Comment by vinodkd | Hacker News Reader

Comment by vinodkd | Hacker News Reader

I know the article and the discussion is about access to drugs, but I must call out that part of the success of medical tourism in India is the lack of stranglehold control over medical care by insurance companies. In India, I can:

- Get an estimate for service before it happens, and plan for it therefore.

- Pay for the service at the time of discharge with/without insurance

- decide by myself if i want to get a specific procedure done or not - no fuss of "does the insurance cover it?". Of course, this is one area where the costs of service being inherently low helps.

- get all my medical records in my hand

These are basic patient freedoms, IMO, that the insurance industry in the US has taken away.

I dont know the history of how it came to be this way in the US, but as it stands, the situation is very geared towards getting mystery service - you dont know what you're allowed until you're refused, you dont know how much the service cost you until months later and even then in multiple bills from various hosiptals, doctors practices and specialists, and you have to ask for your records because you cannot keep them safe!

I have all my records from every treatment in India, but not one coherent,collated record of my last physical checkup in the US. There's something broken there.

> part of the success of medical tourism in India is the lack of stranglehold control over medical care by insurance companies. In India, I can: Get an estimate for service before it happens, and plan for it therefore, Pay for the service at the time of discharge with/without insurance

There are a lot of problems with the insurance industry in the US. The first two that you call out, though, are a bit more subtle, and have to do with the way medical billing has evolved in the US. (Medical billing is related to, but distinct from, insurance).

The reason that you can't get quotes beforehand is because the providers literally do not know what it will end up costing you. As I mentioned in another comment, Medicare effectively leans on private insurers (and uninsured patients[0]) to subsidize the costs of care delivery.

A simplified version: a certain lab test costs $100 from the manufacturers. Medicare decides to pay $80, and providers have no room to negotiate this. Let's say that, for a given hospital, Medicare patients comprise 50% of the patients (not unusual in certain areas). On average, the hospital has to make $120 on each of the other 50% of the patients just to cover the per-unit costs, before paying for the overhead of actually running and staffing a hospital.

So, they bill private insurers $400. They don't expect private insurers to pay $400/test, but they use this as a starting point. In the end, the private insurer (say, Aetna) will come back and say, "okay, we'll pay 200% of what Medicare reimburses, for all Aetna patients you administer this test to for the next year, if you stop sending us these bills"[1]. So, they strike a deal to pay $160/test[2]. That leaves $160-120 = $40 of revenue on 50% of the patients to pay for all the overhead, so hopefully the overhead can be limited to $20/unit, or the practice will go under[3].

Unfortunately, most hospitals can't present patients with different bills depending on their insurance status[4]. So, they present that bill for $400 to uninsured patients, not actually expecting that they'll pay the full amount. If you know this, you can tell them, "if you reduce the bill to $40, I'll pay in cash today." Unfortunately, most people don't know this.

So, the reason you can't get a quote in advance is that the doctor literally has no idea how much it will actually cost you. Because, even if they know your insurer, they don't know the details of your plan well enough to give you a precise quote. And the actual resulting price is only very indirectly related to how much it costs the provider.

[0] this second part - uninsured patients - is more an unintended consequence rather than the intended effect

[1] In reality, it's a bit more complicated, because it's not always set at the level of the insurer (ie, it's not always "all Aetna patients", but more likely "all ____ Aetna patients", which makes it more complicated.

[2] If you're really unlucky, the provider might even enter a capitated agreement with your insurer, in which case they receive a lump sum up-front without actually knowing how many tests they'll administer.

[3] Unsurprisingly, a lot of practices have gone under and been bought out by hospital networks in recent years (and hospitals have similarly gone under and been bought out by insurance companies).

[4] this is a combination of federal and state laws, as well as the infrastructure it would require

> If you know this, you can tell them, "if you reduce the bill to $40, I'll pay in cash today." Unfortunately, most people don't know this.

I've often heard this, but have recently been asking for cash prices for some routine services, and the responses I've gotten have been either "um, we don't do that", or just simply referencing their fake inflated prices.

It's probably different if you've already got an unpaid bill in front of you, especially for a larger procedure, and you're dealing with the billing skinjob rather than the receptionist. But that's still quite far from how sane transactions work.

> It's probably different if you've already got an unpaid bill in front of you, especially for a larger procedure, and you're dealing with the billing skinjob rather than the receptionist. But that's still quite far from how sane transactions work.

Yes, that's what I'm referring to - negotiating down a bill, as opposed to negotiating the price up front. This also is far more likely to work for inpatient services than outpatient services, and for large bills (4 or 5 figures) than small ones. I just chose $100 as the base to keep the numbers simple.

The reason is that hospitals would rather have you pay a small bill than risk having you default on the bill. Accounting-wise, the former is preferable, especially since they don't actually expect uninsured patients to pay the massive sticker price anyway. (That's not meant for patients; it's meant for negotiating with insurers, and it's only an unintended side-effect that uninsured patients end up having to see it).

The reason that you can't get quotes beforehand is because the providers literally do not know what it will end up costing you.

Because the system was design that way. Time and materials vs. fixed price. Most of the rest of the world is on fixed price. We seem to think that's a socialist (or communist, depending on who you talk with) idea.

The problem with T&M is there is no incentive to save money, when it wouldn't affect the outcome. That extra test? Sure! Want your "friend" to stand in with you in the operating theater, even though it adds $50k to the bill, no problem! (This last thing I read about... just mind blowing.)

> Most of the rest of the world is on fixed price

No, "most" of the rest of the world is very much not, either by number of countries or by population. The original post is specifically about cheap, high-quality care in India, where medical care is completely self-pay.

There are both advantages and disadvantages to capitation, though that's a digression from the main discussion.

You can't really call the US system "time and materials" either, as that would still imply some ahead-of-time insight into the pricing structure.

Thanks for this well thought out response. [4] is the killer clearly. My naive response as I read yours was: "Well, just have two rates, the medicare one and the regular one". But if laws prevent that...well then that's played straight into the insurance companies hand.

This is why we need to completely get rid of health insurance in the US. If Hospitals could only charge the actual value for their services, and not the inflated insurance prices, the prices would be much lower.

One of my friends is a Doctor. He told me that they need to over-charge for services because of the insurance companies. If they charge $20 (the actual cost of the service), they might get $4 back from the insurance company. If they charge $100, they might get the $20 from the insurance company for the service. We need to cut out the middle man. It's basic economics.

The drug issue in the US is mostly the fault of the government. It takes hundreds of millions of dollars and 10+ years to get FDA approval. This stifles innovation and creates an environment where there are only a few players (IE: a monopoly). The result is ridiculous prices due to no competition.

If they charge $100, they might get the $20 from the insurance company - the remaining 80 goes to the insurance company?

> If they charge $100, they might get the $20 from the insurance company - the remaining 80 goes to the insurance company?

He's saying they bill for $100, and the insurance company decides to pay $20.

So where does the 80 go?

Mandating identical pricing for all customers [0], published price lists, and all-inclusive standardized line items based on services rendered (not costs incurred) could accomplish the similar thing. Unpaid bills for emergency (non-deniable) services would come from a general state fund, which would then recover from the debtor (or not).

Whatever the solution is, it's got to be stealthy enough to get past the "insurance" cartel. The grass roots demand for national Romneycare obviously came from legitimate problems, but the political machine twisted it into just further empowering the accounting-protection racketeers.

[0] Providers would still be free to set whatever prices they wanted, they just could not have different rates "negotiated" for different customers. And obviously accounting-skirting kickbacks would be illegal.

> Providers would still be free to set whatever price they wanted, they just could not have different rates "negotiated" for different customers

In theory, this could work in a totally free insurer market. Unfortunately, the current system relies on public insurers (Medicare/Medicaid) being able to set prices for their patients by fiat. Unless we required Medicare and Medicaid to accept providers' billing rates (which I could actually support, but would be a political non-starter), providers' prices can't be standardized.

However, even if that happened, there's the other problem of actually enforcing this. Prices are set by billing codes and collections of codes that are billed simultaneously, and they may not be linear[0]. There are 70,000 billing codes, which are far more insanely detailed than you could imagine[1]. Mathematically, it would always be easier to play tricks with the particular codes submitted for billing than it would be to prove any misconduct.

[0] So, billing for the sets {A, B} and {C} would not cost the same as {A, B, C}. Which is totally reasonable, because providing anesthesia (A) for a bronchotomy (B) is less complicated than providing anesthesia for a bronchotomy in which some complication (C) occurs during the surgery.

[1] e.g, G44.82: "headache associated with sexual activity"

But Medicare cannot dictate that a provider must provide services to Medicare, so the providers are obviously finding it beneficial to do so, right? If Medicare is paying only the variable costs and not the amortized fixed costs, this is a fundamental economic problem which must be fixed to have any hope of sanity.

I've heard of how complex the condition codes are, but an individual should not need to understand that system to make financial decisions. The entire problem here is essentially one of complexity, much of it necessary but much of it unnecessarily generated as time goes on. A person has a procedure done for straightforward reasons, possible complications are enumerable, and anything more complex can be billed on prepublished hourly rates and cost-plus for materials.

Individuals can only function as economic actors when they have understanding, with the current system being an abject failure of "nobody knows" as the end result of computers fighting computers.

> But Medicare cannot dictate that a provider must provide services to Medicare, so the providers are obviously finding it beneficial to do so, right?

That's not quite true. There are a lot of intersecting laws that, in their cumulative effect, all-but-require most inpatient providers to accept public insurance.

That said, the situation has gotten bad enough in recent years that some hospitals are openly trying to figure out a way to terminate service for Medicare patients. (The fact that this has been a discussion point for so long should give you an idea of how complicated it is to do so legally).

> If Medicare is paying only the variable costs and not the amortized fixed costs, this is a fundamental economic problem which must be fixed to have any hope of sanity.

I agree. But so far, there's little sign of hope.

> I've heard of how complex the condition codes are, but people should not need to understand that system to make financial decisions.

I'm not saying that patients would need to understand ICD-10 billing codes in order to make their own financial decisions; I'm saying that this would be a serious logistical challenge to enforce any sort of law mandating uniform pricing.

It's the same reason that every PC laptop you purchase has a thousand different model names and numbers, even though they're all 99% identical. They do that so that they can each get a different SKU (they are technically different products). So retailers can provide price-match guarantees with low risk of actually having to make good on that promise (you're unlikely to find the exact same SKU at a different retailer).

I can imagine hospitals being so large (and coupled with mandatory-service emergency rooms), that there would be a lot of hoops to extricate themselves. But smaller private providers surely make the choice more voluntarily. Tangentially, I'd venture that if billing and other deadweight overhead were actually reformed, current Medicare reimbursement rates would actually be quite profitable.

But regardless, either of the archetypical sane systems requires correct reimbursement rates. If not corrected in a functioning market, Medicare doesn't get services. If not corrected in a single-payer government system, then the hospitals go out of business. Healthcare cannot be reformed without solving this problem!

> It's the same reason that every PC laptop you purchase has a thousand different model names and numbers, even though they're all 99% identical

I too see this as another instance of the same general phenomenon (although obviously not as harmful). Computation is being wielded to generate unbounded complexity, to destroy individuals' ability to understand situations for making rational self-interested choices. If you want an even worse one, try buying toilet paper!

I'm not one to reactively say "there needs to be a law", but it seems if there is any economic function of government, it's to facilitate the understandability of transactions. Saner states already have "unit pricing" laws, and they're badly in need of updating to restore their usefulness.

I don't hold out hope given the dysfunctional state of government, so my only real hope is that we can build bottom-up technology to fight back by cutting through the artificial complexity, restoring individuals' economic ability. But that's clearly a long slog away.

>If Hospitals could only charge the actual value for their services, and not the inflated insurance prices, the prices would be much lower.

I don't quite understand how you're arguing using the term "basic economics" that Hospitals en-mass will leave money on the table in a capitalist economy.

> The drug issue in the US is mostly the fault of the government. It takes hundreds of millions of dollars and 10+ years to get FDA approval

Can you point to some jurisdictions where it does not take hundreds of millions to bring a drug to market.

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