IT’S SURGERY, STUPID!

By André WENCKER

I. AHIP'S CONFUSING DOCUMENT ON HEALTHCARE COSTS

American Health Insurance Plans-AHIP, is the well known national trade association of healthplans and Insurers ; hence its views on healthcare spending in Employer Sponsored Insurance (ESI) are expected to be precise and extensive. This is why we were extremely interested by the chart below, proposing a breakdown of which services a dollar spent in healthcare is going to on average .

It confirms the now very well documented fact (see below) that prescription drugs account for about 23% of the total healthcare spending. But contrary to a common myth, or biased view, it’s not the most important line in the equation!

Doctor services come in second, but the chart doesn’t show which part of “Office and clinic visits” costs are related to physicians or specialists fees, and this seems very confusing.

Furthermore, the share of costs induced by hospital stays (16.1%) seems extremely low compared with the ratio observed in most 37 OECD (Organization for Economic Cooperation and Development ) countries, where it generally amounts to around 50 %!

Finally,the graph presents  a very detailed count of all the services insurers are delivering to their clients.

The  2.3% ratio of net profit recorded by insurers is consistent with the results of a recent study released by DELOITTE showing that these profits are very innequally distributed between carriers: 45% of the responding entities in DELOITTE’s study reported losses, while 3 operators represented 34% of the revenues and 84 % of the underwriting margins.

The fact remains that true health care servicesrepresent only 81.9 % of the total spendings, to pay for administrative and managemen costs, as well as taxes of course!

This is one of the lowest ratio observed in comparable high-income countries. In France, for example, approximately 92% of each euro spent by the Assurance Maladie (the French national health insurance) goes to patient care.

II. HCCI'S VISION

The Health Care Cost Institute was founded in 2011, by 4 large insurers (Aetna, Humana, Kaiser Permanente and United Healthcare) sharing anonymized data of more than 40 million insured people, or one in four Americans insured through their employer. One would think that their research should show results very similar to the AHIP study.

Unfortunately,  this is not the case, and by a wide margin:

Hospital costs for instance represent 56% of the average spending on HCCI’s chart we display hereby, (while only 16% in  AHIP’s data), surgery being the first item, with 29%!.

Such a huge difference is clearly confusing and some explanations are needed to understand the causes of these differences.

Professionnal services (PCP, specialists visits and other services) represent 34% of the costs, and this ratio is not comparable with the AHIP’s one, showing that doctors services represent only 22.2 % of the expense.

The only data similar to AHIP’s “study” is on drugs : 23% (HCCI’s gross figure amounts in fact to 19%, but adding costs of drug administration, leads to 23%).

III. CONCLUSION

By way of conclusion to the analysis of AHIP’s diagram, one might say it is not of very useful for the employer and seems to have been made essentially to state that health insurer’s administrative costs are reasonable. 

One should add that there is clearly a lack of shared methods and, above all, a lack of reliable and actionable data on health expenses in the Employer Sponsored Insurance, however needed in consideration of the high cost of the healthcare system.

Furthermore, we found the HCCI’S approach more useful to the average employer than the AHIP’s one, allowing them to see clearly where the stakes are when it comes to cost containment strategies and actionable solutions, which seems to be their main concern, now and in the future.

Thanks to HCCI data, it is now very clear that hospitalization remains the first expense item in the system, as it is the case in most developed countries.

Their study is available on their website (http://www.healthcostinstitute.org/) and we recommend to read it, since it provides many useful and illuminating elements of information on the evolution of healthcare spending and costs in the last years. One of these fundamental findings is that prices, and not utilization, are driving the constant increase in healthcare spending observed over the last decade.

HCCI’s views were recently reinforced by Dr. Atul Gawande, a surgeon who was picked to head the company being formed by Amazon, Berkshire Hathaway and JPMorgan Chase to trim employee healthcare costs. Speaking at the annual AHIP’s meeting held in San Diego, Dr Gawande pointed at surgery as the single biggest U.S. healthcare cost.

He added “We are screaming right now about pharmaceutical costs … and that is just 10 percent” of total U.S. healthcare spending”.

And so we are glad to see that the choice of Dr Gawande to lead the new venture reflects plans to focus on the entire healthcare system, especially hospitalization costs, rather than just looking to curb prescription drug costs, too frequently and falsely held for the first culprit for high healthcare costs in the United States.

We at Care2care Medical Travel are all the more comforted in our view that our offer is a part of the solution and, furthermore, the only one that can produce significant results immediately


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