Insurers will not negotiate prices lower, it is against their interests!
The situation with insurers is similar. If there was a real market that people could enter, competitive pressure would force them to be cheap. If the market was, hypothetically, choked by regulation then they'd be in a great position to charge absurd prices.
Market incentives are odd beasts. It is technically against the interests of the insurers to negotiate lower prices - unless they are competing with other insurers. Then it is in their interests to offer fair prices.
(if it isn't clear, I think I'm agreeing with you)
* People often have to make uninformed decisions or have decisions made for them in an emergency. This naturally puts them at an economic disadvantage in the market place. We consider it unfair because it's the sick, injured that are disadvantaged.
* We have strict regulations about ensuring access to health care. People aren't turned away in an emergency. Sick people aren't treated differently for insurance. There are thousands of other regulations we do that shape the 'free' market.
* Food is far from a free market, although it might look that way from the consumer standpoint. The government helps in both ensuring a strong supply with farm bills and giving $114B/yr in SNAP on the consumption side.
Basically I think this is over-weighting the importance of emergency care. I don't have any stats on hand, but people entering the hospital system at ultra-short-notice is quite rare in my experience compared to having a bit of time to think. Most healthcare engagement seems to be for planned consultation, planned surgeries, emergencies but with hours to spare and then urgent emergencies. In about that order of frequency, and heavily weighted towards the first few cases.
2. People are more than capable of figuring out which of two options are cheaper. The ability of consumers to reject goods over tiny price differentials is legendary.
3. If people aren't up for the challenge of figuring out what to do in an emergency, then in a fair market you'd probably find the insurer starts to step in and assist. If the insurer has to compete for business, they have a very strong incentive to make sure their customers get good and cost-effective care.
4. And on food markets; those are distortions to the market, not limits on it's freedom. A free market can be distorted with subsidies and it is still free. The important factors are whether new providers can enter the market and whether they are allowed to compete on price and service quality.
Time isn't a factor, if you have insurance that covers it you rarely if ever know how much it will cost.
https://www.cms.gov/priorities/key-initiatives/hospital-pric...
Almost no medical practices in the US will tell you what the price is until after you've had the service there, and that price might even vary across multiple trips depending on how your insurance processed the claim _that_ time. (Ask me how I know.)
So you would need to schedule appointments and have the entire medical procedure done multiple times to have any price visibility, and even then, there's lots of nonsense around things like doctors operating in hospitals but billing separately, which completely obfuscates the end cost to someone.
People can and will choose the cheaper option, but I personally, as someone who has limited time, cannot afford to go through totalling all the bills for having the same procedure done twice every time, with all the months of back and forth for setting up being a new patient, scheduling things, being lied to about the doctor being available for the consult, showing up and having the staff gaslighting everyone about how it's not a problem on their end, everyone angrily waiting in the waiting room clearly got their appointments wrong, even if you have the reminders written by the staff at your pre-actually-seeing-the-doctor visit in hand showing their system is wrong...
It's incredibly exhausting and involved to visit a new doctor for even the most trivial things. Most people cannot afford the time commitment to do that multiple times even if the procedure is something where it's not a one-off or urgent.
The US seems to have some sort of racket going on in healthcare. What I've heard about their regulation makes sense if interpreted as a fairly basic system built by lobbyists to extract money from people, using emotional blackmail to break up political opposition. Otherwise it seems a bit silly.
Making it more transparent won't change it.
"Joint replacements can't be a free market" is simply nonsense.
https://www.cms.gov/medical-bill-rights/help/guides/good-fai...
Health plans are now required to give comparison shopping tools to their plan members. Those can be difficult to use for patients who don't understand the system, but it is at least a step in the right direction.
If older poor people had to pay the true market price for health insurance that takes age into account they couldn't afford it.
If insurers weren't allowed to take age into account then younger people wouldn't buy health insurance for that price.
> Alternatively is we simply pooled assets and introduced competition into care delivery, health maintenance, and care quality I expect that the system would be more efficient and effective.
What incentive is there for the patient to choose lower prices if the insurance is paying for everything? What incentive does the insurer have to prevent claims fraud or keep administrative overhead in check if they can just pass on the cost in premiums and no one has any other option?
That’s effectively what much of the rest of the wealthy world does via some form of socialized/nationalized system.
While these systems can be more efficient, the rest of the world isn't amazing either. Nationalized systems do much more central planning for healthcare delivery, so they have almost non-existent customer service culture.
You generally have no direct control over who your doctor or when procedures are scheduled. Furthermore, the concept of preventative care is nascent. Yearly physical? Nope. Routine Bloodwork? What is that? You only see the doctor when something is going wrong and you often wait weeks to months. (unless you pay for private health insurance). I literally know of someone with cancer treatment follow up that they needed to hammer the phone lines to get scheduled.
Finally, most international healthcare is effectively subsidized by the US healthcare consumer. Firstly, the majority of global research funding in healthcare comes from the US. Secondly, US consumer (forcibly) pays 5x to 100x what international systems pay for procedures, medicine, technology. As a result, almost every major technological innovation in med device or pharma is either produced in the US or delivered first to the US market by foreign companies.
Nationalized systems do much more central planning for healthcare delivery. This results in a byzantine bureaucratic nightmare where most innovation goes to die. International healthcare systems effectively delegate the implementation risk to the US and wait to see (sometimes decades).
Note: In my experience, the healthcare workers and administrators all are trying to do the right thing and working really hard, but the systems they operate in are generally broken.
Bottomline, there is no free lunch, everything sucks.
This is a fabrication - a free market with large capital investment requirement tends towards a monopoly. Economists call These places natural monopolies.
We had them in oil and in railways before regulation.
This doesn’t happen in food because anyone can grow a cucumber in their yard. But that’s not gonna cut it for surgeries.
And on top of that you get charlatans, snake oil salesmen, homeopathy, treating people with magnets.
Even expensive machines in hospitals are probably not that expensive; they certainly aren't large. A lot of them would cost single digit millions; ie, be far too cheap to allow monopolies to form. I looked up MRI machines for reference and apparently they can be picked up for around a million dollars. We aren't talking about expensive kit here.
It costs >$100m to build a hospital, and then you have staffing, maintenance, IT, and other costs.
It's not at all a trivial cost of entry.
General practitioner offices are much cheaper, but typically you'll still find an ECG machine, IT systems with subscription access to industry databases and insurance applications, and possibly some on-prem blood testing.
All of that on top of property costs. And student fee payments.
The student fees and insurance access costs are largely profiteering and could be eliminated or hugely reduced. The property costs are the result of poor macro policy, but doctors are still on the hook for that.
The rest is unavoidable capex.
> Surgery requires a sterilised filtered room, anaesthesia equipment, monitoring of all kinds, and in many cases specialised tools.
But none of that, you'll notice, is a large capital expense. Those are what we would call "small, routine capital expenses". And sterilising the room isn't even a capital expense at all, it is an operating expense. That matters for monopolies, it isn't an up-front cost (except for literally the first patient). It is unreasonable to suggest that a business's operating costs create natural monopolies. The ease of competing with businesses with high operating costs is the big driver of market competition and exactly what people should want in the healthcare industry.
> It costs >$100m to build a hospital, and then you have staffing, maintenance, IT, and other costs.
Superficially that makes sense, but if we get into it a bit there are a bunch of reasons that won't promote monopoly conditions:
1) CBDs are full of buildings that cost >100MM, ie, skyscrapers. None of the businesses in them are monopolies, or even paying high capital costs - because they rent space. And most cities manage to organise their CBDs so that owning a skyscraper doesn't give monopoly power.
2) You don't need a 100MM hospital. I've seen small hospitals that would cost single digit millions, which is an approachable fee even for just a single wealthy family let alone a small group of people trying to sort something out.
3) You don't even need a hospital. I've had surgery done in some dude's office. You can start with a room and build up organically if the local demand is there. That is how most other businesses expand. Walmart didn't start with a global empire.
There just isn't a need for large capital accumulations to get started in healthcare. It isn't that demanding. There are a lot of edge cases that need a hospital, but that isn't where new businesses will start. They can grow in to it.
> an ECG machine, IT systems with subscription access to industry databases and insurance applications, and possibly some on-prem blood testing
Again, you're listing a couple of operating expenses (subscriptions and insurance). High operating expenses have nothing to do with monopolies; they are paid for on an ongoing basis and by customers bear the cost.
ECGs and blood testing aren't expensive enough to be interesting. A watch can be an ECG machine; and a good ECG machine is only a few thousand dollars. That'd be like saying a restaurant is a natural monopoly because it needs a special fridge ore one of those big fancy stoves.
> All of that on top of property costs. And student fee payments.
Rent then. And the limit on the number of students is generally legislative not financial. There is no tendency towards monopoly here in a free market.
No, it’s both. Autoclave machines aren’t rented, they’re purchased. Then ongoing usage is opex. sterilization equipment is pretty well the core of the hospital (even called the core in some)
> 3) You don't even need a hospital. I've had surgery done in some dude's office. You can start with a room and build up organically if the local demand is there. That is how most other businesses expand. Walmart didn't start with a global empire.
Maybe for a vasectomy it can be done in office, now tell me how a liver transplant can be done. Also if you wait for demand to fit out a hospital, that means people are dying and you’re waiting until enough of them die to decide to expand your hospital.
Also a watch can be an EKG machine? If my Dr pulled out any cheap piece of equipment to use on me I’d get off the table and leave immediately.
> No, it’s both. Autoclave machines aren’t rented, they’re purchased.
Eh, ok. We're talking order of magnitude single digit thousands again. I, personally and literally, can lend a friend in the medical profession that sort of money if they needed it. It isn't even close to being in the range of capital costs that would cause a monopoly to form.
2.
> Livers
I'm no expert here and you haven't explained why you think this is a natural monopoly. But looking at a random article [0] it is clear that no hospital is required. You need a few doctors and I'm guessing 2-4 rooms worth of equipment. There isn't much of a hospital.
If you want to add in rooms for patients to stay in that would be a hospital, but the room requirements for that aren't especially demanding and can be scaled over time, reducing the up front capital cost.
The equipment costs would range depending on the surgeon but even a conservative estimate of a few million dollars won't get into natural monopoly territory.
3.
> Also if you wait for demand to fit out a hospital...
Demand forecasting is a thing. Capitalists have solved that problem. We don't have to wait for an obvious future to materialise, people act preemptively. And it still isn't suggesting there are natural monopolies present.
In fact, this "waiting until enough of them die to decide to expand your hospital" problems is one that comes with public healthcare systems, they systemically under-call demand in my view. The queue in the emergency department is typically hours long in Australia and the hospitals chronically under provide beds. We only seem to seriously expand them when people start dying and/or a major sandal occurs.
One of the reasons I so like the idea of private healthcare is I'm confident that if I need care right now I will pay for it, then get it. That is not a guarantee the public system can make. Adjusting to demand is a point in favour of private healthcare; they make more money if they meet demand.
4.
> Also a watch can be an EKG machine? If my Dr pulled out any cheap piece of equipment to use on me I’d get off the table and leave immediately.
If you insist that your health care is expensive, that can be arranged. Good luck to you. Please also support the people who want cheap options.
However it is still not evidence of a natural monopoly forming. And I'm not sure what your complaint is - an ECG machine is obviously not that difficult to organise given that it can be done for a couple of hundred dollars and also you get a watch thrown in. This is not a cost that will cripple a new doctor's clinic.
If you want a fancier machine, sure. But the cost still isn't going to be that high. In industries where new business cost millions to start we still get competition entering the market, none of these borderline trivial costs like an ECG machine will stop new doctors starting practices.
[0] https://my.clevelandclinic.org/health/treatments/22930-hepat...
Insurance is for:
- costly things
- that happen rarely
- in an unpredictable way
These are characteristics of things that are well suited to insurance. Healthcare -- the type of routine healthcare that makes up the vast majority of spending -- exhibits literally none of these qualities.
Most healthcare expenditure is:
- not costly. An Advil is not costly. 30 mins of some stupid doctor's time is not inherently costly. An MRI is not costly. Medical office space is not costly.
- totally predictable (eye exams, checkups, scheduled visits, hell even big operations like a heart transplant or C-section are rarely done "in the moment." Usually you can see them coming. The hospital can definitely see them coming; they know exactly how long a gastric bypass or a c-section takes, how much equipment and staff they need, etc.
- not rare; most people visit a doctor at least yearly. That's on par with buying xmas gifts!
Only a small fraction of healthcare spending should happen through insurance -- insurance should be for things where you travel in an ambulance to the hospital and that's it.
PCPs should compete individual to individual on quality of service, price, etc.
Hospitals should compete hospital by hospital on quality of care, facilities, scheduling, bedside manner etc.
Rx should be decoupled completely from insurance. Why do I choose Humalog over Novolog? Not for any medical reason! It's because I need to have insurance to buy one or the other. Why do I need insurance to buy a pill? Because I need insurance to see the doc. Why do I need insurance to see a doc? No good f%@#$ reason. Drop it.
Insurance is for when I need surgery NOW for I have no idea what, and I cannot make any kind of choice about it. It should cost $100 a year for a healthy 20yo adult and $400 a year for a healthy 60yo adult.
None of this shit makes sense to have insurance mandated. None of it. I should be able to walk into any doc's office without insurance and pay a flat cash fee, posted on a big bulletin board outside that says $20 per 15 mins. If I don't like it, I should be able to LEAVE and go across the street!
There is another major class of things you want to insure against, and it's the big one.
Chronic conditions. You get diagnosed with diabetes. It's costly and it happens rarely in an unpredictable way. You don't know if you're going to get diabetes, or cancer, or something else, so you insure against it instead of being bankrupted by the long-term treatment.
And then the insurance covers your annual checkup for free because they want to catch things early before they progress.
The expenses for "common" chronic conditions can be MASSIVE. A condition like rheumatoid arthritis can EASILY exceed $30,000/year in medications alone. Add in frequent doctor visits and related medical issues and that runs up even higher. Without some form of insurance (private or socialized), we would be condemning these people to a life of pain and misery (at best) or death.
A vial of my humalog approaches $300. A visit to the endo is $500 on the bill.
But there is no reason why these things are so expensive! Other than that I have to have insurance so I have to be "in network" and oh, my insurance helpfully consults with a pharmacy benefits manager to decide which medications are "covered."
At no point do I have any choice in any of this. I'm not talking about choosing to have diabetes or not, I'm talking about choosing treatments for my diabetes. Always, it is a conglomerate like UHC choosing which things I have to buy this month. How convenient for them that they choose how much it costs!
> hell even big operations like a heart transplant or C-section are rarely done "in the moment."
Agree on the plannability, but not on the predictability. Once you are on that table, and especially if you are under anesthesia, there are an untold number of ways that procedure can quickly turn into a secondary emergency procedure. It's a miracle of modern medicine that such invasive procedures are perceived as being trivial.
We already have that. It is called a high deductible health plan.
But health insurance companies do not just sell health insurance, they also sell price negotiation services, so you probably want to use them even before you hit your deductible/out of pocket maximum, otherwise you will end up paying more.
"Health maintenance plan" is a more descriptive name for what we're discussing.
Even something as basic as an annual physical is ~$400 (cash price). A doctor visit for illness is $100-$150 before any bloodwork or imaging (which can add another $100+). Those are major expenses for many families. The ability to spread those cost across the year is a good thing.
For one billable minute of every doc's time, we are paying 5 billable minutes for various "healthcare administrators" all over the country to move numbers and billing codes around in a labyrinthine spreadsheet. For what?
There are countries in Europe like the Netherlands and Switzerland where the healthcare systems are almost entirely private (much more so than in the US, since there are no Medicaid/Medicare equivalents). Yet their markets are chocked fully of regulation while being able to maintain low prices (compared to the US) and very good outcomes.
Value based care models are however super effective when properly implemented. Look at Kaiser Permanente. Infinitely better than the alternatives.
This isn't really how they make money. Insurers make their profits by limiting the amount that they have to pay out.
The reason why owning both the care provider and the insurer is wrong is that it makes denying or "moving care" to less costly locations easier.
https://www.forbes.com/sites/brucejapsen/2023/11/28/unitedhe...
https://www.healthcarefinancenews.com/news/unitedhealths-med...
This is a great example why United was the sole insurer who was able to absorb the Medicare cuts while everyone else is shedding their MA exposure.
Second, payer profit margins are now capped by the 80% minimum medical loss ratio introduced by the Affordable Care Act (Obamacare). Payers actually make less profit when they deny care. When coverage for certain services is denied it's usually because your employer designed your plan with strict limits.
https://www.healthcare.gov/coverage/preventive-care-benefits...
Preventative is very narrowly defined to exclude anything considered a sickness in anyway.
Getting something done that will ensure you don't get more sick might be considered preventative naively but is considered fixing a problem and so not covered.
So basically this covers vaccines (make sure if you get multiple you don't see a doctor past the first or you are paying) tests unrelated to medical problems and a single non diagnostic visit to the doctor per year.
It is very much not to support health in any way whatsoever. In fact the industry loves ill-health, because it's far more profitable than wellness.
Public not-for-profit health systems change that motivation into something that actually makes sense from a healthcare pov instead of just being an exercise in piratical opportunism.
Profiting from suffering without the slightest hint of altruism or empathy is simply sociopathic.
ACA's medical loss ratio provisions basically makes this impossible: https://www.cms.gov/marketplace/private-health-insurance/med...
That's not to say they're not incentivized to deny claims. If you are loose with what you pay out, you could lose money by paying out more than you take in.
I feel frustrated when it seems that so much money somehow is going to preventive care… But when they quantify it, it’s just looks like screening. They ask if I feel safe at home they ask if I want to attend a group weight loss class, when I’m 95 pounds. They, the gatekeeping front desk clerks or nurses, just screen screen screen and check off items on a checklist earning them loads of credit. All that screening results in an approved amount of preventative treatment.
How I love socialized medicine!
It's hard to see how regulated, single payor healthcare could be bigger or more expensive if the middle man is cut out.
https://www.healthsystemtracker.org/chart-collection/health-...
https://www.healthsystemtracker.org/chart-collection/u-s-spe...
Health insurance profit would also disappear as much would their administration costs.
You would still need to determine price structures and deal with fraud but you wouldn't need to network anymore.
Look up the McKinsey study. The biggest driver is that Americans get way more healthcare.
The rate of self selection of healthcare is not that different in the US. While our old are more likely to seek care our young are way way less likely to.
A ton of that is unnecessary work to avoid getting sued, unnecessary work because of how our billing works (who would have thought that billing based on services rendered would result in escalating costs?), not to mention the complexity of the system helps make finding fraud more difficult.
What? The government was forced to make insurers cap their profits at 20%.
Except now that means if they want to make more money, they just raise premiums and negotiated provider payments. Even easier when you're as vertically integrated as UHC.
https://www.cms.gov/marketplace/private-health-insurance/med...
For the past quarter, the UnitedHealthcare business unit of UnitedHealth Group had a profit margin of 6.6%.
https://www.sec.gov/ixviewer/ix.html?doc=/Archives/edgar/dat...
The business is still highly competitive, and payers have limited ability to raise premiums due to push back from employers.
The industry as a whole is insanely profitable. Revenue is $1.4 trillion. It posts profits of around $650bn. Which means on average it extracts around $2000 of profit from every single person in the US, with an average individual healthcare spend of more than $4000.
The profit is in the ballpark of the entire US defence budget, at around $750bn.
Healthcare is a huge boat anchor drag on the entire economy.
Source for these numbers? 0.65 billion in profits on 1.4 billion in revenue is an insane margin
- 944 billion on Medicare (federal) - 805 billion on Medicaid (federal + state) - 118 billion on VA health costs - 21 billion on CHIP
That's 1.5 trillion alone, and that doesn't count ACA subsidies, or other state and local government-owned or subsidized medical facilities. That's $5800/year per capita - ALL persons in the US, whether they have private or public or no insurance. US government per capita health care spending is already higher than many European countries and a little more than two-thirds the Swiss number you mention. While US private health insurance companies don't help the situation, neither are they a main cause of US health care costs.
That sounds great, compared to the status quo.
Just compare access in the US to countries with regulated universal care.
Have cystic fibrosis? Good news! There are drugs that reverse the genetic defect! In the US even Medicaid patients got access back in 2014.
In Canada? Unless you live in one of 5 provinces that fund it, you don’t get it. Oh, and if you’re an adult? Nope, not a funding priority.
In the UK, they didn’t get access until 2020. Six years after the US.
Then you can look at some of the newest advances in cancer. You might need to wait 2-3 years after the US gets it.
Then look at physician salaries. Access to primary care doctors. Waiting lists for joint replacement.
/s
Why should I pay for somebody’s Viagra? Or IVF treatment? Because I am healthy? Diabetes is reversible with the healthy diet, no? Why not focus on reducing the costs.
Imagining things is fun, then reality and costs come crashing in. Go look at the state of VA healthcare for an example.
This is absolutely a problem we can fix.
When we started ordering IVF medications under insurance, we found out that the price the pharmacy charged insurance was over 3x what their cash price was for nearly everything. We ran out of the 15k in a single retrieval cycle because of this, and wound up with a bill to the tune of several thousand dollars because one specific prescription ended up partially billing to insurance. People often lose sight of the fact that when you bill insurance, even if the item is only partially covered, the charge you must pay is the insurance negotiated rate even if the insurance is capped well below the price of the charge. We concluded that the medication benefit was a huge racket because of this, and I would imagine Optum rakes in thousands of dollars per patient on something that according to the policy documents is fully covered.
Meanwhile other nationwide pharmacies like Alto Pharmacy do offer the drugs at very reasonable prices, often 1/5 to 1/10 what Optum was charging.
Seems like it would be more appropriate for the FTC to step in rather than the SEC?
I switched jobs recently and despite having a drug regime that worked well for me over an extended period and was also cost effective, CVS denied coverage (and required prior authorizations, that were all denied) for virtually every component of my prescription care. Now, about three months after the switch, it’s probably back up to 85%+ of what it was before, but there was a lot of bureaucracy between then and now - and all due to a change that was really purely administrative in nature.
Frustrating.
How about Kaiser Permanente? They have been a vertical healthcare provider/insurance organization for many decades. You pay Kaiser premiums, you see Kaiser doctors, and you get your medicine from Kaiser pharmacies.
https://healthy.kaiserpermanente.org/northern-california/sho...
https://healthy.kaiserpermanente.org/northern-california/lea...
The old style HMO only plan organizations are almost all gone.
https://en.wikipedia.org/wiki/Health_maintenance_organizatio...
> When HMOs were coming into existence, indemnity plans often did not cover preventive services, such as immunizations, well-baby checkups, mammograms, or physicals. It is this inclusion of services intended to maintain a member's health that gave the HMO its name.
Since the above services are required in all plans by law since ACA, there is much less difference between an HMO style plan and a PPO plan where you only go to in network providers.
UHC is notionally a PPO, but because Optum is owned by the same parent company and Optum is buying up all the providers, they're slowly becoming an HMO by monopoly. They play off of each other in any dispute.
I've had better experiences with Kaiser and had a family member who worked for them for a couple of decades.
UHC and UnitedHealth group need to be broken up, and these incestuous relationships between insurance companies, private equity companies, and care providers need to be stopped by the SEC, because their only purpose is to exploit the wrapping up of care providers under one umbrella to extract more money for less work from people seeking essential services.