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Comment by anon7000 | Hacker News Reader

> It’s their job to get better prices at scale and yet somehow they manage to sell at prices far worse

Maybe on paper, in reality their job is to return as much profit as possible to shareholders. Convoluted bureaucracy, complicated regulations, layers of useless middlemen… they all help to reduce competition and increase profits. There are industries where the “free” market doesn’t work, partly because “human well-being” is a non-goal for any health insurance company. The entire point of the insurance business model is to avoid paying for it as much as possible

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In no way shape or form is the medical industry in the US a free market, it's one of the most heavily regulated sectors in the economy. Remember when the government wanted to make purchasing health insurance mandatory? Forcing employers to pay for their employees health insurance greatly distorts the market. And many other things...

By the way, as much as people complain about the profit seeking motives of insurers, many of them have been performing abmysally in the last six months. As it turns out, our current system is bad for just about everyone.

Just to tack on, dentistry is an example of a somewhat freer market than 'healthcare', and veterinary care is an example of an even freer (though somewhat different) medical service.

In Romania the employer takes a cut from the employee's salary and gives it to a government agency for the health insurance (some thing with income tax, social security (pension), etc). I think this is happening in other European countries as well.

Some employers also offer as a bonus a sort of subscription at a private clinic, so you can see a private doctor or have an operation for a lower price or even for free.

Same in the UK.

In the USA the government health programs for people in low incomes, children and pensioners cost about as much as a typical European single payer health system. Then tax payers get to pay to be gouged by health insurance companies to get any cover for themselves.

> In no way shape or form is the medical industry in the US a free market, it's one of the most heavily regulated sectors in the economy.

If any regulation at all makes a market not "free", then there are no free markets as soon as we have any laws.

Like all free markets, this one is regulated. There are degrees of freedom.

In this market, neither the producer nor the consumer are responding to price signals and often neither knows what anything costs. The Payer (literal healthcare industry terminology) does but isn't producing nor consuming the service.

This is why this isn't a free market. It's not about regulation, it's about the system being divorced from responding to market dynamics.

There are degrees of freedom, but within the American framework, medical care is on the less-free end of the spectrum.

Aside all the insurance stuff, you cannot open an MRI imaging lab or similar without a letter of need from the local government. The supply side is quite literally gated by existing players in the market (via campaign bribes and similar).

And pharmacy vertical integration is an easy way for them to get around regulated profit margins. While if your profits are capped at 15%, the only way to increase them is to increase premiums as a result of increasing providers costs (which the insurers can and absolutely are doing, of course), if you own the pharmacy supply chain, you have freer reign to increase those prices.

Healthcare is one where vertical integration can be really profitable, even at the smaller scale. I used to work as a paramedic, both local agencies and private. The private ambulance company I worked for started when a man who owned a nursing home realized how much money the facility was paying for ambulance transports, so he started an ambulance company. He realized how much his ambulance company was paying to industrial/medical gas companies for oxygen, so he started a medical gas company. And so on. And went from his one small nursing home to his daughter having a $100M empire by the time he died 30 years later.

> The entire point of the insurance business model is to avoid paying for [human well-being] as much as possible

For-profit health insurance. Which imho should be illegal.

A lot of the US' quasi free-market, in-name-only health insurance problems would be solved by:

1. Requiring all insurers to be not-for-profit (critically: also including all corporate owners of insurers too)

2. Tying financial incentives and disincentives to outcome-based KPIs

Does "not for profit" actually solve anything? Aren't most private universities also not-for-profit, while also being major real estate owners, developers, managing massive investment portfolios, etc?

In my experience Kaiser / the Blues have their issues (mostly inefficiency), but not nearly as many directly anti-patient incentives as United Healthcare et al.

Generally speaking, you get decent outcomes with {not for profit} + {efficiency/outcome based KPI}, because the primary thing you're fighting is apathy (not for profit) instead of malicious profiteering (for profit).

And capitalism doesn't particular lend itself to running an insurance company. Fundamentally, there's not that much that should change year-to-year at insurers than {actuaries / pricing}.

Have pharmacy benefits or all the other kooky for-profit inventions really improved patient experience and outcomes?

> Does "not for profit" actually solve anything?

Ask the Swiss and/or Germans? AIUI there are (aspects of) their health insurance that are mandated to be non-profit.

Perhaps someone from one of those countries can give more details.

(IIRC, the Swiss only 'recently' moved to universal coverage: in the 1990s?)

It doesn't.

The Netherlands has a system with both not-for-profit and for-profit insurers, that works reasonably well.

- Transparent, identical rules for minimum coverage and strict rules on minimum and maximum deductible for all insurers and insurees. - Mandatory coverage for everyone (just like liability insurance is mandatory for cars in the US) - Insurers do not have the right to refuse any applicants based on pre-existing conditions - Insurers directly negotiate with hospitals on rates. Emergency care has to be covered regardless of whether hospitals are in network or not.

The Dutch model is a useful counterexample to the argument that you need a single-payer structure to contain costs. Netherlands uses regulated private insurers with community rating and risk equalization, yet achieves per-capita spending well below the US (roughly $7,200 vs. $14,570 in 2023 OECD data). The direct insurer-hospital negotiation you describe is also how Germany's sickness funds operate.

The US equivalent would be all-payer rate setting. Maryland has run a statewide all-payer hospital rate system since 1977 with documented cost containment. Issue #3 of this series focuses on a lighter-weight near-term version: capping commercial hospital payments at 200% of Medicare (already used by Montana Medicaid and thousands of self-insured employers). The Dutch model shows a stronger structural fix is feasible. The question is political path, not technical feasibility.

Big problem here: You get more KPI, not better outcomes. Things like no doctor being willing to risk working a high risk patient.

We have already seen it with things like Medicare Advantage plans doing sign-up meetings on the second floor of buildings without elevators etc.

Medicare Advantage is a clusterfuck from start to finish (denying more claims than Medicare while also costing taxpayers more), precisely because it tries to micro-manage KPIs.

If you want to look at them done correctly, look at the FEP program. High-level KPIs that are difficult to game (without actually improving service & outcomes) tied to financial incentivizes.

Fair point about KPI gaming, and it's a real problem in value-based care. But the fix in Issue #3 (commercial reference pricing at 200% of Medicare) is a price cap, not a quality incentive structure, so it doesn't directly create the risk-avoidance problem you're describing.

Montana Medicaid has used 200% Medicare reference pricing since 2015. Published evaluations haven't shown measurable quality deterioration or patient-selection effects in that program. The RAND Round 5.1 study underlying the savings estimate controlled for case mix, so it's comparing equivalent procedures at equivalent acuity. Risk adjustment is still genuinely hard at the individual level, and the concern is well-founded for P4P schemes. It's a separate question from whether commercial payers should pay 254% of Medicare rates for the same surgery at the same hospital.

Human well-being should reduce medical expenses, so at least in theory it should be a goal of insurance companies.

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