4 ms·

A core reason I think this is the case here is that the US insurers are not very "free-market": they are highly regulated & essentially oligopolistic. Their pr

A core reason I think this is the case here is that the US insurers are not very "free-market": they are highly regulated & essentially oligopolistic. Their premium pricing bands are bounded by the Gov't who mandate that premiums don't exceed a certain % of what they actually spend on care. So, if they pay more for care, they can actually charge the customer more. This is like a contractor who can charge a % based on project size. Of course in a "free market" system, competition based on premium price should counteract this. However, due to another complex set of factors, this pressure does not seem to be very effective. (This includes the US system being employer based, and again the relatively oligopolistic structure of insurers). That said, I'm still very surprised there's not more competitive pricing pressure in the US, despite what seems to be some strong potential corrective forces, like employers self-insuring to reduce their costs. (setr's comment about the "retail" price not being the real one is true, but it's also true that insurers still pay more in reality in the US vs. other Countries). [not a pro on the regulations, so please correct me]

marojejian 6y ago
Thought of another potential force here [speculative, so please pros out there correct me]: A lot of the medical system payments come from the government, and I think this may be the force that sets a lot of the prices, more than, say, private companies negotiating, due to both the aggregate $$$ value and fewer negotiating parties in the gov't group. Thus the high prices might result from poor negotiating incentives on the Gov't side: 1) gov't is bad at it 2) they don't have the proper incentives to control their costs 3) capture by private companies (lobbyists for providers etc.) 4) I think their may be some areas where the Fed Gov't is not allowed to negotiate by law. (drug prices?)
- zaphod12 6y ago
  Quite wrong, actually. Medicare/medicaid usually pays lower than private insurers because of the vast bargaining power. Hospitals that can will try to limit or avoid taking these patients or ensure a balance with private and self pay for this reason. There are also weird rules where sometimes Medicare is legally required to get the best rate of anyone. Healthcare industry is completely insane and to an earlier comment not a free market

marojejian 6y ago

Thought of another potential force here [speculative, so please pros out there correct me]: A lot of the medical system payments come from the government, and I think this may be the force that sets a lot of the prices, more than, say, private companies negotiating, due to both the aggregate $$$ value and fewer negotiating parties in the gov't group. Thus the high prices might result from poor negotiating incentives on the Gov't side: 1) gov't is bad at it 2) they don't have the proper incentives to control their costs 3) capture by private companies (lobbyists for providers etc.) 4) I think their may be some areas where the Fed Gov't is not allowed to negotiate by law. (drug prices?)

zaphod12 6y ago
Quite wrong, actually. Medicare/medicaid usually pays lower than private insurers because of the vast bargaining power. Hospitals that can will try to limit or avoid taking these patients or ensure a balance with private and self pay for this reason. There are also weird rules where sometimes Medicare is legally required to get the best rate of anyone. Healthcare industry is completely insane and to an earlier comment not a free market