Health care costs: no, not insurers' fault either

News flash: health care costs so much because we consume so much, not because evil insurers are price-gouging:

Myth No. 1: Insurers' profits are responsible for our health care costs.

This is the most pervasive and most crowd-pleasing of the health care myths. The profits of the big health insurance companies are central to the rhetoric of the health care debate, figuring heavily in the Democratic primary campaign. Barack Obama's platform includes a promise to force insurers to spend enough on care "instead of keeping exorbitant amounts for profits and administration." Michael Moore, the director of Sicko, has hammered the point repeatedly, thundering about how insurers maximize profits by "providing as little care as possible."

The problem here is that between them the five biggest health insurers—UnitedHealthCare, Wellpoint, Aetna, Humana, and Cigna—which cover 105 million members, last year had profits between them of $11.8 billion. This is not a small number; these are very profitable companies. But total U.S. health care costs last year were in the area of $2.3 trillion.

So, with a membership that included a little more than half of the Americans covered by private insurance, these five insurers' profits came to 0.5 percent of total health care costs. (One interesting point of comparison: In 2006, the income earned by the 50 biggest nonprofit hospitals alone came out at $4 billion.)

Comments

That seems like a fair analysis. The profits of five companies against the entirety of health care expenses for the U.S..

How about return on sales, or return on investment? And what about administrative overhead, which for most insurers comes to about 20% of premiums?

These are not trivial expenses. And the arguments for nationalized health care are only partly about cost.

Posted by Osama Von McIntyre | May 1, 2008 1:08 PM

Your post would be more convincing if you gave the CEO salaries for UnitedHealthCare and the other companies you mention.

Posted by Stan | May 1, 2008 1:08 PM

I have never heard the argument that US health care spending is too high because of insurers' profits. The argument is that health care spending is too high because of insurers' administrative costs. Those are not 0.5% of total spending, but more like 20-25%. Much of that administration consists of their efforts to keep their reimbursement rates low.

Gimein is trying to shift the argument. It's not honest, but it is typical Slate "counterintuitive" pitch-selling stuff. "Hey editor, I can make it look like the conventional wisdom is wrong if I just kind of misstate what the conventional wisdom is!" "Sounds good. How about 2000 words, $1500?"

Posted by brooksfoe | May 1, 2008 1:12 PM

We consume so much? Are you sure? Why do we spend twice as much as any other civilized country with out any discernible benefit?

Posted by Joe Klein's conscience | May 1, 2008 1:17 PM

Much of that administration consists of their efforts to keep their reimbursement rates low.

This means that insurers are spending money to keep costs low. If they stopped spending that money, what do you suppose would happen to costs?

I suppose its possible that the entire industry has decided to spend a bunch of money for no reason; we're all just waiting for that brilliant middle manager to point out that premiums could be cut 1/5 with no effect on profits if only Kaiser would stop wasting money on "administration." But a more likely possibility is that all that spending has a positive ROI, which means lower costs for customers.

But if you disagree, do pass along your suggestions to your health insurer.

Posted by Rob Lyman | May 1, 2008 1:23 PM

Stan,

Do you think those 5 CEOs make even $2 billion/year taken together?

Posted by Yancey Ward | May 1, 2008 1:24 PM

Yeah, it sure seems like a huge source of costs in US medicine has to do with the endless cost-shifting fight between insurers/Medicare and providers. Thus, a bunch of doctor, nurse, pharmacist, and various receptionist/clerk time is spent filling out forms to justify why they should get paid, making phone calls for pre-authorization, etc. Another source of a lot of costs seems to be doctors' responding to the incentives from both insurance/Medicare and lawsuits by doing marginal tests and procedures and such, which get them paid and cover their a--es without doing a whole lot of good for patients. And another is the cost-shifting between different providers, like trying to get the hospital to take over care of the seriously ill nursing home patient for a few days, or the hospital trying to send her back to the nursing home ASAP to minimize costs. And then there's the whole nightmarishly bad idea of turning every emergency room in the country into an insanely expensive 24 hour free clinic which sometimes also treats some people who are seriously ill or injured.

I'm probably about as skeptical as Megan about whether giving everyone coverage will really fix any of these problems, though. That will solve some other problems (like having people go broke because their kid got seriously ill while they were out of work, which kinda sucks), but I don't see why it will fix costs. Has Medicare fixed rising medical care costs?

Posted by albatross | May 1, 2008 1:30 PM

Instead of paying the CEOs and the administrative costs as part of health care, maybe we could just pay insurance carriers directly the profits they're now making and we could keep the difference.

That way we could cut costs, and yet the insurers would still make a profit. Win-win.

Hey, this magical thinking stuff is fun.

Posted by Occam's Beard | May 1, 2008 1:30 PM

This means that insurers are spending money to keep costs low. If they stopped spending that money, what do you suppose would happen to costs? - Rob

What would happen is that they would lose the ability to discriminate out sick patients with high medical bills; sick patients with high medical bills would gravitate towards them; their reimbursement rates would skyrocket; and they would either have to hire more staff to discriminate those patients back out, thus raising their administrative costs again, or they would suck up the bottom of the barrel while their competitors skimmed the cream, and go bankrupt.

Insurance companies are in an administrative costs arms race. They have to do as well as their competitors at keeping away sick customers and fighting payment on drugs and procedures. It is not their "fault" that they discriminate against sick people; they don't do it because they're "evil". They do it because that is their business model -- that is just what their industry is, what it does.

The evil part comes where they convince themselves that their business is necessary and they are helping the American people, and then spend huge sums of money to convince citizens and politicians that they are the solution to the health care crisis rather than the problem. But you have to have some empathy for them; it's hard for anyone to admit, even to themselves, to being a parasite.

Posted by brooksfoe | May 1, 2008 1:36 PM

brooksfoe has it exactly right. It's all about administrative costs, and not just those borne by the insurers but also by the health care providers who have to navigate myriad labyrinthine plans, as other posters have noted. Japan and Taiwan spend per capita half of what the US does on health care, but still manage to insure their entire population and yield excellent health results. And to Joe Klein's c's point, this is all despite the fact that the Japanese populace, at least, is a voracious consumer of health care, with more doctor visits and tests, and longer hospital stays than U.S. patients. All Japanese insurers are nonprofit by law, and administrative costs in Japan are miniscule. A big reason Toyota decided to site a new plant in Canada rather than the US a couple of years ago was that there it would not have to bear the burden of providing health care for its workers. Our current health care system costs too much, doesn't give good results, and is making us economically uncompetitive. it's time to try something else. The track record of universal public health care systems around the world is far superior to that of "free market" alternatives, full-stop.

Posted by kishin | May 1, 2008 1:38 PM

More math, please. There're some numbers in there: 105M members generated $11.8B profit. That's about $112/year/member. This is not insignificant. AND it's only profit, not total overhead.

The $2.3T number is meaningless, as it's a different population. What was the total spend of the 105M members of the top 5 companies?

Posted by Dagon | May 1, 2008 1:38 PM

Brooksfoe,

I gotta hand it to you, I have never seen anyone refute their own arguments as consistently as you do.

Posted by Yancey Ward | May 1, 2008 1:42 PM

The $2.3 trillion consumers spend in health care costs has to go SOMEWHERE as someone's revenue. Someone has to be collecting that, whether it's insurers, hospitals, doctors, manufacturers, etc. I'd love to see a rigorous study that just followed the money.

And the study in Slate is asinine. In just that snippet, the author throws out numbers for PROFITS, COSTS, and INCOME and just sort of conflates them.

Posted by TheF79 | May 1, 2008 1:44 PM

Yancey, why do you even bother typing something like that in? It doesn't have anything in it.

Posted by brooksfoe | May 1, 2008 1:46 PM

What would happen is that they would lose the ability to discriminate out sick patients with high medical bills

Now wait a second. We've been told over and over that a big part of the problem is that insurance is tied to employment, yet ERISA group plans cannot discriminate based on risk and therefore presumably don't spend vast sums in a futile effort to do so. So one of these premises must be incorrect.

But more importantly, the auto and homeowner's insurance industries use the same business model, yet we suffer from neither a car-care nor a house-cleaning "crisis."

The "crisis" here is that most people of all income levels do not want to pay prices commensurate with services rendered for health care. Some of them want free access to treatments they can't afford; others want free access to treatments they can afford, but feel affronted when asked to actually pay full price. Most of our problems (many of which are actually "problems") stem from this mentality.

Japan and Taiwan spend per capita half of what the US does on health care, but still manage to insure their entire population and yield excellent health results.

I don't suppose that could have anything at all to do with diet, lifestyle, or genetics, could it?

Posted by Rob Lyman | May 1, 2008 1:51 PM

brooksfoe,

Sigh...

You asserted that costs are high overall because of the administrative efforts of insurance companies. When Rob points out that insurance companies could just cut out all their overhead and keep it as profit since it is having no effect on rate of return, you return with this classic:

What would happen is that they would lose the ability to discriminate out sick patients with high medical bills; sick patients with high medical bills would gravitate towards them; their reimbursement rates would skyrocket; and they would either have to hire more staff to discriminate those patients back out, thus raising their administrative costs again, or they would suck up the bottom of the barrel while their competitors skimmed the cream, and go bankrupt.

In other words, you conceded the argument that the administrative costs incurred lowered the costs to their customers, and improves the companies profits.

Posted by Yancey Ward | May 1, 2008 1:59 PM

Joe's Conscience: Well, for one thing, "health care expenditures" includes both incredibly expensive and statistically useless terminal care, and cosmetic care.

In a system where you don't have the option of paying $50-100k to keep Grandma alive for another few weeks, you, well, obviously won't. She dies earlier, but that's statistically unlikely to even be counted (since health stats for mortality tend to, from what I've seen, go by age - and the difference is unlikely to be significant in terms of old people making it to one more birthday).

So what the family might see as a large benefit appears on the stats as simply a giant expenditure for "no benefit".

(And stats, of course, show no benefit to "health" from cosmetic or non-seriously-health-impacting voluntary procedures, which still cost a lot. And still provide serious benefit to the consumers of such care, or they wouldn't pay for it.)

And that doesn't even touch the issue of comparing "national" expenditures of healthcare between a relatively free-market system and one with a national monopoly or near-monopoly (such as the NHS).

In one, people more-or-less choose to spend whatever amount of money they wish on healthcare (outside of the VA or Medicare systems), even if part or most of it is from insurance provided by their employers (since after all, such benefits are just replacements for salary).

In the other, the State decides how the rationing works, and who can get what services.

Brooksfoe: I believe Yancey meant that in the absence of evil health-care insurers, the State will "discriminate out expensive care, especially for terminal cases.

Thus reminding us that rationing of healthcare will happen one way or another - the big difference being whether it's the State or the individual's pocketbook doing the rationing.

Do try and explain how it is that it's the "industry" that doesn't want to throw unlimited losses at very sick people (and that this is "evil" somehow)... when the State will do the exact same thing, and does everywhere I've ever heard of that has State healthcare.

(And whether or not the State doing it will cause contraction in supply or quality, which seems to be the case damn near everywhere the State is in control.

The State, after all, has even less incentive than an "evil" insurer to try and serve the customer.

For that matter, "as little care as possible" seems to be a guiding light of the NHS and indeed any other central rationing system. Finite funding for infinite demand has that effect.)

Posted by Sigivald | May 1, 2008 2:06 PM

Yancy,

brooksfoe is going to respond that although admin improves profits, it would be unnecessary in a universal system because there would be no use for actuaries. Everyone's covered, so risk discrimination is unnecessary, so the people who do it all get fired, lose their health insurance, and drive up costs by spreading untreated resistant TB to the rest of us.

My question in response to this argument is: how much is really spent to keep out sick people, given that ERISA plans (which are supposedly the majority) forbid risk-based pricing (but do allow exclusions for pre-existing conditions)? How much admin is devoted to fighting fraud or resisting unnecessary treatments, both essential cost-controlling functions in a universal system?

Posted by Rob Lyman | May 1, 2008 2:08 PM

"I have never heard the argument that US health care spending is too high because of insurers' profits. The argument is that health care spending is too high because of insurers' administrative costs."-my pal, Brooksfoe

I suppose Brooksfoe thinks that governments are well-known for their low administrative costs. Actually, the truth is that for profit companies have ample incentive to contain costs, while government employees have very little, as for example, Nobel laureate Gordon Tullock has explained (see his book Government Failure).

Brooksfoe seems like a clever fellow, but he also seems all too willing to ignore the basic findings of economics when those findings conflict with his own statist predelictions.

Posted by rwe | May 1, 2008 2:12 PM

Look. Health insurers routinely deny payment on a large percentage of doctors' claims, just to see whether the hospital or patient will actually press for them. They know some percentage of those claims will get dropped, and the extra time the appeal costs them is made up for by the reimbursals they don't have to make. So far so good -- some poor bastards are getting screwed, but savings should feed through into lower premiums. Except that hospitals and doctors just respond to this practice by raising fees uniformly to make up for the lost revenue. So now the procedures cost more, so there's even more incentive for insurers to routinely deny procedures. Now, one insurer could say, okay, forget it - we're firing that department that handles all the paperwork for the denials and appeals, that'll save us some money, we can lower premiums. Except hospitals won't drop the prices of procedures just because one insurer decided to stop stiffing them. Rather, that insurer who reimburses all comers will now be paying out more money than any other insurer, and their premiums will thus be higher, they'll lose customers, and so on.

Those huge administrative costs represent insurance companies trying to beat each other at insuring fewer sick people and reimbursing less care. No one insurer can stop doing either one of those things. They can only be stopped by government imposing community rating on the whole sector.

Posted by brooksfoe | May 1, 2008 2:15 PM

"I have never heard the argument that US health care spending is too high because of insurers' profits. The argument is that health care spending is too high because of insurers' administrative costs."-my pal, Brooksfoe

I suppose Brooksfoe thinks that governments are well-known for their low administrative costs. Actually, the truth is that for profit companies have ample incentive to contain costs, while government employees have very little as, for example, Nobel laureate Gordon Tullock has explained (see his book Government Failure).

Brooksfoe seems like a clever fellow, but he also seems all too willing to ignore the basic findings of economics when those findings conflict with his own statist predilections.

Posted by rwe | May 1, 2008 2:15 PM

"A big reason Toyota decided to site a new plant in Canada rather than the US a couple of years ago was that there it would not have to bear the burden of providing health care for its workers."

Last week on this blog, this plant was sited in Canada rather than the US because US workers were illiterate. Could we also blame it on US workers dislike of hockey as well?

Posted by Klug | May 1, 2008 2:18 PM

What would happen is that they would lose the ability to discriminate out sick patients with high medical bills

Brooks,

While you are usually very good - you missed it on this one. The vast majority of health insurance is sold to companies not to individuals - there is very little weeding out of sick patients going on. The weeding only occurs on the individual market, which is a small percentage of the total.

Posted by jmo | May 1, 2008 2:21 PM

I tried to cancel the first post when I noticed the misspelling of predilection, but alas. Anyway, brooksfoe's response to Yancey, Rob and others who have been pointing out that insurance companies have a great deal of incentive to contain costs is this:

No one insurer can stop doing either one of those things. They can only be stopped by government imposing community rating on the whole sector.

Perhaps he is unaware that this is a tired and oft-refuted idea in the history of economics--that competition is somehow wasteful and redundant and that government monopoly would be more efficient.

The intellectual poverty of that idea is one reason why John Kenneth Galbraith has fallen into such disrepute in the profession. In general, competition reduces price and increases quality, which is why, as David Wessel points out in the Journal today, even Democrats have moved away from statist solutions to some extent (though not enough).

Posted by rwe | May 1, 2008 2:27 PM

Does the conversation have to be as theoretical as this?

We have real-world examples of governments with universal health care, whether this is nationalized health care or nationalized health insurance.

Japan, Canada, and several countries in Europe come to mind.

So in spite of the fact that we know that government can be extremely inefficient, we also know that governments in countries with heath care systems which provide a life expectancy and level of health that is comparable to ours.

Another major difference in the aforementioned countries is that health care is available to everyone, and this is better in my view.

So what's the problem with these counties? Is there something going on in these countries that we don't want to happen here?

Why wouldn't we be able to get similar results?

Posted by Jay J | May 1, 2008 2:31 PM

"Brooksfoe seems like a clever fellow, but he also seems all too willing to ignore the basic findings of economics when those findings conflict with his own statist predelictions."

That may be because empirical evidence disagrees with your Nobelaureate in this specific instance.

Regardless though, administrative costs or profits are not the problem. Even if they could be knocked down to zero and we'd only save 30%, and that includes administrative costs on both sides of the provider/insurer divide - most of which is on the provider side (going from memory on that last bit).

No, Rob hit the nail on the head when he facetiously (I assume) said, "I suppose its possible that the entire industry has decided to spend a bunch of money for no reason".

While every entity in the chain has good economic reasons for what they do, the result as a whole is an irrational waste of money. The market system that worked well years ago, no longer functions as a market. What the ultimate consumer wants to buy, and what the ultimate provider decides to sell are no longer related by market forces. It is a pantomime that mimics what the market used to be, so it looks like a market at first glance, but it isn't rational anymore.

Posted by Njorl | May 1, 2008 2:34 PM

Except hospitals won't drop the prices of procedures just because one insurer decided to stop stiffing them...

You are aware, I presume, that the price your insurance company pays is not taken from a price list posted on the wall, but rather negotiated with the hosptial in advance as part of a contract? The insurance company doesn't just pay whatever the list price is, it bargains for a lower price based on the relative certainty of payment. It's the same principle behind cash discounts at gun stores and high interest rates at payday loan shops.

If an insurer chose to fight payment less, it could presumably negotiate lower rates with hospitals, on the grounds that it pays out more often. Such a company might still go bankrupt, but not merely because it was paying a higher percentage of its claims (remember that it would pay less per claim). It would go bankrupt because it would come to be seen as a relatively easy cash cow that doesn't watch carefully for fraud and overtreatment.

Any system other than patient pays will require that the payor choose between 1)fighting with the payee to cut costs, and 2) accepting fraud and overtreatment as costs of doing business.

The point being, you can't escape admin costs for free. There's an optimal point where the marginal cost of stopping the next fraudulent bill is equal to the price of paying that bill, and it's theoretically that possible both that we're far from that point and that the government can bring us closer. But it's unlikely that there's a free lunch waiting to be grabbed here.

Posted by Rob Lyman | May 1, 2008 2:35 PM

"Perhaps he is unaware that this is a tired and oft-refuted idea in the history of economics--that competition is somehow wasteful and redundant and that government monopoly would be more efficient."

Perhaps you are unaware of the actual reality that proves that overhead costs are much lower in centralized health care systems.

http://www.consumeraffairs.com/news03/health_costs.html

http://www.pnhp.org/news/2003/august/administrative_costs.php

Cananda is only one example. PBS recently did a study of health care systems. The US market approach has much higher overhead and administrative costs than Canada, the UK, Germany, Switzerland, Japan, and Taiwan. Even within the US, you can see that the VA is much more efficient. VA patients typically live longer than the average person despite their patients begin inherently less healthy. And lower administrative costs per patient. Perhaps this is why what passes for conservative economic thought is so throughly discredited these days? They ignore basic facts and statistics when they don't align with the "theory".

Posted by freddiemac | May 1, 2008 2:35 PM

I suppose Brooksfoe thinks that governments are well-known for their low administrative costs. Actually, the truth is that - rwe

Actually, the truth is that administrative costs at Medicare are about 2% and at Medicaid are about 6% and administrative costs at private health insurers are around 20%, and that's what the truth is. And, yes, Rob, that was the argument I would make, and that's an interesting point about ERISA and actually sounds worth looking into. But I have to go to bed now so good luck!

On this, which I never responded to, from Yancey:

you conceded the argument that the administrative costs incurred lowered the costs to their customers, and improves the companies profits.

That's because "their customers" now no longer include the people who are actually sick. I could offer you health insurance for $5 a month with a system like this: I guarantee to reimburse all your health care, no questions asked. Except if you get sick and need health care. Then you're out of the plan. But obviously that would be illegal. Finding a legal way to do this requires a lot of staff, so the premiums will be more like $500 a month. And if everyone else is running their insurance plan this way, and I come out and offer a plan for $400 that doesn't drop you when you get sick -- guess who I get as customers? All the sick people. And I have to up my premiums to $1000 a month. End result: instead of everyone paying $400 a month for insurance, we now have healthy people paying $500 a month to employ doctors to make sure they're not sick and lawyers and admin staff to kick them out if they are, and sick people paying $1000 a month. No one wins, everyone loses -- except the lawyers and admin staff, who get jobs. Though if we got rid of the whole idiotic system, maybe they'd find productive things to do with their lives, like raising free-range chickens.

Posted by brooksfoe | May 1, 2008 2:37 PM

Congratulations Ms. McArdle, for continuing to cover a critical if sometimes seemingly "unsexy" issue.

However, I don't think it's that "we consume so much" per se- but that we waste fully 30% of our health care dollars on unnecessary/ineffective care and devote another 30% to administration costs (and yes, insurers overhead and profits contribute to that high figure).

Of course, there is some overlap between these- but that's ultimately around HALF of health care dollars not contributing to actual improvements in health outcomes.

Needless to say, both of these rates are also the highest on the planet.

As rising health costs are the biggest contributor to the unfunded entitlements that former comptroller David Walker keeps warning now threaten the country with insolvency in the next generation- You could make a defensible argument that this is the single biggest national security issue that we face.

Posted by James H. | May 1, 2008 2:38 PM

Here's a keeper:
The Health Insurance Mafia.

Insurance makes sense for catastrophic coverage, not paying for each visit to the doctor and part of each prescription.

And I do think health insurers bear some responsibility for getting us into the current mess: They've lobbied state legislatures and state insurance commissioners to "regulate" health insurance policies and premiums in such a way to keep out competitors. It's typical rent-seeking behavior.

Posted by MarkG | May 1, 2008 2:39 PM

Jay, a couple points.

The countries you cite buy pharmaceuticals essentially on a cost-plus basis negotiated by the government. That means that pharma has to recoup its R&D costs in the U.S. in the five or so years typically left on patent term when a drug is approved.

In addition, at least in the UK, health care is rationed by the NHS. Care for those above a certain age is palliative rather than therapeutic. (Anecdotal instance: one of my wife's relatives didn't receive surgery for breast cancer because she was in her late 70s. The NHS decided - and she (a former nurse) agreed - that she'd had her three score years and ten, and that was that.)

The story brings up another point, namely that Americans are perhaps uniquely individualistic. That's good in the context of entrepreneurial pursuits, but not so good in the healthcare context. Virtually every American expects heroic efforts on his behalf. The idea of writing one's self off, as my wife's relative did, is literally un-American.

Posted by Occam's Beard | May 1, 2008 2:39 PM

Also, I should add that insurers aren't necessarily evil or to blame for all our health ills. I believe that the combination of a highly sedintary lifestyle combined with really cheap food that is abundant, highly processed, devoid of nutrition, and full of fat and sugars is a large part of our problem. If people lived healthier, they would be healthier. As Matt Yglesias is fond of pointing out, some of the biggest advances in life expectancy came from such things as improved sanitation and increased use of soap, not new medical treatments. So many cutting farm subsidies to corn growers and refiners of high fructose corn syrup is a good start to reducing our health care costs.

Posted by freddiemac | May 1, 2008 2:44 PM

Thanks Occam's Beard,

If we switched to a Canadian style nationalized insurance, I suppose pharma would be in the same boat here that they're in many other counries.

Is there any reason to believe that if pharma was not able to recoup its R&D costs in the U.S. the way it does now, that something really bad would happen?

And I probably should have stuck to nationalized health insurance, since a UK style system seem very unlikely in the U.S.

Posted by Jay J | May 1, 2008 2:50 PM

Mark,
"Insurance makes sense for catastrophic coverage, not paying for each visit to the doctor and part of each prescription."

I buy insurance so I don't get stuck with a $200,000 hospital bill.

My insurerer bribes me to get regular check-ups so that they don't get stuck with a $200,000 hospital bill.

Posted by Njorl | May 1, 2008 2:51 PM

Perhaps you are unaware of the actual reality that proves that overhead costs are much lower in centralized health care systems.

http://www.consumeraffairs.com/news03/health_costs.html
http://www.pnhp.org/news/2003/august/administrative_costs.php

Actually I’ve read those reports (and not just the results reported on PBS). What the researchers did was send a survey to doctors and nurses in the US and Canada and ask them how much time a week they estimated that they spent performing “administrative functions” and then they took that time, divided it by a 40-hour work week and prorated it against the average salaries of a doctor or nurse in United States.

The dirty little secret – and why it’s important to actually read the study and its methodology – is that the researchers found that US doctors and nurses actually spent less time doing administrative functions but because doctors and nurses are paid more in the US than in Canada, it showed up as a higher administrative cost which is contrary to what the proponents of a single-payer system have claimed.

So basically in the United States we actually spend less time performing administrative functions in our health care system than Canadian doctors and nurses do under their single payer system but it appears that our administrative costs are higher because our time is more valuable. So basically when proponents of a single payer system say that we’ll have lower administrative costs, what they’re really proposing is that we cut the salaries of doctors and nurses while forcing them to spend more, not less time, complying with government paperwork then they do now complying with insurance company paperwork.

Posted by Thorley Winston | May 1, 2008 2:59 PM

Is there any reason to believe that if pharma was not able to recoup its R&D costs in the U.S. the way it does now, that something really bad would happen?

Jay, it depends on what you consider really bad.

R&D costs - which are huge - have to be recouped somewhere, or there won't be any R&D, obviously. Europe and Japan pretty much have their hands in their pockets on this one, so it's down to Americans.

So if R&D on new drugs becomes uneconomic, there won't be any. There will just be today's drugs, which would all soon become generic, and cheap.

In some perspectives, that's not so bad. We have a huge demographic bulge of boomers, and not going to great lengths to prolong their (our!) lives might not be such a bad thing. A shift to viewing life on a higher philosophical plane, rather than focusing on mere longevity, wouldn't be entirely amiss.

But I think that most people would reject that notion, and want new drugs developed, expecting that one day they themselves will need them - philosophy notwithstanding.

Posted by Occam's Beard | May 1, 2008 3:06 PM

Thorley, cites for the reports you are talking about?

If the researchers actually did what you said, asked Canadian and US doctors and nurses how much time they spent doing administrative stuff and prorated it against US salaries, then the numbers should be directly comparable.

But the other question is, do Canadian doctors' offices have to have a dedicated staffer who only does insurance administration? US doctors do have such a staffer; I have heard that Canadian doctors do not. So then, even supposing that US doctors and nurses do less administrative work, that could be because they have enough administrivia to need to hire an additional staffer to do it.

Posted by Cardinal Fang | May 1, 2008 3:12 PM

brooksfoe,

However, you have missed a step- you have provided no evidence that they actually weed out those who get sick, only that they try to control costs of treatments and procedures- something that no one is denying- even you, apparently. And, it has been noted that there are quite stringent regulations preventing health insurance companies from doing this kind of weeding out in the first place.

Pre-existing conditions are another matter, however. I don't know of a single auto-insurance company that will let me file a claim on a car I wrecked before I signed up for coverage. Pre-existing medical conditions are no different. I suspect little overhead is spent denying policies to such people.

Posted by Yancey Ward | May 1, 2008 3:12 PM

"Is there any reason to believe that if pharma was not able to recoup its R&D costs in the U.S. the way it does now, that something really bad would happen?"

Really bad? No.

First, they would recoup some R&D costs from abroad that they are not getting now, though they would probably not come close to making up the shortfall. Research would decrease here in the US. Again, there would be increases in other countries that would probably not make up the shortfall. This would result in a decline in new drug research.

What industry shills will not say is that the money not spent on research will be spent elsewhere. Nobody will pile it up and set fire to it just because it isn't as profitably invested in drug research anymore. It may be spent in other health care fields, or in entirely unrelated ways, but it will presumably benefit someone. To continue protecting this practice, it is incumbent upon the proponents to make an affirmative case that the money involved is being put to better use than it would be otherwise.

Treating drug research as an unqualified good is often used to justify measures that enhance drug company profits. But the same argument justifies the government giving matching funds to these companies for money spent on research... or double matching funds, or triple, or quadruple etc. It is an assumption that drug research is always the best possible way money can be spent.

Posted by Njorl | May 1, 2008 3:12 PM

Njorl, it might make sense for the ins. co. to provide incentives for its insured to reduce their risks of contracting some illnesses that are cheap to treat if discovered at an early stage, but astronomical later on.

But the idea that health insurance is necessary for each visit to the doctor -- an idea unfortunately now the conventional wisdom -- encourages abuse. Some people are hypochondriacs, others malingerers. Your premium pays for their unwillingness to watch costs.

There are also doctors who have figured out ways to scam the insurers by diagnosing whatever the patient wants as long as the insurer would have a difficult time disproving the diagnosis. There's ample room for fraud on both sides.

Posted by MarkG | May 1, 2008 3:13 PM

Jay J and freddiemac--

Just to address the Canada example, a recent Supreme Court (of Canada, natch) decision overturned the ban on private health insurance.

Why?

The Court's majority found that "waiting lists for health care services have resulted in deaths, have increased the length of time that patients have to be in pain and have impaired patients' ability to enjoy any real quality of life."

http://content.nejm.org/cgi/content/full/354/16/1661

That sounds like a less than ringing endorsement of the Canadian system by their own Supreme Court.

On a more anecdotal level, here's a story about Canadian women increasingly being sent to the U.S. to give birth due to a lack of beds in Canadian hospitals: http://www.komotv.com/news/local/10216201.html

That's all I could come up with just off the bat but I've heard horror stories about the treatment of the old and terminally ill in British hospitals as well.

Our system clearly has its problems but let's not pretend that the easy answer is to emulate one of the utopian systems that are working flawlessly all around us.

Posted by Bob | May 1, 2008 3:16 PM

Actually, the truth is that administrative costs at Medicare are about 2% and at Medicaid are about 6%

Um no, that’s not true either.

First, most of the actual administrative costs that sustain Medicare and Medicaid aren’t counted as part of their budget, they’re either passed along to providers through the regulatory power of the government (whereas private insurance companies have to account for them since they can’t simply pass them along to providers) or they’re coming out of other parts of the federal budget. Example: Medicare premiums are collected by the IRS which acts as Medicare’s accounts receivable department but since it isn’t part of the actual “Medicare budget” it isn’t counted as an administrative expense for Medicare while a private insurance company using activities-based costing would count it as part of the administrative overhead.

The other reason is that the percentages brooksfoe is claiming are actually based on a percentage of payments and Medicare payments tend to be larger (about 60% more or double what the average payment made by most private insurers) so you can have a situation where while it actually costs more to process a request for Medicare/Medicaid payment but because the actual payment will be larger, it shows up as a smaller percentage of the payment.

So basically what brooksfoe’s numbers are based on is (a) funny accounting whereby the government doesn’t count it as an “administrative cost” if it’s coming out of someone else’s budget (even though it makes no difference to the taxpayer or patient since the costs is just being passed along) and (b) differences in the size of Medicare payments rather than the size of administrative expenses.

Posted by Thorley Winston | May 1, 2008 3:17 PM

"The other reason is that the percentages brooksfoe is claiming are actually based on a percentage of payments and Medicare payments tend to be larger (about 60% more or double what the average payment made by most private insurers) "

That is a worthless point. Medicare's patients are exclusively elderly. Comparing their costs to a typical private insurerer, who has alomost no elderly patients is unilluminating.

Medicare and medicaid get better prices than private insurers. This is not because the government has better negotiators, it is because the government has a bigger batch of clients.

Posted by Njorl | May 1, 2008 3:27 PM

Bob,

I am aware of the flaws in the Canadian system. I never said that we should emulate it. I simply pointed out that they have lower overhead costs than the US system, contra what has been typed here previously. This makes sense, due to the comparative advantage a large system has over smaller ones.

One could compare anecdotes all day long about the problems of various health systems and health policies of different nations, including our own. It is disingenuous to state that are system is so great and then off handedly dismiss the mountain of evidence that suggests the huge flaws in our system compared to others.

The reality is that America dedicates and enormous amount of our GDP to health care, a lot more than other industrialized nations. We spend more per capita on health care than any other nation, but there is very little evidence to suggest that we have anything to show for that huge amount of money.

I am no expert on health care laws, rules, and regulations. But I suggest that much of the problem is structural. As I said before, we have a very unhealthy lifestyle in America. That our health care would cost so much and reap so little is therefore not too surprising. I'm sure there are many other problems indemic to the system that I don't know about. But I also see no reason why we might not realistically examine other systems to see what works and what doesn't. Isn't that the American way?

Posted by freddiemac | May 1, 2008 3:44 PM

Njorl,

You seem to be missing Thorley's point about the percentages of overhead.

Posted by Yancey Ward | May 1, 2008 3:48 PM

The Pharma R&D issue is overblown. They spend twice as much on advertising than R&D.

Posted by bbeans | May 1, 2008 3:50 PM

Njorl,

It is true that the money spent on R&D will not be burnt if the return on R&D is set to zero. The people who would have invested in that will find something else to invest in and get a return there.

It seems, though, that you're arguing that the market wildly over-estimates the value of R&D, at least partially because of perverse government incentives applied to the industry, and thus it might be beneficial to eliminate the return on R&D.

I would question whether the government's influence on the returns to pharma R&D is significantly greater than the maelstrom of tax-breaks, grants, zoning, etc., etc. that every other large industry lobbies for.

Assuming that the perversion of the market is not significantly greater in pharma than industry in general, then it seems to be that if you eliminate the return on pharma R&D you will by definition be forcing that money into less productive investments.

Testing drugs is certainly not an unqualified good, if you mean that there is no amount to spend that is too much. The question is where is the point of diminishing returns? How much should we spend on drug R&D?

The free marketer's answers is: let it compete for scarce investment dollars along with everything else. The amount we spend on it will be the sum-total of our collective desire to spend on drug research as opposed to other worthy things.

An alternate answer is to have the government decide how much to spend and then collect and appropriate that much.

One's ideology will significantly influence how one feels about each of these options. I tend to believe that decades of evidence around the world indicate that government is not particularly adept at efficient allocation of resources. Because of that, I'd prefer to see less government overrides of the market in all cases but especially so in sectors of vital importance like health and health-related research.

I seem to be in the minority on that, though, as people generally seem to believe that the more important something is the more government should be involved.

I'm sure brooksfoe and other worthies who share his mindset could give me arguments and evidence about why the government is actually much better at allocating resources and my belief to the contrary is mistaken and ignorant of significant evidence.

Posted by Bob | May 1, 2008 3:55 PM

In a system where you don't have the option of paying $50-100k to keep Grandma alive for another few weeks, you, well, obviously won't. She dies earlier, but that's statistically unlikely to even be counted (since health stats for mortality tend to, from what I've seen, go by age - and the difference is unlikely to be significant in terms of old people making it to one more birthday).
So what the family might see as a large benefit appears on the stats as simply a giant expenditure for "no benefit".

Do explain how keeping a dying elderly person alive for a few more weeks is a "large benefit" to the family. Especially if, as is so often the case, the dying person is too far out of it to communicate.

Posted by Peter | May 1, 2008 4:09 PM

The real elephant in the room here is that too many people want a free lunch and there's no such thing. Also no point in comparing to Japan, they eat much healthier and exercise, so they get better results from their hospital visits.

Posted by FreedomLover | May 1, 2008 4:11 PM

Healthcare costs are high because of government subsidies. Same thing can be said of education. Agricultural goods, too. What hyperinflationary sectors are not subsidized?

Contra exercise: What deflationary sectors (telecom, electronics, etc.) ARE subsidized? Nothing comes to mind.

Stop subsidies, please. Thank you, George Stigler!

Posted by caveat bettor | May 1, 2008 4:12 PM

Do explain how keeping a dying elderly person alive for a few more weeks is a "large benefit" to the family. Especially if, as is so often the case, the dying person is too far out of it to communicate.

Posted by Peter | May 1, 2008 4:09 PM

Except 99% of the families go for the $100K "keep grandma alive" option. Religious reasons, guilt. Who knows, but someone else will pay the tab. You and me.

Posted by FreedomLover | May 1, 2008 4:19 PM

bbeans, that line about advertising budgets in the pharma industry will, I suppose, continue to be used until the end of time.

But it's similar to the argument above about administrative costs in health insurance companies. The purpose of those advertising budgets so that the companies have *more money* than they would have had, even after spending what they did on promotion.

It's not like there's this fixed bucket of cash, and you decide that some of goes to the research labs - never to be seen again, for the most part, and I work there and do my part - and some of it goes to the ad budget and disappears over there. Advertising is a profit center.

Posted by Derek Lowe | May 1, 2008 4:23 PM

Also no point in comparing to Japan, they eat much healthier and exercise, so they get better results from their hospital visits.

Dunno about healthier eating. As I understand it, the Japanese diet is very high in sodium.

Japan's long life expectancy might be at least partly genetic. Asian-Americans, including those of Japanese descent, have longer life expectancies than almost any other group in this country.

Posted by Peter | May 1, 2008 4:24 PM

Peter,

The Japanese diet may not be the paradigm of health, but I'm sure it is much healthier than the average American diet. High in sodium is usually preferrable to high in sugars and fat.

There may be a genetic correlation to health. It also may be that certain ancestries are less suitable to the American diet than others. Some conjecture is that people of Native ancestry are less adept at eating grains and starches because their ancestors didn't start eating a diet filled with bread and cheap grains until only a few generations ago, while some Eurasians have been eating a largely grain based diet for a millenium or more.

Posted by freddiemac | May 1, 2008 4:34 PM

Plus, on the Japanese diet front, it must be stressed that sushi is delicious.

But not the really weird pieces. Those are just gross.

Note: Please feel free to define "weird" in the above statement anyway you like up to and including all sushi.

Posted by Bob | May 1, 2008 4:48 PM

Peter:

What do you suggest we do in terms of long-term care? I'd love to hear some suggestions.

Posted by Klug | May 1, 2008 4:50 PM

The market is not the appropriate mechanism for health care because people do not voluntarily consume health care. I don't want to shop around for cheaper cancer care -- I don't actually *want* to pay for cancer care at all, since I'd much rather not get cancer.

And our current market is really not a good market for people who have a pre-existing condition. A car insurer won't pay for an already wrecked car, as someone here observed. But you can get a new car. You don't get a new body -- your wrecked car is you.

Posted by Diana | May 1, 2008 5:07 PM

Those above (like Brooksfoe and Njorl) who claim tremendous efficiencies will come from a government controlled system are dreaming. As anyone who has been in an NHS hospital knows this is a common refrain in Britain:

"Dirty, understaffed and failing was the damning verdict on 22 English maternity units delivered this week by the Healthcare Commission."-Thu Sun, 5/1/08

"The Prime Minister and his aides have become alarmed that one in four hospitals is still not meeting the hygiene targets imposed in November 2004 by the then Health Secretary John Reid."-The Observer, 7/1/07

The Labor government has increased the NHS budget at a rapid rate, and yet popular discontent with medical treatment has been rising. So, according to the British public, more money has brought a reduction in quality, as hospitals are widely described as filthy and people worry that they come out sicker than they went in.

The Economist has a slightly more optimistic view, arguing that health care is marginally better than it was before New Labor, but that the marginal return on all of that extra spending has been very low.

So much for government efficiency. The truth is that the idea that governments will be able to control costs without reducing quantity and quality of care is a fairy tale.

Governments are simply not more efficient. they can only fix prices and ration care. Again, that's a lesson anyone who has studied basic economics ought to have learned.

Posted by rwe | May 1, 2008 5:24 PM

"Contra exercise: What deflationary sectors (telecom, electronics, etc.) ARE subsidized? Nothing comes to mind."

Is this a straight line or something? Telecom is subsidized.

Posted by Njorl | May 1, 2008 5:25 PM

"But the idea that health insurance is necessary for each visit to the doctor -- an idea unfortunately now the conventional wisdom -- encourages abuse. Some people are hypochondriacs, others malingerers. Your premium pays for their unwillingness to watch costs."

Since 80% of health care costs come for people in the final month of life, I find it hard to believe that fakers cost much money.

Posted by Njorl | May 1, 2008 5:36 PM

Great post rwe. That'll show em.

Posted by bbeans | May 1, 2008 5:43 PM

Derek Lowe: Is it wrong to point that out, similar to administrative costs?

RWE: I guess I'm just so jealous of the American healthcare system.

Posted by bbeans | May 1, 2008 5:46 PM

Njorl,
You seem to be missing Thorley's point about the percentages of overhead.

Yancey,
If someone tells me that they have a cat and that they are a leprechaun, I am not likely to debate the existance of their cat.

But if you insist...

The free ride that government medical insurance gets from the IRS doing its bill collection is a fact of life. It causes virtually no additional expense to the IRS. This synergy is available only to government healthcare systems.

If the IRS charged medicare the market rate, that might be expensive, but they don't. The only cost we are concerned about is the cost to the taxpayer. That is negligible because the IRS is collecting taxes anyway. The marginal cost of collecting more tax to fund medicare is tiny. The cost to the taxpayer for this service is the marginal cost of the next collected tax dollar, not the unit cost of the average tax dollar.

Posted by Njorl | May 1, 2008 5:47 PM

Peter is more frank than some of the other advocates of nationalized health care:

Do explain how keeping a dying elderly person alive for a few more weeks is a "large benefit" to the family.

That's indeed one way that the NHS "controls costs." It simply permits some people to die, when it deems them unlikely to respond to care. I saw that with my own eyes. Older people are more or less expendable.

The NHS is always strapped for cash, despite a ballooning budget, and is therefore always rationing care. That means some people have to wait a long time for treatment, while others get no treatment at all.

That solution always struck me as rather macabre--"Let 'em die. They cost too much. We don't need 'em." But Peter at least deserves credit for admitting the economic reality that there are tradeoffs involved in imposing price controls.

Posted by rwe | May 1, 2008 5:54 PM

The free marketer's answers is: let it compete for scarce investment dollars along with everything else. The amount we spend on it will be the sum-total of our collective desire to spend on drug research as opposed to other worthy things.
An alternate answer is to have the government decide how much to spend and then collect and appropriate that much.

I never said that the government should control drug research. What I believe (but didn't say), is that if the government wants to promote research, then they should find a mechanism to promote research rather than promoting drug company profits and hoping it promotes research.

Posted by Njorl | May 1, 2008 5:56 PM

Can some define "end of life" care in a legal definition sense? If I'm gonna sign up for poor / non-existent end of life care, as that is the only way to control costs it seems, I'd like to know where that starts.

In-patient care after 80? 70? 65?
Joint replacement at those ages?
End stage cancer treatment?
Coma care at all?
My fourth heart bypass? fifth? third?
Organ transplant after 40? 50? 30?
GI stuff after 50?
Second knee replacement?

And I would like to hear an advocate of this speak openly about it: government run health care will be cheaper because we won't do X, Y and Z to people we don't beleive will benefit and this will save us Z dollars per annum

Posted by Skullberg | May 1, 2008 6:01 PM

Skullberg, thanks for trying to flesh this out. Those who advocate such rationing are rarely willing to provide details.

I will say that as a relatively young man, I am more than willing to pay for/provide end-of-life personal/medical care to both my parents and my wife's parents; as such, I'm prepared to pay for it, financially and otherwise. I'm less willing to suggest this to others, but we all durn well know it's coming.

Posted by Klug | May 1, 2008 6:13 PM

Njorl:

Since 80% of health care costs come for people in the final month of life, I find it hard to believe that fakers cost much money.

Interesting claim, but unless 80 percent of health care costs are caused by scads of people dying expensively to get into Medicare, these costs would seem to be borne by that income redistribution system (when people are no longer under the care of private health insurance).

Or is the claim supposed to mean that a person incurs 80 percent of his or her lifetime's worth of health care costs in the final month of life? Does it reflect the fact that a procedure performed decades ago was more expensive than a newly developed procedure performed on an end-of-life patient today for an ailment inadequately described just a few years ago?

I'm not sure, but it doesn't really matter if we just want to toss random speculative statistics around.

Posted by MarkG | May 1, 2008 6:23 PM

Diana,

The market is not the appropriate mechanism for health care because people do not voluntarily consume health care.

Consumption of health care is at least as voluntary as consumption of food, shelter and clothing, all of which are funded primarily by the market. Are you therefore proposing to nationalize the funding of food, housing and clothing too? And what about health care delivery--drug companies, MRI manufacturers, hospitals, physicians groups, etc.? Are you proposing to nationalize those, too? I don't think you've thought your argument through very well.

And our current market is really not a good market for people who have a pre-existing condition. A car insurer won't pay for an already wrecked car, as someone here observed.

But he will insure a high-risk driver, for the right price. Everyone is insurable at some price, whether it's car insurance or health insurance. In cases where pre-existing conditions preclude access to affordable health insurance at market rates, the government can step in to make insurance available through some combination of regulation and subsidy. It doesn't require the nationalization of the entire health insurance market.

Posted by Mixner | May 1, 2008 6:34 PM

Bob,

I agree that we shouldn't pretend that an easy answer is to emulate Canada.

I believe actually that there are no easy answers.

But let's not also pretend that a health care system that leaves millions without access is the best system in the world.

Posted by Jay J | May 1, 2008 7:18 PM

The free ride that government medical insurance gets from the IRS doing its bill collection is a fact of life. It causes virtually no additional expense to the IRS. This synergy is available only to government healthcare systems.

What you're claiming, then, is that the government presently has a budget surplus more than sufficient to begin covering a national healthcare scheme, or at least some sort of national health insurance/indemnity scheme. You might want to notify your friends in the Democratic Party, since they have this misguided notion that the Bush tax cuts were fiscally irresponsible.

Sarcasm aside, the only way this country will be able to fund a national health scheme of any sort is through a substantial tax hike. The only way I can see that happening practically is through an additional payroll deduction under FICA, and people will be accutely aware of exactly how much this non-free lunch is costing when the FICA deduction on their payroll stub jumps to, say, 24%.

Although people overall might willingly pay a greater percentage of their income in exchange for the beneficial aspects of the tradeoff, a much greater percentage of income is at stake, increasing the incentive to cheat; and the IRS now has to handle a greater volume of paperwork to process the collections. Add those together, and I fail to see how the IRS would have to do anything less than grow in order to handle the additional collection and enforcement burden.

If you've got another interpretation, I would like to hear it. Otherwise, your "synergy" is spin, and collection costs at the IRS are a real, but unmeasured, portion of total Medicare administrative costs, both right now and under any future universal insurance or care scheme. Correspondingly, the factoid Brooksfoe reeled off is, and remains, a work of creative fiction.

Posted by aMouseforallSeasons | May 1, 2008 8:14 PM

Re: yet we suffer from neither a car-care nor a house-cleaning "crisis."

??
What does cleaning have to do with it? We don't suffer from a grooming and hygiene crisis either because of the high cost of healthcare. I would however suggest you visit Florida if you want to sample a property insurance crisis. Let's also take note of a fact about healthcare: its costs are potentially unlimited, unlike most other forms of insurance. At absolute worst your car insurance may have to replace your vehicle and pay out to the limit of your liability coverage (often fairly low). Your homeowners policy is similarly limited, albeit houses cost more than cars, though are far more rarely "totaled". Life insurance has a fairly strict and predictable limit for its payoff. Even a disability policy will only pay out a limited amount yearly, so the insurer knows what the worst case scenario will cost. Healthcare issues (if only mild ones) arise at least yearly for most people and the cost of a serious, chronic illness or injury will be many times the maximum likely to be paid on an auto or property policy.

Re: I don't suppose that could have anything at all to do with diet, lifestyle, or genetics, could it?

Obesity and especially smoking are extremely common in Asia too. And I have never seen any evidence that Asian people are genetically healthier. You are grasping at straws. Why not accept the obvious: most other nations have healthcare systems deliver care at entirely acceptable levels and cost less. What's not to like?

Re: The State, after all, has even less incentive than an "evil" insurer to try and serve the customer.

Bullshit. A state that is democratic has every incentive to give the people what they demand. Hard to stay in office if you don't.

Re: I suppose Brooksfoe thinks that governments are well-known for their low administrative costs.

well, um, Medicare actually is well-known for low administrative costs.

Re: Health insurers routinely deny payment on a large percentage of doctors' claims, just to see whether the hospital or patient will actually press for them.

This is not true. Most claims are denied due to paperwork errors (and yes, the paperwork is a problem). I've worked at a healthcare payer company. Accuracy is an absolute requirement for claims payers. We allowed only a 2% error rate, and if they exceeded that they were out the door. Insurance companies do NOT deny claims for the fun of it.

Re: Except 99% of the families go for the $100K "keep grandma alive" option.

Except for the parents of Terri Schiavo, I've never known anyone who wanted to keep a dying person alive beyond the point of rational hope. Certainly none of my realtives were maintained like that: all had DNRs and/or living wills, and in a couple cases plugs were pulled or large doses of narcotics helped ease their final hours. My take on this is that it's the medical profession which runs up high bills on the dying with useless tests and the like: because often these people are well insured and sometimes because the providers fear lawsuits when nature takes its inevitable course.

Re: Finite funding for infinite demand has that effect.)

The demand for healthcare is not infinite-- would you go in for a daily lower GI even if you were rich as Bill Gates? Hello! Hypchondriacs do exist, but most people only consume healthcare when they need it-- and sometimes not even then since healthcare is often inconveient and annoying, sometimes painful and humiliating, occasionally dangerous. There are plenty of disincentives to consume healthcare apart from cost. What reality do you inhabit?

Posted by JonF | May 1, 2008 8:17 PM

3rd party payer creates a moral hazard. Both the doctors and the patients what the best care available regardless of cost... as long as someone else is paying. Why is this so hard to understand?