5 ms·

And yet, health insurance companies have very low profit margins, the lowest amongst the insurance companies. So who is getting all the money?

wu-ikkyu 9y ago
Pharmaceuticals
- conanbatt 9y ago
  ding ding ding. These ones take most of the share. It is quite incredible that the U.S., the symbol of freedom, can't freely import drugs from abroad. Considering the rampant use of pharma specially, dropping the costs 1/2 of meds would lower the cost of healthcare overnight by an enormous amount.
  - tmnvix 9y ago
    Yep. An interesting bit of data that highlights just how profitable this industry can be comes from the wikipedia page for McKesson Corporation[1]: > On June 24, 2013, The Wall Street Journal reported that McKesson Chairman and CEO John Hammergren's pension benefits of $159 million had set a record for "the largest pension on file for a current executive of a public company, and almost certainly the largest ever in corporate America." A study in 2012 by GMI Ratings, which tracks executive pay, found that 60% of CEOs at S&P 500 companies have pensions, and their value averages $11.5 million. [1] https://en.wikipedia.org/wiki/McKesson_Corporation https://en.wikipedia.org/wiki/McKesson_Corporation
    - Pokepokalypse 9y ago
      yes, and before anyone says: "but muh R&D funding!" -- these companies generally have marketing budgets that are 2-3 times the R&D budget. (plus, most basic research is public or university funded). "but muh FDA certification costs" - - there are huge tax carve-outs for these. It's not a main driver. And no: marketing is not necessary for these products. TV commercials and other ads to public: not necessary.
      - wu-ikkyu 9y ago
        Also worth noting that the US is 1 of only 2 countries in the world which allows direct advertising of drugs and also is the #1 per capita spender on drugs.
        conanbatt 9y ago
        Its incredible to me that an ad for prescription drugs can target consumers and pay off. I understand aspirin or over the counter stuff, but "ask your doctor about this drug" pays off? How is that reasonable at all.
allannienhuis 9y ago
It it too tin-foil-hat to think that the majority of shareholders in health insurance providers are medical professionals who benefit from the arrangement?
- conanbatt 9y ago
  Providers get a decent slice, specially big hospitals and specialists. Doctor pay is really high in the US and its very regulated. Its expensive to be a doctor (long schooling, expensive mal praxis insurance), license ceilings, state-licensing and effective banning of doctor importation. Doctors get a decent share of the cost (1/10 i read somewhere), buts its still not the bulk. Nevertheless, just allowing doctors to come in and have unlimited licensing would hit costs a lot.
javadocmd 9y ago
It's a gigantic market though. (Revenue of $850 billion in 2016 according to https://www.statista.com/statistics/214544/total-revenue-of-us-life-and-health-insurance-industry/ https://www.statista.com/statistics/214544/total-revenue-of-... ) I'm not an economist, but it seems like a 5% margin on a $850 billion market is worth a 10% margin on a $425 billion market.
- conanbatt 9y ago
  Thats not how capital investment works, at a certain scale, % of profit is all that matters, because it tells you how much you need to invest to make a buck. Its a big market, but insurance companies are not the ones making a killing.
noobhacker 9y ago
The high health care cost is due to a lot of unnecessary procedures being performed. This can happen in two ways. First, there are a lot of tests and procedures ordered by doctors that only have some, but very small, benefits for the patients [0]. Doctors are incentivized to do this because each procedure has a set price (negotiated with insurance companies and Medicare / Medicaid) and the only way to get more revenue is to perform more procedures. Second, patients themselves order a lot of procedures out of fear. Arguably, they can be better off without these procedures. A prime example is end-of-life care, where patients and families often want to "do everything possible" even if those intrusive medical procedures bring nothing but a few weeks of miserable living [1]. Those end-of-life procedures are extremely expensive while having questionable benefits in terms of bringing a "happy" life rather than just a longer life [2]. [0] https://www.scientificamerican.com/article/unnecessary-tests-and-treatment-explain-why-health-care-costs-so-much/ https://www.scientificamerican.com/article/unnecessary-tests... [1] https://www.npr.org/sections/money/2014/03/05/286126451/living-wills-are-the-talk-of-the-town-in-la-crosse-wis https://www.npr.org/sections/money/2014/03/05/286126451/livi... [2] https://www.amazon.com/Being-Mortal-Illness-Medicine-Matters/dp/1250081246 https://www.amazon.com/Being-Mortal-Illness-Medicine-Matters...
- conanbatt 9y ago
  Sure, but then the 'bad actor' is the provider, not the health insurance company.
- javadocmd 9y ago
  Insurance (including Medicare and Medicaid) can and do push back against things they identify as inappropriate treatment. There are many problems with this system -- too restrictive in some places, not restrictive enough in others -- but in theory this could be improved to act as a reasonable check on rogue doctors. Another relevant effect worth noting here is CYA medicine: doctors order tests aimed at catching highly unlikely conditions to protect themselves against the hypothetical lawsuit that asks "why didn't you test for that?" Whatever the truth is about malpractice suits, the perception in the industry seems to be that these cases are overwhelmingly biased against doctors if even one question can be raised about the course of treatment.
- 9y ago
bawana 9y ago
bertolini walked away with 500 million when cvs bought aetna. those were health care dollars paid by working people as premiums
- ams6110 9y ago
  A drop in the bucket. Insurance executive compensation is not the problem.
Pokepokalypse 9y ago
healthcare monopolies (hospital chains, lab chains; where nationally there is competition, but in local areas, particularly rural they are effectively a monopoly). They charge whatever the fuck they want. Also; equipment manufacturers and drug companies: who both abuse the shit out of our patent system. But even off-patent drugs are being priced ridiculously high now. Barriers to competition are still extremely high. Since manufacturing capacity of IV bags was taken out in PR, there is a national shortage. This is NOW causing rationing (in effect). Prices are going up, but nobody's addressing the manufacturing problem - because: Puerto Rico.

wu-ikkyu 9y ago

Pharmaceuticals

conanbatt 9y ago
ding ding ding. These ones take most of the share. It is quite incredible that the U.S., the symbol of freedom, can't freely import drugs from abroad. Considering the rampant use of pharma specially, dropping the costs 1/2 of meds would lower the cost of healthcare overnight by an enormous amount.
- tmnvix 9y ago
  Yep. An interesting bit of data that highlights just how profitable this industry can be comes from the wikipedia page for McKesson Corporation[1]: > On June 24, 2013, The Wall Street Journal reported that McKesson Chairman and CEO John Hammergren's pension benefits of $159 million had set a record for "the largest pension on file for a current executive of a public company, and almost certainly the largest ever in corporate America." A study in 2012 by GMI Ratings, which tracks executive pay, found that 60% of CEOs at S&P 500 companies have pensions, and their value averages $11.5 million. [1] https://en.wikipedia.org/wiki/McKesson_Corporation https://en.wikipedia.org/wiki/McKesson_Corporation
  - Pokepokalypse 9y ago
    yes, and before anyone says: "but muh R&D funding!" -- these companies generally have marketing budgets that are 2-3 times the R&D budget. (plus, most basic research is public or university funded). "but muh FDA certification costs" - - there are huge tax carve-outs for these. It's not a main driver. And no: marketing is not necessary for these products. TV commercials and other ads to public: not necessary.
    - wu-ikkyu 9y ago
      Also worth noting that the US is 1 of only 2 countries in the world which allows direct advertising of drugs and also is the #1 per capita spender on drugs.
      - conanbatt 9y ago
        Its incredible to me that an ad for prescription drugs can target consumers and pay off. I understand aspirin or over the counter stuff, but "ask your doctor about this drug" pays off? How is that reasonable at all.

allannienhuis 9y ago

It it too tin-foil-hat to think that the majority of shareholders in health insurance providers are medical professionals who benefit from the arrangement?

conanbatt 9y ago
Providers get a decent slice, specially big hospitals and specialists. Doctor pay is really high in the US and its very regulated. Its expensive to be a doctor (long schooling, expensive mal praxis insurance), license ceilings, state-licensing and effective banning of doctor importation. Doctors get a decent share of the cost (1/10 i read somewhere), buts its still not the bulk. Nevertheless, just allowing doctors to come in and have unlimited licensing would hit costs a lot.

javadocmd 9y ago

It's a gigantic market though. (Revenue of $850 billion in 2016 according to https://www.statista.com/statistics/214544/total-revenue-of-us-life-and-health-insurance-industry/ https://www.statista.com/statistics/214544/total-revenue-of-... ) I'm not an economist, but it seems like a 5% margin on a $850 billion market is worth a 10% margin on a $425 billion market.

conanbatt 9y ago
Thats not how capital investment works, at a certain scale, % of profit is all that matters, because it tells you how much you need to invest to make a buck. Its a big market, but insurance companies are not the ones making a killing.

noobhacker 9y ago

The high health care cost is due to a lot of unnecessary procedures being performed. This can happen in two ways. First, there are a lot of tests and procedures ordered by doctors that only have some, but very small, benefits for the patients [0]. Doctors are incentivized to do this because each procedure has a set price (negotiated with insurance companies and Medicare / Medicaid) and the only way to get more revenue is to perform more procedures. Second, patients themselves order a lot of procedures out of fear. Arguably, they can be better off without these procedures. A prime example is end-of-life care, where patients and families often want to "do everything possible" even if those intrusive medical procedures bring nothing but a few weeks of miserable living [1]. Those end-of-life procedures are extremely expensive while having questionable benefits in terms of bringing a "happy" life rather than just a longer life [2]. [0] https://www.scientificamerican.com/article/unnecessary-tests-and-treatment-explain-why-health-care-costs-so-much/ https://www.scientificamerican.com/article/unnecessary-tests... [1] https://www.npr.org/sections/money/2014/03/05/286126451/living-wills-are-the-talk-of-the-town-in-la-crosse-wis https://www.npr.org/sections/money/2014/03/05/286126451/livi... [2] https://www.amazon.com/Being-Mortal-Illness-Medicine-Matters/dp/1250081246 https://www.amazon.com/Being-Mortal-Illness-Medicine-Matters...

conanbatt 9y ago
Sure, but then the 'bad actor' is the provider, not the health insurance company.
javadocmd 9y ago
Insurance (including Medicare and Medicaid) can and do push back against things they identify as inappropriate treatment. There are many problems with this system -- too restrictive in some places, not restrictive enough in others -- but in theory this could be improved to act as a reasonable check on rogue doctors. Another relevant effect worth noting here is CYA medicine: doctors order tests aimed at catching highly unlikely conditions to protect themselves against the hypothetical lawsuit that asks "why didn't you test for that?" Whatever the truth is about malpractice suits, the perception in the industry seems to be that these cases are overwhelmingly biased against doctors if even one question can be raised about the course of treatment.
9y ago

bawana 9y ago

bertolini walked away with 500 million when cvs bought aetna. those were health care dollars paid by working people as premiums

ams6110 9y ago
A drop in the bucket. Insurance executive compensation is not the problem.

Pokepokalypse 9y ago

healthcare monopolies (hospital chains, lab chains; where nationally there is competition, but in local areas, particularly rural they are effectively a monopoly). They charge whatever the fuck they want. Also; equipment manufacturers and drug companies: who both abuse the shit out of our patent system. But even off-patent drugs are being priced ridiculously high now. Barriers to competition are still extremely high. Since manufacturing capacity of IV bags was taken out in PR, there is a national shortage. This is NOW causing rationing (in effect). Prices are going up, but nobody's addressing the manufacturing problem - because: Puerto Rico.