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Same hypothesis applies to health care. Insurance causes providers to raise prices with confidence that it will get covered. Same applies to car repairs. A litt
by sytelus 11y ago
Same hypothesis applies to health care. Insurance causes providers to raise prices with confidence that it will get covered. Same applies to car repairs. A little scratch can cost 100s of dollars even though its labor and material is just a fraction because insurance has obligation to fill in the gap after co-payment.
While insurances have provision that they will not pay above some fixed globally agreed cost but this upper bound is high enough to generate huge margins while eliminating competition to reduce the prices. On the top of this there would always be upward pressure by outliers. I'm not sure what economic model can bring the price competition back while still allowing safety net as well as quality of service to consumers.
- rahimnathwani 11y agoThere are additional factors at play with those to examples: - Insurance has agency problems. The people deciding the treatment (doctors and, to some extend, patients) are not the folks paying. So they want to maximise quantity (doctors and patients) and expense (doctors). - Car repairs are not bought often, so it's not worth most people's time to understand them. Moreover, repairs are often covered by the opposite side, so you (and your insurance) company may only need to show reasonable effort to shop around, and are not invented to spend time/effort to minimise the price, as it's the other side which bears the cost.