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In the united states we can't successfully implement negotiation on drug prices for MediCare. They literally can't negotiate with their suppliers. By law. An

by warcher 10y ago

In the united states we can't successfully implement negotiation on drug prices for MediCare. They literally can't negotiate with their suppliers. By law. Anybody thinking software is going to solve that is way in a bubble. http://healthaffairs.org/blog/2016/09/19/the-politics-of-medicare-and-drug-price-negotiation/ http://healthaffairs.org/blog/2016/09/19/the-politics-of-med...

warcher 10y ago
I just realized that my last two posts are poo-pooing Silicon Valley's recent unwillingness to stay in its lane. I'm not trying to be negative here, it's just... man, it's a big old world and software isn't eating everything. I like a nice website as much as anybody. I think YC has done real well with their websites. If they wanna move fast and break things, I'm gonna wish them godspeed. I still think they're crazy, but that's the point, right?
chimeracoder 10y ago
> In the united states we can't successfully implement negotiation on drug prices for MediCare. They literally can't negotiate with their suppliers. By law. On the flip side, Medicare sets reimbursement rates for services essentially by fiat[0], which can be below the marginal costs of providing service. Most providers cannot legally refuse to treat Medicare patients, so they are forced to accept the rates that Medicare sets (they have no ability to properly negotiate). Medicaid is a whole different system, but in this aspect, it also works the same way. This turns into a system in which privately insured patients subsidize Medicare patients through their premiums[1] (separately from their tax money, which also goes towards Medicare)[2]. Medicare has no incentive to change this, because it allows them to increase their (effective) operating budget without requiring Congressional approval. The reason Medicare drug price negotiation was blocked is that people (both pharmaceutical companies and policymakers) were afraid that it would turn out just like Medicare's "negotiated" rates for inpatient and outpatient services. [0] And private insurers are legally prohibited from reimbursing less than Medicare does [1] And uninsured patients receive the same (inflated) bills that private insurers receive. (Whether or not they actually pay their bills is a separate matter). [2] If you've ever wondered why the sticker prices for inpatient services seem so high, this is the underlying reason. Privately insured patients and uninsured patients aren't just paying for their own care (and for the care of others in the same risk pool). They also have to cover the amount of money that providers lose on Medicare and Medicaid patients.
- khuey 10y ago
  > Most providers cannot legally refuse to treat Medicare patients My understanding is that doctors can choose not to take Medicare patients. Do you have a link or something that explains this?
  - chimeracoder 10y ago
    > My understanding is that doctors can choose not to take Medicare patients. Sort of. For example, most emergency rooms in which physicians have admitting privileges to an associated hospital are required to take Medicare[0]. And those emergency rooms are prohibited from refusing patients based on insurance status. So right off the bat, that's an enormous source of patients who could be publicly insured (Medicare/Medicaid) or uninsured, and they have no legal way to refuse them. (Once a patient is in the ER, if they need to be admitted, you can't (legally!) refuse to admit them based on their insurance status). I'm kind of oversimplifying, because there are a lot of tricks that hospitals try to use to stop the bleeding - for example, Bellevue is a public hospital, and it operates an emergency room, but its private counterpart that is literally across the street does not. NYU can do some (perfectly legal) maneuvering to keep most of the patient population of Langone limited to privately-insured patients. As a result, Langone has undeniably better[1] care, despite having access to the same set of medical staff[2] and being associated with the same medical college. It's true that private practices can refuse Medicare for outpatient services easily. And incidentally, many do. There's a reason that, except in "critical access" areas[3], most of the top physicians who operate purely private practices don't accept Medicare. However, private practices are a dying breed, so that's a moot point in 2017. [0] Conversely, free-standing emergency rooms are prohibited from accepting Medicare. A rather cynical view of this would be that Medicare does not want to encourage free-standing emergency rooms, because it's much more difficult to use private emergency care to subsidize Medicare care than it is to use private inpatient care to subsidize Medicare care (the orders of magnitude in costs are vastly different). [1] More expensive, but vastly better [2] Well, sort of. Staff isn't shared between the hospitals day-to-day (a nurse at Langone will typically only work at Langone unless he or she also has a job at Bellevue), but the allocation draws from the same pool a priori. [3] Rural hospitals that Medicare pays handsomely, because otherwise those regions would have no medical access at all.
refurb 10y ago
That's a vast over simplification of the issue and ignores issues around implementation. First off, Medicare Part D plans are run by private insurers and they certainly do negotiate on price. In fact, they tend to get better prices than commercial plans. Those savings are used to compete for Medicare dollars to cover those patients (i.e. savings are passed on to Medicare). Second, physician administered drugs are paid for at a rate that is the average of what private payers pay. So no negotiation, rather a piggybacking on discounts to private insurers. Finally, if you roll in the 340B discount (23% minimum), Medicare is getting a pretty good deal on drugs. I would argue that unless Medicare threatens to NOT cover some drugs, it won't reduce costs one bit. Currently there are a number of protected classes where Medicare HAS to cover those drugs. That needs to be fixed first. If you don't believe me, look at the CBO estimate of savings if Medicare is allowed to negotiate. Their findings were "minimal savings".[1] CBO estimates that enacting S. 3 would have a negligible effect on direct spending and would result in spending from appropriated funds of $2 million in 2008 and less than $500,000 annually in subsequent years. Enacting S. 3 would have no effect on revenues. [1]https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/costestimate/s30.pdf https://www.cbo.gov/sites/default/files/110th-congress-2007-...
- sbierwagen 10y ago
  Medicare Part D plans are run by private insurers and they certainly do negotiate on price. Why is a third party negotiating for Medicare, rather than Medicare negotiating directly? Because they're smaller, and have less leverage. physician administered drugs are paid for at a rate that is the average of what private payers pay. Why is a third party negotiating for Medicare, rather than Medicare negotiating directly? Because they're smaller, and have less leverage. From http://www.cnn.com/2015/09/28/health/us-pays-more-for-drugs/ http://www.cnn.com/2015/09/28/health/us-pays-more-for-drugs/ -- Gleevec (a cancer treatment): $6,214 (per month/per customer) in the United States, compared to $1,141 in Canada and $2,697 in England. -- Humira (for rheumatoid arthritis): $2,246 in the United States, compared to $881 in Switzerland and $1,102 in England. -- Cymbalta (for depression): $194 in the United States, compared to $46 in England and $52 in the Netherlands. In fact, there is also a generic version of Cymbalta so these prices reflect having a cheaper alternative. Some molecule. Different price.
SilasX 10y ago
If you think that policy is pure benefit for consumers and the only costs are to greedy mustache-twirling men, then there may be another bubble going on. It would mean that the US uses its leverage to push drug prices down to marginal costs, which would almost be the last domino in payers willing to pay for something like the value of new drugs. But drug development doesn't make sense if you can only charge marginal costs. The downsides of such a policy are going to be felt long-term; nothing is as simple as "we pay less and they get less".
- scarmig 10y ago
  Funding research through banning a buyer from negotiating with its suppliers is pretty much the definition of a Rube Goldberg device. I don't think anyone would dispute that that's a major way that research is currently funded, but it's fundamentally stupid. You've got a bunch of free riders, and it obscures where and why costs are actually incurred. Allow negotiation, and then figure out clear, rational funding mechanisms.
  - SilasX 10y ago
    >Funding research through banning a buyer from negotiating with its suppliers is pretty much the definition of a Rube Goldberg device. It's exactly how normal (non-monopsony) markets work in every context, including markets for intellectual works/IP. Note: in this context, "negotiating" means "turning the national market into a monopsony". It's generally recognized as not-a-pure-good-thing when e.g. Walmart comes close to doing that and forces sellers to nearly take a loss in return for access to Walmart's market. (And before anyone makes the obvious point, yes, I know "health care ain't a can of beans etc etc etc". But with respect to the dangers of monopsonies, it's close enough.)
- Sanddancer 10y ago
  Or we could start funding medical research through our system of universities and the like. We have immense public and non-profit institutions that can take over. Maybe we'll even be able to see more benefit in treatment of rare and neglected diseases that way. It also means that a large number of people could actually afford medication, doctors, etc. I have friends who can't afford going to the doctor, can't afford medication, so go without. Their quality of life would greatly improve by them being able to get into the system.
anigbrowl 10y ago
Agreed. US healthcare is a horribly corrupt system designed to redistribute wealth from the most vulnerable into as few hands as possible. It is one of the few industries where I think expropriation and corporate dissolution is entirely justifiable.
will_brown 10y ago
I think in many respects Medicare is a prime example of how easily the US might/can jumble up a single payer system. Medicare is socialized medicine, and should be single payer, yet insurance still manages to get in the middle and increase costs while reducing patient outcomes. Specific example that almost no one talks about: Medicare Insurers come to town and start buying up primary care practices, then, then the Insurer cancels contracts to the remaining providers and those who don't sell. This means patients lose their doctors of years and are stuck going to the primary cares the Insurance companies own, and then provide waterdowned care to patients (e.g. RX that is cheaper for the insurance company even when the Med is proven less effective, less refferals to specialists than the market average, etc...). There have been some lawsuits against Medicare insurers for this specific behavior, but to my knowledge those have resolved in settlements where the insurers temporarily agree to allow existing patients to continue seeing their doctors, but unfortunately the reality of those cases are the doctors aren't fighting for their patients but seeking their own buyout from the insurers.
- chimeracoder 10y ago
  > Medicare is socialized medicine, and should be single payer, yet insurance still manages to get in the middle and increase costs while reducing patient outcomes. Wait, what? Medicare Advantage (the portion of Medicare that is privatized) consistently beats Original Medicare on cost, medical outcomes, and patient satisfaction scores. Amusingly, when people talk about the high patient satisfaction of Medicare, they're talking about the high patient satisfaction of privately-insured Medicare patients, because even the very lowest satisfaction score of all the major injurers who provide Medicare plans is still higher than Original Medicare's satisfaction rates. http://thehill.com/policy/healthcare/237492-poll-seniors-more-satisfied-with-medicare-advantage http://thehill.com/policy/healthcare/237492-poll-seniors-mor...
  - will_brown 10y ago
    Patients like Medicare Part D because millions of patients couldn't afford their drugs and now they can, not because of insurance companies or the market is privatized. Ironically it was GW Bush who got Medicare Part D done (which is the antithesis of fiscal conservatism, and many might remember Bush losing a lot of support from his own party, though many say it was just politicians in the pockets of insurers). Alternatively, Obama originally wanted to do away with Part D because of the cost/waste (forcing millions into situations where again they would lose drug coverage would have been the antithesis of social liberalism, for this reason it was controversial within the party). Luckily there was compromise and instead of dismantling Part D Obama tried to flush out the waste using tools like Star Ratings and mandates to insurers to provide services like Medication Therapy Management to Advantage Chronic Care Patients, which alone has had substantial positive impact on patient outcomes, costs, and the competitive nature of the insurance markets (now insurers are rated based on quality metrics, insurers lose contracts with Medicare due to poor outcomes and only those with the best metrics and ratings can serve the market year round). Still its an inefficient system because of these middlemen, in fact it is arguable many of the "quality metrics" that give insurers better ratings are actually the things leading to bad behavior like buying up medical practices and cancelling contracts with other primary cares in the area to drive down the cost of care.
dagss 10y ago
Though if you refer to the YC Research OP, it doesn't mention anything about the US. Any number of other countries could be markets.
rayiner 10y ago
You're trivializing what is actually a very complicated economic issue. Medicare negotiating drug prices raises a serious buyer-side market power concern: https://en.wikipedia.org/wiki/Monopsony https://en.wikipedia.org/wiki/Monopsony. You can't have a "real market" where something like Medicare exists. So you design the rules to try to mitigate various exercises of market power. That's really hard to do. Of course, you can say "who cares if Medicare drives prices too low, the drug companies will just have to deal with it." But in the long term, that's bad for the customer. All around the country you can see regulated rates that are too low and drive out investment. A great example is water utilities. Almost everywhere, water rates are far lower than they should be, and as a result water infrastructure is crumbling, customers are drinking water through lead pipes that haven't been replaced in a century, etc.
- davidgay 10y ago
  > All around the country you can see regulated rates that are too low and drive out investment. A great example is water utilities. Almost everywhere, water rates are far lower than they should be, and as a result water infrastructure is crumbling, customers are drinking water through lead pipes that haven't been replaced in a century, etc. It's too simplistic to blame this on government regulation. The rest of the world also regulates utilities, and far from all of it has the crumbling water infrastructure problem.
  - rayiner 10y ago
    > It's too simplistic to blame this on government regulation. The rest of the world also regulates utilities, and far from all of it has the crumbling water infrastructure problem. I'm not blaming the fact that government regulates utilities. I'm pointing out that using government regulation to simply drive prices lower is bad in the long term. Government regulation can work when prices are set at levels that balance investor incentives and consumer welfare. Doing that is really hard. When the U.K. privatized British Telecom, it created a regulated monopoly (now BT Openreach) that owned the wires into peoples' houses. They spent a lot of time and intellectual energy into determining how to set BT Openreach's rates. As a result, that monopoly is more profitable than say AT&T (even including AT&T's lucrative wireless division). Unsurprisingly, BT Openreach has aggressively built out FTTN in the U.K. whereas U.S. telephone providers have been trying to limit investment in their networks.

by warcher 10y ago

warcher 10y ago

I just realized that my last two posts are poo-pooing Silicon Valley's recent unwillingness to stay in its lane. I'm not trying to be negative here, it's just... man, it's a big old world and software isn't eating everything. I like a nice website as much as anybody. I think YC has done real well with their websites. If they wanna move fast and break things, I'm gonna wish them godspeed. I still think they're crazy, but that's the point, right?

chimeracoder 10y ago

> In the united states we can't successfully implement negotiation on drug prices for MediCare. They literally can't negotiate with their suppliers. By law. On the flip side, Medicare sets reimbursement rates for services essentially by fiat[0], which can be below the marginal costs of providing service. Most providers cannot legally refuse to treat Medicare patients, so they are forced to accept the rates that Medicare sets (they have no ability to properly negotiate). Medicaid is a whole different system, but in this aspect, it also works the same way. This turns into a system in which privately insured patients subsidize Medicare patients through their premiums[1] (separately from their tax money, which also goes towards Medicare)[2]. Medicare has no incentive to change this, because it allows them to increase their (effective) operating budget without requiring Congressional approval. The reason Medicare drug price negotiation was blocked is that people (both pharmaceutical companies and policymakers) were afraid that it would turn out just like Medicare's "negotiated" rates for inpatient and outpatient services. [0] And private insurers are legally prohibited from reimbursing less than Medicare does [1] And uninsured patients receive the same (inflated) bills that private insurers receive. (Whether or not they actually pay their bills is a separate matter). [2] If you've ever wondered why the sticker prices for inpatient services seem so high, this is the underlying reason. Privately insured patients and uninsured patients aren't just paying for their own care (and for the care of others in the same risk pool). They also have to cover the amount of money that providers lose on Medicare and Medicaid patients.

khuey 10y ago
> Most providers cannot legally refuse to treat Medicare patients My understanding is that doctors can choose not to take Medicare patients. Do you have a link or something that explains this?
- chimeracoder 10y ago
  > My understanding is that doctors can choose not to take Medicare patients. Sort of. For example, most emergency rooms in which physicians have admitting privileges to an associated hospital are required to take Medicare[0]. And those emergency rooms are prohibited from refusing patients based on insurance status. So right off the bat, that's an enormous source of patients who could be publicly insured (Medicare/Medicaid) or uninsured, and they have no legal way to refuse them. (Once a patient is in the ER, if they need to be admitted, you can't (legally!) refuse to admit them based on their insurance status). I'm kind of oversimplifying, because there are a lot of tricks that hospitals try to use to stop the bleeding - for example, Bellevue is a public hospital, and it operates an emergency room, but its private counterpart that is literally across the street does not. NYU can do some (perfectly legal) maneuvering to keep most of the patient population of Langone limited to privately-insured patients. As a result, Langone has undeniably better[1] care, despite having access to the same set of medical staff[2] and being associated with the same medical college. It's true that private practices can refuse Medicare for outpatient services easily. And incidentally, many do. There's a reason that, except in "critical access" areas[3], most of the top physicians who operate purely private practices don't accept Medicare. However, private practices are a dying breed, so that's a moot point in 2017. [0] Conversely, free-standing emergency rooms are prohibited from accepting Medicare. A rather cynical view of this would be that Medicare does not want to encourage free-standing emergency rooms, because it's much more difficult to use private emergency care to subsidize Medicare care than it is to use private inpatient care to subsidize Medicare care (the orders of magnitude in costs are vastly different). [1] More expensive, but vastly better [2] Well, sort of. Staff isn't shared between the hospitals day-to-day (a nurse at Langone will typically only work at Langone unless he or she also has a job at Bellevue), but the allocation draws from the same pool a priori. [3] Rural hospitals that Medicare pays handsomely, because otherwise those regions would have no medical access at all.

refurb 10y ago

That's a vast over simplification of the issue and ignores issues around implementation. First off, Medicare Part D plans are run by private insurers and they certainly do negotiate on price. In fact, they tend to get better prices than commercial plans. Those savings are used to compete for Medicare dollars to cover those patients (i.e. savings are passed on to Medicare). Second, physician administered drugs are paid for at a rate that is the average of what private payers pay. So no negotiation, rather a piggybacking on discounts to private insurers. Finally, if you roll in the 340B discount (23% minimum), Medicare is getting a pretty good deal on drugs. I would argue that unless Medicare threatens to NOT cover some drugs, it won't reduce costs one bit. Currently there are a number of protected classes where Medicare HAS to cover those drugs. That needs to be fixed first. If you don't believe me, look at the CBO estimate of savings if Medicare is allowed to negotiate. Their findings were "minimal savings".[1] CBO estimates that enacting S. 3 would have a negligible effect on direct spending and would result in spending from appropriated funds of $2 million in 2008 and less than $500,000 annually in subsequent years. Enacting S. 3 would have no effect on revenues. [1]https://www.cbo.gov/sites/default/files/110th-congress-2007-2008/costestimate/s30.pdf https://www.cbo.gov/sites/default/files/110th-congress-2007-...

sbierwagen 10y ago
Medicare Part D plans are run by private insurers and they certainly do negotiate on price. Why is a third party negotiating for Medicare, rather than Medicare negotiating directly? Because they're smaller, and have less leverage. physician administered drugs are paid for at a rate that is the average of what private payers pay. Why is a third party negotiating for Medicare, rather than Medicare negotiating directly? Because they're smaller, and have less leverage. From http://www.cnn.com/2015/09/28/health/us-pays-more-for-drugs/ http://www.cnn.com/2015/09/28/health/us-pays-more-for-drugs/ -- Gleevec (a cancer treatment): $6,214 (per month/per customer) in the United States, compared to $1,141 in Canada and $2,697 in England. -- Humira (for rheumatoid arthritis): $2,246 in the United States, compared to $881 in Switzerland and $1,102 in England. -- Cymbalta (for depression): $194 in the United States, compared to $46 in England and $52 in the Netherlands. In fact, there is also a generic version of Cymbalta so these prices reflect having a cheaper alternative. Some molecule. Different price.

SilasX 10y ago

If you think that policy is pure benefit for consumers and the only costs are to greedy mustache-twirling men, then there may be another bubble going on. It would mean that the US uses its leverage to push drug prices down to marginal costs, which would almost be the last domino in payers willing to pay for something like the value of new drugs. But drug development doesn't make sense if you can only charge marginal costs. The downsides of such a policy are going to be felt long-term; nothing is as simple as "we pay less and they get less".

scarmig 10y ago
Funding research through banning a buyer from negotiating with its suppliers is pretty much the definition of a Rube Goldberg device. I don't think anyone would dispute that that's a major way that research is currently funded, but it's fundamentally stupid. You've got a bunch of free riders, and it obscures where and why costs are actually incurred. Allow negotiation, and then figure out clear, rational funding mechanisms.
- SilasX 10y ago
  >Funding research through banning a buyer from negotiating with its suppliers is pretty much the definition of a Rube Goldberg device. It's exactly how normal (non-monopsony) markets work in every context, including markets for intellectual works/IP. Note: in this context, "negotiating" means "turning the national market into a monopsony". It's generally recognized as not-a-pure-good-thing when e.g. Walmart comes close to doing that and forces sellers to nearly take a loss in return for access to Walmart's market. (And before anyone makes the obvious point, yes, I know "health care ain't a can of beans etc etc etc". But with respect to the dangers of monopsonies, it's close enough.)
Sanddancer 10y ago
Or we could start funding medical research through our system of universities and the like. We have immense public and non-profit institutions that can take over. Maybe we'll even be able to see more benefit in treatment of rare and neglected diseases that way. It also means that a large number of people could actually afford medication, doctors, etc. I have friends who can't afford going to the doctor, can't afford medication, so go without. Their quality of life would greatly improve by them being able to get into the system.

anigbrowl 10y ago

Agreed. US healthcare is a horribly corrupt system designed to redistribute wealth from the most vulnerable into as few hands as possible. It is one of the few industries where I think expropriation and corporate dissolution is entirely justifiable.

will_brown 10y ago

I think in many respects Medicare is a prime example of how easily the US might/can jumble up a single payer system. Medicare is socialized medicine, and should be single payer, yet insurance still manages to get in the middle and increase costs while reducing patient outcomes. Specific example that almost no one talks about: Medicare Insurers come to town and start buying up primary care practices, then, then the Insurer cancels contracts to the remaining providers and those who don't sell. This means patients lose their doctors of years and are stuck going to the primary cares the Insurance companies own, and then provide waterdowned care to patients (e.g. RX that is cheaper for the insurance company even when the Med is proven less effective, less refferals to specialists than the market average, etc...). There have been some lawsuits against Medicare insurers for this specific behavior, but to my knowledge those have resolved in settlements where the insurers temporarily agree to allow existing patients to continue seeing their doctors, but unfortunately the reality of those cases are the doctors aren't fighting for their patients but seeking their own buyout from the insurers.

chimeracoder 10y ago
> Medicare is socialized medicine, and should be single payer, yet insurance still manages to get in the middle and increase costs while reducing patient outcomes. Wait, what? Medicare Advantage (the portion of Medicare that is privatized) consistently beats Original Medicare on cost, medical outcomes, and patient satisfaction scores. Amusingly, when people talk about the high patient satisfaction of Medicare, they're talking about the high patient satisfaction of privately-insured Medicare patients, because even the very lowest satisfaction score of all the major injurers who provide Medicare plans is still higher than Original Medicare's satisfaction rates. http://thehill.com/policy/healthcare/237492-poll-seniors-more-satisfied-with-medicare-advantage http://thehill.com/policy/healthcare/237492-poll-seniors-mor...
- will_brown 10y ago
  Patients like Medicare Part D because millions of patients couldn't afford their drugs and now they can, not because of insurance companies or the market is privatized. Ironically it was GW Bush who got Medicare Part D done (which is the antithesis of fiscal conservatism, and many might remember Bush losing a lot of support from his own party, though many say it was just politicians in the pockets of insurers). Alternatively, Obama originally wanted to do away with Part D because of the cost/waste (forcing millions into situations where again they would lose drug coverage would have been the antithesis of social liberalism, for this reason it was controversial within the party). Luckily there was compromise and instead of dismantling Part D Obama tried to flush out the waste using tools like Star Ratings and mandates to insurers to provide services like Medication Therapy Management to Advantage Chronic Care Patients, which alone has had substantial positive impact on patient outcomes, costs, and the competitive nature of the insurance markets (now insurers are rated based on quality metrics, insurers lose contracts with Medicare due to poor outcomes and only those with the best metrics and ratings can serve the market year round). Still its an inefficient system because of these middlemen, in fact it is arguable many of the "quality metrics" that give insurers better ratings are actually the things leading to bad behavior like buying up medical practices and cancelling contracts with other primary cares in the area to drive down the cost of care.

dagss 10y ago

Though if you refer to the YC Research OP, it doesn't mention anything about the US. Any number of other countries could be markets.

rayiner 10y ago

You're trivializing what is actually a very complicated economic issue. Medicare negotiating drug prices raises a serious buyer-side market power concern: https://en.wikipedia.org/wiki/Monopsony https://en.wikipedia.org/wiki/Monopsony. You can't have a "real market" where something like Medicare exists. So you design the rules to try to mitigate various exercises of market power. That's really hard to do. Of course, you can say "who cares if Medicare drives prices too low, the drug companies will just have to deal with it." But in the long term, that's bad for the customer. All around the country you can see regulated rates that are too low and drive out investment. A great example is water utilities. Almost everywhere, water rates are far lower than they should be, and as a result water infrastructure is crumbling, customers are drinking water through lead pipes that haven't been replaced in a century, etc.

davidgay 10y ago
> All around the country you can see regulated rates that are too low and drive out investment. A great example is water utilities. Almost everywhere, water rates are far lower than they should be, and as a result water infrastructure is crumbling, customers are drinking water through lead pipes that haven't been replaced in a century, etc. It's too simplistic to blame this on government regulation. The rest of the world also regulates utilities, and far from all of it has the crumbling water infrastructure problem.
- rayiner 10y ago
  > It's too simplistic to blame this on government regulation. The rest of the world also regulates utilities, and far from all of it has the crumbling water infrastructure problem. I'm not blaming the fact that government regulates utilities. I'm pointing out that using government regulation to simply drive prices lower is bad in the long term. Government regulation can work when prices are set at levels that balance investor incentives and consumer welfare. Doing that is really hard. When the U.K. privatized British Telecom, it created a regulated monopoly (now BT Openreach) that owned the wires into peoples' houses. They spent a lot of time and intellectual energy into determining how to set BT Openreach's rates. As a result, that monopoly is more profitable than say AT&T (even including AT&T's lucrative wireless division). Unsurprisingly, BT Openreach has aggressively built out FTTN in the U.K. whereas U.S. telephone providers have been trying to limit investment in their networks.