Half of US healthcare spending is public payers - Medicare and Medicaid. They do set prices for providers and still spend far more than other countries.
And if you’ve been involved in US healthcare you’d realize it’s drowning in regulations already. It’s not a free market by a stretch.
Both institutions work in tandem[0] with one another to establish pricing guidelines. That's why your hospital-purchased ibuprofen is $10 per pill instead of $6 per bottle. The insurer and hospital "work out" a price that let's them achieve the profit needed to pay their administrative costs, plus margin.
In the USA(this is all from a US citizen's perspective), there are regulations that limit what percentage(15% in my state) of an insurer's income can be profit vs administrative cost. This means that a higher hospital price results in a higher profit for the insurance provider. This provides both parties an opportunity to set prices for an optimal profit. With government-mandated health insurance participation, the pool of people paying into this system has increased.
It is what is. Tell your elected official if you think it would help.
0: Anthem, Blue Cross, and UHC executives sit on the Baptist Health(hospital chain) board of directors, and vice versa.
The only benefit an insurer would have from a higher price is if they have a monopoly position - no other insurer. Otherwise the other insurers will pay less, charge a lower premium and grab all the customers.
When choice is harder, they can play the price game better.
Insurers already have an incentive to limit prices, though, which is essentially what their contracts with providers are. As in, they list how much they'll shell out for CPT codes.
The upward pressure on prices is also from the insurers. Insurers have an "80/20 rule" from Obamacare that only 20% of their revenue can be spent on non-medical expenses (ie. profit, insurance administrative overhead, etc.). They pretty quickly hit the caps, and now only by increasing medical expenditures (the other 80%) can the pie slice that contains their profit grow year after year.
I'm merely debunking your assertion that insurance companies don't have a financial incentive to keep costs high.
What's the trend line since 2010? Since the 80/20 rule went into effect, has the rate of provider costs increased or decreased or stayed the same? If it hasn't increased, does your hypothesis actually explain any empirical observations?
If not, are you concerned this might be a just-so story?
If there was one health insurance marketplace and set of rules, and everyone, young, old, poor, rich, healthy, infirm, we’re forced to buy from it, then it would actually be possible for insurance companies to compete.
Right now, it’s basically a game of hot potato to try and not get stuck with the million dollar hemophiliacs in each state. A lot of the healthy are separated out into employer based insurance plans, and there’s not sufficient possibility of business to have more than one or two insurance offerings on healthcare.gov.
In terms of these insurers who control providers, can you give an example?
Next time you go to your primary doctor ask them how many faxes they get from the pharmacist instructing doctors to change prescriptions. Then ask the pharmacists where they get those instructions from to fax to the docs....the insurers.
I’ll admit the star ratings are related to costs, but short term costs. All this watered down care and cookie cutter treatment will lead to higher costs long term (ie hospitializations, waiting until health problems escalate instead of preventative care or proper management).
It’s also why the big groups have reinvented HMO, now called ACO, bc even they don’t want outcomes based payment, so with ACO they can get paid $x/patient per year and make the care fit. HMO failed from a cost and care perspective, again not in the short term but in the long term, and it’s literally being rebranded as ACO by the insurer/provider groups.
In other words if you aren’t a Medicare patient and are insured by UnitedHealth for example, you will be subject to the same networks of doctors/hospitals as their Medicare plans, so private is driven my the Medicare plans, because Medicare rules are driving the consolidation of the market.
And yes everyone will tell you star ratings are about “outcomes” not price, but if you knew/know anything about the star rating metrics it’s obvious “outcomes” is marketing/PR for cost cutting. Otherwise I’d ask to point out any metrics that increase star ratings that don’t lower costs, whereas it’s easy to point out the metrics that result in better “patient outcomes”/higher star ratings but lower quality of care.
The reason we spend so much on Medicare and Medicare is because people are less hesitant to use the service. On a per capita basis, the public payers have reduced overhead and costs compared to the private markets. If you have sources proving me wrong, I’d be happy to look at them.
And while the US market my be drowong in various regulations, it is severely lacking in price control regulation - the whole reasons for this discussion.
Yes, they reduce costs by saying “this is what we’ll pay”, but it’s still much more costly than other countries’ systems.
My personal hypothesis is that Americans get a lot more healthcare than most countries provide, combined with higher prices. Not all of it is all that beneficial.
If you want to read something really eye-opening, check out this McKinsey report, bottom of page 14[1] It basically compares US healthcare spending across categories, adjusting for GDP (expecting the US' higher GDP means we spend more).
For inpatient care (hospital care), the US actually spends inline with what other countries spend. For long term and home care, the US spends less than other countries. Same thing with durable medical equipment.
Almost all the "excess spend" is in the outpatient setting. American's get a shit ton of procedures done that other countries just wouldn't do. Have a hernia? Providers in the US fix that, where other countries might say "we'll do something if it becomes a problem" (for example).
[1]https://www.mckinsey.com/~/media/McKinsey/Industries/Healthc...