OPINION -- Honoring a rather unpleasant tradition, the September issue of Health Affairs published yet another peer-reviewed study confirming that administrative costs in the U.S. healthcare system are the highest in the world. These administrative costs do not improve patient care. They pay for more administrators.
Each American physician requires 10 administrators to stay in business. Why does American healthcare require twice as many administrators as any other healthcare system?
Because these additional administrators perform a function totally unnecessary in other countries: They restrict access to healthcare and limit benefits of patients who do gain access.
If restricting access and limiting benefits produced a healthier population at lower cost, then Americans could be proud of our massive number of administrators. But the U.S. does not have a healthier population and our healthcare is not inexpensive. In fact, our public health is the worst in the developed world, and our healthcare system is the most expensive of any nation on the planet.
Some blame government bureaucracies for these excessive administrative costs. But let’s not be hasty. Per patient, private insurance overhead exceeds that of Medicare, Medicaid, and the VA – combined. We may have doubts about our government to spend money in other areas, but when it comes to reducing the administrative costs of health care, government programs are ten times as efficient as private insurance.
Restricting access and limiting care is an expensive process, consuming more money than we would spend simply providing unrestricted access and treating all treatable diseases. How do we know? Because every healthcare system in the world that implements universal care without limiting benefits ultimately provides better care to more people for less money.
Where does our private insurance model lead us astray? The primary goal of insurance companies, like all other businesses, is to make more money than they spend. But an insurance company cannot stay solvent selling comprehensive policies at affordable prices to people who will get sick. So insurance companies spend a lot of money to avoid populations that include sick people, to shift costs to patients, to limit benefits, and to exclude physicians who care for patients with expensive diseases (e.g., AIDS, cancer). After all, who will buy a policy that lets you go broke before you get better?
How much money do insurance companies consume in their (so far successful) efforts to avoid selling policies to sick people and limiting their care? A conservative estimate is $400 billion annually (that’s $5 billion annually in Oregon).
How much would the US spend if we simply provided comprehensive care to everyone? About $300 billion ($3.3 billion in Oregon).
The math produces an inescapable conclusion. If Oregon diverted all the money we currently spend to restrict access and limit benefits and instead invested directly in healthcare, we could provide comprehensive care to everyone and save ourselves $1.7 billion dollars.
There is no mystery. A statewide healthcare program that diverted all the money we currently spend on insurance premiums and out-of-pocket payments into a single agency that paid for comprehensive healthcare for everyone would cost less than we spend now. Not only that, but all Oregonians would enjoy healthcare when they need it, no matter what their employment status might be. We just need to stop paying money to restrict access and limit care.
It’s obvious that the barriers to healthcare cost more than providing healthcare. If we commit to universal healthcare in Oregon, we can not only save money but get better care.
Samuel Metz is a private practice anesthesiologist who lives and works in Portland. He is a member of Physicians for a National Health Program and a founding member of Mad As Hell Doctors, both of which are organizations that advocate for universal health care in Oregon and nationally. He is collaborating with State Sen. Michael Dembrow on finding private funding for the HB 3260 study of financing universal health care in Oregon. He can be reached at S@SamuelMetz.com.
Comments posted on the Lund Report
Submitted by danneils on Thu, 11/13/2014 - 16:32 I'm sorry to attack this commentators premise, but the vast majority of Oregonians are already on a government run program. We just gave 300,000 more Oregonians free medical and dental coverage through the Oregon Health Plan's Managed-Care program. Are you honestly going to tell me these 300,000 people in the 'government run' system are getting that happy freedom you seek? Instead of having that freedom of choice, they are have a limited doctor selection, care management, many top specialists not participating, and those administrators are alive and well to make decisions about expensive procedures. On the other side, for those smaller amount of folks in the private-pay system, they are being offered over 100 different plans from 10 companies with no waiting periods for pre-existing conditions. The Marketplace is making it affordable for many, and many are offered a huge doctor networks where they can self-refer to the provider of their choice (Providence alone has around 12,000 providers statewide. Are we really to believe that if the smart people can assemble a single-payor system in Oregon we'd suddenly get the best of both worlds? Trying to point at administrative costs alone as the problem is short sighted.
Submitted by samuelmetz on Sat, 11/15/2014 - 06:17
Danneils makes important points. In reply, here are statistics from the Oregon Insurance Division annual report. About 42% of Oregonians get health care through a government program (primarily Medicare and Medicaid). Because not all physicians accept patients in these government programs, physician choice for these patients is limited. These patients are not free to “self-refer.” About 47% of Oregonians get health care through their employer. Because their employer picks their insurance company and their insurance company picks their physicians, physician choice for these patients is limited. These patients are not free to “self-refer.” About 6% of Oregonians get health care through individual policies. Because only a limited number of companies offer individual policies and the insurance company selects physicians, physician choice for these patients is limited. These patients are not free to “self-refer.” (1) About 200,000 Oregonians have no insurance and no means to pay. Because they lack both insurance and money, they have no choice of physician. These patients are not free to “self-refer.” We should remember that emergency care is not free. While patients with urgent needs cannot be turned away, patients are billed for emergency services and risk bankruptcy if they cannot pay. Other people (like Danneils and me) ultimately pay for their emergency care through higher taxes and higher premium prices. “Affordable” insurance refers only to the price of the premium. Families with “affordable” insurance with high-deductibles may find they cannot afford deductibles, co-pays, excluded conditions, or services from out-of-network physicians. Thus many Oregonians with private insurance policies risk bankruptcy or death if they get the wrong disease at the wrong time. This is called “under-insurance”. Many patients with high-deductible insurance still have a “waiting period” because they must wait until they accumulate enough to pay the deductible. About 500 Oregonians die each year because they never accumulate enough money. In summary, I agree with Danniels that our current system fails to provide us with guaranteed access to health care, or with affordable health care, or with patient choice of physician, or with protection from medical bankruptcy. This applies to both private and public health care programs. Most Oregonians, insured or not, are just one hospitalization away from financial catastrophe. Danneils ultimately asks, “Are we really to believe that if the smart people can assemble a single-payer system in Oregon we'd suddenly get the best of both worlds?” The answer is Yes. A single payer agency, be it private or public, that collected all money currently paid in premiums, out of pocket expenses, and taxes which then paid for all treatable conditions for all Oregonians and included all physicians, would provide us with the care we need with maximal physician choice and at lower cost.
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Governor Peter Shumlin speaks to healthcare advocates in 2012. (Toby Talbot/Associated Press)