Thoughtful Conversation About the US Healthcare System

[sengsational]

MD / clinician and podcaster, Peter Attia interviews his old buddy Saum Sutaria, Chief Executive Officer of Tenet Healthcare (18B revenue, publicly traded, Dallas). The two met/worked at McKinsey (management consulting firm). A 2.5 hour discussion, released 12/3/2024, about the US healthcare industry.

#327 - Choices, costs, and challenges in US healthcare: insurance intricacies, drug pricing, economic impacts, and potential reforms | Saum Sutaria, M.D.

“The US healthcare system in many ways is a story, an optimistic story of well-intended policies that now are questioned based upon the way the expenditures have increased.” —Saum Sutaria

peterattiamd.com

It's biased, as you would expect when talking to someone from the health industrial complex that wants to see things stay the same in order to continue the profitable rent seeking. Not once did they mention private equity buying up everything they can get their hands on and squeezing out cost in every conceivable way to attain an above average return. But they did talk a lot about a lot of interesting things that I didn't know and I don't think what they DID talk about was inaccurate, just incomplete (ignoring the role of businesses rent seeking behavior).

What I took away from the conversation is that the US healthcare system is a financial hot mess. It's gone through a shift from out-of-pocket payments in the 1950s to the current third-party payer model, resulting in the costs going up. Other countries started at the same place as the US in the 50's (5% of GDP?) The US now spends 18% or so of GDP, and other countries maybe around 11%. But they don't have the choice and access we do (big health industry bias talking here?). CMS covers a lot of people, and it's going to go to a much higher percentage (the over 65's are supposed to peak in 2032). CMS payments might not even cover costs, but employer sponsorded plans, unique to the US, get them in the black (again, big business bias?) The US has a legacy of wanting choice and access, so price goes up. Health insurance isn't really "insurance", it's a "discount card"; you buy insurance so you get good pricing. They confirm that chargemaster rates are complete fiction that nobody pays, but law requires. On the positive side for us fogies, the US is the best in the world at keeping the over 65 population alive longer than anywhere. Probably because we're the most profitable, LOL!

 

[audreyh1]

So the US healthcare system is a financial hot mess? Well the (traditional) drug focused healthcare it provides is a very big mess too.

 

[MichaelB]

The US does have around 1/4 fewer physicians per capita than most other developed countries, and in the US more physicians are specialists rather than GPs. This shortage of GPs and specialists leads to higher prices.

 

[AudiDudi]

As I recall, there was very little employer paid health insurance until the wage/price controls in the late 40's. Big pharma certainly would not be creating $10,000/mo drugs if the average person had to pay for them out of pocket. They would have a very small customer base. Same for an MRI machine. Hospital forks out $250k for the machine and then has to use it to recover the cost so ev erytime you stub your big toe, they want to do an MRI.

 

[TickTock]

I don't have any sources handy, but IIRC during WWII there were wage freezes and offering health insurance was a way around that to incentivize employees to stay.

 

[Irishgirlyc58]

The US does have around 1/4 fewer physicians per capita than most other developed countries, and in the US more physicians are specialists rather than GPs. This shortage of GPs and specialists leads to higher prices.

Why is it that we have fewer physicians? Did your source state the reasons?

 

[audreyh1]

I’m pretty sure a big part is the AMA limits admission to US medical schools.

So I notice a lot of US physicians went to medical schools overseas and then do a residency in the US. This is one way they’ve worked around our current system. And why we have so many foreign born doctors.

But sounds like we’re still short!

 

[Irishgirlyc58]

I’m pretty sure a big part is the AMA limits admission to US medical schools.

So I notice a lot of US physicians went to medical schools overseas and then do a residency in the US. This is one way they’ve worked around our current system. And why we have so many foreign born doctors.

But sounds like we’re still short!

Yeah and now that I’m thinking about it nursing programs were impacted and turned away potential students all the time even though there was a shortage of nurses.
This was when I was over employment programs several years ago but I have a sneaking suspicion that it hasn’t changed.

If you want to be a doctor it’s not like you can just sit around and wait for a potential opportunity- you have to go where the opportunity is- I’m assuming!

 

[sengsational]

Concerning physicians and other health worker shortages, the podcast mentioned that physicians and health workers in the US make more money than in other countries. They didn't mention shortages. They kept repeating how great we had it with "access" compared to other countries. The shortages they did mention were the ones caused by "limited network" insurance, and I suffered with that for a decade of ACA policies. But that's just an engineered shortage to save money.

About the competition between employers for workers in the 40's, I heard the same thing. Apparently IBM in New York was vying for workers from a shoe plant, and they got into a bidding war with employee benefits because they weren't permitted to increase wages. Hearsay from my days with the old guys from Fishkill, but I think it was a thing.

 

[audreyh1]

I thought the health care benefits came about because there was a wage freeze. So companies used benefits to attract workers.

Nixon years, 1971. https://www.cato.org/commentary/remembering-nixons-wage-price-controls

Nixon shock - Wikipedia

en.m.wikipedia.org

So maybe these government mandated wage freezes happened multiple times after WW2?

 

[GrayHare]

Doesn't surprise me that healthcare spending is higher in the US than other countries since more research is done in the US, and it is not inexpensive.

 

[Koolau]

Health care and it's funding is extremely complicated. What sounds like an easy fix (like price controls on drugs - most specifically right now: Insulin) simply cause other issues. I'm not picking on drug price controls. I could have mentioned "free" health care as provided in some countries. There are NO easy fixes.

Basically, we have a very good health care system with some big problems. Easy "fixes" won't w*rk. Because other countries' health care systems have some advantages over ours is interesting but don't give us an obvious solution to our complicated issues.

I've stated the obvious but only to remind us all about he old adage of the "baby and the bathwater." YMMV

 

[JoeWras]

I don't know where it is going, all I know is we all see the tweaks to the system every year. When I look back at it over the time frame I was responsible for paying my way (40 years), I've seen massive changes, even though it was just small moves each year. The tweaks all add up.

In the mid 80s, it was fairly straightforward and doctors were trusted for most of their decisions and insurance would pay. Most doctors were in private practice or small groups. Today, it seems like many things are denied or need prior approval. Private practice is getting rarer, and big physician groups are becoming the norm. It is getting difficult to even find a PCP that accepts medicare assignment if you are a new patient.

DW and I have a PCP in private practice, but he is headed for 80 years old. We are 62. We don't know what's going to happen in these three years. Will he retire and will we have to find a new doctor? I'm actually seeing him next week and I'm going to have to ask him the question about this plan. There's a chance his son takes over the practice, although he seems happy working in the ER.

Back to the 80s. I actually had a summer job working in medical billing. It wasn't all roses and sunshine then either. We were seeing the seeds of what bugs people today. Generally, though, denials were rare. Our office manager was a whiz at writing up letters to insurance to explain the situation and get the denial dropped. This woman could type a letter out at 90 wpm. It had all the the proper formatting for a letter and was flawless, and the prose was right from her mind discussing the situation. Anyone remember setting tab stops on a typewriter? But I digress...

 

[pjigar]

I’m pretty sure a big part is the AMA limits admission to US medical schools.

So I notice a lot of US physicians went to medical schools overseas and then do a residency in the US. This is one way they’ve worked around our current system. And why we have so many foreign born doctors.

But sounds like we’re still short!

According to the following data source, only 8000 out of total 37000 Residency Matches were filled by IMGs ( international medical graduates) in 2023, about 22%. About 40% IMGs were US Citizens. So only 9% of total residency matches were allocated to non-citizen non-US graduates (a lot of those may be permanent residents in US, I know my BIL was in that category when he joined residency 3 decades ago). In other words, 91% of new doctors/year were US citizens.

https://www.intealth.org/Match2023Infographic.pdf

FWIW IMGs have substantially lower (58-67%) match rate compared to US graduates (92-93%).

NRMP® Celebrates Match Day for the 2024 Main Residency Match®

The NRMP releases results for over 44,000 applicants and almost 6,400 residency programs Today, the National Resident Matching Program® (NRMP) is excited to recognize Match Day for its 2024 Main…

www.nrmp.org

Practicing doctors are limited by number of available residencies but you are correct that the system is designed to keep the supply of doctors under control. In 2024, NRMP offered only 44,853 residency positions for a population of over 335 millions i.e 1 new doctor/year for 7500 people.

 

[CaptTom]

Health insurance isn't really "insurance", it's a "discount card"; you buy insurance so you get good pricing.

That's a good line. I'm going to steal that one!

Like any messed-up situation, all you need to do is follow the money. I don't know offhand how much money is siphoned out of our health care system and into the pockets of insurance companies, but I suspect it's non-trivial. Yet they don't seem to be adding any value. Imagine if even some of that were spent on patient care.

 

[MichaelB]

Why is it that we have fewer physicians? Did your source state the reasons?

I’m pretty sure a big part is the AMA limits admission to US medical schools.

So I notice a lot of US physicians went to medical schools overseas and then do a residency in the US. This is one way they’ve worked around our current system. And why we have so many foreign born doctors.

But sounds like we’re still short!

The data points to a contrived shortage of physicians. Medical school programs are full ( and wildly expensive) but there is still need for more physicians. In addition, there are not enough residency programs for the current level of medical school graduates. The insurance driven compensation rates are distorted, with specialists being paid much more than primary care, which drives more graduating physicians to specialize and leaves even fewer primary care.

One additional factor is use of technology. There has been relatively little application of tech to make physicians more productive, especially in diagnosis, and is heavily geared toward devices that are patentable. This imbalance points toward the likelihood of excessive investment in devices (and drugs) and insufficient investment in labor.

 

[Jerry1]

That's a good line. I'm going to steal that one!

Like any messed-up situation, all you need to do is follow the money. I don't know offhand how much money is siphoned out of our health care system and into the pockets of insurance companies, but I suspect it's non-trivial. Yet they don't seem to be adding any value. Imagine if even some of that were spent on patient care.

Administrative cost is huge. About 30% according to this article and much more than other countries.

https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=Administrative%20Costs%3A%20About%2030%20Percent,of%20excess%20U.S.%20health%20spending.

 

[Car-Guy]

That's a good line. I'm going to steal that one!

Like any messed-up situation, all you need to do is follow the money. I don't know offhand how much money is siphoned out of our health care system and into the pockets of insurance companies, but I suspect it's non-trivial. Yet they don't seem to be adding any value. Imagine if even some of that were spent on patient care.

Bingo. Now, the question is, who's "really" running the insurance companies these days. I certainly have my suspicions!

 

[Surewhitey]

That's a good line. I'm going to steal that one!

Like any messed-up situation, all you need to do is follow the money. I don't know offhand how much money is siphoned out of our health care system and into the pockets of insurance companies, but I suspect it's non-trivial. Yet they don't seem to be adding any value. Imagine if even some of that were spent on patient care.

Yeah, DW works for the 5th highest compensated insurance CEO company... $16.5 mil in 2023 is definitely not trivial. #1 got ~$27 mil. Hard to imagine anyone's worth based on them having the same # of hours in a day as the rest of us.

We've benefitted from the worker's comp world of insurance but health insurance is a much larger pc of the pie I suspect.

 

[marko]

I’m pretty sure a big part is the AMA limits admission to US medical schools.

Why do they limit admissions? Quality vs quantity?

 

[JoeWras]

Administrative cost is huge. About 30% according to this article and much more than other countries.

https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=Administrative%20Costs%3A%20About%2030%20Percent,of%20excess%20U.S.%20health%20spending.

My doctor has had to add front desk staff through the years to deal with all this.

 

[robls]

Here are the top 20 countries with the highest health insurance costs and average life expectancy as of 2024 according to CoPilot. USA is not even in the top 20 for life expectancy, but number 1 in costs per capita.

 

[audreyh1]

Why do they limit admissions? Quality vs quantity?

In order to be a medical school you have to be accredited by the AMA, so the AMA has considerable influence over what any medical school does.

Why do they limit admissions? Simple, it’s to maintain a shortage of doctors. It has nothing to do with quality, deliberately limiting supply. Means higher prices for physicians. Also higher prices for medical schools I imagine.

 

[Lorenzo]

Why do they limit admissions? Quality vs quantity?

A cynic would say to limit the supply of physicians, so they command a higher price. Keeping quality high is of course a major goal, but if other countries are able to crank out quality physicians, maybe we have room for improvement in balancing quality and quantity?

 

[Toocold]

A cynic would say to limit the supply of physicians, so they command a higher price. Keeping quality high is of course a major goal, but if other countries are able to crank out quality physicians, maybe we have room for improvement in balancing quality and quantity?

The result has been an explosion of pseudo-physician roles like Nurse Practitioners and Physician Assistants, and as a result, PCP positions are becoming more marginalized.