Where does all the health care money go?

Question

Ok, as a country, we spend a bazillion dollars a year on "healthcare". For each dollar we spend, who gets it? I mean EVERYTHING. For example, 7 cents goes to doctor's salaries, 4 cents goes to health insurance companies for overhead and profit, 2 cents goes to office supplies, 12 cents to drug companies, 3 cents to malpractice lawyers, etc, etc, etc.

Answer 1

Medicare is over 130,000 pages. A SIGNIFICANT portion of health care money is wasted complying with with this horrendously bloated program. And since it takes CPAs and Law degrees to understand everything, it is not cheap to pay all these people.
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Answer 2

Basic principal of any insurance is to share the costs. This works well when payments into the insurance exceed the costs of repair.

With the advent of Birth Control (pills, condums, abortion) we're facing a tough population reality. It's called an "Inverted Pyrimid". What does this mean. Simply, there are more elderly than young. The elderly are requesting expensive, new, and advance procedures. Certainly, it's good when we find cures for cancers, give life with organ transplants, and other medical marvels. However, the elderly are retired, and are paying so little into the system (in compairision with their costs).

Most businesses have budgets. Even people have budgets ... but the health care system seems to have an endless spending limit. I was the movie " " where Denzel Washington was holding ppl hostage to get his kid an organ transplant. Surly, this touches my whole emotions and being ... however, careing for a transplant patient ... I wonder if science is going too quick and if we're creating "Frakensteins".

So the health care money is going to research and development, overhead, lawyers, experimental treatments, and yes --- crooks who steel.

Answer 3

I think you answered your own question. Just the overhead (utilities, property costs, etc.) on all the actual hospital buildings across the country, as you can imagine, must be massive.

Answer 4

As ans EMS provider, I know that millions have been wasted on frivolous lawsuits and then malpractice insurance premiums.

Answer 5

You're on track, but taking a deductive approach. The accounting for healthcare expenditures is a sum (or estimated sum, depending on the survey) of all funds spent by consumers and transfer payments (ie medicare and medicaid, as well as private insurance) for everything from pharmaceuticals and over-the-counters to doctors visit and hospital fees to insurance. Categorizing the "who gets it" by percentages will sort of obscure things because the system is not appreciated.

Example, you pay your doctor $25 in co-pay for a visit. Your insurance company pays the doctor $88 for the visit as well as $22 to the lab for blood tests.

Say the doctor sees 5,200 patients a year (100 per week). Her receptionist is paid $20,800. Her nurse is paid $46,800. Her office's utilities total about $5,200 per year (lights, heat, water, phone). Her yearly rent on the office is $10,400 and her malpractice premium is $104,000 (a low-ball figure; generally, it's closer to a quarter-million, and can be as high as half a million for high-risk fields such as neo-natal intensive care and neurosurgery specialties).

The doctor's expenses are, for the most part, generalizeable to a per-hour rate. The receptionist is paid, on average, $4 per patient, and the nurse is paid, on average $9 per patient. The average utility cost of one visit is $1. Let's also include $3 for general & admin (maintenance, postage, billing services, office supplies, medical supplies like thermometer covers, depreciation on thermometers, etc). The doctor also pays a malpractice insurance of, say, $20 per patient, and rent that generalizes to $2 per patient. Finally, there's local sales tax of 8.7%, which we'll round to $9 and is included in the cost of the visit (the actual cost is $104, the sales tax is figured in because they collect it at the source; not all states have sales tax on doctor's visits). This means the average visit (and your visit is average) costs your doctor $48.

Now the revenues: $88 from your insurer, $25 from you, or $113 total, of which $48 goes to run the office, so the doctor keeps $65 for herself, giving her a personal salary of $338,000 (not bad, considering she'll pay roughly $150,000 in taxes and close to $20,000 in student loans for the $200,000 in debt built up over 8 years of post-high school education).

The lab fees go to pay an outside lab group that runs all the bloodwork, so the doctor sees none of that. This is fairly common - the outside lab can do it cheaper than a small facility can in-house.

In addition, you paid a health insurance premium of $90 for the month, and your company paid $140, for a total premium of $230. That $230 is split up between an insurance pool (goes to a store of cash to pay claims, and a store of financial assets to increase the value of the pool and provide future liquidity), and G&A (call it everything else - salaries, advertising, ops expenses, lobbying, research). If the insurance company makes money at the end of the period (month or year usually), it accounts it as profit. Otherwise, to account something as profit ahead of time means that the cash is not going toward some good purpose. The one exception would be dividends, if these are paid, and bond payments if the insurance company has sold bonds (most are bond-owners, not bond-issuers).

Now let's take the script your doctor wrote you for a pharmaceutical. You have two scripts - one for now, to take to the pharmacy immediately, and one for a three-month supply to buy from your mail-order company.

The first one you take to your Tripping Monkey Drugstore. You pay $12 co-pay, and your insurance company pays $288 for a 30-day supply (yes, $10 a bloody day; it's a name-brand). The other, you pay your $25 co-pay, and your insurance company pays $470, to the mail-order warehouse. The difference in average price of the pills ($10 per day for the drugstore, $5.50 for the mail-order) is due partially to lower overhead at the warehouse, higher returns to scale at the warehouse, and better bargaining power at the warehouse.

The difference in overhead is based on:
* The pharmacy pays its two pharm techs and one Pharmacist (one who has a PhD in Pharmacology, required in most states) to service roughly 200 scripts a day, while the warehouse pays its five pharm techs and two Pharmacists to service roughly 4,000 scripts a day.
* The pharmacy pays higher G&A costs per customer - it needs 20 shops to service the same number of scripts as the one warehouse.
* The pharmacy may have to consider local sales tax; mail order is still, generally, not subject to tax (although that may not always be so) on out-of-state sales.

The savings due to bargaining power are due to sales volumes. Say there are 10 warehouses and 50 pharmacies. The three warehouses churn through 40,000 scripts a day, the 50 pharmacies through 10,000 scripts a day. This means that the warehouses can negotiate for a lower per-pill bulk cost from the manufacturer, since they demand 1.2 million scripts per month, while the pharmacy network only pulls through 0.3 million scripts per month. Say this means the pharmacy network pays an average of $200 for your script, but the warehouse network only pays $140 - the ability for savings presents itself readily.

Now the pharmaceutical company, who receives, from you and your insurance company:
* $200 for the in-store script ($100 went to the pharmacy)
* $420 for the warehouse script ($75 went to the pharmacy)

These costs go towards:
* R&D
* Operations (production & distribution)
* G&A (Salaries, advertising, etc)

Of course that's a generalized economy, but you get the idea.