https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
The real world has "actually bad" actors -- not just misaligned incentives.
Sometimes a dude getting some money does not yield the worst outcome which is why some countries still run despite the corruption.
Nah, you can do it just on the basis of information asymmetries.
Banks can sell mortgages. People think buying mortgages is safe, because banks don't loan money to people they don't think can pay it back, and even if they did, the mortgage is backed by the house so in the worst case you can foreclose and get back your principal. So lots of people buy mortgages.
Then banks figure out that it's easy to sell mortgages, and that if they sell them it doesn't matter that much if the people they loan the money to can pay it back. Plus, the less creditworthy people pay higher interest rates, and you can still foreclose if they default. So banks make a lot of loans to people who can't afford them, and then sell the mortgages, and people still buy them.
Except that if this happens at scale, the people taking out mortgages they can't afford bid up the price of houses. And then when they start to default and you want to foreclose, you'd have to sell the house to get back the money, which at scale means that the prices would go back down to where they were before they got bid up, which means you wouldn't even recover your principal.
If everybody realizes that this is what's going to happen then people wouldn't buy bad mortgages from banks and then banks wouldn't issue them. But if enough people don't notice until after the bubble is inflated...
You skip over a very important step here, where people keep buying the MBSes because the ratings agencies are knowingly rating the securities incorrectly. If that didn't happen, the market would be too small to blow up in the way that it did, all of the safe money can't invest if the MBSes aren't AAA.
It's not that no-one noticed in time, it's that the people responsible for noticing were paid to pretend they hadn't. That is the corrupt part.
What they were doing was, they'd take a bucket of high risk mortgages and apply a contract to them to retroactively sort them. So, if you bought the 30th percentile of the bucket and then anything more than 70% of the people in the bucket paid their mortgages you would get paid, and if fewer than that did then you wouldn't.
Then they were rating the highest percentiles in the bucket as AAA because even for borrowers with bad credit, the probability that such a high percentage of them would default was considered very low. Even for people with bad credit, default rates are usually only something like 10%.
But that doesn't work out if you haven't noticed that banks have stopped caring about the default rate when issuing mortgages.
You can sit them down and explain precisely why buying something, like a new car, is a bad financial decision and that they cannot afford it anyway, and then watch them go buy it anyway. To the point where I have seen people laugh about how dumb of an idea it is, while in the act of doing it.
The "I wish someone explained to me..." that comes later when it all falls apart is largely just licking the wounds of their damaged ego.
Feels like I’m in a bizarro world where logic and math no longer apply.
Even if I could easily afford it, it seems crazy between the purchase cost and the yearly insurance cost.
They could still have a new car and use the money saved to pay down mortgage or invest it.
I digress, the numbers alone are the reason for the base model, because I could use the extra money somewhere else. And yes, new vehicles do depreciate too much. However, if you keep the vehicle for it's entire lifespan, the hit isn't so bad.
And this is actually fine because it comes with its own integrated stupidity penalty. We only need the government to impose a penalty if the person who needs the disincentive when making a decision is different than the person being affected by it.
To me, a great majority of problems in the US fundamentally boils down to people looking for markets and money where there aren’t any. Great examples include rising healthcare costs (what is the right price to pay for saving a child’s life, for example? Culturally, it’s basically unlimited!) whereas rising legal costs are NOT seen as a crisis (suing other people over BS grievances, unlike saving lives, is not compulsory); infrastructure investment (cars don’t make financial sense everywhere and everything all the time, but they’re REALLY cozy, so we will spend exorbitant amounts of money on infrastructure for them compared to everything else); the obesity crisis (eating feels GOOD, even if it costs EXORBITANT amounts of money); worsening education outcomes; lack of growth of alternatives to single family homes…
Your examples are mostly things where there are, though, e.g.:
> rising healthcare costs (what is the right price to pay for saving a child’s life, for example? Culturally, it’s basically unlimited!)
This is confusing value with cost. If you had to pay a million dollars to save a child's life, maybe that's worth it, but that's not the problem. The problem is that so often we could have saved the child's life for $100 but for various bad reasons it ends up being $100,000 instead, and the people getting the other $99,900 want to keep it that way.
> whereas rising legal costs are NOT seen as a crisis (suing other people over BS grievances, unlike saving lives, is not compulsory)
Isn't the problem with the rising legal costs mostly on the defense side? You can't prevent someone from filing an unmeritorious lawsuit against you, or avoid hiring compliance lawyers to tell you what to do to prevent that from happening, so it matters when those things get more expensive. But then the compliance lawyers and their lobbyists like it to get more expensive because they're the ones getting the money.
> infrastructure investment (cars don’t make financial sense everywhere and everything all the time, but they’re REALLY cozy, so we will spend exorbitant amounts of money on infrastructure for them compared to everything else)
People who hate cars say this but we mostly spend money on cars because everything is too spread out for mass transit, which brings us to this one:
> lack of growth of alternatives to single family homes
Markets are great at solving this. If it wasn't literally banned in most of the relevant places, developers would be replacing single family homes with higher density housing all over and people would be buying it.
> the obesity crisis (eating feels GOOD, even if it costs EXORBITANT amounts of money)
Government subsidizes the production of high fructose corn syrup, which does this:
https://www.princeton.edu/news/2010/03/22/sweet-problem-prin...
> worsening education outcomes
And then people make school choice arguments.
Which one of these isn't a situation where we would benefit from a competitive market but the existing laws prevent us from having one?
Zoning boards put a tiny little strip of commercial and high density residential in the downtown and then require the whole rest of the map to be single-family homes. At that point it doesn't even matter what the downtown actually looks like, people are still going to be in cars because it's the only way to get there from the suburbs.
Tangentially, the additional length and width of roads as well as the traffic lights all constitute an increase in infrastructure costs while also reducing the amount of revenue generated per unit space (because so much more of the space is for streets and parking).
The real thing minimum parking requirements do is increase cost, because building parking floors costs money. But that isn't nearly as much as the cost increase from zoning most of the map exclusively for single family homes, because that's the thing that makes the land expensive, and on top of that requires you to use 15+ story buildings in the limited area that allows them when you could have the same average density by using 3-5 story buildings over a wider area.
Moreover, you can't put the cart before the horse. If people currently live in the suburbs and arrive in cars, you can't expect them to walk before you allow anyone to build them housing within walking distance.
First of all, I don't think anyone's goal is "an area full of tall buildings"; that's certainly not what I mean by "density" (although it is _one kind_ of density). Secondly, even in urban areas full of tall buildings, there's frequently much less space between buildings than a CostCo parking lot.
> Moreover, it isn't actually a density limit anyway because you can make the buildings taller instead of wider, and you can build a parking garage under the building rather than beside it.
Building vertically is expensive, and in many places land is cheaper, so it's easier to meet the legal requirement by surrounding the building with pavement than it is to build a parking garage beneath the structure. This is why you rarely see a Walmart with an underground parking garage (and when you do, it's usually in a dense city with more lax parking regulations).
> Moreover, you can't put the cart before the horse. If people currently live in the suburbs and arrive in cars, you can't expect them to walk before you allow anyone to build them housing within walking distance.
I think you're confused about what is being advocated. No one is suggesting we make everyone walk to work. I don't think that's a realistic outcome, and probably not a desirable one for many people (who wants to work close to a factory, airport, etc)? More importantly, relaxing parking requirements on developers doesn't make the existing parking lots go away, so it doesn't really affect the current crop of commuters; it just means that future suburban commuters will lean more on public transit to get to work.
You just have to look at India or Africa a bit to understand the severity to which this problem permeates day to day in these countries.
The same cannot be said about Indians and other poor people from poor countries. Their optimisation lies solely on themselves or immediate family. This has consequences at every level and even at the political level.
When your are poor and basic necessities are difficult to meet, its natural to optimize for self and not care about the big picture.
http://www.economist.com/news/finance-and-economics/21598651...
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.
> 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."
For example, it found that diagnoses and medication increased. If you are diagnosed with heart disease and you begin an intervention, you probably see no change in mortality in two years especially since it took decades for you to progress to that point in the first place.
Otoh this is why we invented reinsurance
So hey, at least in my case, it worked as the commonly held belief states.
And that study doesn't look at multi-decade long term effects like diabetes, etc. where you need it for a decade (or longer!) untreated (or poorly managed) before it kills ya. But it still kills ya years early.
So even the "raising rates of diabetes detection" in combination with your belief from that study proves you incorrect when people talk long term.
Letting it grow and catching it when symptoms arise is terribly expensive. The chemo, surgery, scans, and frequent doctors visits are all crazy expensive.
About the only way I could see preventative care not costing less is if you just let the people die and call it god's will rather than calling it a death that could have been prevented.
Obesity costs USA $1.75T (https://milkeninstitute.org/content-hub/news-releases/econom..., grossed up for inflation)
Number of people that are obese: 100M
Annual economic impact from obesity per person: $17,500 per year
GLP-1 "For All": $6,000 per year (assuming multiple vendors, and some will be over vs under)
Savings: $11,500 per year per person.
Economic impact: Around $1T
This should free up around 3% of GDP for better uses of money rather than just fixing up people.
Obviously, the devil is in the details, but the potential impact is so massive that it should be deeply studied.
Actually, you don't need to do everybody all at once. Target the biggest (no pun intended) opportunities first.
That said preventative probably does result in more dollars being spent on healthcare; presumably significantly, if not completely, offset by economic benefits like increased productivity and quality-of-life benefits. Analyses that only look at the cost side of the equation IMO are unhelpful.
The idea is that increased primary care services will have benefits 10 or 15 years down the line by preventing chronic disease from reaching a critical state. For example, preventing prediabetes from reaching diabetes and then diabetic end stage renal disease (which would require dialysis at a cost of 5 figures per person per month). You're not going to see that over 2 to 3 years.
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.
How compelling of an example, really.
Please name just one.
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
[0] https://en.wikipedia.org/wiki/Certificate_of_need#History
Messy business!
no
more paid money for less healthcare consumed = better for insurence
thus all the declined treatments
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.
The problem is that it doesn't stop there. There is a second order effect.
Which is probably the right way to support american manufacturing.
> 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.
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-gla...
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.
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.
OF COURSE single-payer means lower prices, the government has a shit ton of power in negotiating prices if they want to. They don't want to because they are corrupt, freaks like the above are only there to rationalize the theft. They need to be defeated politically.
It's very easy to find examples of abuse in this system. For example, in modern "factory towns" around corporate campuses, somehow, routine dental maintenance costs exactly the maximum amount provided for this purpose by the employee health plan.
> If consumers actually directly paid the whole cost for health services, the prices charged would become far more regular.
Which is arguing against the very idea of insurance which distributes risk, its an absurd argument not even libertarians make. The problem for literarians/neoliberals is that we already have exactly the system they think should work great, it just doesn't, but they completely refuse to ever recognize that the reason it doesn't work is systemic and it will never be fixed by more literarianism/neoliberalism, we need to shove it. Whats needed is a single-payer, universal, zero(!!!)-private, public health care system.
Reasoning about things abstractly without taking in into account actually measured phenomena that conflict with your conclusions; just ask Aristotle.
Suppose that to devise some treatment for 10 million people worldwide, it costs a billion dollars once for R&D, i.e. $100 each, and then $10 more per person to actually manufacture it. So the average person will have to pay no less than $110.
Then some countries say "that costs you $10 to manufacture, we won't pay more than $40" and if you don't take the $40 you can't sell there at all. So, if you don't recover $30 of your R&D per person there then you recover $0, even though you need to average $100.
If everybody does that it doesn't work; they go out of business. But suppose that half the patients live in those countries and the rest live somewhere that the company can charge enough to sustain themselves, i.e. in those countries people have to pay an average of $180 instead of $40 so the total average can stay $110. Then they don't go out of business, but the countries not paying their share are cheating the people in the other ones.
And to add insult to injury, you then hear the people in the countries paying $40 saying "why are you paying $180 instead of doing it like we do"?
The situation you're describing can happen in one of two ways. The first is that the more bioavailable version wasn't patented in the early 20th century, only the less bioavailable version, and then the version you like is still under patent and that's exactly what's supposed to happen. They get to charge a lot until the patent expires as the incentive to invent the more bioavailable version to begin with, and then Canada isn't paying their share and the US will be paying less when the patent expires, and if you don't like what they're charging then you can use the old version until the patent expires.
The second is that nobody is making a generic of the more bioavailable version even though the patent is expired. The US could and ought to fix that by remediating whatever regulation is impeding other companies from entering the market even though they should be able to. But then we're into a different problem because it can't be other countries not paying their share for something still under patent if it isn't still under patent.
I've been taking this drug since 1995 and the brand-name version has been in production (in its current format) since 1938. I don't think there have been any substantial improvements in the formulation in decades (as evidenced by my dosage, at least.) It certainly isn't expensive due to patents.
What's happening here is that in the US generic alternatives are supposed to demonstrate bioequivalence (meaning the same bioavailability), but the standards are lax and not well-enforced. Insurance formularies aren't going to spring for a brand-name drug formulation that costs 10x when the government has certified the cheap generic as bioequivalent. Manufacturers of the unpatented (but more bioavailable) brand-name drugs know that in reality some subset of their patients will need their formulation to keep blood levels stable, which means that in the US they can crank their prices way up and soak a bunch of sick people. In Canada they can't do this. Nothing about this is really defensible.
Which brings me back to the larger issue. High US drug prices can be due to both (1) recouping R&D costs and (2) greed, but the greed is enough to render our current system unworkable. You can't just assign manufacturers a monopoly and the right to charge whatever they want, and expect that they won't abuse this to soak desperate sick people with prices far in excess of their costs (as they are clearly doing.) So yes, you can point to the cost of R&D as one reason we should all (globally) pay more for some drugs, but you can't really use the need for R&D to justify the US system, which is inefficient and dangerous.
With respect to generics, there's little incentive to make a better formulation. If patients have insurance, they'll get whatever "bioequivalent" generic is available from the pharmacy if it matches the insurance provider's formulary price requirements. That manufacturer can change any time, since by law they're all deemed equivalent. It's like buying generic store-brand ibuprofen: you have no idea which factory is actually making the stuff, and it can change from package to package.
There's also very little benefit to having a "brand name" generic that has better bioavailability since you really can't charge more for it: insurance companies and pharmacies will just switch to another generic brand with lower costs. Trying to argue better bioavailability could also involve admitting that your existing bioequivalence studies are bunk, which would require an expensive new certification process. Plus, even in a functioning and truly competitive market, trying to experiment with different formulations to figure out which "gets better results" is a dangerous game for individuals; it's not like buying different Kleenex and deciding which holds together better. You have to do a lot of risky trial and error and get frequent blood tests.
So basically we have a system that ensures a completely non-functioning non-competitive market, and then we throw in an exclusive term where new medication can be sold at any price and we expect market forces to somehow constrain manufacturers. But the market forces are very weak and limited here. When we clearly end up paying dozens of times more than other countries (even for unpatented medicine) people raise the R&D issue to justify the costs. But that's sort of like saying "hey, the Mafia spends a lot on churches, so their extractive business model is fine." If you really want churches (or R&D) we should find a more rational way to come up with those funds.
PS this paper is a good (old) study: https://pubmed.ncbi.nlm.nih.gov/8026413/
The biggest problem with US health insurance is that it's not actually insurance. The purpose of insurance is to cover major claims. If a storm does $30,000 in damage to your house, you file an insurance claim. If it does $30 in damage, you go to the hardware store and pay $30. But we expect health "insurance" to cover the little stuff. Health insurance should be for if you get cancer or need major surgery, not for a generic drug that ought to cost $30.
Which in turn is what messes up what could otherwise be a competitive market. Instead of picking who you want to buy the drug from, most people have insurance, and the insurance company picks. And then most people get insurance from their employer so they also don't get to pick their insurance which makes the insurance company unresponsive because the patient can't easily switch.
And then it sounds like what happened is that the manufacturers make nearly all of their sales through insurance, who only care about regulatory compliance, and there aren't enough people paying out of pocket to get them to compete on actual quality.
But the other problems shouldn't be there if we could get people actually buying what ought to be cheap generics themselves instead of through generics:
> Plus, even in a functioning and truly competitive market, trying to experiment with different formulations to figure out which "gets better results" is a dangerous game for individuals; it's not like buying different Kleenex and deciding which holds together better. You have to do a lot of risky trial and error and get frequent blood tests.
This wouldn't be something most people would have to do themselves. If there are five companies making the same drug then forums for people with the condition it treats would have people already taking each of them, and if some of them are actually not right then aggregate data should show that, and then everybody would find out without each person having to do their own trials.
And somebody needs to be doing that anyway or you're going to have a lot of people whose medication is wrong who don't realize that it's because they're not getting what they paid for and the one that works is actually available from someone else.
> When we clearly end up paying dozens of times more than other countries (even for unpatented medicine) people raise the R&D issue to justify the costs.
But then we're back to, the trouble is that it's both.
And then people propose to have the government set prices, which is only trading one problem for another. Whereas what we ought to do is address the things causing the markets that are supposed to be competitive to not.
But the lesson you should take from this is not “we should just deregulate it a bit and hope the free market takes hold.” This is the planned system we designed in one of the most capitalist countries on earth: it got to the state of being a planned system because the truly competitive market systems kept failing. I’m not sure where you can go to find a truly competitive system that isn’t in some way underpinned and supported by the government (and the US government specifically.) People often point to third world countries where they can pay cash, but I think that’s mostly just rich US people buying luxury healthcare at lower prices, not a real working free-market health system that delivers broadly-shared results.
You have to entertain the hypothesis that when the ideal “free market system” exists nowhere, the reason is because the free market system was tried (here in the US, even) and it worked so poorly that it was replaced with one of the systems that survived. Because that’s the pattern we see everywhere with healthcare (and with roads and fire departments, too, outside of a few exceptions.)
The pharma investment problem is a problem, but just to be clear: it’s a question of financial allocation. There are many ways to solve it that aren’t what we have right now.
We didn't really "design" it though, it emerged organically out of the various constraints, many of them historical.
For example, why is quality health insurance in US tied to employers? Because during WW2, when federal government froze salaries, companies started to use various benefits to attract employees instead, and one of the most lucrative benefits turned out to be health insurance. And, since companies were large customers negotiating on behalf of all their employees, they could get more out of insurers for the same amount of money. And so gradually it evolved into what things have been before ACA, and ACA is basically a crutch that preserves this historical nonsense.
FWIW I don't think that free market is the answer here, but that doesn't mean that it can't produce significantly better results than what we currently have (it's not hard because our existing system essentially combines the downsides of free market with the downsides of centralized healthcare - you don't get the choice and you get fleeced).
It should also be noted that there are many different ways in which less-than-free market can be implemented. Single payer is a fairly extreme take with no clear evidence that it works better than more market-friendly approaches as seen across Europe. The one model that I'm really curious about and that doesn't seem to exist anywhere, though, is one where the government simply provides healthcare at a certain level as a non-profit public service, thereby setting the baseline, but doesn't try to heavily regulate private healthcare, and doesn't require citizens to participate in the public plan. Germany has some similarities but I don't think it's quite there yet.
Interesting that the graphs use PPP, but that the age-adjusted graph still shows the richer OECD countries spend more than the poorer ones. I wonder what's up with that.
I think looking only on the spending per capita tells us nothing about accessibility of service, and its quality. Once you start to consider those things, imo, the whole thing is not as a clear cut as it looks.
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.
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.
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.
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.
You won't get in trouble but the hospital will, but if they ask if you have insurance and you say no when you do, that could change the situation.
Again, I'm not a lawyer but this was they told me once a few years ago because I got charged a ridiculous amount for something and wanted to see if it would be cheaper if I just paid without insurance considering my deductible was many thousands of dollars.
I have also been in a situation where insurance price was cheaper.
Thereinlies the problem..without know the price people CANNOT make an informed decision. There is no freemarket. This done on purpose and only happens in America.
While it’s often 2x-3x the allowed amount, I’ve even seen it closer to 20x-40x one — an amount for a simple outpatient procedure the would lead to financial ruin if it had to be paid in full.
I really don’t understand why there is any math in the initial amounts.
Why don’t they just bill $1M for every single item and then see what they get?
$6500 is nothing once surgery, radiation, and/or anesthesiology enters the picture.
But when you get into the really big, serious, time-sensitive things. Cancer treatment, heart disease, anything that starts with an ER visit... you don't really have an ability or time to "shop around". The demand is inelastic.
I could be misinformed but I feel like there are only a few possible combinations of one’s actual coverage.
A simple spreadsheet could easily track everything. The providers even know how much they get from each company, so they know the allowed in-network cost for a patient.
It’s just utter laziness and stupidity.
However, if it's something like a surgery at a major health system, then it's way more complicated. The health system can't be as selective about what insurance they take, so they're dealing with medicare, medicaid, plans sold on the individual/small business market, and employer-sponsored plans. So way more than a few providers and a few types of plans. I checked the stats for my state and just the individual/small business market is 12 providers and 250+ plans. Medicare Advantage is at least 14 providers. A major hospital system probably accepts thousands, if not tens of thousands of different types of plans. Then you have to consider that the anesthesiologist, the surgeon, and the facility are all separate providers who may not all take the same insurance.
> 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.
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?
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.
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.
Just my €0.03.
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.
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.
This can make even small countries into relatively large buyers which can make better and more long term deals.
- 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
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.
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.