Today's CPI report shows hospital prices continue to race ahead of price increases in other health care sectors. In the past year, so have hospital profits.
Perhaps the profit rate of insurance companies is not that hight. However, the whole cost of insurance is a waste of money--trillions of dollars. That could be saved with a single-payer system.
Yes, I wonder about how the reporting is done and could the profits be payments embedded in expenses. I just don't trust it anymore after decades of trying to work with insurance companies, it's time we go with a single payer model putting health first.
While hospital costs are driving much of the increase in healthcare spending, linking it to profit margins from non-profit institutions is a bit misleading.
Non-profits make much of their margins (> 95%) from investments, philanthropy etc.. not billing. These profits are then put back in to areas of net loss (like ER medicine etc..)-- as required by law I believe. Overall, year over year increases in hospital costs have risen much less than the overall margin-- but more than inflation (3-6%).
Appreciate you keeping the focus on what real cost drivers are...I find it unsettling that too many attribute blame/identify insurer "profits" as the primary problem (see below). Everyone likes to identify a villain...while insurers may be problematic, it is simplistic and frankly misguided to focus on insurers as "the primary problem/most guilty party".
yes insurers are a big part of the issue - but not because of their profits.
In my view the real problem with insurers is they've completely failed in their primary mission - to deliver better health outcomes at a lower cost. Insurers' top lines go up with hospital cost increases.
There is a built-in incentive for publicly traded insurers to benefit from higher prices and over-utilization - more costs = more revenue = higher stock price.
On the related topic Medicare for all is not the answer. I'd suggest Medicaid for All is a far better approach.
Re hospital and nursing home chains--there is no need to have chains, or extensive consolidation. Most of that is rent-seeking, generates huge bureaucracy. To paraphrase Tip O'Neil (I'm from Massachusetts), most medicine is local. Medicine is not about efficiency, economies of scale, standardization. The scale of medical information is now huge--not just what's in the doctor's head and in his black bag, as in the1950's. But now we have AI and UpToDate. If I don't know, I don't necessarily need to talk to someone else, I can look it up. For prices, we have standard procedure and diagnostic codes, Medicare can set prices based on cost, just like the government used to do when electricity was by definition a local monopoly. (Forget the RUC).
Finally, speaking of Massachusetts, we used to have good local hospitals, with access to the huge Boston Medical Meccas and their super specialists. What happened? The big hospitals bought the little local ones everyone depended on (often after they had first been purchased by private equity), and CLOSED them, despite brave fights by various Massachusetts AGs. (The one I know most about was Quincy Hospital, as Quincy is where my late husband grew up, but I have read about others). So now patients have to travel further and pay more. The care is NOT necessarily better, my father died at the Beth Israel, my mother at Newton-Wellesley (part of the BI group), where they saw multiple doctors, different each day, and received wretched care.
To be fair, my mother, who was 94 and developing dementia but living happily in independent living in Dedham, was taken by the companion we had hired for her to the Needham Hospital ER for a minor infection on a finger which didn't respond to topical antibiotics. Instead of giving her an appt with a hand surgeon for an office procedure to remove a small piece of surgical metal, they put her in an ambulance, sent her to the BI. The ER had the companion sign mother's name to the wrong form, of course Medicare didn't pay (it was not medically necessary), the ambulance company billed my mother $1800. Of course, I am lawyer as well as an MD, and still of counsel to Reuben Guttman. I sent the ambulance company a nasty letter about fraud, citing the appropriate regs, and that was the end of that. But you can't trust anyone anymore.
"we used to have good local hospitals, with access to the huge Boston Medical Meccas and their super specialists. What happened? The big hospitals bought the little local ones everyone depended on (often after they had first been purchased by private equity), and CLOSED them, despite brave fights by various Massachusetts AGs."
Exactly what I have found happening. Almost like a hub of a wheel with spokes going out to various places. You start out at the community hospital and to the hub or various hospitals with greater capability when needed. I have found chains were buying up hospitals and then milking them.
Merrill - excellent work, thanks for the deep research and documentation. This is the most useful report I've seen on the issue.
be well Joe
Perhaps the profit rate of insurance companies is not that hight. However, the whole cost of insurance is a waste of money--trillions of dollars. That could be saved with a single-payer system.
Yes, I wonder about how the reporting is done and could the profits be payments embedded in expenses. I just don't trust it anymore after decades of trying to work with insurance companies, it's time we go with a single payer model putting health first.
While hospital costs are driving much of the increase in healthcare spending, linking it to profit margins from non-profit institutions is a bit misleading.
Non-profits make much of their margins (> 95%) from investments, philanthropy etc.. not billing. These profits are then put back in to areas of net loss (like ER medicine etc..)-- as required by law I believe. Overall, year over year increases in hospital costs have risen much less than the overall margin-- but more than inflation (3-6%).
Thanks for the insights Merrill.
Appreciate you keeping the focus on what real cost drivers are...I find it unsettling that too many attribute blame/identify insurer "profits" as the primary problem (see below). Everyone likes to identify a villain...while insurers may be problematic, it is simplistic and frankly misguided to focus on insurers as "the primary problem/most guilty party".
yes insurers are a big part of the issue - but not because of their profits.
In my view the real problem with insurers is they've completely failed in their primary mission - to deliver better health outcomes at a lower cost. Insurers' top lines go up with hospital cost increases.
There is a built-in incentive for publicly traded insurers to benefit from higher prices and over-utilization - more costs = more revenue = higher stock price.
On the related topic Medicare for all is not the answer. I'd suggest Medicaid for All is a far better approach.
https://joepaduda.substack.com/p/the-case-for-medicaid-for-all?utm_source=publication-search
Exactly, almost. Re for profit "health insurance": these days, it is an oxymoron:
https://www.commondreams.org/opinion/medicare-for-all-better-than-obamacare
Re hospital and nursing home chains--there is no need to have chains, or extensive consolidation. Most of that is rent-seeking, generates huge bureaucracy. To paraphrase Tip O'Neil (I'm from Massachusetts), most medicine is local. Medicine is not about efficiency, economies of scale, standardization. The scale of medical information is now huge--not just what's in the doctor's head and in his black bag, as in the1950's. But now we have AI and UpToDate. If I don't know, I don't necessarily need to talk to someone else, I can look it up. For prices, we have standard procedure and diagnostic codes, Medicare can set prices based on cost, just like the government used to do when electricity was by definition a local monopoly. (Forget the RUC).
Finally, speaking of Massachusetts, we used to have good local hospitals, with access to the huge Boston Medical Meccas and their super specialists. What happened? The big hospitals bought the little local ones everyone depended on (often after they had first been purchased by private equity), and CLOSED them, despite brave fights by various Massachusetts AGs. (The one I know most about was Quincy Hospital, as Quincy is where my late husband grew up, but I have read about others). So now patients have to travel further and pay more. The care is NOT necessarily better, my father died at the Beth Israel, my mother at Newton-Wellesley (part of the BI group), where they saw multiple doctors, different each day, and received wretched care.
To be fair, my mother, who was 94 and developing dementia but living happily in independent living in Dedham, was taken by the companion we had hired for her to the Needham Hospital ER for a minor infection on a finger which didn't respond to topical antibiotics. Instead of giving her an appt with a hand surgeon for an office procedure to remove a small piece of surgical metal, they put her in an ambulance, sent her to the BI. The ER had the companion sign mother's name to the wrong form, of course Medicare didn't pay (it was not medically necessary), the ambulance company billed my mother $1800. Of course, I am lawyer as well as an MD, and still of counsel to Reuben Guttman. I sent the ambulance company a nasty letter about fraud, citing the appropriate regs, and that was the end of that. But you can't trust anyone anymore.
C. Poplin MD FACP JD
Dr. Caroline:
"we used to have good local hospitals, with access to the huge Boston Medical Meccas and their super specialists. What happened? The big hospitals bought the little local ones everyone depended on (often after they had first been purchased by private equity), and CLOSED them, despite brave fights by various Massachusetts AGs."
Exactly what I have found happening. Almost like a hub of a wheel with spokes going out to various places. You start out at the community hospital and to the hub or various hospitals with greater capability when needed. I have found chains were buying up hospitals and then milking them.