[rdmcfee]

A single payer system is a step in the right direction, however, there are deeper issues with the American healthcare system.

The unit cost of healthcare is so much higher than in other developed countries.

In British Columbia, physicians bill at total of around $31 CAD ($23 USD) for a standard office visit. They pay all their overhead out of this fee. Typically doctors keep 65% of their billings and the offices take 35% for overhead. From what I can tell, a similar visit in Washington State will run between $60 and $200 USD when billed to insurance.

Why is this the case? What are the factors in the American system that prevent reasonable pricing?

http://www2.gov.bc.ca/assets/gov/health/practitioner-pro/med...

[notliketherest]

It's the insurance companies dance with the healthcare providers. Over many decades, the insurance companies have negotiated payments much less than the quoted payment. In turn, the healthcare providers raise their rates in order to make sure they can still make money even with the discount they give insurance. When the time comes for the insurance companies to renegotiate, the same thing happens, and the healthcare providers raise their rates. This works fine for those of us who have insurance, but for non insured individuals, they have to pay the "actual" rate - which has been inflated because of the insurance company discount! This has been going on for many decades.

[chimeracoder]

> ver many decades, the insurance companies have negotiated payments much less than the quoted payment. In turn, the healthcare providers raise their rates in order to make sure they can still make money even with the discount they give insurance. When the time comes for the insurance companies to renegotiate, the same thing happens, and the healthcare providers raise their rates. This works fine for those of us who have insurance, but for non insured individuals, they have to pay the "actual" rate - which has been inflated because of the insurance company discount! This has been going on for many decades

This is close to correct, but a subtle correction:

Medicare and Medicaid set their reimbursement rates by fiat, and providers have essentially no ability to negotiate those. Except in critical access areas, Medicare actually reimburses much less than the marginal costs of care for its patients (7% in the aggregate). As a result, providers present very large bills to everyone else (privately insured and uninsured patients) to make up for this loss - you can't stay in business if you're literally making a loss on every patient! Uninsured patients see the large bill and assume they have to pay the entire amount (they don't!), and private insurers end up negotiating that down to some multiple of what Medicare pays.

A typical insurer will negotiate an agreement like, "we'll pay 350% of what Medicare pays for this category of services".

[ra1n85]

Great insights - never considered this.

I can't imagine that insurance not being available for purchase across state lines is helping here, either.

[wapz]

It's really ridiculous, too. I went to the ER for stomach pains in california for 3 hours (ct scan, IV, and morphine). It was $3500 (no healthcare). I was in college and talked to them and paid around $800. I went to the ER in Japan overnight (12 hours) ct scan, IV, and it was $40 (insurance covered 70% so it was about $130).

[mullen]

There are several states where health insurance sells across state lines. It does not lower the price of health insurance.

[ra1n85]

How can you say that? When an arbitrary law creates artificial markets and restricts the choices of consumers, you really think that prices aren't affected?

[mullen]

Because health insurance is not about scarcity or moving goods across state lines. Setting up insurance is much more complex than that and I think that is why people get caught up in thinking that allowing insurance to be sold across state lines will help.

When an insurance company sets up in another state, they have create a network of doctors, hospitals and medical providers. The doctor network does not just pop up over night.

[jahewson]

What are the factors? Number one is that doctors in the US are paid too much. Why is this? Because health insurance is purchased by employers, not individuals, so most people don't see or care how much it costs. This also explains number two - the price gouging by pharmaceutical companies and hospitals.

People will try to say it's because of malpractice insurance or because the US invents all the drugs (they don't) and bla bla and while those are contributing factors, it's very clear to me as a UK expat that key players in the medical system here just take too much money off people.

A simple example is that Paracetemol (Tylenol), available since the 1950s costs about 10x as much in my local CVS as it would in an equivalent British pharmacy (Boots). Why? Because the US market is already used to paying far too much so they have no idea what a rip off is.

[SilasX]

Mostly agree but I think you misrepresent this argument:

>People will try to say it's because of malpractice insurance or because the US invents all the drugs (they don't)

It's not that the US invents all the drugs, but that US customers bear a disproportionate share of the drug development costs because drug makers (whichever country they originate in) can actually charge above marginal price in the US, compared to the monopsonist discount that other countries can secure.

[narrator]

For one, doctors educational costs are astronomical in the U.S compared to other countries. The amount of people able to become doctors is artificially limited. Drug prices are unregulated. The cost of developing drugs is high and has been getting higher.

Hospitals have little price transparency and the cost of same procedures at different hospitals is wildly different. The same bag of saline can cost 10x more at one hospital vs another. In markets where there is price transparency, like Lasik surgery or other elective procedures, the prices are far more sane.

One thing that spending double as a percent of GDP on health care and getting worse outcomes proves is that THE SOLUTION TO THE PROBLEM IS NOT TO SPEND MORE MONEY. Unfortunately, this is the only thing American politics knows how to do as more money means more money for every special interest with their hand out.

[chimeracoder]

> The amount of people able to become doctors is artificially limited.

It is not artificially limited, and this is a common misconception that simply won't go away.

The bottleneck is currently the number of people who can complete residency training. Residency programs are not self-sufficient, so most of them are funded by Medicare. That's not an artificial limit - that's a natural one (the sheer economics of the process).

[SilasX]

And (per previous discussion [1]) that doesn't explain it. If there is still excess demand for MD degrees, then there is still room for potential MDs to borrow any shortfall that residency subsidies won't cover.

The argument is like saying that Hamilton showings are limited by how much the government will pay in subsidies for the tickets. No. The demand is enough to cover expansion.

And even if it weren't there's still the issue of how much training is actually required to fill the functional role of a doctor. I'm pretty sure that there's some fat to cut out when you're making someone go all the way through a bachelors before they can even start.

[1] https://news.ycombinator.com/item?id=13593944

[chimeracoder]

> If there is still excess demand for MD degrees, then there is still room for potential MDs to borrow any shortfall that residency subsidies won't cover.

Because the amount of loan debt physicians have to take on is already massive, and very few want to increase that by an additional $112,000 (which is the amount Medicare provides). There are some, but empirically, not many.

The term of that loan is comparable to many mortgages, and there's enough uncertainty at this point in the expected payout that many qualified would-be doctors are incentivized to choose other professions instead, where they can make a pretty good living (and, possibly, a better one) much sooner and without the risk of taking out an additional series of six-figure loans on top of whatever may be outstanding from undergraduate education.

> The argument is like saying that Hamilton showings are limited by how much the government will subsidize ticket prices by.

Broadway ticket prices are a really bad analogy, because prices are intentionally sold below market-clearing rate for a whole slew of reasons that aren't directly comparable to the medical profession.

[SilasX]

>Because the amount of loan debt physicians have to take on is already massive, and very few would want to increase that by an additional $112,000 (which is the amount Medicare provides).

Sure, you think it's expensive, but the demand is still there, people are willing to work for (net of costs) less than they currently are. That supports the claim that the service is priced above the market clearing level. (Edit: and they wouldn't be increasing debt by that full $112k; they could simply provide 80% of the existing subsidy per slot instead of the current 100%.)

>Broadway ticket prices are a really bad analogy, because prices are intentionally sold below market-clearing rate for a whole slew of reasons that aren't directly comparable to the medical profession.

No, that makes it a better analogy, because it's a case of good sold below it's market clearing price but which has excess demand capable of paying a (much) higher MCP, and where it's more obvious that the bottleneck isn't (and can't be) insufficient subsidies.

[chimeracoder]

> Sure, you think it's expensive, but the demand is still there, people are willing to work for (net of costs) less than they currently are. That supports the claim that the service is priced above the market clearing level.

* There are more people who apply for publicly-funded GME every year than there are positions available, yes.

* However, almost nobody (roughly speaking) applies for self-funded residency positions (which do exist).

I don't know how those two facts combine to say that "the demand is there" - there is not excess demand at market-clearing rates. There is only excess demand at a subsidized rate. People are not willing to work for less than they currently are; the supply is highly substitutable, and we're already seeing the effects of that.

[SilasX]

>Drug prices are unregulated. The cost of developing drugs is high and has been getting higher.

What do drug prices have to do with the cost of an office consultation?

[k-mcgrady]

>> For one, doctors educational costs are astronomical in the U.S compared to other countries.

Doesn't this apply to all US educational costs (at the college level)? On the other hand doctors in the US seem to get paid a lot more than in, say, the UK.

[nodamage]

Insurance companies acting as profit-seeking middlemen between doctors and patients create a perverse incentive to drive up costs on both ends. It's a terrible feedback loop caused by treating health care (which is ultimately a cost center) as a for-profit enterprise. Every other modern country has managed to figure this out except the United States.

[refurb]

* It's a terrible feedback loop caused by treating health care (which is ultimately a cost center) as a for-profit enterprise.*

Ummm... you do realize that many other countries with universal coverage rely on private insurance, right?

[nodamage]

Not really the same thing. Insurers in a purely for-profit marketplace will always be incentivized to reject coverage for people with pre-existing conditions and drop coverage for people who become sick, because both groups are unprofitable to treat. The only way to avoid this is with strict regulations preventing insurers from doing what's in their own best interests at the expense of everyone else.

[jbhatab]

Why is single payer better? Genuinely curious. I just don't have any solid proof of the American Government doing a better job than the private industry enabled by competition.

[davewritescode]

It's hard to quantify 'better' but there are some major advantages to a single payer systems in terms of efficiencies. For example, a single standard for billing is in itself a major win.

[apathy]

Contracts and practice plans are considerably simplified ;-)

[olalonde]

One problem is that "private industry enabled by competition" is not really an option. Deregulating healthcare would be close to impossible politically.

[apathy]

assuming you're asking in good faith, the answer is pretty simple. A larger population has more leverage, and if all of the citizens bargain as one bloc (i.e., if the government does so on their behalf), it drives the market. Note that a tremendous chunk of the market needs to be involved for this to have maximum effect -- if a physician can "opt out" of Medicare/MediCal and make more money, they will, by and large. (There's a reason that being on call instead of waiting for referrals is called "service")

Most physicians in (e.g.) the UK do participate in the single-payer market (there are a small number who make a living offering pay-as-you-go services, but they are the vanishing minority), since it dominates demand. In the US there are a great many physicians who simply won't accept Medicare rates (they're viewed as too low by most) and since there are alternative sources of patients, that's who they treat (typically privately insured). This leads to the cases that show up at County or the ER being a hell of a lot more expensive than necessary as they tend not to be survivable for long. (A running joke at most county hospitals is that conditions believed "incompatible with life" routinely walk or roll into the ER and clinics.)

If you have 1-3 insurance companies and MediCal/Medicaid and Medicare then you have different rates for different groups, almost all of it horrendously opaque, and the 3rd party insurers are not incentivized to pay for anything.

As far as private vs. public, the issue here is the same as for schools, a private insurer or school can choose not to insure or educate a "customer", the government by law cannot. In the handful of cross-over studies of charter schools or vouchers, after controlling for subject-specific effects, the children who switched from public to charter or private tended to do slightly worse than expected based on their test scores from public schools. (It is a difficult experiment to run for numerous reasons.)

Medical care, unlike most goods and services, is stunningly inelastic in demand -- you either need it and will do whatever is required to get it, or you don't and won't, by and large. (Elective surgeries for cosmetic purposes are a separate matter; nobody goes in for a stent "just because" or visits the trauma unit just to poke their head in) Furthermore, a substantial amount of the cost is centered on the first and last few years of a person's life. Unless you would like the "market driven solution" of even higher infant mortality and elderly culling to proceed, 3rd party insurers don't have the incentives to make it go.

[chimeracoder]

> In the US there are a great many physicians who simply won't accept Medicare rates (they're viewed as too low by most)

Right there is the big problem, though: Medicare reimbursement rates are already below sustainable levels for providers, which actually results in providers charging private insurers for the difference.

If Medicare were expanded to everyone, either Medicare would have to increase its reimbursement rates, or you'd see providers close up their practices (which is already happening, and which is one of the current problems with providing affordable care outside urban areas).

> Medical care, unlike most goods and services, is stunningly inelastic in demand

That's actually not true at all - medical care is highly elastic, as evidenced by the utilization differences for people who have plans with high copays and deductibles compared to those who don't.

> As far as private vs. public, the issue here is the same as for schools, a private insurer or school can choose not to insure or educate a "customer", the government by law cannot. In the handful of cross-over studies of charter schools or vouchers, after controlling for subject-specific effects, the children who switched from public to charter or private tended to do slightly worse than expected based on their test scores from public schools. (It is a difficult experiment to run for numerous reasons.)

But we actually do have a point of comparison here, because Medicare does have both privately managed and publicly-managed plans (as does Medicaid). Consistently, the privately-managed plans come in under budget while delivering superior medical outcome metrics and patient satisfaction scores compared to Original Medicare (or the publicly-administered Medicaid plans).

[apathy]

This is interesting -- suppose that the choke point of negotiation was handled by the government on behalf of citizens, but the administration of programs was privatized? That could be interesting.

Lord knows I've had about enough red tape for several lifetimes from NIH, NSF, and similar organs; Medicare as it now stands somehow manages to result in both medicine-at-a-loss and also fraud on a spectacular scale. I'm not a big fan of government but between consolidation and fragmentation, I don't think the current medical care solution is working, nor is it sustainable.

[jahewson]

Medicare reimbursement rates aren't necessarily too low if healthcare providers are currently overcharging. They could be perfectly be fair.

But as long as healthcare providers can find someone else to overcharge then they'll do that rather than accepting Medicare patients.

[chimeracoder]

> Medicare reimbursement rates aren't necessarily too low if healthcare providers are currently overcharging. They could be perfectly be fair.

No, Medicare reimbursement rates are about 7% lower (in the aggregate, not individually) than COGS - the marginal costs of providing care. That is, if a test costs a provider $100 to purchase wholesale, Medicare reimburses $93, which doesn't cover the cost of the supplies, let alone covering overhead (wages for staff, office rent, etc.)

[lutorm]

If that's true, why does any single doctor in the entire country take Medicare patients then?

[sanswork]

Private insurance is a big once since the Dr bills $xx with the expectation that insurance will only agree to pay a % of that amount(but different amounts from different insurers and clients). In BC doctors know up front what they'll get back so they don't have to play pricing games.

[FullMtlAlcoholc]

> What are the factors in the American system that prevent reasonable pricing?

One major factor is the administrative cost for medical providers when dealing with insurance. That's why the cash price for medical services is often much cheaper

[refurb]

Take a close look at physician salaries in US vs. Canada.

If you're going to cut costs, you're going to have to convince physicians to take a pay cut.