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In case you’re wondering . . . this is why the U.S. health care system is the most expensive in the world

Read the above letter carefully, then remember this. (Greg Mankiw called comparisons of life expectancies schlocky, but maybe he’ll feel different about this once he reaches the age of 70 or 75 . . .)

P.S. This doesn’t help either.


  1. DCE says:

    Here is a link to the full image of the linked OECD cost/life expectancy slope graphic – not the most intuitive dataviz but once we realize how it works, it is quite powerful (and I doubt much has changed for the better since 2011):

    • Anoneuoid says:

      Where is cuba? I always thought it funny how cuba with chronic shortages of modern medical equipment and drugs has about the same life expectancy as the US. Seems to indicate you don’t get much for all that money.

      Also, I wonder if the USD as reserve currency has anything to do with the cost disparity. Prices rise where those dollars get spent first.

  2. jon says:

    Is it possible the cost of making sure these letters don’t get sent would exceed the cost of creating and sending them on occasion?

    • Sean says:

      = IF ( Claim amount < $1.00, "Do not send", "Send" )

      No charge for the programming.

      Of course this is the Excel version and it may be expensive to find a programmer that convert it into COBOL or Fortran so we can run it on the ole Univac.

      • Jon says:

        That is not an accurate indication of the cost of making a change. Generally writing the code itself is the cheapest part.

        Once the system is built and someone sees the need, they need to locate the relevant part(s) of the code. It then needs to go through the testing and review procedures.

        Btw–your logic will fail if the case is that the “Claim amount” that gets tested is just the first “Claim” in a notice that includes multiple claims and as a result a letter or letters covering multiple claim amounts don’t get sent. Or perhaps the “Claim amount” field excludes certain contested charges.

  3. Nitika Mathur says:

    I thought this only happened in textbooks.

    (Image from Computer Networks by Tanenbaum)

  4. Olav says:

    That’s not the only inefficiency in the US. Two years in a row, the IRS instigated a several months long “investigation” on me only to conclude (in the first case) that I had filled out a line above the line I was supposed to fill out, and (in the second case) that they owed me $11 more than I had said they did. I mean, I guess I did something wrong both times, but the whole process just seemed like a big waste of their resources given the very low sums at stake (I was a graduate student making very little money). The tax system (like the insurance system) is too convoluted and just a pain to deal with in the US.

  5. LLk says:

    People so rarely notice the outrageous costs, complexity and inanities of the US healthcare system — if only we had a large prestigious professional class of social scientists that could carefully analyze this problem for many decades and come up with a solution. We could call these people Economists, or something.

    • Hasdrubal says:

      I mean, they do? There’s even a section of JEL codes (the I10s: dedicated to Health Economics topics.

      But you run into the standard two big issues with applying economics to real world problems: !.) There’s no One True Answer, much less a simple solution, and 2.) Policy makers have to actually follow economists’ guidance, but that would limit the implementation of _their_ preferred policies.

  6. oncodoc says:

    UNH, the corporate entity sending that bill, was $114 in 2017 and $314 per share now. The CEO is getting nearly $19 million this year. They are doing well; why mess with procedures in the face of such success?

    • jim says:

      Here’s some data on UNH and health care costs in general:

      Annual growth: 2015 – 2019:

      UNH Revenue: 11.4%
      UNH Profit: 24.2%
      UNH Stock Price: 24.5%

      Total Cost of Family Health Care Insurance: 4.1%
      Growth in total cost of Family Health Care Insurance, 1999-2014: 7.1%

      During the time UNH’s stock price rose at 24.5% annually, the annual growth in health care costs fell from 7.1% to 4.1%. That’s pretty strong evidence that UNH is generating efficiencies and passing them on to consumers. Revenue is rising faster than consumer costs, indicating the company is attracting new customers – probably because of it’s increasing efficiency. Profit is rising much faster than revenue – further evidence that the company is generating efficiencies.

      • TBW says:

        Revenue and profit can also grow as a company becomes less efficient. For example, a company could go on an acquisition spree and buy up lots of other companies and make themselves larger, but also bloated and inefficient. In fact, UNH spent made at least $20B in acquisitions in the 2015-2019 time frame.

        When you buy another company yes your revenue increases but it’s not because you attracted new customers with your efficiency. It’s easy to game profits when you’re acquiring other companies simply by laying people off. Aha, that’s an efficiency you say. Maybe, or maybe it’s just a cynical way to boost profits short-term knowing that the long-term costs won’t need to be paid until someone else is CEO or Chairman. Laying off non-essential workers is efficient, laying off essential workers is not efficient, unfortunately it takes a while to discern whether a company has done the former or the latter. Of course management probably doesn’t care, in the short-run profits get boosted and the share price goes up and they can cash in their options.

        Your claim is effectively that UNH’s efficiency has allowed it to grow organically at impressive rates. That could be true, but you need better metrics than Revenue and Profit to support it. Any company can grow simply by purchasing other companies, as UNH has been doing, it is not sufficient evidence of efficiency or competence.

        • jim says:

          “Revenue and profit can also grow as a company becomes less efficient. A company could go on an acquisition spree and buy up lots of other companies and make themselves larger, but also bloated and inefficient. ”

          UNH revenue has grown by $85B since 2015, about 4x the value you provide for acquisitions, so if all the new revenue is from acquisitions, that’s money well spent. Also total debt has grown at only 6.1% while revenue grew by 11% and profit by 25%. Looks like improving efficiency to me. UNHs’ acquisitions are small – the biggest one is about $4B – only about 2% of UNH current market cap. I’m not sure how you can characterize that as becoming bloated.

          My claim is that the company is generating efficiencies that are helping to slow the growth in the cost of health care.

      • oncodoc says:

        Here is an example of United Healthcare efficiency: the $11,000 covid antibody test.

      • I think the thing Jim tends to take for granted is that more money = better service and better product.

        But this is the US, where our main strength these days is being the absolute kings of gaming the system. it’s what we do. In this context, more money can easily be made by making people worse off. Think Perdue Pharma for example.

        • Anonymous says:

          ‘I think the thing Jim tends to take for granted is that more money = better service and better product.’

          Nope. I don’t take that for granted.

          Better products – whether that means better service or lower cost – drive revenue growth over the long term. What do you have in your pocket now? An iPhone or a Blackberry?

          UNH’s revenue is growing much – 3x – faster than overall health care costs. It’s hard to argue that they’re gouging consumers.

          • John Williams says:

            For things that people or members of coherent groups use over and over again,the quality of the product matters. Decades ago, Toyota and Datsen introduced small pickups; contractors soon learned that Toyotas were the better product. Health care doesn’t work that way. If you get a colonoscopy every 10 years, it is hard to comparison shop.

  7. jonathan says:

    Very first sort of real paper I may ever have written, back in middle school, was about health costs. This was not a subject of much study way back in the Pleistocene, but there was interest in the effect of Medicare and Medicaid, so some work was being published, and I would see it while going through my dad’s journals. (BTW, the change in intelligibility over the decades in journals is fairly astonishing, meaning articles have progressively become technical and ever more jargonized. Similar changes have occurred everywhere, including legal opinions. If you want to have fun, go into the 19thC legal reporters and pull out cases to read. The intelligibility is remarkable.)

    Back then, the main reason for rising costs was people in a traditionally low paid field being paid more. This was true across hospital employment. There were then only doctors’ offices and hospitals.

    One thing that then took over was technology driven, most notably the introduction of the CT scanner. I knew a weird amount about hospital economics because my dad’s group sued the hospital group because the hospital claimed radiology lost money (when it was one of the 2 main profit centers). They won the right to separately bill. And incomes exploded, both because now you could bill piecemeal and because you had this wave of computer driven procedures. I remember my uncle telling me about a brand new thing called nuclear magnetic response imaging. This was changed to MRI. In the House of Pain, which was a general name for nuclear medicine, they went from a liver scan being this: a form of geiger counter gliding back and forth over an immobilized patient while a ‘sharpie’ made dots on a piece of paper. You would get a general image of a liver and maybe a density difference would say tumor. (I used to help with this.) Within a few years, medicine went from a handful of diagnostic imaging tools – mostly injectable dyes photographed using x-rays – to CT scans, which originally were a series of slices, to being able to read those at home over a portable phone attachment, to those being combined, to those having color, etc. The amount of money this generated was extraordinary. Medical income skyrocketed.

    I cant help but say government money enabled this transition. There has been a lot of work done about the role of technology in medical costs, so I’ll leave that.

    The next stage was the blizzard of requirements. I learned a lot about that because the hospital group was building a new facility and I learned about the massive new requirements for literally everything.

    And then came the avalanche of paperwork. Which created jobs. My dad’s group had almost no paperwork for a long time. The administrative help was almost completely transcription of recordings made by the doctors.

    And now we have massive amounts of pretty much everything. G&A for insurers is, last I checked, over ¼ of all their cost. And that’s a lot of jobs. Like there are careers in medical coding.

    As to the investigation letter: they do not value their work on the random letter that goes out wrong, but on two things. One is total recoveries, but the main one is that they are required by a huge set of regulations to check. And they have public image worries about not appearing vigilant, etc.

  8. JFA says:

    Not the only reason, but I’m sure Medicare incentivizing hospital care over outpatient, requiring doctors do jobs that nurses could do, giving off-patent medications new monopolies for “upgrading” production facilities, having arcane rules about what is considered sufficient insurance that effectively disallows insurance companies to negotiate with hospitals more effectively, and etc.

    Also in many other countries, you are basically told what procedures and treatments you can get, and in the UK that’s based on cost effectiveness (for which the threshold ranges from 20,000-30,000 pounds sterling per QALY, while in the US, the EPA uses a value of statistical life around $10 million (which crudely is around $127,000 per life year)). Insurance regulations prohibit insurance companies from offering policies that would result in anything like the kind of restriction on services that the UK has.

    This is not some libertarian defense of a free market in healthcare and there should be regulations and antitrust enforcement, but I think discussion of how current regulations (both at the state and federal levels) hinder anything remotely resembling cost-reducing competition is rarely commented on when most people discuss healthcare cost in the US. I hope that the recent example of the failure of the FDA and CDC in their responses to the pandemic make people think a little bit more about how else the government might make healthcare in the US less efficient than it could be.

    Also, here’s how some clerical errors are handled by governments in the US: Not a pretty picture.

  9. jim says:

    Why health care costs are higher in the US:

    1) Americans have the most gigantic butts in the world. We are fat. And we are paying for it.

    2) The US develops and debuts most health care technology. Nationalized Health Care Countries (NHCCs) don’t buy new technology.

    3) Many NHCCs have stringent price controls on both equipment and prescriptions. US companies operate mostly at break-even in those countries. So, in effect, just like with defense, Americans are paying for the rest of the world.

    4) NHCCs limit both treatment and capacity – which means lots of people from NHCCs come to the US for treatment they can’t get, or can’t get in a reasonable time, at home. They’re willing to pay the price for spare capacity, so they don’t have to wait a year for surgery.

    No doubt the US health care system has a lot of problems, but this story at that it’s ten times the cost of Mexico because corporations are gouging people is wrong.

    • Carlos Ungil says:

      5) Physician compensation (relative to per capita GDP) is more than 50% higher than in other developed countries.

    • somebody says:

      Most of these new health care technologies are spurious garbage proven by p<.05 to have a marginal effect of a secondary biomarker. People wouldn’t actually pay for most of them except that they don’t make the decision, because if you already have insurance there’s no reason not to get the shiniest new thing and there’s ridiculous shit like Medicare/Medicaid not being allowed to negotiate prices while being legally required to provide every shiny new thing.

      Nobody’s being “gouged” because nobody actually pays for their own health care. So as a pharma company why not bill Medicaid and UHC a ludicrous sum for your stupid patented snake oil? They can’t not pay for it. As a doctor, why not prescribe the newest version of a drug? It’s probably not worst, and it’s not like the patient’s gonna pay any more, and it gets you in the good graces of Moderna. As a patient, why not just take what your doctor gives you? You don’t pay for it.

      • This times 100, a few years ago I actually asked my doctor to prescribe a less fancy new and expensive steroid inhaler since although I didn’t pay any more I knew it was crazy expensive for my insurance company, and why not because it was only for a few months for a sort of symptom relief during high grass allergy season, not any kind of real dangerous asthma or anything… She refused. She basically said something like “if I had to think about the cost of these drugs for everyone and make those kind of decisions, I’d just never be able to do my job”. (*eyeroll*)

        The worst thing about it was that not only was the newer drug way more expensive, it was probably marginally worse, because the delivery mechanism was whey powder, and I have some marginal intolerance to milk.

        Similarly my doctors kept prescribing Protonix, which is not available as a generic, but after coverage cost me basically the same as Lansoprazole, which is a generic. So I kept taking it… But when COVID hit I didn’t want to go to the pharmacy, so I ordered OTC Lansoprazole from Amazon… Turns out it worked better for me!

        The main product of the US economy is rent-seeking snake-oil. We basically produce stock market prices, everything else we import.

    • Nick Adams says:

      Australian doctor here.
      1. We’re about as fat as you.
      2. I don’t know of any useful tech the US has that we don’t – give me an example.
      3. This doesn’t make sense. If US companies weren’t making a profit they wouldn’t be selling to the rest of the world.
      4. In 40 years I have never met a patient who had to go to the US for treatment so it must be pretty rare.

      Anecdotally, having seen a few tourists from the US, they are often bemused by how few tests they get and how cheap the prescribed drugs are here. Although you might imagine that government attempts to reduce costs would impair access to useful but expensive treatments, doctors and patient groups are able to wield considerable political pressure when appropriate. Also, most decisions about what to fund are made by independent scientific panels rather than politicians. It all works.
      We do get invoices for $0 though.

      • Anonymous says:

        “3. This doesn’t make sense. If US companies weren’t making a profit they wouldn’t be selling to the rest of the world.”

        Oh but it’s true. Having worked in the business I can assure management is always carping about it. Supplies do OK outside the US but capital equipment is a big fat zero.

        “2. I don’t know of any useful tech the US has that we don’t – give me an example.”

        It’s not necessarily a question of utility. It’s a question of the newest, slickest models, which cost more. Keep in mind that many hospitals etc are funded by private donors and donors want to buy the hottest stuff.

        “4. In 40 years I have never met a patient who had to go to the US for treatment so it must be pretty rare.”

        “had to” isn’t the question. “Want to” is. *LOTS* of Canadians come to the US. They don’t want to wait a year for a knee replacement.

      • Anonymous says:

        “how cheap the prescribed drugs are here.”

        Do you have price controls? That would probably be why they’re cheaper there. :)

      • jim says:

        This data indicates that obesity is a third higher in the US compared to Australia, 60% higher vs. Canada and over 3x higher than Norway! Brutal. That could be responsible for the difference in life expectancy right there. I really didn’t know it was that bad.

        According to this report, about 100K-200K fly to the US for health care annually (excludes people who drive from Canada/Mexico). They spend about $3B, which isn’t that much in the larger scheme of things. OTOH, none of these people would be counted in per capita health care spending data, yet they’re contributing $3B.

        BTW, the anonymous comments are mine, I was so excited to respond to your comments that I posted before putting my name and email in! :)

        • Mendel says:

          From the report:
          “Americans cite cost savings as the most common reason to go abroad for health treatment, as medical procedures in foreign hospitals can cost thousands of dollars less than in the United States. This is especially true for those without health insurance”

    • Martha (Smith) says:

      Jim says,
      “1) Americans have the most gigantic butts in the world. We are fat.”

      Well, fat is not always bad. Fat around the acetabulum (“socket” of the hip joint) could help prevent a nasty fracture, which might be very expensive to treat.

  10. Steve says:

    Send them a letter back stating that you no longer want the service covered, you have paid it and you want the amount to count against your deductible. See what happens.

  11. Sam says:

    ‘maybe he’ll feel different about this once he reaches the age of 70 or 75’ thats cute but kind of underscores his point that its a ‘schloky’ comparison. A tenured Ivy League professor has a much different lifestyle and life expectancy than the average person.

  12. Dale Lehman says:

    I’ve had the misfortune of having some medical care needs in the past year, including MRIs, emergency room visits, hospital stays, etc. I can’t begin to show you the issues that arise in billing. I literally have boxes full of multi page statements that I receive every month (or more often) that are unintelligible. All of my education did not prepare me for trying to decipher the bills. Once you have a treatment in a hospital, there are separate facilities and physician charges – good luck trying to sort these out. Luckily, I went on Medicare so I can ignore most of the paperwork and just pay the ridiculously low charges that Medicare actually allows providers to collect. But I can assure you that virtually nobody is the health care system – not the billers, not the insurers, not the providers, and certainly not the patients – can make any sense out of the bills.

    I know there have been attempts to measure the extent of these “administrative costs” and I seem to recall estimates on the order of 10% (or less). I can’t really say I have any idea whether they are larger or smaller than that. But I am sure that they are considerable, and in my view, unnecessary. The supposed benefit of our complex private/public insurance system is that competition permits innovation and development of better goods and services. I’m hard put to see any such benefits that have arisen due to competition between health insurers – and there are clear costs attached to that competition. I’m an economist, so I can appreciate competition. But I’m not convinced that competition between insurers benefits anyone other than the insurers (and their owners) themselves.

    • jim says:

      Medicare is different story, but companies typically have a person who’s primary job is to work with health care providers to help employees navigate the system. Where I’ve worked that person can be very effective.

      • jim says:

        I manage my mom’s care. My dad was enlisted for 20 yrs so mom has the famous Tri Care for Life. She gets piles of paperwork but pays no premiums and rarely pays anything out of pocket. On top of that she has a decent income but pays almost no taxes and now can get a property tax break too.

        • Dale Lehman says:

          I’m not sure what your comment and example is supposed to tell us. I don’t doubt its truth. But this is America – 300+ million people and billions of stories. The sad truth is that every story is different and many people are left thinking the system works pretty well for themselves. That is the real tragedy of this system. It is so fragmented that we each think it is working ok for us – until something unusual happens, and then it is one of those special cases that happens to other people. It is hard to recognize a dysfunctional system when you are surrounded by it. I suppose the same thing can be said for academia (to digress to a different path entirely).

      • Dale Lehman says:

        Yes, we have such a person as well. Sometimes they can be effective, but that generally depends on the wealth of the employer. At a small private college, there are as helpless as the rest of us. One fact that nobody should ignore: the contract is between your employer and the insurer – not you. I am not aware of anyone that has actually seen the insurance contract – I am not talking about the literature you received showing your benefits plan. The “real” plan is what the contract says. For most people, you don’t have to worry about the difference, but when/if something unusual happens, you will discover that the literature you got from HR and the insurer is not really what matters. And good luck trying to see what the actual contract looks like. Again – if you work at an important employer and you are an important employee, then your issues will get taken care of. But, for the rest of us, almost everyone concerned is not “very effective.”

    • Anoneuoid says:

      Think of the bill as a starting point for negotiations.

    • jrkrideau says:

      Canadian here. I was quite badly injured last year. Approximately two months in hospital, 2 MRI, X-rays, with physio & and occupational therapy followed by two weeks of home nurse visits and weekly home visits from occupational and physio therapists for two months.

      Total paperwork and cost: One invoice from hospital for $CDN 45 for the ambulance.

      Of course, my taxes have been contributing to health care for many years.

  13. Radford Neal says:

    It doesn’t necessarily seem silly to me. If the problem is that the form was not legible, maybe the amount being claimed was among the illegible bits, and so was left at zero.

    • Andrew says:


      You just haven’t dealt with the U.S. health care system enough! See Dale’s comment above. Just about any medical procedure results in a long stream of bills for $30, $45, $3.12, $1200, etc., along with endless struggles for what gets reimbursed—recall that one of the basic business models of insurance is to make it so difficult to collect on the claim that people will just give up. Paperwork on a claim for $0.00 is just one of the many absurd things that we deal with. Also, any claims they received would not have been directly from us; they would’ve come from one of the health care providers—so if there really was something illegible, then sending the letter to us wouldn’t resolve anything.

      • Esteban says:

        I think the point is that the claim is probably currently paid at $0.00 specifically because it is pended. The patient, as the subscriber/covered entity are sent a courtesy letter to keep them in the communication loop, and for them to function as a check on the provider’s due diligence efforts with respect to accurate claims submissions on their part to some degree. Would the patient rather prefer being shocked in 90 – 120 days upon discovering their account has been sent to a collections agency for an unpaid balance they mistakenly assumed to have already been paid by the insurance company? If I had received such a letter I would be sure to contact the provider for additional clarity.
        The fact that this UHC letter is dated the very same day as what appears to be the date of service provision speaks more to a system operating at a peak efficiency, at least as far as claims submissions are concerned. However, if the intent of this thread is to highlight existing inefficiencies, and aim to maximize resources within the present system, why not consider registering on the UHC website, and opt out of receiving such paper correspondence altogether?

        • Andrew says:


          If it were just this one bill or just one website, it wouldn’t be such a big deal. But what really happens is that one medical appointment will generate zillions of bills from many different sources. Any given one of these bills might make sense, but in aggregate we end up drowning in paperwork.

  14. Howard Edwards says:

    Perhaps I am feeling paranoid, but: this makes me think of the 1965 sci-fi short story “Computers Don’t Argue” by Gordon R. Dickson.

  15. Andre says:

    I wasn’t wondering. I don’t really care.

    I don’t feel bad for you.

    My last dental appointment was in thailand. I can get lithium on a walk in in China. I’ve been hoarding lithium that was (thankfully) prescribed to me from an empathetic NP in a large quantity in the american South from 2 years ago. Mexico was the first genuine, good psychiatry appointment I’ve ever had.

    A plurality of my student loan debt, and almost all of my medical debt, is in collections, which is the greater part of 100k. I can barely afford to live. Even with arguably the most difficult degree from a top university in that major.

    Deal with it, like the rest of us. (almost) welcome to the club!

    • Andrew says:


      I think you’re misunderstanding. It’s not about feeling bad for me. The reason why people care that the U.S. health care system is the most expensive in the world is that it’s busting our budget. Not my personal budget; I’m talking about individuals, companies, and governments that are having a hard time paying for the health care system, which isn’t just paying for nurses, doctors, drugs, bedpans, etc.; it’s also paying for people to send us bills for $0.00.

      • David J. Littleboy says:

        But in real life, the bottom line is that there are no price controls. Obamacare has a bunch of stuff in it to try to suppress costs, but the health care provision industry has been consolidating like crazy so that the hospitals are bigger companies/bigger players than the insurers, can fight back for higher payments, and end-run the rules. Make a rule, and the hospital administrators devise a work-around.

        If the government price-controls the costs providers are allowed to charge, negotiates with drug companies, and the like, prices can go down. But right now, outside of Medicare, hospitals charge what they want for services. And there’s no such thing as an independent private hospital. It’s all like the “Partners” conglomerate in MA.

        It ain’t the doctors (although they’re complicit), it ain’t the sicker than usual patients, it’s that it’s the friggin wild west out there.

        Here in Japan, unless you are making minimum wage, medical services are quite affordable and everyone’s insured. The doctors play frantic “point collecting” games to pad their bills, but when the patient coughs up his 30% of charges*, it’s chicken feed. US$45 a month for the seven meds my SO and I take, US$12.50 for an office visit, US#45 for a thorough teeth cleaning at the dentist, including fixing minor chips and things (the latest UV setting epoxy resins are amazing).

        *: Yep, the patient’s on the hook for 30% of charges up to a maximum per month per disease/condition. This can get out of hand: don’t be briefly hospitalized across a month boundary.

        Bottom line: you can’t let the players in a game make the rules, they’ll run you through the wringer every time.

        (OK, in Japan, the government has a policy of supporting the medical imaging industry, and every half-arsed “medical mall” (group of doctors offices in an area of an office building) has way more CT/MRI and the like equipment than they need. So bleeding-edge imaging is cheaper than in the US.)

        • A big part of it is that consumers aren’t price sensitive.

          It’s hard to be price sensitive when you’re having a heart attack or in a car crash, but it’s totally possible for a scheduled knee replacement or a sinus surgery. The fact that Lasik type eye surgery is not covered means it’s progressed amazingly in both effectiveness and cost effectiveness.

          A simple requirement that every hospital post ONE single set of prices publicly and all customers be they medicare or cash or anything get charged the same thing, together with limiting insurance policies to cover only the excess above some reasonable amount (I’d suggest an exponential moving average methodology) would put a lot of things under control. Much of the gaming the system is because the system is allowed to be so convoluted.

  16. A Country Farmer says:

    Haha! Darkly fun.

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