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Do American healthcare costs represent a broken market?

gavinfielder

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This video claims that the primary reason for rising healthcare costs in the US is inelastic demand. He goes through it and gives quite a few justifications, but I don't think he really connected the dots. Sure, demand for healthcare is inelastic, but you still have competing providers, so in a functional market, you shouldn't have companies able to charge extreme prices without cutting out their consumer base.

I claim that markets generally stop functioning under two conditions. A lack of choices, or a lack of information. If you agree, which would it be in the case of healthcare and why? Or is it something else entirely?
 

lizzie

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I personally think it's a combination of factors, mostly government regulations which require that comprehensive coverage is mandatory, rather than actual insurance which would cover unexpected and catastrophic events. When insurance companies are required to pay for drugs and for physician office visits, the consumer is left out of the loop, and is not informed as to what the actual costs are, thus there is no competition in the marketplace, and no incentive for the consumer to keep costs in control.
 

RabidAlpaca

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I think Lizzie nailed it. I think it has more to do with the fact that the hospitals and insurance companies just write down ridiculous sums of money to charge, like $1,000 for an IV bag. Not to mention the prices for our medicine are astronomically high, and it's only that high because they can make it that way.

It takes some 7+ years to get FDA approval for a drug, which makes drug creation a VERY expensive process. When they do make it, they patent the living **** out of it so they have a complete monopoly and can charge whatever they want. This is one of the most important things we should address. Ease the drug approval process and cut back on the power of drug patents.
 

phattonez

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Lol, you said healthcare market. That's like saying that the US has a market for roads.
 

head of joaquin

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Both. If your child has a broken leg you aren't going to shop around for a hospital to treat him at a lower price. You pay anything they ask.

Similarly, if a doctor tells you need this or that treatment involving this or that pharmaceutical costing thousands of dollars, you're in no position to question him about it, or even understand his answers (unless you want to go to medical school). In addition sick people are often not in a position to be rationally evaluating information of a complex nature. That's why you've gone to a doctor.

So price inelasticity is an obvious element of health care making our for-profit system totally inappropriate and dysfunctional in providing public health.

People don't want to negotiate when they're sick and injured: they want a health care system that treats them without having to go bankrupt. Our system can't do that. Time to get universal single payer. It's the only system that works for health care.
 
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MaggieD

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This video claims that the primary reason for rising healthcare costs in the US is inelastic demand. He goes through it and gives quite a few justifications, but I don't think he really connected the dots. Sure, demand for healthcare is inelastic, but you still have competing providers, so in a functional market, you shouldn't have companies able to charge extreme prices without cutting out their consumer base.

I claim that markets generally stop functioning under two conditions. A lack of choices, or a lack of information. If you agree, which would it be in the case of healthcare and why? Or is it something else entirely?


When I see how Blue Cross Blue Shield discounts my diagnostic charges, it's hard to believe that what hospitals charge is the cause of the exponential rise in healthcare costs. I think it's more likely that doctors are prescribing diagnostic tests up the wazoo in order to keep their hospital privileges.

For instance, my mom's doctor wanted her to do a bone density test. She's in heart failure and, per her doctor a month after she suggested the test, has three to six months to live. A bone density test. Really. Uh, no. At the same time, she asked mom if she'd like to have a mammogram. WTF? What would they be doing if they found a cancerous growth? Chemotherapy? Surgery?

As to how these tests are discounted by insurance companies? I got billed $140 for an ultrasound. The insurance company paid them like $40. "Amount you may owe provider? None."
 

phattonez

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Both. If you're child has a broken leg you aren't going to shop around for a hospital to treat him at a lower price. You pay anything they ask.

If you know of a hospital that offers the same care for 50% cheaper, then you're going to that hospital. There is no debate about that.

Similarly, if a doctor tells you need this or that treatment involving this or that pharmaceutical costing thousands of dollars, you're in no position to question him about it, or even understand his answers (unless you want to go to law school). In addition sick people are often not in a position to be rationally evaluating information of a complex nature. That's why you've gone to a doctor.

So price inelasticity is an obvious element of health care making our for-profit system totally inappropriate and dysfunctional in providing public health.

Seems to me that those prices aren't set by a market. The patent allows monopoly privilege.

People don't want to negotiate when they're sick and injured: they want a health care system that treats them without having to go bankrupt. Our system can't do that. Time to get universal single payer. It's the only system that works for health care.

You're confusing rationing with serving the needs of consumers.
 

head of joaquin

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If you know of a hospital that offers the same care for 50% cheaper, then you're going to that hospital. There is no debate about that.

Unless you have a full time job pricing hospital treatment programs and happen to suffer from the ailment that is cheaper, this is meaningless. The transaction cost of finding out which is cheaper isn't worth it.

Seems to me that those prices aren't set by a market. The patent allows monopoly privilege.

Patents create markets so this isn't on point.

You're confusing rationing with serving the needs of consumers.

We already ration by income so this isn't relevant.
 

MaggieD

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If you know of a hospital that offers the same care for 50% cheaper, then you're going to that hospital. There is no debate about that.

There most certainly is a debate about that. Have you ever tried to get a price for a specific service from the hospital? Even an x-ray?

Call your local hospital. Let me know.
 

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This video claims that the primary reason for rising healthcare costs in the US is inelastic demand. He goes through it and gives quite a few justifications, but I don't think he really connected the dots. Sure, demand for healthcare is inelastic, but you still have competing providers, so in a functional market, you shouldn't have companies able to charge extreme prices without cutting out their consumer base.


Why would providers compete? Inelasticity of demand with regard to price means health care consumers don't care about price. The providers can charge anything the want to charge up to the absolute limit of the consumers capacity to pay.
 

phattonez

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There most certainly is a debate about that. Have you ever tried to get a price for a specific service from the hospital? Even an x-ray?

Call your local hospital. Let me know.

I was speaking hypothetically. As I already said earlier, we don't have a healthcare market in this country.
 

Helix

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This video claims that the primary reason for rising healthcare costs in the US is inelastic demand. He goes through it and gives quite a few justifications, but I don't think he really connected the dots. Sure, demand for healthcare is inelastic, but you still have competing providers, so in a functional market, you shouldn't have companies able to charge extreme prices without cutting out their consumer base.

I claim that markets generally stop functioning under two conditions. A lack of choices, or a lack of information. If you agree, which would it be in the case of healthcare and why? Or is it something else entirely?


he's right.

we have :

an essential service with inelastic demand being delivered by three levels of for-profit entities

an artificial doctor shortage, and a tremendous financial disincentive between potentially qualified candidates and access to medical school

and most idiotic : health insurance, the gateway to all health care, is tied to specific employment.

we need a complete system redesign.
 

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Unless you have a full time job pricing hospital treatment programs and happen to suffer from the ailment that is cheaper, this is meaningless. The transaction cost of finding out which is cheaper isn't worth it.



Patents create markets so this isn't on point.



We already ration by income so this isn't relevant.

Everyone doesn't have to price shop for every emergency treatment. If just more people price shopped, for non-emergency treatment, prices would tend to fall.

I don't price shop for absolutely everything that I purchase, but I rest assured that because some people price shop, prices at most places for most stuff are held in check by them price shopping.

I've mentioned the story about my son falling out of a tree before, so I won't go into the long details of that story again, but it is definitely possible to price shop, in one form or another, even for emergency care. Most emergencies aren't time critical life or death situtuations, patients are transfered between health care providers all the time for major treatments. And as long as I am concious, it's not really that difficult for me to tell the ambulance driver to take me to Hospital B instead of Hospital A.

One of the most important things that would be necessary to have price competition between medical care providers is simply to require that all health care providers make their superbill pricing information public. It could be posted on the internet, or in their office, or available over the phone by request. I have people to price shop my business all the time, I can't think of a reason that I shouldn't be able to do that at a doctors office or emergency care facility.
 

phattonez

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an essential service with inelastic demand being delivered by three levels of for-profit entities

I agreed with the rest, but fail to see why this is a problem. Food and shoes are essential goods that are provided for by markets. Yet we don't have a problem there. What is the difference?
 

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There most certainly is a debate about that. Have you ever tried to get a price for a specific service from the hospital? Even an x-ray?

Call your local hospital. Let me know.

They will absolutely not give you a straight answer unless you really push the issue.

Almost two years ago, I needed surgery, it took me several hours of calling different people before I was able to get a price on the procedure (prior to having it done). It's ashamed that I couldn't just look on the website of several different healthcare providers and select the surgery package that fitted my needs the best.

Generally, I'm a cheapass and could care less about the fluff, so the surgery options listed on the "value meal" list would have been just fine with me. But I still like options and choices. When my wife had our child, the hospital litterally told us that for $X a night more, she could get a two bedroom suite room so that I could stay overnight with her, in the comfort of my own bed and with my own tv, meals included. Rediculous, I know, and it's generally out of character for me, but I actually did it, it seemed like a bit of a vacation.
 

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I agreed with the rest, but fail to see why this is a problem. Food and shoes are essential goods that are provided for by markets. Yet we don't have a problem there. What is the difference?

Exactly. There is no difference. It's an emotional thing for those who think that stuff should be free, and for those who believe that healthcare is somehow different than any other product or industry.

No one REALLY NEEDS a MRI, or any other healthcare treatment. Just 50 years ago most of these nice medical proceedures didn't even exist. It's nice to have... if you can afford it, just like one of those fancy Italian sports cars are nice to have...if you can afford it.
 

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I agreed with the rest, but fail to see why this is a problem. Food and shoes are essential goods that are provided for by markets. Yet we don't have a problem there. What is the difference?

because food is cheap, and access is guaranteed. also, choosing one of the thousands of varieties of cheap shoes is not analogous to having your kid break an arm.
 

Neomalthusian

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This video claims that the primary reason for rising healthcare costs in the US is inelastic demand. He goes through it and gives quite a few justifications, but I don't think he really connected the dots. Sure, demand for healthcare is inelastic, but you still have competing providers, so in a functional market, you shouldn't have companies able to charge extreme prices without cutting out their consumer base.

I claim that markets generally stop functioning under two conditions. A lack of choices, or a lack of information. If you agree, which would it be in the case of healthcare and why? Or is it something else entirely?


I think it's both a lack of information and a lack of choice and they are intertwined. People often buy and sell health care services without knowing or caring about its actual price tag (lack of information), and in many cases they don't know its full price even after its paid (by the insurer). Consequently, it's not that no other choice exists, but no incentive exists to shop for the best deal on that service based on price v. quality, which looks a lot like a lack of choice.

Add to this the fact that health insurance typically covers any and all health care services post-deductible, and you end up with perfectly inelastic demand among all those who have cleared their deductibles.
 
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phattonez

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because food is cheap, and access is guaranteed.

Why is food cheap? How is access guaranteed?

also, choosing one of the thousands of varieties of cheap shoes is not analogous to having your kid break an arm.

It is if the kid has thousands of doctors to choose from all offering their services and competing against each other.
 

phattonez

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Exactly. There is no difference. It's an emotional thing for those who think that stuff should be free, and for those who believe that healthcare is somehow different than any other product or industry.

No one REALLY NEEDS a MRI, or any other healthcare treatment. Just 50 years ago most of these nice medical proceedures didn't even exist. It's nice to have... if you can afford it, just like one of those fancy Italian sports cars are nice to have...if you can afford it.

I like to extend the analogy to utilities, but then people get freaked out and think that for some reason markets can't work with water or electricity.
 

Helix

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Why is food cheap? How is access guaranteed?

Using Food Stamps

it's cheap because we live in the world's kitchen.

It is if the kid has thousands of doctors to choose from all offering their services and competing against each other.

when your kid is critically ill or injured, do you shop around for the best price? no, you call an ambulance. does your employer provided insurance even give you the option of picking any doctor?

to support your argument and to take this out of the hypothetical, quote me the prices of emergency rooms within driving distance for the treatment of a broken arm. how competitive are these prices?
 

head of joaquin

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Everyone doesn't have to price shop for every emergency treatment. If just more people price shopped, for non-emergency treatment, prices would tend to fall.

I don't price shop for absolutely everything that I purchase, but I rest assured that because some people price shop, prices at most places for most stuff are held in check by them price shopping.

I've mentioned the story about my son falling out of a tree before, so I won't go into the long details of that story again, but it is definitely possible to price shop, in one form or another, even for emergency care. Most emergencies aren't time critical life or death situtuations, patients are transfered between health care providers all the time for major treatments. And as long as I am concious, it's not really that difficult for me to tell the ambulance driver to take me to Hospital B instead of Hospital A.

One of the most important things that would be necessary to have price competition between medical care providers is simply to require that all health care providers make their superbill pricing information public. It could be posted on the internet, or in their office, or available over the phone by request. I have people to price shop my business all the time, I can't think of a reason that I shouldn't be able to do that at a doctors office or emergency care facility.

I actually don't want cheap medical care, or doctors who are trying to price bargain in order to get a competitive advantage, which means cutting corners. I don't think I'd opt for $50 brain surgery anymore than I want a Yugo. I want doctors to focus on professionalism in providing medical care, not hustling for profits like used car salesmen

Health care simply isn't a typical market for the reasons cited. What people want is to get quality professional health care when they need it without going bankrupt and without going through the kind of stressful transaction costs (negotiations) that you would in buying a second hand end table at a swap meet. There are systems that provide that in the world. Ours doesn't. That's why we are falling behind in health outcomes.

Finally, and this is critical, health care involves more than individual health. It involves public health. For individuals to remain healthy the entire society has to avoid bad health outcomes (like people with flu not going to the doctors because they can't afford it). So it's in everybody's interest that everybody get health care, not just those of us who are rich enough to afford it.

(Not to mention that it's immoral to deny health care to people because they lack funds).
 
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Neomalthusian

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I actually don't want cheap medical care, or doctors who are trying to price bargain in order to get a competitive advantage, which means cutting corners. I don't think I'd opt for $50 brain surgery anymore than I want a Yugo. I want doctors to focus on professionalism in providing medical care, not hustling for profits like used car salesmen

Health care simply isn't a typical market for the reasons cited. What people want is to get quality professional health care when they need it without going bankrupt and without going through the kind of stressful transaction costs (negotiations) that you would in buying a second hand end table at a swap meet.

Producing whatever people want is not how you fix a broken market. People want a lot and want to pay little to nothing. Big surprise, but that doesn't solve squat.

Finally, and this is critical, health care involves more than individual health. It involves public health. For individuals to remain healthy the entire society has to avoid bad health outcomes (like people with flu not going to the doctors because they can't afford it).

The flu is not causing our cost problems. Nor is any other contagion. The public health excuse is just that, an excuse.

(Not to mention that it's immoral to deny health care to people because they lack funds).

Your opinion of what is moral is warped by a profound sense of entitlement.
 

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Even without, food is very affordable.

it's cheap because we live in the world's kitchen.

What does this even mean?

when your kid is critically ill or injured, do you shop around for the best price? no, you call an ambulance. does your employer provided insurance even give you the option of picking any doctor?

As for the first part, you probably go to the hospital that has a reputation for providing good services at a low price. You probably don't look up what store has the best price on apples, you just go. Usually there isn't much of a price difference. Why would we expect any different with medicine?

As for the second part, this is an example of how we don't have a market in healthcare.

to support your argument and to take this out of the hypothetical, quote me the prices of emergency rooms within driving distance for the treatment of a broken arm. how competitive are these prices?

We don't have a healthcare market in this country!
 

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Even without, food is very affordable.

you asked how access was guaranteed. i answered the question.



What does this even mean?

it means that we live in the bread basket of the world. food is plentiful and inexpensive. it's also not analogous.



As for the first part, you probably go to the hospital that has a reputation for providing good services at a low price. You probably don't look up what store has the best price on apples, you just go. Usually there isn't much of a price difference. Why would we expect any different with medicine?

no, i go wherever is close and that my health insurance considers in network.

once again, food is not analogous. if they start charging $1,200 a pound for apples, i can eat oranges. or i can not eat fruit at all. if i have serious pneumonia, however, i can't just decide the price is too high. it's my ass on the line, and i have to pay whatever they ask. if i can't pay, i can either go bankrupt or default on the charge. then you get to pay for my treatment in the form of higher premiums.

As for the second part, this is an example of how we don't have a market in healthcare.

and we never will. a market for essential services with inelastic demand (and which is largely location dependent) cannot and will not happen outside of the big table at the Cato institute where they dream about it. if your kid is seriously ill and the price is a hundred bucks, you pay it. if your kid is seriously ill and the price is a thousand bucks, you pay it. if your kid is seriously ill and the price is a million bucks, you default, and everyone else pays it.

this disconnect from reality in favor of a theory is a big part of why i'm no longer a libertarian. a free market for essential health care will not happen in real life. that's why it's best to guarantee care (which we already do in the most stupid, inefficient way possible) through a single payer entity which will have more power to force prices down. there are other things we need to do along with that, but this is the biggest piece of the solution.
 
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