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Comment by omarforgotpwd | Hacker News Reader

"The US spends more on healthcare because the prices are higher!"

Um, okay. Duh. A better question to ask would be: Why are prices not falling? In the "normal" economy, people can't offer any arbitrarily high price they want: They have to compete with others to offer their good or service at a low price. The more you raise your price, the more you invite competition and give them room to run a profitable business.

Anyone who has gone to a doctors office or hospital lately knows why there is so much overspending in health care: The health care system is the most fucked up, overcomplicated, ridiculous system you could possibly imagine. You start out by filling out a big paper form with all your info on it... They use that to bill your insurance, which then says okay, we're going to pay you half of what you asked for. What ridiculously perverse incentives. Now the provider will naturally ask for twice as much, knowing they won't get everything they bill for.

Health Care will be fixed not by laws or insurance companies, but by technical innovation and good old fashioned economics. You know, those old ideas Adam Smith had. If there was serious technical and economic / business model innovation in the industry (an Apple of health care) prices would go down, outcomes would improve, etc.

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> "The US spends more on healthcare because the prices are higher!"

> Um, okay. Duh. A better question to ask would be: Why are prices not falling?

It's an excellent observation, and it begs your excellent question.

Unfortunately, we can't get to an excellent answer. The US is ideologically incapable of acknowledging that "market failure" exists.

Things like Lasik, Invisialign, and plastic surgery prove the market can work in healthcare. They are relatively affordable and good service is easy to find.

I will admit that these may work because they fall into the area of human vanity, and our current image obsessed society may be driving that behavior.

But then, doesn't that hint the total healthcare market could work with similar market adhering dynamics as in Lasik (its easy to get a quote and find a competent doctor) and a long run advertising campaign, a la brushing teeth back in the day, to get people to have regular checkups rather than ER visits.

Possibly. I thought the top answer in the Uber-as-ambulance discussion offered a lot of insight as to how the current system is a market failure:

https://news.ycombinator.com/item?id=16007246

>> I don't have the time or expertise to do the months of legalese and calculus it would take me to understand my insurance policy, so I have no idea how much an ambulance ride would have cost me. $0? $400? $15000? None of those numbers would surprise me. As best I can tell, insurance companies throw a dart to decide whether you're covered or not, and then the healthcare provider makes up some insane number if you aren't.

>> The Uber got me to the hospital faster than an ambulance would have, for less than $10, and I knew it would cost less than $10.

It would be interesting to have a conversation about how you deliberately construct a sane ambulance market (liability, dispatch, predictable pricing, proper competition) to handle a wider range of emergencies.

But in the US, I don't expect such a reasonable conversation. I expect to be bludgeoned to death with the word "deregulation", as if the only control we have is a a single dial to turn "regulation" up or down.

You never get to zero "regulation". "Deregulation" is always selective and another form of market interference -- and like any market constraint, selective deregulation will always favor certain players.

So, can we have a conversation about constructing a market? It's the US. I'm not getting my hopes up.

It's the most frustrating thing in today's climate.

Everyone agrees there are good and bad regulations, but everything gets framed such that any regulation is bad, and any deregulation is good!

There's no real conversation about which regulations are which! It's just naive free market vs full socialism debates in every public sphere.

The simple answer is not to construct a market, but just have the government set a reasonable price.

Another option would require localities to use a bidding system for ambulance providers rather than doing it themselves or contracting a gold plated service.

Maybe mandate the ambulance charge the same rate to insurers as they do non-insured people. A huge part of the "list price" for these services are just an attempt to set the negociation with insurers high.

Also, comparing Uber to an ambulance is silly. They aren't comparible services. Ambulences aren't a hospital taxi. They provide some level of first aid and stabilization.

If you don't think you are going to get or potentially die, you should be taking an uber/taxi/friend ride to the ER.

> The simple answer is not to construct a market, but just have the government set a reasonable price.

My point is that all markets are artificially constructed. Having the government set prices is simply constructing a market using a different set of rules.

Your proposal sounds like applying the "all-payer" system to ambulance service.

https://en.wikipedia.org/wiki/All-payer_rate_setting

There probably isn't a more appropriate use case for all-payer than ambulance service!

> Also, comparing Uber to an ambulance is silly. They aren't comparible services.

Au contraire -- it's a brilliant, revealing comparison. It illustrates exactly what is missing from ambulance service today: price transparency.

Even if there were an ambulance market, it's not like I'm going to spend time researching pricing when I need an ambulance. That'd be like if 911 and police services were market-based instead of public utilities. I know police do charge for special events and misuse, but I just mean the average citizen emergency.

>Things like Lasik, Invisialign, and plastic surgery prove the market can work in healthcare.

It's no coincidence that all three of those are optional services that (most) people do not need to not die. The free market has worked relatively well for services like that, and most healthcare does not fall under that category.

Most healthcare actually does fall into that category, and the unwillingness to acknowledge that is a big root factor in what's keeping costs high.

What's your mechanism here? Anything that's covered by "insurance" is disconnected from consumer choice and thus normal competitive pressures don't work to constrain prices?

Would you outlaw insurance, then? I guess that could be a good approach if all of us were rich enough to self-insure!

> Anything that's covered by "insurance" is disconnected from consumer choice and thus normal competitive pressures don't work to constrain prices?

Not "anything." Obviously there are other types of insurance whose rates aren't skyrocketing higher than inflation, like car, auto, or life insurance.

> Would you outlaw insurance, then? I guess that could be a good approach if all of us were rich enough to self-insure!

I would make employer-provided coverage no longer tax deductible, and possibly even reverse that initially so that consumer-purchased coverage is tax deductible. This would cause a shift over the next few years away from employer-provided coverage.

This would be a net zero change in spending on day one, but now consumers will care about what they're paying for insurance and can switch on their own. This isn't a problem that will fix itself overnight, but when consumers actually see $1k+/mo leaving their checking accounts every month, they will actually shop around and make choices based on pricing. They don't do that now because they don't see the cost or pay for it directly.

With consumers making choices based on pricing, insurance providers will care much more about prices and push back, just like they do in other markets.

It won't solve everything, but it's a start.

> I would make employer-provided coverage no longer tax deductible, and possibly even reverse that initially so that consumer-purchased coverage is tax deductible. This would cause a shift over the next few years away from employer-provided coverage.

This is something that I have argued for as well; the disconnect right now between what insurance costs, what it pays, and what the customer pays is too confusing and provides a very strange incentive structure. I would even go further and argue that all medical expenses should be tax deductible, with insurance premiums just being a special case of the general deduction. Get rid of all this FSA and HSA nonsense.

That said, I think part of the problem is that medical insurance is increasingly being used for routine medical care. Auto insurance, for example, does not cover preventative maintenance or oil changes, so consumers need to price those themselves. Similarly for other major kinds of insurance, like life or homeowners.

Vision insurance plans are increasingly common now, like VSP, and as a result, I've anecdotally noticed strange distortions of the market for eye checkups; we're still at the point where you can get a quote for one, but increasingly it's buried behind talk of co-pays and co-insurance that serves to hide the fact that the costs are going up for no reason, and the quality of service is being put at the exact minimum level that the insurance generally will cover.

I'd much prefer a high deductible plan (in fact I'm on one now) but I'm hampered by the fact that it is almost impossible to actually manage -- the billing comes from three different places and I can never figure out whether I've already paid a bill because they keep billing for different amounts for the same visit. And sometimes they bill my insurer, and other times they bill me directly, or sometimes they just go ahead and do both, and also send me threatening letters about paying bills that I've already paid.

I would love to see increased competition in this space, but until we get rid of employer plans, I don't see that happening.

This concept is addressed in the book “Catastrophic Care: How American Health Care Killed My Father--and How We Can Fix It.”

Highly recommend it. It’s got some great ideas. And I've mostly just copy/pasted this from another comment I made recently. I really hope some of the ideas in that book start making inroads via legislation.

Elective procedures (that may have cheaper substitutes) are not all that likely to inform how other services will be priced. To capture a wide market, Lasik can only be so much more expensive than glasses or contacts.

Also, for medical care it turns out that healthy people don't benefit much from regular checkups. That way of stating it is a little tautological, but people lacking conditions that need management get little benefit from scheduled checkups.

I would argue that it is not difficult to construct a functioning market for elective procedures. For elective procedures not covered by insurance, the consumer has time and motivation to educate themselves about alternatives. For elective procedures covered by "insurance", the insurer has the option not to provide such coverage. Competitive pressures can work as they do in the rest of the economy.

The harder question is how to construct a market for non-elective procedures, such as emergency care. Consumer choice doesn't work under those circumstances. We have a market failure. How do we solve it?

Are we having a market failure, or a failure to have a market?

I'm content with either framing. Both can be fixed through deliberate construction of a market using regulation.

But in the US, we don't acknowledge that we are already regulating, and we are wholly ideologically committed to the notion that "regulation" is bad.

Health care is the absolute prime example of a Veblen good as people are willing to pay for perceived quality. After all would you prefer the heart surgeon who charges $5000 or the one who can charge $25000

> Health care is the absolute prime example of a Veblen good

"Veblen Good: A good for which demand increases as the price increases, because of its exclusive nature and appeal as a status symbol."

I'm not following. Heart surgery demand is based on having a heart problem. Taking a step back, health care encompasses more than just picking a heart surgeon. Most practitioners won't tell you the dollar price of a service beforehand even if you ask. Standard behavior is to go see whoever is covered by your insurance.

> Standard behavior is to go see whoever is covered by your insurance.

Standard behavior is to see the best provider covered by your insurance.

It's a small textual difference, but a massive actual difference (and what makes it a Veblen good).

This. I moved to Switzerland a while ago and noticed that they are suffering from the same issue: Switzerland is one of the richest countries in Europe and just like the US, they are also faced with health care costs that are completely getting out of hand.

Another example is day care for children, which is also disproportionally expensive here. Both are cases when people just don't want to cut on money, they want to have the best option for their health or their children, the costs are only a secondary consideration. Which means that the health care market has not much of a competition on prices and as a result everything that is health related is expensive. Even basic things like nutrition supplements are around 5 times more expensive than in other European countries.

You'd probably find most people would go with the $5,000 guy.

We're not talking Drunk Eddie suddenly being allowed to practice as a surgeon, the $5k guy will still have standards and steady hands.

The risk differential is probably not worth a cheap car.

A concrete example: Private health insurance in the UK is cheap, because it excludes a lot of the basics - you use the NHS for that, and only call your private insurer if you e.g. need a specialist or if you can't get an appointment with your GP.

Yet only 10% opt for it, because the NHS is generally good enough. And of those 10% a lot only have it because it's offered as a mostly free perk by their employer.

But I do think that there is a segment - part of those 10% who opt for private insurance - that will always pay extra to get "the best" whether or not there is a major difference.

Especially if you can only borrow 5k

Seems like a bad example. All board certified cardiothoracic surgeons have to report their mortality rates from procedures (there are problems with that, but one could easily look this up). Not to mention most work for a hospital and therefore have a fixed salary. On top of this, most healthcare consumers in America are directed by their insurance provider as to who they can even go to for these sort of procedures.

> Not to mention most work for a hospital and therefore have a fixed salary.

Unless you have knowledge to the contrary, I'd dispute this. Most physicians, and specialists in hospitals in at least the Pacific North West are NOT hospital employees.

This is how you can get into ridiculous situations where your hospital is "in network", but your provider is not (because of course, you get a choice on the physician you are assigned at a hospital, especially in ED...).

Mortality rate is a poor metric.

First, it "penalizes" doctors/hospitals that take on the most severe cases. There is no objective metric for "we saved X people who would have died at an average facility." Do you want a metric that would encourage a doctor/hospital to deny an aggressive procedure for fear of taking a hit in its mortality metrics?

Secondly, it ignores ongoing quality of life. A cardiac surgery can have a later death that does not count in its mortality rate, even if it was due to a complication caused by, or significantly contributed to, by inferior medicine.

Oh, I'm in agreement, and should have made my point about this more clear. The reason I brought it up at all is that there are other external factors that influence a patients decision, or lack thereof, in choosing a CT surgeon for their non urgent (or emergency I guess, but there's even less choice there) procedure.

I'm in the UK not the US. The example is actually a friend who has watched his private practice (1 day a week) expand as he tried to reduce demand by increasing his rates.

Oh, I see. I figured you were talking about the US due to the article. Your friend works one day a week?? That's awesome.

4 days NHS (the day job), 1 day private practice. That's typical for Consultants in the UK...

After I posted the comment I figured that was the case.

Well, unfortunately both surgeons charge the same, which is the maximum what your insurance pays. Capitalism doesn't work here.

You do realize that the US has this problem alone.

It doesn't require innovation or technology.

Just proper policy on pricing, like every other western nation has. The market will fix the efficiency, but not as long as the medical field itself can set the prices, since life and death choices are the ultimate i-will-rob-a-bank-for-this price elasticity.

'Nobody else is this incompetent.'

Here in the UK we have 'free' healthcare and the system is equally incompetent.

You aren't spending nearly as much as Americans and for that money you treat everyone.

Are large organisation inefficient? Yes. Is it frustration when you look at it? Yes. Does this mean the US situation where they are spending 3 to 5 times as much to provide the same level of care to only a part of the population, is objectively worse than the UK situation? Yes.

(I removed the quoted line, because the tone of voice is suboptimal - but it doesn't change the argument)

I agree the sum total cost may be significantly different but I was simply acknowledging that inefficient health care administration wasn't purely an American phenomenon.

It is not unique to healthcare either. It is simple a common aspect of large organisations that have too many stake holders that need to coordinate to get things done.

It is an interesting organisational problem.

But inefficient does not mean expensive. Generally you see a lot of inefficiency, much like with code, when it is not the hot path. If you would fix all the obvious inefficiencies it will not drastically reduce cost (actually: it would mean the hospitals have more money, so anybody selling anything to them would up their prices)

Inefficiency only makes a difference when the price is based on cost not on negotiation position (i.e. value based). So in a red ocean as they say, there is a strong economic incentive to fix all in efficiencies and squeeze the last dollar out of it. This is referred to a race to the bottom.

But health care is the opposite of a red ocean. And no price is too high if it means survival, so the consumer (i.e. the patient) needs a much better negotiation position. For example: having all patients collectively negotiating the price. If only over time the invisible hand of the market would have created structures for this purpose again and again everywhere in the world. Oh wait! It did. It's called government.

The "UK" NHS is failing because government has made the choice to defund it and to privatise it.

It's a purely political choice from a health minister who believes in homeopathy and who has previously written about the need to sell off the NHS.

The NHS has been failing for at least the last 25 years.

We've had labour, lib-dem/con and conservative Governments and countless health ministers in all this time.

I fail to see the political connection?

> The NHS has been failing for at least the last 25 years.

You sound like the Daily Mail.

If it's been "failing" for a quarter of a century why is it always ranked as one of the best health services in the world?

Yes it has it's problems but it far from failing.

https://www.kingsfund.org.uk/projects/health-and-social-care...

http://www.commonwealthfund.org/~/media/files/publications/f... [PDF warning]

http://www.independent.co.uk/news/uk/uks-healthcare-ranked-t...

http://www.bmj.com/bmj/section-pdf/187348?path=/bmj/343/7826... [PDF warning]

Could the rating organizations be biased to weigh disseminated coverage and care more than individual quality of care? Just a question, since I seem to get that impression these types of quality of life surveys.

As a USer with good insurance, it's a hard pill to swallow to trade next day doctor appointments, same day urgent care (not ER) with very short waits, and quick schedules for surgical procedures for the broader coverage other countries offer with more rationed care.

Purely anecdotal but I've never had a problem getting a GP (Doctor) appointment for the next day (and get same day if they're not busy). Not sure what would be urgent enough to warrant same day but not ER?

That said I am fairly healthy and can probably count the number of doctor visits in the last 10 years on one hand so I may have just been lucky in my limited experiences.

That's an awfully long time to be in a state of "failing"? Can we quantify what we mean by "failing" here?

'Can we quantify what we mean by "failing" here?'

'In decline' maybe? The NHS has been in some crisis or another for all of these years.

No, it hasn't.

Standards have got considerably worse in many measures recently.

When people talk about the winter crisis it's differently to previous winter crises -- A&Es turning away ambos because the corridors are full isn't something that used to happen.

In the past Ambos have been turned away, but that's because the beds were full. Those A&Es still had emergency capacity (in the corridors).

'A&Es turning away ambos because the corridors are full isn't something that used to happen.'

'In the past Ambos have been turned away, but that's because the beds were full...'

And before this, what? Ambos queuing up, patients treated in ambos, patients waiting a long time for ambos, etc, etc.

You have to go a long way back to find a time when everything was working as it should be.

Before this an A&E would tell an Ambo that the beds are full, and to go to a different hospital.

This leaves some spare in the system for when things are very busy - you put people in corridors.

But now all the corridors are full. We've had A&Es declare major incidents.

We've even seen, and I don't think we've seen it before, triage on resus. That alone is a big flag that things are fucked.

> And before this, what? Ambos queuing up, patients treated in ambos, patients waiting a long time for ambos, etc, et

Right, you think we'll go from fully working NHS to fully broken NHS in the blink of an eye. These things you mention were fixed once, and they've been getting steadily worse (as the Conservatives de-funded social care, and privatised drug & alcohol services, and cut MH services, and defunded the rest of the NHS) - the crisis started a few years ago, and is building year on year.

'These things you mention were fixed once, and they've been getting steadily worse...'

OK, it was the Conservatives what done it. I get it.

Yes, clearly and unambiguously the Conservatives have destroyed the NHS.

I said this in my first post.

Here, for example, is a chart of A&E 4 hour breeches: https://twitter.com/FactCheck/status/948953869509423108

They haven't destroyed the NHS since the NHS still exists.

However, this aside, do you have any ideas regarding turning around this perceived calamity?

Personally, I think the solution is politically unpalatable but I am not so narrow minded as to think there may be a solution that doesn't simply resort to giving doctors and nurses a bonanza pay rise.

As far as I know it's not. Here are two pieces of anecdotal evidence:

- cycle responders in London [1]. I can't see how private companies can get enough "client density" to afford the fleet in a congested city centre to reduce response time. Moreover, centralized dispatch is inherently more efficient.

- centralized and somewhat open control of life-saving procedures' efficiency [2][3]. In this particular case it's children heart surgery. NHS not only applied country-wide risk-adjusted statistical model, they also did a project to communicate it to patients. I'm not sure if it's possible in the US healthcare system.

From the POV of a recent immigrant it looks like most dissatisfaction with NHS stems from their approach to mundane and/or chronic problems, that's where you see GP resistance and long waiting times. They seem very good at not letting people die. Arguably it's a reasonable tradeoff given their constrained resources.

[1]: http://www.londonambulance.nhs.uk/calling_999/who_will_treat...

[2]: https://www.youtube.com/watch?v=-NebRpbMTK8

[3]: http://childrensheartsurgery.info/

IMO technology can improve much.

But the decision to use the technology or not is a political one.

The incindental economist blog covers this issue well. Basically you have providers and payers both striving to be monopolies. Payers are a two sided monopoly so they can pass on costs. Patients are a captive audience.

> Why are prices not falling?

In many European countries, prices are negotiated by the publicly-funded health service or a government-appointed body.

Every country will attempt to negotiate the cheapest price they can get. Even so, drug prices across Europe vary widely by country. And there are powerful European pharmaceutical companies[1] who naturally resist price discounts or cheaper alternatives (UK example: https://www.theguardian.com/society/2017/nov/01/drug-giants-...).

[1] Large European pharmaceutical companies: GlaxoSmithKline (British), AstroZeneca (Anglo-Swedish), Novartis (Swiss), Roche (Swiss), Bayer (German), Sanofi (French)

> Every country will attempt to negotiate the cheapest price they can get. Even so, drug prices across Europe vary widely by country. And there are powerful European pharmaceutical companies[1] who naturally resist price discounts or cheaper alternatives

The only reason those countries are able to "negotiate" low prices is that the US is a much larger market and doesn't fix prices, so they can simply mark up prices in the US to make up the difference.

Every single one of those European pharmaceutical companies you mentioned? They make the bulk of their revenue in the US market, even though Europe is more than twice the size of the US. That's why half the R&D done in the entire world is done in the US, and a large portion of the R&D done elsewhere is still funded by revenue generated from the US market.

Perhaps this is working better at the moment than the American system in some regards (such as price), but I'm wary of any third party (especially the government) setting prices. Should the government tell Apple what they can charge for a phone, or what you can charge for your web service? A good system should set the price automatically. For those rolling their eyes, yes, clearly this market system for health care has not been invented yet. But that doesn't mean it's not possible.

That's precisely where everyone is mistaking. Healthcare has turned into profit making business. Doctors, healthcare organisations, Multi speciality hospitals are more concerned with profits, top line, bottom line, share-holder values, etc. In India, there are still some old, reputed, brilliant Ayurveda/ Allopathy/ homeopathy doctors who are treating patients for nominal charges over decades of their practice just because of one principle - Treating patient means service to God.

[1] https://www.thebetterindia.com/107629/balwantghatpande-oldes...

European governments can not and do not dictate the prices of products of companies like Apple or BMW.

IMO there is a clear difference between health and survival and a new phone or a new car.

Because there is no competition on the supply side. Do you shop around when you're gravely sick? Can you even get transparent prices out of hospitals?

Exactly. There is no competition on the supply side. Suppliers are often granted legal monopolies as a matter of fact!

> You start out by filling out a big paper form with all your info on it...

This drives me insane. Why do we still not have a working system of digital medical records? They ought to just be able to punch in my name and social security number and be able to pull up all my history, without me having to try to remember when I've been operated on and scribble it on a paper form.

> "Health Care will be fixed not by laws or insurance companies, but by technical innovation and good old fashioned economics. "

I doubt market forces can drive the healthcare prices to normal values. The success of a free market hinges on supply-demand balance and consumer choice. In healthcare, both factors are skewed against the consumer. If I am consumer of a non-essential product and if I find a supplier unsatisfactory, I either have the choice of going with a better competitor or even forego consuming the product altogether. When it comes to healthcare, I don't have much option. Even the competitive forces are weakened due to high barrier for entry and lack of bargaining power from the consumer. If you are sick and even if all the existing healthcare providers are expensive, you don't have the luxury to sit out. When consumers are locked in like this, there is no motivation for healthcare providers to drop their rates.

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