Tl;Dr: Physicians are an incredibly sympathetic lobby that have designed a healthcare system that disobeys economic fundamentals. People seem to think too often that the problem with healthcare is one of resource allocation, but we spend the most of any country and get the worst outcomes in the developed world, and that's explainable by just how nonsensical the medical industry has become. Lots of points here, so I have sections you can jump around to. Skim what you know, read what you want to learn. THE SPENDING PROBLEM: -The US spends more money as a percentage of GDP on healthcare than any other nation. That means when we normalize for wealth/income, our healthcare is at least 50-100% higher than most countries in the developed world. -The US spends over $1 trillion dollars in solely government spending every year on healthcare, and it's still unaffordable for most of the population. Medicare and Medicaid don't get nearly as much attention as the defense budget ($750 billion) because appropriations are automatically approved for Medicare and Medicaid, while Congress has to pass an NDAA every year just to keep the military funded. I bring this up because there are a lot of hot takes on defense vs healthcare spending and it's important to get numerical perspective on 1) the fact that the government already spends more on healthcare and 2) we have weird mental accounting that deceptively implies that Congress spends more on defense, when it's just that there's legislative accountability for defense and not for healthcare. -Since 1970, wages have stagnated while productivity has risen. Some economists note that the gap could be explained by healthcare costs - it's not just the government that's paying the bills, it's your company that's doing so too, via employer sponsored insurance. Employers have continued to pay more for rising productivity, but much of that is going straight to healthcare, and not employees. THE QUALITY PROBLEM: -The US has a lower life expectancy than most other countries in the developed world. This is an incomplete statistic as people often (fairly) note that other factors like lifestyle can influence healthcare. So a second fact... -The US is among the worst performers in terms of maternal and child mortality among the developed world. Why those stats? Because those procedures are largely in control of physicians, and yet we are the worst at it relative to other nations. And so that is a clear demonstration of the poor quality of healthcare. -But we have hospitals like Johns Hopkins and MGH, so how can we be the worst? That's because we have wide differences in the quality of healthcare (more on that later) between hospitals. Our hospitals serving rich communities are among the best in the world while our hospitals serving most average Americans are among the worst in the developed world. More on why later. HOW PHYSICIANS CONSTRAIN SUPPLY: -The main mechanism through which we can increase the supply of healthcare is by training more physicians. More supply usually means lower prices in economics. But the American Medical Association (AMA) has repeatedly lobbied against increasing slots for residencies which are required to train physicians. This means physicians trained in foreign schools in Europe/Canada and even many American schools fail to get a slot to train. From the 1990s to 2000s, the number of slots didn't budge nationally despite an increasing population. Slots have slowly increased since then but have not kept pace with population growth, and that's by design. -We can also increase the supply of physicians by taking in doctors from nations with equivalent healthcare systems like Canada and western Europe. But even Canadian doctors with years of independent experience have to go through the same arduous and time consuming residency match+years long training process to practice in the US, when we have a shortage in the tens of thousands of doctors. That is by design, to pump up wages of US doctors at the expense of patients. HOW PHYSICIANS DISOBEY THE LAWS OF PRICE COMPETITION: -Another way to lower prices is to ensure that there are competitive pressures to provide quality services at lower costs. That means consumers must be able to compare prices and select the best service. You can't do that in the US. Try to find out how much it will cost to give birth at a hospital and most hospitals will refuse to provide a price and those that do provide a price will provide one that likely won't align with the bill. This is also by design. If you don't have prices to compare what you're shopping for, hospitals aren't competing with each other on price and so have no reason to lower them. -When legally required to disclose prices by a new 2020 regulation by the US government, a full 40% of hospitals refused to comply by 2021 and still have not disclosed the prices they charge patients and insurers. In some cases, nonprofit hospitals charged far more than for profit hospitals, and in others, insured patients got charged more than uninsured patients. In still others, outlandish prices like hundreds of dollars for 1 session of handfeeding pills appeared. All this is possible because again, no one knows what they're being charged for. -Physicians and hospitals have a clear stance on this issue: they don't want price transparency. The American Hospital Association has repeatedly lobbied against price transparency regulation like the 2020 measure. HOW PHYSICIANS DISOBEY THE LAWS OF QUALITY COMPETITION: -There are also no metrics disclosed for the quality of different hospitals, like complication/survival rates/etc. This is a similar issue to price competition - if you can't confidently find out which hospital is better, as backed by national metrics, hospitals have no incentive to perform better. Obamacare actually tried to rectify this problem by tying 15% of federal funding (Medicare, Medicaid) to new quality metrics; the American Hospital Association lobbied against such metrics vigorously. -American doctors are also paid per service, which provides incentives for unnecessary procedures and no incentives for patient outcomes. The AMA itself has admitted that in a survey, it found that its doctors believed that over a quarter of their prescriptions and 10% of surgeries they recommended were unnecessary. And the problem may be even worse if it were measured by an independent third party. -Another interesting aside is that in the 1970s, Congress commissioned a study on healthcare costs and they found that hospitals continuously expanded whenever they were allocated more federal funding, regardless of whether communities needed that bedspace. They found that hospitals would find ways to raise revenue, fill those beds, and provide unnecessary services - whether by extending the stay of patients or by admitting patients to expensive hospital beds they didn't need for non emergencies. This led to one of the few productive regulatory measures including oversight such that hospitals have to demonstrate to state governments why there is a need for more bedspace before expanding. THE SCAM OF "NON PROFIT" AND LOCAL HEALTHCARE PROVIDERS: -Healthcare providers, particularly hospitals but others too, structure their business to 1) attract sympathy and 2) avoid targeting from federal regulation. -On 1), being a nonprofit does not mean that the organization is charging less for its services. As mentioned before, some nonprofit hospitals are charging far higher rates than for profit ones. What makes a nonprofit organization a nonprofit is simply that it has no shareholders that profits are flowing directly to - i.e., no sense of equity in its biz structure. But a nonprofit is free to pay its salaried employees as much as it wants, which means American doctors can make many multiples more than the median income, more so than other nations. I.e., in other developed nations, physicians make more than the median income but the difference is far less stark than it is in the US. -On 2), federal antitrust regulation is designed to target anticompetitive practices facilitated by consolidation. If you have a single provider across a wide area, people have no choice but that one provider and that provider is free to raise prices/degrade quality since it has no competition. But federal regs target interstate commerce, not local commerce. Even if there's a single hospital in your city and you can't viably choose to go to another city to get that healthcare, if anticompetition is local and not interstate, federal antitrust can't help you. Hospitals have consolidated all over the country like this. In numerous cities, there is just one or a few provider institutions now, lowering even what little competition there was. THE LIE PHYSICIANS TELL OF EXPANDING HEALTHCARE ACCESS -The American Medical Association claims that its mission is to expand healthcare access but it is first and foremost a lobbying organization aimed at defending its profession. We've seen that in its history. A great source on that is Throughline's podcast on how doctors have lobbied against universal healthcare repeatedly, and this next bullets are a quick review of that: https://open.spotify.com/episode/1PlRILuYQU4AHNcUNZ1JtI?si=0iviNKsWQqmNcgpteCvgWQ&utm_source=copy-link - Since physicians have professionalized in the early 1900s, they have repeatedly lobbied against single payer healthcare. What is single payer healthcare and what are its economic fundamentals? It is, as its name suggests, a system where there is literally a single payer/consumer (the govt) of healthcare on behalf of numerous consumers. The idea is to increase the bargaining power of consumers so that they aren't pitted against one another in a tornado of prices spiraling out of control. There, the consumers have market setting power and can therefore lower prices. This has kept healthcare inflation well under control as in the UK. Another example worth noting is Israel, which doesn't have a single payer system but has a 4 payer system (4 government sponsored insurers that compete with each other to lower prices and improve quality) which has no doubt contributed to its world class and cheap healthcare system. -In the 1930s, one of the cornerstones of FDR's New Deal, at least at the time, was this idea of universal single payer healthcare. The AMA cast it as anti-American and socialist, shutting the idea down. FDR said that its failures was one of his great regrets. Truman took up the idea, but failed again for the same reasons and because of the same lobby, and so in 1941-1945, employer sponsored healthcare (which reduces the price setting power of customers) took off. The government, as a stopgap measure, made the employer sponsored healthcare industry tax free (another subsidy on top of Medicare and Medicaid today), but this regulation was intended to sunset after WWII. It did not and persists to this day. -LBJ's great society again made *universal* healthcare a cornerstone of his policy agenda, and he failed for the same reasons. Medicare and Medicaid were in fact compromise measures. There are a number of reasons why those programs have led to trillions of dollars in debt, including the fact that payroll taxes don't cover their expenditures and how Congress, through its automatic appropriations procedure, has relinquished its role for oversight of the programs. But the thing that's most relevant to this discussion is that a Medicare and Medicaid pay more for healthcare than necessary because they are competing with private insurers who don't have as much purchasing power. Private insurers bid up healthcare prices because they feel pressured to establish relationships and claim coverage for as many providers as possible, which in turn raises the prices for Medicare and Medicaid. Doctors have refused to take Medicare and Medicaid because they know they can earn more from private insurers who can't put sufficient price/quality pressure on them. Instead of single payer, we have a private system that has no competition and is subsidized as a largely untaxed industry - i.e., a market totally tilted in favor of suppliers. -Since then, the American Medical Association has repeatedly lobbied against single payer healthcare efforts, using the same arguments as it did in the 1930s: That it is socialist and more akin to the Soviet Union despite how it has been implemented in multiple NATO countries like the UK and how other nations like Israel have designed similar systems that borrow some of the key principles to defend consumers.
Cool. Any weekend plans, man?
I agree I agree but how do we fix it??
Basically doing the reverse of everything I said. Price transparency. Quality transparency. Single payer healthcare. Raising residency slots. Allowing foreign docs to practice. Etc. Pretty straightforward. Any one of those measures that the healthcare lobby hates will do.
We need medical Blind to share Medical Expense like TCs. Perhaps a Wiki to collect all info (procedure, expense, outcome, ranking). Whoever does it will face major issues/pushbacks from medical lobbyists.
Good post OP. Markets solve most allocation problems, if you just let them.
👏👏 Say it again for the people in the back!
this was very informative — thank you
I’d add to that the fact that doctors behave currently as gatekeepers to care as opposed to advisers; their actual role should not be in deciding what the outcomes should be so much as providing risk information so patients can make informed choices. Additionally, prescription power needs to wrested from physicians. That’s not to say doctors shouldn’t play a role in the prescription process but it should be one in ensuring balanced care (in conjunction with pharmacists who quite often have a much better understanding of medical interaction); but those should be advisory roles not gatekeeper roles. Lastly, (and maybe you covered this above) the way billing takes place where medical coders “upcode” the level of care simply so hospitals can earn more money on the same procedure needs to be fixed. Price transparency is a piece of that puzzle but not the only piece. Disregard if you covered any of this above (it was kind of long and I didn’t read the whole thing)
Exactly. There's so much more to the problem than I put. The petty fights that doctors have against nurses and pharmacists also constrain supply, and unfortunately, usually the MDs win.
I also didn't know the upcoding issue, so thank you for bringing that to light.
Hit the nail on the coffin. Both parties are guilty of sleeping at the wheel on this one
Totally. This ain't a democratic or republican issue. Both parties have embraced a consensus that takes the American Medical Association at its word, and are unintentionally creating debt crisis after debt crisis as a result.
Too much commercial interests from 95% of the medical providers. Teaching and medical providing used to be called noble profession s, but I have lost all my respect for doctors. One needs to be well informed to challenge these unscrupulous folks and the basis for their treatment decisions. Having a US degree is no indication of quality.
Preach.
TLDR?
Tl;Dr is literally at the top of the post. I put that there intentionally.
Still too long