Thursday, August 25, 2016

Why do we spend so much on health care?

Its the incentives, stupid!  The Atlantic has a nice summary of the problem.
Ten days after my father’s death, the hospital sent my mother a copy of the bill for his five-week stay: $636,687.75. ... but why should my mother care? Her share of the bill was only $992; the balance, undoubtedly at some huge discount, was paid by Medicare.

And what about President Obama's Affordable Care Act?
Like its predecessors, the Obama administration treats additional government funding as a solution to unaffordable health care, rather than its cause. The current reform will likely expand our government’s already massive role in health-care decision-making—all just to continue the illusion that someone else is paying for our care.

A better solution would limit the government's role to catastrophic insurance:
...a threshold of $50,000 or more ... (Chronic conditions with expected annual costs above some lower threshold would also be covered.) ... But the real key would be to restrict the coverage to true catastrophes—if this approach is to work, only a minority of us should ever be beneficiaries.

But what about poor people who cannot afford catastrophic insurance?
...the government should fill the gap—in some cases, providing all the funding. ... If we abolished Medicaid, we could spend the same money to make a roughly $3,000 HSA contribution and a $2,000 catastrophic-premium payment for 60 million Americans every year. That’s a $12,000 annual HSA plus catastrophic coverage for a low-income family of four. Do we really believe most of them wouldn’t be better off?


  1. Alcor can cryogenically preserve a human head for O($100k), and most of that is funds to revive the person someday, the actual cost of preservation is much, much lower, roughly $20k.

    If I had to choose between a few more weeks of miserable existence at extreme expense, or popping my head into a freezer and waking up someday Futurama-style with a healthy body again, I'd go for the latter. Not only would it save money in the present, but if reanimation becomes possible (and it seems to be gradually moving from "pure science fiction" to "something we might actually be able to pull off in another century"), it would lead to a healthier outcome.

    So does this mean that Medicare and the ACA should start paying for cryogenic preservation for those people who are amenable to it?

  2. While not as original as the post from 8/25/16 at 3:53, I'll comment that I think the last paragraph of the post is the most important. Ideas for how we can stretch dollars should always be welcome. Any idea is better than accepting current circumstances without any aspirations towards improvement. -Adelyn

  3. Lets add "and the Politicians?" after your answer. I think it all goes back to Medicare. It is because of CMS and politicians (via lobbyists) that we have such high drug costs in the US. Medicare is actually legally unable to negotiate drug costs but yet they are the largest purchaser in the US.

  4. Medical costs in the U.S. are astronomical because the true costs of medicine has not been valued. What value can be put on a doctor’s or nurse’s care? How do you determine how much a physician should be paid? Is it based on their schooling, the number of hours or minutes in total they spend with a patient? Medical costs could be decreases if they started out with the prices associated with certain procedures or medicines. Maybe if all brain scans per say were valued at $1,000, for example, we could start to understand what we’re paying for when we visit a dr.
    I’ve had the same doctor for the past 15 to 17 years. When I changed jobs last year I didn’t notice that she didn’t take my new insurance. Rather than find another doctor I decided that I’d pay the $250 out of pocket to see her. Why, because I value her time and care. Is she worth $250 per visit? I don’t know, I’d have to see a doctor who charges more or less to determine that. Or maybe I’ll have to have a medical crisis that she helps me with and then I’ll know. But until I do either of those things, I won’t know. We have to put a realistic and true price on healthcare before we can determine what we should or should not be paying in connection with it.

  5. Why do we spend so much on health care?

    After reading this post I think how can one manage their health and healthcare costs?
    In the book, “Understanding Health Policy: A Clinical Approach” by Bodenheimer and Grumbach they identify different ways in which healthcare costs can be controlled while maintaining the quality of healthcare. They discuss different cost control mechanism. These strategies help regulate healthcare costs. I feel by using a combination of all the cost control strategies will lead to the biggest results. I feel that patient cost sharing makes patients more aware of their health and holds them more accountable. Having to share costs will make you think twice before going to the ER for a cold. I personally have a high deductible insurance plan. With this said, I have to pay a lot of money out of pocket up to a certain point. This makes me more responsible when it comes to making decisions about my health. In a study, “patients made about one-third few visits and were hospitalized on-third less often”(Bodenheimer & Grumbach, 2012). Another strategy is utilization management. Utilization management holds the physician accountable for making cost effective choices for their patients. Is it really necessary to take an x-ray? Is there a generic brand of that medication? These are questions that should be asked. Making cost-effective decisions will go a long way in reducing healthcare costs. Too often, people are given treatments that are unnecessary. By combining all the best qualities of these different cost control mechanisms will go a long way in reducing healthcare costs without jeopardizing patient care.


    Bodenheimer, T., & Grumbach, K. (2012). Understanding health policy a clinical approach (6th ed.). New York: McGraw-Hill Medical.


    In the article, "Why do we spend so much on health care? " I just went through my chemo bills today, I find it hard to even open the bills. There is just so many bills where do I start?
    I am grateful for the amazing care and doctors I have dealt with the last year and a half. I noticed that the biggest cost was for my chemo medication, you mean to tell me that pharmaceutical companies need to charge that much for medication. So the drug companies need to charge us astronomical prices.
    I try to be smart when someone in my family is sick or hurt. Example my son hurt his finger at a hockey game. He thought that he broke his finger, so I called his primary doctor which we could've seen, then we could've gone next-door for x-rays and if he needed a cast we would see orthopedic doctor. So having high deductible insurance and a high co-pay, that’s a lot of money. Instead I went to the orthopedic doctor where they could do X-rays, put on a cast and treat him. I saved money by going right to the orthopedic doctor.
    We need to pay for those who can’t afford to pay for themselves. I have dealt first hand where a daycare mom takes their child to the emergency room for a cold or they take an ambulance. They don't understand or care about how they are driving the prices up. People should just go to the doctors when they are truly sick.

  7. I read the article about the father who passed but his family was left with a little over a half-million dollar bill for a 5-week stay. To add insult to injury, the man’s father died from a hospital borne infection in the ICU. Then the other bad outcome is Medicare paid the bill, most likely by a reduced rate. So a unaffordable healthcare bill was paid by Medicare, which is really the taxpayers. Medicare, Medicaid, and the Affordable Health Act have good intentions but are abuse by out of control healthcare cost.
    Out of control healthcare cost have been unchecked for years and now it’s evident that controls have to be put in place. A 5-week stay at the hospital should not cost $636,687 for an 83-year-old man. The article made a good point and that is the incentives are partly to blame. For instance, there is not a committee to or government agency to question the cost of care. There are agencies to pay the healthcare cost, but nothing to question the rates. Matter of fact, Medicaid will negotiate the bill down, however the patient would have been stuck with the bill if they were un-insured. The government could help by setting up a group to help negotiate a lower price for un-insured patients, just like Medicaid has the power to negotiate it’s member bills lower.

  8. Over the past 100 years the subject of the national health insurance have seen six periods of intense legislative activity. After all this time, unfortunately the United States does still not have a successful universal health insurance system.

    The reason why U.S. government health care is so big already, without achieving universal coverage, is that we heavily subsidize health coverage for Americans with high incomes, while leaving many Americans with low incomes unsubsidized. If we had a true safety net, in which we helped the poor and sick get coverage—while letting the wealthy buy health care in the free market—we’d spend a fraction of what we do today (Roy, 2015).

    The United States has the most bureaucratic health care system in the world. Over 31% of every health care dollar goes to paperwork, overhead, CEO salaries, profits, etc. Because the U.S. does not have a unified system that serves everyone, and instead has thousands of different insurance plans, each with its own marketing, paperwork, enrollment, premiums, and rules and regulations, our insurance system is both extremely complex and fragmented. The Medicare program operates with just 3% overhead, compared to 15% to 25% overhead at a typical HMO. Provincial single-payer plans in Canada have an overhead of about 1%. With a universal health care system they would be able to cut our bureaucratic burden in half and save over $300 billion annually (Single Payment System, 2016).

    Administrative costs are at 31% of U.S. health spending, far higher than in other countries’ systems. These inflated costs are due to our failure to have a publicly financed, universal health care system. We spend about twice as much per person as Canada or most European nations, and still deny health care to many in need. A national health program could save enough on administration to assure access to care for all Americans, without rationing (Single Payment System, 2016).

    Roy, A. (2015). Conservative Think Tank: 10 Countries with Universal Healthcare Have Freer Economies than the U.S. Forbes. Retrieved from:

    Single Payer Systems. (2016). Physicians for a National Health Program. Retrieved from:

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