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"Federal funding typically covers 80% of bus purchases, with agencies responsible for the remainder." Well, there is your answer. The one making the purchase i
by RobKohr 1y ago
"Federal funding typically covers 80% of bus purchases, with agencies responsible for the remainder."
Well, there is your answer. The one making the purchase isn't the one primarily paying for the purchase. This makes them less sensitive to pricing.
Kinda like how expensive healthcare is since it is paid for by insurance.
Or how you don't care how much you put on your plate or what you choose to eat at an all you can eat buffet.
The second you detach the consumer from the price of something, even through an intermediary such as health insurance, that is when they stop caring about how much something costs, and so the price jumps.
- deleted 1y ago[deleted]
- frollogaston 1y agoShouldn't insurance care about the pricing though? I get why federal govt isn't sensitive, given 0 competition.
- whimsicalism 1y agomassive proportions of utilization come from govt subsidized plans
- SoftTalker 1y agoInsurance profit is limited to a percentage of what they pay out. So the more they pay, the more money they make.
- frollogaston 1y agoOh, that's important info. Also such a rule suggests that health insurance isn't a competitive market.
- littlestymaar 1y agoThere's no such thing as a “competitive market” in the real world.
- samdoesnothing 1y agoYes there is.
- littlestymaar 1y agoName a single one then. It's funny to see that this was my most downvoted comment ever on HN. Looks like blasphemy against the “free market” religion isn't tolerated here.
- frollogaston 1y agoAll the other kinds of insurance
- littlestymaar 1y agoAh yes, like the health insurance market, so competitive it took a CEO murder to fix abusive practices from the dominant actor. How compelling of an example, really.
- frollogaston 1y agoTo clarify, "other kinds of insurance" means not health insurance
- ninalanyon 1y agoYou first have to agree on a definition of free in this context. When Adam Smith was writing the Wealth of Nations most of the transactions in the market were between entities with more or less comparable power. Local people bought stuff from local suppliers. This is very much not the case any more when it comes to transactions involving private individuals on one side and corporations on the other.
- estearum 1y agoAlso the largest insurers increasingly own the doctors you’re seeing too. Also the pharmacy you get your drugs from. Also the entity that negotiates prices between pharma companies and your insurer. More healthcare consumption = better, across the board
- doctorpangloss 1y agoUh, no… they want to deny claims. The best situation for insurers is that you are healthy for a while, then abruptly die of something that cannot be treated.
- frollogaston 1y agoThey are accepting claims that are way more expensive than in any other country, so I don't think this is their game
- estearum 1y agoUh no, they don't. Not if they're also the ones who provide healthcare. Simply denying claims isn't even remotely close to the financially (and obviously not the politically) optimal strategy. The optimal strategy if you own both the insurer and the provider is a combination of premiums, copays, deductibles, and maybe even some totally unnecessary care to drive up volume. Lower margin on dramatically higher volume is still dramatically more money. Lower margin actually provides political cover for your $400 billion revenue years.
- hibikir 1y agoEven when it's not the insurer, it's at least a hospital. Many a doctor around me that used to have a private practice sold to one of the hospital chains, as they promised more money than by owning, solely due to superior collective action advantages. A large insurer can bully a private practice into cutting costs, but a hospital network that handles 40% of ERs in the metro area? The insurance company can lose. So everyone makes more money but the people paying insurance.
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- VirusNewbie 1y agowow, why would they cap it that way? that makes no sense.
- darkerside 1y agoIt makes a ton of sense in theory. In a fair market, you would want to prevent the insurer from charging super high premiums that let them make a large profit relative to the cost of care provided. The problem is that it doesn't stop there. There is a second order effect.
- sleepybrett 1y agoIf the feds are mandating USA manufacture in order to secure the funding for the muni.. then it just really amounts to welfare for the bus manufacturer. Which is probably the right way to support american manufacturing.
- foolswisdom 1y agoAs noted by sibling comments, the arm of the Healthcare company that wons the doctor's office wants to collect as much as possible, while the insurance arms are anyway capped at how much they can make. Incentives (conflict of interest) are towards paying more.
- nicoburns 1y agoGovernments of countries that have public health care generally are price sensitive. The competition is from other governmental functions that need the budget.
- silotis 1y agoThat's less a matter of price sensitively and more that other countries usually have price controls on healthcare. That's why doctors make so much less and drugs are so much cheaper outside the US: it's literally illegal to charge more.
- cyanydeez 1y agoOr how government bailouts go to corporations
- Fade_Dance 1y agoI actually don't see how that follows from OP.
- Y_Y 1y agoAnd congratulations to any of today's lucky ten thousand who are just learning of the Principal-Agent Problem. https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
- trollbridge 1y agoAnd watch out for troublesome agents who often propose themselves as the answer to the principal-agent problem they created in the first place.
- airstrike 1y agoHow about the ten thousand learning about "today's lucky ten thousand"?
- wyre 1y agohttps://xkcd.com/1053/ https://xkcd.com/1053/
- phil21 1y agoI'm convinced that a great majority of problems in the US these days fundamentally boils down to principal agent problems. The 2008 financial crisis is a great example. Once banks no longer kept mortgages on their own books, it just became a matter of time until that was going to blow up. The incentives change.
- breatheoften 1y agoIt takes more than just misaligned incentives to get a banking crisis -- you have to have structural corruption preventing the transfer of the loss gradient back to the "misaligned" decision makers. It's somewhat disingenuous (or overly innocent) to reimagine the pathways which power structural corruption as "innocent ignorance in the face of bad incentives". The real world has "actually bad" actors -- not just misaligned incentives.
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- ericmcer 1y agoIt's even worse, I will use my healthcare just because it is free. I would feel like a moron not get my free physical, bloodwork and other labs every year. If it was $20 I wouldn't bother but its almost obligatory to take something "because its free". Once I learn something is free it is like I already own it, so now I don't get it if I take it, I lose it if I don't.
- NoahZuniga 1y agoThese free things are preventative. If you take them, the insurance company expects you to need less healthcare in the future, so actually this is a good thing (and not a problem as in the op)!
- tehjoker 1y agoPreventative care is free because it saves a tremendous amount of money for the insurance company and physical and emotional hardship for yourself by catching bad things early.
- nickff 1y agoYour view is a commonly-held one, and makes a lot of sense; unfortunately there is very little support for it. One data point to the contrary is the Oregon Health Care Study, which showed that 'free' preventative care increased healthcare spending, but did not improve lifespan or reduce long-term cost.
- radlad 1y agoI'm not sure they determined that it did not improve lifespans. Here's some snippets from the Wikipedia article (https://en.wikipedia.org/wiki/Oregon_Medicaid_health_experiment https://en.wikipedia.org/wiki/Oregon_Medicaid_health_experim...): > On average, Medicaid coverage increased annual medical spending by approximately $1,172 relative to spending in the control group. The researchers looked at mortality rates, but they could not reach any conclusions because of the extremely low death rate of the general population of able-bodied Oregon adults aged 19 to 64. > In the first year after the lottery, Medicaid coverage was associated with higher rates of health care use, a lower probability of having medical debts sent to a collection agency, and higher self-reported mental and physical health. In the 18 months following the lottery, researchers found that Medicaid increased emergency department visits. > Approximately two years after the lottery, researchers found that Medicaid had no statistically significant impact on physical health measures, but "it did increase use of health care services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain."
- thegreatpeter 1y agoPosts like these on Hacker News are quite interesting bc if this scenario comes up in any "left vs right" debate, it's always shot down as a terrible concept and idea to keep the government out of it.
- marbro 1y agoWe need to shut down the government until buses and other wasteful borrowing and spending is eliminated. Local governments should pay for 100% of their buses rather than 20%.
- avar 1y ago> The second you detach the consumer from the > price of something, even through an > intermediary such as health insurance, that > is when they stop caring about how much > something costs, and so the price jumps. In reality, this claim doesn't survive a cursory glance at the OECD's numbers for health expenditure per capita[1]. You'll find that (even ignoring the outlier that is the US health care system) that in some countries where consumers bear at least some of the cost directly via mandatory insurance and deductibles, the spending per capita (and which survives a comparison with overall life expectancy etc.) is higher than in some countries where the consumer is even further detached from spending, via single-payer universal healthcare systems. Or, the other way around, it's almost like it's a very complex issue that resists reducing the problem to an Econ 101 parable. 1. https://www.oecd.org/en/publications/2023/11/health-at-a-glance-2023_e04f8239/full-report/health-expenditure-per-capita_735cda79.html https://www.oecd.org/en/publications/2023/11/health-at-a-gla...
- trollbridge 1y agoIf consumers actually directly paid the whole cost for health services (as opposed to a fixed price, like a $20 copay, etc.), the prices charged would become far more regular. An easy way to examine this is to compare the price of over-the-counter versus pharmaceuticals. If a third party weren't paying for them, the price would have to either come down to something affordable to the average person, or else the market for it would shrink to only the wealthy.
- avar 1y agoI'm aware of your and the GP's claim, I'm saying it doesn't survive contact with reality. If you look at e.g. the per-dose price of insulin it's as low or lower in countries with single-payer universal systems, where someone requiring insulin is never going to have any idea what it even costs, because it's just something that's provided for them should they need it. In that case it's usually some centralized state purchaser that has an incentive to bring prices down, or a government that has an overall incentive to keep the inflation of its budgetary items down, which ultimately comes down to public elections etc. In any case, a much more indirect mechanism than someone who'd be directly affected paying the costs associated with the product, which directly contradicts this particular argument.
- barchar 1y agoI mean if it's a strict 80/20 split the incentives are the same as a 0/100 split no?
- salmonellaeater 1y agoThe transit agency will choose more expensive features that do not meet a 1x ROI but do meet a 5x ROI.
- WalterBright 1y agoIt's not just about not caring. It's a system that is wide open for grift. For example, the mayor awards the contract to X, and X in return donates to his campaign reelection.
- sam345 1y agoExactly. Same for Universities. Thank you.
- qgin 1y agoI have a $6500 deductible. I definitely care what things cost because my insurance almost never actually helps pay for anything unless I have an unbelievably bad year. The problem is that literally nobody can tell me how much anything is going to cost until I get the bill in a month. Not even because they don't want to tell me. Nobody at the desk even knows what my price is going to be because it's all numberwang.
- ethagknight 1y agoYou are the best customer, thinking you’re a smart customer!
- moduspol 1y agoNot defending insurance but theoretically you do also get a better rate than the uninsured rate just by having it go through the health insurance. I say “theoretically” because I’ve also heard they’re often willing to cut some pretty good deals if you don’t have insurance and pay cash. And I mean “good” relative to the initially billed amount, not “good” relative to what it should actually cost.
- bruce511 1y agoYeah, I suspect this is very country and region specific. In my country I don't have health insurance. I've noticed that medical providers charge me less on discovering that. Party (I suspect) because I'll pay immediately so there's no financial cost (ie cost of delayed cash flow) and much lower admin cost (ie they don't need to deal with insurers.) In some places I've seen signs advertising 30% discount if you "pay now, claim back from your insurance yourself". This informs my hypothesis that providers see the insurance system as a major overhead.
- jmyeet 1y agoNo, it’s the opposite actually. There are a couple of reasons why: 1. You have a deductible. Insurance is incentivized to make things more expensive so you don’t use it. With a $10,000 deductible, are you going to pay $500 for a service outside insurance or $2,000 with insurance? 2. Hospitals really have no idea what anything costs. Nobody does. There is a maze if agreements between providers, contractors, hospitals and insurance companies. If you have insurance, hospitals are more likely to throw out a higher random number; 3. There is more process and paperwork for the hospital with insurance; and 4. You are more likely to be able to negotiate down a bill without insurance.
- throwawayqqq11 1y agoIsnt it a little onesided to put blame on the payers for price insensitivity? > The second you detach the consumer from the price of something, that is when they stop caring about how much something costs, and so the price jumps. Why should nobody care about prices? The customer gets subsidizes by another payer, in this case governments that have to authorize budgets. The reverse could be true too, companies raise their prices in lock step because they want to 'detach' more profits off of production and so, the government steps in to subsidize. So what is the causality chain here? Still the government not caring? IMO you are putting blame onesidedly on payers and not on the ones in charge of price policy, which would include companies too. I dont understand why people dont apply their critizism of large organisations, like a government, to other large organisations, like a company.
- simianwords 1y agoCompanies are incentivised to keep costs low and the feedback loop for this incentive is much smaller. What I mean by feedback loop is: the cost of running the company directly affects the stake-holders in a meaningful way. The CEO is probably has stock options and has to hit a target so that they can be paid well. To do so they need to be more sensitive with prices or shareholders or the board will be on the CEO’s behind. There is a direct monetary incentive relation here. There is one for the government too but the feedback loop is much bigger. If some one in the government makes a suboptimal decision, what incentives exist to penalise them?
- Ygg2 1y ago> The second you detach the consumer from the price of something, even through an intermediary such as health insurance, that is when they stop caring about how much something costs, and so the price jumps. That's not the only problem with health. It's a very inelastic resource. If you and your neighbor's have cancer, and I promise to treat whoever pays most, I can safely assume I'm going to be filthy rich. After all, money is pointless if you die, so barring money for descendants, the logical thing is to give me as much money as you can.
- cowsandmilk 1y agoYou’re assuming the federal government rubber stamps their 80%
- deleted 1y ago[deleted]
- gottorf 1y agoFairly accurate assumption to make in this case. Incentives around government spending are structured against close scrutiny of how much gets spent on what and why. Politicians love splashing their names on papers on how they got a bill passed to spend $X on $GOOD_SOUNDING_PROJECT, and the bigger the X, the better. Government employees are strongly incentivized against the reduction of their own employment should that spending go away. Lobbyists and service providers obviously have a direct interest in ensuring those contracts continue. Nobody but the taxpayer has any interest at all in ensuring that money gets spent on things worth spending on and, moreover, that the spent money actually achieves the outcomes desired and intended behind those projects. And how much influence does the average taxpayer have on any of that? It rounds to zero.
- rollcat 1y agoI don't know. I live in a country with excellent healthcare, excellent public transport, overall excellent quality of life - yeah, and so much of it is funded from our taxes. Granted, the country was rich to begin with, but it seems to be perfectly sustainable. Just my €0.03.
- grafmax 1y ago> Kinda like how expensive healthcare is since it is paid for by insurance. If your argument were correct, socialized medicine would lead to higher costs, but it usually does the opposite. Insurance profit margins are a small portion of the overall cost in the US. In inelastic markets, when profit is removed, often you can see lower costs because profit by itself is purely extractive and in an inelastic market competitive forces are weaker.
- jeroenhd 1y agoOne of the controlling factors for socialized healthcare is that prices are negotiated down by the people paying for the medicine. In countries where private healthcare is extremely rare, pharmaceutical companies can choose between "less profit" or "no sales in that country at all". Sometimes they bluff and in rare cases that means public healthcare has to go without certain medication or certain vendors, but on the whole the price is kept under control (until corruption kicks in, at least). When the people handing out cheques don't get a chance or don't bother to demand lower prices, things become incredibly expensive. Even if a party like a private insurer tries to negotiate the price down, the healthcare provider can always say "tough shit, guess your customers aren't insured then" as long as there's at least one insurance company willing to pay the full price. You also see this with electric vehicle incentives. Governments incentivising people to buy electric cars by giving money directly to the consumer just end up with electric vehicles rising in cost because the money is essentially free anyway.
- grafmax 1y agoSubsidies, depending on the market, often produce some degree of the effect you’re talking about, but it’s not black and white. The term is pass-through and full pass-through is rare with partial pass-through being typical. Often with subsidies (like for EVs) prices rise (showing pass-through) but it rarely cancels out, for example this study showing every $1000 of subsidy in California lowering the post-subsidy cost by around $800 - https://www.sciencedirect.com/science/article/abs/pii/S0047272722001542 https://www.sciencedirect.com/science/article/abs/pii/S00472... - so only around $200 pass-through. But this is a more elastic market than healthcare. To your point about negotiating power - it’s elasticity that gives negotiating power to consumers vs not.
- analog31 1y agoIt could also be like health care, where the cost goes down when the government is paying for it. In fact my knee jerk reaction to the title of the thread was: Let the government buy generic buses in volume and give them to the localities.
- smath 1y agoAlso (I think?): - Govt beaureucreats spending taxpayer money - Availability of cheap credit for the US govt (the spender is other countries buying the debt) - Availabiulity of cheap student loans
- throwaway894345 1y ago> Kinda like how expensive healthcare is since it is paid for by insurance. This seems different. A healthcare consumer (in the US) is overpaying in large part because (1) they need the coverage (2) they lack the expertise to distinguish between offerings and (3) there simply aren't more affordable offerings. Single payer healthcare systems feature significantly lower costs and better quality despite that the payer is not the consumer.