Not just any vlogger. The ‘vlogbrothers’ Hank and John Green are actually really good at this kind of thing. Their piece on the tax plans of the various US Presidential candidates this year was quick & eye-opening.
Across the board, mandatory, government provided, health insurance is cheaper because it is not for profit, and everyone bears some small share of the burden. That’s the bottom line.
As for private insurance systems, one big issue is in that, in the USA, employers organize health plans. In contrast, in other countries that also have commercial health insurance, the economics of the trade are pretty much like every other standard economic transaction - the insurance providers have set plans, and they are competing with eachother for the consumer dollars. In the US system, the people who pay for insurance and the insurance providers have no incentive NOT to increase costs - both of them simply run the numbers and increase premiums/deductables, or reduce wages, or some combination of those. In addition the healthcare providers lose nothing by escalating prices also. The people with no power to negotiate (wage slaves and unemployed) are the ones who get screwed because they have been taken out of the transaction.
The US is the most technologically advanced country on the planet and it does more than its share. Indeed, the US share is now much greater than the 1980’s (when it was dominated by Europeans and Japan).
However, simply looking at the Dollar value is inaccurate and misleading for a plethora of reasons. Firstly many drugs are introduced due to JV’s between Companies of different geographic locations. Secondly, Company’s often purchase each other’s business. Thirdly, the location of Corporate HQ and research centers are not necessarily the same; Pfizer was in the US at the time; however the research that developed Viagra came from the UK.
You are right that Big Pharma does support lots of labs all over the world, sometimes in unexpected places. However, the point was that Shagnasty had claimed that one reasons that US drugs are so expensive is that Americans are subsidizing its development for the rest of the world, which is far from the truth and indeed sometimes the reverse is true.
Trying to navigate the often Byzantine world of pharma R & D is next to impossible, but on the issue of patents came up in the TPP negotiations. Lots of diseases are regional, so many governments in the Far East or S Asia (as an example) support research on diseases, research which is later sold to large US Pharma who later patent the drugs and turn around and charge an arm and a leg for them.
I know, I just wasn’t going to begin to argument by authority. They’re right in this instance, it makes no difference they have a reputation for being so in others.
But that’s in part because, since anyway companies will need to pass FDA inspections, it’s easier to just do it where the FDA lives, partly because of the large population, partly because of the varied ethnic composition, partly because it is allowed to pay people to take part in clinical trials…
it’s not as if it’s done out of the goodness and generosity of any of the people involved.
And when FDA’s inspections are seen more as “fines to be avoided” than “guidelines on how to do a better job”, frankly it’s kind of scary. I’ve only worked in three Pharma companies and one parapharma, but the three Pharma ones had that mindset. I’d like to hope they’re not representative of the sector but hope is losing the battle.
This is not to be underestimated. Where a cost is always insured, and has to be insured, there is a positive long term incentive for insurers to allow costs to go up. It sounds counter intuitive but bear with me.
You would think that insurers would want to drive costs down. That would benefit them in the short term, in the sense that they could then increase their underwriting profit (ie the amount by which their premium income exceeds their claims paid). And of course insurers do work to keep claim costs down. But this only actually helps them to the extent of trying to ensure that they don’t pay more for their claims than their competitors would.
However, usually most and sometimes all profit made by insurers is investment profit, that is, the profit they earn by obtaining premium up front, investing it, and then only paying out claims later. This means that the higher claims are, the more premium they can charge, and the more investment profit they make.
In other words, if an insurer take premium from you of $1000 and pays out $999 in claims for you, that is far better for them than if they take premium from you of $2 and pay out $1 in claims for you. Even though their underwriting profit is exactly the same either way, the first option allows them to invest $1000 for a year and take the interest, and the second option allows them to invest $2 for a year and take the interest.
As long as medical costs rise steadily so that premium can keep pace, it is best for insurers if medical costs are as high as possible, so that as much money as possible churns through their investments.
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For profit.
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No standardization means different forms, rules, qualifications and layer upon layer of red tape. That all adds huge costs.
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Copays discourage people from getting care, at onset, when it would be the most cost effective to treat them. Putting it off until it can’t be avoided, or worse, until things are catastrophic means the cost of treatment is now through the roof. So we won’t cover your diabetic maintenance needs but will foot the bill for you ER visits. It’s not just kinda stupid, it’s stupid expensive.
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Just like the bigger the company/insurance grouping, the lower individual coverage becomes, when an entire state/province acts as a single group, premiums drop to very low rates. In addition, the risk, of persons with resource sucking conditions, is spread over such a large group as to have little impact. Bonus you will be able to negotiate very reasonable drug prices for your citizens.
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In a for profit system there is zero motive for the incredible cost savings realized by preventative medicine spending. I don’t ever think you’ll see it manifest in a for profit model.
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A huge savings could also be realized when you subsidize insurance premiums for those in need, instead of footing the bill for their actual care. Again, seems self evident.
For those who prefer to read instead of watching, here is the blog posts Mr Green based his show on.
Those who are blaming the profit motive have no understanding of how profits are generated and what their purpose is.
Profits are the way prices go down. The way it works is someone invents something. Then a price that reflects the resources being used is arrived on. Then some greedy person finds a way to do it cheaper and get more profit. He is then copied and a new lower price is found. This repeats until the price is much lower than at first. However, without the greedy person trying to increase his profits by cutting his costs the price can never drop.
This can work in healthcare. For instance, under most insurance flu shots are now either free or nearly so because that reduces costs.
It’s the US mindset, get as much as you can, which is pretty good bargaining leverage when your arm is hanging by a thread, or your liver needs a replacement, or a gun is pointed to your head - the US system.
There are three meta categories as to why our system costs 50-100% more than other wealthy nations as a % of gdp.
Administration - our administration is disjointed and disorganized. A lot of replication, Doctor hours and extra employees are needed for it.
Lack of market forces - the US lacks either public or private market forces in health care. Costs are not transparent, hospitals do not compete, people cannot compare prices, the public sector can’t negotiate, people technically can’t buy items from overseas
A fee for service system - everyone is incentivized to provide the most expensive care possible. I once heard a European say in Europe they treat every pregnancy as a regular pregnancy, in the US they treat every pregnancy like the highest risk types. However outcomes are the same. More medical care is not necessarily better, but patients want more and hospitals, pharmaceutical companies and doctors want to sell them more.
So assume you hurt your knee. I’m the US due to shitty administration there is far more red tape and overhead for all your care. Because nobody negotiates prices you will pay for more for care. Also the doctor and hospitals want to push the most expensive care possible. So multiple scans, surgery, expensive implants, etc even if clinical science shows rest and physical therapy is just as effective.
As someone who has studied this issue for years as an amateur, supposedly it comes down to those three things.
Streamline our administration, allow market forces to work and alter incentives for providers to reduce costs.
I’m not so sure that a for-profit motive means that prices will automatically and necessarily be higher.
The big issue here is that nobody, save maybe the insurance carriers, has anything approaching good information on the market (meaning the market of healthcare goods and services), especially when we’re talking about things that are typically referral-only or specialist.
For example, if you’re insured, and you go to your GP for what you think may be strep throat, you’re liable to pay one of two things- either the full list price (paying down your deductible) or you pay some sort of co-pay that’s a fixed amount and less than the retail list price (say… $30). Your doctor has an incentive to keep that retail list price in line with the local doc-in-a-box/urgent care clinics, because if he charges $300 for a strep throat exam, and the rest charge $100, who are most people without a co-pay going to visit?
If you have a co-pay, your doctor will submit a claim to your insurance carrier, which may or may not be at the retail list price, depending on whether they have negotiated a different rate for that sort of service with him. So your doctor may only file a claim for $55 with your carrier, since that’s the negotiated rate. But the other guy with strep throat who went back after you may have a claim filed for $75, since that’s his carrier’s negotiated rate for that same exam.
The carrier may reveal that based on the information submitted, that they don’t cover penicillin injections for strep throat, and refuse to pay the doctor at all, or they may decide that they only pay out 1/2 the amount because it doesn’t have a negotiated rate. So they’ll pay the doctor whatever that rate is, who will then send you a bill for the balance.
Not that anyone actually knows this stuff going in, except the carrier and to a much lesser extent, the doctors. So neither the doctor nor the patient can make informed choices about their treatment at the time of examination. What ends up happening is that since there’s no downward price pressure from the patients, everyone jacks up the prices accordingly, because there’s no way for the consumer to say “Dr. X and Carrier Y suck; I’ll go to Dr Z and Carrier W.” because they’re typically insured through their employers, and have no visibility into the pricing of anything.
If all the prices were out in the open, it would shed some disinfectant light on the carriers and providers with respect to how they manage their billing and reimbursement.
Up until the 1970s, US healthcare spending was only slightly higher than that of Europe (excluding the UK) and Canada. After a period of worldwide high inflation in the 1970s, European countries and Canada held health care cost growth relatively low through the 1980s, while the US failed to do so and continued to experience high inflation in that area through the rest of the decade. By 1990 or so, US health care spending was consequently at a much higher level.
Nearly all of the current difference between US and European health care spending is due to that period of divergent cost growth in the 1980s. These costs are path-dependent and baked in everywhere. Consequently, we pay our specialists, PCPs, and therapists more; our hospitals have more private rooms (due to different models of infection control); our drug pricing is premised upon recovery of average costs. Basically, we ended up paying a lot more for everything by 1990, and that gap has persisted.
It has not generally gotten larger, however. Since then, health care cost growth in the United States has been in the middle of the pack among OECD members. In other words, for the last 25 years or so, our for-profit, fragmented system has been no better or worse at controlling costs than the single-payer and other systems in Europe. Similarly, within the US, Medicare has generally been no more or less successful than private insurers in holding cost growth down. I.e., profit is not really a driving factor.
Preventive care is a red herring as to cost issues. It’s consistently been shown that the expense of extending preventive care more broadly eats up any savings from illness prevented.
ER use and PCP access is hard to fix. The experience in Massachusetts was that expansion of insurance coverage simply caused the newly insured to use the ER more often.
Medical school cost is not the issue. Whether paid for by the doctor and offset by charges to patients or paid by taxpayers, the cost of the education isn’t going to change and is going to be borne by the system somewhere. Much the same is true as to malpractice costs.
Drug costs are what they are. The model has developed such that by and large, manufacturers recover their development costs in the US, while sales to other countries are mostly profit. The bargaining power of single payer systems is not really an issue, as many US private insurers are larger than the systems in Canada and other countries and do exercise bargaining power themselves (limiting or denying coverage to new drugs in some cases). Once again, though, the costs have to be borne somewhere, and if the US were to, say, pass legislation that held down drug reimbursement to a point where the drug companies could not recover their development costs here, fewer new drugs will get put into the pipeline (and the ones that do will tend to be copycats, since the outcome will be more predictable).
Administrative costs are less different than they seem, because public systems outsource much of their collection and compliance functions to other agencies.
Recent increases in the costs of ACA plans are their own set of issues unique to the structure of that law. They’re not necessarily reflective of health care cost trends in general. Overall, our health care spending growth has lately been quite low.
Basically, our costs are higher because we let ourselves go for a period in the past. Since then, we’ve been doing as well on this issue as anyone else, but the gap remains because “as well as” is just running in place, and we have not been able to achieve actual reductions in costs. That’s not really remarkable, though, because no system in any developed country has ever been able to achieve sustained cuts in health care spending. At best, it’s just a matter of restraining growth; for now, we’re doing that as successfully as any other system, and we’re just stuck with the cost disparity.
That is the free market argument, as espoused by the likes of Gordon Gecko and Kenneth Lay (Enron). Simpletons can be convinced by their simplistic economic arguments. Lay convinced Bush (JR) that a free energy market would be more economic for everyone, and lower prices. I think we all remember how that went down, right?
Wiki definition: “In a system of free-market healthcare, prices for healthcare goods and services are set freely by agreement between patients and health care providers, and the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.”
I think we can all agree that none of that describes what is happening in the US. There is no free market in US healthcare, so free market arguments don’t even apply.
I think that’s what everyone is arguing- there isn’t enough transparency in the current state of the healthcare market for traditional free-market mechanisms to drive prices downward, or at the very least, to keep a lid on absurd prices and what-not.
excellent, thank you for sharing
That link does appear to have a pretty good run down of things. I particularly was glad to see that he emphasizes that the problem is COMPLICATED. That there is no single cause or solution.
I want to add a couple of observations:
- part of the reason why attempted solutions are all inhibited, is because of the primary structure that is in place. That is, that Insurance companies depend on Medical authorities, to establish best practices, as well as prices, so that they can do what the primary task of insurance companies always is: predict costs, in order to make sure of a profit. Medical establishments base their charges, as well as what they charge for, on what insurance companies are most likely to cover, in order to increase the likelihood that THEY will get paid. Medical establishments also follow the same primary medical authority, in order to reduce the likelihood of successful lawsuits.
Because all these things are interlocked, any attempt to change only the fee charged, will meet resistance from the entirety of the system. Doctors CAN’T choose to follow different, cheaper treatments, because the AMA tells them the insurance companies that if one specific set of tests are not performed, that they will lose any legal challenges for proper care. And the insurance companies tell the hospitals and doctors, that they will not remain insured, if they fail to adhere to the AMA’s conclusions.
One of the direct causes of some of the seeming abuse anecdotes we read of, charging people for “skin to skin contact” with their own baby, for example, results from the mechanism of insurance and payments itself.
- many attempts to “fix” problems will fail, or even make things worse, because the overall nature of the existing system, and of health itself, isn’t properly understood. For example, insisting on detailing each charge separately, with the hope that individual items can be selected out and savings effected, often fails for two reasons: one, that there is a real cost involved with making the separation, which has to be ADDED to the overall bill, and two, because many things can only have arbitrary values assigned to them in the first place.
We saw that happen in several industries already: make airlines specify detailed costs, and though the stated cost of a ticket might fall, miscellaneous other costs will show up, in addition to the addition of the administrative cost of telling you about them.
It’s a bit like when a given politician lowers taxes ostentatiously in one area, or for one group, but then reduces the benefits and services which those taxes paid for, to another group, and in the end, the larger society actually loses wealth.
- people who claim that market competition would save us all, fail to realize that medical care is NOT A COMMODITY, and that market forces do not apply to it the same way that they do to simpler products and services. Primarily, because the PRODUCT of the medical practitioner, is a HEALTHY PATIENT. The person who pays for the medical service, IS THE PRODUCT. Using market forces to drive down costs, depends on the product being SEPARATE from the customer.
That’s not true at all. Being a commodity or not has nothing to do whatsoever with whether or not market forces apply.
The point is that barring cases where patients have no choice (severe injuries, etc…), the presence of a clearly cheaper alternative provider will eventually pull business from the more expensive ones and drive prices down to some kind of equilibrium level, all else being equal. Nobody’s going to go to the 3x more expensive doctor unless there’s proof that the outcomes are that much better. And right now, there’s not that much price transparency, nor is there much visibility into outcomes either, so people just go to their usual doctors and pay whatever their insurance says they should pay.
Given that, at the point when you actually need service, you may well not be in the best situation to make a rational choice, and that in any case you do not have the clinical qualifications to judge whether your doctor’s diagnosis and recommendations for treatment are correct, it may well never be possible for true market conditions to apply, however much price transparency or knowledge about outcomes there may be. The other party in the transaction is, after all, interpreting the evidence for you.
There’s a wide range of situations, and the vast, vast majority are things like sinus infections, allergies, hypertension, etc… that are neither emergency situations nor so critical that someone couldn’t spend a half-hour shopping around.
That’s the point- for situations where you’re being carted to the ER in an ambulance, you don’t have much ability to shop around. But if you’re just feeling kind of miserable because you have strep throat, you have some time to make decisions. Same thing if you’re facing chronic health conditions or non-emergency surgeries and procedures.
If there was greater transparency in pricing, people would be able to determine if their GP is the best bet, or if maybe an urgent care clinic or merely another physician is a better option.
But right now, it’s hard to even make a decision on what the best insurance plan for you at your employer is; they give you all the deductibles and what-not up front, but they don’t tell you exactly what’s covered and out-of-network, so you can’t really make a solid estimate whether the high-deductible or the 80/20 plan is the best one for your situation. I ran into that last year, and I even went to the trouble to try to make a spreadsheet to estimate the cost tiers, but without knowing what we might face as a family, and what is and isn’t paid for, or what providers charge for anything, it was still guesswork in large part.
If it was clear up front what everyone would pay, then people would be able to make informed choices, and then there would be both a price differential by provider competence (to some degree), and/or based on speed or availability.
Allergies can very much be a high-emergency situation. The first time my niece tried a flatfish, she didn’t die because her mother always carries epinephrine injectors in her doctor’s bag.