My follow-up conversation with ChatGPT resulted in:
1) What percentage of US healthcare expenditures are considered for routine care (as opposed to catastrophic care)?
Estimate: Approximately 40-50% of US healthcare expenditures are associated with routine care, while catastrophic care accounts for the remainder.
Routine care includes preventive services, regular check-ups, screenings, management of chronic conditions, and minor illnesses.
Catastrophic care includes high-cost treatments like trauma, surgeries, cancer care, ICU stays, and advanced procedures.
2) What percentage of routine care is paid through one's health insurance policy (as opposed to out-of-pocket or through one's HSA)?
Estimate: Approximately 70-80% of routine care costs are covered by insurance policies.
These costs include annual checkups, primary care visits, diagnostic tests, and screenings, often covered with minimal copays or deductibles.
The remainder is typically paid out-of-pocket or via HSAs. HSAs specifically cover a smaller share (~5-10%) due to their more selective use among Americans with high-deductible health plans (HDHPs).
3) If we were to reform US healthcare such that ALL routine care was paid out of an HSA or out of pocket, what sorts of cost savings could be realized for the system, including due to price competition?
Potential Cost Savings:
Administrative Simplification:
Routine care billing through insurance involves substantial overhead (e.g., claims processing, pre-authorizations, administrative staff). Paying directly could save an estimated 15-20% of routine care costs due to reduced administrative expenses.
Price Transparency and Competition:
Out-of-pocket payments would likely encourage price transparency and competition among providers, potentially lowering costs by an estimated 10-30%. For example:
Direct primary care clinics already show reduced costs compared to insurance-based pricing.
Providers would offer clearer pricing for routine services to attract cost-conscious patients.
Consumer Behavior Changes:
Patients spending their own money tend to use healthcare services more judiciously, potentially reducing unnecessary tests or procedures. This could reduce routine care spending by an estimated 5-15%.
Increased Efficiency:
Transitioning routine care to HSAs or out-of-pocket payments could encourage innovation, such as more telemedicine or community health solutions, further reducing costs by 5-10%.
Total Estimated Savings: Combining these factors, systemic cost savings could range from 25-50% of routine care expenditures. For the total US healthcare system, this reform might yield 10-20% overall cost reductions, depending on how effectively competition and efficiency improvements are realized.
I really like the term Care-tel and will be using it in the future. I have a significant personal stake in that industry (I depend on it to remain alive), so here are my 2 cents worth:
1. HSAs are likely the best way to push responsibility for paying for health care back to the consumer. There is an issue, though. For HSAs to be tax deductible, they must be funded by payroll deductions. People with no W2 income don't have access to them. (I learned this the hard way).
2. Medicare.gov charges premiums (mine go up to $180 per month in January) and there are eligibility requirements - you had to pay into the system for 10 years to qualify for Medicare). It isn't welfare for anyone over 65,
3. The Affordable Care Act ended the practice of denying eligibility for pre-existing conditions. There were costs: generally higher premiums (my sister had to go back to work full time to pay for her medical insurance) and massive government subsidies (the exact opposite of the advantages of HSAs).
4. For the Pharma supply chain, the biggest evil (IMO) are Pharmacy Benefits Managers. I can't tell that PBMs add a bit of value to the supply chain, they seem to me nothing but cash extractors that are politically connected. They can be traced to the decimation of independent pharmacies. Mark Cuban's Cost-plus Pharmacy is disrupting that. Note: Big Pharma shares a lot of blame here but PBMs are even worse.
Definitely a big move in the right direction, but you're still having the government insert mandates and prohibitions into the market ("Require care providers to post prices for all non-experimental procedures and treatments.", etc). And unless I missed it, you don't address the issue of licensing. I would get the government's nose entirely out of healthcare, including what training providers do or do not have, as long as a provider does not misrepresent his/her qualifications.
If I had my ideal system, there would be no government involvement. Instead, I'm trying to throw spaghetti into the Overton Window with this to see what might stick. But you're right: I should have added licensing reform and probably malpractice caps. (I borrowed the transparent pricing mandate from Singapore.)
The entrenched Care-tel will have none of this. “It will surely kill Grandma” is the deflecting retort they will assert. Herbert Stein’s Law asserts: “if something cannot go on forever, it won’t”. Davies Corollary says: “it will last longer than we think” and “it will end without anyone doing anything about it”.
Rather this changes in some catastrophic collapse or some incremental steps of natural self reform is an open question. The latter is less dramatic, but more likely (in my humble opinion).
Some good ideas. I'm a fan of HSA's as we've saved a lot there and made interest. I would like to see insurance entirely out of it. I like the Kaiser Permanente model, where instead of paying for insurance that money goes straight to your provider. Then you have competing providers incentivized to provide the best outcomes and overall health of their members, all very measurable, at the lowest prices. All of this would be a haircut for a large sector of GDP, which is the reality of the times ahead, that is who will take less? Somebody as long as it's not me.
My follow-up conversation with ChatGPT resulted in:
1) What percentage of US healthcare expenditures are considered for routine care (as opposed to catastrophic care)?
Estimate: Approximately 40-50% of US healthcare expenditures are associated with routine care, while catastrophic care accounts for the remainder.
Routine care includes preventive services, regular check-ups, screenings, management of chronic conditions, and minor illnesses.
Catastrophic care includes high-cost treatments like trauma, surgeries, cancer care, ICU stays, and advanced procedures.
2) What percentage of routine care is paid through one's health insurance policy (as opposed to out-of-pocket or through one's HSA)?
Estimate: Approximately 70-80% of routine care costs are covered by insurance policies.
These costs include annual checkups, primary care visits, diagnostic tests, and screenings, often covered with minimal copays or deductibles.
The remainder is typically paid out-of-pocket or via HSAs. HSAs specifically cover a smaller share (~5-10%) due to their more selective use among Americans with high-deductible health plans (HDHPs).
3) If we were to reform US healthcare such that ALL routine care was paid out of an HSA or out of pocket, what sorts of cost savings could be realized for the system, including due to price competition?
Potential Cost Savings:
Administrative Simplification:
Routine care billing through insurance involves substantial overhead (e.g., claims processing, pre-authorizations, administrative staff). Paying directly could save an estimated 15-20% of routine care costs due to reduced administrative expenses.
Price Transparency and Competition:
Out-of-pocket payments would likely encourage price transparency and competition among providers, potentially lowering costs by an estimated 10-30%. For example:
Direct primary care clinics already show reduced costs compared to insurance-based pricing.
Providers would offer clearer pricing for routine services to attract cost-conscious patients.
Consumer Behavior Changes:
Patients spending their own money tend to use healthcare services more judiciously, potentially reducing unnecessary tests or procedures. This could reduce routine care spending by an estimated 5-15%.
Increased Efficiency:
Transitioning routine care to HSAs or out-of-pocket payments could encourage innovation, such as more telemedicine or community health solutions, further reducing costs by 5-10%.
Total Estimated Savings: Combining these factors, systemic cost savings could range from 25-50% of routine care expenditures. For the total US healthcare system, this reform might yield 10-20% overall cost reductions, depending on how effectively competition and efficiency improvements are realized.
Excellent list! I was going to do something similar, so you saved me the work. I can refer people to this piece.
Please share with me if you think of it!
All excellent reforms and none require harming healthcare insurance CEO's.
Hi Max,
I really like the term Care-tel and will be using it in the future. I have a significant personal stake in that industry (I depend on it to remain alive), so here are my 2 cents worth:
1. HSAs are likely the best way to push responsibility for paying for health care back to the consumer. There is an issue, though. For HSAs to be tax deductible, they must be funded by payroll deductions. People with no W2 income don't have access to them. (I learned this the hard way).
2. Medicare.gov charges premiums (mine go up to $180 per month in January) and there are eligibility requirements - you had to pay into the system for 10 years to qualify for Medicare). It isn't welfare for anyone over 65,
3. The Affordable Care Act ended the practice of denying eligibility for pre-existing conditions. There were costs: generally higher premiums (my sister had to go back to work full time to pay for her medical insurance) and massive government subsidies (the exact opposite of the advantages of HSAs).
4. For the Pharma supply chain, the biggest evil (IMO) are Pharmacy Benefits Managers. I can't tell that PBMs add a bit of value to the supply chain, they seem to me nothing but cash extractors that are politically connected. They can be traced to the decimation of independent pharmacies. Mark Cuban's Cost-plus Pharmacy is disrupting that. Note: Big Pharma shares a lot of blame here but PBMs are even worse.
Definitely a big move in the right direction, but you're still having the government insert mandates and prohibitions into the market ("Require care providers to post prices for all non-experimental procedures and treatments.", etc). And unless I missed it, you don't address the issue of licensing. I would get the government's nose entirely out of healthcare, including what training providers do or do not have, as long as a provider does not misrepresent his/her qualifications.
If I had my ideal system, there would be no government involvement. Instead, I'm trying to throw spaghetti into the Overton Window with this to see what might stick. But you're right: I should have added licensing reform and probably malpractice caps. (I borrowed the transparent pricing mandate from Singapore.)
The entrenched Care-tel will have none of this. “It will surely kill Grandma” is the deflecting retort they will assert. Herbert Stein’s Law asserts: “if something cannot go on forever, it won’t”. Davies Corollary says: “it will last longer than we think” and “it will end without anyone doing anything about it”.
Rather this changes in some catastrophic collapse or some incremental steps of natural self reform is an open question. The latter is less dramatic, but more likely (in my humble opinion).
For now, it is not yet bad enough.
Chris
You are right. I regret that all I have is: “Collapse is nigh.” But that might be 2 years or 20.
The video at the end had me rolling hahahahhahahah
It's a follow-up to this one, which I helped write with John Papola. John produced and directed it and it's gold.
https://www.youtube.com/watch?v=ZDXuPQ9ML9E
Good, solid suggestions.
PS I'm not holding my breath either. Corruption is our middle name: The Corrupt United States.
Some good ideas. I'm a fan of HSA's as we've saved a lot there and made interest. I would like to see insurance entirely out of it. I like the Kaiser Permanente model, where instead of paying for insurance that money goes straight to your provider. Then you have competing providers incentivized to provide the best outcomes and overall health of their members, all very measurable, at the lowest prices. All of this would be a haircut for a large sector of GDP, which is the reality of the times ahead, that is who will take less? Somebody as long as it's not me.
Interesting—sort of like vertical integration. I didn’t know about this, so thank you.
Excellent list! I was going to do something similar, so you saved me the work. I can refer people to this piece.