Which firms profit most from America’s health-care system (2018)
economist.com
economist.com
This episode about the Oklahoma group that has had low cost & transparent prices for surgeries for many years. http://www.econtalk.org/keith-smith-on-free-market-health-ca...
This one on why we get such expensive drugs with marginal benefit: http://www.econtalk.org/vinay-prasad-on-cancer-drugs-medical...
This one on benefit management companies terrifying behavior: http://www.econtalk.org/robin-feldman-on-drugs-money-and-sec...
(Also PS Russ Roberts on this show is a treasure. His way of thoughtfully engaging with others is something I try to learn from.)
https://www.econtalk.org/elizabeth-anderson-on-worker-rights...
He also does a nice job of “O.K., this is where we have differing opinions”. Unlike a lot of media that covers politics issues, it’s much more civilized to me.
I think part of the reason Americans spend more on healthcare is precisely because they're unhealthy. According to the American CDC the obesity rate has reached a staggering 42.4% of adults[0], which brings with it a slew of health problems. This accounts for an additional $147 billion in healthcare spending, or $1,429 per person (with obesity).
* Bigger homes means you feel more comfortable being lazy and spending all your time indoors
* Bigger cars means you are incentivized to drive 20 miles to a restaurant in comfort instead of walking over to a closer one
* Bigger TVs means you spend all day "watching the game" instead of going out and playing a sport.
Once again, these are grossly oversimplified, but should drive home the central point that spending on some things can actually worsen outcomes of others.
For many (most?) people in the US, the idea of walking anywhere of consequence from their home is simply ludicrous. Restaurant, convenience store, grocery store, all are completely inaccessible except by car.
Suburb planning has explicitly disallowed that sort of living for most people. It has also made it nearly impossible to serve neighborhoods with any sort of reasonable public transit.
This particular aspect of USA struck me as quite bizarre whenever I visited on business trips. More so as I’m from India where it’s almost a given that things that you need on a day to day basis (grocery, bakery, pharmacy, convenience store etc.,) are available within walking distance. Apart from an opportunity to get some fresh air it’s also a good way to interact with my neighborhood community.
I assumed this is how it’d be in any developed country until I moved to Netherlands. It’s not too different from India at all in that respect here.
So now I wonder, what factors lead to that kind of city planning in US. It was a real ordeal for me to get a meal outside in US, had to either walk for an hour or order taxi service (those were pre-Uber days).
What other countries? The US is very much an outlier. The only one I can think of is maybe Australia?
A car requirement (and hence minimum fuel purchasing requirement) helps keep lower socioeconomic classes out of higher socioeconomic classes’ neighborhoods. This results in marked improvements in economic performance of children in school, as the public school students are determined by the area they are in, and spacing things out results in a populace with a minimum level of financial security who can afford to travel further.
The original impetus may not have been exactly that, as people generally like their space anyway, but it’s affects are well known. Historically, I’m sure there was also a racial component to it, with white people moving to more expensive areas that non white people couldn’t afford.
I call BS on that. Accordingly to this logic homeless must be the healthiest people. That aside, rich people (who also happen to have bigger houses) actually exercise more than the poor.
* Bigger cars means you are incentivized to drive 20 miles to a restaurant in comfort instead of walking over to a closer one
You telling that person with the smaller car would rather walk to the store (often VERY long walk in the US)? I call another BS here.
* Bigger TVs means you spend all day "watching the game" instead of going out and playing a sport.
Same argument as for size of the houses. I think you pulled these arguments right out of the place where the sun does not shine.
Not to put too fine a point on it, but maybe "bigger $things" and "worse outcome" are on the same side of the graph.
Do you have a source for that?
In my experience living and working in a slew of countries around the world, the USA has the cheapest alcohol, cigarettes, cars, electricity, clothing, electronics, gas (and diesel), food at the supermarket, food at the restaurant and many other things of any developed country.
Because taxes are so low, stuff in America is extremely cheap compared to countries with tax-funded healthcare, higher education, etc.
But mostly they're buying the stuff I talked about above. Consumerism.
It was tried and rolled back in chicago because it was deemed as unfairly targeting the poor.
[0] https://truthinitiative.org/research-resources/targeted-comm...
There's no reason why you couldn't pair taxing sugar with price-subsidies on non-sugary foods. The US already knows how to subsidize food production. Just stop subsidizing corn syrup and shift the subsidies to something less clearly destructive.
That makes a big assumption that people aren't buying more spinach because of price of spinach.
beans and rice are already super cheap. Much healthier and cheaper option than mcdonalds.
Why are you slyly shifting from "sugar" to "mcdonalds"? Minus drinks and desserts, McDonalds' offerings are not high in sugar.
> That makes a big assumption that people aren't buying more spinach because of price of spinach.
The price per calorie of spinach is extremely high. Micronutrients are great and all, but you can't live off micronutrients alone.
Aren't carbohydrates sugar though?
Why is the distinction between sugar in drinks and sugar is burger buns relevant to the discussion.
> Micronutrients are great and all, but you can't live off micronutrients alone.
Why did you slyly ignore 'beans and rice' in my comment. I wasn't suggesting people get their calories from spinach, what a weird interpretation.
my mexican family of 5 ate this combo every single day ,growing up. spinach + rice+ beans and occasional meat was afforable on one gardner's salary.
My general point is that the incentives today are all wrong. Many things need to be fixed and subsidies of corn syrup is one egregious thing.
McDonalds is not cheap, but it’s easy. It astounds me how many people eat out almost every meal.
How?
Bariatric surgery is currently the only real effective treatment. With GLP agonists like semaglutide having similar effects at least in the near term.
This baseless assertion is simply outright wrong, and utterly absurd on so many levels.
* https://www.acpjournals.org/doi/abs/10.7326/0003-4819-133-2-...
* https://www.nature.com/articles/0800499
Please don't spread misinformation.
Weight loss from diet/exercise will definitely persist for a year or even a couple.
Also specifically about exercise your study says "[Weight] did not change in the exercise without weight loss [group]"
That only happens if the patient relapses into his previous unhealthy lifestyle.
You can't simply follow a poor high calory diet and a sedentary lifestyle and still expect zero consequences from your actions. If your problem is behavioral then you fix it by fixing the problems in your behavior.
1. https://milkeninstitute.org/reports/costs-chronic-disease-us....
The fact that hospital/physicians charge as much and insurance accepts to pay is not due to some unhealthy habits or chronic diseases in the US.
Edit: of course your point stands and the higher rate of chronic diseases makes it worse.
Maybe I'm misremembering, but we had a ridiculous high deductible ($10k?) when we had our first kid, and I don't think we met it.
That said, I complain about the price of healthcare and insurance to anyone who will listen, and I hope someday it gets sorted out. So far the only solution I've found is to get a better paying job, which isn't a solution for most people.
No idea how you can make it lower than $10k :) Where was that?
I know, couldn't believe it either
I doubt obesity makes a very large difference because even though it increases morbidity I think it has a larger effect on mortality. If you're obese you might have to retire a few years early, but you'll also die even earlier missing out on years of being taken care of in a nursing home while you suffer from Alzheimer's.
What's odd is that the concept of comorbidies has been abandoned in the C19 era. There is little transparency when it comes to C19's co-conspirators.
Editorial: It troubles me when article after article about the high price is insulin fails to mention demand; and that close to all the demand created by Type 2 is avoidable.
Might there be manufacturer price gouging? Perhaps. But it's universally agreed that demand will increase price.
I understand there are many parties in the food-chain. Still $6K for two people for an hour, feels like ripped to the gills - almost dirty.
If the US wants to tackle its healthcare costs, it not only has to get rid of the pointless middlemen everywhere and the notion of uninsured people whose bills have to be picked up by the rest, but also enlarge its supply of new doctors, and reduce the student debt they have to pay off.
Also historically feudal lords had been constantly in debt spending more on representation then they have earned. Some moneylenders might have taken all this rent from river chain. Or the feudal lord have spent that income on luxury items stimulating demand for art or trade with far away corners of the globe.
This is an example of how economist have no idea how making money works..
> An example of rent-seeking in a modern economy is spending money on lobbying for government subsidies in order to be given wealth that has already been created, or to impose regulations on competitors, in order to increase market share.
> The concept of rent-seeking would also apply to corruption of bureaucrats who solicit and extract "bribe" or "rent" for applying their legal but discretionary authority for awarding legitimate or illegitimate benefits to clients.
What is it about a feudal lord or moneylender that the way they spend money is better than the way the merchants would have spent it? Further, just because the money has downstream effects doesn't mean that it was rightfully earned. All of your arguments could equally apply to pirates or bankrobbers.
There are certainly situations where organizations that seem like rent seekers are not entirely rent seekers, though. Government is the main example. Taxes can seem like a drag on wealth creation, and sometimes they are, but they also fund infrastructure, education, and stability, which are wealth multipliers.
The issue is also complicated by the fact that the world economy is very connected, but economic growth is often measured on a per country, corporation, or even individual basis. Also, aggregate wealth is not the be-all end-all metric. Wealth redistribution can sometimes lead to greater aggregate happiness, even if the amount of wealth stays the same or even decreases.
Overall, though, I think that the majority of rent seeking hurts the economy and the people in the economy more than it helps, but I would be very interested to see empirical data showing otherwise.
The government for not collecting taxes from you and using that money to pay the doctor?
The doctor for billing too high for the visit?
The insurance company for not covering more of the price?
Personally I would seek to understand why the doctor is billing so much and how that can become more fair for everyone involved.
Because that ability doesn't exist, there is no downwards price pressure anywhere at the consumer level for medical services.
I think we'd see a lot more results if we asked 'why aren't these facilities putting more efforts into reducing costs' rather than asking 'what makes this so expensive?'
It's important to note that the downward pressure you'd see here is only for elastic goods which most healthcare-related things likely aren't.
Are you against a monopsony in healthcare? If you care about having a fair-shake for every consumer, then that's the most consistent way of wielding power against would-be price gougers.
In all cases though, I think price transparency is always good as that is what helps to properly allocate resources in the long run. And I think that published healthcare prices coupled with high deductible health insurance is a good idea as it would allow proper information about pricing to be transmitted, at least for minor issues such as covid tests or broken bones or routine visits and procedures.
For more complex cases, I would have to defer to those with expertise on how to ration resources.
Given that every developed country has much lower per capita and per GDP costs, and pretty much none have more of a free market in health than the US, I'm pretty sure that's not the problem driving US prices high. I get that free market fundamentalism is one of the most influential religions in the US, but it's popularity doesn't make it contentions true any more than the popularity of Christian fundamentalism does for young earth creationism.
I've seen numbers to the effect that health outcomes are 30% genetic, 30% diet, 30% lifestyle, and 10% medical intervention. Frankly Americans don't need as many procedures done as they have done. Medical care is rationed everywhere and there is no way for supply to meet demand. The only question is how do you ration it. Turns out rationing by ability to pay leads to unnecessary procedures with no boost in outcomes.
The hard part to accept is that the system that imposes a 3-6 month wait for non-life threatening treatments is better because some number of cases resolve themselves during that time period and reduce total demand.
Overall medicine has limited tools to improve health compared to diet and exercise. We like to believe an intervention by someone else - surgical, pharmaceutical, etc. - can fix our problems, but that's not the case for many people. Medicine can really help with things such as pain management and trauma, but to an unsettling degree we rely on the body to heal itself.
The U.S., through everything from safety regulations to IP laws to insurance regulation has destroyed competition, but outside of medicare isn't involved in determining prices. The result is predictable.
Markets work great when the incentives are right. It's hard to get incentives right in healthcare and most nations want medicine to be part of a government safety net, so they go the direction of socializing healthcare. Almost anything would be better than the system the U.S. has now.
US healthcare doesn’t have a free market by any definition. You would need a buyer and seller agreeing on a price, and without price information, there is no market.
For the same reason a McDonald’s worker bills closer to minimum wage - because that is the most the buyers are willing to pay. Solution to bringing prices down is to increase supply and/or decrease demand, and increase price transparency.
How do you know the doctor wouldn’t be billing erroneously anyway? People have no idea what doctors do or what is appropriate. The insurance company serves as an educated advocate for the patient (they employ doctors and pharmacists) to reduce over billing.
Yes, the people working at insurance companies could be over zealous, but the same applies to healthcare providers.
If doctors didn’t want to deal with insurance, they are free to hang a sign that says $50 per 15 min consultation.
Insurance company profits are capped at a percentage of payout, and they are part of oligopolies protected by high barriers to entry, why would they reduce overbilling or advocate for patients?
Obviously not forcing everyone to go through healthcare.gov crippled the ability for numerous health insurance to exist and compete, but that is a political problem.
Aka a hospital might negotiate a separate rate for stitches with each company, but they don’t get to decide if it was needed on a case by case basis. Alternatively, apply the Japanese system where all procedures have a single agreed upon rate negotiated regularly.
Most, if not all, states outsource the implementation of their Medicaid plans to large insurers like Anthem or UHC or Humana, etc.
That said, outsourcing them back to the same insurance companies which also offer plans has major issues.
On your own initiative ( partially paid back):
- 9.6€ for the Covid test
- 17 € for the doctor visit
By Government:
- fully paid back by our health care, including doctor visit
I love transparent pricing :)
The per capita figure in https://multimedia.tijd.be/oversterfte/ for VK (United Kingdom) is for confirmed deaths (62.2 per 100,000). In mid June, the total figure was at 42,000, while excess deaths totalled 65,000, so that would make UK excess deaths 96.3 per 100,000, significantly higher than the Belgian suspected figure of 84.4 per 100,000.
NY has ~19M people, death per 1M ~1700 Belgium has ~11M people, death per 1M ~840
The US has 5 states with a far higher death rate than Belgium: https://www.worldometers.info/coronavirus/country/us/ So far.
Belgium counts any suspected Covid death as a confirmed one, so we have approx. 2* as much deaths in statistics.
It's mentioned a lot, but I guess not everyone knows ;)
I think the culprit here is obamacare; after all it was written by the insurance companies. Who's surprised that it benefits them the most? Insurance stocks absolutely took off after it was passed.
I can right now download all my health info into Apple health app from my healthcare provider’s website and use that anywhere I want, whereas that might have required a few calls and someone’s time.
Source: worked for an independent specialty pharmacy that was purchased by a PBM that in turn merged with a major national insurer
This article misses the point.
People hate pharmaceuticals because of ridiculously high drug costs, and that's about it. If they can't produce drugs at profit without gouging potential end users then it should be nationalized or subsidized.
For the second point, cost spreading helps particular people in particular circumstances, but doesn't lower overall cost. You're just running a wealth transfer or insurance program in addition at that point.
Regarding You're just running a wealth transfer or insurance program in addition at that point. Yes, that would be a major purpose of nationalizing drug R&D and manufacturing. You could say the same about every public service.
https://www.fda.gov/drugs/drug-information-consumers/impact-...
The FDA identified several benefits of DTC ads.
58 percent [of physicians surveyed] agreed strongly that DTC ads make the drugs seem better than they really are.
Physicians thought the ads did not convey information about risks and benefits equally well. Seventy-eight percent of physicians believe their patients understand the possible benefits of the drug very well or somewhat, compared to 40 percent who believe their patients understand the possible risks, and 65 percent believe DTC ads confuse patients about the relative risks and benefits of prescription drugs. In addition, about 75 percent of physicians surveyed believed that DTC ads cause patients to think that the drug works better than it does, and many physicians felt some pressure to prescribe something when patients mentioned DTC ads.
Eight percent of physicians said they felt very pressured to prescribe the specific brand-name drug when asked.
Doctors believe that patients understand that they need to consult a health care professional about appropriate treatment. Eighty-two percent responded either "very well" or "somewhat" when asked whether they believe that their patients understand that only a doctor can decide whether a drug is right for them.
Note the last point means that 18% of the doctors believed that their patients thought they knew better than the doctor about whether or not a drug is right for them.
The few positive aspects, about patients being better informed about drug therapies that might help them, could be solved by making the monthly journal info I described available online. People go to Google and type in their symptoms and/or the name of their disease if they know it, and end up on sites like drugs.com and webmd.com. If Google were indexing the journal I described, and those other sites pulled from it too (publishing license should allow that, as it would be publicly funded), then patients would see all of the good information about the drugs, without the advertising bias.
On the other point, subsidizing drugs for those who need them is a perfectly reasonable goal. It just seemed to me (incorrectly, it appears) like you were suggesting this cost shifting lowers the total cost.
Even if run by the government, you’d still need to market (educate) about new drugs.
And R&D in the big pharma firms is spread out across the entire population. That diabetes drug that sold $1B last year is paying for the cancer R&D this year.
[0] https://www.gilead.com/news-and-press/press-room/press-relea...
Why not free the intellectual property here instead?
https://www.wsj.com/amp/articles/how-other-countries-freeloa...
A common claim by big-pharma defenders is that if you take away the gouging aspect, drug development will stop. Is there some way we can test this experimentally on a subset of the drug market?
It is totally possible to develop drugs without that moat, it just requires getting the money from somewhere.
I have no idea which method would produce better outcomes. Back when there was more science leadership at large pharma, I thought they would be more likely to take crazy bets that work out, that wouldn't necessarily happen at an NIH grant review panel. But last I checked most upper management in pharma are people that tout a PhD on their name, but it's for a field outside of a relevant science.
US taxpayers seem to be able to find hundreds billions for R&D of fighter jets and aircraft carriers. Perhaps this is not as necessary as developing medicine. Or not invading and occupying random countries.
1. Secure maritime trade for all. Protection against piracy and gone are the days when countries would just steal each other's cargo. 2. Global trading currency that is backed by the biggest economy in the world. 3. Establishment of a global trade network. Industrialised countries have access to more natural resources than ever without needing colonies.
Remember how the world was before the American Order. Colonies and hostility all over the world. Europe was in two world wars and would have probably been in another one with the Sovjets.
Generally speaking, people trust the American rule of law and trust that the US will help her allies. This only made relevant by having an ultra beefy military. It's hard to put a price on these things, and which portion the US tax payers have to pay.
Note that the current administration wants to cut back on these costs. European countries are benefitting a lot from the American Order, and should perhaps shoulder more of the costs.
There is zero valid reason the world’s mightiest military should need mercenaries.
A far better plan to remain as the world leader would be to court the world’s top minds and lure them into living in the US permanently. And all it would have required is handing out green cards at graduation. But that is another topic.
Look at China’s aggression in the past couple of months, especially with India. It would never have happened 10 or 20 years back with a strong America. Yes, the US does serve as the world’s policeman.
The only way for the US to have been able to threaten China without using force would have been to sow political discord and break it up into smaller countries. The US has 330M people, mostly getting older. China has 1.4B. Both have nukes so it’s not in anyone’s interest to engage militarily, and both have sufficient resources to not have to depend on someone else. And both need each other economically.
China has India right next door.
https://www.nytimes.com/2019/11/07/business/gilead-truvada-h...
is corruption only explanation of how this happened?
Nope, drugs sales in the EU alone are enough to cover pharmaceutical R&D costs worldwide. What they aren't enough to cover is Marketing costs, but that's OK since most EU countries don't allow direct marketing of drugs.
That's what the US covers. Not quite so noble sounding that you're covering the cost of advertising though, is it?
Pharmaceutical R&D spending in 2015: USA $47B, Europe: $33B.
Total drug sales Europe 2015: $190B
wow!
But it remains unsatisfying.
What about the other overheads? Marketing, customer acquisition and retention? Health plan negotiators? Payment processing? Executive compensation? Etc, etc.
Many others have guesstimated USA healthcare costs 50% more per capita than Canada. So eliminating administrative overhead would whack 1/3rd of the costs, right?
Advocates for single payer could better emphasize all the unnecessary inefficiencies of our Freedom Markets™ health care system. All those "bullshit jobs" David Graeber has been telling us about.
The base rate of the profession is around 250k per year. Specialities are not included in that calculation.
Specialities are closer to 400k to 500k per year.
This is not natural. This is 130+ years of regulatory capture. Other countries pay their physicians half as much.
Not to mention outcomes are basically the same.
Also you can look at the training of all the recent physicians, - many are from abroad. Same thing that the Silicon valley industry has been doing , hiring foreigners at lower pay. Education for physicians abroad is FREE. Whereas here you have to go to college (>50k a year tuition x 4) AND medical school (60k a year x 4) and then training 3-7 years at low income (40k a year) and crap life style.
That being said, the overall point is correct. There is a HUGE opportunity cost to becoming a physician. People would rather ignore that because it doesn't support their argument. It's much easier to cherry pick point-in-time data without looking at the larger picture.
So talking about what doctors make might be misleading.
That $250k salary looks outrageous because you're ignoring all of the opportunity cost that went to get there.
* 4 years of med school. $40k tuition/year. $160k in principal total.
* 4 years of med school. No salary. $100k/year opportunity cost. $400k total.
* 4 years of residency. $60k salary. Yay, she's making an income. Boo, it's literally all going towards student loans. $80k/year opportunity cost. $320k total.
* Congrats, you're now an attending. You're living the "good life". Oh, don't forget that $160k of tuition, it's full cost is roughly $300k.
* $400k + $320k + $300k = ~$1M in the hole. That doesn't include a bunch of misc. expenses - exams, re-locations, interviews (residency programs don't pay for your travel).
During that entire time, my wife is consistently outworking me by 50% to 100%. Step exams, board exams, residency interview season (holy shit that's a stressful time), volunteering, research, etc, etc, etc. Even when she's an attending, she still has a bunch of things she needs to do to maintain her licensing.
This is also $1M in the hole in a critical part of building a life/savings. A good portion/all of that $1M could be going towards long term investments like retirement, college funds, etc. We're basically 10 years behind on retirement. That's easily $500k of interest lost.
----
Physician pay is only 8.6% of health care costs [0]. You could cut physician salaries in half and the effects on your health care would be trivial.
[0] https://www.beckershospitalreview.com/compensation-issues/ph...
It's a form of business that is orthogonal to producing things people want, where instead it's mainly in the business of depriving people of what they need. Rent seeking is what professions and institutions are designed to do, to create scarcity in exchange for a promise of quality, but somehow that latter part gets lost.
Some years ago when "disruption" was the popular idea, I put together a list of vulnerable industries. The sharing economy was an attack on businesses whose profits depended on a regulatory bar to entry (Uber/AirBnB etc.) The list was based on the presence of labour unions and professional associations, using the hypothesis that their existence creates a price premium that tips the economics of their industry in favour of automation, or at least in favour of economic substitution away by customers to a new tech that meets %80 of their need. Maybe we have the technology now to create an economic rentier map that lays out parts of the economy that have artificially propped up rent-seeking groups, as a means to develop new tools to avoid them.
Regarding the rentierism of the health business, I've noticed an anecdotal trend among some aging boomers who are rejecting that system altogether, and choosing palliative care and to die at home instead of in the hallway of a hospital, or worse, spending years in a long term care home. The best thing that could happen to healthcare is that instead of seeing it as broken, we should recognize that it looks like that because works for someone where we can't see who or how, and the goal is not to problematize and fix it, but to make it work for everyone else.
I googled it, it's from Shaw's Doctor's Dilemma. (I'm a big fan of both those guys.) Only 3 hits on the internet saying it was Bierce - all 3 are your comments on HN! hehe.