8 ms·
This is what happens when the buyer doesn't care what the price is because its not their money and the seller doesn't publish prices to allow comparison. Insur
by tastyfreeze 5y ago
This is what happens when the buyer doesn't care what the price is because its not their money and the seller doesn't publish prices to allow comparison. Insurance companies only care if a price is outside of "normal" as they can just increase premiums as hospitals push "normal" continually higher.
Hospitals make ridiculous profit. Insurance companies make ridiculous profit. Neither of them care at all what the real customer gets charged.
See also Federally guaranteed student loans
- afsafsaf 5y agoShouldn't the insurance company care because if they can reduce their premiums, they can be more competitive for employers/purchasers? I don't understand why the insurance company isn't cost driven.
- pmalynin 5y agoInsurance companies are require to put a certain % of the premiums towards actual healthcare. In other words administrative fees (read profit) is capped as a % of the premium. The higher the premium the higher the profit.
- huitzitziltzin 5y agoAdministrative fees =/= “profit”. That is wrong. Administrative fees include profit, but also salaries, IT expenses, whatever other costs it takes to actually run an insurer.
- s1artibartfast 5y agoIs the rest correct? That is to say, there is an incentive for higher overall insurance spend, because it allows for higher admin fees (including profit)
- SomewhatLikely 5y agoThese ridiculous markups existed before those caps imposed by the ACA.
- SkittyDog 5y agoThe ACA did not impose those caps, in the first place. It merely standardized them. State insurance laws have mandated the same kind of caps for decades... I believe they date back to around WWII, but I don't know for certain.
- quinnjh 5y agoMedical costs being high mean that you have to buy the insurance
- SkittyDog 5y agoAnother poster mentioned this, bur I think it's worth talking about in more detail, because it's at the heart if exactly what's broken about US health care. Every US state has laws that prohibit insurance companies from collecting "too much" profit from the premiums they charge their customers. In most states, the limit is given as a percentage of pure profit. So insurers set their premiums based on their expected payout costs plus operating expenses, and usually make premium adjustments on an annual basis. (That's why most US drivers received a bunch of rebates from our auto insurers, early in the COVID pandemic. The sudden unexpected drop in accident rates drastically reduced the insurers payout costs. They were required by law to return the excess.) The intended purpose of these laws was to protect consumers from predatory insurance companies. But in modern practice, with basically zero effective cost controls on medicine, it's created a perverse incentive: Rising healthcare costs are the easiest opportunity for health insurers to increase their absolute profits... All they have to do is sit back and let health care providers keep raising their prices. But: • the costs are passed only indirectly to the consumers who ultimately pay • the market for health care is so terribly distorted • health care demand is highly inelastic So normal market mechanisms (like price signaling) aren't very effective at containing the rise in costs.
- deleted 5y ago[deleted]
- mox1 5y agoHave you ever "shopped around" for health insurance? Maybe ACA people do, but amongst 2 or 3 giant companies on the exchange..whose prices, features, benefits, etc. are basically the same. Further, most bigger companies self-insure, and only use the insurance company to provide services. So F100 company partners with Blue Cross Blue Shield just for billing, administration of the plan, etc. What does BCBS care how much surgery costs? They are getting Admin fees the same whether its $5,00 or $10,000. Does a F100 employer really have the time and energy to question whats going on? They just look at the cost last year, raise the price for their employees by %XY and march forward. Even further, health insurance is incredibly regulated, on a state level. If you have a good idea to "disrupt" the industry, its such a slog to get anything done. Your best bet is to partner with an existing insurance company and go from there.
- lotsofpulp 5y agoBCBS is a network that insurers partake in. But the managed care organizations (health insurance companies) still complete with each other. UHC, Anthem, Cigna, CVS, Humana, Centene, etc. there are many. Considering they all have low single digit profit margins per their 10-K reports, it seems evident that there is sufficient competition to incentivize low prices for managed care services.
- evergrande 5y agoThis chart speaks volumes. https://www.investors.com/wp-content/uploads/2018/03/CPIChart2018.png https://www.investors.com/wp-content/uploads/2018/03/CPIChar...
- nebula8804 5y agoI've seen this chart blasted around the mainstream media and I feel it is sort of cheating. The categories below the 0% line: Cellphone Service, Software, Toys and TVs all benefited mainly from one miracle innovation: Moore's Law. Other than that, have they really done anything else innovative to keep prices that low? If you eliminate anything that mainly benefited from Moore's law then you can derive a very different picture from the chart. I guess we should be thankful to Moore's law and figure out how to apply it to Childcare, College, and hospital services? I guess thats where Elon Musks's robot comes in to play. It can teach you skills to get a job, take care of your kids, and then perform your surgery. Problem solved! :)
- KoftaBob 5y ago> Hospitals make ridiculous profit. What's interesting about this is that around 75% of hospitals in the US are actually non-profit. Source: https://www.kff.org/other/state-indicator/hospitals-by-ownership/?currentTimeframe=0&sortModel=%7B%22colId%22:%22Location%22,%22sort%22:%22asc%22%7D https://www.kff.org/other/state-indicator/hospitals-by-owner... All this ends up meaning is that any revenue above their expenses is plowed into hiring more and more administrative staff and building new facilities.
- huitzitziltzin 5y agoI’m a health economist who works on hospitals. There is a long-standing question in our literature about whether non profit and for profit hospitals actually act differently. My sense has always been no. You also leave out one important place for “extra” money to go: salaries within the hospital.
- seibelj 5y agoThere are many who work in non-profits with high 6 or 7 figure salaries. Seems like profit to me! Back in 2015 the president of Boston University raked in $2.5 million https://www.bostonmagazine.com/education/2017/12/11/boston-university-president-salary-2/ https://www.bostonmagazine.com/education/2017/12/11/boston-u...
- KoftaBob 5y agoThat's only 50 students worth of tuition for that year, or 0.3% of tuition brought in that year. While $2.5M is obviously a lot of money, it's a drop in the bucket in terms of how much the university brought in. For universities and hospitals, it's not the high salaries of a few execs, it's the massive amounts of administrative staff. For the larger hospital systems, several thousand admin staff making 60-70k+ adds up to waaaaay more than the fat paychecks that a dozen execs make. It's basically a snowball effect. Execs get bonuses for bringing in more revenue, but it's a non-profit so they have to spend it somewhere, so they expand admin and build facilities, rinse repeat.
- 5y ago
- handrous 5y ago> This is what happens when the buyer doesn't care what the price is because its not their money and the seller doesn't publish prices to allow comparison. The norm in most systems (in developed states, anyway) is that the buyer doesn't care what the price is, to at least the same degree that they don't in ours. Yet they're all much cheaper than our system.
- mikem170 5y agoMost of those other systems have price controls for everything, like Medicare does in the U.S. The U.S. is different because we allow corporations to lobby/bribe/buy politicians, which most other developed countries consider to be corruption. So we have a health care system optimized for profits, not people.
- handrous 5y agoBingo, see my post elsewhere in this thread :-) I'm no expert but have been reading about this for a couple decades now, and the consistent element in every non-US system in developed countries, despite a vast variety of approaches, is indeed price controls, either explicit or de facto. I'm highly skeptical of any reform attempt in the US that doesn't have that as a central element, due to, you know, gestures at the rest of the world.
- derekjdanserl 5y agoThat’s right. But the employer-dependent health insurance arrangement in the U.S. was implemented as an alternative to the various political dynamics that regulate most countries’ healthcare systems and it has successfully done so. The problem, in other words, is that a truly free-market healthcare system would be politically infeasible in a major first-world nation. So instead of a public healthcare system that would provide minimal healthcare services to all citizens, they tied it to employment, effectively moving it from the consumer market to the labor market. So this arrangement, like most neoliberal policies including Obamacare, has served merely to buy more time for the ruling class. And worst of all it has worked.
- ethbr0 5y ago> Hospitals make ridiculous profit. "It depends." Non-trauma hospitals in affluent areas that perform lots of elective procedures make a lot of profit. Trauma centers in less-affluent, usually urban or rural, areas that deliver emergency care almost always run at a loss, and are subsidized by city / state / federal funds to maintain capability.
- derekjdanserl 5y agoWhether it’s hospitals, hosipital owners, doctors, or other healthcare industry benefactors, someone is making a killing beyond just the insurance companies. Ballooning administration is not only a cause but a symptom, which is why free market solutions can’t overcome the problem. Establishing new healthcare institutions will depend on the existing healthcare industry, which will expect the same profits or it won’t cooperate. There is no way around the fact that free-market healthcare is just deeply immoral and inhumane.
- tastyfreeze 5y agoYour entire argument is based on the assumption that healthcare is a free-market which it is obviously not. The mechanisms of price discovery are not present to all players in the market. When there is an unbalance in information in any market it will always be detrimental to the player with less information. The way to fix the problem is to create a free-market.
- lotsofpulp 5y agoThere never will be a free market due to inability to negotiate prices and obtain quotes. A person who had a stroke is not going to be evaluating offers from various surgeons. Nor are 99% of people going to know what healthcare they need or don’t need. That is the service a managed care organization provided (aka insurance company).
- tynpeddler 5y agoSpending for emergency health care is between 2%-7% of total US health care spending depending on who you ask. It's an important consideration of course, but the vast majority of health care can exist in a market to one extent or another.
- WillPostForFood 5y agoFWIW, the institution in the article, Scripps Health, is a non-profit. Would be interesting to see where the money is going.
- throwaway0a5e 5y agoHospitals are routinely nonprofit orgs. I assume scripps overpays everyone and pays for crap it just doesn't need like hospitals do.