American Health Care’s Staggering Administrative Overhead

A pie chart.

When a group called Citizen Health recently crunched the government’s numbers for 2018 to find out where the money was going in American health care, the result was a pie chart — a picture worth a thousand words, some of which aren’t printable.

That pie chart showed that 73 cents of every dollar of the $3.6 trillion national tab for health care that year went to people who have nothing to do with actually providing care to patients.

Let that sink in.

Almost three-fourths of your healthcare-related taxes, your insurance premiums, your out-of-pocket costs do not pay physicians, nurses, nurse practitioners, physician assistants, physical therapists, EMTs, testing labs, and health aides. Most of your money pays administrators (executives, bureaucrats, clerks, assorted paper pushers, and bean counters).

A 2013 study indicated that American health care’s administrative class outnumbered physicians by 10 to 1. Between 1975 and 2010, the number of health care administrators grew by 3,200%. From 1970 to 2018, spending on health care increased by a similar amount. That spending now constitutes over a sixth of the American economy.

The “apex predators” of healthcare administration do extremely well. Almost $1.7 billion goes to the top 64 CEOs alone in healthcare-related industries — pharmacy benefit managers (PBMs); information technology companies producing healthcare-related software; healthcare-related data miners; insurance conglomerates; pharmaceutical manufacturers; regional health systems; and the list goes on. (And make no mistake about it — the lobbying dollar spent by these industries in Washington and state capitals is impressive also.)

How did we get here?

We’ve voted, legislated, and regulated ourselves into this predicament. We looked elsewhere while the political class did this to us in the name of doing it “for” us. In short, we did it to ourselves.

We started small.

In the 1940s, we started to anesthetize ourselves by giving employers who bore the cost of health insurance a special tax deduction. In the 1960s, Medicare and Medicaid were introduced. At the time, physicians wagged a finger at us, warning us of where this would take us. (And to be even more tiresome and annoying, those callous, heartless skinflints turned out to be right.) The original, official estimates of the cost of Medicare were not a little bit low, but wildly, stunningly low. Medicare’s trustees issue fresh reports from time to time on when insolvency can be expected.

And yet there are some who call for “Medicare for All.” They argue that the simplicity of having the federal government manage the nation’s health care and be the “single-payer” would lead to the reduction of all that costly administrative overhead. Uh-huh. Remember those original, official estimates of the 1960s?

Here’s some more history.

• 1973: The HMO Act.
• 2003: MMA (Medicare, Part D; prescription drug benefits, etc.).
• 2009: The HITECH Act.
• 2010: The Affordable Care Act (ACA, aka Obamacare),
• 2015: The little-known MACRA bill.

You will be happy to know that there’s an academic who has crafted a justification for American lawmakers not reading the laws they pass and not understanding their consequences in the real world.

Death and taxes — you can count on them, right?

You can count on this, too: More regulation = more administration.

Did you know that physicians now spend at least half (and often more) of their time each day on “administrative” work?

Call your lawmakers.

Tell them: “Get smart about unwinding this mess. We need healthcare policy that puts patients first, not corporations, not lobbyists, not a bloated administrative class.”

Remember Citizen Health, the number-crunching makers of that pie chart? Join ’em.

This Article originally appeared in The Intelligencer and is featured here with Author permission.