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Why is healthcare prohibitively expensive in the US?

Masterhawk

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As you may know, the costs of healthcare are going up faster than GDP. Healthcare in the US is getting rather expensive these days.

Supporters of universal healthcare typically say that since healthcare is a basic necessity, prices do not affect demand because without it, people will die. The economic term for how much demand changes relative to price is price elasticity. To their credit, healthcare is an inelastic good (demand changes more slowly than price), but on the other hand, it isn't the only one.

Other examples of inelastic goods are gasoline, clothing, recreational drugs (including tobacco), and to some extent, food and water. And yet, we don't see companies price gouge on gasoline, clothing, food, or water. Now maybe one could make the case that water utilities are heavily regulated or are owned by municipal governments and most recreational drugs are illegal but what about the others?

Although the cost of food has gone up in the last generation or so, it didn't do so by nearly as much as healthcare. When food (or drinks) get close to expiration date, they go on sale. In fact, sometimes when they're not close to expiration date, they go on sale. Clothing likewise is not being price gouged.

Oil is considered an inelastic good because it's necessary to power our cars. Sure, electric cars exist, but the market is only in its infancy. But despite the importance of oil, prices aren't constantly on the rise, even with growing demand. Rather, they fluctuate, even though most oil reserves are in OPEC countries.

So why don't the markets of other inelastic markets see a great amount of price gouging? The answer is competition. If Safeway charges too much for groceries, shoppers will simply look elsewhere. If one gas station charges too much for gasoline, people will go to other gas stations. The markets for clothing likewise don't price gouge because there is competition. Thes markets are inelastic, if the price rises by a lot, there will still be a great deal of demand for them. An inelastic market will be able to maintain fairly small prices so long as there is competition. Thus it is worth asking why we don't see the same in healthcare.

It would perhaps be fallacious to say that healthcare in the US is expensive purely because of the free market because it is one of the most heavily regulated sectors in the US economy.

If this Forbes article is to be trusted, the US government is limiting the number of physicians per year, causing a shortage and thus raising the cost of medical care due to lobbying on the part of the AMA. The government has also restricted the establishment of medical schools. Foreign doctors have to redo their residencies, regardless of how long they have been practicing, to legally practice in the US.
The Evil-Mongering Of The American Medical Association

Another problem is prescription drug medication. Thanks to patents, prescription drug companies have the license to price gouge their consumers without fear of competition. Some argue that the patent system guerantees that drug manufacturers will make a profit after developing the drug. The problem with this notion is that the big prescription drug companies spend more money on marketing than on R&D.
https://www.washingtonpost.com/news...rketing-than-research/?utm_term=.be4ebaf0521a

Which brings me onto my next point. The FDA puts a long and burdensome process on getting drugs approved. While it may be with best of intentions, it has effectively prevented many would be useful drugs from coming onto the market. Big pharmaceutical companies have little trouble complying with these regulations but smaller companies are effectively crowded out.
 
As you may know, the costs of healthcare are going up faster than GDP. Healthcare in the US is getting rather expensive these days.

Supporters of universal healthcare typically say that since healthcare is a basic necessity, prices do not affect demand because without it, people will die. The economic term for how much demand changes relative to price is price elasticity. To their credit, healthcare is an inelastic good (demand changes more slowly than price), but on the other hand, it isn't the only one.

Other examples of inelastic goods are gasoline, clothing, recreational drugs (including tobacco), and to some extent, food and water. And yet, we don't see companies price gouge on gasoline, clothing, food, or water. Now maybe one could make the case that water utilities are heavily regulated or are owned by municipal governments and most recreational drugs are illegal but what about the others?

Although the cost of food has gone up in the last generation or so, it didn't do so by nearly as much as healthcare. When food (or drinks) get close to expiration date, they go on sale. In fact, sometimes when they're not close to expiration date, they go on sale. Clothing likewise is not being price gouged.

One problem with healthcare is that it is service-based. With most things, we can use automation to reduce prices. But with healthcare, doctors and nurses can't be easily automated. They also are highly paid and have large hourly fees. In addition healthcare uses a lot of expensive new drugs and technologies often with patents and often with little competition for individual products. Healthcare providers also don't show their prices before providing their services and have very complex pricing. So its hard to really compare different options especially when healthcare services can be so varied. healthcare providers often don't charge prices that have anything to do with the cost of care and will simply charge as much as people are able to pay. Insurance companies negotiate with hospitals but only the large ones can get good deals because they need large provider networks to be competitive. Healthcare is also an inelastic product and people will often not care about price when choosing healthcare especially when insurance companies pay for a lot of their care. They will often spend a lot of money on expensive treatments especially at the end of life and insurance companies cover a lot of that which heaps a large cost on insurance payers. Americans also also having a big obesity epidemic that is overburdening our healthcare system. We have so many states with different regulations and healthcare providers negotiating with insurance companies with complex policies that creates a lot of red tape and results in 25% of healthcare costs going to administrative cost. We do have many problems created by the government but the private market creates problems too and just isn't able to limit prices.
 
I don't have an opinion on admission rates for medical schools, but drug approval is necessary, and arguably too easy as is. It's simply too easy for manufacturers to get drugs that are dangerous and/or unhelpful approved (e.g. SSRIs).

The best solution for high medical costs would likely be direct limits on drug prices.
 
but drug approval is necessary, and arguably too easy as is. It's simply too easy for manufacturers to get drugs that are dangerous and/or unhelpful approved (e.g. SSRIs).

The best solution for high medical costs would likely be direct limits on drug prices.

The problem with this view is the seen and the unseen. You see the damage that faulty drugs which do go through cause but you don't see the help that drugs which didn't make it through would have done.

Perhaps a better solution would be to make drug approval optional but to require the label "not approved by the FDA" for any drugs which are not approved.
 
The problem with this view is the seen and the unseen. You see the damage that faulty drugs which do go through cause but you don't see the help that drugs which didn't make it through would have done.

Perhaps a better solution would be to make drug approval optional but to require the label "not approved by the FDA" for any drugs which are not approved.

That's a fair point. The current process just measures a manufacturer's ability to spend lots of money. Making a approval optional would be one possibility, but I think a better option would be to change the approval process so that it's less expensive, and so that it actually requires that a drug work and be safe (e.g. require all clinical trial data to be reported, require all clinical trials to take place in the US). Of course, that would require the government to not be corrupt, which is a non-starter.
 
The cost issue with healthcare lies solely in the fact that it is a for profit system, along with the pharmaceutical companies and our insurance companies.

Because they know they're going to get their money, healthcare and pharma can price gouge like crazy, and they do, and insurance companies are such a racket that they still make out with yearly record profits even when paying out the exorbitant costs of the things they pay for.

also, if you think oil prices aren't gouged, you're being silly.
 
As you may know, the costs of healthcare are going up faster than GDP. Healthcare in the US is getting rather expensive these days.

Supporters of universal healthcare typically say that since healthcare is a basic necessity, prices do not affect demand because without it, people will die. The economic term for how much demand changes relative to price is price elasticity. To their credit, healthcare is an inelastic good (demand changes more slowly than price), but on the other hand, it isn't the only one.

Other examples of inelastic goods are gasoline, clothing, recreational drugs (including tobacco), and to some extent, food and water. And yet, we don't see companies price gouge on gasoline, clothing, food, or water. Now maybe one could make the case that water utilities are heavily regulated or are owned by municipal governments and most recreational drugs are illegal but what about the others?

Although the cost of food has gone up in the last generation or so, it didn't do so by nearly as much as healthcare. When food (or drinks) get close to expiration date, they go on sale. In fact, sometimes when they're not close to expiration date, they go on sale. Clothing likewise is not being price gouged.

Oil is considered an inelastic good because it's necessary to power our cars. Sure, electric cars exist, but the market is only in its infancy. But despite the importance of oil, prices aren't constantly on the rise, even with growing demand. Rather, they fluctuate, even though most oil reserves are in OPEC countries.

So why don't the markets of other inelastic markets see a great amount of price gouging? The answer is competition. If Safeway charges too much for groceries, shoppers will simply look elsewhere. If one gas station charges too much for gasoline, people will go to other gas stations. The markets for clothing likewise don't price gouge because there is competition. Thes markets are inelastic, if the price rises by a lot, there will still be a great deal of demand for them. An inelastic market will be able to maintain fairly small prices so long as there is competition. Thus it is worth asking why we don't see the same in healthcare.

It would perhaps be fallacious to say that healthcare in the US is expensive purely because of the free market because it is one of the most heavily regulated sectors in the US economy.

If this Forbes article is to be trusted, the US government is limiting the number of physicians per year, causing a shortage and thus raising the cost of medical care due to lobbying on the part of the AMA. The government has also restricted the establishment of medical schools. Foreign doctors have to redo their residencies, regardless of how long they have been practicing, to legally practice in the US.
The Evil-Mongering Of The American Medical Association

Another problem is prescription drug medication. Thanks to patents, prescription drug companies have the license to price gouge their consumers without fear of competition. Some argue that the patent system guerantees that drug manufacturers will make a profit after developing the drug. The problem with this notion is that the big prescription drug companies spend more money on marketing than on R&D.
https://www.washingtonpost.com/news...rketing-than-research/?utm_term=.be4ebaf0521a

Which brings me onto my next point. The FDA puts a long and burdensome process on getting drugs approved. While it may be with best of intentions, it has effectively prevented many would be useful drugs from coming onto the market. Big pharmaceutical companies have little trouble complying with these regulations but smaller companies are effectively crowded out.

You hit the nail on the head here. There has been a doctor shortage in this country for years now, and why not? Everyone who goes to college sees what doctors are put through, and the demands placed on them. I'm sorry, but no profession should require someone to go without sleep and work for 36 straight hours. Doctors get paid a lot for this(and many other) reasons. We simply need more doctors in this country, and people at the top aren't letting it happen.
 
There are several reasons why America's "socalled" Healthcare System is prohibitively expensive.

First and foremost is the high-cost of a medical diploma! In Europe, these diplomas - across the board of medical learning - are nearly free, gratis and for nothing. However, that is not the case in the US. From here:
The median four-year cost of medical school (including expenses and books) was $278,455 for private schools, and $207,866 for public schools in 2013 according to the Association of American Medical Colleges.

Which means that doctors working as GPs have a average income close to $200K a year! Comparing that to elsewhere in the world is not easy, because recent data does not exist. However, I managed to find this in the NYT (dated 2009):
GPpay.jpg


As you can see, the salary for doctors in the US - a the GP level - in the above infographic is about $50K less than the actual salary today (ten years later). I doubt however the one could say the same for salaries in EU countries. In fact, because salaries are largely determined in EU countries by National Healthcare Systems, I'll bet they've not moved at all. (Here in France, it costs me about $30 to just see a doctor. How much do you pay?)

So, fellow Yanks, if you want to both enhance your availability of decent healthcare AND want to pay far less, then somehow vote into office people who will want to provide such across the country. And, then, but only then, will you have a chance to live as long a life-expectation as we do here in Europe!

At present national life-expectancy comparisons look like this:
ftotHealthExp_pC_USD_long-485x550.png
 
It would perhaps be fallacious to say that healthcare in the US is expensive purely because of the free market because it is one of the most heavily regulated sectors in the US economy.

That is not the reason why healthcare is so expensive.

It is expensive because healthcare is seen to be like a commodity that responds to the law of Supply&Demand. Were prices regulated, GPs would not be making $200K a year.

And people covered by National HC Insurance quite likely lifespans would not be 4-years lower than here in Europe ... ?
 
I don't have an opinion on admission rates for medical schools, .

Well then I'll use yours. Admission to medical school is a joke. It needs top be changed.
 
Why is American health care comparatively more expensive than other states?

1) Profit Taking. Greedy Shareholders and Underwriters demanding more Dividends on Shares and Investments leaving lpLess Capital for the Practice of Medicine.

2) Patent Law and Intellectual Property Law.

3) Bloated Private and Public Health Bureaucracies.

4) High Capital Costs of Medical and Management Infrastructure.

5) Oligopoly Market Structure which does not have to deal with either Domestic or Foreign Competition.

6) Artificially High Labour Costs.

7) An overly Litigious Society which drives up Insurance Costs for doctors and patients alike.

8) Differential Pricing for Medical Care, Medical Equipment and Medicine.

9) A lack of Preventative Medicine Programmes and an Over Reliance on Medication.

10) An Over Emphasis on Elaborate and very Expensive High-end Medicine combined with an Under Emphasis on Cheaper Low-end Medicine which is in far higher Demand.

Cheers.
Evilroddy.
 
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We have so many states with different regulations and healthcare providers negotiating with insurance companies with complex policies that creates a lot of red tape and results in 25% of healthcare costs going to administrative cost. We do have many problems created by the government but the private market creates problems too and just isn't able to limit prices.

Not to worry, Donald Dork and his Replicant cohorts are trying to cancel ObamaCare and once that happens, healthcare will be ALL RIGHT again!

And if you believe that bit-of-BS, you also need your head examined ...
 
The cost issue with healthcare lies solely in the fact that it is a for profit system, along with the pharmaceutical companies and our insurance companies.

Because they know they're going to get their money, healthcare and pharma can price gouge like crazy, and they do, and insurance companies are such a racket that they still make out with yearly record profits even when paying out the exorbitant costs of the things they pay for.

also, if you think oil prices aren't gouged, you're being silly.

Compare the USA to the rest of world and you'll see that petroleum in the USA is a good deal.
 
The cost issue with healthcare lies solely in the fact that it is a for profit system, along with the pharmaceutical companies and our insurance companies.

Because they know they're going to get their money, healthcare and pharma can price gouge like crazy, and they do, and insurance companies are such a racket that they still make out with yearly record profits even when paying out the exorbitant costs of the things they pay for.

also, if you think oil prices aren't gouged, you're being silly.

Oil prices do occasionally soar up (such as after a disaster). The point I was trying to make was on the long term trends. The cost of healthcare is constantly going up whereas the price of oil is fluctuating.
 
Were prices regulated, GPs would not be making $200K a year.

And I should have added this (from here):
The median four-year cost of medical school (including expenses and books) was $278,455 for private schools, and $207,866 for public schools in 2013 according to the Association of American Medical Colleges.

Whereas in Europe it is closer to $1500 a year ($6000 for four-years of schooling), books and all. Why is it less expensive in Europe? Because Europe has had the foresight to make Tertiary Education nearly free for all that want it!

Now ponder that last fact, if you will. Because - as I never tire of repeating - we have left the Industrial Age and are now rushing (thank you Internet) into the Information Age!

A postsecondary education becomes indispensable to obtain a decent job at a decent wage - which means it should be nearly free, gratis and for nothing throughout the country ... !
 
The cost issue with healthcare lies solely in the fact that it is a for profit system, along with the pharmaceutical companies and our insurance companies.

Because they know they're going to get their money, healthcare and pharma can price gouge like crazy, and they do, and insurance companies are such a racket that they still make out with yearly record profits even when paying out the exorbitant costs of the things they pay for.

also, if you think oil prices aren't gouged, you're being silly.

It turned out that Obamacare was not cheaper by several thousand dollars on average, but more expensive by several thousand dollars on average. Tens of millions of Americans were misled into thinking Obamacare would be cheaper and then were calmed down after experiencing sticker shock themselves when they had to buy the healthtax plan. Leftist propagandists continued to insist the subjected buyers were better off in spite of the fact they could see they were paying much more for insurance than they had been before.
 
It turned out that Obamacare was not cheaper by several thousand dollars on average, but more expensive by several thousand dollars on average. Tens of millions of Americans were misled into thinking Obamacare would be cheaper and then were calmed down after experiencing sticker shock themselves when they had to buy the healthtax plan. Leftist propagandists continued to insist the subjected buyers were better off in spite of the fact they could see they were paying much more for insurance than they had been before.

The Affordable Care Act isn't really a government healthcare system. It still relies on the private insurance market for most of the coverage, and yeah, it didn't really handle any of it well. The ACA was the Democrats take on the Republican healthcare bills they worked back in the 90s. It was stupid and pointless from the beginning, but it did actually increase the number of people covered and help people with pre-existing conditions who couldn't otherwise get coverage.

as long as you have the healthcare market being dominated by for-profit corporations, there will never be anything affordable about it. Statistically speaking, we're probably better with the ACA than we were without it, but it really shows how right-leaning the majority of the Democratic party is. no one who is a "leftist" is going to praise the ACA for doing anything other than marginally helping people get insured.
 
Unregulated for profit greed.
 
LET'S GET BIG-BUSINESS OUT OF HEALTHCARE!

It turned out that Obamacare was not cheaper by several thousand dollars on average, but more expensive by several thousand dollars on average. Tens of millions of Americans were misled into thinking Obamacare would be cheaper and then were calmed down after experiencing sticker shock themselves when they had to buy the healthtax plan. Leftist propagandists continued to insist the subjected buyers were better off in spite of the fact they could see they were paying much more for insurance than they had been before.

Any dunce dealing with Healthcare Costs should know that - based upon a service that maintains exorbitant cost-structures (as does both pre- and post-Obamacare) - there would be a problem containing runaway HC-prices*. (For instance, my constant complaint: For the same education, American GPs are often getting paid twice what a European GP obtains! - for the same degree and the same competence!)

Do the maths, boyz-'n-girlz, it aint that hard to see why Obamacare did not workout quite the way we expected! Obamacare fiddles with the cost-structure and coverage but does not solve the problem of healthcare that is inherently too expensive. Which means what?

It means that when med-students spend more than $200/270K for a medical degree, then that country is wacko! - datapoint from here: IS MEDICAL SCHOOL WORTH IT FINANCIALLY?
Excerpt:
The median four-year cost of medical school (including expenses and books) was $278,455 for private schools, and $207,866 for public schools in 2013 according to the Association of American Medical Colleges.
(NB: It is even likely to be more expensive seven years later!)

At the above costing, a wannabe-doctor will have paid their med-school debt cost in 4/5 years of practice (with still a decent enough salary that they would earn as interns)!

The larger point being that these people then turn-around and continue to expect to earn the prevailing incomes, with their debt having been paid. Which is the American Way, one must suppose because despite the arithmetic, it is the American clientele that is paying higher prices for higher schooling costs.

And then we continue to pay exorbitant medical-profession salaries because those are the "going rates" - after hungry Insurance Companies have taken their cut! Moreover the administrative costs are also wacko - see that reported by the NYT here: The Astonishingly High Administrative Costs of U.S. Health Care.


Meaning quite simply that if we Yanks want a decent healthcare services that covers all of us at decent costs, it has to be "nationalized". Let's get BigBusiness out of healthcare.

Any country that applies "free market logic" to both Health Care and Education deserves the consequences - which are showing painfully in the US today ...
 
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Because America is the land of the greed. Everything is about sucking every last penny out of people
 
Because America is the land of the greed. Everything is about sucking every last penny out of people

Now as yourself how that greed came about.

For me, it was dead easy. We did not learn what Europe learned at the latter half of the 18th century. That the rich were robbing the poor of their "work value".

And, aside from a very brief period under FDR, we've not known the slightest bit of what today is called a Social Democracy. Which goes like this (for definition):
Social democracy is a political, social and economic ideology that supports economic and social interventions to promote social justice within the framework of a liberal democratic polity and a capitalist economy.

The protocols and norms used to accomplish this involve a commitment to (1) representative and participatory democracy, (2) measures for income redistribution and (3) regulation of the economy in the general interest as well as welfare-state provisions.

Of course, the Replicant Dorks will call the above Commie BS. They are likely (aside from Russia) the last bastion on earth to believe that the accumulation of Personal Wealth is the be-all and end-all of human existence*.

As if life was all about earning Immense Wealth whilst 40 million fellow Americans were incarcerated below the Poverty Threshold; and then leaving their wealth to their kids who waste it away ...
 
Why is American health care comparatively more expensive than other states?

1) Profit Taking. Greedy Shareholders and Underwriters demanding more Dividends on Shares and Investments leaving lpLess Capital for the Practice of Medicine.

2) Patent Law and Intellectual Property Law.

3) Bloated Private and Public Health Bureaucracies.

4) High Capital Costs of Medical and Management Infrastructure.

5) Oligopoly Market Structure which does not have to deal with either Domestic or Foreign Competition.

6) Artificially High Labour Costs.

7) An overly Litigious Society which drives up Insurance Costs for doctors and patients alike.

8) Differential Pricing for Medical Care, Medical Equipment and Medicine.

9) A lack of Preventative Medicine Programmes and an Over Reliance on Medication.

10) An Over Emphasis on Elaborate and very Expensive High-end Medicine combined with an Under Emphasis on Cheaper Low-end Medicine which is in far higher Demand.
.

Nice list but it needs some "proof" to substantiate it.

I could agree with most of it, but this is a Debate Forum not a Message Board, and debate requires a higher level of substantiated argumentation.

And substantiating the above is one helluva longggg piece of work! But, the substantiation is there if we go looking for it! Anyway, well done!
 
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I don't have an opinion on admission rates for medical schools, but drug approval is necessary, and arguably too easy as is. It's simply too easy for manufacturers to get drugs that are dangerous and/or unhelpful approved (e.g. SSRIs).

The best solution for high medical costs would likely be direct limits on drug prices.


This is completely wrong. it's not way too easy, its really, really hard, and very expensive. Takes years, piles and piles of data. Prior to electronic records, for submission to FDA companies would have to bring a truck load of data and paper work.

And its difficult to push drug pricing changes because it can stifle innovation and investment into research and development of new drugs if the profit incentive isn't there to justify the great risk and expense of developing and bring to market a new drug.
 
The Affordable Care Act isn't really a government healthcare system. It still relies on the private insurance market for most of the coverage, and yeah, it didn't really handle any of it well. The ACA was the Democrats take on the Republican healthcare bills they worked back in the 90s. It was stupid and pointless from the beginning, but it did actually increase the number of people covered and help people with pre-existing conditions who couldn't otherwise get coverage.

as long as you have the healthcare market being dominated by for-profit corporations, there will never be anything affordable about it. Statistically speaking, we're probably better with the ACA than we were without it, but it really shows how right-leaning the majority of the Democratic party is. no one who is a "leftist" is going to praise the ACA for doing anything other than marginally helping people get insured.

Nothing is cheaper when purchased from a non-profit. That is a lie. Somebody must pay a great deal to keep non-profit enterprises afloat. Taxpayers must pay huge costs to keep government run or government sponsored non-profit insurance companies in business.
 
I don't have an opinion on admission rates for medical schools, but drug approval is necessary, and arguably too easy as is. It's simply too easy for manufacturers to get drugs that are dangerous and/or unhelpful approved (e.g. SSRIs).

First of all, if a drug is found chemically responsible for the death of an individual that was treated, then there is the possibility of a criminal trial. No company escapes that with a "smart lawyer" if the drug has been found to cause the death of more than one person.


The best solution for high medical costs would likely be direct limits on drug prices.

In a word, YES! That is the way it works in a National Healthcare System (NHS)! Moreover, doctors are independent but contracted to the NHS. That is where their revenues are derived - and they can leave the system any time they want. (Moreover not all healthcare is covered by a NHS - for instance, cosmetic surgery is not. Neither is dentistry.)

The result is that due to lower pricing doctors practicing in the EU earn about half that of American doctors. Which means total HC-costs are lower on average here in Europe than in the US.

But far more important is the claim that the EU government healthcare system is better because it extends lifespan four years longer than in the US.

Now, THAT is an argument worth recognizing. So, let's go bump-it-with-a-trumpet ... !
 
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