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Comment by tyfon | Hacker News Reader

I don't live in the US, but I've always though it was because it is for profit.

In most countries the hospitals don't have to return a profit to the owners and run at cost. In the US they have to pay the profit on top of the cost. In addition you have an insurance industry with high administrative cost and the need to turn a profit that makes it even more expensive.

This in addition to very high medicine prices results in an overall expensive healthcare system.

The article seems to support this notion although it doesn't spell it out directly. The punchline is “It’s not that we’re buying more pizzas, we’re just paying more for each pie,”

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You have your conception of profit backwards.

The existence of profit is supposed to act as an incentive to competition. Profit isn't something that is added on top of the cost; profit is the difference between the cost and what the market is willing to pay. Lots of profit attracts competition, and competition reduces the market's willingness to pay.

Normally profit arises from looking at what the market is willing to pay, then figuring out how to provide that for some cost that is lower. Profits are normally increased by decreasing costs, since increasing prices is not normally an option - the market won't pay the higher costs due to alternatives.

What stops the market functioning is irrational markets (e.g. people always want the best and won't settle for second-best, so they overpay; or they want treatment even if risks and costs due to treatment are worse than the probability adjusted costs of the thing being treated), barriers to competition (lots of regulation - for good reason), monopolies (e.g. drug patents), information inefficiencies (lack of pricing transparency so price isn't able to act like the signal it should), information asymmetries (doctors know more than the patients, who are actually paying for the healthcare), incentive misalignment (employer-provided healthcare being a big one), etc.

It's not really backwards though.

There is nothing to stop a non-profit hospital from being as efficient as a for-profit one.

In that situation the non-profit will always be less expensive as the for-profit one unless the investors are willing to take a 0% return on their equity.

When it comes to what the market is willing to pay, what will a man that is about to die be willing to pay to be cured? Quite a lot I guess so there is nothing really to stop price gauging if the patient is paying for it directly.

> There is nothing to stop a non-profit hospital from being as efficient as a for-profit one.

Sure, but there is also no motivation to do so. NASA never even thought about having a rocket return. SpaceX/Blue Origin, that was the first thing they thought of "how do we reduce cost over time, this is wasteful"

The solution could be a government lower cost alternative to the private health care so they can keep each other in control. Same as us post office does for ups and fedex

I actually really like that idea.

NASA has had several concepts for having a rocket return, and DCX is an example of a test vehicle that actually flew.

You have your conception of profit backwards.

Still he has a point. I you introduce some new actors in the chain, you should consider what incentives apply to them. Private owners might reduce inefficiencies, but at what cost? Their own profit, that they would try to maximize at all costs, and service degradation most likely.

> Private owners might reduce inefficiencies, but at what cost? Their own profit, that they would try to maximize at all costs

Correct, this has been the SOP for private companies since the beginning of time. This is why things get better.

Except things aren't getting better, that's why we're having this conversation to begin with.

I'm all for private companies and profit, but there are a few areas that I prefer the government to have control instead of private interests.

A great many hospitals and care networks in the U.S. are non-profit. Many are attached to public or private but otherwise non-profit universities. Some are religious and/or regional non-profit organizations (e.g. Partners, Intermountain Healthcare) Some are operated though mutual insurance or local municipal governments. This doesn't mean that administration isn't paid exceptionally well.

In particular, patients and even the physicians in the health care systems rarely have a say in how it is operated. In most university contexts, there is no real democracy other than through the board of trustees which is often appointed via an inner-circle. Although mutuals should permit insured patients a democratic vote, most are not setup to encourage participation in any sort of elections.

That said, the drug industry is predominantly for-profit. Health care software vendors (Epic, Cerner) are for-profit. Some insurance systems are for-profit, such as Anthem. So are physicians who work independently or as part of a larger privately-held network. Even so, the vast majority of the U.S. healthcare system is a patchwork of "non-profits" (with lots of holes in it).

High paid administration is not only in the US though, there is a scandal breaking here in Norway right now too[1][2] due to high salaries of the administration. Apparently the average is about 1.3 million NOK, $170k a year.

In comparison I make about the same as an analyst in a bank while the average salary is around 530.000 nok ($70k)

[1] https://www.nrk.no/norge/133-av-141-helseledere-har-millionl...

[2] translated: https://translate.google.com/translate?sl=auto&tl=en&js=y&pr...

Does this imply every product sold online is a rip off? Even for-profit companies are often run at-cost when you subtract employee compensation (which is a necessary expense).

If a company runs at cost it is not profitable though?

In any case, if you are a merchant you usually buy lower than what a single individual could buy for and sell it for what the customer is willing to pay so in the end the customer will have the same or lower price than if they had to negotiate with the producer directly so I don't think that is a rip off.

Many Ebay stores are operated this way. Many are sole proprietorships with themselves as the single employee. All profit goes to them but they still often barely have enough to scrape by in day to day life. Whether its called "profit" or "the cost of paying your sole employee a living wage" is mainly a semantic difference. Are these companies operating "at-cost", or earning a profit?

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