Steve Klingaman

Steve Klingaman
Minneapolis, Minnesota,
January 01
Steve Klingaman is a nonprofit development consultant and nonfiction writer specializing in personal finance and public policy. His music reviews can be found at

NOVEMBER 3, 2011 8:31AM

U.S. Health Care: Welfare for a Bloated Medical Bureaucracy

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Eight thousand dollars a head—for every man, woman and child in the U.S.—that’s what we spent on health care last year.  It adds up to 2.6 trillion dollars, more than the entire GDP of France.  As Ezekial J. Emanuel, professor of medical ethics and health policy at the University of Pennsylvania, put it in a Sunday New York Times Op-Ed piece, that’s equal to the fifth largest GDP in the world.  It’s about what France, with a population of 65 million, spends on everything.

            And what do we get for this gargantuan expenditure?  Number one health status in the world, right?  Emphatically, No.  Mostly, we’re buried in the middle of the pack.  In terms of life expectancy, we rank 49th in the world.  In a broad range of measures I covered in a June 2010 Open Salon piece, we stood in the middle of the pack as compared to European countries, like France, that spent about 50 percent less per person than the U.S.  So what is all our excess medical spending buying?

            Welfare.  Corporate welfare.  Welfare for an army of apparatchiks who administer claims, deny claims, and, finally, often with significant delays, pay claims—that's one thing our excess medical spending buys.

            The Congressional Budget Office found in 2009 that overall health administration expenditures by insurance companies cost about 12 percent of all medical spending.  That’s 312 billion dollars a year.  But wait, there’s more.  Administrative overhead on an individual policy, the kind Paul Ryan would like you to buy with a Medicare voucher, is 30 percent according to the CBO.  And these numbers do not cover the costs medical providers must pay to process medical claims. According to noted health care economist Ewe E. Reinhardt, writing in the New York Times, “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.”  That would be $546 billion in 2010.  Since 2003, when that figure was $477 billion, this excess expenditure has been growing at a rate of just under $10 billion a year.

            This means that when our health insurance premiums grow by a factor of up to 15 percent per year, and the actual costs of providing health care grow by 2.4 percent per year faster than GNP, we are funding to a significant extent a form of corporate or institutional welfare.  Think of it as a make-work project of gargantuan proportions for a vast middle and upper-middle class of workers who enjoy salaries, health benefits and retirement benefits that would be the envy of millions of un- or underemployed Americans.

            And the profits that inure to those at the very top of this food chain rate right up there with some of the most egregious cases of overcompensation for underperformance in the entire corporate landscape.  In our present ugly civics moment, we see public sector workers scapegoated for enjoying perks greater than employees receive in the private sector.  What about private sector workers, and costs, that deliver nothing but unnecessary administrative labor as compared to the labor required to deliver health care in countries where outcomes far exceed our own?  I’m talking about France and Germany, for example.

            This isn’t to demonize people who go to work each day and perform their jobs as instructed.  It’s just, why would we waste precious medical dollars on useless work?  Rick Perry wants to give you a tax plan that can be described on a postcard.  One must presume this would throw an army of tax preparers out of work.  No one worries about their fates under such a plan.

            In fact, much of what we have come to describe as a service economy is really an administrative economy.  I’m sorry, but I would rather keep teachers and cops on the job than billing and claims administrators. 

Corporate Welfare for the Health Care Middle-Man

The status quo so beloved to insurance companies positions them as an afunctional intermediary force in terms of medical outcomes.  These private sector bureaucrats do not improve patient outcomes, save lives, deliver babies, or provide any other service beyond a perpetuation of their own machinery.  It’s a bloated bureaucracy that we simply cannot afford.

            In our accidental universe of Balkanized employer plans, the greatest administrative efficiencies are found in the largest employer plans according to the CBO.  But most of us don’t work for Fortune 500 companies. Most of us, as conservatives will be quick to tell you, work for small employers, where the administrative overhead is more than double that found in the largest companies.

            All of this would argue for broad-based health exchanges covering millions of people under one umbrella.  That at least would be a step in the right direction.  But shadowy insurance and provider interests want this whole reform thing to disappear before it has time to gain a foothold against the waste they represent. Yet these administrative monoliths decrease the percentage of your medical dollar that goes to medical care each and every year.

            It is no surprise that those who benefit from this welfare gravy train are poised to defend their interests. What is surprising is that we insist on attacking a public sector workforce that comprises a much smaller piece of the pie than $546 billion a year spent on medical overhead while we look the other way regarding a make-work bureaucracy that dwarfs even our military personnel spending, which was “just” $154 billion in 2010.

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In a post filled with inaccuracies and false logic I found this little gem to be the most outrageous:
“One must presume this would throw an army of tax preparers out of work. No one worries about their fates under such a plan.”
In other words, you oppose a tax plan that would throw an army of tax preparers out of work? If yes, you need a little lesson on logic and economics.
Logic: Reductio ad absurdum - If a complicated tax code keeps tax prepares employed why don’t we make it more complicated and solve the nation’s unemployment problem?
Economics: The heavy compliance costs of the income tax are like an anchor holding back economic growth. We have nothing to show for the trillions that is spent each year measuring, tracking, sheltering, documenting, and filing our annual income. Surely these valuable labor and capital resources can be employed more productively. So yes some IRS agents and CPAs will be out of work but thanks to a increased productivity and global competitiveness more new jobs than those that are lost will take their place.
"I’m sorry, but I would rather keep teachers and cops on the job than billing and claims administrators. "
Yep. Exactly. To demonize cops and teachers is abhorrent to me in the midst of such corruption and bloat. R
They will not give him a new knee until he gets a colonoscopy. Why? The primary care doc has a financial interest in the endoscopy business. True story. Kind of a metaphor for the whole mess...

Good article. Thanks. Feels kind of alone out here with "managed care" such as it is.
I think conservative "thinking" runs along the lines of private bloat being a more efficient form of bloat than public bloat. It's hard to say, though, because detecting thought in a conservative might require the use of an electron microscope...and patience.

Take Johnny, for example. He opens with a charge of inaccuracies and false logic, then proves he's in no position to judge the presence of either. This could be the result of bloated education spending that didn't take, or the bloat some get when their heads are filled with water.
What Steve was saying, Johnny, is that Perry offers a tax plan that streamlines tax filing. He's comparing that to the conservative defense of a bloated, duplicative and inefficient healthcare system. He did not, in any way, suggest he's against tax reform to keep accountants employed. Only a half-wit would arrive at that post hoc ergo propter hoc conclusion and did, apparently so he could argue with himself.

What makes your cerebral inadequacy into a bloated mass of hilarity is the use of terms you don't understand enough to know they don't apply. The absurdum is yours.
Fair enough, I’ll give Klingaman the benefit of the doubt as it relates to tax code simplification. But Klingaman clearly has a shaky understanding of economics as evidenced by his rant against administrative costs related to health care. If we could magically snap our fingers and eliminate administrative costs, how does he suppose Doctors, Nurses and other direct medical care providers would get paid? Please tell me he doesn’t think the Government could do these tasks more efficiently than the private sector? If yes, one only needs to look at Medicare fraud to understand that the Government does a horrible job of administering health care. In addition, he shows a lack of appreciation for the free market system, which would render insurance plans with high administration costs, without customers and out of business.
it's really easy to find a more efficient and effective health care system than that imposed on the suckers of youessay: just about everyone has one. maybe even cuba. perhaps not haiti...

but that's not the problem. the problem is, when you realize america is mis-managed you can not change it. the 'founding fathers' fixed a system that had no input from the ordinary people whose role it was to select 'virtuous men' to act for them.

'virtuous men' are hard to find nowadays, and would have been hard to find in madison's day too, except that he meant people 'like me.'

in any event, do your sums, prove you're being screwed endlessly by your masters in the beltway, and shrug your shoulders. god meant for dim and spineless people to be screwed, kismet!
Johnny Fever, what a strange pair of comments. So you support a bloated medical-administrative bureaucracy that sucks dollars away from actual care to fund elaborate billing schemes and care denial mechanisms in the name of free market economics? And at the same time rail about the wasted work associated with our Byzantine tax system? Sort of underscoring my main point that some see government bureaucracy = Bad, private sector bureaucracy = No problem! When the amount we spend that way could fund three U.S. military personnel structures and the status quo is going a long way toward bankrupting us...amazing.
Well said Steve. The obvious answer is a single payer system that covers most services and procedures. Whether that logic can overcome the army of lobbyists deployed by the health care insurance companies is another question.

And I see that Johnny Fever is popping up again. A while back I'd read how some of the right wing foundations were paying bloggers to disrupt and disinform left of center blogging sites. No idea if he's a paid subversive or a willing stooge, but his comment is typical of his output. One does have to acknowledge that he's no stranger to absurdum.
If you want a bloated medical-administrative bureaucracy give the responsibility of administering health care to the Government. If you can identify a single Government program/service that is administered efficiently (as without evidence of waste or corruption) I could be persuaded it could tackle health care. In the meantime, keep in mind that when a private company is wasteful or corrupt, it runs the risk of going out of business. So if you want us to spend the equivalent of four U.S. military personnel structures, have the Government do it.
“care denial mechanisms” – Thank god the private market is doing something to reign in cost and prevent fraud. I’m sure, if administered by the Government, no care would be deemed too costly or unnecessary. Perhaps that is why the Democrats caved so easily, despite having veto proof majorities, on the public option. I implore you to educate yourself on Medicare fraud. Would you like some links?
I don't think anyone would be paying for Fever's work product.

The problem with "free market" ideologues (besides being that way because it requires no thinking skills) is they can't admit the obvious failure of their simplistic ideology. HCare insurance is people pay in to cover the expenses of care IF and when they need it. Medicare does a better job of that than private insurance, as proven in Medicare/private direct same-service competition.

There is fraud in any system, but in this case it's a matter of who is sitting behind the desk. The most grand Medicare fraud has been committed by privatized hospital system Columbia/HCA.

If the Feverish declaration of private owned healthcare as superior were true, the privatized hospitals would have at least one, I'd think, in the Top 25 US Hospitals. But no, all those are not-for-profits.

Thinking as Fever does isn't a crime, but trying to intellectualize it is committing the sin of begging the impossible.
Johnny Fever writes “If you want a bloated medical-administrative bureaucracy give the responsibility of administering health care to the Government. If you can identify a single Government program/service that is administered efficiently (as without evidence of waste or corruption) I could be persuaded it could tackle health care.

Well, Johnny boy, if the single-payer system is good enough our soldiers to defend your “freedom,” it should be good enough for everybody else:

Without health care, the U.S. will lose the perpetual war

Are you advocating that each soldier who is engaged in battle carry private insurance or no insurance at all (like 50 million Americans)? The field hospital should consequently screen each injured soldier to verify his or her insurance status. Not insured? Well, the soldier is left bleeding on the battle field. What do you think? It would be interesting to see if such system is efficient.

Sure, go ahead and share your links (cut and pasted from right-wing blogs and lobbyist websites). Please note that even if 100% of all the Medicare and Medicaid claims were fraudulent (we know many people who believe these entire programs are fraudulent, since they are designed to help fellow Americans - go figure), the expenditure associated these two programs is peanuts compared to the total health care expenditure:

Ballooning health care cost: is Medicare the culprit?

Look carefully at the first figure in the link above.

Paul is right when he says this “Take Johnny, for example. He opens with a charge of inaccuracies and false logic, then proves he's in no position to judge the presence of either.

Unfortunately, it’s because of people like Johnny that we have the kind of the health care system Steve has so eloquently described.

I tip my hat to you; you’re funny and successfully broke down this debate into the core issue: The Free Market. Yes, I’m a free market ideologue and those that would support Klingaman are not. We free market ideologues watched countries like China bring hundreds of millions of their people out of poverty by embracing capitalism whereas the people in countries like Cuba continue to live in squalor. Sure it’s simplistic, but I’ll take simplistic over the ridiculous notion that Government is NOT wasteful, corrupt or inefficient. Oh and by the way, not-for-profit does not mean, run by the Government.

Hey, if the Government was so good at running things why don’t they run everything? Let’s have them take over burger joints; they can fire all the managers because they don’t actual participate in the preparing of the food (Klingamen “administrative bureaucracy that sucks dollars away from actual care”). They probably don’t need corporate offices either and all that administrative waste. Wow, the Government, if we believe the theorists at OS, could deliver burgers at a fraction of the cost we currently pay.
Should be "carries" above.
"Hey, if the Government was so good at running things why don’t they run everything?"

No one is proposing something so absurd. But the fact that you're resorting to making that kind of argument tells me you're getting in over your head.
You argue like a child. Free market theory and capitalism aren't the same thing. Capitalism has to have a market function, but there are differences between laissez faire and a regulated market, the primary one being laissez faire does not work.

Here, you defend a dysfunctional system that wastes and misdirects consumer capitalism for the sake of some theory you don't even know well enough to effectively argue. When you do argue it, you retreat to trite absurdities much like a pre-teen arguing beyond their comprehension level.

It's kind of funny you cite China as a model for the beneficial effects of capitalism. Their expansion has come at the expense of American capitalism. So, praise theirs for the decimation it has caused ours. Typical of the brainless libertarian argument.

Your idea of a Free Market isn't free. It bars the public, acting in their own interest, from entering the market and taking advantage of the benefits of capitalism. This extends from an equally brainless anti-gubbermint theme that leads people like you to a state of constant contradiction--spouting the language of liberty while denying it function by insisting it only applies to private entities--the conservative-libertarian corporate nanny state.

30 years of conservative social BS coupled with libertarian free market dogma. What has it delivered? Poorer Americans, foreign, dis-American corporate rule and a mountain of public and private debt.

Please, go to China. They have a huge trade surplus, little sovereign debt and inexpensive and available health care.

I'm positive your ilk has the talent it takes to help China turn all of that around.
Health insurers, private hospitals, and god knows pharmaceutical companies spend billions on advertising. But I suppose using "conservative logic" we should accept that, since getting rid of that expense would put a lot of advertising and tv executives out of a job.

As you say, many more billions are wasted on private industry administrative costs (which includes the bloated, obscene salaries of those at the top of the executive dungheap). In fact, it's widely reported that administrative costs of private insurers are ten times those of Medicare and the VA.

I think we all know what the answer is to this problem, and it ain't the govt -- except that portion of the govt that continues to spout nonsense about private industry always doing the job better and cheaper than the govt.
My kingdom -- okay my serfdom -- for a comment editor.

I think we all know what the problem is, and it ain't the govt -- except that portion of the govt that continues to spout nonsense about private industry always doing the job better and cheaper than the govt.
The entire health care system in America is a wildly inefficient gravy train for private enterprise. It's a vicious circle of greed that only gets worse with time.

The doctors and hospitals overcharge the insurance companies. The insurance companies in turn overcharge their customers and those employers who offer health insurance. Big pharma owns the government in order to keep drug prices inflated and what you end up with is rising medical costs far and away above the inflation rate but with less healthcare to show for it!

Healthcare in this country is a giant parasite on the economy bleeding us dry. Anyone who supports the current situation is delusional and destructive in the worst way.
"And what do we get for this gargantuan expenditure? Number one health status in the world, right? Emphatically, No. Mostly, we’re buried in the middle of the pack."

this statistic alone could be the driving force for change...but no one discusses it. Once again, you astound me with your grasp of the larger picture and his it affects the details of the daily happenings...and you present in a very readable, engaging way that captivates and convinces. thanks Steve.
Mr Fever is in dire need of some intellectual penicillin

I was really beginning to respect you. I rarely encounter a liberal that truly understands the economic implications of their rhetoric. Take Ghost for example “The entire health care system in America is a wildly inefficient gravy train for private enterprise” -the largest insurance companies and most hospitals are non-profit (not to mention the Government) so obviously he’s wrong. Or how about Cordle “Health insurers, private hospitals, and god knows pharmaceutical companies spend billions on advertising.” –In business, advertising increases customers and customers are why businesses exist.

But then I read this anti-capitalist garbage and have no choice but to place you with the Cordles, Ghosts and OWS of the world. I suppose, if you are Marxist, capitalism and free markets have nothing to do with each other, but Milton Friedman thinks they are pretty much the same thing. Oh by the way, if laissez faire capitalism doesn’t work why did the banks need bailouts, afterall they compete in one of the most heavily (if not the most) regulated industries in America?

I have made no such defense of the current dysfunctional system. As usual, you liberals blame Corporate America, in this case insurance companies, for the failures of your Government.

Newsflash: China’s economy is growing rapidly but it is still roughly a third the size of the economy of the U.S. More importantly, China’s GDP per capita is about a tenth the size of the U.S. So any suggestion that things are better in China, than in the U.S., is false. And when liberal Government policies fail, as usual you are quick to look for scapegoats (China, the 1%, banks, insurance companies) versus embracing the one thing we know works, capitalism.
I have never respected you, but haven't really had the time or inclination to consider a deeper level of disregard.
Now I'll briefly discuss your abandonment of traditional business principles to serve a stunted ideology and a weak semantic argument.
You consider private h-care advertising as an acceptable h-care expense in order to gin up customers. This creates unnecessary expenses to be paid in substitution for more effective use of public capital. As many large corporations do, the more efficient use of capital is to self-insure. As healthcare is a desired outcome of any large business entity, the idea of misdirecting capital towards covering the advertising cost of a system all will use at some point regardless is the product of an idiot businessperson. Do you intend to lose 15% or more in useless overhead on every transaction but make up for it in volume?

I don't know where you got your business education, but I suspect if we flipped it 180 degrees we'd see a charming picture of Snap, Crackle and Pop.

I am talking capitalism, your pointless, airheaded pile of chimplistic label-babbling drivel. And capitalism is about free markets, but the word "free" can be misleading. Your form of stupid capitalism has Americans spending far more capital than is necessary in order to meet a truly dumbassed standard of "freedom." What's in a name if the results of your dumbed-down capitalism differ little from the economic dysfunction of communism? Perhaps you're just a pinko agent from the Kremlin...

I blame the people for the failure of the government to effectively cope with the proven failure of private h-care insurance. Even a dipwad actuary with dyslexia can see that in order to maximize profits it has to stratify, not spread, risk. While that means added profit for those companies, it directly translates into a massive added business expense for the owners of America.

The banks "needed" bailouts because deregulation brought on a series of mergers creating the "too big to fail" behemoths. Every creeping move towards Milton's laissez faire Utopia has brought financial and capitalist dystopia. That's some track record ol' Milton has that you tout as "wisdom."If you feel like you're being slapped but can't see it coming at you, it's Adam Smith's Invisible Hand trying to beat some capitalist sense into your bobble head.

A serious student of reality would see the obvious, which is why I have to point this out to you. You're just another weak-game asswhistler quoting the same disproven dogmafood, dropping some dead man names and calling intelligent capitalism "Marxist."

God help the business that would have you as the CEO. You don't know capitalism from crap and would soon sink any company that relies on intelligent decisions to pull a profit. You'd end up pleading your case to the board, claiming you blew through 6% of gross receipts because getting screwed was an essential function of a free market.

And don't badmouth liberalism. It's the source of the Declaration, Constitution and free, but not economy-destroying, trade. Conservatism is a dusty old British ruling class mindset and libertarianism is a pseudo-philosophy British import that didn't rear it's half-filled head until the latter 1830s. I'll gladly defend our founding, liberal American heritage against you foreign import pretenders.

I'd spend more time thumping your melon, but if I owned you beyond what I have accomplished so far I'd be in violation of the 13th amendment.

I...yawn...await our next exchange. Try to bring some new dead men names to drop, a different label or two to launch and perhaps a more strident defense of dead and braindead ideology.

Sign me: A Better Capitalist than you'll Ever Be.
Sorry, Mr Fever, but I'm afraid you don't understand that healthcare is not like other businesses -- there is no need to create demand for healthcare through advertising -- people avail themselves of it out of necessity, not out of desire.

One egregious example of how the healthcare-industrial-complex disturbs the natural order of things is the highly-suggestive ads thrown up by Big Pharma with ED medications.The very attractive actors in these ads do everything but lick their eyebrows to convey the message that you, too, can enjoy rutting-beast sex "when the moment is right", if only you use Viagra or Cialis, etc.

I'm not suggesting some people don't need a little help with their love life as they get older. But if your wife is a two-bagger with a mustache thicker and darker than yours, and if you're so overweight you haven't seen your penis except in the mirror in a couple of decades, I think you may have other reasons why you can't get it up.

And even if a pill might cure your physiological problem, how about your wife? Taking that pill is not going to suddenly turn you into an irresistible Adonis -- tho that's clearly what these companies would like you to believe.

And notice how prominently the *precaution* "if you have an erection lasting more than four hours" is featured in these ads. Why? Yes, it's required on the slim chance that might happen to some old fart; but the real purpose is for the secondary market for such products.

These companies know full well these products, like every other prescription medicine, have found their way onto the black-market, where they are being taken by twenty-something young men with no ED problem, who very much hope that little blue pill WILL give them a four-hour throbbing blue-veiner.

C'mon, Mr Fever, do you seriously expect anyone to believe doctors are so uninformed they need patients to diagnose their own ailments and recommend treatments?
Amazing…utter the word “capitalism” and liberals get their panties in a tizzy writing senseless babble into the wee hours of the morning. I give up; trying to explain the merits of capitalism to Democrats is a futile exercise despite the countless examples of countries that have used it to their advantage and the countless backwards economies still meddling with socialism. I’ll stick to the easy stuff and stay on subject:

“Sorry, Mr Fever, but I'm afraid you don't understand that healthcare is not like other businesses -- there is no need to create demand for healthcare through advertising -- people avail themselves of it out of necessity, not out of desire.”
When Lasik eye surgery was invented nobody knew what it was or whether or not it was safe. Billions was spent on advertising and the wonders of the free market took care of the rest. So we can cross out your first paragraph, would you like me to disprove paragraph #2.

Yes, your writing skills are top notch but it’s time for your math lesson. Assume both you and Tom have competing insurance companies that offer the exact same coverage:

Tom’s Insurance Company:
Average healthcare cost per member = $1,000
Admiistrative cost per member =$100
Profit margin of 10% = $110
Total end user cost = $1,210

Paul’s Insurance Company:
Average healthcare cost per member = $1,000
Administrative cost per member =$300
Profit margin of 10% = $130
Total end user cost = $1,430

Do you think businesses spend money on advertising because they like to increase expenses or because it serves a purpose? Would you rather the public never benefit from Tom’s insurance despite the fact it’s cheaper than yours?
The point I made very clearly is that in any case, h-care insurance advertising is a useless expense. You bring an example of elective medical service and try to shoehorn it into a same-as frame. Again I am compelled to question your business acumen. Okay, I questioned it and the answer is you have none. The problem is you think piss-poor ideology first, then try to cram reality through the tiny ring of single-think prescription.
The only successful business guided by ideology is the one that sells simple-minded ideology to easily swayed and otherwise disengaged minds.

Your math example is as pointless as the rest, Fever. You're trying to prove a point with a model I wisely reject as inefficient and wastefully expensive. Now you fire back with an example of two wastefully expensive models and act as if choosing between the two somehow rebuts my assertion. Who didn't teach you how to argue?

I'd advise you to give up, but a mind that can't grasp simple concepts or recognize logical connections can't comprehend failure or inferiority. No, Fever claims, it's all a matter of...writing skills. The only way that can be seen as correct is that thinking skills are expressed in writing, so it's simply an extension of superior thinking.

There are plenty of people around here who will engage you in irrelevant minutia without simply jerking the rug out from under your flawed premises. You should seek their engagement first, hone your "writing skills" and them come back for another round. You should crawl before walking and walk before becoming a flying clay pigeon.
As expected, our good friend Johnny Boy has shown problems with his math skills. He forget to include all options:

Fever’s 1st Insurance Company:
Average healthcare cost per member = $1,000
Admistrative cost per member =$100
Profit margin of 10% = $110
Total end user cost = $1,210

Fever’s 2nd Insurance Company:
Average healthcare cost per member = $1,000
Administrative cost per member =$300
Profit margin of 10% = $130
Total end user cost = $1,430

Kanuk’s single-payer system:
Average healthcare cost per member = $1,000
Administrative cost per member =$10*
Profit margin of 0% = $0**
Total end user cost = $1,010

*Minimal administrative cost mainly covering paperwork related to reimbursement of bills.
**No profit margin, since the system’s goal is to improve the general health of its member (i.e., the entire population) and is therefore revenue neutral.

Important hypotheses above include that nobody rejects claims which cause premature deaths and disabilities and the average cost per user is the same. Obviously, we all know those are not true.

Now, since you’re so good in math, perhaps you would like to show us what happens when the size of the insurance pool is different? I’ll give you a head start: 1st Co has 400,000 people, 2nd Co has 600,000 (better in advertizing, hence larger number of customers), and the single-payer system has 1,000,000. There is a 1% chance for getting a fatal cancer and treating it costs it members $50,000 per person; the administrative cost is 10% for 1st Co, 30% for 2nd Co, and 5% for the single-payer system (applied to the $50,000/person) . I’ll let you decide about any other assumptions that may be important for this example.
To be more specific: ...getting a fatal cancer (if untreated)...
Fever: An abnormally high body temperature, usually accompanied by shivering, headache, and in severe instances, delirium; a state of nervous excitement or agitation.

Patient J's delirium and inability to perform basic computational tasks indicates a severe, and probably terminal case of Friedmania, a debilitating disease common in a percentage of the population isolated from the real world, thus having no immunity to this disease and a host of other mentally-incapacitating disorders such as Libertarianism and Voodoo Economics.

In addition, the severity of this patient's symptoms suggest he may be a habitual user of Viagra, Cialis or other ED medications intended to over-stimulate the nether regions of the anatomy, but when taken in excess have been shown to have a profoundly debilitating effect on the cerebral cortex.
I worked as a data analyst in a large hospital for almost 20 years. From my perspective, these discussions about capitalism, socialism, marxism, corporate welfare, liberal, conservative, etc., are not helpful and confuse the issue more than they illuminate it.

The current medical billing and payment system is not an economic problem; it is a process problem. As Steve says, the billing and payment system is "useless work." In process terms we call that a non-value-added (NVA) activity. It is an NVA activity because it makes no change in the patient's health. It gives no injections, cures no disease, lowers no blood pressure, etc. When possible, you want to eliminate NVA activities; if not possible to eliminate, you reduce them as much as possible. So the question is how best to eliminate or reduce that activity.

One way is to have a single payor system. Single payor is exactly as it sounds: one payor that handles all the claims administration. Instead of a hospital having to deal with a thousand insurance companies and a thousand contracts it deals with one payor and one contract This would simplify things tremendously.

Note that in saying "single payor" I'm not specifying what kind of entity that is. It may be a government agency, a non-profit organization, or a for-profit business, with the government providing the funds. That is a separate issue, and people can argue about which one is best. It could be a hybrid system, like how Medicare works now. Medicare makes the regulations and provides the funds, but contracts out the process of claims administration to various third parties such as Blue Cross.

This option would greatly simplify things, but would also leave most of the current billing system in place.

Another option would be for the government in effect to "contract out" healthcare. For example, the government would say to Acme Health System "you have 100 thousand enrollees. Here's 500 million dollars you can spend on their care, and here is a list of services you must provide." The government then audits -- or hires a private company to audit -- Acme Health System to make sure that they are doing what they were contracted to do.

Please note here that I'm not specifying what kind of entity Acme Health System is. It may be a governmental entity, a non-profit organization, or a for-profit company. As long as Acme does what they are supposed to do, it doesn't matter.

This option would eliminate all individual billing activity, but would still require some system of internal cost accounting.

I personally favor the second system, as it would eliminate much more of the NVA activity. But either system would be better than what we have now. In both systems terms such as "capitalism" and "socialism" are irrelevant. The point is to reduce NVA activity, and it doesn't matter what label we put on it.
I use a capitalist model because people like Fever think the various aspects of market function such as economies of scale are restricted to private entities. That "free market" is closed to citizen shareholders in America, so the de facto ruling class becomes private wealth...which is where America finds itself today.

I find that more clarifying than confusing, as most people can grasp self-interested economics, but are confused by the ideological effort to negate government by the people. Fever is one of those surrender the people's control for corporate control types who sees bondage as liberty. That based entirely on dumbed-down ideology and, once you frame it in real, not labeled, terms, it's revealed as simplistic semantics. For example, Fev supports a highly dysfunctional h-care economic template while launching words like Marxist at far more functional systems.

I agree that single-payer can be farmed out to various corporate public monopolies based on an assured level of profit. No different than how public utilities are administered in many cases.

On the level of Grand Hypocrisies, notice that American corporations move jobs overseas claiming American workers cost too much, but when it comes to their cost inefficiency they claim a right to exist regardless. The conservatarian types call the former Free Market and the latter Free Market and one capitalism, the other socialism. So yes, the words can confuse, but probably mostly to ideologues already predisposed to confusion because they rely on it. They don't realize they rely on it, but being an ideologue means thinking isn't in the list of attributes.

Thank you, I completely agree “discussions about capitalism, socialism, marxism, corporate welfare, liberal, conservative, etc., are not helpful”. I would add that a discussion of that nature is especially unhelpful if it’s taking place on a liberal website.
I would also like to thank you for bringing up the single-payer system. I just did a Ctrl-F and sure enough, it’s been mentioned a number of times, but I was preoccupied with Paul to focus on it.

Let’s start with the preposterous claim that NVA activity magically is reduced under such a system. Allow me to elaborate with a fictional story of a day in the life without NVA activity. I’m on my way to the doctor’s office, I walk in the front door and there is no front desk staff. With no front desk staff there was nobody available to make a scheduled appointment with so I’m hoping to find my doctor. I walk by a few offices and sure enough he’s there, he checks me out and sends me home. Without a billing department he asks X (in the real world we call this the billing department) to let Y (another NVA) know that he saw me and how much he should be paid. When the check comes in he gives it to Z (yet another NVA) that processes it accordingly. When the landlord comes for the rent and computer breaks more NVAs show up to save the day. Are you starting to understand why NVA activity is a necessary part of medical care or do I need to go back to my burger joint example to get my point across?

More importantly, I also learned that (after doing some research on the single-payer system) that the people commenting on this website represent a thin, ultra-left faction of Democratic Party. For two years the Democrats had the power to do whatever they wanted and with that power they gave us Obamacare. If one were to develop a scale of healthcare policies going from liberal to conservative it would look something like this:
single-payer – public option – Obamacare – the system before Obamacare – the free market

So those advocating the single-payer system represent a small percentage of the population. This debate is over; you can agree with each other until your blue in the face, the single-payer option isn’t happening anytime soon.
You truly are a mental midget. Mish was talking about unnecessary duplication being NVA activity, which means many insurance companies have to be dealt with causing added labor and costs. Not only dealt with on payments, but I'm sure haggling over which services they'll cover. Top-heavy administration that serves little purpose compared to cost.

You respond with yet another all-or-nothing absurdity. You are a clown, guy. A total ideological simpleton with nothing of value to add. Just cry neener-neener and leave the adults alone.

And you started out trying to be a smart ass...but have nothing to back it up. You should return to whatever chat room where you usually spout-off and where, apparently, people are so stupid it made you think you were ready for the majors.

Thanks for the laughs.
Johnny writes: " . . . Are you starting to understand why NVA activity is a necessary part of medical care . . . "

You may recall that I wrote "When possible, you want to eliminate NVA activities; if not possible to eliminate, you reduce them as much as possible." I'm not saying that all non-value-added activity has to be eliminated. So perhaps we can dispense with that idea.

Let me give you an inside look at the massive amount of overhead activity involved in the current system of billing and payment.

I started out as a patient account analyst in 1984 in a hospital with around 350 beds, emergency room, outpatient clinics, and all of the ancillary services required to support that. At that time there were over 100 people employed in the Patient Accounts department, all of us involved in billing and receiving payments from insurance companies, and also processing hundreds of thousands of accounting adjustments as required. But this is only the tip of the iceberg.

In addition to the hospital Patient Accounts department, the hospital physicians also had their own billing department, because physician fees are billed separately from hospital charges. So you can add another 30 people for the physician side of billing.

Every year the hospital generated around 3 million billing records. Since I have not worked in a hospital for some years, that figure is probably now around 4 million, maybe more. These records are generated by hundreds of people around the hospital, some of whom do nothing but billing, some of whom do other things as well.

The foundation of the billing system is the Charge Description Master file, or CDM. It is the hospital's price list, and it contains around 80 thousand records. Each record contains the description and price of the item, as well as all of the various revenue and accounting codes used in the billing process. Several full-time people are employed in the maintenance of that file.

And then there is the Insurance Master file, that contains all of the information on all of the various insurance companies that the hospital deals with. The hospital has to have contracts with most of those insurance companies. Contracts specify how much the hospital will be paid for each kind of service. A single insurance company contract can have a number of different payment schemes, including per diem, flat rate, percent of charges, passthru, and DRG (diagnosis related group, or which there are around 500) reimbursement., depending on the services that the patient has received.

Add to all of this the expensive systems that are required to support all of this billing activity, along with the army of programmers, analysts, and database administrators who keep it all running. And then there is the army of accountants, financial analysts, and accounting clerks who balance the books on the financial side.

Keep in mind that all of the above is for ONE hospital. So multiply that by all the hospitals in the country.

But of course, all of this is only one side of the equation. On the other side are all of the systems, accountants, contract officers, actuaries, secretaries, janitors, etc., etc., who work for the insurance companies. And add to that all of the benefit managers and other HR staff in companies around the country who manage the health insurance benefits for tens of millions of employees.

Have I left anyone out? Probably. But this gives you some idea of vast overhead required by our current health care system.

While no alternative system could eliminate all of this non-value-added activity, clearly there are options that would greatly reduce it, thus freeing up resources that could be used to provide better medical care, or for any other purpose. Going out on a limb here, but it's possible that we could end up with a health care system that is actually affordable, covers everyone, and doesn't drive thousands of people into bankruptcy every year. But we will never get there with our current system.

Just give it up.

From your first comment, it was very apparent that you’re completely ignorant on this subject. If you cannot even understand Steve’s post or Mish’s comment (among others), we don’t expect you to comprehend more complex topics, such as the components of a health care system. You can study the single-payer system all you want, but your case is beyond hope. No amount of cut and pasting will help you in this regards. Paul has provided a good assessment yesterday.

When you follow a very bad ideology, you get this:

GMs Healthcare Double Standard: Bad ideology trumps good business

"Yet just across the Detroit River in Ontario, the company's subsidiary-like the subsidiaries of Ford, DaimlerChrysler and other U.S. firms----strongly endorses Canada's national health system.

"The Canadian plan has been a significant advantage for investing in Canada," says GM Canada spokesman David Patterson, noting that in the United States, GM spends $1,400 per car on health benefits. Indeed, with the provinces sharing 75 percent of the cost of Canadian healthcare, it's no surprise that GM, Ford and Chrysler have all been shifting car production across the border at such a rate that the name "Motor City" should belong to Windsor, not Detroit.

Just two years ago, GM Canada's CEO Michael Grimaldi sent a letter co-signed by Canadian Autoworkers Union president Buzz Hargrave to a Crown Commission considering reforms of Canada's 35-year-old national health program that said, "The public healthcare system significantly reduces total labour costs for automobile manufacturing firms, compared to their cost of equivalent private insurance services purchased by U.S.-based automakers."

It looks like business people in Canada are much better at understanding what's good for their company. Not everything is lost however. Some folks here also understand this problem:

U.S. Health Care's Competitive Disadvantage

Obviously, the list doesn't include you.

You lesson in math has been very very short I might add.
Here’s a peer-reviewed publication that supports Mishima666’s point:

Costs of Health Care Administration in the United States and Canada

Conclusions: The gap between U.S. and Canadian spending on health care administration has grown to $752 per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system.

Some may be interested in this piece:

Market competition is not going to fix US health care

If a single-payer system is the holy grail of healthcare savings why hasn’t either major political party championing the cause? I’ll answer that, because the Republicans and Democrats both know it will achieve the opposite result. They both know that the law of unintended consequences will render the system wasteful, corrupt and inefficient and here’s why:

We have a single-payer system already and it’s called Medicare. Medicare does an excellent job at covering seniors but it comes at high price tag. So high that if continued at its current trajectory it will bankrupt the country. The reason costs have risen so fast is because the Government has no idea how to administer the program efficiently. In addition, the healthcare industry has learned how to game/scam the system so that a huge percentage of the cost is NVA. Private insurers would put an end to these scams in a heartbeat because every dollar swindled or wasted would come out of their bottom line. So when makes statements like “But we will never get there with our current system” your basically recommending we double-down on the current system. You need to read more about Medicare waste, I’ll be happy to send you links, all you have to do is ask me nicely.
Johnny writes "We have a single-payer system already and it’s called Medicare. Medicare does an excellent job at covering seniors but it comes at high price tag. So high that if continued at its current trajectory it will bankrupt the country."

Notwithstanding that Medicare is not a single-payer system, it is not what causes the health care expenditures to have ballooned to 17% of the GDP.

Spot spreading misinformation.
"Stop" spreading misinformation (and lies).
The inefficient and wallet-raping privatized insurance market is DESTROYING health care. It's very easy to see the doctors and health care providers as a major part of the problem, but in as much as health care consumers are worried (and rightly so) about THEIR costs, it's very easy to overlook the fact that as OUR insurance rates go up past the point of affordability, so do those of the health care professionals' MALPRACTICE insurance. Without malpractice insurance, they cannot practice medicine. The same companies that are bleeding the average citizen dry, are doing the same to the doctors. In turn, they must raise their rates to offset the cost of what they have to pay just to practice, which doesn't account for overhead costs of running a practice. Those overhead costs, due to privatized insurance, also have to include office workers whose sole duty is to "chase down" insurance claims, paperwork, and payments.
Johnny, you are a wealth of misinformation -- you should go to work for Fux News. One reason Medicare costs are high is that Medicare covers only the elderly and the disabled, unlike a a true-single-payer system which spreads those costs out over the entire population.

In fact, if you'd take the trouble to examine our present system, you'd discover that that govt provides healthcare not only for the elderly and disabled, but for veterans and children of the poor. All these groups are high-risk. Meanwhile, the private insurance industry charges exorbitant premiums to cover those who are considerably less likely to need healthcare.

In other words, we have the worst of all possible systems. Sorry, to keep confusing with facts when your mind is already made up -- I know it's painful.
Why don't you do a blog post, Fever?

Neither Soc Sec or Medicare can borrow from the general fund, by law. Soc Sec and Medicare Part A are both in surplus. The general fund has instead been borrowing from SocSec/Medicare. Part B was never designed to be fully self funding and the Bush/GOP SOP to big pharm--Part D, is the same. Designed to tap most of the cost from the general fund, the rest from premiums.

Medicare is less costly and more efficient than private insurance when measured in exactly same-service terms. 12% of medical professionals refuse to accept private insurance patients due to added admin overhead and too-stingy payments. Only 7% of the same group reject Medicare.

Medicare is less costly because it's more efficient and involves less administrative overhead and is non-profit. Medical costs go up for reasons other than Medicare, which is, of course, proven to be more efficient anyway, so less Medicare+more private = higher costs above the already increasing costs.

This is where we again encounter Fever's terrible business sense. Choose poor performance over better, then claim some political fantasy like Dems and Repubs know single-payer would encounter unintended consequences! That's why! It's less costly, more efficient and has been for decades, but if expanded, there would be...ya know...unintended consequences! (sfx: slide whistle, crashing pots and pans)

Americans support a single-payer system, and not by slight poll margins. About 2/3rds have felt that way for a long time. It's a different political motivation preventing that from happening.

So, the answer is obvious. Enact a Federal Single-Payer healthcare insurance plan, just like the Founding Fathers did. Then that part of the problem is as solved as it can get.
Excellent post. I do wonder sometimes why people are happy with wasteful bureaucracies in the private sector having so much control over their lives. The mantra from the Right is that the free-market and competition among corporate entities create efficiencies which guarantee a better, more affordable level of care, but anyone who's been paying attention can see the fallacy of that notion.
I can’t believe the reaction I’m getting from suggesting Government is wasteful, corrupt and inefficient. It’s like I stumbled upon Bizarro-world. It’s simply too time consuming to respond to everyone, so I’ll stick to the ones that are really egregious.


“Notwithstanding that Medicare is not a single-payer system”

Wikipedia: Medicare in the United States is a single-payer healthcare system, but is restricted to only senior citizens and certain other classes of people. If you don’t like Wikipedia I can send you more sources or leave you with a little joke from a sign at a Tea Party that was wildly repeated across cyberspace “keep your Government hands off my Medicare”.

The Feminine Context:

Malpractice insurance is really expensive and has grown astronomically in our increasingly litigious society. How do Doctors avoid being sued under a single-payer system? I’ll answer that, they don’t.

In terms of low hanging fruit, dealing with malpractice insurance would be a great way to reduce the cost of healthcare, and accordingly, the cost of healthcare insurance. Republicans would have loved to see Obamacare tackle healthcare malpractice, sadly, it only focused on increasing taxes and coverage. But your post gets me thinking, in addition to the fact there is no political will for single-payer healthcare, do you think the liberals understand the difference between the cost of healthcare and the cost of healthcare insurance? Based on what I keep reading, I don’t think they are capable of making that distinction.
Johnny writes "Kanuk:

“Notwithstanding that Medicare is not a single-payer system”

Wikipedia: Medicare in the United States is a single-payer healthcare system, but is restricted to only senior citizens and certain other classes of people. If you don’t like Wikipedia I can send you more sources or leave you with a little joke from a sign at a Tea Party that was wildly repeated across cyberspace “keep your Government hands off my Medicare”.

So now Wikipedia is the authority to find accurate definitions. We asked our students not to cite Wikipedia for a reason.

What is the definition of "single-payer"? Does it mean that you pay once or many times? When a patient shows up at the doctor’s office or the emergency, does he or she have to shell out a co-pay or needs to cover the costs associated with a deductible? Is this considered a single payment?

Is Part A a single-payer system?
Introduction to Medicare Part A”

Is Medicare - Part B also a single-payer system?
Medicare benefits”

Up north, we pay for medical services once via our taxes and when one shows up at the emergency or for a regular office visit, a person pays $0. Weird isn't? In this case, has the person paid once or multiple times?

Nice try, though.
Fever, Fever, Fever, you poor pathetic fool -- you're not even a very good sophist. It’s never a good idea to insult the audience, especially if as you claim, you’re trying to "educate" them. You ask "do you think the liberals understand the difference between the cost of healthcare and the cost of healthcare insurance?” As comments here make plain, yes, they do. But it’s all too obvious, you don't.

You don’t seem to understand that Medicare is only insurance; it provides no healthcare services. And by any measure, it does so much more cost effectively, studies say for as little as a tenth the administrative cost of private insurance. These are facts, try to absorb a few of them.

You’re also either ignorant or willfully blind to the fact this post makes exactly the distinction between insurance and service. Steve quite clearly suggests that one way to mitigate the rising cost of healthcare services is by reducing the cost of health insurance through adopting a single-payer system, a solution that has in fact been adopted successfully by most of the rest of the industrialized western world – not to mention a number of third-world countries like Cuba and Mexico.

Your other bit of failed sophistry was to try to change the subject – as most of your stripe is wont to do – and switch to a subject you think you can win on – govt waste. Sorry, but you can’t even win there, though you are too ignorant or too willfully blind – or both -- to see that.

No one here is fool enough to argue govt is not wasteful. Are you fool enough to argue private industry is not? Or are you fool enough to argue, as most of your ilk seems to, that private industry is always far less wasteful than govt in providing any and every good and service?

The facts say otherwise. I have several member of my immediate family who work in the healthcare industry, and they would be happy to educate you as to the facts concerning the massive costs incurred trying to comply with health insurers’ duplicitous practices and deliberately overly-complicated paperwork. These ruses are not intended to promote efficiency. To the contrary, they are intended to provide an excuse to delay or refuse payment even on legitimate claims.

Medicare is clearly more cost-efficient than private insurance. And when it comes to providing healthcare services, most studies show VA hospitals operate more cost effectively than private hospitals.

And speaking of the military – are you fool enough to argue that privatizing many aspects of our military – as was done under Reagan and Bush/Cheney/Rumsfeld – was much more cost effective? Hardly. Rapacious profiteering by Halliburton and Blackwater should have put an end to that argument. But facts don’t seem to hold much sway with the Rabid Wrong and Luddite Libertarians.

After three decades of disaster wrought by Reaganomics aka Voodoo Economics and consequent freemarketeering that has brought this country to the brink of abyss, anyone fool enough to keep swallowing Free-Market Kool-Aid has NO business questioning the judgment of others.
It looks like the links didn't work. I decided to put the information here:

Medicare Premiums

Medicare Part A (Hospital Insurance) pays for inpatient hospital stays, skilled nursing facility care, and some home health care. As reported by the Centers for Medicare & Medicaid Services, approximately 99% of people receiving Medicare benefits do not have to pay Medicare premiums on Part A, because they (or their spouses) have over 40 quarters of Medicare-covered employment. For the small percentage of people who do have to pay Medicare premiums, the amount per month depends on the number of quarters of Medicare-covered employment the person (or his/her spouse) has. People with 30 to 39 quarters of Medicare-covered employment will pay a reduced monthly premium of $248 in 2011. For people who do not have at least 30 quarters of Medicare-covered employment and are not eligible for free or reduced Medicare premiums for any other reason, the monthly premium in 2011 for Medicare Part A will be $450, which is $11 less than the 2010 premiums.

Medicare Part B (Medical Insurance) pays for physician services, outpatient hospital services, certain home health services, and durable medical equipment. People already on Medicare who have their Medicare premiums withheld by the Social Security Administration and have annual household incomes of less than $85,000 for single filers or less than $170,000 for couples who file jointly will not see an increase in their monthly premiums. (The monthly rate will stay the same, $96.40 or $110.50, as in previous years.) People who have the same annual household incomes as those listed above (less than $85,000 for single filers or $170,000 for joint filers) but who do not have the Social Security Administration withhold their monthly premiums will see their monthly premiums for Medicare Part B increase $4.90 to $115.40 in 2011. (This is a 4.4% increase over 2010.) Those people on Medicare who make more than $85,000 as a single filer or $170,000 jointly will see a greater increase in their monthly Medicare premiums. These premiums will be figured on a sliding scale depending on annual household income and will start at $161.50 per month.

Medicare Copayment, Coinsurance and Deductibles

Medicare Part A pays all covered hospital, skilled nursing facility and home health care benefits for each benefit period except for the deductible. For 2011, the deductible is $1,132 for any hospital stay 60 days long or less. For any hospital stay lasting longer than 60 days, a Medicare copayment will apply. For stays lasting 61 to 90 days, you will have to pay a Medicare copayment of $283 per day. For stays of 91 to 150 days, you will have to pay $566 per day. For any hospital stay that lasts longer than 150 days within a single benefit period, you will be required to pay the full cost for each day after the 150th day. For people on Medicare who receive care in a skilled nursing facility, a Medicare copayment of $141.50 per day will apply to days 21 through 100. Medicare will cover days 1 through 20 in full. You will be required to pay in full any days after the 100th day.

Medicare Part B includes a yearly deductible of $162 in 2011. This deductible will be applied to health care costs that involve physician services, outpatient hospital services, certain home health services, and durable medical equipment. Once the deductible is met, you will be required to pay only 20% of the Medicare-approved amount charged by providers for your health care services. In 2011, because of the new health care law, many preventive services will be provided at no cost to you. These free benefits will not be affected by the deductible.

So what is the difference between this insurance plan and one we use for our vehicles or houses (i.e., deductibles and co-pay, etc.)? Perhaps we should call now automobile insurance a "single-payer" automobile insurance plan.

On a concluding note, there are very few countries that have a true single-payer health care system.

Johnny writes: "The reason costs have risen so fast is because the Government has no idea how to administer the [Medicare] program efficiently."

Once again, the response to this is in my first comment: "Medicare makes the regulations and provides the funds, but contracts out the process of claims administration to various third parties such as Blue Cross."

Perhaps that is not clear enough, so I will clarify. Medicare medical claims are audited and paid by intermediaries -- PRIVATE BUSINESSES. Stated differently, Medicare does not administer its own claims. Private companies, under contract with CMS (the Center for Medicare and Medicaid Services, a department under Health and Human Services), do all the claims administration for Medicare. In turn, the performance of these companies is audited by Medicare.

But don't take my word for it. You can go to the CMS web site and read the actual contracts for yourself. Everything is in the contracts, with the exception that private business information is blacked out. For example, in Medicare jurisdiction 10, consisting of Alabama, Georgia, and Tennessee, Cahaba Government Benefit Administrators LLC, of Birmingham, Alabama, Tax ID #20-3684719, has been selected as the Medicare Administrative Contractor for the period of 01/12/2009 through 01/11/2014. The duties of this contractor are "to provide specified health insurance benefit administration services, including Medicare claims processing and payment services, for the Medicare program." The 70 page contract spells out in detail the duties of the contractor, how the contractor's performance will be evaluated, how the contractor will be paid, and so on.

Medicare Administrative Contractors are selected on the basis of an open competitive process. For example, the 2009 announcement of the new Medicare contractors -- the year that Cahaba was selected -- states that "As a result of a full and open competitive procurement, the new contractors, will take over the claims payment work now performed by numerous fiscal intermediaries and carriers. . . . The competitive selection of the new Part A and Part B MACs was made on a 'best value' basis. Primary consideration was given to the technical quality of the offerors’ proposals. CMS conducted a technical and past performance evaluation, performed a cost realism analysis and assessed overall cost reasonableness for each award."

So when you say that "the government has no idea how to administer the program efficiently," I have no idea what you are talking about. Do you mean that the private contractors have no idea how to administer the program? Do you mean that Medicare selected the wrong contractors? Do you mean that Medicare doesn't properly evaluate the contractors?

As far as the cost of Medicare, as others have already noted, Medicare takes care of an expensive population, many of whom have chronic illnesses that require constant treatment. In addition to their elderly population, they also pay for the care of people with end stage renal disease (ESRD). ESRD patients require dialysis, and also receive cadaveric or live kidney transplants along with expensive anti-rejection drugs. Back when I was in the medical business the standard anti-rejection cocktail was prednisone, cyclosporine, and azathioprine. I don't know what they use today, but immunosuppressive drugs such as those can create other medical problems that have to be treated. And ESRD patients have other complications and comorbidities that have to be treated.

With an aging population we should not be surprised that Medicare costs are increasing. But Medicare also has implemented cost control measures. For example, in 1984 Medicare introduced the DRG (diagnosis related group) reimbursement scheme, in which hospitals are paid a flat fee based on the patient's primary diagnosis, instead of basing the payment on what the hospital charged. DRG reimbursement has been adopted by private insurers, and is a standard throughout the health insurance industry. If "the government doesn't know how to administer the program," why would private insurers adopt the government's reimbursement scheme?

It's very easy to throw out a one-liner such as "the government doesn't know how to administer the program." But with all respect, I don't think you know what you're talking about, and I recommend that you spend some time learning about how the system actually works.
I didn't know that Medicare was implemented by private contractors before you mentioned it above. I'm sure others have said this, but your knowledge is appreciated. I always look forward to your comments on this issue.

Fever is shooting over his shoulder as he retreats. He's pretty much out of slogan, nostrum and platitude ammo.

Maybe as his "writing skills" improve he'll honor us all with a blog post.
Paul writes: "I didn't know that Medicare was implemented by private contractors before you mentioned it above."

This is one reason why I don't think that labels such as "socialized medicine," "capitalism," "free market," etc., are helpful.

Some people denounce Medicare as "socialized medicine." But is it really? The government provides the funds and the regulations. Private companies administer the claims. For-profit hospitals, non-profit hospitals, public hospitals, public clinics, private clinics, and private pharmacies, labs, and radiology groups provide the services.

So there is this mix of government entities, private businesses, and non-profit organizations, all involved in providing health care. What is the "label" that describes this arrangement? There isn't one.

My guess is that in whatever direction health care reform goes, there will always be this mix of government, private, and non-profit, and putting a simple label on all of that just doesn't make any sense.

Even at the micro level these labels don't make any sense. The teaching hospital and university I worked for started out as part of the State university system. Then it became a separate state agency. Today it is a public corporation, accountable to the State but operating under its own policies and procedures, and just as much concerned with the bottom line as is any private business. It receives a small amount of State money, but is largely self-supporting, and it even spins off private, for-profit businesses involved in high-tech research and product development. While there I developed a new system, and had the organization sold that system to a private company, I, an ordinary employee, would have received 30 percent of the profits.

So what is that? Private? Public? Non-profit? It is all of those, and no label describes it.

The problem for Johnny Fever is that he is operating under an old, simple model, and the world of health care is much more complex than that.
At the risk of showing my ignorance, I, too, was unaware processing of Medicare claims was done privately -- so thanks from me as well, Mish.

You and PJ hit the nail -- and the nincompoop -- on the head. The divide between govt and private industry is a very artificial one, and it serves only to provide talking points for people with little or no acquaintance with reality. Almost all infrastructure construction and maintenance is a cooperative effort between govt and private industry. The space program is another example.

Speaking of which, govt detractors often cite the Hubble telescope as an example of govt incompetence, but it was in fact, the private contractor that screwed up initially. But rather than resort to the blame game, which is the wont of govt critics, the govt cooperated with private industry to come up with a solution. Essentially, the Hubble was fitted with glasses.

If only that solution would work for the willfully blind!
You've got that one right "The problem for Johnny Fever is that he is operating under an old, simple model, and the world of health care is much more complex than that."

According to your excellent description, the significant problem linked to Medicare fraud (if we believe this is true) is actually caused by the private companies, which are responsible for managing the claims. Go figure. Maybe Johnny will now argue that because the private sector is involved, the level of fraudulent activities is not as high as he initially stated.

If the process was directly managed by the government, would this be better? For a quick answer, we should check the efficiency of the "fraud squad" for OHIP (Ontario). I remember checking out this issue a while and the problem related to fraudulent events in Ontario was extremely small. Furthermore, I believe that in 90%+ of the cases (not that many I may add) it involved a physician rather than a patient.
The connotative connections most make can confuse and be inadequate. In real terms of private ownership and the market motivations that rise from self and public interest (pretty much the same), you can draw it all in under Capitalism. Shareholders owning corporations or citizens owning shares in our government doesn't make the actions of either necessarily socialism over capitalism by true definition of function.

The Soviet Union did nothing less than mimic the industrialism of capitalism as State Capitalism, the difference being worker motivation. In spite of authoritarianism, capitalism made its presence known in the black market. Capitalism is an industrialist update to the state of nature, simply describing survival in terms of paper money and labor to gain it and a system to support it.

So, when encountering a labelbabbler, the better rebuttal is to strip the buzzwords of incorrect connotative meaning and speak in terms of the reality of their nature. Here, I make a business case, strictly cold-blooded reality, to reveal the true nature of Fever's ideological-but-not-realistic complaints. I present it in the same terms because they apply and because reality is the most difficult of all argumentative devices to rebut.

I wrote something along that line of thinking a while back. If you're curious as to why I present an argument as I have here, give this a quick read.
Tom Cordle:

“It’s never a good idea to insult the audience”
Now isn’t that the pot calling the kettle black? At least I don’t insult the audience’s family or spend 80% of my comments slinging insults. If you weren’t so busy insulting me, you might have helped Kanuk understand why Medicare is an example of single-payer healthcare as your comment dated 11/6/2011 – 10:04pm, clearly suggested. Obviously Kanuk is still confused about single-payer/Medicare, seeing that she isn’t listening to Cordle or me; will someone please help her out?


Thank you for the education. Unfortunately, it only helps to prove my point about Government waste and the unintended consequence of Government action. Allow me to explain: Assume for a moment I agree, a lot of excess expense could be eliminated if we got rid of the insurance companies. If true, all these Medicare NVA functions being performed by private companies should be handled by the Government. With the savings the Government could do something more “value-add” with the money. The answer is obviously that Government is incapable and highly dependent on private corporations to process claims. However, they are alarmingly efficient and capable in writing checks as the next generation will surely come to realize. So let’s be painfully clear about where this debate currently stands:

Single-payer – Private firms (with imbedded profit margins) and government bureaucrats perform the task of processing claims
Private Insurers – Private firms process claims

It looks to me like single-payer cost savings is just more smoke and mirrors. At least with private insurers there is no need for highly paid Government bureaucrats which are all NVAs.
Fever is one of those who ignores his failure and thinks having the last last word salves his wounds. Fevie, you bombed. You should surf away on that wave of flop sweat, not pause to wave goodbye.

Back to the Chatrooms!
Fever Blister -- yes, I resorted to insulting you; first, because you opened that door with your very initial insulting, ignorant comment; you had ample opportunity to close that door, but you harbor the delusion you are among equals, and could return tit for tat. Your foolish insolence has left you in tatters, and the rest of us in titters.

Beyond that, I entertained the hope (vain, as it turns out) that you'd go away and let the grown-ups have a polite conversation without being interrupted by the mewling of an ignorant, insolent child. But apparently you enjoy a mugging,. So in addition to being a rude ignoramus, you're a masochist.

For the record, Kanuk doesn't need my help defining "single-payer" and god knows none of us need your help defining anything. Kanuk is correct in that any system that uses co-pays is technically not a single-payer system. In other words, 1+1 does not equal 1 -- or is even simple arithmetic to complex for you?

Most of us in the US use a broader definition; I suppose because we know we have so little chance of ever getting a true single-payer system, thanks to idiots like you and the graft-grabbing Luddite politicians people like you send to Congress.

I could go on exposing your utter stupidity; but instead, I'm going to give you some free advice: When you're in a hole, stop digging -- and you'll always be in a hole.
More Facts:

"It is true that in a number of measures, the U.S. does do better than other developed countries, including England and Canada. But it is also true that we do far, far worse in many other measures, and we are falling further behind. That was borne out in the results of a real report by Commonwealth Fund’s National Scorecard on U.S. Health System Performance for 2011. The authors of the report wrote that “access to health care (has) significantly eroded since 2006. As of 2010, more than 81 million working-age adults were uninsured or underinsured, up from 61 million in 2003. Further, the U.S. failed to keep pace with gains in health outcomes achieved by the leading countries. The U.S. ranks last out of 16 industrialized countries on a measure of mortality amenable to medical care (deaths that might have been prevented with timely and effective care), with premature death rates that are dramatically worse than in the best performing countries."
Don’t worry Johnny, you’re part of the very large proportion of the U.S. population who don’t have a good understanding of constitutes a single-payer system (as opposed to Tom who understands it). Don’t worry. You’re in good company, since many well- and less-known politicians and journalists are also confused by the term “single-payer.”

Fortunately, there is hope, since a large group of American doctors has put something together to explain this concept to people who don’t understand it (like you):

What is Single Payer?

Single-payer is a term used to describe a type of financing system. It refers to one entity acting as administrator, or “payer.” In the case of health care, a single-payer system would be setup such that one entity—a government run organization—would collect all health care fees, and pay out all health care costs.

…Individuals receive no bills, and copayment and deductibles...

I’ll repeat the following statement “one entity that pays out all health care costs”. Can you define for us the meaning of the word all? Since you’re having difficulties with your definitions, here’s some help:

Definition of the word “All”

Furthermore, what’s weird is that not once do they discuss Medicare?

Now, let’s see what the literature taken from medical textbooks and dictionaries says:

Single payer system: a type of health care in which there is only one purchaser of health care services. Canada uses the single-payer system.

Health care system, in which all medical services are paid by a single reimbursement agency. See Canadian plan.

An approach to health care financing with only one source of money for paying health care providers.

I’m not sure about you, but a doctor or medical provider who is being paid simultaneously by the patient and an insurance company, which happens to be a government-run program, does not receive one payment (or source of money), but two. Should the word “single” now be referred to two or more?

Here’s another position taken from the literature:

Perpetuating multiple payers - even two - would force hospitals to maintain expensive cost accounting systems to attribute costs and charges to individual patients and payers.

You should visit Canada and interview a few people living there. You should first start explaining to these folks the characteristics of the Medicare program, which works exactly like a private insurance company minus the large overhead. Then, just need to tell them that Medicare is considered a single-payer system equivalent to the Canadian health care system. You’ll be surprised by what they think of your viewpoint.
Johnny writes: "The answer is obviously that Government is incapable and highly dependent on private corporations to process claims."

It seems that in your view the government is damned if they do, damned if they don't. My guess is that the government determined that contractors can do claims administration for less cost. That doesn't mean that government is "incapable." It just means that claims administration is not their specialty. Private businesses also frequently contract for services that are not a part of their core business.

Johnny: "It looks to me like single-payer cost savings is just more smoke and mirrors."

I'm not sure where you are getting that. Even if we retained all other parts of the current system, if you were a hospital director, wouldn't it be cheaper and easier for you to deal with one insurance company rather than a thousand? To have a system that supports one insurer rather than a thousand?

And don't be married to this idea that we have to have claims administration, because we don't. Consider the HMO model. Instead of paying claims, the single payor under discussion gives a per person payment to a health system, and the health system provides care to all of its patients. There is no billing, no claims, and no claims administration. HMOs such as Kaiser Permanente already work this way.

Johnny: "At least with private insurers there is no need for highly paid Government bureaucrats which are all NVAs."

Are you serious? What about Cleve Killingsworth in 2009:

"The salary and bonus paid to Cleve L. Killingsworth, chairman and chief executive of Blue Cross and Blue Shield of Massachusetts, increased 26 percent last year, to $3.5 million, even though the health insurer's membership declined and its net income fell 49 percent."

And now in 2011, when he finally got the boot:

"BOSTON (AP) — The state's dominant health insurer is under fire for a roughly $11 million compensation package given to its former chief executive who resigned last March after five years.

"According to documents filed with the state Tuesday, former Blue Cross Blue Shield of Massachusetts CEO Cleve Killingsworth collected $1.4 million in severance and $7.4 million in additional compensation last year. He is scheduled to receive nearly $3 million more over the next two years.

"The package was given at a time of skyrocketing health care costs and poor performance by the nonprofit insurer, which has 3 million subscribers."

Please explain who are the "highly paid government bureaucrats" with multi-million dollar salaries. Please identify the government bureaucrats with $1.4 million severance packages.

Johnny, I think you need to follow Tom's advice -- when you're in a hole, stop digging.
When I was looking for insurance last year, as an expat, I looked at international plans. Guess what? Worldwide coverage except the US is half the price of Worldwide coverage including the US. This is true regardless of whether the insurance company is US (Aetna), British, Danish or German.

There are no limitations on what hospitals one can go to worldwide -- the most state-of-the-art private British or German hospitals, for example. But if you want to be covered in the US to go to East Podunk Community clinic, you pay twice as much.

This is a fact that anyone can check on the internet. It's not all admin costs, since obviously, American companies like Aetna can handle US admin costs efficiently. But it does point to the fact that US costs are totally out of line.

We aren't better than other countries in either outcomes or inputs (frequency of annual mammograms, for example).

I can understand your confusion as to the current state of the debate in light of your late arrival. We all agree; the cost of healthcare is outrageous. Rather than read the countless unnecessary comments above from Cordle’s insults (in 20 minutes we are sure to see another), to Paul’s pro-Marxist sermons (thankfully he’s now banging some drum at an OWS protest) and Kanuk’s confusion about the word “single” (she’s of the opinion the tooth fairy is the second-payer of Medicare), I thought I would give you the Cliff Note version:

Klingaman: Private Insurance Companies are a big reason healthcare is so expensive because $546 billion is spent on administration.

Fever: If the Government took over healthcare insurance a lot more than $546 billion would be spent on administration.

Mishima: Under a single-payer system there is no need for insurance companies, so NVA (non value add) costs must come down

Fever: Medicare is a single-payer system; those costs are bankrupting the country.

The Feminine Context: Makes an excellent post that is clearly one reason for the high cost of healthcare. That post goes ignored.

Mishima: Medicare basically writes checks the NVA activity under Medicare is handled by private industry

Fever: So much for $546 billion in savings, which brings us back to my original point, there is not savings if we eliminated private insurance companies. If anything, because we know Government is wasteful, corrupt and inefficient, it will make a bad problem worse. Speaking of Government waste, ask Tom who wrote the checks for the initial screw-up of the Hubble telescope.


Newsflash: we live in a free country! If you think Blue Cross pays too much money to their executives you are free to choose an alternative insurance company. Ahhhh……capitalism.

“It seems that in your view the government is damned if they do, damned if they don't.”
How can the Government waste money they don’t spend?
Methinks there's a nasty echo in here, the tinkle of sounding brass, or the sound of one man crapping
At least Fever proved the Theory of Perpetual Moron.
Wow, look at that Johnny!

From Blue Cross Blue Shields:

Choose from a variety of our Medicare Supplement Insurance Plans

We offer a choice of seven Medicare Supplement Insurance plans: Plan F, Plan F High Deductible, and Plan G pay the Medicare Part A hospital deductible and coinsurance, the skilled nursing facility coinsurance and foreign travel emergency care. Plan K and Plan L are low-cost, cost-sharing Medicare Supplement Insurance plans that require you to pay a higher percentage of the costs in return for reduced premiums.

Preferred Plan G covers:

Your $1,132 Part A deductible and coinsurance
The cost of 365 extra days of hospital care during your lifetime after Medicare coverage ends
Your Part B coinsurance and the cost of the first three pints of blood
100% of Part B physician charges that are in excess of the Medicare-approved amount (By law no physician may charge more than 115% of Medicare-approved amounts).
Skilled nursing facility copayment
Hospice care

Here's another one:

Welcome to where we strive to offer information, helping you receive the best Medicare supplemental insurance policy possible. While every person has different needs we try to outline policies that fit you best.

Medicare Supplemental Insurance is a policy provided by private insurance companies that fill the gaps in coverage that your basic Medicare Part A and Medicare Part B do not cover. Parts A and B, while covering close to 80% of your medical bills and expenses certainly do not cover them all.

Did I read this right? Parts A & B don't cover all medical expenses!

What? Medicare even provides a list of supplemental private health insurance providers in order to cover all the medical costs that are covered by the public policy: Medigap.

Now, we don’t have two payers, but multiple payers to cover “all medical costs” of people above 65.

Here are Johnny Fever’s new definitions of a “single-payer” system:

Definition 1

Health care system, in which all medical services are paid by multiple reimbursement agencies, as long as a public insurance plan covers a portion of these services. See Medicare plan.

Definition 2

An approach to health care financing with multiple sources of money for paying health care providers. These sources can be used for one or more medical acts per single office or emergency visit. Preferably, a public insurance plan should be one of the payers.

Don’t forget to send these definitions of the Bantam Medical Dictionary.

Make sense? Obviously not, like all your comments above.

(note: I had to remove several html codes, since my original comment would not show up.)
At least Fever proved the Theory of Perpetual Moron.

I second that.

1 payer + 1 payer + 1 payer = 1 payer.

Can it get any dumber than this?
Johnny writes: "Medicare is a single-payer system; those costs are bankrupting the country."

You make these pronouncements without any source or documentation. Medicare is not bankrupting the country. Yes, there will have to be changes in the program, but Medicare costs are driven by the cost of health care in general. As the Wiki article on Medicare notes (citing 'U.S. Health Care Costs: Background Brief -, Health Policy Education from the Henry J. Kaiser Family Foundation') "Medicare spending increases mostly in response to increases in overall health care costs, and it grew at a slower rate than spending by private insurance plans from 1998-2008."

Note the last part of the sentence -- "it grew at a slower rate than spending by private insurance plans . . . " In other words, even though Medicare provides care for sicker people, the elderly and the disabled, Medicare costs grew more slowly than private insurance.

I have come to understand that no facts, no evidence will ever cause you to question your assumptions. But I would personally appreciate it very much if you refrained from publishing falsehoods.

Johnny: "If anything, because we know Government is wasteful, corrupt and inefficient . . . "

Blue Cross dumps over $11 million on a failed CEO, but you think that government is wasteful and corrupt. And once again you throw out a blanket statement without any evidence to back it up. It's just "we know" -- in other words, you know, or you think you know.

Johnny: "Newsflash: we live in a free country! If you think Blue Cross pays too much money to their executives you are free to choose an alternative insurance company. Ahhhh……capitalism."

Another one of your little discussion techniques -- changing the subject. When you're losing at chess you pull out the backgammon board.

The topic under discussion is not whether I can pick a different insurance company. The topic under discussion, in case you've already forgotten, is the salaries given to those who administer health insurance. I've already shown you an example of the salary of the CEO of a private insurance company that is many times that paid to government employees. But apparently you don't care about that. You're not outraged over that. It's "capitalism," so you give it a pass. In your world what matters is not the performance but the label.

“Medicare is not bankrupting the country”

The United States spends approximately $3.5 trillion annually, at 21%; Medicare, Medicaid and SCHIP represent the largest portion of the budget. Oh by the way, we only collect about $2 trillion in taxes.

“In other words, even though Medicare provides care for sicker people, the elderly and the disabled, Medicare costs grew more slowly than private insurance."

Talk about distorting the facts. The fact is Medicare still costs far more than Private Insurance. And the reason for the rate of growth being slower is largely due to the fact private insurers pick up the tab for the insufficient funding by Medicare. The following article should help to round out your education about Medicare.

“The topic under discussion is not whether I can pick a different insurance company. The topic under discussion, in case you've already forgotten, is the salaries given to those who administer health insurance.”

Time for a math test:

Cordle’s Health Plan Cost = $1,000, Cordle’s Compensation =$1 million dollars

Ryan’s Health Plan Cost = $2,000, Ryan’s Compensation = $.99 cents

Which health plan do you choose? If you answered Cordle, you’re right! Why would you care that Cordle makes an outrageous salary if his company can deliver the same service at half the cost?
Jeezuz, John Boy -- you failed your own math test!

Cordle’s Health Plan Cost = $1,000, Cordle’s Compensation =$1 million dollars

Ryan’s Health Plan Cost = $2,000, Ryan’s Compensation = $.99 cents

Are you really fool enough to think my hypothetical company is going to provide the same coverage as Ryan's for half the cost, particularly when my salary is astronomically higher than Ryan's? Why that's like arguing lowering tax rates will increase revenues. That kind of "thinking" is so ludicrous, it's a real Laffer.

No wonder you think private industry always does it better and cheaper than govt. But, hey, I do appreciate the confidence you show in me by offering such an obscene salary.

By the way, how did you manage to get your GED, when you so obviously failed remedial math?
There are a lot of things about the way that we do healthcare that are ... curious. Colleges are like this too, although, the"customers" can be a hard sell that they don't really want the "services." The economics of services are odd, since they so often are nebulous in character in comparison to widgets or even bullets. Speaking to education, in one sense, that same criticism applies, since in higher ed, you can't swing a dead cat without hitting some administrator or coordinator, and medicine has that too it would seem like, although, we also ask for pretty buildings, and machines that go "bing" too. There is value in these things, although because of the very indirect modes of payment, private insurers or governments, whether or not the observed price equals marginal cost, always the efficiency criterion in economic theory, that's one that economists usually don't look at with a clear eye in some fields, although, management always has its rationales, if, maybe sometimes, maybe a lot of the time, that's convenient too. Funny world that way, as to what has "value." Farmers are on the safest ground, and then people who make farm equipment. It's all downhill from there in one sense, but, who wants to really live that way any more, although lately, the idea of 40 acres and pigs has come to mind.
Tom, Paul and Kanuk, how can you argue with the free market? Supply meets demand at a rational price point, inefficient suppliers are driven from the market and an optimum mix of supply and demand always obtains. I've taken the courses and seen the graphs. Let me know if you would like to peruse some of my University of Chicago textbooks. The fact that for the moment (a decades long one but the graphs are only two dimensional), the U.S. prices are vastly higher than comparable countries and the outcomes delivered are mediocre at best is just one of those temporary disequilibriums that will self correct any day now. Just you wait and see.
I know you'll never understand why you're a joke, as that's the Catch 22 of being too stupid to realize you're too stupid.

The funny thing isn't that you're stupid. The funny thing is you're aggressively stupid. Being a propaganda soakhead and the lack of anything resembling a logical mind is just a bonus--for us, not you.

That WSJ article is one where a logical mind finds more humor than enlightenment. It's a blathering bit of disjointed, self-sourced statements along with some random, but not logically connected, observations. If you didn't notice the Medicare cost/projected cost had zero to do with the point the authors pretend to make, you're...well...I already covered that.

An intelligent person wouldn't come in all excited like a child who just found their first pube over a single-source, non-academic "study" found in a hack newspaper. Even worse than that is you tell mish, who is far above your pay grade, that you're educating him. You write:

"The fact is Medicare still costs far more than Private Insurance. And the reason for the rate of growth being slower is largely due to the fact private insurers pick up the tab for the insufficient funding by Medicare."

Here's what the author of the study you cite says:

"The study does not establish a causal relationship between low public program pay and higher private insurance rates, but instead calculates the disparity using survey and claims data, said study co-author John Pickering, principal and consulting actuary with Milliman."

You just cited as FACT! what the study's authors say isn't. Ouch, oh braying jackass! That hurts!

AHIP-- a health insurance industry group DID endorse the "study."


"The American Academy of Family Physicians would not support equalizing public and private pay as outlined in the Milliman study, said Ted Epperly, MD, AAFP president.

The AMA said it appreciated the attention of study sponsors to the issue of inadequate Medicare and Medicaid physician pay."

The AMA offered no endorsement and a weak, vague, general, physician pay attaboy.

The Institute For Policy Innovation -- the source of your article -- is a Dick Armey propaganda mill. Fine for stupid people, but not something that intelligent people find worthy of attention.

Instead of being properly embarrassed and either withdrawing or taming your lizard-brain impulses, you give a display of comedic authority and dumb-assed gullibility.

And I didn't mention your equally stupid medicare cost - fed deficit anal ysis.

You're not impressing anyone, Fever. We're all convinced the front half of your horse isn't going to show up.
Fever has de religion and chants the roll of the dead ideas from dead economists. He studies the writings of the gawds and quaffs deeply from the wholly water well of slogans and nostrums. Yet another OS "Buys-The-Whole-Program" idiotlogue.

The biggest problem is he can't properly experience humility. If he could, there's a chance he could learn something.

But he keeps coming back for more. I'm afraid if we keep beating on him his masochism will become our sadism.
The problem with supply meets demand when you are talking about health care is that people can't really judge the quality of health care. When your doctor recommends medicine X and three more tests, most people are incapable of judging whether this is overpriced overkill. If they go home and research it on-line, they have missed the opportunity to discuss alternatives with their doctor.

The Health Care market is very distorted. Health care is paid for by insurance companies, not the person getting the health care and insurance is bought by employers, not the insured.

People want their doctors and local hospitals to be covered by their insurance company and insurance companies want discounts, so large insurance companies that can contract with providers have a cost advantage.

However, much of the cost advantage comes from the grossly distorted hospital pricing. One OSer posted that the hospital billed her over 13k$, but only asked her to pay 2k$, meaning that the 13k$ was a totally bogus number. Any insurance company paying 13k$ for a 2k$ bill is going to go out of business fast.

This creates a huge entry barrier to new insurance companies and economic theory suggests that high entry barriers lead to monopoly pricing.

Further, to streamline the insurance companies' administration, they introduce new forms, which increase provider costs, which gets rolled into the cost of health care. It can be hard to see that in order to save the cost of a 10$/hour admin clerk, your policy is making a $200/hour doctor spend more time and the result is a net loss of efficiency when you supervise the clerk and never see the doctor at work.

Hence, the assumption that supply and demand will lead to lower costs and more efficient business methods is wrong in this case.
Here's an actual study published by the AMA. It makes no distinction between Medicare and private insurers on the issue of overutilization, and cites 7 cause --, 4 related to physicians and 3 to patients. It's a pdf, but a quick download.
Malusinka - I was being ironic. I'm a government run, single-payer advocate for many of the reasons outlined in Steve's article and several of the comments. Your critique of my parody is nonetheless spot on.
Paul is right, I must be a masochist to continue to respond, but when the pain is for the well being of the next generation, I have no problem sacrificing myself. So I will keep fighting the good fight, now let’s see, eenie meenie miney moe, today’s winner is:

Malusinka (& Abrawang for stating Malusinka was spot on):

“U.S. prices (healthcare) are vastly higher than comparable countries and the outcomes delivered are mediocre at best”
Correct me if I’m wrong but you blame the free market for this? I just read some more, “Hence, the assumption that supply and demand will lead to lower costs and more efficient business methods is wrong in this case.” So the answer to the free market question is clearly “yes”.

I hate to break it to you but thanks to Government policies, the healthcare industry is heavily regulated and far from free. Wow, where to begin, I could write a novel explaining it or send you thousands of links. Instead I will leave you with three brief reasons why it is the fault of our Government healthcare is expensive in this country. *keep in mind, we have moved from the debate over healthcare insurance administration to the cost of healthcare itself. It doesn’t take a free market ideologue to know that if the cost of healthcare were to be reduced the cost of healthcare insurance would be cheaper.

Government Mandates – In order to compete in a given market the Government issues mandate on what type of coverage needs to be included in private insurance. The economics of mandates are simple: Benefits aren't free, and their costs will be built into insurance premiums. Let’s not forget the market damaging effect of the mandate to even have healthcare insurance.

Reforming tort laws – see The Feminine Context comment

Obamacare – Otherwise known as the elephant in the room. The bill is almost a thousand pages long, contains over 700 directives and is expected to include hundreds of thousands of pages of regulations/rules. If Obamacare was so great why would private companies request waivers or the Government feel compelled to grant waivers?
The idea of Fighting the Good Fight is to build on victories, not serial ignorance, misstatements, factual and logical errors, all delivered with a laughable certainty and failed attempts at wit.

You suck at this, Fever. In the Free Market of ideas and discussion, your product has been repeatedly marked-down, thrown into a damaged goods discount rack and then tossed out with the rest of the garbage.

You couldn't even effectively discuss free market theory and economics with the average libertarian ideologue. So, you're inadequate to argue the inadequacies of an inadequate ideology with inadequate ideologues.

The Fever argument template:
"Yes, I was wrong about that, but here's this! Yes, I was wrong about that, but here's this! Yes, I was wrong about that, but here's this! Yes, I was wrong about that, but here's this! Yes, I was wrong about that, but here's this! Yes, I was wrong about that, but here's this!..."
The Government is a magical portal of competence, integrity and -- well-- wonderfulness.

Once some greedy free market evil guy crosses that threshold -- he transforms into a delightful angel of light.

Magical --- maaaagical ---- ooooooo ----- ahhhhh.

There I said it.

PS: When Paul-O calls people that don't agree with him "idiots" - I pee a little.

I love you Paul.
When you have peons like Johnny who are easily influenced by bogus talking points, you get people who rely on nobodies, such as the two authors of the laughable WSJ article (based on opinions and not facts). This is not surprising since Johnny has difficulties understanding simple words, such as “single” and “multiple.” We don't expect these people to provide reliable information.

When we rely on peer-reviewed papers from researchers who know their stuff, we get this:

The old saying that you get what you pay for doesn't necessarily apply in healthcare.

A recent study highlighted that point once again. The report, published in the September issue of the journal Health Affairs, concluded that higher physician fees--rather than higher practice costs, volume of services or tuition expenses--were the main drivers of higher spending in this country, especially on orthopedics.

The researchers compared fees paid by public and private payers for primary-care office visits and hip replacements in Australia, Canada, France, Germany, the United Kingdom and the U.S. It also examined doctor incomes (net of practice expenses), differences in paying for the costs of medical education and the relative contribution of payments per physician and physician supply in the countries' national spending on physician services.

As Washington Bureau Chief Jessica Zigmond reported (Sept. 12, p. 6), the study found that Medicare paid about 27% higher fees for primary-care office visits than did foreign public payers, while private health plans paid 70% more. When the spotlight was turned on orthopedic care, researchers found that public payers in the U.S. shelled out 70% more for hip replacements and private payers paid 120% more.

McLaughlin, N. (2011) Pricey healthcare: Studies show U.S. costs are higher, benefits lower-with blame for all. Modern Healthcare, Vol. 41 Issue 39, p17-17 (published two months ago)

You’ll also notice that he refers to these systems as public payers rather than “single-payer.” Since Medicare is not a single-payer system, but an hybrid public-private system, it’s becoming obvious that the driving costs of this program are caused by the involvement of the private sector, as described above.
John-Boy, oh, so now you want to be a martyr to the cause for the benefit of future generations. How noble of you!

If you really want to help future generations, you'll educate yourself and stop watching Fux News and reading the Wall Street Urinal, both of which are clearly -- to anyone with half-a-brain -- propaganda arms of vulture capitalist Rupert Murdick. But then, he's probably one of your heroes.

Until you do educate yourself, you are not a martyr, you are simply a masochist.

I owe you an apology; there is no “right” definition of single-payer healthcare. Wikipedia, Paul Krugman and I think Medicare is an example of single-payer but I concede the fact others may think otherwise. So let’s agree to disagree.

“As Washington Bureau Chief Jessica Zigmond reported (Sept. 12, p. 6), the study found that Medicare paid about 27% higher fees for primary-care office visits than did foreign public payers, while private health plans paid 70% more. When the spotlight was turned on orthopedic care, researchers found that public payers in the U.S. shelled out 70% more for hip replacements and private payers paid 120% more. “

First Mishima and now you, I love it when the person I’m debating provides quotes that hurt their argument and help mine. If you had bothered to read my article you would have learned that Medicare does not reimburse Doctors/Hospitals at the same rates as private insurance. As a result, Doctors/Hospitals must charge private pay patients higher rates than Medicare patients, in order to make-up the shortfall from Medicare. The system essentially robs from the young (private pay) in order to benefit the old (Medicare). Your quote only provides further evidence of this robbery.

I mean, why would a hip replacement cost more for one group of patients and less for another? Furthermore, the current system, in light of the fact Government regulations/mandates have made private insurance less affordable, and as a result forced more hospitals to rely on the Government (Medicare, Medicaid, SCHIP). Do a Google search “Medicare reimbursement” and you’ll learn all about how this shortfall is bankrupting hospitals or forcing doctors to drop Medicare patients.

But educating you on Medicare was not my intention, in fact, seeing that you don’t believe Medicare is an example of single-payer healthcare, why are we discussing Medicare?
I love it when the study you cite doesn't agree with you, Fever. Yet again you mention it as saying something it doesn't say.

Now it's: "Yes, I was wrong, but let's try it again..."

The thrust of this conversation is physical, not mental health, so let's quit making it about you.

I think everyone is pretty much done with you, Fever.

Back to the chatroom...
Let us all now pray that Fever's pseudo-apology was the last word from a lost turd.
@ Fever

No, I don't blame the free market for the problems with the American Health Care System. I'm all for removing distortions. A huge market distortion is the tax subsidy for employer-sponsored health care.

But, of course, the minute employment-based health insurance is no longer subsidized with tax breaks, companies will drop it. Young, healthy singles would pocket more with a higher salary and buying insurance themselves. Half of couples would prefer higher salary and to be on their spouse's plan. Hence, company insurance would evaporate fast, leaving the uninsurable to the Gov't.

But, I don't see how this is going to cure the problems with health care pricing.

And, for the record, having lived in England for 5 years and been a patient of the NHS, I am a firm believer in single-payer, gov't health care. This is much more a statement about how messed up the US system is than praise of the NHS, which has a considerable number of flaws.

In the mean time, before we get there, I'm all for free markets in health care. Just skeptical that freeing a market or two will do much good.
There is no way to say this nicely; your writing requires a secret decoder ring.

“No, I don't blame the free market for the problems with the American Health Care System.”

“Young, healthy singles would pocket more with a higher salary and buying insurance themselves.”

“Half of couples would prefer higher salary and to be on their spouse's plan.”

Now this is a sentence I can work with: “Just skeptical that freeing a market or two will do much good.”

Why be skeptical, I’ll give you one easy example why free markets are good: Solyndra.
@ Fever
My point is, that if you make the market for health insurance free from distortion, then you increase the number of people who can not get insurance at a reasonable price and need expensive medical care. So, you are increasing Gov't role in the health care market, which isn't going to yield free market benefits to the price of health care.
A fair question but common sense should render that theory incorrect. Assume you could snap your fingers today and magically reduce the cost of health insurance; would more or less people be able to afford health insurance? The answer of course is more. Voila! Allow health insurance to be purchased across state lines and the states with the most competitive programs would instantly be more attractive than the states with less competitive programs. No magic necessary, just the free market doing what it does best. And I didn’t even touch the cost of healthcare or Medicare, I simply removed a single Government mandate.
You're tweaking at the margins, like someone trying to bail the Titanic. Sure, maybe one more person will make it to the lifeboats before the ship sinks.

I'm for reducing unnecessary regulation and allowing insurance to be sold across state lines (a feature of ObamaCare, BTW) but it's not going to make a dent in the basic problem.
“I'm for reducing unnecessary regulation and allowing insurance to be sold across state lines (a feature of ObamaCare, BTW) but it's not going to make a dent in the basic problem.

You’re right, but as we saw above, for some, it’s a concept too difficult to grasp. If they cannot understand a simple three-paragraph excerpt (see Paul’s comment at 11:33 pm on Nov.17 who summarized Fever’s significant lack of understanding very well), we don’t expect them to comprehend that “free market” won’t do any squat to lower health care costs. Again, people who know this stuff provide much better information (published two days ago):

Why Competition Among Health Plans Can't Help Us
Nov. 9, not Nov. 17.
You managed to point some really good points there, though I can't say that I fully agree with all. Nonetheless what you've pointed out got me thinking.