3 ms·

A lot of lobbying kills regulation in its tracks. I think there's two kinds of regulation, and it's valuable to distiguish them: regulation that places onerous

A lot of lobbying kills regulation in its tracks. I think there's two kinds of regulation, and it's valuable to distiguish them: regulation that places onerous barriers to entry to entrench existing players (the type you mention), but also: regulation that prevents a truly free market. For example, Medicare being unable to negotiate drug prices, by law. The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry, but we all suffer through higher federal expenditures, and ultimately, higher taxes.

AnthonyMouse 7y ago
> For example, Medicare being unable to negotiate drug prices, by law. This isn't a very good example because the health insurance market is dysfunctional for reasons independent of this and Medicare is the government, so "negotiating prices" really just means dictating prices. We already see this with Medicare in areas other than prescription drugs, where Medicare will set payouts below cost. Then many providers won't accept it (harming patients by reducing choice) and others, not wanting to turn away sick patients, will see them at a loss but then have to recover the money by charging more to patients with private insurance or paying out of pocket (harming them and reducing access to care due to higher prices). > The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry Even if all it did was exactly what you expect it to (cause lower prescription drug prices), low margins are exactly what will deter new companies from entering a market. They can't recover their startup costs (which incumbents paid years ago), so they don't bother. With price controls that lower amount of competition may not raise prices, but you would certainly expect it to impact the amount of new R&D happening.
- dv_dt 7y ago
  Dictating prices is better done from a government panel than a corporate board. Medicare sometimes sets payouts below "cost", but sometimes costs are out of control. The article below touches on this and goes through some data, and concludes that some segments of over-cost hospitals should maybe come down in price, while also suggesting that primary care physicians are underpaid via Medicare. Regardless of the over/under, that's a better discussion to have in the open publically, than behind closed negotiating doors - leading to systemic over costs (comparing between the US and other nations). http://voices.washingtonpost.com/ezra-klein/2009/07/does_medicare_pay_below_cost_w.html http://voices.washingtonpost.com/ezra-klein/2009/07/does_med...
  - AnthonyMouse 7y ago
    The issue is that prices shouldn't be dictated at all. The way health insurance should ideally work for non-emergency care is that the insurance pays the amount charged by the lowest cost provider, but the patient can choose any provider they like and pay the difference themselves. Then if one provider has bigger rooms or is less of a commute or has better ratings on some ratings service, the patient is the one deciding whether or not the benefit is worth the additional cost, instead of some functionary who is neither the patient nor the recipient of the bill.
    - dv_dt 7y ago
      This assumes that the health insurance plans are an effective check on cost, that there is any sort of shoppable market for medical services, and that the patient has the knowledge to shop with at the level of sophistication of medical professionals. None of that happens in the current healthcare market where we pay over double all other modern nations, nor does it happen in the many other nations that effectively control medical costs via setting a schedule of prices for drugs and medical procedures.
      - AnthonyMouse 7y ago
        > This assumes that the health insurance plans are an effective check on cost, that there is any sort of shoppable market for medical services, and that the patient has the knowledge to shop with at the level of sophistication of medical professionals. The check on cost in this case would be the patient, because outside of any other reason to choose one provider over the other, they would choose the least expensive one and save money. Which gives every provider the incentive to either be the least expensive one or provide tangibly more benefit to justify a higher price. Yes, for it to work it would have to be combined with some functioning price transparency, but so let's do that then. And the last isn't actually required. If patients can discern no meaningful difference between providers then they'll just choose the least expensive one, leading to price competition as intended. Though you can imagine that repeat patients will still have good knowledge of how big the patient rooms are, how soft the beds are, how much time they find themselves spending in the waiting room, how far the office is from their house, etc. > None of that happens in the current healthcare market where we pay over double all other modern nations, nor does it happen in the many other nations that effectively control medical costs via setting a schedule of prices for drugs and medical procedures. Nobody thinks the current US healthcare market is cost efficient. The existing regulatory environment is bad and promotes a lack of competition. But why is the only solution price controls, instead of fixing the bad rules that impair competition?
- Spooky23 7y ago
  The medical community always whines about this, but they still accept Medicare. They do walk away from Medicaid in many cases. The problem with Medicare is that they don’t pay for ineffective treatment. This makes it slightly more difficult for medical networks to charge for higher margin procedures.
- nickpsecurity 7y ago
  "where Medicare will set payouts below cost." I think the data on what hospitals, insurance companies, and drug companies call the "cost" shows it's over-inflated BS. If they're lying and price-gouging, then whoever is charging them should demand payouts below their "costs" if they can't force them to do a reasonable profit above actual costs. Quick article off the top of Google with examples of the "costs" at hospitals: https://www.foxbusiness.com/features/outrageous-e-r-hospital-charges-what-to-do https://www.foxbusiness.com/features/outrageous-e-r-hospital...
  - AnthonyMouse 7y ago
    The list prices for US medicine are completely fictitious. It doesn't cost them $30 for an aspirin, what it costs them is millions of dollars to staff and supply an emergency room with the capacity to handle a bus accident even though most of the time there isn't a bus accident. Which they then try to recover with higher margins on ordinary commodities when they can. It's certainly the case that some of the underlying costs are higher than they ought to be. The problem is you can't fix that by lowering payouts across the board -- if certain medical devices are too expensive because of a lack of competition, the hospital can't lower the price the other company charges (or they'd have done it regardless). Nor can they reduce regulatory compliance costs when they still have to comply with the same regulations. So they have to cut something else instead. Which isn't what you want when the something else was a cost effective method of improving patient outcomes. There isn't a "make it cost less" button that can magically lower prices across the board. Some things already have reasonable margins. To reduce costs without killing people you have to specifically target the waste (and its causes, which in many cases are high compliance costs, barriers to entry and a lack of competition).
- etripe 7y ago
  I think what you're failing to consider (in the particular case of pharma) is the case where government doesn't dictate prices, but limits patents to reasonable maximum terms and only offers reimbursement for the cheapest market alternative. The limitation in patent durations would disallow corporations milking old inventions and would incentivise them to keep innovating. It would also allow more competition, because the formulas end up in the public domain quicker, enabling actual market efficiency through improving production processes and so on. Parallels could be drawn to the entertainment and software sectors. Stimulating the lowest market price would counteract predatory tenfold price hikes by allowing competitors to produce a generic variant at reasonable prices and outcompeting the bad behaviour. The current regulatory framework incentivises big conglomarates to be anti-consumer because that's where the money lies. At the end of the day, we're talking about people's health.

AnthonyMouse 7y ago

> For example, Medicare being unable to negotiate drug prices, by law. This isn't a very good example because the health insurance market is dysfunctional for reasons independent of this and Medicare is the government, so "negotiating prices" really just means dictating prices. We already see this with Medicare in areas other than prescription drugs, where Medicare will set payouts below cost. Then many providers won't accept it (harming patients by reducing choice) and others, not wanting to turn away sick patients, will see them at a loss but then have to recover the money by charging more to patients with private insurance or paying out of pocket (harming them and reducing access to care due to higher prices). > The latter is a regulation that does nothing to deter new companies from entering the pharmaceutical industry Even if all it did was exactly what you expect it to (cause lower prescription drug prices), low margins are exactly what will deter new companies from entering a market. They can't recover their startup costs (which incumbents paid years ago), so they don't bother. With price controls that lower amount of competition may not raise prices, but you would certainly expect it to impact the amount of new R&D happening.

dv_dt 7y ago
Dictating prices is better done from a government panel than a corporate board. Medicare sometimes sets payouts below "cost", but sometimes costs are out of control. The article below touches on this and goes through some data, and concludes that some segments of over-cost hospitals should maybe come down in price, while also suggesting that primary care physicians are underpaid via Medicare. Regardless of the over/under, that's a better discussion to have in the open publically, than behind closed negotiating doors - leading to systemic over costs (comparing between the US and other nations). http://voices.washingtonpost.com/ezra-klein/2009/07/does_medicare_pay_below_cost_w.html http://voices.washingtonpost.com/ezra-klein/2009/07/does_med...
- AnthonyMouse 7y ago
  The issue is that prices shouldn't be dictated at all. The way health insurance should ideally work for non-emergency care is that the insurance pays the amount charged by the lowest cost provider, but the patient can choose any provider they like and pay the difference themselves. Then if one provider has bigger rooms or is less of a commute or has better ratings on some ratings service, the patient is the one deciding whether or not the benefit is worth the additional cost, instead of some functionary who is neither the patient nor the recipient of the bill.
  - dv_dt 7y ago
    This assumes that the health insurance plans are an effective check on cost, that there is any sort of shoppable market for medical services, and that the patient has the knowledge to shop with at the level of sophistication of medical professionals. None of that happens in the current healthcare market where we pay over double all other modern nations, nor does it happen in the many other nations that effectively control medical costs via setting a schedule of prices for drugs and medical procedures.
    - AnthonyMouse 7y ago
      > This assumes that the health insurance plans are an effective check on cost, that there is any sort of shoppable market for medical services, and that the patient has the knowledge to shop with at the level of sophistication of medical professionals. The check on cost in this case would be the patient, because outside of any other reason to choose one provider over the other, they would choose the least expensive one and save money. Which gives every provider the incentive to either be the least expensive one or provide tangibly more benefit to justify a higher price. Yes, for it to work it would have to be combined with some functioning price transparency, but so let's do that then. And the last isn't actually required. If patients can discern no meaningful difference between providers then they'll just choose the least expensive one, leading to price competition as intended. Though you can imagine that repeat patients will still have good knowledge of how big the patient rooms are, how soft the beds are, how much time they find themselves spending in the waiting room, how far the office is from their house, etc. > None of that happens in the current healthcare market where we pay over double all other modern nations, nor does it happen in the many other nations that effectively control medical costs via setting a schedule of prices for drugs and medical procedures. Nobody thinks the current US healthcare market is cost efficient. The existing regulatory environment is bad and promotes a lack of competition. But why is the only solution price controls, instead of fixing the bad rules that impair competition?
Spooky23 7y ago
The medical community always whines about this, but they still accept Medicare. They do walk away from Medicaid in many cases. The problem with Medicare is that they don’t pay for ineffective treatment. This makes it slightly more difficult for medical networks to charge for higher margin procedures.
nickpsecurity 7y ago
"where Medicare will set payouts below cost." I think the data on what hospitals, insurance companies, and drug companies call the "cost" shows it's over-inflated BS. If they're lying and price-gouging, then whoever is charging them should demand payouts below their "costs" if they can't force them to do a reasonable profit above actual costs. Quick article off the top of Google with examples of the "costs" at hospitals: https://www.foxbusiness.com/features/outrageous-e-r-hospital-charges-what-to-do https://www.foxbusiness.com/features/outrageous-e-r-hospital...
- AnthonyMouse 7y ago
  The list prices for US medicine are completely fictitious. It doesn't cost them $30 for an aspirin, what it costs them is millions of dollars to staff and supply an emergency room with the capacity to handle a bus accident even though most of the time there isn't a bus accident. Which they then try to recover with higher margins on ordinary commodities when they can. It's certainly the case that some of the underlying costs are higher than they ought to be. The problem is you can't fix that by lowering payouts across the board -- if certain medical devices are too expensive because of a lack of competition, the hospital can't lower the price the other company charges (or they'd have done it regardless). Nor can they reduce regulatory compliance costs when they still have to comply with the same regulations. So they have to cut something else instead. Which isn't what you want when the something else was a cost effective method of improving patient outcomes. There isn't a "make it cost less" button that can magically lower prices across the board. Some things already have reasonable margins. To reduce costs without killing people you have to specifically target the waste (and its causes, which in many cases are high compliance costs, barriers to entry and a lack of competition).
etripe 7y ago
I think what you're failing to consider (in the particular case of pharma) is the case where government doesn't dictate prices, but limits patents to reasonable maximum terms and only offers reimbursement for the cheapest market alternative. The limitation in patent durations would disallow corporations milking old inventions and would incentivise them to keep innovating. It would also allow more competition, because the formulas end up in the public domain quicker, enabling actual market efficiency through improving production processes and so on. Parallels could be drawn to the entertainment and software sectors. Stimulating the lowest market price would counteract predatory tenfold price hikes by allowing competitors to produce a generic variant at reasonable prices and outcompeting the bad behaviour. The current regulatory framework incentivises big conglomarates to be anti-consumer because that's where the money lies. At the end of the day, we're talking about people's health.