5 ms·

I think what all of these countries have in common is that they have a strong entity negotiating prices on behalf of the patients, drastically lowering the pric

by Nitramp 15y ago

I think what all of these countries have in common is that they have a strong entity negotiating prices on behalf of the patients, drastically lowering the price, and to a varying degrees also dictating what treatment is appropriate. It'd be really nice if health care could work like a regular market, but evidence and intuition suggest it simply doesn't. As others have commented, people don't comparison shop even if they could. It's a bit like having no idea how a car works or what could be wrong with it, and then being asked to pick the best mechanic and strategy to fix it. Except of course, that it's not a car but your life or somebody else's depending on the right choice. I think it's unrealistic to expect a working market economy to develop under such circumstances. One or multiple big entities negotiating prices and dictating treatment comes at the cost of less freedom for the providers and also less freedom for the consumers. Whether it gives better or worse care I wouldn't be too sure - on the one hand, special cases won't get specialised treatment, on the other hand trusting the decision of what needs to be done effectively to the provider sounds like it will cause over-treatment. The freedom aspect probably drives the USA to the current system, but given the measurable effects, it just seems like bad policy.

yummyfajitas 15y ago
I think what all of these countries have in common is that they have a strong entity negotiating prices on behalf of the patients, drastically lowering the price, and to a varying degrees also dictating what treatment is appropriate. The US has these entities too - they are called "insurance companies". As others have commented, people don't comparison shop even if they could. This is simply false. People with low deductible insurance don't comparison shop because they have no incentive to do so. I have no insurance (my startup is minimally funded), and I do comparison shop. It's a bit like having no idea how a car works or what could be wrong with it, and then being asked to pick the best mechanic and strategy to fix it. Here is what I did a few weeks back. I went to a doctor who ordered an MRI. I called around, discovered the price of MRI's varied from 5-7k (INR, not USD), and then picked the closest one to my home (the price difference was small enough that I didn't care). When it came time to get treatment, I did research on the internet, as well as asking three separate doctors. They all independently had the same recommendation - microlumbar discectomy on L5-S1. This was fairly apparent based also on the pattern of pain I was suffering, and just by looking at the MRI. I ruled out one hospital because it seemed dirty, chose a doctor/hospital to have it done (not the cheapest, but not the priciest), downgraded from a deluxe room to a private one [1], and got myself fixed up. This doesn't work for emergency medicine, but most medicine is not emergencies. [1] The default over here is to give white guys the gold-plated options.
- ktizo 15y ago
  So you are saying that US insurance companies are dramatically lowering the prices. If so, then compared to what exactly? The US has some of the highest costs per treatment of just about anywhere in the world, so if the insurance companies are dramatically lowering prices, then the only conclusion I can draw is that the US healthcare providers must be powering all their equipment by burning money for fuel or something.
  - mikeash 15y ago
    The premiums set by American insurance companies will be largely driven by the cost of the services they provide. If they get providers to lower costs, then insurance premiums will decrease across the board, both for that company and their competitors. They can negotiate small discounts in their own individual favor, but large measures that truly cut costs and not just prices will impact everyone. As such, there's no real reason for insurance companies to negotiate for lower costs, since competition will ensure that their premiums decrease by a similar amount and they don't make any more money. Since demand for health care is pretty inelastic, they won't gain substantially more custom by lowering prices, thus they have no reason to try to substantially cut costs..
  - malay 15y ago
    They are certainly lowering the prices, hence the constant back and forth (literally for 30 years straight) of local market consolidation between the buyers (health insurers) and the suppliers (hospitals/physicians). There are legal fights going on all over the country because of all the pricing issues; Pittsburgh is a great example of how the dominant insurer (Highmark) simply refused to pay the dominant provider's (UPMC) price increase. Highmark's solution? Vertical integration and just buy the other local health system. In terms of MRIs, you have some odd effects with pricing, particularly when the MRI is seated inside of a massive tertiary care center instead of a standalone facility. If you look at the pricing discrepancies, it is almost always related to getting the MRI done at an academic medical center versus one of the ambulatory care centers. The problem is actually pretty simple: hospitals are terrible at cost accounting and totally game it. Instead of taking the leasing costs over the expected uses of the machine, adding in time for the technician and a bit of a real estate or facility charge, they allocate hospital costs (from all departments/overhead) to services based on their expectations on what they can charge. Michael Porter and his staff at HBS are looking at this right now. Further complicating MRIs (I'm not sure if this is included in the study's cost estimate) is that radiologists essentially operate in a cartel fashion. They are rarely, if ever, employed by the hospital (like most doctors), but band together and set outrageous prices for reading images. Radiology, despite being non-patient facing and limited liability (they render opinions to other doctors, not patients), is one of the most lucrative medical trades. Eventually, traditional radiology should give way - either through disruption (overseas or computers) or by other doctors simply saying why the heck should a radiologist get money for reading an image I can read myself and will then have to intervene on anyways? Startups have emerged in price/transparency space (e.g. Castlight Health) and will hopefully start to put pressure on hospitals/physicians to actually compete with one another and bring down costs. Since they have so much local market power, there is only so far an insurer can go without owning an entire market.

by Nitramp 15y ago

yummyfajitas 15y ago

I think what all of these countries have in common is that they have a strong entity negotiating prices on behalf of the patients, drastically lowering the price, and to a varying degrees also dictating what treatment is appropriate. The US has these entities too - they are called "insurance companies". As others have commented, people don't comparison shop even if they could. This is simply false. People with low deductible insurance don't comparison shop because they have no incentive to do so. I have no insurance (my startup is minimally funded), and I do comparison shop. It's a bit like having no idea how a car works or what could be wrong with it, and then being asked to pick the best mechanic and strategy to fix it. Here is what I did a few weeks back. I went to a doctor who ordered an MRI. I called around, discovered the price of MRI's varied from 5-7k (INR, not USD), and then picked the closest one to my home (the price difference was small enough that I didn't care). When it came time to get treatment, I did research on the internet, as well as asking three separate doctors. They all independently had the same recommendation - microlumbar discectomy on L5-S1. This was fairly apparent based also on the pattern of pain I was suffering, and just by looking at the MRI. I ruled out one hospital because it seemed dirty, chose a doctor/hospital to have it done (not the cheapest, but not the priciest), downgraded from a deluxe room to a private one [1], and got myself fixed up. This doesn't work for emergency medicine, but most medicine is not emergencies. [1] The default over here is to give white guys the gold-plated options.

ktizo 15y ago
So you are saying that US insurance companies are dramatically lowering the prices. If so, then compared to what exactly? The US has some of the highest costs per treatment of just about anywhere in the world, so if the insurance companies are dramatically lowering prices, then the only conclusion I can draw is that the US healthcare providers must be powering all their equipment by burning money for fuel or something.
- mikeash 15y ago
  The premiums set by American insurance companies will be largely driven by the cost of the services they provide. If they get providers to lower costs, then insurance premiums will decrease across the board, both for that company and their competitors. They can negotiate small discounts in their own individual favor, but large measures that truly cut costs and not just prices will impact everyone. As such, there's no real reason for insurance companies to negotiate for lower costs, since competition will ensure that their premiums decrease by a similar amount and they don't make any more money. Since demand for health care is pretty inelastic, they won't gain substantially more custom by lowering prices, thus they have no reason to try to substantially cut costs..
- malay 15y ago
  They are certainly lowering the prices, hence the constant back and forth (literally for 30 years straight) of local market consolidation between the buyers (health insurers) and the suppliers (hospitals/physicians). There are legal fights going on all over the country because of all the pricing issues; Pittsburgh is a great example of how the dominant insurer (Highmark) simply refused to pay the dominant provider's (UPMC) price increase. Highmark's solution? Vertical integration and just buy the other local health system. In terms of MRIs, you have some odd effects with pricing, particularly when the MRI is seated inside of a massive tertiary care center instead of a standalone facility. If you look at the pricing discrepancies, it is almost always related to getting the MRI done at an academic medical center versus one of the ambulatory care centers. The problem is actually pretty simple: hospitals are terrible at cost accounting and totally game it. Instead of taking the leasing costs over the expected uses of the machine, adding in time for the technician and a bit of a real estate or facility charge, they allocate hospital costs (from all departments/overhead) to services based on their expectations on what they can charge. Michael Porter and his staff at HBS are looking at this right now. Further complicating MRIs (I'm not sure if this is included in the study's cost estimate) is that radiologists essentially operate in a cartel fashion. They are rarely, if ever, employed by the hospital (like most doctors), but band together and set outrageous prices for reading images. Radiology, despite being non-patient facing and limited liability (they render opinions to other doctors, not patients), is one of the most lucrative medical trades. Eventually, traditional radiology should give way - either through disruption (overseas or computers) or by other doctors simply saying why the heck should a radiologist get money for reading an image I can read myself and will then have to intervene on anyways? Startups have emerged in price/transparency space (e.g. Castlight Health) and will hopefully start to put pressure on hospitals/physicians to actually compete with one another and bring down costs. Since they have so much local market power, there is only so far an insurer can go without owning an entire market.