I happened to stumble across the above chart online the other day. It’s not new data, and was actually quoted in this major publication. I can write articles and parse the challenges we face till the cows come home, but nothing can really sum up what’s wrong with American healthcare more than this chart. It says everything and is quite obnoxious. What’s worse, it’s from 2009—and the curve has probably considerably diverged since then.
So that’s it, my blog post for the week. Just stare at this chart and take it all in. Feel free to comment below. I was going to write a long article on what these curves mean for healthcare. Then I thought to myself: absolutely nothing I write can possibly say more than the chart itself. It speaks not just a thousand words, but a million…..
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Footnote: The above chart was found in multiple online publications, and I did not have time to find the original source. However, no frontline healthcare professional would be surprised by this exponential administration bloat, because we see it at close quarters every day. If you’d like more reading because I’ve only posted a short post this week, I also refer you to this great article from The Hill titled: Administrative job growth in healthcare isn’t good for America.
Suneel Dhand is a physician, writer and speaker. He is Co-Founder at DocsDox.
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Good grief! No words!
Its not really the health care industry. It’s the fact that insurance companies are requiring more and more paperwork for less and less money. More claims are being denied for dumb reasons and when you try to call insurance they put you on hold for an hour when they pick up you are talking to someone in India who has no clue as to why you are calling. When you ask to speak to someone in America you are put on hold for 2 hours
A Greed.
The ultimate cottage industry. More regulations, more administrators, more costs,less physician input resulting in the ” blind leading the sighted”.
Exactly, while we get less good care, etc.
Your chart reminds me of what happened to the teaching profession about 7 years ago. Our new state Superintendent of Education was 32 years old and had never taught a day in his life. All of a sudden, teachers were subject to ridiculous recording and data gathering requirements which added a good two hours to an already ten hour work day. We were also required to utilize ineffective teaching strategies on a daily basis. Students were being shortchanged and their right to a quality education was compromised. Over 30% of teachers in my state left the profession, myself included.
What can be done about this, anything? Physicians joining corporate medicine just reinforces this.
Agree, it seems to be a vicious circle unfortunately 🙁 Suneel
How much of this “administration” is devoted towards deciding insurance claims (ie denying sick people care)? How much of the total cost of medical care does this consume? 10 cents on the dollar… 20 cents? I’ve seen estimates as high as 22. In other words shifting to a Medicare For All system (where it is ones job to deny care) would immediately eliminate as much as 22% of the costs of our medical system, and cut a huge chunk out of the absurd data revealed in the chart. This is just one reason why publicly funded care is both cheaper and more efficient economically than a private system.
Correction: where it is *no* ones job
Gan…really good point! Eventually, big change will be needed when the system implodes. Thanks for reading. Suneel
I would say that if the money paid to insurance companies was instead paid to the individual (in the form of an HSA) with a small amount for emergency /catastrophic care, costs would come down.
Medical offices would spend much less time just handling insurance claims, and people would be more conscience of how much they spend on health care.
I’m almost 63, and I spend less than $500 per year on my health care.
If all the money paid to insurance companies, on my behalf, had been at my disposal over the years, I could have taken care of my rotator cuff damage, and had a couple of colonoscopies. I could also have had better dental care.
See, the thing is, freedom of choice is a tough thing, but I believe its worth it.
Freedom is neither free, cheap, easy, safe, or guaranteed, but its a whole lot better than being a virtual slave to “the bureaucracy:.
That’s absolutely ridiculous, Gan. Unaccountable bureaucrats will ever be as efficient or effective as private company. Just look at the VA. Also, no private healthcare company would ever burden themselves with that many useless bureaucrats unless they were forced to. They produce nothing and cost a fortune. The dramatic rise you see comes from the armies of administrators they were forced to hire to handle the ever-increasing regulations heaped on them by the government. You want affordable, effective healthcare? Get the government out of it. It’s a classic example of career politicians creating a problem and then proudly enacting a solution that makes the problem worse in a cycle that will repeat until it collapses the system itself. Government ruins everything it touches.
Do not think it is government that ruins everything, it is for profit greed by insurance companies. Health coverage needs to be non profit/public so that most dollars can be used for care and not go to bureaucracy that overburdens the care giving and takes the dollars to wall street. Small , affordable co pays can have a function for people to have skin in the game, at least for certain therapies.
Lol. Have you ever heard of the term “regulatory capture”? People need healthcare so they are ripe for exploitation. It is easy to understand. Human beings are a flawed species. Private or government… it doesn’t matter. The cunning and strong exploit the weak. This is all that chart shows. There isn’t anything more to it than that.
Hi David, that’s a really good point and philosophical argument for why things are the way they are. Doctors have indeed been very weak to surrender their profession. Suneel
I am so delighted with my government run health care insurance called Medicare with supplemental picked up by my former employer. I was able to chose my surgeon, hospital, and received a prescription for a week in the New York state owned rehabilitation hospital for both of my knee replacements. My cost was 0. My son, who was a hospital administrator, said that I received some of the best health care in the US and perhaps the world. And the overhead for those Medicare bureaucrats is 3%, overhead for those profiting off of sickness is what? 20% or more. Corporations will never be more efficient than government run services as corporations have the added expenses of share holder profits, hiring lobbyists, campaign contributions, advertisement promoting their corporation, and corporate salaries. Bureaucrats in government are doing it to be of service to the public, bureaucrats in corporations are doing it to make money by cheating the public.
Hi Anne, thanks for your great comment. I have also seen evidence that pure Medicare bureaucracy costs are much less than those from private insurance. The cost though of regulations also needs to be factored in (i.e. a lot of the bureaucratic expenses are for trying to “comply” with Govt regulations). Suneel
Do you know if this is ‘number of people’ or ‘salary of people in those groups’? I would be afraid it’s both, but some clarity would be helpful.
Hi Wylie, I think it is pure number of people! A salary comparison would be interesting though too. Suneel
Thank you Sunheel. Very good read!
Thanks for reading Patrick! Suneel
This is the way it is in all businesses, educational instutions, medical fields.. it’s just not right…. everyone wants to be the chief and make more $ but no one wants to do the hands on….
Hospitalization Insurance became widely available in the 70’s in the US. Insurance and hospital/medical practice administration ballooned.
It looks like the number of administrators took a big jump in the early 1990s. I’m trying to think back and remember what might have motivated this. The advent of HMOs, maybe? Knowing this might give us a clue as to how to fix the problem.
Neil, great point– I wasn’t in medicine then, but HMOs perhaps could have been it. Thanks, Suneel
My physician’s office was forced into a one-issue per fifteen-minute appointment by the greedy, corporate mentality of the governing healthcare system with which it is associated (bound to). If the doctor determines that you have more than one issue, then they require you to make another appointment. This 15-minute slot, which works out to less than half that time WITH the doctor, costs $125.
My family is looking elsewhere.
What you are describing with squeezed appointments, is unfortunately the trend across the country : ( Hope we can reverse it one day. Suneel
What happened right about 1992?
Max, I need to research that too. Suneel
Thank you for this chart, which I’ve shared. I’ve read that, adjusted for inflation, the per capita cost of healthcare in the US during this same period has increased about 6-fold. I wonder how much of that increase was driven by bloated administration. I wonder how much of the bloating in administration was driven by a need to promote corporate growth and increase profits. I wonder what a comparable chart would look like for Canada, Spain, or Japan.
Question: The most dramatic increase in the administrators seems to have come between about 1992 -94/5. What was happening then in terms of (de)regulation, the economy, business, etc., which might explain this?
Hi Jonathan, thanks for your comment. I also need to research exactly what happened in the early ’90s (I wasn’t yet in medicine). Suneel
I got this from an article that may be relevant. Its talking about Massachusetts, but I note that it mentions several States made these changes:
“From 1992 on, hospitals and insurance companies negotiated rates of payment for services among themselves, in private, with no government interference or oversight.
Perhaps the biggest change, the number of acute care hospitals in Massachusetts dropped from 93 in 1990 to 65 today. In 1990, most were independent, and today most are part of larger systems such as Partners and Steward. Most of the closings happened in the 1990s, while the merger and affiliation game keeps going today. Discharges dropped from 52,209 in 1990 to 28,266 in 2004, and beds dropped from 23,262 to 16,190. Health insurers also consolidated, with the number of plans dropping from about 18 in 1990 to 8 today.
In the late 1980s, reducing the size of the hospital system was an unattainable policy obsession, and in the 1990s, the deregulated market made it happen with stunning efficiency. This is a clear-cut case of “be careful what you wish for, because you just might get it.” While the downsizing eliminated excess capacity, it also enabled market consolidation triggering widespread hospital payment and health insurance cost inflation over the last ten years.
The emblematic event happened in late 1993 with the announcement of the merger of Mass. General and Brigham & Women’s Hospitals into the Partners Healthcare System. That move, at the time, was utterly defensive as the two behemoths worried about their survival in the new deregulated environment. Their move was replicated across the state as hospitals formed mini-monopolies in nearly every region.
“http://archive.boston.com/…/it_was_20_years_ago_today…
Looking back, this is in line with “Clintonomics” where the was strong economic growth through deregulation. Recall the US was in a recession and Clinton adopted a repeat of the pro-market orientation associated Regan and Republicans in the 1980s, in contrast to the more traditional Democratic fiscal policies, which had emphasized government spending and public investment rather than fiscal discipline and private investment. The recovery of the economy here was led by private-sector spending and private-sector employment leading to substantial economic growth. Also welfare “reform.” Personal bankruptcies climbed, the personal saving rate plummeted (as measured in the national income statistics), while the trade deficit expanded dramatically, and the stock market bubble grew with overvaluation.
Giovanni, that’s really interesting! Suneel
I have no doubt that our U.S. healthcare system has serious problems. But, you cannot find that out by studying this graph. The graph is a textbook example of deceptive presentation of data. Let me explain:
First, neither the graph, nor the accompanying text explains exactly what quantity is being graphed. After studying this, I think that what is shown on this graph is the number of physicians (or administrators) as a percentage increase over a baseline which is the 1970 value. Just wrap your mind around that — it is a really weird thing to graph. Why not just show the total number of physicians or administrators? Answer: Because it would not look nearly so dramatic!
The key statistics that we are missing here are those 1970 baseline numbers. We see from the graph that the number of physicians has roughly doubled since 1970. And, the number of administrators has increased by roughly a factor of 30. But, suppose that the baseline number of administrators in 1970 was tiny?? Then 30 times that baseline is still a small number.
And, we might suspect that the number of administrators was tiny in 1970, because in that era most healthcare was delivered by non-profit organizations (and was required to do so by law).
Regardless of what we may think about the inequities and effectiveness of our healthcare system. We should never sink to making fallacious arguments via deceptive displays of data.
Hi Matthew, thanks for your comment and analysis. While I appreciate the intellectual and intelligence behind what you say– statistics can of course always be presented for effect– the underlying problem is one that every single one of the almost a million practicing physicians in the USA will identify with. Namely, all around us we have seen an explosion in the number of healthcare administrators. The reasons can be debated, but at a time when frontline physician (and nurse) shortages plague every state, and costs of care keep rising, we are left scratching our heads. The graph is a symbol of this problem, and we need to discuss what’s happened. Suneel
I am uninsured and am therefore a cash customer, and for paying cash, I get a 60% discount from my providers. Just to not have to contend with insurance companies! Imagine a country where providers could provide and the government (We the People) could pay the bill. If you increase taxes on everyone but eliminate the need to pay exorbitant insurance premiums, this is going to come out less expensive for everyone and more efficient. Subtract a bunch of administrators on top of that and… Well, who knows?
Right now not everyone is paying into the system – me, for example. Spread this cost out over every tax payer and it automatically gets less costly for individuals and families.
I had to make a choice between having a home or having insurance. No one should have to make that choice.
I wonder what triggered the major jump around 1990. Does anyone know?
Money from Profit for investor wealth is at this point part of Admin cost.
The value of Health/Onsurance stocks has grown 200+% since the Affirdable Care Act AND 15% in the last 3 months.
Yes, investor wealth is contributing to the cost of Health Care and many investors do not want to see Medicare for All!
20 y
https://www.barchart.com/stocks/quotes/$SRHC/technical-chart?plot=BAR&volume=0&data=MO&density=X&pricesOn=1&asPctChange=1&logscale=0&sym=$SRHC&grid=1&height=210&studyheight=100
3 months
https://www.barchart.com/stocks/quotes/$SRHC/technical-chart?plot=BAR&volume=0&data=DO&density=M&pricesOn=1&asPctChange=1&logscale=0&sym=$SRHC&grid=1&height=210&studyheight=100
Just FYI I believe the original chart was posted here, and Rocky Bilhartz (the author I believe) posted some commentary as well including a footnote about the statistics to the effect that they don’t include insurance companies and many other parts of the equation.
https://bilhartzmd.com/?p=1349