Eric Zuesse

An important study was reported on January 7th in the scientific journal Annals of Internal Medicine, published by the American College of Physicians. It’s titled “Health Care Administrative Costs in the United States and Canada, 2017”.

Canada doesn’t have the best healthcare system in the world, nor the least expensive; but, amongst industrialized nations, it scores as being about average on quality of healthcare, and also as average on per-capita healthcare costs. By contrast, the United States scores as below average on quality, and as by far the world’s costliest, with the world’s highest per-capita healthcare costs and also with the highest percentage of the nation’s GDP that goes to pay for healthcare. The World Health Organization rates quality of care in the various nations, and whereas Canada rates low among industrialized nations, U.S. rates at the bottom amongst them. An analysis as to why these two adjoining countries have such drastically different healthcare-results is long overdue, but finally it has come in this new study; and what it shows is that Americans are being robbed blind by the investors in America’s healthcare corporations and by the U.S. politicians who have been doing their bidding such as all Republicans and ‘moderate’ Democrats, who have been defending the U.S. system of paying for healthcare and arguing for only yet more tinkering with that system in order to get it up to international standards (i.e., for it to no longer be at the bottom of the OECD countries).

Here is the “Abstract” or summary that opens this historic article:

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https://annals.org/aim/article-abstract/2758511/health-care-administrative-costs-united-states-canada-2017

ABSTRACT

Background:

Before Canada’s single-payer reform, its payment system, health costs, and number of health administrative personnel per capita resembled those of the United States. By 1999, administration accounted for 31% of U.S. health expenditures versus 16.7% in Canada. No recent comprehensive analyses of those costs are available.

Objective:

To quantify 2017 spending for administration by insurers and providers.

Design:

Analyses of government reports, accounting data that providers file with regulators, surveys of physicians, and census-collected data on employment in health care.

Setting:

United States and Canada.

Measurements:

Insurance overhead; administrative expenditures of hospitals, physicians, nursing homes, home care agencies, and hospices.

Results:

U.S. insurers and providers spent $812 billion on administration, amounting to $2497 per capita (34.2% of national health expenditures) versus $551 per capita (17.0%) in Canada: $844 versus $146 on insurers’ overhead; $933 versus $196 for hospital administration; $255 versus $123 for nursing home, home care, and hospice administration; and $465 versus $87 for physicians’ insurance-related costs. Of the 3.2–percentage point increase in administration’s share of U.S. health expenditures since 1999, 2.4 percentage points was due to growth in private insurers’ overhead, mostly because of high overhead in their Medicare and Medicaid managed-care plans.

Limitations:

Estimates exclude dentists, pharmacies, and some other providers; accounting categories for the 2 countries differ somewhat; and methodological changes probably resulted in an underestimate of administrative cost growth since 1999.

Conclusion:

The gap in health administrative spending between the United States and Canada is large and widening, and it apparently reflects the inefficiencies of the U.S. private insurance–based, multipayer system. The prices that U.S. medical providers charge incorporate a hidden surcharge to cover their costly administrative burden.

Primary Funding Source:

None.

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Here are typical numbers in the study’s findings:

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In U.S. hospitals, 26.6% “of total expenditures” are “devoted to administration.”

In Canadian hospitals, 13.1% are — less than half as much.

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In U.S. insurers, 9.6% goes to “overhead.”

In Canadian insurers, 3.8% does — again less than half.

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In U.S. nursing homes, 26.7% goes to “administration.”

In Canadian ones, the estimated figure is 16.375%.

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In U.S. home health care agencies and hospices, 39.8% goes to “administration.”

In Canadian ones, 13.0% does — less than a third as much.

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In U.S., 21.8% of “gross receipts” in physicians’ offices pay for “administration.”

In Canada, that figure is 10.78% — again less than half.

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“Health care administrative costs in the United States in 2017 totaled … $2497 per capita, … or 34.2% of total spending in the categories for which data are available. The comparable estimates for Canada are $551 per capita … or 17.0% of expenditures.”

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The explanations as to why socializing the healthcare function produces enormously more cost-efficient and higher quality health care are too complex for a short article such as this, and therefore won’t be discussed here. Suffice it to say that Republican-Party economics (100% capitalism) is maximally designed to benefit the nation’s stockholders, and Democratic Party economics compromises that exclusive concern for investors by providing the rhetoric of concern about other people than stockholders, while still adhering mainly to protecting and improving corporate profits (so being only around 90% capitalism — which still is among the world’s most-capitalist).

As Warren Buffett has said, “There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.” In order to achieve that ongoing victory, lots of money has to be spent on ‘educating’ the public to believe that in capitalism there is only the democratic variety, no dictatorial variety (which is what’s elsewhere commonly called “fascism”) and that in socialism there is only the dictatorial variety (commonly called “communism”), no democratic variety (such as in Scandinavia). The aristocrats spend however much it takes, in order to achieve a majority of the public believing their lie — to achieve a majority of the voters becoming and remaining their fools — to believe that 100% capitalism and 0% socialism will be optimal for the public and not just for the aristocrats. For example: even Democraic Party billionaires refuse to support Bernie Sanders — he’s the only Democratic candidate who has no billionaires donating to his campaign.

The United States is the only industrialized nation — and one of the minority among all nations — that doesn’t treat healthcare as being a right (“universal health care”) but instead as a privilege (available only to those who are lucky enough to afford it). In other words: most Americans are obsessively afraid of “socialism” — even of the democratic variety that’s practiced in so many countries. Most Americans have been fooled by the investors in healthcare corporations and by those investors’ agents in Congress and in the White House for so many decades — the unceasing propaganda against “socialism” — the propaganda against human necessities (such as basic healthcare) being handled as a right instead of as a privilege that’s available only to the people who can afford it.

This is how America became a fascist country — a country ruled by its richest. (Prior to 1919, there had been instead the forerunner of fascism, which was called “feudalism.” Mussolini created fascism, to replace that. He also instituted the world’s first privatizations of Government-owned assets. In America, privatizations are equated with democracy, though that’s actually only ‘democracy’ — it’s part of the aristocratic con.)

This failure on the part of the U.S. doesn’t happen because the profitability of healthcare firms is exceptionally high in the United States. It happens because of the astoundingly high inefficiencies which are produced by handling people’s needs (health, education, and welfare) — instead of only their wants (regular consumer products and services) — on the basis of market-forces (i.e., in a capitalist way). Consider these data:

Healthcare profit-margins in the United States, as of 2019, were:

26% for Pharmaceutical manufacturers

12% for Medical-device manufacturers

8% for Hospitals,

6% for Pharmacies

3% for Health insurers

2% for Pharmacy benefit managers

According to an NYU calculation as of 2019, the “After-tax Unadjusted Operating Margin” globally (not just in the U.S.) is:

Drugs (Pharmaceutical) 22.78%

Healthcare Products 14.46%

Healthcare Support Services 4.15%

Heathcare Information and Technology 12.37%

Hospitals/Healthcare Facilities 9.43%

Insurance (General) 9.46%

TOTAL MARKET (EXCLUDING FINANCIALS) 11.11%

Clearly, except for the most-highly-regulated field of pharmaceuticals, where the regulation is very corrupt not only in the U.S. but in the UK (so that even a relatively efficient socialized system can improve its efficiency by outlawing and enforcing laws against corruption), healthcare profitability in the U.S. is in line with the profitability of other firms, and in line with healthcare profitability globally. America stands out for its way overpriced, low quality, healthcare, but not for the profitability of its healthcare firms. The problem with the American healthcare system is instead the incentives. Without having a healthcare system that’s based on healthcare as being a right instead of a privilege, the inefficiencies will inevitably abound. A greed-based healthcare system fails for everyone except investors in healthcare companies. The incentives in the healthcare system should not be to make a profit but to provide terrific care at the lowest possible cost. It should be based on the producers’ pride in the quality of their work, according to objective governmentally-established, scientifically validated, measures of their work-outcomes, not on how high their incomes from that work are. For everyone except investors, the free market fails in healthcare.

The Wall Street Journal headlined, on 22 June 2006, “How a Hospital Stumbled Across An Rx for Medicaid: Mt. Sinai Helps Patients Avoid The ER, Paring State Costs And Aiding Its Bottom Line.” John Carryrou reported that, “The hospital provides free preventive care to poor East Harlem residents in exchange for higher Medicaid reimbursement rates at its outpatient clinic.” The aristocrats’ newspaper, hostile toward “socialized medicine,” was nonetheless in the lead reporting on the inefficiencies of America’s “free market” medicine. Just a few weeks later, on July 17th, BusinessWeek headlined “The Best Medical Care In the U.S.: How Veterans Affairs transformed itself,” and reporter Catherine Arnst explained how the VA hospital system had transformed itself from bad to excellent by increasing its focus on prevention programs. Moreover, “According to a Rand Corp. study, the VA system provides two-thirds of the care recommended by” standards-setting bodies, “but the nation’s private-sector hospitals provide only 50%.” And, whereas private-sector hospitals were filling from 3% to 8% of prescriptions erroneously, which means with wrong medications, the comparable error-rate at VA hospitals was only 003% — virtually nil. “This keeps happening despite the fact that the VA spends an average of $5,000 per patient, vs. the national average of $6,300.” So, socialized medicine is already higher in quality and lower in cost in the U.S. than is America’s typical “free market” medicine. The latter, which Republicans insist upon keeping in place, is a proven disastrous failure in both international and intranational comparisons.

On 5 December 2006, the Wall Street Journal personalized America’s idiotic (not to say evil) policy about health care, in a front-page story, with photos, about a beautiful and exceptionally intelligent young woman, Monique White, who, after decades of struggle, was finally brought down by the American healthcare system. Reporter Jane Zhang headlined “Amid Fight for Life, A Victim of Lupus Fights for Insurance: Lost in U.S. Health-Care Maze, Her Coverage Was Ended As Her Illness Worsened.” Ms. Zhang noted: “Many Americans have health insurance, and 47 million don’t. But lots of people are in a messy middle — sometimes insured by employers, sometimes by government, sometimes not at all. Ms. White was left without health insurance just as her disease took a turn for the worse. While battling to stay alive and going from doctor to doctor, she had to navigate among government programs, private insurance rules and hospital charity,” until the compromises to her care ultimately made her condition so bad, and drove the costs to treat it so high, that she died from this treatable condition, which, in countries that have socialized medicine, isn’t even life-threatening (though it does require constant monitoring, tests, and medication). “Her case illustrates how arduous the American health-care system can be, even for an educated person in a middle-class family. Unique among developed countries, the U.S. delivers medical care through a patchwork of public and private entities, paid for by another patchwork of public and private insurers. Coverage is tied to the workplace or to intricately crafted government programs.” Yet, oddly, the same newspaper whose reporter did such an outstanding job of reporting this, was passionately opposed to the solution already long-proven-successful in other countries, which was providing their citizens far better medical care, at half of America’s medical cost. The Wall Street Journal, and other Republicans, had, for decades, lobbied and propagandized the American public against “socialized health care,” and so prevented the Democratic Party, ever since the time of Franklin Delano Roosevelt, from doing in the United States, what other advanced countries did. In the millions, Americans like Monique White have been destroyed, simply by barbaric Republican dogma: 100% capitalism, no socialism even when needs instead of wants are involved. That’s 100% greed.

Furthermore, as Malcolm Gladwell explained in “The Risk Pool,” in the 28 August 2006 New Yorker, “a system in which companies shoulder their own benefits is ultimately a system that penalizes companies for offering any benefits at all.” A main reason for this is that, “If the risks of providing for health care and old age pensions are shared by all of us [via taxes], then companies can succeed or fail based on what they do and not on the number of their retirees.” The American system prejudices in favor of new industries, which have no or few retirees receiving benefits, and against old industries, which are paying out benefits to many retirees. Gladwell documented that America’s old-line manufacturing firms such as GM were sinking because of their extraordinarily high ratios of retirees receiving benefits versus their numbers of current workers (producing automobiles, etc.), which thus drove the costs in these old-line firms through the roof and made them internationally uncompetitive, while America’s new industries were avoiding this burden by their temporary good fortune of simply not having many retirees. Wilbur Ross, who purchased the bankrupt old-line Bethlehem Steel, thus said, “Every country against which we compete has universal health care. … That means we probably face a fifteen-per-cent cost disadvantage versus foreigners for no other reason than historical accident. … The randomness of our system is just not going to work.” Ross is now Trump’s Secretary of Commerce, and under his friend and fellow Republican, Trump, he’s no public proponent of socializing the healthcare industries.

on 25 January 2007, the New York Times headlined “Bonus Pay By Medicare Lifts Quality,” and Reed Abelson reported that, “The 266 hospitals participating in a Medicare experiment that pays them more to follow medical recommendations have steadily improved the quality of patient care.” The U.S. was beginning to experiment with the type of cost-control, efficiency-enhancement, systems that socialized health insurance in other industrialized nations already had long in place and operating.

Moreover, without a specific governmental program to create incentives to rationalize medical costs, it would be impossible to make quality correlate with price. Just months later, on June 14th, Mr. Abelson headlined “In Health Care, Cost Isn’t Proof Of High Quality,” and he reported that, “In a Pennsylvania government survey of the state’s 60 hospitals that perform heart bypass surgery, the best-paid hospital received nearly $100,000 on average, for the operation, while the least-paid got less than $20,000. At both, patients had comparable lengths of stay and death rates.” Likewise on other measures of quality and cost, there was no correlation between the two variables. The “free market” model of financing health care is a hugely expensive disaster and mess. In fact, the consumers of health care typically lack the highly specialized knowledge to be able to evaluate whether or not they’re getting a true bargain on their own care, and they are thus left to make such purchasing decisions upon the basis of mere faith.

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Investigative historian Eric Zuesse is the author, most recently, of They’re Not Even Close: The Democratic vs. Republican Economic Records, 1910-2010, and of CHRIST’S VENTRILOQUISTS: The Event that Created Christianity.

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