8 ms·

"The US spends more on healthcare because the prices are higher!" Um, okay. Duh. A better question to ask would be: Why are prices not falling? In the "normal"

"The US spends more on healthcare because the prices are higher!" Um, okay. Duh. A better question to ask would be: Why are prices not falling? In the "normal" economy, people can't offer any arbitrarily high price they want: They have to compete with others to offer their good or service at a low price. The more you raise your price, the more you invite competition and give them room to run a profitable business. Anyone who has gone to a doctors office or hospital lately knows why there is so much overspending in health care: The health care system is the most fucked up, overcomplicated, ridiculous system you could possibly imagine. You start out by filling out a big paper form with all your info on it... They use that to bill your insurance, which then says okay, we're going to pay you half of what you asked for. What ridiculously perverse incentives. Now the provider will naturally ask for twice as much, knowing they won't get everything they bill for. Health Care will be fixed not by laws or insurance companies, but by technical innovation and good old fashioned economics. You know, those old ideas Adam Smith had. If there was serious technical and economic / business model innovation in the industry (an Apple of health care) prices would go down, outcomes would improve, etc.

pishpash 9y ago
Because there is no competition on the supply side. Do you shop around when you're gravely sick? Can you even get transparent prices out of hospitals?
- omarforgotpwd 9y ago
  Exactly. There is no competition on the supply side. Suppliers are often granted legal monopolies as a matter of fact!
- PakG1 9y ago
  I'm so confused. Isn't that what's supposed to be so great about privatization in the US? Isn't that why so many in the US are against public health care? Some sarcasm here, but I also really actually don't get Americans sometimes.
  - em500 9y ago
    No, the belief in health care is that privatization leads to better quality (because privatization and higher pay leads to better care and smarter doctors), not (necessarily) lower prices. Not saying that I hold such beliefs, just pointing out that your argument is a bit too simplistic.
    - jacobush 9y ago
      State encouraged private monopolies.
    - chimeracoder 9y ago
      > No, the belief in health care is that privatization leads to better quality (because privatization and higher pay leads to better care and smarter doctors), not (necessarily) lower prices. If we look at Medicare as an example, empirically, the private plans have both better quality metrics and come in under budget consistently. (And patients prefer them, which is why the private plans have been gaining in popularity among patients over the years).
  - speby 9y ago
    I feel ya there .... sometimes we simply refuse to successfully understand our own follies, especially as long as the Republican mindset is one where the belief is that the US has the "best healthcare delivery system" in the world, said most famously by John Boehner: http://www.politifact.com/truth-o-meter/statements/2012/jul/05/john-boehner/john-boehner-says-us-health-care-system-best-world/ http://www.politifact.com/truth-o-meter/statements/2012/jul/...
hkmurakami 9y ago
The incindental economist blog covers this issue well. Basically you have providers and payers both striving to be monopolies. Payers are a two sided monopoly so they can pass on costs. Patients are a captive audience.
rectang 9y ago
> "The US spends more on healthcare because the prices are higher!" > Um, okay. Duh. A better question to ask would be: Why are prices not falling? It's an excellent observation, and it begs your excellent question. Unfortunately, we can't get to an excellent answer. The US is ideologically incapable of acknowledging that "market failure" exists.
- monkeyprojects 9y ago
  Health care is the absolute prime example of a Veblen good as people are willing to pay for perceived quality. After all would you prefer the heart surgeon who charges $5000 or the one who can charge $25000
  - epmaybe 9y ago
    Seems like a bad example. All board certified cardiothoracic surgeons have to report their mortality rates from procedures (there are problems with that, but one could easily look this up). Not to mention most work for a hospital and therefore have a fixed salary. On top of this, most healthcare consumers in America are directed by their insurance provider as to who they can even go to for these sort of procedures.
    - monkeyprojects 9y ago
      I'm in the UK not the US. The example is actually a friend who has watched his private practice (1 day a week) expand as he tried to reduce demand by increasing his rates.
      - epmaybe 9y ago
        Oh, I see. I figured you were talking about the US due to the article. Your friend works one day a week?? That's awesome.
        monkeyprojects 9y ago
ralfn 9y ago
You do realize that the US has this problem alone. It doesn't require innovation or technology. Just proper policy on pricing, like every other western nation has. The market will fix the efficiency, but not as long as the medical field itself can set the prices, since life and death choices are the ultimate i-will-rob-a-bank-for-this price elasticity.
- dazc 9y ago
  'Nobody else is this incompetent.' Here in the UK we have 'free' healthcare and the system is equally incompetent.
  - ralfn 9y ago
    You aren't spending nearly as much as Americans and for that money you treat everyone. Are large organisation inefficient? Yes. Is it frustration when you look at it? Yes. Does this mean the US situation where they are spending 3 to 5 times as much to provide the same level of care to only a part of the population, is objectively worse than the UK situation? Yes. (I removed the quoted line, because the tone of voice is suboptimal - but it doesn't change the argument)
    - dazc 9y ago
      I agree the sum total cost may be significantly different but I was simply acknowledging that inefficient health care administration wasn't purely an American phenomenon.
      - ralfn 9y ago
        It is not unique to healthcare either. It is simple a common aspect of large organisations that have too many stake holders that need to coordinate to get things done. It is an interesting organisational problem. But inefficient does not mean expensive. Generally you see a lot of inefficiency, much like with code, when it is not the hot path. If you would fix all the obvious inefficiencies it will not drastically reduce cost (actually: it would mean the hospitals have more money, so anybody selling anything to them would up their prices) Inefficiency only makes a difference when the price is based on cost not on negotiation position (i.e. value based). So in a red ocean as they say, there is a strong economic incentive to fix all in efficiencies and squeeze the last dollar out of it. This is referred to a race to the bottom. But health care is the opposite of a red ocean. And no price is too high if it means survival, so the consumer (i.e. the patient) needs a much better negotiation position. For example: having all patients collectively negotiating the price. If only over time the invisible hand of the market would have created structures for this purpose again and again everywhere in the world. Oh wait! It did. It's called government.
cirrus-clouds 9y ago
> Why are prices not falling? In many European countries, prices are negotiated by the publicly-funded health service or a government-appointed body. Every country will attempt to negotiate the cheapest price they can get. Even so, drug prices across Europe vary widely by country. And there are powerful European pharmaceutical companies[1] who naturally resist price discounts or cheaper alternatives (UK example: https://www.theguardian.com/society/2017/nov/01/drug-giants-threaten-nhs-with-legal-action-over-cheaper-drug-that-could-save-84m-a-year https://www.theguardian.com/society/2017/nov/01/drug-giants-...). [1] Large European pharmaceutical companies: GlaxoSmithKline (British), AstroZeneca (Anglo-Swedish), Novartis (Swiss), Roche (Swiss), Bayer (German), Sanofi (French)
- omarforgotpwd 9y ago
  Perhaps this is working better at the moment than the American system in some regards (such as price), but I'm wary of any third party (especially the government) setting prices. Should the government tell Apple what they can charge for a phone, or what you can charge for your web service? A good system should set the price automatically. For those rolling their eyes, yes, clearly this market system for health care has not been invented yet. But that doesn't mean it's not possible.
  - gepi79 9y ago
    European governments can not and do not dictate the prices of products of companies like Apple or BMW. IMO there is a clear difference between health and survival and a new phone or a new car.
  - kulu2002 9y ago
    That's precisely where everyone is mistaking. Healthcare has turned into profit making business. Doctors, healthcare organisations, Multi speciality hospitals are more concerned with profits, top line, bottom line, share-holder values, etc. In India, there are still some old, reputed, brilliant Ayurveda/ Allopathy/ homeopathy doctors who are treating patients for nominal charges over decades of their practice just because of one principle - Treating patient means service to God. [1] https://www.thebetterindia.com/107629/balwantghatpande-oldest-doctor-pune-india/ https://www.thebetterindia.com/107629/balwantghatpande-oldes...
megaman22 9y ago
> You start out by filling out a big paper form with all your info on it... This drives me insane. Why do we still not have a working system of digital medical records? They ought to just be able to punch in my name and social security number and be able to pull up all my history, without me having to try to remember when I've been operated on and scribble it on a paper form.
xkgt 9y ago
> "Health Care will be fixed not by laws or insurance companies, but by technical innovation and good old fashioned economics. " I doubt market forces can drive the healthcare prices to normal values. The success of a free market hinges on supply-demand balance and consumer choice. In healthcare, both factors are skewed against the consumer. If I am consumer of a non-essential product and if I find a supplier unsatisfactory, I either have the choice of going with a better competitor or even forego consuming the product altogether. When it comes to healthcare, I don't have much option. Even the competitive forces are weakened due to high barrier for entry and lack of bargaining power from the consumer. If you are sick and even if all the existing healthcare providers are expensive, you don't have the luxury to sit out. When consumers are locked in like this, there is no motivation for healthcare providers to drop their rates.

pishpash 9y ago

Because there is no competition on the supply side. Do you shop around when you're gravely sick? Can you even get transparent prices out of hospitals?

omarforgotpwd 9y ago
Exactly. There is no competition on the supply side. Suppliers are often granted legal monopolies as a matter of fact!
PakG1 9y ago
I'm so confused. Isn't that what's supposed to be so great about privatization in the US? Isn't that why so many in the US are against public health care? Some sarcasm here, but I also really actually don't get Americans sometimes.
- em500 9y ago
  No, the belief in health care is that privatization leads to better quality (because privatization and higher pay leads to better care and smarter doctors), not (necessarily) lower prices. Not saying that I hold such beliefs, just pointing out that your argument is a bit too simplistic.
  - jacobush 9y ago
    State encouraged private monopolies.
  - chimeracoder 9y ago
    > No, the belief in health care is that privatization leads to better quality (because privatization and higher pay leads to better care and smarter doctors), not (necessarily) lower prices. If we look at Medicare as an example, empirically, the private plans have both better quality metrics and come in under budget consistently. (And patients prefer them, which is why the private plans have been gaining in popularity among patients over the years).
- speby 9y ago
  I feel ya there .... sometimes we simply refuse to successfully understand our own follies, especially as long as the Republican mindset is one where the belief is that the US has the "best healthcare delivery system" in the world, said most famously by John Boehner: http://www.politifact.com/truth-o-meter/statements/2012/jul/05/john-boehner/john-boehner-says-us-health-care-system-best-world/ http://www.politifact.com/truth-o-meter/statements/2012/jul/...

hkmurakami 9y ago

The incindental economist blog covers this issue well. Basically you have providers and payers both striving to be monopolies. Payers are a two sided monopoly so they can pass on costs. Patients are a captive audience.

rectang 9y ago

> "The US spends more on healthcare because the prices are higher!" > Um, okay. Duh. A better question to ask would be: Why are prices not falling? It's an excellent observation, and it begs your excellent question. Unfortunately, we can't get to an excellent answer. The US is ideologically incapable of acknowledging that "market failure" exists.

monkeyprojects 9y ago
Health care is the absolute prime example of a Veblen good as people are willing to pay for perceived quality. After all would you prefer the heart surgeon who charges $5000 or the one who can charge $25000
- epmaybe 9y ago
  Seems like a bad example. All board certified cardiothoracic surgeons have to report their mortality rates from procedures (there are problems with that, but one could easily look this up). Not to mention most work for a hospital and therefore have a fixed salary. On top of this, most healthcare consumers in America are directed by their insurance provider as to who they can even go to for these sort of procedures.
  - monkeyprojects 9y ago
    I'm in the UK not the US. The example is actually a friend who has watched his private practice (1 day a week) expand as he tried to reduce demand by increasing his rates.
    - epmaybe 9y ago
      Oh, I see. I figured you were talking about the US due to the article. Your friend works one day a week?? That's awesome.
      - monkeyprojects 9y ago

ralfn 9y ago

You do realize that the US has this problem alone. It doesn't require innovation or technology. Just proper policy on pricing, like every other western nation has. The market will fix the efficiency, but not as long as the medical field itself can set the prices, since life and death choices are the ultimate i-will-rob-a-bank-for-this price elasticity.

dazc 9y ago
'Nobody else is this incompetent.' Here in the UK we have 'free' healthcare and the system is equally incompetent.
- ralfn 9y ago
  You aren't spending nearly as much as Americans and for that money you treat everyone. Are large organisation inefficient? Yes. Is it frustration when you look at it? Yes. Does this mean the US situation where they are spending 3 to 5 times as much to provide the same level of care to only a part of the population, is objectively worse than the UK situation? Yes. (I removed the quoted line, because the tone of voice is suboptimal - but it doesn't change the argument)
  - dazc 9y ago
    I agree the sum total cost may be significantly different but I was simply acknowledging that inefficient health care administration wasn't purely an American phenomenon.
    - ralfn 9y ago
      It is not unique to healthcare either. It is simple a common aspect of large organisations that have too many stake holders that need to coordinate to get things done. It is an interesting organisational problem. But inefficient does not mean expensive. Generally you see a lot of inefficiency, much like with code, when it is not the hot path. If you would fix all the obvious inefficiencies it will not drastically reduce cost (actually: it would mean the hospitals have more money, so anybody selling anything to them would up their prices) Inefficiency only makes a difference when the price is based on cost not on negotiation position (i.e. value based). So in a red ocean as they say, there is a strong economic incentive to fix all in efficiencies and squeeze the last dollar out of it. This is referred to a race to the bottom. But health care is the opposite of a red ocean. And no price is too high if it means survival, so the consumer (i.e. the patient) needs a much better negotiation position. For example: having all patients collectively negotiating the price. If only over time the invisible hand of the market would have created structures for this purpose again and again everywhere in the world. Oh wait! It did. It's called government.

cirrus-clouds 9y ago

> Why are prices not falling? In many European countries, prices are negotiated by the publicly-funded health service or a government-appointed body. Every country will attempt to negotiate the cheapest price they can get. Even so, drug prices across Europe vary widely by country. And there are powerful European pharmaceutical companies[1] who naturally resist price discounts or cheaper alternatives (UK example: https://www.theguardian.com/society/2017/nov/01/drug-giants-threaten-nhs-with-legal-action-over-cheaper-drug-that-could-save-84m-a-year https://www.theguardian.com/society/2017/nov/01/drug-giants-...). [1] Large European pharmaceutical companies: GlaxoSmithKline (British), AstroZeneca (Anglo-Swedish), Novartis (Swiss), Roche (Swiss), Bayer (German), Sanofi (French)

omarforgotpwd 9y ago
Perhaps this is working better at the moment than the American system in some regards (such as price), but I'm wary of any third party (especially the government) setting prices. Should the government tell Apple what they can charge for a phone, or what you can charge for your web service? A good system should set the price automatically. For those rolling their eyes, yes, clearly this market system for health care has not been invented yet. But that doesn't mean it's not possible.
- gepi79 9y ago
  European governments can not and do not dictate the prices of products of companies like Apple or BMW. IMO there is a clear difference between health and survival and a new phone or a new car.
- kulu2002 9y ago
  That's precisely where everyone is mistaking. Healthcare has turned into profit making business. Doctors, healthcare organisations, Multi speciality hospitals are more concerned with profits, top line, bottom line, share-holder values, etc. In India, there are still some old, reputed, brilliant Ayurveda/ Allopathy/ homeopathy doctors who are treating patients for nominal charges over decades of their practice just because of one principle - Treating patient means service to God. [1] https://www.thebetterindia.com/107629/balwantghatpande-oldest-doctor-pune-india/ https://www.thebetterindia.com/107629/balwantghatpande-oldes...

megaman22 9y ago

> You start out by filling out a big paper form with all your info on it... This drives me insane. Why do we still not have a working system of digital medical records? They ought to just be able to punch in my name and social security number and be able to pull up all my history, without me having to try to remember when I've been operated on and scribble it on a paper form.

xkgt 9y ago

> "Health Care will be fixed not by laws or insurance companies, but by technical innovation and good old fashioned economics. " I doubt market forces can drive the healthcare prices to normal values. The success of a free market hinges on supply-demand balance and consumer choice. In healthcare, both factors are skewed against the consumer. If I am consumer of a non-essential product and if I find a supplier unsatisfactory, I either have the choice of going with a better competitor or even forego consuming the product altogether. When it comes to healthcare, I don't have much option. Even the competitive forces are weakened due to high barrier for entry and lack of bargaining power from the consumer. If you are sick and even if all the existing healthcare providers are expensive, you don't have the luxury to sit out. When consumers are locked in like this, there is no motivation for healthcare providers to drop their rates.