6 ms·

As much as I like articles that tries to use economics or finance to explain stuff, the "options" analogy is a bit hamfisted. The article starts off by noting a

by gruez 3mo ago

As much as I like articles that tries to use economics or finance to explain stuff, the "options" analogy is a bit hamfisted. The article starts off by noting about how ambulance is an "option" for a rescue, but even though the analogy might vaguely work, it's not really needed to answer the question. That can be answered far more simply: "medicare and insurance companies pay them too little, so they have to charge everyone else more". Or, from the article: >This meant that the payment structure and the cost structure were increasingly mismatched: and so ambulance services had to pay for their round-the-clock readiness by billing for individual rides. [...] >And notably, the fees that Medicare sets run far below cost. The average ambulance transport costs $2,673 to provide; Medicare pays only about $329 of that. A typical ambulance ride for a Medicare patient, in other words, loses theambulance service thousands of dollars.

Noumenon72 3mo ago
"Medicare pays too little" is based on the "fee for service" model; it only makes sense if you believe the group of people who actually use the ambulance should pay its full cost. The options model matters: if you model an ambulance ride as a roulette wheel, you only expect to pay if you get very unlucky. If you model it as an option, you expect to pay even if you never use it. The former doesn't imply "everyone else should have to pay for my bad luck"; the latter does. It's effective persuasion.
- gruez 3mo ago
  >The options model matters: if you model an ambulance ride as a roulette wheel, you only expect to pay if you get very unlucky. If you model it as an option, you expect to pay even if you never use it. There are plenty of services that have high fixed costs but low marginal costs, but we don't use the "options" framing. A movie costs tens to hundreds of millions to make, but otherwise costs very little to deliver. Their price are also fixed, rather than dynamically priced. Yet when a movie bombs, nobody is like "wow I guess they shouldn't have been selling an option for 2 hours of entertainment for $20!". It's a price problem, first and foremost, caused by insurance companies and medicare strongarming them.
  - Noumenon72 3mo ago
    I don't think you fully grasped the concept of an option, which is why it isn't illustrative for you; no one is purchasing the right to see a movie regardless of how much it turns out to cost to show. It's the movie maker that would love to buy an option that makes you promise to buy a ticket, even if the movie turns out bad.
    - gruez 3mo ago
      >I don't think you fully grasped the concept of an option, which is why it isn't illustrative for you I perfectly do know what an option is. It's just not relevant to the discussion, or at least not necessary. If you're selling a service that costs $2k of amortized costs to provide for $300, because that's all medicare/insurance companies are willing to pay, that's not a problem because you're offering options, it's an issue because you're charging too little. You're losing money because the numbers simply don't pencil out, not because you sold a bunch of options and sharp jane st traders cleaned you out. In any other situation where you're charging less than what it costs to provide, people just call it "bad business model", not "you're selling options" or whatever.
gerdesj 3mo ago
Given you find this is _normal_ for a six mile ambulance ride: "and $11,670 as a “base rate.”" What on earth would you consider normal for a helicopter ride from Exeter to London? That's roughly 150 miles as the crow flies. Pilot, co-pilot and a medic, minimum crew for say 1.5 hours. Each way, so 300 miles of fuel and aircraft lifetime and three hours of crew cost, not to mention ground crew etc. My dad got that on the firm when the shit hit the fan and he needed to be seen by specialists in the Royal Brompton and Royal Devon and Exeter decided that was his best shot at life. That was 15 years ago. Anyway, the OP's bill looked pretty normal until the 11,000 base rate nonsense. How can that possibly be justified?
- gruez 3mo ago
  > How can that possibly be justified? They can't make money on some customers (medicare/insurance), so they have to make up the difference however they can. In practice this means screwing over the people who have assets to seize.
  - joe_the_user 3mo ago
    This thread is filled with strong arguments that ambulence operators do make money with medicare. But even more, it's completely false that the reason an ongoing, working business charges a huge price to some people is that some other people are taking money from them. A business charge people huge prices when it can. Businesses make as much money as they can. It is true that what health care providers charge individuals tends to be their "opening offer" to insurance companies so they do make this exact argument "we gotta make all our profits on you 'cause everyone else is denying us" but that doesn't make such arguments any more reasonable.
  - deleted 3mo ago
    [deleted]
jjk166 3mo ago
> The average ambulance transport costs $2,673 to provide I think this ignores the 400 pound gorilla in the room. Why does an ambulance transport cost thousands for the operator? This is a short trip in an automobile, essentially a fancy uber ride. At first one might say that's flippant - obviously ambulances are specialized vehicles, and you have paramedics, and they need to get to locations quickly, and so forth, but let's consider those costs. A new, fully equipped ambulance is about $150k. Of course this is more than a regular car, but by a factor of 5, not 50. Let's be generous and presume the ambulance fully depreciates in 2 years. Typically an ems crew will be two paramedics. Average paramedic wage is about $23/hr. Again, not orders of magnitude more expensive. Then you have liability, both for the vehicle and for the medical treatment; that's about $12k per year. Throw in money for gas and wear and tear, which should be quite comparable to other automobiles, and it costs about $1600 to own and operate an ambulance for 24 hours. Now the other side of the equation is utilization. Taking the arbitrary example of Philadelphia Fire Department, they have 60 ambulances that handle on average 700 ems calls per day, and approximately 70% of ems calls lead to transport, so that's about 8 transports per ambulance per day. So distributing this all out, the actual cost to the ambulance operator, ignoring overhead, ought to be somewhere around $200. I'm sure there are some additional costs I haven't included in this back of the envelope calculation, and maybe some of the numbers I pulled off google are off a bit, this should be taken as a very rough estimate. But even if you significantly increase the cost, the medicare payment amount seems quite reasonable to cover the expenses with a healthy profit margin. Unless you want to claim that operating an ambulance is less than 10% of the cost of ambulance transport, and that the estimators with Medicare are absurdly out of touch with reality, whence cometh $2,673?
- Insanity 3mo ago
  +1. The base price for US healthcare is entirely removed from the cost of the service provided. And you can of course just look at other countries to figure out that the cost is much higher than it should be.
- cogman10 3mo ago
  I think the main expense you are missing is medication and disposable equipment and insurance for the ambulance and medical malpractice. Otherwise, yeah, I suspect the other major cost is the "It's the mayor's brother's business" cost and the "private equity has figured out how to extract maximum value" cost. That said, there's no reason the patent should be charged anything. It should be entirely a tax burden of the citizens. It's crazy to make some decide between death and crippling debt.
JumpCrisscross 3mo ago
> As much as I like articles that tries to use economics or finance to explain stuff, the "options" analogy is a bit hamfisted Idk, my takeaway is ambulances look like a solid market for a subscription model. Ideally, one that taxpayers pay for. But also, potentially, as a private one that you can pay e.g. $50/month to know you won't be billed $12,000 by idiots.
- FireBeyond 3mo ago
  One thing I'd like to point out, many of the Airlift companies, like Airlift Northwest, offer $60/year family insurance for Heli EMS. They'll bill your insurance and accept the insurer's payment as "Paid in full". They also tend to have reciprocal agreements with many other HEMS agencies.
- mekael 3mo ago
  At the end of the day doesnt that just end up being universal healthcare but with more steps?
- Atotalnoob 3mo ago
  This is just insurance, dude
arjie 3mo ago
You’re right. The cost of the service not matching the direct cost is something we’re familiar with - that’s just fixed cost and entirely normal (happens with books, movies, etc). This just happens to be the case where you must transport people but most people are net losses. In this scenario, the only surviving companies would be those who charge the remainder sufficient enough that the blended population of clients causes a net pay-in. Everyone who doesn’t account for that will just go out of business. Being available constantly could be helped with a retainer, it’s true, but even with that we should expect that some patients pay a lot if they’re rarer than the loss-makers.
- Spooky23 3mo ago
  That’s wrong. The poor people who don’t pay are Medicare and Medicaid patients, and both pay for medically necessary transportation. Those calls essentially cover the base business expenses.
dripdry45 3mo ago
That 150k figure I believe is quite outdated. New ones are running 300k or more. The ambulance vehicle providers have been bought up by private equity and the lead times are now years to get one.
fuckyah 3mo ago
[dead]
pjc50 3mo ago
Comparable UK costs: https://www.kingsfund.org.uk/insight-and-analysis/data-and-charts/key-facts-figures-nhs https://www.kingsfund.org.uk/insight-and-analysis/data-and-c... Estimate for an ambulance call is about £450. I suspect the main reason the US costs more is wages.
- manarth 3mo ago
  Wages for which role? UK – Newly Qualified Paramedics (Band 5): £28,407 – £34,581. USA - $38,000 to $48,000: £28,323 – £35,777 Sure, there's a bunch of different tax treatments and work-benefits between the countries, but I don't think it's the cost-of-labour that is making the USA more expensive.
shusaku 3mo ago
I completely lost interest at the options part, it’s not that complicated of a concept. But substack writers have their type
veunes 3mo ago
Most of the cost is keeping crews, vehicles and equipment available for the call that may or may not come

by gruez 3mo ago

Noumenon72 3mo ago

"Medicare pays too little" is based on the "fee for service" model; it only makes sense if you believe the group of people who actually use the ambulance should pay its full cost. The options model matters: if you model an ambulance ride as a roulette wheel, you only expect to pay if you get very unlucky. If you model it as an option, you expect to pay even if you never use it. The former doesn't imply "everyone else should have to pay for my bad luck"; the latter does. It's effective persuasion.

gruez 3mo ago
>The options model matters: if you model an ambulance ride as a roulette wheel, you only expect to pay if you get very unlucky. If you model it as an option, you expect to pay even if you never use it. There are plenty of services that have high fixed costs but low marginal costs, but we don't use the "options" framing. A movie costs tens to hundreds of millions to make, but otherwise costs very little to deliver. Their price are also fixed, rather than dynamically priced. Yet when a movie bombs, nobody is like "wow I guess they shouldn't have been selling an option for 2 hours of entertainment for $20!". It's a price problem, first and foremost, caused by insurance companies and medicare strongarming them.
- Noumenon72 3mo ago
  I don't think you fully grasped the concept of an option, which is why it isn't illustrative for you; no one is purchasing the right to see a movie regardless of how much it turns out to cost to show. It's the movie maker that would love to buy an option that makes you promise to buy a ticket, even if the movie turns out bad.
  - gruez 3mo ago
    >I don't think you fully grasped the concept of an option, which is why it isn't illustrative for you I perfectly do know what an option is. It's just not relevant to the discussion, or at least not necessary. If you're selling a service that costs $2k of amortized costs to provide for $300, because that's all medicare/insurance companies are willing to pay, that's not a problem because you're offering options, it's an issue because you're charging too little. You're losing money because the numbers simply don't pencil out, not because you sold a bunch of options and sharp jane st traders cleaned you out. In any other situation where you're charging less than what it costs to provide, people just call it "bad business model", not "you're selling options" or whatever.

gerdesj 3mo ago

Given you find this is _normal_ for a six mile ambulance ride: "and $11,670 as a “base rate.”" What on earth would you consider normal for a helicopter ride from Exeter to London? That's roughly 150 miles as the crow flies. Pilot, co-pilot and a medic, minimum crew for say 1.5 hours. Each way, so 300 miles of fuel and aircraft lifetime and three hours of crew cost, not to mention ground crew etc. My dad got that on the firm when the shit hit the fan and he needed to be seen by specialists in the Royal Brompton and Royal Devon and Exeter decided that was his best shot at life. That was 15 years ago. Anyway, the OP's bill looked pretty normal until the 11,000 base rate nonsense. How can that possibly be justified?

gruez 3mo ago
> How can that possibly be justified? They can't make money on some customers (medicare/insurance), so they have to make up the difference however they can. In practice this means screwing over the people who have assets to seize.
- joe_the_user 3mo ago
  This thread is filled with strong arguments that ambulence operators do make money with medicare. But even more, it's completely false that the reason an ongoing, working business charges a huge price to some people is that some other people are taking money from them. A business charge people huge prices when it can. Businesses make as much money as they can. It is true that what health care providers charge individuals tends to be their "opening offer" to insurance companies so they do make this exact argument "we gotta make all our profits on you 'cause everyone else is denying us" but that doesn't make such arguments any more reasonable.
- deleted 3mo ago
  [deleted]

jjk166 3mo ago

> The average ambulance transport costs $2,673 to provide I think this ignores the 400 pound gorilla in the room. Why does an ambulance transport cost thousands for the operator? This is a short trip in an automobile, essentially a fancy uber ride. At first one might say that's flippant - obviously ambulances are specialized vehicles, and you have paramedics, and they need to get to locations quickly, and so forth, but let's consider those costs. A new, fully equipped ambulance is about $150k. Of course this is more than a regular car, but by a factor of 5, not 50. Let's be generous and presume the ambulance fully depreciates in 2 years. Typically an ems crew will be two paramedics. Average paramedic wage is about $23/hr. Again, not orders of magnitude more expensive. Then you have liability, both for the vehicle and for the medical treatment; that's about $12k per year. Throw in money for gas and wear and tear, which should be quite comparable to other automobiles, and it costs about $1600 to own and operate an ambulance for 24 hours. Now the other side of the equation is utilization. Taking the arbitrary example of Philadelphia Fire Department, they have 60 ambulances that handle on average 700 ems calls per day, and approximately 70% of ems calls lead to transport, so that's about 8 transports per ambulance per day. So distributing this all out, the actual cost to the ambulance operator, ignoring overhead, ought to be somewhere around $200. I'm sure there are some additional costs I haven't included in this back of the envelope calculation, and maybe some of the numbers I pulled off google are off a bit, this should be taken as a very rough estimate. But even if you significantly increase the cost, the medicare payment amount seems quite reasonable to cover the expenses with a healthy profit margin. Unless you want to claim that operating an ambulance is less than 10% of the cost of ambulance transport, and that the estimators with Medicare are absurdly out of touch with reality, whence cometh $2,673?

Insanity 3mo ago
+1. The base price for US healthcare is entirely removed from the cost of the service provided. And you can of course just look at other countries to figure out that the cost is much higher than it should be.
cogman10 3mo ago
I think the main expense you are missing is medication and disposable equipment and insurance for the ambulance and medical malpractice. Otherwise, yeah, I suspect the other major cost is the "It's the mayor's brother's business" cost and the "private equity has figured out how to extract maximum value" cost. That said, there's no reason the patent should be charged anything. It should be entirely a tax burden of the citizens. It's crazy to make some decide between death and crippling debt.

JumpCrisscross 3mo ago

> As much as I like articles that tries to use economics or finance to explain stuff, the "options" analogy is a bit hamfisted Idk, my takeaway is ambulances look like a solid market for a subscription model. Ideally, one that taxpayers pay for. But also, potentially, as a private one that you can pay e.g. $50/month to know you won't be billed $12,000 by idiots.

FireBeyond 3mo ago
One thing I'd like to point out, many of the Airlift companies, like Airlift Northwest, offer $60/year family insurance for Heli EMS. They'll bill your insurance and accept the insurer's payment as "Paid in full". They also tend to have reciprocal agreements with many other HEMS agencies.
mekael 3mo ago
At the end of the day doesnt that just end up being universal healthcare but with more steps?
Atotalnoob 3mo ago
This is just insurance, dude

arjie 3mo ago

You’re right. The cost of the service not matching the direct cost is something we’re familiar with - that’s just fixed cost and entirely normal (happens with books, movies, etc). This just happens to be the case where you must transport people but most people are net losses. In this scenario, the only surviving companies would be those who charge the remainder sufficient enough that the blended population of clients causes a net pay-in. Everyone who doesn’t account for that will just go out of business. Being available constantly could be helped with a retainer, it’s true, but even with that we should expect that some patients pay a lot if they’re rarer than the loss-makers.

Spooky23 3mo ago
That’s wrong. The poor people who don’t pay are Medicare and Medicaid patients, and both pay for medically necessary transportation. Those calls essentially cover the base business expenses.

dripdry45 3mo ago

That 150k figure I believe is quite outdated. New ones are running 300k or more. The ambulance vehicle providers have been bought up by private equity and the lead times are now years to get one.

fuckyah 3mo ago

[dead]

pjc50 3mo ago

Comparable UK costs: https://www.kingsfund.org.uk/insight-and-analysis/data-and-charts/key-facts-figures-nhs https://www.kingsfund.org.uk/insight-and-analysis/data-and-c... Estimate for an ambulance call is about £450. I suspect the main reason the US costs more is wages.

manarth 3mo ago
Wages for which role? UK – Newly Qualified Paramedics (Band 5): £28,407 – £34,581. USA - $38,000 to $48,000: £28,323 – £35,777 Sure, there's a bunch of different tax treatments and work-benefits between the countries, but I don't think it's the cost-of-labour that is making the USA more expensive.

shusaku 3mo ago

I completely lost interest at the options part, it’s not that complicated of a concept. But substack writers have their type

veunes 3mo ago

Most of the cost is keeping crews, vehicles and equipment available for the call that may or may not come