5 ms·

I'm not sure what to say if you think that American healthcare and eduction in 2020 is the result of "outsourcing policy to the invisible hand of the market".

by bhupy 7y ago

pbourke 7y ago
I agree with you. They both seem to be a worst-of-all-worlds approach.
throwanem 7y ago
Aren't they? How else do you explain their subversion of the mechanisms of government to maximize their own profits without regard for societal cost?
- bhupy 7y ago
  The current status quo in the US Healthcare system is a byproduct of the mechanisms of government. It's not some crazy accident of the market, rather it is the inevitable result of a series of policies passed at state, local, and federal levels over the past half century. The fact that health insurance isn’t portable, and is rather tied to employment is a consequence of 1) the WW2 era wage ceilings imposed on private corporations, which resulted in employers competing for labor by providing health benefits, followed by 2) the ability for employers to deduct insurance premiums from payroll taxes (which costs the government $280 billion per year), and finally, 3) the Federal government imposed mandate on employers to provide health insurance. This is in contrast with other countries that employ private insurance, like the Netherlands and Switzerland, where insurance is tied to the individual, not the employer. The lack of price transparency logically follows from the fact that patients never really care how much their treatments cost, since employer sponsored insurance covers everything anyway. Large corporations are less price sensitive than individuals, which exacerbates the price inflation over decades. Certificate of need laws, where local hospitals get to decide if a new, competing hospital may open (imagine Uber being able to decide if Lyft may ply), and the residency system requiring 10+ years of schooling to practice has resulted in inevitable supply constraints, further driving up costs[1]. Medicare, which provides healthcare for free for the elderly, removed the most engaged buyers from the market, suffocating price discovery for medical goods and services. Not only that, the elderly tend to be the richest people in the country - those above the age of 55 account for 73% of wealth in America. Boomers are disproportionately rich, and yet they also enjoy some of the most generous welfare on top of that. The resulting kafkaesque Frankenstein of a system was created through decades of well-intentioned government regulation at all levels of the Government. Healthcare is one of the least free markets in the US. University education costs as much as it does because the Federal government guarantees any loan for any degree, regardless of the expected ability to pay upon graduation. This causes inevitable inflation in University sticker price, because they're going to be paid the money anyway regardless of a student's financial outcome. The guaranteed loan results in zero skin in the game for Universities. [1] https://www.politico.com/agenda/story/2017/10/25/doctors-salaries-pay-disparities-000557/ https://www.politico.com/agenda/story/2017/10/25/doctors-sal...
  - throwanem 7y ago
    Interesting. There's some history there I didn't know, and I'm glad to be aware of it. Thanks for that!
  - watwut 7y ago
    Afaik, medical insurance in US is not covering everything except for rather small group of people. People pay out of pocket enough to care about price, but don't have means to shop around or even know price in advance. I see "everything is paid by insurance" argument surprisingly often, but whenever people talk about actual visit to hospital or doctir it turns out expensive despite insurance. Medical debt is primary reason for personal bankruptcy.
    - bhupy 7y ago
      This is not true for most employer-funded group plans. Of late, High Deductible Health plans have become more common, but clinics and hospitals still do not post prices like other industries, and surprise billing is still the norm. In fact, IMO the most low hanging fruit problem is that physicians charge different prices for the same treatment depending on who the insurer is, which makes price transparency extremely difficult, and therefore “shopping around” extremely difficult. Source: I work in health insurance
cs702 7y ago
I did not write that. Please don't attack a straw man. What I did write is that many important components of these systems appear to be stuck in lousy Nash equilibria, after decades during which the conventional wisdom in DC became that government should rely on markets to solve problems whenever possible. The systems we've ended up are best described as hodgepodges -- e.g., in healthcare: many insurers are for-profit but two (Medicare and Medicaid) are not; many hospitals are now part of for-profit chains but others are non-profit; most medical research is done by for-profit entities like pharmaceutical companies but a lot is also done by government-funded organizations like NIH. On and on it goes. BTW, while we're on the subject of healthcare, you might find the following article by Atul Gawande thought-provoking: https://www.newyorker.com/magazine/2009/06/01/the-cost-conundrum https://www.newyorker.com/magazine/2009/06/01/the-cost-conun...
- bhupy 7y ago
  An equally thought provoking piece with a different perspective: https://www.econtalk.org/keith-smith-on-free-market-health-care/ https://www.econtalk.org/keith-smith-on-free-market-health-c...

I'm not sure what to say if you think that American healthcare and eduction in 2020 is the result of "outsourcing policy to the invisible hand of the market".

by bhupy 7y ago

I'm not sure what to say if you think that American healthcare and eduction in 2020 is the result of "outsourcing policy to the invisible hand of the market".

pbourke 7y ago

I agree with you. They both seem to be a worst-of-all-worlds approach.

throwanem 7y ago

Aren't they? How else do you explain their subversion of the mechanisms of government to maximize their own profits without regard for societal cost?

bhupy 7y ago
The current status quo in the US Healthcare system is a byproduct of the mechanisms of government. It's not some crazy accident of the market, rather it is the inevitable result of a series of policies passed at state, local, and federal levels over the past half century. The fact that health insurance isn’t portable, and is rather tied to employment is a consequence of 1) the WW2 era wage ceilings imposed on private corporations, which resulted in employers competing for labor by providing health benefits, followed by 2) the ability for employers to deduct insurance premiums from payroll taxes (which costs the government $280 billion per year), and finally, 3) the Federal government imposed mandate on employers to provide health insurance. This is in contrast with other countries that employ private insurance, like the Netherlands and Switzerland, where insurance is tied to the individual, not the employer. The lack of price transparency logically follows from the fact that patients never really care how much their treatments cost, since employer sponsored insurance covers everything anyway. Large corporations are less price sensitive than individuals, which exacerbates the price inflation over decades. Certificate of need laws, where local hospitals get to decide if a new, competing hospital may open (imagine Uber being able to decide if Lyft may ply), and the residency system requiring 10+ years of schooling to practice has resulted in inevitable supply constraints, further driving up costs[1]. Medicare, which provides healthcare for free for the elderly, removed the most engaged buyers from the market, suffocating price discovery for medical goods and services. Not only that, the elderly tend to be the richest people in the country - those above the age of 55 account for 73% of wealth in America. Boomers are disproportionately rich, and yet they also enjoy some of the most generous welfare on top of that. The resulting kafkaesque Frankenstein of a system was created through decades of well-intentioned government regulation at all levels of the Government. Healthcare is one of the least free markets in the US. University education costs as much as it does because the Federal government guarantees any loan for any degree, regardless of the expected ability to pay upon graduation. This causes inevitable inflation in University sticker price, because they're going to be paid the money anyway regardless of a student's financial outcome. The guaranteed loan results in zero skin in the game for Universities. [1] https://www.politico.com/agenda/story/2017/10/25/doctors-salaries-pay-disparities-000557/ https://www.politico.com/agenda/story/2017/10/25/doctors-sal...
- throwanem 7y ago
  Interesting. There's some history there I didn't know, and I'm glad to be aware of it. Thanks for that!
- watwut 7y ago
  Afaik, medical insurance in US is not covering everything except for rather small group of people. People pay out of pocket enough to care about price, but don't have means to shop around or even know price in advance. I see "everything is paid by insurance" argument surprisingly often, but whenever people talk about actual visit to hospital or doctir it turns out expensive despite insurance. Medical debt is primary reason for personal bankruptcy.
  - bhupy 7y ago
    This is not true for most employer-funded group plans. Of late, High Deductible Health plans have become more common, but clinics and hospitals still do not post prices like other industries, and surprise billing is still the norm. In fact, IMO the most low hanging fruit problem is that physicians charge different prices for the same treatment depending on who the insurer is, which makes price transparency extremely difficult, and therefore “shopping around” extremely difficult. Source: I work in health insurance

cs702 7y ago

I did not write that. Please don't attack a straw man. What I did write is that many important components of these systems appear to be stuck in lousy Nash equilibria, after decades during which the conventional wisdom in DC became that government should rely on markets to solve problems whenever possible. The systems we've ended up are best described as hodgepodges -- e.g., in healthcare: many insurers are for-profit but two (Medicare and Medicaid) are not; many hospitals are now part of for-profit chains but others are non-profit; most medical research is done by for-profit entities like pharmaceutical companies but a lot is also done by government-funded organizations like NIH. On and on it goes. BTW, while we're on the subject of healthcare, you might find the following article by Atul Gawande thought-provoking: https://www.newyorker.com/magazine/2009/06/01/the-cost-conundrum https://www.newyorker.com/magazine/2009/06/01/the-cost-conun...

bhupy 7y ago
An equally thought provoking piece with a different perspective: https://www.econtalk.org/keith-smith-on-free-market-health-care/ https://www.econtalk.org/keith-smith-on-free-market-health-c...