Bureaucracy consumes 1/4 of US hospitals’ budgets...

Authors say single-payer reform could save $150 billion annually on hospital overhead

Sept. 8, 2014
Mark Almberg,, (312) 782-6006

A study of hospital administrative costs in eight nations published today in the September issue of Health Affairs finds that hospital bureaucracy consumed 25.3 percent of hospital budgets in the U.S. in 2011, far more than in other nations.

Administrative costs were lowest (about 12 percent) in Scotland and Canada, whose single-payer systems fund hospitals through global, lump-sum budgets, much as a fire department is funded in the U.S.

The study is the first analysis of administrative costs across multiple nations with widely varying health systems. It was carried out by an international team from the U.S., the U.K., France, Germany and the Netherlands, and was coordinated by researchers at the City University of New York (CUNY) and the London School of Economics.

The researchers analyzed detailed accounting data that hospitals reported to each nation’s government. The data covered virtually all hospitals in each nation. The research was funded by a grant from The Commonwealth Fund, which played no role in the study.

Hospital administrative spending totaled $667 per capita in the U.S., vs. $158 in Canada, $164 in Scotland, $211 in Wales, $225 in England and $325 in the Netherlands. Comparable dollar estimates could not be calculated for French and German hospitals because of accounting differences. However, their hospital administration costs were about 20 percent higher than in Canada and Scotland, but still 40 percent below the U.S. levels.

The study found no evidence that the high U.S. administrative costs translated into better care or yielded any other benefits.

The study also found that U.S. hospital administrative costs rose from 23.5 percent of hospital budgets ($97.8 billion – 0.98 percent of GDP) in 2000 to 25.3 percent ($215.4 billion – 1.43 percent of GDP) in 2011.

In contrast, the proportion spent on administration by Canadian hospitals fell slightly from 12.9 percent in 1999 to 12.4 percent in 2011. The article attributes the high administrative costs in the U.S. to two factors: (1) the complexity of billing a multiplicity of insurers with varying payment rates, rules and documentation requirements; and (2) the entrepreneurial imperative for hospitals to amass profits (or, for nonprofit hospitals, surpluses) in order to fund the modernization and upgrades essential to survival.

Paradoxically, this entrepreneurial imperative has reduced hospitals’ efficiency, driving them to divert personnel and dollars to marketing, to cherry-picking profitable patients and services (and avoiding unprofitable ones), and to expensive computer systems and consultants to game the payment system.

The researchers found that within the U.S., administrative costs were highest (27.2 percent of spending) at for-profit hospitals.

The relatively high hospital administrative costs in the Netherlands, and rising costs in England – both of which are transitioning to market-oriented hospital systems – were also cited as evidence that increasing reliance on market mechanisms raises administrative costs.

“We’re squandering $150 billion each year on hospital bureaucracy,” said lead author Dr. David Himmelstein, a professor at the CUNY/Hunter College School of Public Health and lecturer at Harvard Medical School. “And $300 billion more is wasted each year on insurance companies’ overhead and the paperwork they inflict on doctors.”

He added: “Only a single-payer reform can squeeze out the bureaucratic waste and use the money to give patients the care they need. Instead, we’re layering on more bureaucracy in insurance exchanges and ‘accountable care organizations.’”

Dr. Steffie Woolhandler, senior author of the study, said: “For three decades our policy makers have pushed market-oriented strategies that have turned health care into a business. As a result, Americans now have the world’s costliest health care, and our life expectancy is years shorter than in most other wealthy nations. It’s time to admit that, when it comes to caring for sick people, markets don’t work.”

Woolhandler is a professor at CUNY/Hunter College who also holds appointments at Harvard and the Albert Einstein College of Medicine. She co-founded Physicians for a National Health Program with Dr. Himmelstein.

**** “A Comparison Of Hospital Administrative Costs In Eight Nations: US Costs Exceed All Others By Far,” David U. Himmelstein, Miraya Jun, Reinhard Busse, Karine Chevreul, Alexander Geissler, Patrick Jeurissen, Sarah Thomson, Marie-Amelie Vinet, and Steffie Woolhandler. Health Affairs, September 2014.

A link to the abstract of the study is available here:

















Keep Medicaid expansion plan in Ohio: editorial

 By The Plain Dealer Editorial Board on April 09, 2013 at 7:15 PM, updated April 09, 2013 at 7:24 PM

Ohio House Republicans are acting with gross irresponsibility in rejecting Republican Gov. John Kasich's bid to expand Medicaid coverage for poor Ohioans. Even more perplexing is the lack of vocal opposition from some Cleveland-area GOP lawmakers for a decision that -- if it stands -- will gravely damage Greater Cleveland.

Anti-expansion Republicans portray their position as a matter of principle. But their stance is the poisoned fruit of childish partisanship and craven self-interest: They fear primary-election challenges from other Republicans who think that expanding Medicaid in Ohio represents a form of collusion with President Barack Obama, whom they loathe.

For that seamy reason, the Ohio House's GOP caucus, led by Medina's William Batchelder, would deny adequate medical care to hundreds of thousands of Ohioans (many in Greater Cleveland) and reject billions of dollars from the U.S. Treasury. It's mindless and it's pathetic.

Rejecting Medicaid expansion will damage Ohio from Lake Erie to the Ohio River. It will further imperil community hospitals already squeezed by the cost of caring for uninsured patients. It will especially damage Greater Cleveland, which has some of Ohio's greatest concentrations of poverty -- and a nexus of high-tech biomedical companies, including world-renowned hospitals that help shoulder the costs of caring for the uninsured, a burden Medicaid expansion would lighten.

Medicaid expansion also is a smart economic strategy that will underwrite jobs, keep Ohioans' tax dollars in Ohio, improve the health and productivity of our citizens and reduce state outlays for prison health care.

Among those who would benefit are working Ohioans without health insurance who live at or below 138 percent of the poverty level. These men and women, who play by the rules, are the very Ohioans Republicans claim to respect.

What Ohio House Republicans have really decided is that unpaid emergency room charges -- and all other such unpaid medical costs -- will be paid not with help from taxpayers in all 50 states but instead by jacking up the health-insurance premiums or employer-sponsored health plan costs of Ohioans who do have coverage. If that's fair to Ohio employers, the word "fair" has no meaning at the Statehouse.

The House Finance-Appropriations Committee now will affirm or reject House Republicans' refusal of Medicaid expansion. Among the committee's members are Reps. Marlene Anielski of Independence and Mike Dovilla of Berea, both Republicans. Also with a key voice within the House GOP caucus, although she's not on the committee, is Westlake's Nan Baker.

Baker, Anielski and Dovilla have a clear choice. They can stand with the blind partisanship of some of their GOP colleagues. Or they can stand with Greater Clevelanders by fighting for Medicaid expansion.

Medicaid expansion adds up for Ohio

Medicaid expansion adds up for Ohio families, taxpayers: Evelyn Lundberg Stratton

By Plain Dealer guest columnist on March 16, 2013

As a former Ohio Supreme Court justice busily and happily transitioning into my new work on mental health and veterans' issues, I wasn't paying much attention to the discussion about Medicaid expansion. Like Gov. John Kasich and many others, I had issues with Obamacare. Then a friend asked me to "look at the facts" of Medicaid expansion. That triggered 23 years of judicial training, learning how to put aside personal biases and feeling and judge a matter on evidence alone.

This is what I learned:

Medicaid is health insurance for Ohio's most vulnerable citizens -- those earning up to 138 percent of the federal poverty level, or about $15,856 for an individual and $32,499 for a family of four. About 366,000 Ohioans will be covered by the Medicaid expansion for an estimated total cost of $2.6 billion over the biennium.

That cost will be paid entirely by the federal government through 2016, ratcheting down to 90 percent afterward. Ohio can opt out of the expansion if the rules change later.

Rejecting the federal expansion money would send federal money back to Washington and to other states to pay for their Medicaid expansions. Yet Ohio receives billions of dollars every year from the federal government for roads and bridges, education and research grants, and we don't for one minute consider sending that money back to the federal government. After all, we pay good money to the federal government in the form of taxes, and we deserve to get some of it back. How is Medicaid expansion any different?

Besides, state and local governments, employers and taxpayers already pay for the health care of uninsured Ohioans. Our Department of Rehabilitation and Corrections will save $27 million over the biennium on inpatient hospital costs to prisoners under the expansion. In addition, the community behavioral health system will save approximately $105 million over the biennium on services that shift to Medicaid. For example, of the 8,000 individuals in Lucas County now requiring behavioral health services, 7,000 -- or 88 percent -- would be covered by Medicaid, saving $4.6 million and freeing up much-needed local funding for other county needs.

Today, health care for 1.5 million uninsured Ohioans is borne by Ohio's hospitals, employers and 10 million other taxpayers. Hospitals are required to provide medically necessary care, at no cost, to low-income and uninsured individuals. Hospitals make up their losses by charging others more or eliminating services or programs. As a result, the average privately insured individual pays approximately $1,000 per year for costs incurred by uninsured individuals.

Preventive health care for uninsured individuals is virtually nonexistent. They often wait to seek medical treatment -- hoping the condition resolves itself -- until their situation worsens, requiring care in the emergency department. This is a costly scenario for both the individual and the hospital. In 2010, Ohio hospitals provided $1.1 billion in total charity care and incurred $645 million in bad debt.

The Affordable Care Act reduced reimbursement to hospitals that provide a high volume of care to low-income and uninsured individuals with the expectation that the additional Medicaid funds associated with the expansion would offset the loss. The U.S. Supreme Court ruled that the Medicaid expansion is optional for states, but if a state rejects it, its hospitals will still feel the impact of the reimbursement cuts.

My analysis: Why would we turn down these federal funds and instead use local dollars to pay for needs that already exist? Our federal income-tax dollars will go to other states and we still have to come up with the local dollars.

I have used my health insurance many times, including for surgery that I otherwise would never have been able to afford. But so many people have no such insurance. I am particularly concerned about those with serious mental illnesses. I saw many of them in my courtroom, and I know firsthand the ill effects of a lack of insurance and a poorly funded community behavioral health system.

Individuals who do not get needed physical and behavioral health treatment and their families struggle. Extending Medicaid to Ohio's lowest-income uninsured is the right thing to do for them and for all Ohioans.

Evelyn Lundberg Stratton, a former Ohio Supreme Court justice, is a health care adviser and attorney with Vorys, Sater, Seymour and Pease LLP.

Dead Woman Working: American Dream Died Long Ago

Published on Friday, August 17, 2012 by Common Dreams

by Donna Smith

It was a slow and torturous death, my American dream. And for millions of others, I am guessing it is the same. Nothing this current round of politicos is planning to do can restore it. Just like there is nothing to being a little bit pregnant, there is nothing anyone can do to breathe life back into what once seemed possible. Now I just hang on waiting to die.

This piece is not about who will or will not be our president or vice president, as after voting in every election since the 1970s, I am pretty sure what I need and want isn’t coming from any of them.

Read more: Dead Woman Working: American Dream Died Long Ago

A (sarcastic) salute to America's health-care system

The Columbus Dispatch Op Ed, Wednesday August 8, 2012

 By Kevin Horrigan, The St. Louis Post-Dispatch

 “Perhaps not surprisingly in a country where health-care reform is so controversial, it was the high-profile presence of the NHS that stunned many American writers. … Certainly the U.S. equivalent, which would be dancing health insurance corporate executives, was hard to imagine.”

— Paul Harris, in The Guardian , July 28

?Hah, hah, hah. Very funny. It’s not hard at all to imagine what the “U.S. equivalent” to your Olympic Opening Ceremony’s salute to Britain’s National Health Service would look like. I’m already working on it.

Sure, “dancing health-insurance corporate executives” will be part of it. If you’d made that much money last year, you’d want to dance, too.

Picture this: It’s night in Florida. We’re in a darkened Raymond James Stadium in Tampa, jammed with 66,000 delegates to the Republican National Convention and their guests. A spotlight illuminates the stage. The seven top health-care CEOs, carrying canes and dressed in white top hats and tails, prance on stage as the Mormon Tabernacle Choir sings Puttin’ on the Ritz.

Pretty nice, huh?

The spotlight widens to show 94 primary-care doctors, in multi-colored scrub suits, forming a ring around David Cordani, the CEO of Cigna Health Care, bowing and scraping to honor the fact that at $19.1 million, Cordani made more in 2011 than all 94 of them combined.

The orchestra breaks into Gershwin’s It Ain’t Necessarily So as the stadium floor is lighted, revealing 400 actual health-insurance bureaucrats wearing telephone headsets and sitting at small desks. They shake their heads back and forth in our “Salute to Rescission.”

The crowd erupts, because fans know that if Republicans repeal the Affordable Care Act, God will be in his heaven, all will be right with the world and insurance companies once again will be allowed to retroactively cancel coverage when someone needs it.

Lights around the stadium’s upper tier are forming a large donut, signifying the “Medicare donut hole” that will return once “Obamacare” is eliminated, thus ensuring that drugs for anything between basic coverage and catastrophe are not covered. The orchestra swings into Live and Let Die.

Cannons in the end zones fire clouds of pills into the sky. As they fall to the floor, out of the stadium tunnels limp thousands of senior citizens who are allowed to scrounge for the pills. Then, it’s time for our….

Tribute to the ER! Giant video boards flash the image of former President George W. Bush uttering these immortal words in 2007: “I mean, people have access to health care in America. After all, you just go to an emergency room.”

The theme from the TV show ER comes up as sirens wail, ambulances tear around the stadium floor, disgorging patients into the busy “emergency department” on center stage, already jammed with insured adults and children who have no primary-care doctors.

Our ER “treats” them and sends them on their way with big weights (symbolizing hospital bills) strapped to their backs, which they then pass to the people in the crowd — who are delighted to get them!

On wires stretched across the top of the stadium a huge number “17.6” sparkles in lights. It represents the percentage of the gross domestic product devoted to health care — 8 percent higher than the Brits. The music swells into Creed’s Can You Take Me Higher?

The crowd sings along, waving 66,000 foam “We’re No. 1” fingers, signaling America’s status as the nation with the most expensive health care in the world — 2.4 times more expensive than the silly Brits.

KA-BOOM! go the fireworks. We crane our heads skyward to see a giant figure “37,” symbolizing the World Health Organization’s ranking of the American health-care system.

The big finale: With the crowd’s attention diverted skyward, volunteers from health-insurance companies have erected cardboard cutouts of men, women, children and babies around the floor of the stadium. There are so many of them — 45,000 — that they loop around the field in a squiggly line almost a mile long.

They represent the 45,000 Americans whose lack of health insurance contributes to their premature death each year, according to a 2009 study by the Harvard Medical School. Now riding into the stadium atop Rafalca, his wife’s Olympic dressage horse, is Mitt Romney, who will be nominated for president on the following night.

He guides the mare’s nose to the first cardboard figure. A simple nudge and, like dominoes, they topple over in spectacular sequence. The crowd goes wild.

Kevin Horrigan writes for the St. Louis Post-Dispatch.

Everyone Should Be Entitled to Medicare

By Bill Moyers, Moyers & Company

04 Aug 12

BILL MOYERS: I read a news story this week that sent me on a nostalgic trip down memory lane. This past Monday, July 30th was the 47th anniversary of Medicare, and to celebrate it, the "Raging Grannies," as they’re known, gathered outside the county office building in Rochester, New York to protest rumored cuts to their Medicare coverage.

RAGING GRANNIES: This old grey granny now needs a test or two -

BILL MOYERS: They praised Medicare in song as "the best deal we have in the country," and even called for expanding it Medicare into universal health care for everyone.

It seems the Republican Speaker of the House, John Boehner, was coming up from Washington to raise funds for Republican congressional candidate Maggie Brooks. The "Raging Grannies" wanted to make certain Ms. Brooks didn’t sign on to the GOP budget which includes cuts to Medicare.

For myself, the "Raging Grannies" channeled a familiar voice, the Texas twang of my boss back in 1965, Lyndon Baines Johnson. I was a White House assistant at the time and had been working with the President and others on the team trying to get Medicare through Congress. Even with overwhelming Democratic majorities in the House and Senate, it was one tough fight. Others had tried before us.

In his 1948 State of the Union message, President Harry Truman said:

HARRY TRUMAN: This great Nation cannot afford to allow its citizens to suffer needlessly from the lack of proper medical care. Our ultimate aim must be a comprehensive insurance system to protect all our people equally against insecurity and ill health.

BILL MOYERS: But every time Harry Truman proposed legislation to do just that, Congress refused to budge. In the 1960s, John F. Kennedy took up the cause:

JOHN F. KENNEDY: Our working men and women, instead of being forced to ask for help from public charity, once they are old and ill, should start contributing now to their own retirement health program through the Social Security System…

BILL MOYERS: But his proposal failed in the Senate by just two votes.

On the other side, actor Ronald Reagan, still in private life, had signed on as the American Medical Association’s hired spokesman in their campaign against Medicare. Doctors’ wives organized thousands of small meetings in homes around the country, where guests listened to a phonograph record of Reagan deploring the evils of "socialized medicine":

RONALD REAGAN: Behind it will come other Federal programs that will invade every area of freedom as we have known it in this country […] until one day, as Norman Thomas said […] you and I are going to spend our sunset years telling our children and our children’s children what it once was like in America when men were free.

BILL MOYERS: But now, it was Lyndon Johnson’s turn. Tragically thrust into the White House by Kennedy’s assassination, LBJ, the son of Franklin Roosevelt’s New Deal and Harry Truman’s Fair Deal, vowed to finish what they had started. He pushed us relentlessly to get it done. Here he is talking to his Vice President, Hubert Humphrey, in early March of 1965:

LYNDON JOHNSON: They are bogged down. The House had nothing this week, all -damn week. Now that’s where you and Moyers and Larry O’Brien have got to find something for them. And the Senate had nothing […] so we just wasted three weeks […] Now we are here in the first week in March, and we have just got to get these things passed […] I want that program carried. And I’ll put every Cabinet officer behind you. I’ll put every banker behind you. I’ll put every organization we got behind you […] I’ll put the labor unions behind you."

BILL MOYERS: About all he had left was the White House kitchen sink, and pretty soon he threw that behind us, too.

Later that March he called me to talk about a retroactive increase in Social Security payments that we were supporting. I had argued for it as a stimulus to the economy. LBJ said okay, but reminded me that social security and Medicare were about a lot more than economics:

LYNDON JOHNSON: My inclination would be […] that it ought to be retroactive as far back as you can get it […] because none of them ever get enough. That they are entitled to it. That that's an obligation of ours. It's just like your mother writing you and saying she wants $20, and I'd always sent mine a $100 when she did. I never did it because I thought it was going to be good for the economy of Austin. I always did it because I thought she was entitled to it. And I think that's a much better reason and a much better cause and I think it can be defended on a hell of a lot better basis […] We do know that it affects the economy […] But that's not the basis to go to the Hill, or the justification. We've just got to say that by God you can't treat grandma this way. She's entitled to it and we promised it to her.

BILL MOYERS: LBJ kept that promise. He pushed and drove and cajoled and traded, until Congress finally said yes. And so it was that 47 years ago, we traveled to Independence, Missouri, the hometown of Harry Truman, and there with the former president at his side, LBJ signed Medicare into law. Turning to Truman, whom he called "the real daddy of Medicare, " Johnson signed him up as its first beneficiary. Harry Truman was 81.

All this was high drama, touched with history, sentimentality, politics, and compromise. A whole lot of compromise. The bill wasn’t all LBJ wanted. It was, in fact, deeply flawed. There were too few cost controls, as some principled conservatives warned, who were then rudely ignored. Co-pays and deductibles remain a problem. And we didn’t anticipate the impact of new technology, or the impact of a burgeoning population.

In fact, even as he signed the bill we still weren’t sure what all was in it. As LBJ himself once told me, never watch hogs slaughtered before breakfast and never, never, never show young children how legislation gets enacted.

But Lyndon Johnson had warned: "We will face a new challenge and that will be what to do within our economy to adjust ourselves to a life span and a work span for the average man or woman of 100 years."

That longevity, and the cost, are what we must now reckon with. As the historian Robert Dallek has written, Medicare and Medicaid, the similar program for the very poor, "…did not solve the problem of care at reasonable cost for all Americans", but "the benefits to the elderly and the indigent…are indisputable." And there’s no going back, current efforts notwithstanding. A new study in the journal Health Affairs finds that Medicare beneficiaries age 65 and older are more satisfied with their health insurance, have better access to care, and are less likely to have problems paying medical bills than working-age adults who get insurance through employers or purchase coverage on their own.

So sing on, Raging Grannies, sing on. The surest way to save so popular and efficient a health care system is to make it available to everyone.

RAGING GRANNIES: Everybody in and nobody out, single-payer Medicare for all.

Bullet Points for Legislators

  • Single Payer saves money.  For the past 20 years, states have commissioned studies on different types of health care systems.   In EVERY case, single payer was shown to be the only way to cover everyone and the only system that saved money and controlled costs.

  • Publicly financed does not mean government run health care.  YOU have publicly finance health coverage, but the government does not make decisions regarding your health care.

  • Cost conscious patients often don't get the care they need.   Most decisions are made by the doctor in concert with the patient, but the patient relies on the doctor's knowledge to make a decision.  Expensive tests and treatments cannot be ordered by the patient, only the doctor.

  • Lifestyle choices are not what is fueling high costs in health care.   The United States ranks low in general health indicators, but high in good health habits.  We smoke less, drink less and consume less animal fat that many other countries with better health indicators and much lower health care costs.

  • Businesses can accurately determine their health care costs and are not subject to unanticipated large premium increases.

  • It will reduce labor costs due to a more efficient way of financing health care, eliminating much wasteful administration.

  • Workers' Compensation costs will be reduced, likely by half, due to the fact that everyone has health coverage and there is no need for the medical portion.

  • It reduces the need for part time employees and provides easier recruiting.  There are no pre-existing conditions or Cobra issues.

  • Eliminates the oversight of health benefits and bargaining health coverage with employees.

  • It creates healthier personnel and more stable employees, reduces absenteeism and eliminates employer health coverage complaints.

  • It reduces employee health related debt and personal bankruptcies.

  • It frees up family income that can be spent on other goods and services, thus stimulating the economy.

Tips for Writing Letters to Editor

Follow guidelines for your local paper (word count, submission instructions, etc.)

Frame your letter in relation to a recent news item Use state specific data whenever possible (let us know if you need help finding some!)

Address counter arguments

Be aware of your audience and emphasize how Medicare for All is good for ALL residents of the state

Criticize other positions, not people Include your credentials (especially if you work in the healthcare field)

Avoid jargon and abbreviations

Don’t overload on statistics and minor details

Cover only one or two points in a single letter

Avoid rambling and vagueness


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