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felixlehmann
02-07-2011, 01:36 PM
Hi,

I'm from Germany and do believe in free market economy to archeive best prices and quality.

But I wonder why in the US, where the health care system is mostly free, the health care system is the most expensive in the world.

The health care in Germany is owned by the state but much cheaper than in the US.

Any ideas?

Thanks,
Felix

Zippyjuan
02-07-2011, 02:22 PM
One big contributor is administration costs. When you have a single payer for healthcare, the paperwork is very simple compared to what we have. Here there are hundreds of companies offering thousands of different insurance policies- each with their own paperwork which needs properly filed with different payment schedules and coverage of proceedures and different places to send the forms and try to collect payments from. This is very complicated and requires lots of money and resources to deal with. This is only one factor though.

http://economix.blogs.nytimes.com/2008/11/21/why-does-us-health-care-cost-so-much-part-ii-indefensible-administrative-costs/


The United States spends nearly 40 percent more on health care per capita than its G.D.P. per capita would predict. Given the sheer magnitude of the estimated excess spending, it is fair to ask American health care providers what extra benefits the American people receive in return for this enormous extra spending. After all, translated into total dollar spending per year, this excess spending amounted to $570 billion in 2006 and about $650 billion in 2008. The latter figure is over five times the estimated $125 billion or so in additional health spending that would be needed to attain truly universal health insurance coverage in this country.

One thing Americans do buy with this extra spending is an administrative overhead load that is huge by international standards. The McKinsey Global Institute estimated that excess spending on “health administration and insurance” accounted for as much as 21 percent of the estimated total excess spending ($477 billion in 2003). Brought forward, that 21 percent of excess spending on administration would amount to about $120 billion in 2006 and about $150 billion in 2008. It would have been more than enough to finance universal health insurance this year.


Two studies using more detailed bilateral comparisons of two countries illustrate even more sharply the magnitude of our administrative burden relative to that in other developed countries.

One of these is an earlier McKinsey study explaining the difference in 1990 health spending in West Germany and in the United States. The researchers found that in 1990 Americans received $390 per capita less in actual health care but spent $360 more per capita on administration.

A second, more recent study of administrative costs in the American and Canadian health systems was published in 2003 by Steffie Woolhandler and David Himmelstein in The New England Journal of Medicine in 2003. The study used a measure of administrative costs that includes not only the insurer’s costs, but also the costs borne by employers, health-care providers and governments – but not the value of the time patients spent claiming reimbursement. These authors estimated that in 1999, Americans spent $1,059 per capita on administration compared with only $307 in purchasing power parity dollars (PPP $) spent in Canada.

teacherone
02-07-2011, 02:25 PM
Let's see--

Germany has:

Underpaid doctors:
About one-third less than the U.S. average BEfORE taxes (http://www.npr.org/templates/story/story.php?storyId=91931036) (so 50% less after tax)

Dramatically decreasing number of doctors-- In 1993 Germany graduated 11,555 medical students. In 2003 it graduated 8,754. (http://www.gqmg.de/Dokumente/STT_GHCS2.pdf)

Dramatically increasing taxes to pay for these underpaid overworked doctors.
The parties in the center-right coalition agreed to raise the contribution to the country's health fund, which pools fixed-rate health-insurance payments from employers and workers, with total premiums rising to 15.5% of workers' gross pay from 14.9% at present. Employers and employees will now contribute 14.6% of gross pay, while insured workers will continue to pay an additional 0.9% of their gross wages, as they do already.

And a giant budget hole:
The measures are aimed at plugging next year's expected €11 billion budget gap in the public-insurance system.

I give it 15 years max.

Acala
02-07-2011, 03:04 PM
Health care in the US is not by any stretch of the imagination a free market. On the contrary, it is almost certainly the most highly regulated, subsidized, and government-controlled business in the US. Government grants monopolies of one kind or another to virtually every health care provider in the business. Government erects enormously expensive and restrictive regulatory barriers to health care servcies. Then, on the other hand, government subsidizes health care costs through massive direct payments and by pushing businesses to provide health insurance. Then government turns true risk pooling health insurance into total health care plans. Very few people pay for their own health care - it is either paid by government or some third party payor.

So, by intervening in the market, government curtails supply and boosts demand. The result is as would be predicted by economics 101 - soaring prices.

Zippyjuan
02-07-2011, 03:12 PM
A second reason for higher costs is that there is little incentive to keep those costs lower. Consumers with insurance don't have any idea of what their medical treatment costs so they have no reason to seek lower price alternatives. As long as they can collect enough in premiums, an insurance company has little incentive to control costs (though they could increase their profit margin by doing so- so they do have a little incentive). Doctors get paid by the treatment so the more they do, the more they get paid. No incentive to do less there.

One way to "share the cost" is to have co-payments by the consumer. Here they at least share the costs and have some incentive to seek lower cost alternatives instead of just wanting the best care possible (who does not want that?). This can actually backfire in some cases though. People with co-payments may decide to not take their medicines (or all of them) and instead of keeping their condition in check or curing it, they get worse and this requires more expensive treatment.

People complain about the possiblity of "rationing" healthcare- but it is rationed in our current system. If you have insurance coverage (and an estimated 40% of people don't), you can get good care- some of the best in the world. If you don't have coverage, you are rationed in what you get.

Sola_Fide
02-07-2011, 03:15 PM
Hi,

I'm from Germany and do believe in free market economy to archeive best prices and quality.

But I wonder why in the US, where the health care system is mostly free, the health care system is the most expensive in the world.

The health care in Germany is owned by the state but much cheaper than in the US.

Any ideas?

Thanks,
Felix


The answer to your question is that America's health care system is not "mostly free".

The only people here who falsely say it is "mostly free" are the people who want to attack any remnant of it that is actually exposed to the marketplace.

dean.engelhardt
02-07-2011, 03:16 PM
Malpractice Lawsuits

Zippyjuan
02-07-2011, 03:22 PM
From an earlier piece from the writer of the first article I quoted:
http://economix.blogs.nytimes.com/2008/11/14/why-does-us-health-care-cost-so-much-part-i/

An additional insight from the graph, however, is that even after adjustment for differences in G.D.P. per capita, the United States in 2006 spent $1,895 more on health care than would have been predicted after such an adjustment. If G.D.P. per capita were the only factor driving the difference between United States health spending and that of other nations, the United States would be expected to have spent an average of only $4,819 per capita on health care rather than the $6,714 it actually spent.

Health-services researchers call the difference between these numbers, here $1,895, “excess spending.” That term, however, is not meant to convey “excessive spending,” but merely a difference driven by factors other than G.D.P. per capita. Prominent among these other factors are:

1. higher prices for the same health care goods and services than are paid in other countries for the same goods and services;

2. significantly higher administrative overhead costs than are incurred in other countries with simpler health-insurance systems;

3. more widespread use of high-cost, high-tech equipment and procedures than are used in other countries;

4. higher treatment costs triggered by our uniquely American tort laws, which in the context of medicine can lead to “defensive medicine” — that is, the application of tests and procedures mainly as a defense against possible malpractice litigation, rather than as a clinical imperative.

felixlehmann
02-07-2011, 03:30 PM
Germany has:

Underpaid doctors: (so 50% less after tax)



Well. German doctors earn very well. Maybe not as much as in the US but still much more than the average German. But it's true that most doctors have a heavy work load with sometimes about 60 - 80 hours per week.



So, by intervening in the market, government curtails supply and boosts demand. The result is as would be predicted by economics 101 - soaring prices.


In a free market health care system I would expect something like "drive in doctors". Fast and streamlined.

1) Is there real competition between doctors and hospitals in the US?

2) Do people have an interested in choosing the most efficient doctors and hospitals in the US?

The second point that I most criticize in Germany. People don't have to choose the most efficient doctors and hospitals.

Brian4Liberty
02-07-2011, 03:39 PM
Malpractice Lawsuits

And lack of competition. Two big reasons.

Zippyjuan
02-07-2011, 03:41 PM
If you pay for your own healthcare, you can choose your own doctor whereever you want. Otherwise it depends on your insurance. Some are system specific (my own coverage is with a Health Maintainance Organization- a group of providers- known as Kaiser. I can pick my own doctor (but know nothing about them) from the list of providers. Some may just offer to pay a certain amount for certain proceedures and let you choose your own doctor. My dental coverage works that way. If it costs more than the insurance pays, I pick up the extra. My prescriptions (if I need any) are on a different plan and there is only one place I can go to get that taken care of (unless I want to pay for it at full cost myself).

It is very expensive to build and maintain a hospital. In less populated areas, there may be a single medical center or hospital. Larger cities may have more options.

oyarde
02-07-2011, 08:49 PM
And lack of competition. Two big reasons.

Yeah , those two factors are major.

Kludge
02-07-2011, 08:58 PM
In a free market health care system I would expect something like "drive in doctors". Fast and streamlined.

1) Is there real competition between doctors and hospitals in the US?

2) Do people have an interested in choosing the most efficient doctors and hospitals in the US?

The second point that I most criticize in Germany. People don't have to choose the most efficient doctors and hospitals.

1) No. There are no prices listed and most doctors will give you a hard time if you ask.

2) Yes, we have an interest, but it's difficult finding good doctors. There just aren't many places to find out the credibility of a doctor unless you live in a city where you can go online and find many reviews of all the different clinics/doctors. Generally, we go by word-of-mouth and wait times. Some places will take 10m to admit you, others 2+ hours. Since we have many different healthcare providers, our decisions are also usually heavily influenced by which doctors accept our insurance coverage. In some areas, you will have to drive 30+ minutes just to find a doctor who accepts your insurance.

Athena
02-07-2011, 09:04 PM
It's not a free market - it's crony capitalism, corrupt to the core and regulated (by both gov and insurance companies) into crazy costs. There's really hundreds of little factors that all add up.

Either a free market OR actual 100% government provided health care is a lot cheaper.

Dr Wes explained a big part of it well:

http://drwes.blogspot.com/2009/07/my-comments-at-national-press-club.html


The honest truth is, if I could help the uninsured, and unemployed and chronically ill while preserving my relationship with you – I would. If I could solve these problems while preserving my love for medicine – and the devotion of my colleagues, I would.

Fortunately, I believe we can.

But we can’t do that and continue to fund the gravy train. And that gravy train is the multi-billion dollar health insurance industry with executives who made over $24M annually in 2007, the $800B pharmaceutical industry with executive compensations of over 25 million dollars the same year, the over $24 billion spent in one year in our country on new hospital construction, the nearly half a billion dollars in political campaign contributions from health care special interests a single year (2008), and the 55-80% increase in malpractice insurance premiums that your doctors have paid over the past 5 years.

oyarde
02-07-2011, 09:14 PM
Then you have the FDA driving meds costs . I last read the amount of years and money to get a drug to market and was astounded .

Athena
02-07-2011, 09:19 PM
Then you have the FDA driving meds costs . I last read the amount of years and money to get a drug to market and was astounded .

Plus pretty draconian (for consumers) patent laws for pharmaceuticals.

oyarde
02-07-2011, 09:39 PM
Plus pretty draconian (for consumers) patent laws for pharmaceuticals.

Yeah and they would not need any of that protection if they could get something approved without having to drop 350 million.

BlackTerrel
02-07-2011, 09:48 PM
One big contributor is administration costs. When you have a single payer for healthcare, the paperwork is very simple compared to what we have. Here there are hundreds of companies offering thousands of different insurance policies- each with their own paperwork which needs properly filed with different payment schedules and coverage of proceedures and different places to send the forms and try to collect payments from. This is very complicated and requires lots of money and resources to deal with. This is only one factor though.

This. Times a million.

I had knee surgery 8 months back - 2 hour thing, relatively simple procedure. I was released the same day. I am STILL getting bills from about 12 different sources all who request more money. And it's still coming and I still do not know what the final tally will be. It's been 8 months since I've seen a doctor - shouldn't I be done by now? My grandkids will be paying for this surgery.