Trendspotting: 1/3 of U.S. Healthcare Spending Goes to Paperwork

NEWSWIRE: 2/3/20

• According to a new study, more than a third of U.S. health care expenditures go to administrative costs, adding up to $812 billion or nearly $2,500 per person. That’s more than four times the per-capita administrative costs in Canada; if costs in the U.S. were comparable, it would save an estimated $628 billion. (Annals of Internal Medicine)
• NH: I'm sure you've already noticed this. You go into a typical hospital or a doctor's clinic, and you see that roughly two out of three workers there are engaged in administrative activities--filling out, copying, and filing forms (either paper or electronic); figuring out how to "code" a procedure; making sure every pill and cup is entered into accounting; arguing on the phone with other providers or insurers; haggling over accounts due or payable. Many of these procedures may have been farmed out to other entities (billing, for example), so you don't even see all of the iceberg beneath the waterline. And then you've got major insurance firms, whose whole business is to shuffle reimbursement records. Needless to say, none of these work hours have anything to do with actually treating patients.
• Here is the latest study quantifying this phenomenon. Publishing in the prestigious journal Annals of Internal Medicine, Dr. David Himmelstein et al. (a team of three doctors and professors) find that 34.2% of U.S. national health expenditures in 2017 go to administrative costs. Their parallel study of Canada in 2017 finds that the comparable Canadian figure in 2017 is 16.7%. That's a difference of 17.5%, which--multiplied times total U.S. health spending (18% of GDP)--is a staggering number (3.1% of GDP). It's roughly what the United States spends on national defense. See first chart below.
• The authors have a long expertise in this area. In the New England Journal of Medicine, back in 2003, they published a similar comparison and found that, in 1999, administrative costs were 31.0% of total healthcare spending in the United States and 16.7% in Canada. So in 1999 the gap was similar, though since then the administrative cost margin has risen in both countries. Interestingly, though exact data are not available, the authors estimate that back in 1969--when the two countries' healthcare systems were more similar in structure--their administrative cost margins were probably also similar. It's in the United States where the administrative margin has soared. In Canada, it has remained low.
• These authors are the only researchers who have attempted a national system-wide look into administrative costs. But lots of narrower studies have come to similar conclusions. In 2014, a Health Affairs research team looked into hospital administrative costs in eight countries. Result: Costs in the United States were just over 25%, versus 11-12% in most of the others. (And remember, that's a lower percentage of a much lower share of GDP.) Many researchers have looked specifically into billing- and insurance-related (BIR) costs. BIR comprises a large share of total administrative costs (see second chart below). One team found that BIR alone costs a typical medical group 14% of total revenue and required 0.67 FTE staff for every one FTE physician. Another found that BIR is four times more costly as a share of revenue for a U.S. physician than for a Canadian physician. Yet another that BIR adds 15% to total healthcare costs relative to a single-payer administrative system (like Medicare).
• High administrative costs are not the only reason that America spends so much on healthcare... and with such indifferent results. Compared to other high-income countries, we're about the same in doctors per capita and in how much we utilize doctors. Where we differ--to our detriment, IMO--is the exaggerated skew in America toward the number of specialists versus the number of general internists and in how much specialists get to determine their own standard for what constitutes "medically necessary" care. The predictable result: Scandalous overdiagnosis and overtreatment. (See, e.g., "Trendspotting 12/16/19, Keyword: Statin.") Other large cost drivers include rampant price discrimination by big pharma and big insurers and growing pricing power in hands of providers--who are everywhere hoovering up small practices to achieve effective regional monopolies.
• Yet all of these drivers--and high administrative costs in particular--are directly connected to central illogic of how the U.S. healthcare system works... its original sin, so to speak. We promise providers open-ended fee-for-service reimbursement. We pay those providers almost entirely from third parties (in America, the government pays for about 63% of healthcare; private insurers for 27%; and patients themselves for only 10%). And then we smother everyone with the most detailed and obtrusive regulatory system on earth to try to prevent providers (and patients) from gaming the system to their advantage. But of course every party tries its best to game the system anyway, including the patients themselves, who routinely waste their own time (this is not counted in any of the administrative cost studies) battling providers and insurers over surprise billings and overcharges.
• The result? America ends up with all of the vices of "socialized" medicine--third-party reimbursement for most care and crushing regulatory oversight. But with none of the advantages--since there is no top-down cost control and no uniformity in pricing or reimbursement. The typical doctor's office has to deal with hundreds of different insurers, each with different coverage definitions, legal provisos, and market power. It's crazy. It's a wild-west anarchy of negative-sum bargaining. See the last chart below: According to the authors, personnel in a typical doctor's office spend 80 hours every week, per physician, interacting with payers.
• The sheer size and affluence of the United States ought to give it huge economies of scale in handling administrative costs relative to, say, Scotland (yes, Scotland runs its own NHS). But apparently, in this case, America suffers from diseconomies of scale.

• In 2018, U.S. life expectancy rose for the first time in four years, ticking up about a month to 78.7 years. Much of the increase was driven by a decline in deaths from cancer, as well as a 4% decrease in deaths from drug overdoses. (National Center for Health Statistics)
• NH: You heard it here first. We have been looking at quarterly CDC data, and as of last fall we predicted that life expectancy would rise (and age-adjusted mortality would fall) in 2018. (See “Trendspotting 12/17/18, Keyword: Fentanyl” and “Trendspotting 8/12/19, Keyword: Mortality.”) The CDC has now officially confirmed our prediction. 
• So what exactly did the report say? For the total population, life expectancy rose by 0.1 years--from 78.6 years in 2017 to 78.7 years in 2018. But let me emphasize: The improvement we are seeing is only marginal. 
• Due to the importance of these numbers, we will be releasing an in-depth report on the data later this week. Stay tuned for further analysis.  

• Ideologically, the U.S. leans center-right: 37% of Americans identify as conservative, 35% as moderate, and 24% as liberal. After increasing steadily for years, the share of adults identifying as liberal has ticked down slightly in 2019, while conservatives have inched up and moderates have remained steady. (Gallup)
• NH: If Gallup is right, this new trend (or trendlet, for now) is definitely good news for the GOP.
• Over the last two or three decades, by most measures, the general tide of public opinion has been shifting left. Since the mid-1990s, the share of Americans calling themselves liberal has been rising over time. And since the mid-2000s, the share calling themselves conservatives has been declining. See the first chart below. According to UNC's "Policy Mood" survey, public support for liberal policies reached a 60-year high in 2018. (See "Trendspotting 7/1/19, Keyword: Left.") In the last three off-year elections (2017, 2018, and 2019), moderate suburban electorates have been tipping in the Democrats' direction.
• Now in 2019, according to Gallup, opinion may be starting to break the other way. For the first time since 2011, conservatives have gained share at the same time that liberals have lost share (see first chart below).
• Explanations? Maybe favorable economic news is making voters feel better about conservatism in the era of President Trump. Maybe the growing radicalization of the progressive platform (both in the culture and in public policy) is making voters feel more wary about liberalism. Trump's odds of winning re-election in 2020, which seemed remote a year ago, are now better than 50-50 in betting markets (see fourth chart below).

• A new book, Why We Can’t Sleep, explores the many challenges Gen-X women are facing in midlife. Author Ada Calhoun describes lives marked by endless personal and professional demands, financial instability, and underlying it all, what she calls Xers’ “almost comically bad timing.” (NBC News)
• NH: Calhoun’s book expands upon a viral essay she wrote for Oprah.com in 2017, “The New Midlife Crisis.” In it, she describes feeling perpetually panicked about money and stuck in her career between Boomers who aren’t retiring and Millennials hankering to move up. In the book, Calhoun interviews some 200 women born between 1965 and 1980, who share similar stories of struggling with debt, being sidelined at work, and trying to cope with outsized expectations made worse by social media. Many delayed parenthood and are now grappling with fertility issues or raising very young children, while at the same time taking the lead in caring for their aging parents (see: "Trendspotting 1/13/20, Keyword: Sandwich”) as they themselves are starting to face the health issues typical of middle age.
• She writes that the women around her are bearing their midlife struggles quietly. One spends her afternoons crying in movie theaters. Another rented a private karaoke room to scream out her frustrations in. I’d say, however, that we’re beginning to see their frustrations writ large in measures of health and wellness: A new NIAAA report, for instance, notes a sharp rise in alcohol-related deaths since 1999, with the most dramatic increases seen among white middle-aged women.
• Calhoun doesn’t have any pat answers. There are no silver linings here; her main purpose feels like it’s reassuring women like her that they’re not alone. She says that as kids, Xers learned that “there was no consequence-free indulgence” and concludes later that “the first step to peace in middle age has been learning the game is rigged.”
• In an op-ed, political scientist Ivan Krastev proclaims that depopulation is Eastern Europe’s biggest problem. He fears that in trying to fix it, these countries are turning into illiberal democracies: They might be bringing in immigrants, but these newcomers are shut out from the political process. (Financial Times)
• NH: Krastev makes some good points here, even if his overall argument is hard to follow. He points out, rightly, that Eastern Europe is facing a depopulation crisis. Since the 1990s, these nations have lost 6% of their collective population, or 18 million people. They’re aging. They're losing young people in droves to their western neighbors with better economic prospects. And they continue to resist encouraging ordinary immigration to help boost their numbers.
• As a result, Eastern Europe (and Russia) are becoming ever-more racially and ethnically homogenous. World Wars I and II, plus the breakup of the Soviet Empire, have already subjected these regions to repeated waves of ethnic cleansing and ethnic re-sorting. In 1939, for instance, ethnic Poles made up about two-thirds of the population in Poland. Today, that share has jumped to 95%. Similar "purifications" have occurred in the Czech Republic, Slovakia, Austria, Hungary, Slovenia, Croatia, Serbia, and so on. Woodrow Wilson's dream, national self-determination, has in fact prevailed--even if by more gruesome means than he ever envisioned.
• Today, most of the self-sorting that is still going on is attitudinal. That is, Hungarians who want to live in a more diverse society (and who tend to be younger) are leaving--while those comfortable with more homogeneity (and who tend to older) are staying. This challenges Hungary demographically. But it also solidifies Hungary's political resolve to preserve its homogeneity. That political resolve keeps leaders like Victor Orban in power and maintains support for his pronatalist policies. (See "Trendspotting 8/19/19, Keyword: Birthrates.")
• To be sure, many of these Eastern European countries are now allowing workers to immigrate. But typically they are only allowing them in as "guest workers," unable ro bring their families or to aspire to full citizenship. Krastev deplores these guest-worker programs. But why? Many countries have used them over the years (including the United States), and many countries in East Asia and on the Persian Gulf continue to use them today.
• Krastev further seems to imply that it is imperative for every society to strive for greater racial and ethnic diversity. Either that, or get left behind by history. But again, why? Krastev may prefer greater diversity. But he offers no compelling argument that history always moves in this direction. Such has certainly not been the case for Eastern Europe over the last hundred years.
• “Barbell buildings” where Millennials and Boomers live together continue to grow in popularity. These types of apartments are designed to appeal equally to both generations, with plenty of all-ages activities and happy hours. (Star Tribune)
• NH: Now here are real-estate companies that intend to make money by anticipating demographic trends. We have written often about the rising preference of Millennials and Boomers for inter-generational living in single-family homes (see “Trendspotting: 5/13/19, Keyword: Mother’s”) and in apartments (see "Trendspotting 5/20/19, Keyword: Taiwan").
• These living complexes advertise that their residents are a mix of all ages who hang out together--which is a marketing angle that works. Today's Boomers, unlike their parents back in the heyday of Sun City, don't especially want to live as seniors just with people their own age. And today's Millennials, unlike their own parents (Boomers back in gerontophobic Woodstock era), don't see anything wrong with making friends with older people.
• Each generation transforms each phase of life that it moves into. And how that generation transforms each phase of life depends on its archetype. All this is Generations 101.
• The average human body temperature is no longer 98.6 degrees Fahrenheit, according to recent studies. Instead, it’s closer to 97.5 degrees, which researchers  believe reflects population-level changes in chronic inflammation since the familiar norm was first established in 1851. (The Wall Street Journal) 
• NH: It is a fact that the average "normal" body temperature is 98.6° F (or 37.0° C).
• Or is it?  This supposed fact is apparently derived from the vast empirical work of the German physician Carl Reinhold August Wunderlich, who published his results in 1851--more than a century and a half ago. A Stanford research team, in order to see if this is still true, analyzed the results of hundreds of thousands of measurements collected at various dates since the U.S. Civil War. And they found that the actual average temperature has steadily declined by decade. The current average is only 97.5° F.
• You might at first suppose this is just measurement error, maybe due to changes in thermometers over time. But through clever analysis of temperatures by birth cohort, the researchers ruled out that possibility. Also, other things being equal, the larger body mass of today's population should have had the opposite effect--raise body temperature--since obesity is known to trigger higher body metabolism. This confirmed the researchers' conviction that something else must be going on.
• So what accounts for the decline? The researchers cannot be certain. But they suspect it is mostly due to a parallel decline in chronic infection. Back in the Victorian era, a large share of the population suffered from ongoing inflammation--due to tuberculosis, syphilis, untreated infections, or just periodontal disease--which is known to raise body temperature. That share has declined. What's more, much of the population today regularly takes anti-inflammatory medications (statins, aspirin, and other NSAIDs). This is known to lower body temperature.
• Corroborating their theory is the established correlation between lower chronic inflammation and lower all-cause mortality. That would help explain why longevity has generally risen over time. The researchers also compared the U.S. results with those of a population known to have higher rates of chronic inflammation (in this case, Pakistan) and found that indeed that the other population had a higher average "normal" temperature.
• Another possible theory points to the spread of centralized heating/AC. Extreme heat or cold raises body temperature (a symptom of the body trying to cool or heat itself). And in the old days, most homes and workplaces were poorly heated or cooled. But in modern affluent societies, people live most of their lives in tightly regulated environments. This allows most bodies to rest at a lower metabolic rate. Anyway, that's the alternative. For now, the researchers are sticking with their inflammation story.

• A new collection of essays on the state of the humanities in higher-ed sends a grim message: It’s in crisis. The humanities, particularly literary studies, are grappling with declining enrollment and fewer job opportunities, as well as a more general sense that high culture is losing its cachet. (Chronicle of Higher Education)
• NH: OK, Boomers, you've got a problem. You've finally taken over the most senior leadership positions in academia. And you've finally reshaped the curricula in the fields you were always most passionate about--the humanities--around your own interests and desires. So we now have hundreds of critical race studies programs and thousands of courses with titles like "Deviant Sexuality in 12th-Century Limoges."
• And guess what? Millennial collegians are refusing to enroll, bigtime. And what's worse, their Xer parents think it's a waste of their hard-earned money.
• You see the signs everywhere. Small liberal arts colleges are desperately retooling themselves with STEM courses and business career tracks. The number of students majoring in humanities and liberal arts, even at Ivy League schools, is falling. Between 2006 and 2016, according to one recent study (see chart below), BAs in most classic liberal arts fields were down sharply (English and History majors were down 22% and 25%, respectively) even though total BAs were up 31%.
• According to this dirge-like series of essays in the Chronicle of Higher Ed, humanities are truly hitting the wall--handing out graduate degrees that no longer lead to any conceivable employment. Consider these facts. Colleges cut 651 foreign language programs from 2012 to 2015. The number of English jobs advertised by the Modern Language Association has dropped by 55% since 2009. Assistant professors in the humanities are applying for food stamps. In 2019, Columbia University’s English department did not place a single PhD student in a tenure track job.
• I know, I know. I've ranted about all this before. (See "Trendspotting 11/20/18, Keyword: Academia.") In my own field, history, let me offer a personal data point. In 1965, Harvard's history department had about 30 permanent faculty members and graduated more than 270 history majors. In 2018, it had more than 50 permanent faculty members and graduated 43 history majors. That says it all.
• Boomers, you really messed up. You took these wonderful, fascinating fields and turned them into a tasteless and themeless gruel of post-modern posturing. As for courses that would be intrinsically interesting no matter who taught them--like straight political history--colleges have largely given up offering them. (And don't even mention military history--I don't know a single university outside of West Point where such a course is still offered.) Someday, eventually, Millennial professors will have to re-invent the humanities as a curriculum that actually appeals to young people. Now that's a "deconstruction" project I'm looking forward to!

• According to a recent study from Michigan State University, narcissism tends to decrease with age and also by birth cohort. In other words, earlier-born generations are more narcissistic than later-born ones. (Psychology and Aging)
• NH: There’s a lot going on in this study. Let’s unpack it.
• You don’t have to look far to find headlines claiming that narcissism is both harmful and out of control—and in particular, that Millennials are the most narcissistic young people ever. San Diego State psychologist Jean Twenge has famously pushed this thesis for years (see her books Generation Me and The Narcissism Epidemic). Her main evidence is rising scores on the Narcissistic Personality Inventory (NPI), an assessment that measures different narcissistic traits, across successive generations of college students.
• The Michigan State researchers find this argument unpersuasive for several reasons. First, the traits described by narcissism aren’t necessarily negative. Focusing on the self can result in both adaptive traits (like self-confidence and goal persistence) and maladaptive ones (like hypersensitivity and antagonism toward others). Throwing everything in an unhealthy “narcissism” bucket is reductive. Second, it’s impossible to draw larger conclusions about narcissism when the data focus only on college students. It may be normal, for instance, for narcissistic traits to rise in young adulthood only to decline later in life.
• The researchers set out to examine how narcissism changes across the adult life span, and whether those changes are adaptive or maladaptive. They also examine how narcissism differs between different generations. Their study follows six samples drawn from people ranging from ages 13 to 77. The researchers find that maladaptive forms of narcissism (1) tend to decrease with age, while autonomy tends to rise, and (2) tend to decline by birth year across the cohorts they studied. Later-born generations were less hypersensitive, less willful (i.e. less likely to push their opinions on others), and higher in autonomy than earlier-born generations at the same age.
• These findings highlight the importance of a more nuanced definition of narcissism, and they push back at the simple narrative that successive generations are all simply getting more narcissistic over time. But there’s a caveat: The study doesn’t really grapple with Twenge's specific indictment against today’s Millennials. One point the media coverage of this study generally all missed is that the authors don’t actually cover the transition from Xers to Millennials, which is the focus of much of Twenge’s work. The individuals studied were born between 1923 and 1969.

DID YOU KNOW?

Hunt for the Animals. It’s no secret that hunting is declining in popularity. According to a 2016 survey by the U.S. Fish and Wildlife Service, 11.5 million Americans say they hunt, down more than 2 million since 2011. In recent years, sales of hunting licenses and equipment have also fallen. What’s not as publicized is the impact that the decline in hunting is having on wildlife conservation. As detailed in The Washington Post, the funds for conservation largely come from hunting licenses and permits and taxes on firearms, bows, and other weapons—and as interest wanes, state wildlife agencies are scrambling to make up the difference. Missouri, for instance, is redirecting some state tax revenue toward conservation. In Pennsylvania, state officials are expanding mentored hunting programs for young people and inexperienced hunters. But without more hunters, the biggest assist may come from Congress: House legislators will soon vote on a bipartisan bill that would provide $1.4 billion in revenue annually to help at-risk species.