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Comment by success_hawk | Hacker News Reader

I tend to always want the free market to find the balance as well, however medical care price markets for everything are not a free market. Between patent regulations allowing for extension and monopoly combine, liability on producers, pressure from investors for profit and returns, with those prescribing and taking the drugs having no connection to the price and value the forces that drive pricing are a maelstrom. I have worked in pharma research both internal to the companies and as an external independent data reviewer. I am also aware of a both subtle and overt collusion to fix data and pricing. While I think government does nothing well this is area is a dark cave that could use some light.

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While I agree with you and the author, I don't see either of you proposing any solutions, and I don't really have one either. About the closest I can get to is to abolish or at least very radically reform the third-party payer system. But since it's fashionable these days to push for a single-payer system (which is even farther in the wrong direction), that seems at least as politically impossible as anything else that might be proposed. There are a number of modest improvements to e.g. the approval process that would lower risks and costs, but not enough to make any real difference, and even those are politically daunting.

Ultimately, the only way to get new research is to be willing to pay for it. And the only way to get low prices is to be willing to walk away. It might be helpful for people to take a big-picture approach here, and I suspect that if they did, many would decide that maybe having all these expensive drugs and even more expensive medical plans isn't really worth it. You can probably get a lot more enjoyment out of a 60-year life than a 70-year life if every year comes with an extra 10 grand to spend, especially if your last five years would have been spent suffering side effects in a hospital bed. I suppose I'm questioning the author's assertion that (rational) people are willing to pay any price for drugs.

> push for a single-payer system (which is even farther in the wrong direction),

Why do you think it's in the wrong direction?

Many countries have socialized medicine, some of which have single payer, and I've never met a person who experienced a single payer system who didn't think it was the right way to go.

This article correctly pointed out very early on that the third-party payer system inflates demand and prices for drugs. If you disagree with that assertion, then you're welcome to disagree with mine as well. Otherwise, if you think having coverage denied for a treatment by a private corporation (that owes you nothing beyond what is contracted) is politically incendiary, wait until you see the government (theoretically "for the people") deny that same payout. Death panels, anyone? By making it even harder to refuse to pay for a treatment, a single-payer system would increase demand and therefore prices even further. This is Econ 101 stuff; it's not some rabid flight of fancy.

If my understanding is correct, other nations with single payer systems have lower health care costs and frequently better outcomes than in the US.

Econ101 is good for teaching concepts about how to think about economic interactions, but when the data doesn't match the theory, you can't stick with the theory.

Every other country on the planet have lower health care costs than the US by a large margin.

US public healthcare spending alone, excluding private payments and insurance, places the US in the top 20, possibly top 10, in government spending on healthcare.

In other words, Americans pay more than citizens of most developed countries over their taxes, and then pay about the same again to private insurers...

That's an interesting argument, but it misses the fact that the US is effectively subsidizing the healthcare in the rest of the world.

Even if that's true -- and people asserting that never support it -- I don't see what the point of that is in defense of the status quo US policy. If that is the reason that Americans are paying so much more for healthcare and not getting any more benefits, it would be better for Americans if the US stopped doing that.

If the US stopped doing that there's no reason to assume that another country would magically step up to the plate. What if, as is the point of the article, the US stopped doing that and the world simply stopped getting as many new drugs?

> If the US stopped doing that there's no reason to assume that another country would magically step up to the plate.

Another country, no, because that would be irrational and stupid (just as it would be for the US, if the argument atht the US is actually doing that is correct.)

On the other hand, if the US is subsidizing the rest of the world, that means the US is substantially reducing the marginal benefit of expenditures in the subsidized domain by other countries, disincentivizing their own expenditures (direct or through policy which promotes drug development.) It would be irrational to expect the removal of that subsidy and the associate disincetives not to result in increased expenditures.

> Every other country on the planet have lower health care costs than the US by a large margin.

To put it in concrete terms, of OECD countries (comparable non-OECD data is harder to get), the #2 country in per capita healthcare spending (Switzerland) spends about 72% of what the US does per capita.

> US public healthcare spending alone, excluding private payments and insurance, places the US in the top 20, possibly top 10, in government spending on healthcare.

Again, to provide some concrete numbers, in the OECD, the US is #3 (behind Norway and Netherlands) in per capita public healthcare spending.

It also has the second highest proportion (52%, just barely behind Chile) of total healthcare expenses that are private, rather than public.

This is true, but on the other hand the US does have a much higher standard of care.

In my experiences with the US hospital system I've been shocked by the way every single town seems to have all the fanciest, newest equipment. A scan that you'd wait days for in Australia you can get on the spot in the US.

That money is going somewhere.

> That money is going somewhere.

A lot of it is going on over diagnosing and over treating, both of which cause harm.

https://en.m.wikipedia.org/wiki/Unnecessary_health_care

So you're agreeing at least in part with my original assertion, then. Namely, that we probably need to be less willing to pay high prices for drugs (and by extension other treatments) because in many cases they are of much less value than other things we could buy instead. Right? I mean, overtreatment has negative value, so it's hard not to imagine that what was paid for it couldn't have been better spent on something else. Anything else. Throwing the money into a fire would have provided more value.

No. Over testing and over treatment is unrelated to the (initial) high price of drugs and other treatments.

Just this week I got a 2-month wait from a US hospital for a scan I got a 1-month delay outside the US. And that's a major, top ten US hospital, not some dinky place no one has heard of (but it's a non-standard scan setting, I'll grant you that). And the out-of-pocket (despite having insurance) is almost as high as the entire scan if I did it privately in the other place (which I pay zero for - it's all covered)

> That money is going somewhere.

Mostly to the pockets of the health insurance companies, which rake in ridiculous profits for providing services which are essentially non-existent and not needed almost anywhere else in the world.

The reason for this gap is that these are unnecessary conveniences. There's a reason the US care actually never rank very well on WHO rankings, despite the availability of extremely advanced care.

You can get most stuff done immediately in the UK too, by paying for private insurance (incidentally you'd still pay less in taxes + private insurance than Americans pay in taxes towards healthcare alone) or just going to a private clinic. Most people don't, though, because as much as people might complain about waiting, they also tend to accept that the NHS prioritises by clinical need and will provide treatment when necessary. Including through buying capacity from private providers or sending patients abroad if serious enough.

The result is that when you need it, you generally get treatment rapidly, regardless of your financials. When you don't need it instantly, then yes, you get to wait (or pay).

If anything, this situation in the US reflects how distorted the market is by having a system where healthcare providers are have an incentive to find every means of charging sky high rates as most of them are not paid directly by patients, and insurers have little reason to push back (because the occasional experience of high medical expenses provides a massive reason for people to well covered by insurance, and they're competing with other insurers that will use unwillingness to cover certain types of expenses against them).

But ultimately this is also part of why so many Americans have been poorly covered by insurance: The system has been geared towards people who can pay higher premiums. Had the US system focused on affordability, and left luxuries to top-up insurance like in the UK, the US could have paid for universal care out of current taxes and still have (lots) money left over.

Well, as the article pointed out, some part of what the US is spending money on is subsidizing those other countries. How much? That would be interesting to know. There's also the small problem that "health care" doesn't have a UPC code; what people in those countries get and what people in the US get are not the same thing (which doesn't mean that the US standard of care is better, only that they're different). So it's pretty hard to look at what people are spending in two different places for two different things, with a probably large subsidy involved, and conclude that a theory about supply and demand for identical goods in a free market is wrong.

Let's put it another way: it seems that you must disagree with at least one of the following statements:

(a) Higher demand, ceteris paribus, means higher prices.

(b) A single-payer system implemented in the US would likely cover more treatments than the system that exists in the US today.

(d) A single-payer system would not shift the supply curve for treatments.

With which do you disagree? It seems like most of the interesting arguments here are around (d), but there doesn't seem to be any evidence against it. Of course, again, there is some seriously massive distortion going on here, so it's hard to be sure.

With which do you disagree?

Well, everything. Including but limited to your random assumptions, weird logic, and counterfactual conclusions.

Single payer enables the capitation model for healthcare. Lowering costs by incentivizing prevention.

I disagree with arguing (provably wrong) theory in the face of hard data (which disproves said theory) - drugs and care are significantly cheaper in every single payer market, and provide better outcomes as measured by life expectancy and many other measures.

> So it's pretty hard to look at what people are spending in two different places for two different things, with a probably large subsidy involved, and conclude that a theory about supply and demand for identical goods in a free market is wrong.

It's actually quite easy, just like you do with e.g. a McDonald's meal or a bottle of coke (e.g. the US subsidies these indirectly through corn subsidies, no other country does). It's not the same everywhere, not by a long shot, but it's functionally quite close.

Same drugs and similar are cost much more in the US.

The market is not free - it is illegal for you to have your medicine shipped from Canada or India or anywhere else.

>Death panels, anyone?

Can you elaborate on this? Do you have any examples of death panels in countries with socialized medicine? Or at least of the government refusing to pay for medicine?

Look at the recent decision by the UK's cancer fund to stop paying for a bunch of cancer drugs, including ones like Kadcyla which dramatically extends life in metastatic breast cancer.

There are lots of news stories about this in Britain. A couple examples from 2015:

http://www.economist.com/news/britain/21640343-well-meaning-...

http://www.dailymail.co.uk/health/article-3106130/Ovarian-ca...

Notably, the first article is arguing that the evaluation of medical effectiveness (or as they say in the USA, "death panels") is a good thing.

Others have provided examples; I was actually making the opposite point with respect to the US. "Death panels" was a phrase used by politicians to drum up hysteria around a hypothetical single-payer system refusing to pay for a treatment. My contention is that such hysteria would make it nearly impossible, politically, for a US single-payer system to refuse to pay for any treatment, no matter how expensive or ineffective. This would of course drive up demand and therefore prices even moreso than the already distorted third-party payer system that exists today.

The sad thing that everyone missed is, insurers already do this. Death panels exist, they're built into our current dumb not-really-free-market solution!

> Death panels, anyone? By making it even harder to refuse to pay for a treatment, a single-payer system would increase demand and therefore prices even further. This is Econ 101 stuff; it's not some rabid flight of fancy.

Your interpretation of Econ 101 apparently is a rabid flight of fancy, - because if you look at the data, single payer systems pay less (often an order of magnitude less) for the same drugs.

First of all, the number of payers doesn't actually figure into Econ 101 arguments, because the demand is driven by the number of customers, who are generally speaking independent of whether the payment flows through one or 20 payers. If anything, it lets producer strongarm any one payer - as the customers shift to paying through other payers. There isn't much incentive for affordable prices.

In a single payer system, if the producer will charge too much, they have no one to sell to - which gives them an incentive to price it affordably.

Furthermore, the market is not free, neither in the US nor in single payer markets. The US market is regulatorily tilted towards producers (e.g., it is illegal for you to buy your medicine abroad, even if it is the same one produced in the US by the same factory and company, and maybe even same batch). Single payer markets are tilted towards the buyers.

Death panels already exist in the US, except they are privatized. Do you really believe that private-for-profit insurance companies just give everyone everything that could help them? If you do believe that, then - yes, I think it's some rabid flight of fancy. I've known quite a few cases in which they don't. And if you don't, then you agree that death panels already exist.

>Many countries have socialized medicine, some of which have single payer, and I've never met a person who experienced a single payer system who didn't think it was the right way to go.

Really? You haven't met many people.

However, I'm pleased to meet you, because I've lived in the US and Australia and I think that the US system is vastly superior (assuming you have decent insurance).

My objection to the Australian system is both practical (the standard of care is lower because hospitals are just government departments, they don't have a profit motive, it suits them to give you less care rather than more) and philosophical ("single-payer" health care just functions as yet another government-enforced transfer of wealth from the rich who earn it to the poor who vote for it).

Practically, the Australian system has better outcomes at lower cost.

Philosophically, you say "earn", whereas the labor denied their fair share of productivity gains would more likely say "horde" or "theft".

Surveys show overwhelming popularity among single-payer systems. The parent poster doesn't need to have met many people--all the data we have suggests that single-payer is very popular.

As for the "wealth transfer" stuff, well, yes, that's what society is. The idea that we're all somehow making money in isolation and in a vacuum (some more, some less), and the government can only interfere with that activity, was in vogue for a while but seems to be falling out of favor, I think, because it doesn't actually describe reality.

Reality is, we all live in a society we all share, and when someone comes out on top, the answer isn't "ok, you're rich, you won the game, and screw everyone else," the answer is, "ok, you're rich, now you have a greater responsibility to everyone else." Behold, society!

(Assuming one has good insurance) ... This is the major problem in the U.S.

> I've lived in the US and Australia and I think that the US system is vastly superior (assuming you have decent insurance).

Go ask your australian friends who lived in the US what they think. I've lived in the US and Israel, and spent considerable time in the UK (the latter two single payer systems), and I had great insurance living in the US.

The "standard of care" is a vague measure that could mean anything at all. Yes, being hospitalized in the US is more like a hotel room, one person per room.

But the doctors are considerably less experienced (structurally so), which means you get the wrong care for things that aren't common (from experience). The "out-of-pocket" on my great insurance in the US is significantly higher than my premium-to-make-include-hotel-room-stays in the other places. And I generally have much shorter waits for both routine visits and specialty doctors outside the US.

The US costs a lot more. In return, you get care that is lesser but is shinier. Every statistic of care effectiveness that I've seen ranks the US quite low -- mostly comparing life expectancy but also quality-of-life post treatment.

What's this "standard of care" you speak of?

Note, I'm unfamiliar with the australian system - it might be worse than the US on every front. But the Japanese, Swiss, British, most EU, and Israeli systems are not lesser and much, much cheaper, in my opinion and limited experience.

p.s. re "great insurance" - it's great until you really need it, but then it fails to be great way too often. Leading cause of bankruptcy in the US is medical expenses[0] - more than 50% of medical bankruptcies are by people who have insurance. How great is that?

[0] http://www.cnbc.com/id/100840148

Why all of this focus on "people" and "if they did" placeholding for your own opinions? It may drive home how dystopic they are if you deign to own them.

The competition for health is illness, infirmity, and death, and I don't see it as anything but cruel for the free market to force people to choose between these options. Yes, people will (attempt to) pay any price for drugs, because it's their life. This seems uncontroversial.

The reasons third-party payer persists has nothing to do with any fashionability of opposing it. The fact is that nearly every country with universal healthcare (not sure if this is included in what you deride as "fashionable" single-payer) has a higher standard of living than the US.

> Why all of this focus on "people" and "if they did" placeholding for your own opinions? It may drive home how dystopic they are if you deign to own th

Because politics and economics are human sciences? I already know what I want/value for myself, and there's nothing dystopian about it. One person doesn't make a market and certainly doesn't make policy.

> The competition for health is illness, infirmity, and death, and I don't see it as anything but cruel for the free market to force people to choose between these options. Yes, people will (attempt to) pay any price for drugs, because it's their life. This seems uncontroversial.

It's controversial. Take a step back and let your SJW anger fade a bit, then think about it. Just how much would you pay for 5 years of extra life, and of what kind? Not how much would you force someone else to pay at gunpoint. Not how much would you imagine being willing to pay in the moment for 5 years of ideal life. How much, every year from birth to death, would you really be willing to pay for 5 years of probably-degraded life? Everything you pay means giving up something else. For most people, that figure is not in fact "infinity" nor is it "every dime I'll ever earn". It's less than that, and how much less depends on individual values.

Quality of life matters. Drugs have side effects, and those side effects reduce quality. Drugs aren't perfectly effective, and whatever they're intended to treat is very likely causing symptoms that also reduce quality. Very often that combination reduces quality to a great extreme. And paying for drugs, whether a vast sum or a relative pittance, means not having something else, which, you guessed it, reduces quality.

Economics is the study of scarcity and how humans adapt themselves to it. Both quality and quantity of life are scarce resources, and there are tradeoffs to be made with other scarce resources. While your gut reaction might be that the tradeoff here is obvious, universal, and uncontroversial, a more careful examination is warranted. It's most definitely not as simple as you make it out to be.

Take a step back and let your SJW anger fade a bit, then think about it.

Take it back to Reddit, kid.

Not a kid, don't use Reddit, never have. From the HN FAQ:

> When disagreeing, please reply to the argument instead of calling names. E.g. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."

Was there some substance to your response that was cut off, or could it have been shortened to ""?

That's some hypocritical rules-lawyering, but is there any other kind?

But since it's fashionable these days to push for a single-payer system...

Good. I'm pleased that evidence-based rationality is coming back into fashion.

...the only way to get low prices is to be willing to walk away.

Don't confuse individual choices with collective action.

Prices can decrease through economies of scale. Which requires investment.

Libertarians wax poetic about Freedom Markets (tm), conflating profit motive and incentive, ignoring externalized costs, ignoring the need for law and order to form open markets. It's exhausting.

OP wrote:

People who are dying are price insensitive; they would pay any amount to get a few more months of life.

Your misinterpretation:

I suppose I'm questioning the author's assertion that (rational) people are willing to pay any price for drugs.

OP makes no such assertion. The fear of death is the definition of irrationality.

Expecting the free market to find balance is like expecting the weather to be on a regular schedule.

Economics is by now the only science clinging to the notion of balance. Everyone has moved on to thinking in terms of inherent instabilities, and either attempt to predict (weather) or manage (engineering) them as best one can.

Economics is insofar different that we are not just at mercy of the laws of nature. We have to deal with the nature of humans and their behavior but besides that we can make up the rules and could at least in principle set them up in a way that yields a stable system. If it is possible in practice I don't know, maybe stability inevitably leads to terrible inefficient systems or requires enforcing practically unenforceable things. But you are at least correct for our current system, there are several constructs that are not stable and lead to runaway behavior.

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