[anaolykarpov]

Can this be a side effect of the "free healthcare" goal that the state is trying to achieve?

When people don't have to pay for something straight from their pocket, they're not feeling the ripoff so strongly, so they don't revolt.

That's why I personally think that the systems where people vote with their wallets are much more efficient.

[willvarfar]

And yet in countries with universal health care, the cost of health care in real total terms is much lower: https://en.wikipedia.org/wiki/List_of_countries_by_total_hea...

Monopolies can dictate terms, which is why monopolistic companies are regulated. But if that monopoly is the state, then it actually works in the citizens favour if the monopoly presses down costs.

[winter_blue]

> monopoly presses down costs

Yes, assuming the monopoly actually wants to keep its costs low. In the US, corporate-funded legislators made it so that Medicare is not allowed to negotiate drug prices. It willy-nilly pays whatever the private drug companies prices its drugs at.[1]

This is why it's so profitable for companies to "purchase legislation". The return on investment is 10x or something insanely high, like in this case. Spend $10 million "donating" to the campaigns of a few unconscientious politicians, and soon you are milking an extra $100 million in profits from unwitting taxpayers.

[1] http://healthaffairs.org/blog/2016/09/19/the-politics-of-med...

[willvarfar]

Bugs me to bits. I'm very glad I live in a much 'cleaner' country i.e. Sweden.

Transparency could strip off lobbying. If we know who gets what money, and we know how people vote, a bit of clustering etc ought reveal patterns...

What's needed is something gimmicky that gets popular appeal and covered on mainstream media for fifteen minute fame...

E.g. an iphone app that you point at the live news on your TV and it OCRs the senator's name and queries opensecrets.org or something bigger and better and tells you how much money they got, from whom, and how this correlates with their voting record etc.

Something that makes politicians accepting money very counterproductive.

[tracker1]

Don't underestimate the complacency of the public.. Most of this information (campaign funding information) is publicly available in the US as well... it's just that most of the population doesn't care... they're more worried about one of those damned (insert other party here) getting into office.

[gambiting]

I'm from Poland, where we have 100% national healthcare, and it's literally illegal for people or companies to donate to politicians to do anything. Or fund their campaigns, or pay for their holidays, or whatever - politicians are straight up forbidden from taking money from companies/people no matter what reason. So basically, our healthcare system plays hardball with suppliers, basically saying that we can pay X, or we won't buy your product at all - because it simply can't afford to pay any more.

[nickff]

These strategies can allow governments to bargain down the cost of products to the marginal cost of production; the only problem is that if every buyer does the same thing, the supplier goes bankrupt (as it can't cover its fixed costs). This strategy also doesn't allow for any earnings to be retained for product development, and discourages investment in the field but those are separate issues.

[rfrey]

This sounds like capitalism. This is the inverse of the anti-marketplace argument that capitalism leads to monopolies, which then price-gouge consumers.

In this scenario, consumers drive the prices too low and put suppliers out of business. It's the same argument coming from the other direction.

Markets don't seem to work like that. Prices get driven down, but not to the point where suppliers go out of business, because they won't sell at that price. Sometimes if margins are too low new players will find efficiencies or new inventions that allows them more profit for awhile.

For this to happen you need a balance of power between buyer and seller. It's obvious to me that such a balance is radically absent in the US system right now.

Putting governments into the role of buyers is not anti-market - it's pro market because it allows an informed, more powerful buyer that balances the market forces and allows the market to work. (It's certainly possible that other entities, such as insurance companies, could fill the same role.)

A worry comes because of the label "single buyer" which is the inverse of a monopoly and is anti-market. But in practice drug companies are global and there are many governments.

All this would lead to much lower profits for drug companies, of course, but that's not a pro-market argument, that's a pro-monopoly concern.

[tpeo]

>This is the inverse of the anti-marketplace argument that capitalism leads to monopolies

I don't think I have heard such an argument, and I understand the parent comment just fine.

What he means is that, since pharmaceutical and medical supplies companies have large upfront research costs coupled with negligible marginal costs, they face a falling average-cost curve. However, a firm operating under competition has it output at the point where marginal and average costs are equal. The point is that for a firm who profits off research, reaching this point is unfeasible. What all this economic gobbledygook is that, in order to survive, firms have to charge above what would be otherwise the "warranted" price (like the price of the components and labor that go into a kit).

This is more obvious in the case of software, since the cost of copying any piece of software is pretty much zero, anyone trying to sell it for it's marginal price won't ever get what he put in by having written it in the first place. In such markets the socially efficient outcome, the one which makes both consumer and producer better off, is actually to have a single or few firms regulated firms operating under imperfect competition. And all this happens because of the cost structure of the firms, not because of the market itself.

Though I'm rather skeptic that pressing on the suppliers will push them near their marginal costs in this particular case.

https://en.wikipedia.org/wiki/Cost_curve

[abricot]

They can, but that is not what all of them are doing.

They realize that if they only cover marginal cost, and don't allow for development, they will only get the right product for a limited amount of time.

What often happens is that they agree on a more realistic price that will allow for that.

In many cases the company will go low to still be the supplier for a whole country - especially as they can still keep their margins in other countries, like US.

[nickff]

I think we agree on this, but the strategy of bargaining down to near marginal cost is dependent on the US customers paying for the fixed costs. The 'internationals' don't have to worry about doing safety studies or drug development either, so they can just take advantage of US companies doing the expensive work. For their part, the US government seems to know what they are doing too; they know they pay more for the drugs than anyone else, and do so to retain the industry.

I'd compare it to a 'tragedy of the commons' scenario where one farmer keeps paying his son to re-turf the meadow, so the boy can have a job (and thereby feeds everyone else's sheep).

[grive]

> the only problem is that if every buyer does the same thing, the supplier goes bankrupt (as it can't cover its fixed costs).

The government is responsible for using a fair price, both for itself and the supplier.

His non-profit nature ensure that it will not try to lower the price too far.

If a politician is dumb enough to make companies go bankrupt, it's the responsibility of the people to vote him out of office.

That's the only way to have a fair price on drugs. A free market cannot exist in these industries and the inelasticity of the demand will always, always distort the prices.

Yes, America will have to face its demons and trust its government. The alternative is to continue paying exhorbitant prices to greedy scumbags and let fellow citizens die as a result.

[abawany]

From a quick read, it seems that this article does not talk about Pharmacy Benefits Managers such as Express Scripts. The latter are certainly not a full-fledged solution but another country-specific attempt to privatize for the sake of privatization. I agree that it is sad that the elected representatives in the US have worked so hard against the people they serve by hampering Medicare in this manner.

[bonoboTP]

I live in Hungary and we're often fed up with the corruption we see here, but as I learn more and more about American corruption I'm not so sure we're that bad in the end.

[titzer]

I think the problem is that the US healthcare system is a perfectly miscalibrated non-free market coupled with aggressive corporations pursuing unrealistic profit margins and hyper-growth, coupled with corporatism in government, coupled with a poorly design public system, employer-provided health insurance, and a general lack of information about real costs.

[lake99]

I don't think we can generalize from Wikipedia lists for complex issues when the lists contain very diverse countries. I have spent some time in Europe and in India. I have a couple of chronic conditions that requires daily medications. One of those conditions have generics available worldwide, the other one does not. My medication costed 5 times my montly European insurance premium in Europe. In India, insurance providers don't cover much beyond hospitalization and cancer. In India, the same non-generic medicine used to cost me about half of my European insurance cost, but I had to foot the bill myself. Now, there are generics of that available here, and I pay about one fifth of my European insurance premium for a month's worth of medication. I have to pay for doctors' visits off-pocket too, and the specialists I visit charge me about 3€ per visit. If I visit a local GP, they'd charge me about 1.5€ per visit. I pay for tests out-of-pocket too, but most of them cost in the range of single-euro-digit per test. Sorry about being vague, I don't want to give away too much about myself.

Looking at per capita healthcare costs in India would be pointless, as the vast majority of people go without proper healthcare.

[richmarr]

All well and good saying "you can't generalize" to dismiss criticism of US healthcare.

Here's a generalisation for you: The US has lower life expectancy than most of the 'developed' world and yet spends twice as much (OECD 2007).

See Meeker's USA Inc. slide 111 https://s3.amazonaws.com/kpcbweb/files/USA_Inc.pdf

[lake99]

No, the US healthcare is in serious trouble. My point was about a line of approach for the problem. In fact, India can give a few good pointers here, which you can see from how little I pay for my own, rather excellent, healthcare.

Indian healthcare has its own can of worms, but since we are not talking about that, I won't open it.

[ThrustVectoring]

Monopsonies pressing down costs by exerting their sole-buyer power causes deadweight losses (compared to the free-market clearing price). Really the question is whether or not the redistribution from health care providers to the general population is worthwhile -- and if it is, you have to compare the monopsony against levying a specific tax to accomplish the same goal.

[AstralStorm]

A specific tax that is pushed down to consumers? So that everyone actually pays more?

Deadweight losses are a joke, if the sole buyer buys too much, they are at a loss. It just does not happen in this sector.

[ThrustVectoring]

Not too much, but too little. A monopsonist that buys at a lower price than where the market naturally clears will remove more producer surplus than the extra consumer surplus it extracts.

In concrete terms, this means something like "the price of a doctors visit is low enough that a nearby clinic closes down. Even though you were happy to pay the higher price for the convenience, and they were happy to provide service at that price, we no longer get to have that experience."

[colechristensen]

"Universal"-ness is just one dimension of health care costs. What about the malpractice liability environment in other countries, for example? What about the attitudes towards end-of-life medicine? What about medical tourism to America for advanced care? How much of the cost savings for universal health care is a result of saying no to procedures?

Insisting that moving to a single-payer system is the only solution is very one-dimensional thinking.

It can also be said that drug companies use Americans to make their profits and sell to other countries for the best they can get, we could well be paying for an unfair portion of the "real" cost and other countries are only doing better because we're paying the bill.

---

I'll switch to talking about something entirely different to expand on the last point. You'll often see people arguing about how the US has the highest military budget, higher than the next N countries combined.

The thing is, we're providing security for those next N countries, and the world as a whole. Many of those N countries are NATO allies who would have to spend a whole lot more if the US didn't. And also by making real war outside regional and civil conflicts impossible for the whole world with military dominance.

In other words, in an American military spending blackout, the game would change and everyone else would be spending a whole lot more. We couldn't simply reduce our defense spending to something comparable without significant consequences.

[newjersey]

> How much of the cost savings for universal health care is a result of saying no to procedures?

My personal opinion is that we should absolutely say no to a lot of scenarios when it comes to single payer. That and we should absolutely stop providing care in the worst cases if there is a strong likelihood that the patient will not make it out alive. We spend way too much in the last six months of a patient's life holding on to every last bit of hope grasping to keep their heart beating. I've heard doctors express frustration about this as well.

> In other words, in an American military spending blackout, the game would change and everyone else would be spending a whole lot more. We couldn't simply reduce our defense spending to something comparable without significant consequences.

Consequences for us too. We have to keep spending to maintain the status quo.

I mean I get that there are certain common goal costs that we contribute perhaps a little more than our tab but it isn't nice to point it out like this. At the end of the day, we aren't spending on our military prowess to be charitable. I'm not an expert so it is likely that some cost saving would be possible. I'd welcome efforts to do that.

With medicine, I think a single payer should be able to negotiate with manufacturers and suppliers to keep costs low.

We have to rethink end of life care for humans. I'm very willing to sign a medical release form that says pull the plugs if my treatment will cost over $10M regardless of who pays for it.

But that's a different topic. This current issue with epippen is a simple issue of rent seeking. There is no way anyone could side with the company of this one. I hope that the spotlight means their efforts will fail.

Are you suggesting we spend more than we can get away with hoping the slimeball companies will reinvest their profits into R&D?

[colechristensen]

>My personal opinion is that we should absolutely say no

We don't disagree that there's a problem: medically fighting to the last breath should be replaced by gracefully accepting the end at the appropriate time (for both cost reasons and for the quality of life at the end for the patient, etc.)

We do disagree on how. If you want to make progress on that front we should have education and cultural growth around accepting death and doing what's best at the end for doctors, patients, and families. We shouldn't have a bureaucrat forcing the decision on anyone.

---

>This current issue with epipen is a simple issue of rent seeking

It's not an issue of rent seeking specifically, but abusing government granted monopolies (patent protection, trademark protection, forcing schools to buy, etc)

> Are you suggesting we spend more than we can get away with hoping the slimeball companies will reinvest their profits into R&D?

No, the high cost of R&D and slimeball behavior are often intermixed, but separate issues. I'm suggesting that a whole lot of the money for expensive drugs is actually going towards R&D. Lots of foreign countries are getting steep discounts and not paying equal shares because the drug companies are taking the path of least resistance. They can get funded in America more easily so they don't fight as much in places that are more difficult to win.

America couldn't magically get the foreign prices because the R&D money wouldn't appear from anywhere else. America's prices go down but the rest of the world's prices go up to meet in the middle ... or a lot less drug research happens (or a bit of both)

There are lots of things happening, and a lot of the problems are due to lacking regulation. What can get patented and for how long is wrong; more research should be publicly funded with stipulations that the results are free to society; drug approval mechanisms need to be more efficient; some barriers between national drug markets need to be broken down (you should be able to sell across borders between economically equal nations)

There are a lot of things which could lead to a healthier medical environment which aren't being done. We've got some small reforms out of the way, but there are still huge inefficiencies.

[vertex-four]

If you're scared about being told "no", don't be - you're more than welcome to purchase additional private insurance in a single-payer system to cover whatever you want. It's not a particularly uncommon job perk in the UK.

Our single-payer system covers a pile of things that low-end insurance often doesn't in the US as it is, so most people are happy with it.

[rayiner]

What you're talking about is a monopsony and those are bad too. They undermine investment in a market because market participants can't get a normal ROI.

[coredog64]

What you're missing is that those countries can (and do) use market mechanisms.

I have direct experience with the French system, so I'll use that as an example. When you go to the doctor for an outpatient visit, you pay the whole bill right then and there. Your insurance company will then reimburse you for some significant percentage of the "reasonable and customary" cost of that visit. Do you need a shot as part of that visit? Guess what -- you have to go next door to the pharmacist and buy the dose. The doctor will then administer it.

Inpatient is different (fully covered and no billing) and indigent patients are given a special card that directs the doctor to bill insurance directly.

We could do that here in the US without universal health care and it would make a significant dent in our spend without a corresponding decrease in outcomes.

[tracker1]

Unfortunately the "monopoly" in this case is as a result of our IP system.

[hueving]

So the question that comes up with this, if there is no free market like the US medical system, would it kill the incentive for biomedical startups and pharmaceutical research in general (which is largely based on the US now).

[vvvv]

Is the R&D largely based in the US?

Also, it's important to distinguish between true R&D aimed at developing actual cures and iterative R&D aimed at developing medicine that will get you hooked on long-term courses that maximise profits.

[willvarfar]

And R&D aimed at developing replacements for perfectly-fine drugs that are soon to go out of patent, or R&D that is put on a back burner until some other drug is about to go out of patent etc.

[hueving]

>Is the R&D largely based in the US?

As far as I understand it, yes. http://www.xconomy.com/seattle/2014/09/02/which-countries-ex...

As far as your claim about most drugs being a scam, I can't speak to that as I'm not familiar enough with the industry.

[snewk]

I think its clear that the US medical system is specifically not a free market. It has become (and is continuing to become) increasingly subjected to regulatory capture.

[AstralStorm]

Corporate capture, not regulatory. Plain old corruption. Regulation just increases the barrier to enter for competition, which is beneficial to the status quo who can afford it.

[hueving]

>Regulation just increases the barrier to enter for competition, which is beneficial to the status quo who can afford it.

Uh, that's precisely the point of regulatory capture. Ensure nobody else can compete but you.

[tracker1]

Just to clarify, the medical system in the US is far from a free market... the pharmaceutical industry itself is the opposite of a free market, inundated with incumbents and very strong patent protections without anything to force open generic production and licensing at a reasonable cost.

Beyond the pharmaceuticals, is that the most expensive healthcare services are provided by hospitals that are mostly locked in by proximity.

[cmdrfred]

GlaxoSmithKline spent 15 percent of revenue last year on R and D, 40 percent on marketing and sales. This is a myth.

http://www.bizjournals.com/triangle/news/2016/07/19/where-gs...

[rogerdpack]

My question is similar...is the US fitting most of the bill for R&D currently, since apparently we get ripped off for prescription drugs? (or are we getting ripped off? maybe it costs that much to develop the drugs dunno)

[bigchewy]

the challenge is that ~40% of healthcare spend is even plausibly directed by the patient. the majority is not elective, a result of an acute situation, etc. The concept of free market, unfortunately, doesn't work. It's easy to confuse this because most people on HN are (relatively) healthy. 15% of the population consumes 80% of total healthcare spend. These are the ones that we need to solve for

Sources: lots of research I could link to but don't have handy and, with great dismay/frustration, I've spent a decade analyzing the root causes of US healthcare spend.

[nickff]

How much does the government have to intervene in this market before it is at least partially culpable for the problems? Will government be blamed for any systemic problems even when there is a single-payer system, or will the problems then be attributed to underfunding?

[huuu]

Voting with your wallet is very short sighted. Some examples:

A manager replaces free coffee in the office with a paid vending machine to save expenses. Moral goes down. Production goes down.

A team member is fired because she has the worst production level of the team. What they did not know is that this team member was holding the team together.

So there are a lot of side effects to every decision. And therefore I think voting with your wallet is a bad idea.

[hueving]

That's not even what "voting with your wallet" means. It has nothing to do with saving costs. It's about depriving an organization/person of money to stop supporting them.

For example, you might choose a higher airfare with a carrier that has better customer service than the cheapest. This is voting with your wallet and it has nothing to do with cutting costs.

[nickff]

Voting with your wallet is short-sighted if you are short-sighted.

Alternatively, we might have a manager who buys a coffee machine to give the employees free coffee, as the former sees the latter will be happier and more productive for a low price; this the manager buys productivity cheaply.

[austinjp]

In this situation, an example of the staff "voting with their wallets" might be that they buy coffee elsewhere.

The manager hasn't "voted with their wallet" in your example.

[armenarmen]

alternatively:

A manager sees that workers work better when well caffeinated, but that they are sucking up time with starbucks runs. So she installs a Keurig machine, an investment that saves money and time in the long run.

[colemickens]

Wait, how is the state trying to achieve "free healthcare" in the US? .... or is your comment not about the US?

If it's in regards to Obamacare, that's pretty recent compared to the trend of the medical lobbying getting one over on Americans... and definitely not "free healthcare" by really any measure.

[rickycook]

here in australia where social healthcare pays for plenty of things including medicine subsidies, i'd tend to disagree

[pikzen]

Unfortunately, voting with your wallet when it's a matter of life and death is not an option.

[nickff]

People vote with their wallets (and their feet) on matters of life and death all the time. People choose what car they buy (with crash ratings and cost being significant factors), what dentist they go to (in places where they pay for dental), and many (but not all) Canadians choose to pay for medical care to avoid long waits. People also choose what neighborhood they live in (both safety and pollution are significant concerns), what job they do, how much to spend on food, what airplane to fly on (, the DC-10 was doomed by its safety record), and any number of other health-critical, financial decisions.

[gambiting]

I thought it was obvious, but I'm sure OP meant that if you have an accident, you can't shop for providers - an ambulance or a helicopter takes you to a hospital, and you wake up with a gigantic bill. Not exactly "voting with your wallet", is it?

[nickff]

Perhaps there is some misunderstanding, but that (parent to my comment) was responding to a comment which indicated that there is too much government intervention, which is not allowing people to feel the direct financial impact of their medical decisions. People using epipens are not buying them 'just-in-time', they are planning ahead.

The great grandparent comment also seemed to be speaking to the way the government has incentivized employer-provided health insurance, which insulates people from making cost/benefit decisions. I think that if individuals had to pay $100 per juice box their insurer gets billed, they would likely find a way to cut costs.