Information on the Healthcare Business

Understanding the healthcare business can help one to better understand why medical care choices are made, and how to get the best care possible. Fundamentally, healthcare is provided in a context of the society in which the healthcare is delivered.

In the United States, the delivery of healthcare is primarily through non-profit and profit-based businesses. The federal government provides some care, especially to the military, and through 'free clinics' designed to serve the poor. The government pays for much of the healthcare delivered in the US through the aforementioned providers, through medicare, and medicaid. Some state and local goverments also pay for care. A few even operate insurance organizations, which blend subscriber payments and tax-generated money. A significant proportion of the rest of healthcare costs are paid through insurance companies and the rest is paid directly by consumers.

The payment of healthcare costs through government and insurance programs adds administrative costs and indirect costs to the cost of healthcare. This is because third party payment (government or insurance) requires an entire infrastructure to perform. It also creates various interest groups that have interests that are not aligned with the goal of delivering healthcare in the most direct, efficient manner possible. The healthcare providers must keep additional records, communicate with the payers, and consider the policies and practices of the payers in much of their decision making. They also, in effect, provide short term, no-interest loans to both the payers and the patients. Because of the time value of money, this results in a loss to the healthcare provider. The payers (government and insurance) must employ people, create systems and policies, etc. to collect money and make payments. Government collects taxes and insurance companies collect premiums. Both then create policies, procedures, and practices that determine how and whether healthcare providers and patients can make claims and get reimbursed for expenses.

In many cases the payer policies determine whether or not specific healthcare (treatments, diagnostic testing, proceedures, drugs, etc.) are even offered to patients who would benefit from them. The patient may be able to pay for the beneficial care, but even if they make it clear that they are willling to do so, they may not be offered or provided care that their payer will not pay for.

Achieving efficient and effective healthcare is a huge challenge. Dr. Christopher Murray, head of the new Institute for Health Metrics and Evaluation at the University of Washington, has published reports indicating that the United States spend far more than most first world nations and has far worse health. The United States is estimated to spend more than 30% of all healthcare expenses on administation (billing, insurance claim handling, etc.) Most nations spend less than 15% on administration. Clearly we have a lot of waste and special interest groups that prevent getting good healthcare from being straightforward and efficient.

There are many companies that stand to gain from selling products to the consumers of healthcare. Unfortunately, increasing sales is not always (or, some might argue, often) accomplished by providing the best care, treatment, and products at the lowest prices. Pharmaceutical companies in particular have a long history of focussing on getting approval for and marketing drugs, even when the drugs are no more effective than those available and sometimes when they have significant, even lethal side effects. This NY Times Article is one in which a doctor explains how he was persuaded to violate his own ethical standards and work in the interests of a drug company and against the interests of patient care.

Given this complex environment it is hard to know who to trust and how to get the best healthcare possible. We hope that by providing information you will be empowered to make intellilgent choices and avoid having them made for you by insurance and drug companies whose main goal is making money.


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