Why market competition has not brought down health care costs

Wait what? Your math is completely off. The 3% drop in administrative costs is not directly deductible from the 6% growth because that 3% drop would mean the growth would also be lower (since it's a %age of the total costs).

That's a great article.

It looks like we spend a large amount more than every other country in every category they define, but the primary difference thing that makes the huge difference is we pay for specialists a lot more. Their conclusion is just that, well, the cost is higher.

Interesting but leaves a huge question as to why.

The fundamental point is that incentives are horribly misaligned between making money and providing health care the way the current system works.

Try having a pre-existing condition before ACA - no one will insure you because you're too expensive, or your premiums go ridiculously high. Think about that. The people who need insurance the most were denied it - this is perfectly in line with market forces of course because its cheaper. The other alternative is to believe healthcare is expensive for everyone because the healthy subsidize the ill, but oops if you're ill your costs are astronomically high anyways and insurance companies will fight you tooth and nail over expensive claims, so that doesn't hold much water either.

If you want to talk data look at spending on health care vs outcomes [1]. If market forces were working so well maybe we wouldn't spend 2x - 4x more than other countries with worse life expectancy to show for it? We can argue over where the money is going but its clear theres a lot more of it going in for worse outcomes coming out than most of the world.

Honestly, seeing that if you don't see ANY contradiction or perverse misalignment between the ideal goals of a health system and the current system, you must be a very healthy guy.

[1] https://ourworldindata.org/the-link-between-life-expectancy-...

Price discovery requires the ability to price some customers out of the market. For serious healthcare (the only kind that costs a lot of money) that means life-long disability or death. There is no such thing as a free market without the ability to set prices for maximal profit (vs maximal coverage).

BY DEFINITION a free market in healthcare MUST kill people (or allow them to die of treatable diseases if you prefer). Period. Full-stop. Do not pass GO, do not collect $200.

A free market means if you are unlucky and born into a poor family, get bonked in the head, and have a retinal detachment then you should go blind. Despite the massive dead-weight economic loss to our society of converting an able-bodied person into one with a life-long disability, if you can't pay for retinal re-attachment then fuck you buddy.

I wish all your free-market healthcare proponents would address this fundamental inescapable fact. I suspect most don't because the idea is repugnant and the argument falls apart. Please don't bring out the charity canard. That's largely how our system functioned in the past (and still does for some people thanks to states refusing Medicaid expansion) and it simply doesn't work.

I don't want to live in a society that so prizes the god of free markets that it is willing to let people suffer and die of completely treatable diseases. I'm happy to seize as much money as required from whoever is required to make non-elective healthcare free for all citizens. Fortunately a minor tax on the top 10% along with a larger tax on the 0.1% is more than enough to cover healthcare. As a member of the top 10% I say that knowing I will pay higher taxes.

Your math is completely wrong, though not in the way the other poster said. You're making the classic mistake treating percentages as though they add and subtract when they really multiply.

> "So, if we adopted a true single payer system, by this math, the total spend in the US healthcare system would drop by 3%. US healthcare costs have recently been growing by 6% per year, so this would bring our costs all the way down to where they were on election day, 2016."

Assuming the numbers are right, if we adopted a true single payer system, costs would drop from 7% to 3%, a 42% reduction. After such a reduction, the spending would take nearly 10 years to grow back to whatever its original dollar value was at a 6% growth rate, not 6 months.

In summary, respecting "market forces" acting in a market created by the people, for the people is more important than ensuring peoples health - arguably the most basic of human needs... right. ALL HAIL THE FREE MARKET WOO.

Given that countries with single payer systems achieve similar or better life expectancy outcomes for in most cases half the cost of the US system, I'm inclined to believe that you have no idea what you're talking about. The US system is literary the only first world system that's not working.

Next.

Some people are questioning your math - I think this is due ambiguity in the expression, "Administration of the US health system alone accounts for about 7% share of total spending". My initial thought was this meant 7% of GDP, but it seems the OECD article means 7% of health spending.

I agree that a 3% reduction in total health spending would not make a single payer system worth it.

Hypothetically, if that figure was 30% would you be in favour of a single payer system?

> So, if we adopted a true single payer system, by this math, the total spend in the US healthcare system would drop by 3%. US healthcare costs have recently been growing by 6% per year, so this would bring our costs all the way down to where they were on election day, 2016.

But with the "true single payer" system you mentioned, everyone would be covered, and have equal access to care?

Including the ~28 million Americans without care?[1]

For the same costs as Election Day, 2016?

That sounds like a pretty good start to me.

[1] https://www.cdc.gov/nchs/fastats/health-insurance.htm

Exactly. That's not an exactly free market to operate in to begin with. Contrast that with the software/hardware markets, or even consumer goods markets, and the difference in terms of outcomes is pretty obvious. The problem with healthcare is that there is no direct "pay for service" system. It's all a mix of insurances, hidden costs, complex pricing systems (with little to no elasticity once fixed) defined by governments and third parties that have nothing to do with the end user.

Why isn't that information from other countries, which does publish it, enough to alter prices here?

This is definitely true, so far as it goes. For many types of medical care it is unreasonable to expect a patient to act in a price setting capacity on the demand side.

However there are many types of medical care where that is very reasonable! LASIK and cosmetic surgery are classic examples because they elective and have historically not been covered by any insurance. You can see cosmetic surgery prices on ads in the NY city subway. Other kinds of care, such as dentistry, orthodontia, and vision services, also have very well-functioning markets, largely because insurance has historically not covered these things. Lots of non-urgent care (primary medicine, pediatrics, dermatology, psychiatrics, orthopedics, many surgeries) would probably have well-functioning markets if they were separated from the insurance system.

Now, that's all the cheap stuff. The expensive stuff (hospitalizations, cancers, chronic disease) that makes up the bulk of the US health expenditure - yeah. You can't expect a patient to come in and argue with the doctor about whether they really need that saline drip. But in a properly functioning market, there is another entity that can and should (and does) act as a price-setter mechanism on the demand side, and that is the insurance company.

The problems show up when 1. there is only one supplier in a market 2. the insurer is required by law to cover a certain thing 3. the supplier does not face a price control, and through (1) and (2) has unlimited pricing power

This is very acute with prescription drugs. Even generic drugs sometimes only have one supplier because the process of getting FDA approval is so onerous. It is also very acute when you have hospital and physician consolidation within markets, so that medical suppliers can effectively act as a cartel.

So - deal with the supply side problems. Stop the cartel behavior. Make it easier to sell prescription drugs and open hospitals. Allow consumers to act as consumers when it makes sense (by excluding basic medical services from the insurance system) and reserve insurance for the risky, expensive, hairy stuff. This is the path forward, and it all follows very neatly from basic supply and demand.

> Extending that logic, a single payer health care system where one party has the power to negotiate could actually help a lot in bringing the price down.

Which was another big argument for single-payer. Medicare is know for negotiating the lowest prices, and practices prefer higher rate negotiated insurances than Medicare.

Insurers don't care. I recently got mono. It took three visits to a doctor, who just prescribe two back to back courses of antibiotics, a referral to see an ENT on the last visit (which did not seem right and would have taken three weeks to get an appointment for). And finally me deciding "fuck it" and making a trip to the ER to get to the bottom of it. At the ER I sat in a chair four or five hours. They took some blood and ran a simple test and it was done. Total cost to my insurer was something around $4000. I paid about $160 all up. I tried contacting my insurer and the provider to explain this was ridiculous cost to sit in a chair, give some blood, and have a test done. My insurer is Cigna. They literally have no online way of sending them email or a message. And their call center is useless. So I gave that effort half an hour and gave up.

> the problem with healthcare has to be insurance.

It's a big part of the problem. For example, I believed that a certain medical procedure was in my best interests. I was told that insurance often doesn't cover the costs (i.e., the considered the procedure "elective." When I asked the price, I was told $700 – but if I forego insurance claims it's $400. And this was a super-reputable medical establishment. (Half of Silicon Valley probably uses it.)

There is a large set of non-optional and emergency medical procedures where competition will remain nonexistent. Personally, I hope for AI to provide answers to cost-benefit analysis (treatment costs X, will reduce/improve chances by Y).

And that's why countries with higher government involvement spend less in healthcare and have better results.

How is a single-payer not simpler, given that it is exactly as is sounds, a single-payer for healthcare, which is the government.

The coding system for insurance billing is insanely complex (and getting more so). For example, there are at least nine turtle related injury codes: https://loweringthebar.net/2011/09/injury-code-w5922xa-struc...

How can you profit off of that?

Most of the argument centers around one's belief in the competency of the government. If you think they can do things well, you will probably argue for a single health payer system, or maybe a German model. If you think they are incompetent, bought, fools, then you argue against a single payer system. Humorously both sides point to Medicare and Medicaid as evidence of their views.

I think that it's because it's too far to the left to be politically viable.

That being said, there is some talk about it, even today for example: http://www.politico.com/story/2017/03/sanders-to-introduce-s...

There is too much money in the US system, and the current employees would never agree to losing what they have. It's far more lucrative to be in medicine in the US than in other countries.

In short, it's not just the insurance companies or the administration, but the industry as a whole. You try telling a group of doctors that they have to take a pay cut for the good of society, and they'll laugh you out of the room.

This is not to say that doctors don't work hard or aren't worth a lot in a career with a decade or more of training, but it's pretty clear that doctors in the US don't work particularly harder than their foreign contemporaries, yet they earn a ton more.

One, existing medical insurers comprise an industry worth tens of billions of dollars and have shown they are willing to every last cent they have on ads and lobbying to oppose such ideas, which of course completely threatens their existence. Any plan has to find a way to funnel them money in order to avoid that.

Two, partisan politics has gotten so bad that it is starting to warp and twist people's brains. "Obamacare" was demonized relentlessly by Republicans even though it was essentially a copy of a leading Republican health care plan at the time. The plan originally came from the Heritage Foundation and was championed by Mitt Romney, both of whom immediately turned around and demonized it as soon as a Democrat proposed it.

Third, the US right wing is fairly unique compared to the right wings of other countries, it has immense power, and it generally opposes this kind of thing for a variety of reasons. To varying degrees of justification they would tend to dismiss whatever arguments you might make or empirical evidence you might try to cite.

Fourth, the average American has no idea what single payer is, and has absolutely no idea that every other country in the rest of the developed world has something like it. Americans have no idea what life is like in other countries. They might know that Canada has some form of socialized medicine but might assume that to be a curiosity unique to Canada; and have never thought much about whether the Canadian system is any good or not.

Fifth, Americans would not generally assume that such a thing in any event is within the realm of possibility or competence of the US government. It's been many decades since the US has attempted any grand national experiment like this.

Sixth, because racism. Socialist programs would easily be seen as mostly benefitting other races; even if it was not at all true. Politicians can benefit themselves by exploiting this to varying degrees of subtlety.

It's a relatively simple mix of economics and politics.

If the only thing we changed was a single payer, without changing anything else, prices would continue skyrocketing and the government would either have huge deficits or very high taxes, even compared to most of Europe: US healthcare is that expensive.

To make single payer work, what the US would have to do is to also force prices down. This can be done through price controls, like in Singapore, by directly owning hospitals and employing doctors, like a good percentage of Europe, or by increasing the supply of healthcare providers so much that prices must go down. Any and all of those things would cause an upheaval in the healthcare industry: A lot of jobs would be lost, and others would pay a lot less. Many investments, like those of hospitals that compete with each other by being the most luxurious and with the most MRI machines, or pharma companies that expected to be able to charge a whole lot more to US patients than they do in Europe, would go down the drain.

Every single bit of extra US healthcare expense an inefficiency is benefitting someone else. More efficiency when driven directly by government mandates, like a single payer system would aim to do, is a wonderful way to lose elections. This is not just why democrats don't really pursue single payer seriously, but why republicans don't propose any changes that would really make the system more market driven: It's hard to rein the profits of an industry that is over 17% of GDP.

I don't think anyone disagrees with that. Americans are pretty unhealthy.

Well I mean being unable to afford to get your broken ankle re-set when it heals weird the first or spending a life in chronic pain or never getting treatment for sleep apnea etc... all seem like good ways to make obesity grow as a result of in ability to pay for medical care and a good way to eventually find your way to being on disability, poor and in poor health and then on medicaid/medicare.

So you know maybe it's a vicious fucking cycle.

Oh wait actually we know for a damn fact it is and has nothing to do with obesity: preventative care just keeps shit way cheaper that's half the point of the ACA forcing insurance companies to cover at least some of it (the other half being a basic belief in human dignity).

Like so many things that are broken in America, it's not one thing that's to blame - it's multiple:

People lives longer; more illness we can treat; growing administration; new expensive technology; few doctors; price gouging; anti-competitive behavior; malpractice lawsuits; lack of preventative care; uninsured bumping in and out of emergency rooms; and so on...

Some of these are successfully solved by most western countries. Some of them are quite plausibly not solvable.

As we have more technology and treatments to keep people alive, cost will necessarily go up.