Healthcare Musings For August 21, 2026

August 21, 2026

Dear Interested Readers,

 

The Cost of Healthcare as a Political Issue

 

Healthcare has been a political issue for over a century. In some elections, such as the 2008 election, it was a prominent issue. In 2024, healthcare was not a top concern, but it seems to always be in the mix of factors many voters consider when deciding who will get their vote. A significant underlying issue has been whether healthcare is a public concern, with our government responsible for helping everyone get the care they need, or a private or individual responsibility.

 

Historically and currently, the vast majority of Republican politicians and voters have viewed healthcare as an individual responsibility, while Democrats, dating back to President Franklin Roosevelt, have argued that the government has a responsibility to optimize its citizens’ health. Political concerns about healthcare even go back to the progressive era of the late nineteenth century and early twentieth century, when Teddy Roosevelt, a progressive Republican and FDR’s distant cousin and relative by marriage, advocated for the government’s responsibility for the nation’s health.

 

Another recurrent theme in the politics of healthcare, since the days of FDR and particularly since World War II, used by those who did not want the government involved in healthcare, has been that government healthcare is the leading edge of socialism and that socialism is a slippery slope to communism. You might have noticed that President Trump is currently sounding the trumpet about the creeping threat of communism. He labels almost any progressive stance or progressive politician as evidence that we have a current communist threat. 

 

Even if we were to decide that the government had no responsibility for our healthcare, the current cost of care for Americans would be a significant part of another major political issue in this election: “affordability.” I think that if lowering the cost of living is a politician’s main objective, cutting healthcare costs is probably much easier than lowering the cost of groceries or rent. I asked Google’s Gemini AI what the average cost of healthcare is currently for a family of four, including their portion of the premium for their employer-sponsored insurance, plus out-of-pocket charges for visits and test co-pays, and their co-pays for prescriptions. Based on your personal experience, do you agree with Gemini’s answer?

 

For an average family of four with employer-sponsored health insurance, the total annual cost of healthcare—including the employee’s share of the premium plus out-of-pocket costs for medical services, tests, and prescriptions—is roughly $11,500 to $14,000 out of pocket. [1, 2, 3]

According to comprehensive industry benchmarks from the Kaiser Family Foundation (KFF) Employer Health Benefits Survey and the Milliman Medical Index, the total cost of healthcare for a family of four (including both employer and employee portions) is about $37,824 per year. [1, 2, 3]

 

Healthcare finance is complex. But one thing that is true is that what you are charged for care is more related to the leverage a supplier has over you than the true cost of the service you receive in a fee-for-service system of care. I asked ChatGPT whether one reason value-based reimbursement is attractive is that it incentivizes moving healthcare reimbursement toward costs and away from “charges.” The answer I got was:

 

Yes. The idea is that value-based reimbursement shifts payment away from the provider’s billed charges and toward the actual or expected cost and value of care delivered.

Traditional fee-for-service often reimburses based on the number and price of services provided, which can encourage higher utilization. Value-based models instead tie reimbursement to outcomes, quality, efficiency, or a predetermined cost of care. This can make payment more closely reflect the resources required to provide care, rather than simply the provider’s listed charges.

 

I was surprised this week to discover an op-ed piece in my local newspaper on the issue of costs versus charges, written by a retired Dartmouth gynecologist, Dr. Paul Manganiello, who has been active in Vermont’s medical politics. I had never met or heard of Dr. Manganiello before reading his August 15th piece, titled “We must learn how to measure healthcare costs,” but I agree with what he wrote. He begins:

 

In December 2022, I published a commentary in the VtDigger titled, “If you can’t measure it, you can’t improve it.” It was written in response to ongoing, yet largely unsuccessful, attempts to control health care costs [in Vermont]. Today, very little has changed. Healthcare costs continue to rise without significant improvement in measurable outcomes, despite the Vermont Legislature’s repeated attempts to implement “value-based care” — an approach meant to improve patient outcomes while decreasing expenditures.

 

He continues by reiterating our painful reality:

 

Healthcare is multifaceted and, quite literally, more complicated than rocket science. It encompasses complex questions of insurance access, pharmaceutical pricing, rapid technological advances, workforce availability and the education of future providers and basic science researchers. Unlike the aerospace industry, the healthcare industry has been unable to get a grip on containing costs. A major factor in this failure is the sheer volume of competing interests on both the supply side and the consumer side.

 

Dr. Manganiello continues his explanation of costs versus charges, making many of the same points I made to you back on October 3, 2017, in a piece titled “The Patient Centered Value System.” I was reviewing a book, The Patient-Centered Value System: Transforming Healthcare through Co-Design, by Anthony M. DiGioia, MD, and Eve Shapiro, for which Don Berwick had written the foreword, and I had written the preface. In the letter I wrote:

 

My favorite chapter is Chapter 8, “Time-Driven Activity-Costing in the Patient Centered Value System: A User’s Manual,” which demonstrates how to use “Shadowing” along with the costing approach developed by Robert S. Kaplan and Steven R. Anderson (2007) to determine the true cost of care delivery. Any organization that hopes to lower its costs to succeed in the era of value-based reimbursement needs to develop consistency in combining Shadowing with Time-Driven Activity-Based Costing. This “monograph” within a book makes the subject easy to understand and demonstrates nicely how it can be implemented.

 

Dr. Manganiello continues with the lucidity of the professor emeritus and expert that he is. His lesson aligns well with what Dr. DiGioia and Ms. Shapiro wrote and what Don Berwick and I endorsed. The process he describes is also highly aligned with the quality improvement and cost reduction philosophy of Lean processes and practice. 

 

To get a handle on costs, we must evaluate how medical services are organized and delivered. Unless we understand the individual components involved in a care cycle, we cannot improve services or reduce actual costs — let alone determine an appropriate “charge.” Without this granularity, true value-based care will remain out of reach. It all comes down to understanding the actual cost of a process and whether that process improves patient outcomes.

 

Next, Dr. Manganiello expands on the difference between costs and charges. More than 20 years ago, Berwick and his collaborators at the Institute for Healthcare Improvement (IHI) proposed that healthcare expenses could be reduced by more than 30% by focusing on quality improvements that eliminated process waste and tests and procedures that provided no value. Indeed, cost is a derivative of the definition of quality published in Crossing the Quality Chasm back in 2001, of which Berwick was a contributor. If you focus on those six domains, costs will fall, and quality will improve. Do you remember the six components of quality? They are:

 

The Six Domains of Quality

• Safety: Preventing patient harm from care meant to help them.

• Timeliness: Reducing waits and harmful delays for both patients and providers.

• Effectiveness: Providing services based on scientific evidence to those who can benefit, while avoiding care for those unlikely to benefit.

• Efficiency: Avoiding waste of equipment, supplies, ideas, and energy.

• Equity: Providing care that does not vary in quality based on personal traits like race, gender, geography, or socioeconomic status.

• Patient-centeredness: Providing care respectful of and responsive to individual patient preferences, needs, and values. [1, 2, 3]

 

Dr. Manganiello reminds us that we can lower the cost of providing care without consumers seeing savings because the “cost” of producing care and the “charge” that consumers see in a fee-for-service system are not the same. The difference between the cost of production, which is hard to determine in a complex process like healthcare, and the charge the producer, the hospital, outpatient specialty practice, or practitioner can get from the individual, the insurer, ot the government, is the “margin.” He writes:

 

In my 2022 column, I lamented that “costs” are too often conflated with “charges.” When we receive our surgeon’s bill, it is a charge; we really don’t know the total cost i.e., of the actual knee replacement. Simply put, “costs” is the actual value assigned to the resources consumed — labor, materials, and overhead — to deliver a healthcare service. “Charges,” on the other hand, are what a provider asks a patient or insurer to pay. Currently, calculating these charges is largely guesswork. Costs should be based on objective data; charges are usually highly subjective.

As management guru Peter Drucker famously stated, “If you can’t measure it, you can’t improve it.” In 2004, Harvard Business School professors Robert Kaplan and Michael Porter proposed a solution for medicine: using “process mapping” to measure the cost of health care delivery, a method known as Time Driven-Activity Based Costing (TD-ABC). Their original TD-ABC method was a major breakthrough, in helping medical institutions understand the true cost of supplying a service. However, its biggest weakness was that it was incredibly labor intensive.

 

If you go to a restaurant, what it costs for the owner to buy the food you will eat from a supplier, pay the rent on the building, pay to keep the facility heated or air-conditioned and clean, plus pay the chefs and waitpersons is relatively easy to calculate, but not so in healthcare. Doing these tasks efficiently in healthcare may now be possible and efficient using AI tools. Dr. Manganiello continues with his lesson on costs versus charges in healthcare.

 

To map costs manually, administrators had to interview staff to ask exactly how many minutes they spent on a task; track the exact price and variance of various knee prosthetics; calculate the real-time cost of utilities like heating, water, and air conditioning; factor in facilities overhead and administrative support. The same exhausting process would need to be applied to primary care or dermatology clinics. Today, however, artificial intelligence platforms can effectively automate these complex equations in real time, removing the manual burden.

 

Dr. Manganiello’s piece was written in response to a veto of legislation by the governor of Vermont that was an attempt to improve the cost of care. Dr. Manganiello advocates moving away from “spending caps” and moving toward “value engineering.” He points out that it is unrealistic to ask providers to make spending cuts when they don’t understand the true cost of the services they provide. He equates the task required of providers to “flying blind.” He continues by pointing out that the need to understand cost is the same whether the payer is an insurer like Blue Cross or a “public option.”

 

If you follow these notes, you know that over the past several months I have been channeling Nobel Prize-winning economist Paul Krugman. Krugman believes that a “public option” is the next step toward universal access to care and lower healthcare costs. On August 14, Krugman published an article on his Substack entitled “The Case for a Medicare Buy-In Option: Mandates vs options: The good, the bad, and the feasible.”

 

Krugman’s article was in part a response to some of the comments from the political right following the successful Michigan primary election of Dr. Abdul El-Syed as the Democratic candidate for the Senate. Krugman begins:

 

Abdul El-Sayed won the Democratic nomination for Michigan Senate on a platform advocating Medicare for All, aka single-payer health insurance. As I argued Tuesday, this makes a lot of sense in policy terms. Many healthcare experts would choose single-payer if designing a healthcare system from scratch… 

 

Krugman has pointed out before that our current healthcare system is essentially a dysfunctional form of socialized medicine since, through a variety of programs including tax credits to employers, the government pays more than two-thirds of the nation’s healthcare costs, and uses these payments in a dysfunctional way to attempt to bring some guarantees of service and improve outcomes. In his words:

 

Furthermore, as I pointed out Tuesday, the United States is already most of the way to single-payer in terms of dollars spent: the government de facto pays for about two-thirds of health insurance and extensively regulates the rest. Except as providers of supplemental care, there is really no net positive added by private insurers. In fact, for basic health insurance coverge, private insurers are a net negative because they impose excessive administrative costs and often engage in fraudulent overbilling.

 

Krugman believes that it is time for a Medicare-like public option, but he is a realist. Further along, he writes:

 

Why won’t making the legitimate case that Medicare for All is the best system be enough to win the political argument? The pervasive corruption of our political environment by corporate and right-leaning money is part of the answer. Health insurers may be parasites, but parasites make campaign contributions. Other players will also spend big to fight single-payer. Drug companies, in particular, don’t want to see the U.S., like healthcare systems almost everywhere else in the world, bargain down their prices and reduce their monopoly power. And MAGA is against anything that would improve the health and well-being of average Americans.

 

Krugman’s assessment of the moment is probably correct. It probably is politically impossible to switch from what we have now to Medicare-For-All in one fell swoop, but Krugman does think that if Democrats can come together, convince voters that they have the ability to offer a better way, and then win elections in 2026 and 2028, there could be the possibility of creating a public option that could compete with commercial insurance and eventually expand into a pathway for universal access to care. Krugman sums it all up by talking about a public option as a “Medicare By In.” He describes the idea:

 

…a rapid transition to Medicare for All looks unlikely. Bear in mind that such a transition would require higher taxes, so that it would be necessary to persuade people that these taxes would be more than offset by lower premiums. And this would be a hard sell.

But there is an alternative: A public option, better described as Medicare Buy-In. Allow individuals, and possibly more important, employers, to sign up for Medicare benefits, paying actuarially fair premiums to Medicare reflecting the health status of their workers. There’s no obvious reason a public option would be any harder to implement than payments to the Medicare Advantage plans offered by private insurers, which are also supposed to be actuarially fair.

And if a Medicare Buy-In option were available, many people and many employers would surely take it. It would be a safe choice, with lower administrative and marketing costs than private insurance.

 

After some more discussion, Krugman finishes with a nod to pragmatism, and I say Amen.

 

I’m not going to denounce people who want to be more ambitious, to push more quickly for full Medicare for All. For now, the crucial thing is to elect people who really are committed to providing Americans with the healthcare they deserve.

 

As we argue and advocate for universal coverage, we need to be cognizant of the fact that its companions are equity, especially in outcomes, and efficiency that lowers the cost of care. To get to that better world, healthcare professionals and voters need to understand that costs and charges are not the same thing, and that in a world of quality, the charge for care should more closely reflect the true cost of providing care. We have a lot to learn and obstacles to overcome before we can lower what we pay for healthcare that everyone can enjoy at a cost we can afford.

 

Paying Attention 

 

One thing that has changed for me since retirement is that I now notice things I never noticed before, when I was busy “becoming.” I am certain that many wonderful things still go unnoticed by me, but I am enjoying the idea that I am “seeing more.” As you may have noticed this summer, I am really enjoying the wildflowers along the roads I walk, as they take their turn to appear in time. At the end of August, we have lots of goldenrod. I have seen full fields of goldenrod, and to my surprise, I have learned that there are at least twenty varieties of goldenrod in New England. I must admit that I have only seen three types on my walks near my home, but I am looking for more. Goldenrod gets a bad rap for causing allergies for many, but the reality is that it is ragweed, which appears at the same time, that gives some folks the sniffles. Here is what Google’s Gemini says about the issue:

 

The header for today’s letter shows “Early” Goldenrod (Solidago juncea). The tall mauve-purplish flowers are Spotted Joe-Pye Weed (Eutrochium maculatum).  Together, in a denser clump, they can look like a floral arrangement. 

 

There are just two more weekends until Labor Day weekend. You can make them memorable by checking out the late August wildflowers near you.

Be well,

Gene