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"The Affordable Care Act kept profit margins in check by requiring companies to use at least 80 percent of the premiums for medical care. That’s good in theory
by taysic 8y ago
"The Affordable Care Act kept profit margins in check by requiring companies to use at least 80 percent of the premiums for medical care. That’s good in theory but it actually contributes to rising health care costs. If the insurance company has accurately built high costs into the premium, it can make more money. Here’s how: Let’s say administrative expenses eat up about 17 percent of each premium dollar and around 3 percent is profit. Making a 3 percent profit is better if the company spends more."
Wow. Great example of free market distortions that don't work. Now if there was true competition in the field, a company would never be able to get away with this.
- brazzy 8y agoA free market does not work for health care. At all. Or, more technically: health care does not meet the requirements for a "free market", so cannot exist in principle.
- dorchadas 8y agoExactly. Free market is great for wants but absolutely horrible for necessities.
- dragonwriter 8y agoWants and necessities are not economically distinct, and that's not why health care and health insurance don't have the features there make free markets efficient. Lack of transparent utilities at the time of transactions is more of an issue.
- hitekker 8y agoTransparency works if you have a choice. Outside of libertarian lala-land, most U.S. citizens are limited to three, two, or oftentimes, just one healthcare insurer. Also, most U.S. citizens will pay anything to not die.
- throwaway2016a 8y ago> Outside of libertarian lala-land "la la land" implies people are unaware of reality. Libertarian's by and large aren't naive. They know what reality is. They realize people don't have choice and want to change that by opening up competition for pharmaceutical sales and insurance across state borders and even country borders. Just because something is far from the reality of current day does not mean it doesn't have merit or that the people who want it are la la land. Imagine a world where if a drug is approved in the EU but not our FDA then we can still buy it. Or a world where if a drug is cheaper in Canada we can buy it from there. Or if the people on the other side of the border between two states has lower premiums than I can actually buy that plan without moving to the other state. And further more, insurance and drug companies will feel the market pressure of consumers having real choice. Doesn't seem that "La La" to me.
- Eridrus 8y ago> Imagine a world where ... if a drug is cheaper in Canada we can buy it from there. This assumes that the issue here is a regulatory failure, rather than intentional price discrimination on the price of drug companies. Forcing the entire world into a single market with the same prices would raise drug prices on most of the world, without necessarily reducing prices meaningfully in the US.
- hitekker 8y agoOne point to take note of is that the GP already knows the fact you're describing. He just chooses not to believe it. He resents the implication that libertarians are delusional, and says that they "know reality". But then, attempting to buttress his realism, he implores the audience to "imagine" a world where everything works according to his will, or "imagine" a promised land just around the corner, or "imagine" this or that. Religious cognitive dissonance is fairly weird.
- throwaway2016a 8y agoCorrect, I am assuming that regulation drives up cost which may or may not be true. Let's assume that is wrong... And I agree, taken in isolation you are right. There is no guarantee that opening up the markets will lower prices. In fact, as you say, the opposite might happen. But, I am also assuming that opening free trade between markets (not merging into one giant market as you say) will produce competition. Not just with insurers but also with pharmaceutical companies and safety agencies. On the safety front if there was some reciprocity between safety agencies that the pharma company doesn't have to have their drug approved in every country that they want to sell in. Now, you will say there is no guarantee big pharma will pass along that savings but... - These savings should allow new entrants into the market by lowering the barrier of entry - It allows multiple drugs that treat the same illness (but are not patent infringing) to compete. As opposed to currently it can be years (if ever) for a foreign drug to enter the US marker. Edit: To summarize. The pharma and insurance companies can charge what they want because they are a monopoly. You are assuming the monopoly will continue when trade is opened. I am more optimistic if it can be executed well as opposed to just blind deregulation.