9 ms·

Which firms profit most from America’s health-care system (2018)

122 points by SQL2219 6y ago

SQL2219 6y ago
from Wikipedia: The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to make money from something that used to be free.
- chewz 6y ago
  This feudal lord probably have invested in an upkeep of few knights who enforce that chains stays in place. And then lobbied at the court against complaints from merchants and peasants. He might have also have to bribe few judges. Also historically feudal lords had been constantly in debt spending more on representation then they have earned. Some moneylenders might have taken all this rent from river chain. Or the feudal lord have spent that income on luxury items stimulating demand for art or trade with far away corners of the globe. This is an example of how economist have no idea how making money works..
  - sweeneyrod 6y ago
    If I offer you the opportunity of not having your kneecaps broken in exchange for only $100/month, is this potentially completely fine because I could spend the money on "stimulating demand"?
    - chewz 6y ago
      Many great American companies started exactly from that. Time Warner comes to mind.. :-) https://en.m.wikipedia.org/wiki/Kinney_Parking_Company https://en.m.wikipedia.org/wiki/Kinney_Parking_Company
  - enragedcacti 6y ago
    Stupid Economists, already making your points for you: > An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share. > The concept of rent-seeking would also apply to corruption of bureaucrats who solicit and extract "bribe" or "rent" for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients. What is it about a feudal lord or moneylender that the way they spend money is better than the way the merchants would have spent it? Further, just because the money has downstream effects doesn't mean that it was rightfully earned. All of your arguments could equally apply to pirates or bankrobbers. [1] https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
  - sacred_numbers 6y ago
    Just because rent seekers spend their money does not make them productive members of society. In nature parasites have their own parasites, which can again have their own parasites. I suppose in a zero sum economy rent seeking doesn't hurt the economy (just certain members of the economy), but in a positive sum economy, if non-productive rent seekers are taking money from productive people this will cause the economy to be worse than it could have been. If people who would otherwise be productive are lured into rent seeking by the potential profits then it's a double loss. Not only are they taking capital from productive people that could have been used to create more wealth, but they themselves could have been producing wealth instead of being a drag on wealth creation. There are certainly situations where organizations that seem like rent seekers are not entirely rent seekers, though. Government is the main example. Taxes can seem like a drag on wealth creation, and sometimes they are, but they also fund infrastructure, education, and stability, which are wealth multipliers. The issue is also complicated by the fact that the world economy is very connected, but economic growth is often measured on a per country, corporation, or even individual basis. Also, aggregate wealth is not the be-all end-all metric. Wealth redistribution can sometimes lead to greater aggregate happiness, even if the amount of wealth stays the same or even decreases. Overall, though, I think that the majority of rent seeking hurts the economy and the people in the economy more than it helps, but I would be very interested to see empirical data showing otherwise.
HPsquared 6y ago
What's missing is the Bender solution: "I'll make my own system! With blackjack! And hookers!" Barriers to entry are too high for a really free market to emerge.
- standardUser 6y ago
  Are the barriers too high? I've seen a lot of "modern" medical offices pop up in recent years, like One Medical and Carbon Health. Not to mention the scores of startups that specialize on more narrow parts of healthcare.
singingwolfboy 6y ago
https://web.archive.org/web/20200426011358/https://www.economist.com/business/2018/03/15/which-firms-profit-most-from-americas-health-care-system https://web.archive.org/web/20200426011358/https://www.econo...
knubie 6y ago
> Every year America spends about $5,000 more per person on health care than other rich countries do. Yet its people are not any healthier. I think part of the reason Americans spend more on healthcare is precisely because they're unhealthy. According to the American CDC the obesity rate has reached a staggering 42.4% of adults[0], which brings with it a slew of health problems. This accounts for an additional $147 billion in healthcare spending, or $1,429 per person (with obesity). [0] https://www.cdc.gov/obesity/data/adult.html https://www.cdc.gov/obesity/data/adult.html
- Dumblydorr 6y ago
  Obesity, CHF, smoking, poisoned by air pollution or ground water waste, cancer due to the above...sedentary lifestyle, non examined mental life, glued to the TV and basing all opinions on cable news, no exercise and crappy diets...it's not a good way that many americans live.
- dan-robertson 6y ago
  A counter argument I see sometimes is that the reason Americans spend more on healthcare compared to other rich countries is that American consumers spend more on just about everything than most other rich countries (and also earn more money). I don’t really know how much merit the argument has.
  - standardUser 6y ago
    And as a result we have bigger homes, bigger cars, bigger TVs.... but worse healthcare outcomes? Seems like some of that excess spending yields us more returns than others.
    - quadrifoliate 6y ago
      The things you mentioned are almost all inversely related to better healthcare outcomes, to grossly oversimplify a contributing factor. * Bigger homes means you feel more comfortable being lazy and spending all your time indoors * Bigger cars means you are incentivized to drive 20 miles to a restaurant in comfort instead of walking over to a closer one * Bigger TVs means you spend all day "watching the game" instead of going out and playing a sport. Once again, these are grossly oversimplified, but should drive home the central point that spending on some things can actually worsen outcomes of others.
ntsplnkv2 6y ago
> Everyone hates pharmaceutical firms, but their share of health-care rent-seeking is relatively trivial, especially once you include the many midsized and small firms that are investing heavily. This article misses the point. People hate pharmaceuticals because of ridiculously high drug costs, and that's about it. If they can't produce drugs at profit without gouging potential end users then it should be nationalized or subsidized.
- saddlerustle 6y ago
  Why do you think that'll make drugs significantly cheaper? Drug companies are only about as profitable as other science-heavy industries.
  - DougWebb 6y ago
    Pharmaceutical companies have massive advertising/marketing budgets, which a nationalized drug R&D program would not need. That lowers overall costs. The R&D and manufacturing costs would also be spread across all Americans instead of only the patients who need the drugs, so the costs would be much lower for the patients as well.
    - satyrnein 6y ago
      At least some of those marketing costs would still be needed, they'd just be called "education" or "outreach" or "access" programs. Patients and doctors still need to be informed of new advancements to improve outcomes. For the second point, cost spreading helps particular people in particular circumstances, but doesn't lower overall cost. You're just running a wealth transfer or insurance program in addition at that point.
      - DougWebb 6y ago
        Patients do not need to be informed of new drugs, and never were until pharmaceutical companies lobbied Congress to remove the ban on direct advertising, which had been put in place as a consumer protection law due to 19th century "snake oil" salesmen/con-men. For doctors, a monthly publication of drugs currently in development, their status, and their uses would be adequate. It'd be much better for doctors to get their information from a published journal than the advertisements in some trade magazine or attractive reps handing out free samples. Regarding You're just running a wealth transfer or insurance program in addition at that point. Yes, that would be a major purpose of nationalizing drug R&D and manufacturing. You could say the same about every public service.
francisofascii 6y ago
Just got the bill yesterday for my "free" Covid test. $250, insurance pays $105, you owe $145. (The test was free, the office visit was not.)
- sushshshsh 6y ago
  Who is to blame? The government for not collecting taxes from you and using that money to pay the doctor? The doctor for billing too high for the visit? The insurance company for not covering more of the price? Personally I would seek to understand why the doctor is billing so much and how that can become more fair for everyone involved.
  - Taek 6y ago
    A big element here is that the free market is being choked out. Consumers walk into healthcare facilities without any idea what they will be paying when they walk out, and therefore have no ability to choose one facility over another based on price. Because that ability doesn't exist, there is no downwards price pressure anywhere at the consumer level for medical services. I think we'd see a lot more results if we asked 'why aren't these facilities putting more efforts into reducing costs' rather than asking 'what makes this so expensive?'
    - ianleeclark 6y ago
      > Because that ability doesn't exist, there is no downwards price pressure anywhere at the consumer level for medical services. It's important to note that the downward pressure you'd see here is only for elastic goods which most healthcare-related things likely aren't.
      - lotsofpulp 6y ago
        There are plenty of healthcare related things that one can shop for, such as this COVID test. The price could easily be advertised on the healthcare facilities website. But it’s not because it would hurt revenue since price transparency benefits buyers, and price obfuscation benefits sellers by allowing them to price discriminate and charge each seller the most each seller is able to pay.
motohagiography 6y ago
The U.S. health system is what happens when corruption goes on so long you just call it the culture. "All professions are a conspiracy against the layman." was said by either G.B. Shaw or Ambrose Bierce, depending on your reference point. It's a form of business that is orthogonal to producing things people want, where instead it's mainly in the business of depriving people of what they need. Rent seeking is what professions and institutions are designed to do, to create scarcity in exchange for a promise of quality, but somehow that latter part gets lost. Some years ago when "disruption" was the popular idea, I put together a list of vulnerable industries. The sharing economy was an attack on businesses whose profits depended on a regulatory bar to entry (Uber/AirBnB etc.) The list was based on the presence of labour unions and professional associations, using the hypothesis that their existence creates a price premium that tips the economics of their industry in favour of automation, or at least in favour of economic substitution away by customers to a new tech that meets %80 of their need. Maybe we have the technology now to create an economic rentier map that lays out parts of the economy that have artificially propped up rent-seeking groups, as a means to develop new tools to avoid them. Regarding the rentierism of the health business, I've noticed an anecdotal trend among some aging boomers who are rejecting that system altogether, and choosing palliative care and to die at home instead of in the hallway of a hospital, or worse, spending years in a long term care home. The best thing that could happen to healthcare is that instead of seeing it as broken, we should recognize that it looks like that because works for someone where we can't see who or how, and the goal is not to problematize and fix it, but to make it work for everyone else.
- yesenadam 6y ago
  > either G.B. Shaw or Ambrose Bierce, depending on your reference point. I googled it, it's from Shaw's Doctor's Dilemma. (I'm a big fan of both those guys.) Only 3 hits on the internet saying it was Bierce - all 3 are your comments on HN! hehe.
  - motohagiography 6y ago
    That's hilarious. I'd swear I read it in the Devil's Dictionary it in a fortune file somewhere.
mchusma 6y ago
EconTalk has many great episodes digging into interesting aspects that are touched on here: why the US healthcare so expensive for so little extra value. This episode about the Oklahoma group that has had low cost & transparent prices for surgeries for many years. http://www.econtalk.org/keith-smith-on-free-market-health-care/ http://www.econtalk.org/keith-smith-on-free-market-health-ca... This one on why we get such expensive drugs with marginal benefit: http://www.econtalk.org/vinay-prasad-on-cancer-drugs-medical-ethics-and-malignant/ http://www.econtalk.org/vinay-prasad-on-cancer-drugs-medical... This one on benefit management companies terrifying behavior: http://www.econtalk.org/robin-feldman-on-drugs-money-and-secret-handshakes/ http://www.econtalk.org/robin-feldman-on-drugs-money-and-sec... (Also PS Russ Roberts on this show is a treasure. His way of thoughtfully engaging with others is something I try to learn from.)
- claudeganon 6y ago
  Roberts is well-read and diplomatic, but I wouldn’t exactly call what he does with his show thoughtful engagement. The very few instances he has guests that truly diverge from his ideological dispositions, he mostly dismisses their arguments without the same rigor that he defends those within his biases. His conversation with Elizabeth Anderson on workplaces as a form of private government is a good example of this: https://www.econtalk.org/elizabeth-anderson-on-worker-rights-and-private-government/ https://www.econtalk.org/elizabeth-anderson-on-worker-rights...
  - specialist 6y ago
    Ya. It'd be nice if the Freedom Markets™ advocates would remain mindful of the "freedom from coercion" parts of libertarianism. I remain mystified by the application of different standards for governments and corporations.
  - refurb 6y ago
    Russ isn’t 100% unbiased (is anyone), but what I like about his podcast (been a while since I last listened) is he is willing to bring people on with very different views and let’s them have the floor for a bit. He also does a nice job of “O.K., this is where we have differing opinions”. Unlike a lot of media that covers politics issues, it’s much more civilized to me.
sytelus 6y ago
In the case of health care, consolidation has probably made things worse by muting competition. There are now five big insurance companies, three big wholesalers, three large pharmacy chains and three big benefit managers. In the case of health care, consolidation has probably made things worse by muting competition. There are now five big insurance companies, three big wholesalers, three large pharmacy chains and three big benefit managers.
- lotsofpulp 6y ago
  That is the situation I see with pretty much all businesses. 2 to 3, maybe 5 large organizations who can outcompete everyone due to economies of scale, especially due to advancements in technology.
  - tryptophan 6y ago
    Healthcare administration isn't really a high tech business though. I think the culprit here is obamacare; after all it was written by the insurance companies. Who's surprised that it benefits them the most? Insurance stocks absolutely took off after it was passed.
    - lotsofpulp 6y ago
      Databases, instant communications, time And chart tracking all allow healthcare facilities (and every other private business) to scale up much easier and with far less labor than ever before. I can right now download all my health info into Apple health app from my healthcare provider’s website and use that anywhere I want, whereas that might have required a few calls and someone’s time.
- boublepop 6y ago
  As I see it consolidation isn’t the root cause. The central problem is that pharmacy benefits manager have been allowed to invert the normal market. Normally for someone arranging the “resale” of a product from a producer to costumers would make more money if the price got negotiated down. But since PBMs have forced rebates of 70%+ that means that they are making most of the money on a drug sale. So even thought they are representing the buyers at the negotiation table, they want the prices as high as they can be. Producers are sitting down at the table and outbitting each other not on how low the price could be, but how high they are willing to make it, it’s absurd. And you’d think the insurance companies or pharmacies would object, but often they are owned by the same group so they all just share the proceeds from ripping of the people.
tomrod 6y ago
I can't read due to pay wall, but have a guess. Data systems, such as Epic, seem unnecessarily close walled. Is Epic the big winner, pharma, or something else?
test1208test 6y ago
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test1208test 6y ago
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sriku 6y ago
> The excess profits of the health-care firms are equivalent to $200 per American per year, compared with $69 for the telecoms and cable TV industry and $25 captured by the airline oligopoly. Only the five big tech “platform” firms, with a figure of $250, are more brazen gougers. wow!
tkeAmarktinClss 6y ago
I didn't see anyone mention physicians. The base rate of the profession is around 250k per year. Specialities are not included in that calculation. Specialities are closer to 400k to 500k per year. This is not natural. This is 130+ years of regulatory capture. Other countries pay their physicians half as much. Not to mention outcomes are basically the same.
- bawana 6y ago
  Actually, you are wrong. PCPs start at 90-100k salary. If you are quoting gross income before expenses then its about 200k. The overhead of running a physicians office is high. In terms of specialists, it's come down quite a bit. Just check the ads in the back of professional journals. 400k is more like the 70s. Also you can look at the training of all the recent physicians, - many are from abroad. Same thing that the Silicon valley industry has been doing , hiring foreigners at lower pay. Education for physicians abroad is FREE. Whereas here you have to go to college (>50k a year tuition x 4) AND medical school (60k a year x 4) and then training 3-7 years at low income (40k a year) and crap life style.
  - tkeAmarktinClss 6y ago
    Please post a citation
    - boublepop 6y ago
      Perhaps you could post a citation yourself before asking it if others.
  - SkyPuncher 6y ago
    FYI, all of the numbers you listed are close, but not totally accurate. See my other comment: https://news.ycombinator.com/item?id=23733575 https://news.ycombinator.com/item?id=23733575 That being said, the overall point is correct. There is a HUGE opportunity cost to becoming a physician. People would rather ignore that because it doesn't support their argument. It's much easier to cherry pick point-in-time data without looking at the larger picture.
vgchh 6y ago
I recently got a shock when I went for a tooth extraction. A nurse and a surgeon spent an hour to complete the procedure. It came out to ~$6000. I had to pay for $700 for calcium grafting right then and there and they were going to get back to me for the remaining after consulting with insurance plan. I am still waiting for the call, albeit terrified of the possibilities. I understand there are many parties in the food-chain. Still $6K for two people for an hour, feels like ripped to the gills - almost dirty.
- durnygbur 6y ago
  At which point one draws the line and says "wait... they're not doctors or dentists - they're scammers"?
- mschuster91 6y ago
  reminds me of an old joke: 15$ for positioning a screw, 10.000$ to know where to put that screw. If the US wants to tackle its healthcare costs, it not only has to get rid of the pointless middlemen everywhere and the notion of uninsured people whose bills have to be picked up by the rest, but also enlarge its supply of new doctors, and reduce the student debt they have to pay off.
specialist 6y ago
This paper says 4% of cost goes towards "excess profits". I accept this without reservation. But it remains unsatisfying. What about the other overheads? Marketing, customer acquisition and retention? Health plan negotiators? Payment processing? Executive compensation? Etc, etc. Many others have guesstimated USA healthcare costs 50% more per capita than Canada. So eliminating administrative overhead would whack 1/3rd of the costs, right? Advocates for single payer could better emphasize all the unnecessary inefficiencies of our Freedom Markets™ health care system. All those "bullshit jobs" David Graeber has been telling us about.

122 points by SQL2219 6y ago

from Wikipedia: The classic example of rent-seeking, according to Robert Shiller, is that of a feudal lord who installs a chain across a river that flows through his land and then hires a collector to charge passing boats a fee to lower the chain. There is nothing productive about the chain or the collector. The lord has made no improvements to the river and is not adding value in any way, directly or indirectly, except for himself. All he is doing is finding a way to make money from something that used to be free.

chewz 6y ago
This feudal lord probably have invested in an upkeep of few knights who enforce that chains stays in place. And then lobbied at the court against complaints from merchants and peasants. He might have also have to bribe few judges. Also historically feudal lords had been constantly in debt spending more on representation then they have earned. Some moneylenders might have taken all this rent from river chain. Or the feudal lord have spent that income on luxury items stimulating demand for art or trade with far away corners of the globe. This is an example of how economist have no idea how making money works..
- sweeneyrod 6y ago
  If I offer you the opportunity of not having your kneecaps broken in exchange for only $100/month, is this potentially completely fine because I could spend the money on "stimulating demand"?
  - chewz 6y ago
    Many great American companies started exactly from that. Time Warner comes to mind.. :-) https://en.m.wikipedia.org/wiki/Kinney_Parking_Company https://en.m.wikipedia.org/wiki/Kinney_Parking_Company
- enragedcacti 6y ago
  Stupid Economists, already making your points for you: > An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share. > The concept of rent-seeking would also apply to corruption of bureaucrats who solicit and extract "bribe" or "rent" for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients. What is it about a feudal lord or moneylender that the way they spend money is better than the way the merchants would have spent it? Further, just because the money has downstream effects doesn't mean that it was rightfully earned. All of your arguments could equally apply to pirates or bankrobbers. [1] https://en.wikipedia.org/wiki/Rent-seeking https://en.wikipedia.org/wiki/Rent-seeking
- sacred_numbers 6y ago
  Just because rent seekers spend their money does not make them productive members of society. In nature parasites have their own parasites, which can again have their own parasites. I suppose in a zero sum economy rent seeking doesn't hurt the economy (just certain members of the economy), but in a positive sum economy, if non-productive rent seekers are taking money from productive people this will cause the economy to be worse than it could have been. If people who would otherwise be productive are lured into rent seeking by the potential profits then it's a double loss. Not only are they taking capital from productive people that could have been used to create more wealth, but they themselves could have been producing wealth instead of being a drag on wealth creation. There are certainly situations where organizations that seem like rent seekers are not entirely rent seekers, though. Government is the main example. Taxes can seem like a drag on wealth creation, and sometimes they are, but they also fund infrastructure, education, and stability, which are wealth multipliers. The issue is also complicated by the fact that the world economy is very connected, but economic growth is often measured on a per country, corporation, or even individual basis. Also, aggregate wealth is not the be-all end-all metric. Wealth redistribution can sometimes lead to greater aggregate happiness, even if the amount of wealth stays the same or even decreases. Overall, though, I think that the majority of rent seeking hurts the economy and the people in the economy more than it helps, but I would be very interested to see empirical data showing otherwise.

HPsquared 6y ago

What's missing is the Bender solution: "I'll make my own system! With blackjack! And hookers!" Barriers to entry are too high for a really free market to emerge.

standardUser 6y ago
Are the barriers too high? I've seen a lot of "modern" medical offices pop up in recent years, like One Medical and Carbon Health. Not to mention the scores of startups that specialize on more narrow parts of healthcare.

singingwolfboy 6y ago

https://web.archive.org/web/20200426011358/https://www.economist.com/business/2018/03/15/which-firms-profit-most-from-americas-health-care-system https://web.archive.org/web/20200426011358/https://www.econo...

knubie 6y ago

> Every year America spends about $5,000 more per person on health care than other rich countries do. Yet its people are not any healthier. I think part of the reason Americans spend more on healthcare is precisely because they're unhealthy. According to the American CDC the obesity rate has reached a staggering 42.4% of adults[0], which brings with it a slew of health problems. This accounts for an additional $147 billion in healthcare spending, or $1,429 per person (with obesity). [0] https://www.cdc.gov/obesity/data/adult.html https://www.cdc.gov/obesity/data/adult.html

Dumblydorr 6y ago
Obesity, CHF, smoking, poisoned by air pollution or ground water waste, cancer due to the above...sedentary lifestyle, non examined mental life, glued to the TV and basing all opinions on cable news, no exercise and crappy diets...it's not a good way that many americans live.
dan-robertson 6y ago
A counter argument I see sometimes is that the reason Americans spend more on healthcare compared to other rich countries is that American consumers spend more on just about everything than most other rich countries (and also earn more money). I don’t really know how much merit the argument has.
- standardUser 6y ago
  And as a result we have bigger homes, bigger cars, bigger TVs.... but worse healthcare outcomes? Seems like some of that excess spending yields us more returns than others.
  - quadrifoliate 6y ago
    The things you mentioned are almost all inversely related to better healthcare outcomes, to grossly oversimplify a contributing factor. * Bigger homes means you feel more comfortable being lazy and spending all your time indoors * Bigger cars means you are incentivized to drive 20 miles to a restaurant in comfort instead of walking over to a closer one * Bigger TVs means you spend all day "watching the game" instead of going out and playing a sport. Once again, these are grossly oversimplified, but should drive home the central point that spending on some things can actually worsen outcomes of others.

ntsplnkv2 6y ago

> Everyone hates pharmaceutical firms, but their share of health-care rent-seeking is relatively trivial, especially once you include the many midsized and small firms that are investing heavily. This article misses the point. People hate pharmaceuticals because of ridiculously high drug costs, and that's about it. If they can't produce drugs at profit without gouging potential end users then it should be nationalized or subsidized.

saddlerustle 6y ago
Why do you think that'll make drugs significantly cheaper? Drug companies are only about as profitable as other science-heavy industries.
- DougWebb 6y ago
  Pharmaceutical companies have massive advertising/marketing budgets, which a nationalized drug R&D program would not need. That lowers overall costs. The R&D and manufacturing costs would also be spread across all Americans instead of only the patients who need the drugs, so the costs would be much lower for the patients as well.
  - satyrnein 6y ago
    At least some of those marketing costs would still be needed, they'd just be called "education" or "outreach" or "access" programs. Patients and doctors still need to be informed of new advancements to improve outcomes. For the second point, cost spreading helps particular people in particular circumstances, but doesn't lower overall cost. You're just running a wealth transfer or insurance program in addition at that point.
    - DougWebb 6y ago
      Patients do not need to be informed of new drugs, and never were until pharmaceutical companies lobbied Congress to remove the ban on direct advertising, which had been put in place as a consumer protection law due to 19th century "snake oil" salesmen/con-men. For doctors, a monthly publication of drugs currently in development, their status, and their uses would be adequate. It'd be much better for doctors to get their information from a published journal than the advertisements in some trade magazine or attractive reps handing out free samples. Regarding You're just running a wealth transfer or insurance program in addition at that point. Yes, that would be a major purpose of nationalizing drug R&D and manufacturing. You could say the same about every public service.

francisofascii 6y ago

Just got the bill yesterday for my "free" Covid test. $250, insurance pays $105, you owe $145. (The test was free, the office visit was not.)

sushshshsh 6y ago
Who is to blame? The government for not collecting taxes from you and using that money to pay the doctor? The doctor for billing too high for the visit? The insurance company for not covering more of the price? Personally I would seek to understand why the doctor is billing so much and how that can become more fair for everyone involved.
- Taek 6y ago
  A big element here is that the free market is being choked out. Consumers walk into healthcare facilities without any idea what they will be paying when they walk out, and therefore have no ability to choose one facility over another based on price. Because that ability doesn't exist, there is no downwards price pressure anywhere at the consumer level for medical services. I think we'd see a lot more results if we asked 'why aren't these facilities putting more efforts into reducing costs' rather than asking 'what makes this so expensive?'
  - ianleeclark 6y ago
    > Because that ability doesn't exist, there is no downwards price pressure anywhere at the consumer level for medical services. It's important to note that the downward pressure you'd see here is only for elastic goods which most healthcare-related things likely aren't.
    - lotsofpulp 6y ago
      There are plenty of healthcare related things that one can shop for, such as this COVID test. The price could easily be advertised on the healthcare facilities website. But it’s not because it would hurt revenue since price transparency benefits buyers, and price obfuscation benefits sellers by allowing them to price discriminate and charge each seller the most each seller is able to pay.

motohagiography 6y ago

The U.S. health system is what happens when corruption goes on so long you just call it the culture. "All professions are a conspiracy against the layman." was said by either G.B. Shaw or Ambrose Bierce, depending on your reference point. It's a form of business that is orthogonal to producing things people want, where instead it's mainly in the business of depriving people of what they need. Rent seeking is what professions and institutions are designed to do, to create scarcity in exchange for a promise of quality, but somehow that latter part gets lost. Some years ago when "disruption" was the popular idea, I put together a list of vulnerable industries. The sharing economy was an attack on businesses whose profits depended on a regulatory bar to entry (Uber/AirBnB etc.) The list was based on the presence of labour unions and professional associations, using the hypothesis that their existence creates a price premium that tips the economics of their industry in favour of automation, or at least in favour of economic substitution away by customers to a new tech that meets %80 of their need. Maybe we have the technology now to create an economic rentier map that lays out parts of the economy that have artificially propped up rent-seeking groups, as a means to develop new tools to avoid them. Regarding the rentierism of the health business, I've noticed an anecdotal trend among some aging boomers who are rejecting that system altogether, and choosing palliative care and to die at home instead of in the hallway of a hospital, or worse, spending years in a long term care home. The best thing that could happen to healthcare is that instead of seeing it as broken, we should recognize that it looks like that because works for someone where we can't see who or how, and the goal is not to problematize and fix it, but to make it work for everyone else.

yesenadam 6y ago
> either G.B. Shaw or Ambrose Bierce, depending on your reference point. I googled it, it's from Shaw's Doctor's Dilemma. (I'm a big fan of both those guys.) Only 3 hits on the internet saying it was Bierce - all 3 are your comments on HN! hehe.
- motohagiography 6y ago
  That's hilarious. I'd swear I read it in the Devil's Dictionary it in a fortune file somewhere.

mchusma 6y ago

EconTalk has many great episodes digging into interesting aspects that are touched on here: why the US healthcare so expensive for so little extra value. This episode about the Oklahoma group that has had low cost & transparent prices for surgeries for many years. http://www.econtalk.org/keith-smith-on-free-market-health-care/ http://www.econtalk.org/keith-smith-on-free-market-health-ca... This one on why we get such expensive drugs with marginal benefit: http://www.econtalk.org/vinay-prasad-on-cancer-drugs-medical-ethics-and-malignant/ http://www.econtalk.org/vinay-prasad-on-cancer-drugs-medical... This one on benefit management companies terrifying behavior: http://www.econtalk.org/robin-feldman-on-drugs-money-and-secret-handshakes/ http://www.econtalk.org/robin-feldman-on-drugs-money-and-sec... (Also PS Russ Roberts on this show is a treasure. His way of thoughtfully engaging with others is something I try to learn from.)

claudeganon 6y ago
Roberts is well-read and diplomatic, but I wouldn’t exactly call what he does with his show thoughtful engagement. The very few instances he has guests that truly diverge from his ideological dispositions, he mostly dismisses their arguments without the same rigor that he defends those within his biases. His conversation with Elizabeth Anderson on workplaces as a form of private government is a good example of this: https://www.econtalk.org/elizabeth-anderson-on-worker-rights-and-private-government/ https://www.econtalk.org/elizabeth-anderson-on-worker-rights...
- specialist 6y ago
  Ya. It'd be nice if the Freedom Markets™ advocates would remain mindful of the "freedom from coercion" parts of libertarianism. I remain mystified by the application of different standards for governments and corporations.
- refurb 6y ago
  Russ isn’t 100% unbiased (is anyone), but what I like about his podcast (been a while since I last listened) is he is willing to bring people on with very different views and let’s them have the floor for a bit. He also does a nice job of “O.K., this is where we have differing opinions”. Unlike a lot of media that covers politics issues, it’s much more civilized to me.

sytelus 6y ago

In the case of health care, consolidation has probably made things worse by muting competition. There are now five big insurance companies, three big wholesalers, three large pharmacy chains and three big benefit managers. In the case of health care, consolidation has probably made things worse by muting competition. There are now five big insurance companies, three big wholesalers, three large pharmacy chains and three big benefit managers.

lotsofpulp 6y ago
That is the situation I see with pretty much all businesses. 2 to 3, maybe 5 large organizations who can outcompete everyone due to economies of scale, especially due to advancements in technology.
- tryptophan 6y ago
  Healthcare administration isn't really a high tech business though. I think the culprit here is obamacare; after all it was written by the insurance companies. Who's surprised that it benefits them the most? Insurance stocks absolutely took off after it was passed.
  - lotsofpulp 6y ago
    Databases, instant communications, time And chart tracking all allow healthcare facilities (and every other private business) to scale up much easier and with far less labor than ever before. I can right now download all my health info into Apple health app from my healthcare provider’s website and use that anywhere I want, whereas that might have required a few calls and someone’s time.
boublepop 6y ago
As I see it consolidation isn’t the root cause. The central problem is that pharmacy benefits manager have been allowed to invert the normal market. Normally for someone arranging the “resale” of a product from a producer to costumers would make more money if the price got negotiated down. But since PBMs have forced rebates of 70%+ that means that they are making most of the money on a drug sale. So even thought they are representing the buyers at the negotiation table, they want the prices as high as they can be. Producers are sitting down at the table and outbitting each other not on how low the price could be, but how high they are willing to make it, it’s absurd. And you’d think the insurance companies or pharmacies would object, but often they are owned by the same group so they all just share the proceeds from ripping of the people.

tomrod 6y ago

I can't read due to pay wall, but have a guess. Data systems, such as Epic, seem unnecessarily close walled. Is Epic the big winner, pharma, or something else?

test1208test 6y ago

sacdcsdc

test1208test 6y ago

Tessts

sriku 6y ago

> The excess profits of the health-care firms are equivalent to $200 per American per year, compared with $69 for the telecoms and cable TV industry and $25 captured by the airline oligopoly. Only the five big tech “platform” firms, with a figure of $250, are more brazen gougers. wow!

tkeAmarktinClss 6y ago

I didn't see anyone mention physicians. The base rate of the profession is around 250k per year. Specialities are not included in that calculation. Specialities are closer to 400k to 500k per year. This is not natural. This is 130+ years of regulatory capture. Other countries pay their physicians half as much. Not to mention outcomes are basically the same.

bawana 6y ago
Actually, you are wrong. PCPs start at 90-100k salary. If you are quoting gross income before expenses then its about 200k. The overhead of running a physicians office is high. In terms of specialists, it's come down quite a bit. Just check the ads in the back of professional journals. 400k is more like the 70s. Also you can look at the training of all the recent physicians, - many are from abroad. Same thing that the Silicon valley industry has been doing , hiring foreigners at lower pay. Education for physicians abroad is FREE. Whereas here you have to go to college (>50k a year tuition x 4) AND medical school (60k a year x 4) and then training 3-7 years at low income (40k a year) and crap life style.
- tkeAmarktinClss 6y ago
  Please post a citation
  - boublepop 6y ago
    Perhaps you could post a citation yourself before asking it if others.
- SkyPuncher 6y ago
  FYI, all of the numbers you listed are close, but not totally accurate. See my other comment: https://news.ycombinator.com/item?id=23733575 https://news.ycombinator.com/item?id=23733575 That being said, the overall point is correct. There is a HUGE opportunity cost to becoming a physician. People would rather ignore that because it doesn't support their argument. It's much easier to cherry pick point-in-time data without looking at the larger picture.

vgchh 6y ago

I recently got a shock when I went for a tooth extraction. A nurse and a surgeon spent an hour to complete the procedure. It came out to ~$6000. I had to pay for $700 for calcium grafting right then and there and they were going to get back to me for the remaining after consulting with insurance plan. I am still waiting for the call, albeit terrified of the possibilities. I understand there are many parties in the food-chain. Still $6K for two people for an hour, feels like ripped to the gills - almost dirty.

durnygbur 6y ago
At which point one draws the line and says "wait... they're not doctors or dentists - they're scammers"?
mschuster91 6y ago
reminds me of an old joke: 15$ for positioning a screw, 10.000$ to know where to put that screw. If the US wants to tackle its healthcare costs, it not only has to get rid of the pointless middlemen everywhere and the notion of uninsured people whose bills have to be picked up by the rest, but also enlarge its supply of new doctors, and reduce the student debt they have to pay off.

specialist 6y ago

This paper says 4% of cost goes towards "excess profits". I accept this without reservation. But it remains unsatisfying. What about the other overheads? Marketing, customer acquisition and retention? Health plan negotiators? Payment processing? Executive compensation? Etc, etc. Many others have guesstimated USA healthcare costs 50% more per capita than Canada. So eliminating administrative overhead would whack 1/3rd of the costs, right? Advocates for single payer could better emphasize all the unnecessary inefficiencies of our Freedom Markets™ health care system. All those "bullshit jobs" David Graeber has been telling us about.