would see under a single-payer system is that many doctors would opt out and shift to a cash payment model. So the shortage of doctors would get even worse for patients who can't afford to pay out of pocket.

This is broken window fallacy. The $1T not wasted on healthcare inefficiencies would be spent/invested on other things, creating jobs there. Yes, there would be churn because a good number of people involved in the bureaucracy of private health insurance would lose their job and possibly their career. But these things get smoothed out. Social supports (should) exist to dampen the effects of such churn and keep the economy agile.

We're quick to want to automate trucking, manufacturing, even knowledge jobs and say "ooh but the horse shoe maker became the tire installer" but the pointless middleman jobs making everyone's health worse seems to be the line in the sand for job automation.

You can't touch the legions of people who exist to make things more expensive.

Only the American mind can comprehend leading to the deaths of tens of thousands of your own people for the sake of 3% of your economy. As long as the line goes up.

If we're taking the $1T figure seriously, let's take the other figure seriously too. Let's slash it to be more conservative while we're at it and say it would only save 90k lives. Do you think 3% of your economy is worth sacrificing to prevent the equivalent of 30 9/11s? And that's before considering that other people here already explained how these 3% are offset by other gains - if not completely then still substantially.

> these are about rebuilding an entire economy, a painful process.

"Sorry kids, can't turn off the Orphan Grinder 9000, there's a whole supply chain behind it that would have to restructure."

The money doesn't vanish. It stays in the hands of people. People who would spend it on other things, feeding it into the wider economy instead of the pockets of a small number of corporations. There's zero reason to think this would result in anyone rioting except maybe insurance company CEOs.

The US spends more than 16% of GDP on health. The UK around 11%.

Shrinking US health expenditure by 3% of GDP while roughly maintaining health outcomes is eminently, obviously doable.

Well it wouldn't "vanish". The $1T savings (if produced) that were once spent on healthcare would instead be spent on anything else.

This seems a lot like the parable of the broken window but for inefficiency rather than destruction per se.

I mean there's flavors of contributions to gdp. Spending money on make work for people digging holes still counts. I wouldn't mind 1 trilly being freed up for more effective use. I imagine we could get pretty good returns on it just paying it against the debt as a simple idea, effectively a tax cut.