Why is healthcare prohibitively expensive in the US?

Lafayette said:

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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Lafayette:

My time is limited right now so this is just a start. As per your request:

For disproportionately high labour costs, high material costs, high pharmaceutical costs and high management costs see:

Health Care Spending in the United States and Other High-Income Countries. | Health Care Reform | JAMA | JAMA Network.

For the same above plus,Olipopoly leading to a lack of transparency and a lack of government regulation to control costs, plus the costs of the single-payer-pay-as-you-go system and finally the high-end vs low-end medicine issue:

7 reasons U.S. health care is so expensive: Why do we pay more for less? - mlive.com

For the litigious society and the defensive medicine which that induces plus something which was not on my list but should have been which is referred to as branding (high advertisement and marketing costs):

6 Reasons Healthcare Is So Expensive in the U.S.

Cheers.
Evilroddy.

Sampson Simpson said:

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.

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It costs of a lot of money, but that doesn't mean it's difficult. Collecting data and paperwork is standard procedure for big companies.

Evilroddy said:

7 reasons U.S. health care is so expensive: Why do we pay more for less?

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I found this one very interesting and far more complete than that which I have at my disposal.

It describes accurately various aspects of Healthcare and indicates comparative pricing. Unfortunately it makes a common mistake - that is, of American-bred articles. That is, when comparing the data in the US, for the comparison to be correct, it must be between the EU and the US. Not just the US and a variety of European countries. The EU is a consolidated union of 28 different European states, and in that respect it is pretty much like the US.

In the EU there is diversity between the states but some matters (such as Healthcare) has an umbrella-like legal identity. All healthcare in the EU is identical or the country cannot belong to the EU - and that is a Common Rule (of which there are many) for any country to enter and it becomes an integral part of the country's "Constitution".

And I hold this to mean both entities are statistically comparable despite the fact that the EU has a population-size nearly 60% larger than the US.

Whyzzat? Because the dimensions are different but the economic structures are similar.

Masterhawk said:

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.

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"Price gouging" feels a little strong. Maybe I'm incorrect but I associate that term with prices that have been allowed to get wildly out of line with costs, leading to excessive margins. A quick Google search says "average profit margin for supermarkets typically ranging from 1 to 2 percent. However, natural, organic and gourmet food markets enjoy higher averages from 3.5 to 6 percent." Well, Moody's has median operating margins for American non-profit hospitals at 1.6%.

That said, I'm fully in agreement that the cost structure of our health system has gotten to where it is in no small part because normal market signaling/feedbacks are absent. But that also implies more of our national resources have flowed into the health sector than we wanted. I've long felt that the primary issue isn't necessarily how much we spend on health care (there's no objectively 'correct' proportion of GDP that the health sector should constitute), it's that we spend a lot and it feels like we never consented to it. Maybe we do want to put our resources there but nobody asked. On the other hand, one could argue we've been more than happy to delegate decision-making to yes-men who will keep the spending spigot on full-blast and we've collectively booed, hissed, and shamed any actors who have the gall to say "no." So perhaps we tacitly have consented to this spending level.

Lafayette said:

I found this one very interesting and far more complete than that which I have at my disposal.

It describes accurately various aspects of Healthcare and indicates comparative pricing. Unfortunately it makes a common mistake - that is, of American-bred articles. That is, when comparing the data in the US, for the comparison to be correct, it must be between the EU and the US. Not just the US and a variety of European countries. The EU is a consolidated union of 28 different European states, and in that respect it is pretty much like the US.

In the EU there is diversity between the states but some matters (such as Healthcare) has an umbrella-like legal identity. All healthcare in the EU is identical or the country cannot belong to the EU - and that is a Common Rule (of which there are many) for any country to enter and it becomes an integral part of the country's "Constitution".

And I hold this to mean both entities are statistically comparable despite the fact that the EU has a population-size nearly 60% larger than the US.

Whyzzat? Because the dimensions are different but the economic structures are similar.

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Lafayette:

You make a good point about the EU being the comparable level for contrasting the differences in healthcare costs and healthcare benefits/utility with the USA in terms of scale and demographics. But does the EU have a harmonised Social Medicine Regime or at least common goals by which member states are required/encouraged to structure and operate their public healthcare programmes? I haven't been in the UK or Western Europe since the late 1980's and at that time there did not seem to be much in the way of coordination or harmonisation of public health services between the member states I visited. So from a bureaucratic and structural stand point are the roles of the American states and EU member states parallel and are the overarching roles of the US Federal Government and the EU Parliament and bureaucracy comparable? These are not rhetorical questions. I really don't know and unfortunately I do not have the time presently available to research it thoroughly.

More sources will follow later for backing up my ten points, which should have been eleven ones.

Cheers.
Evilroddy.

Evilroddy said:

But does the EU have a harmonised Social Medicine Regime or at least common goals by which member states are required/encouraged to structure and operate their public healthcare programmes?.

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In a common entity with such a mix of different languages and practices, no that is simply not possible. From the very beginning, what was sought was a common "organizational National Health Care system" in each country.

How the country did that was up to each country. Nonetheless, what is common is that when you go to see a doctor regardless of where you will pay a common fee within the country. And that fee is collected by means of the governmental agency that pays for it.

Which means what? That any sickness or series of sicknesses that you may have can be scrutinized by doctors treating you. This helps in the process of attending to the patient in the best manner possible.

And, one has no problem whatsoever with a "third-party" middle-man called a "medical insurance supplier". That supplier throughout the EU is the National Healthcare System that dictates the prices that doctors may charge for their array of services.

The results being that doctors in Europe earn far less than in the US (about half for French doctors) - but also there is no private insurance middle-man fee that balloons costs.

The US could do well to dump the present system that makes medical practitioners demi-gods and institutes a system that is less costly and more generalized amongst the population ...

Greenbeard said:

I'm fully in agreement that the cost structure of our health system has gotten to where it is in no small part because normal market signaling/feedbacks are absent. But that also implies more of our national resources have flowed into the health sector than we wanted. I've long felt that the primary issue isn't necessarily how much we spend on health care (there's no objectively 'correct' proportion of GDP that the health sector should constitute), it's that we spend a lot and it feels like we never consented to it. Maybe we do want to put our resources there but nobody asked. On the other hand, one could argue we've been more than happy to delegate decision-making to yes-men who will keep the spending spigot on full-blast and we've collectively booed, hissed, and shamed any actors who have the gall to say "no." So perhaps we tacitly have consented to this spending level.

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Do explain where in the economy - other than with the Insurance Companies - there is any price competition with the "prime agent", that is, the person that provides the service? Healthcare specialists (or companies that run private hospitals) accept the "given rate" (and add a margin if run by a company) of which there is very little competition among rates.

Which they then sell to companies that offer such coverage to their workers.

(Tell me if I am wrong on that supposition, because I don't know if, in fact, that does happen!)

The Insurance Companies simply assume the cost of professional doctors, add their commission and sell the protection to large companies and the general public. At the heart of the cost structure thus is the lack of competition amongst those who provide the service - the GPs themselves.

In any such circumstance (of key public-service importance), where there is no/little competition, it is imperative therefore that the service being offered be performed by government price-oversight to assure "market distribution fairness".

Otherwise "price gouging" can occur, which is what is happening in the US ...

Lafayette said:

Do explain where in the economy - other than with the Insurance Companies - there is any price competition with the "prime agent", that is, the person that provides the service? Healthcare specialists (or companies that run private hospitals) accept the "given rate" (and add a margin if run by a company) of which there is very little competition among rates.

Which they then sell to companies that offer such coverage to their workers.

(Tell me if I am wrong on that supposition, because I don't know if, in fact, that does happen!)

The Insurance Companies simply assume the cost of professional doctors, add their commission and sell the protection to large companies and the general public. At the heart of the cost structure thus is the lack of competition amongst those who provide the service - the GPs themselves.

In any such circumstance (of key public-service importance), where there is no/little competition, it is imperative therefore that the service being offered be performed by government price-oversight to assure "market distribution fairness".

Otherwise "price gouging" can occur, which is what is happening in the US ...

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As I said, for the most part the American system has not done a good job of encouraging price competition, it's muted it (part of the tacit consent to higher prices I mentioned). Historically health care pricing has happened at the level of insurer-provider contracts on the back end, and consumer/employer exposure to those prices has happened indirectly via the premium insurers bring to the market on the front end. But other than in the ACA marketplaces, that set-up hasn't been well-designed to encourage competition.

There are various ways to set up the system to try and inject competition (I laid out my thoughts on the three primary ways competition can be set up in health care in .), but we haven't seriously pursued any of them on a large scale.

Greenbeard said:

There are various ways to set up the system to try and inject competition (I laid out my thoughts on the three primary ways competition can be set up in health care in .), but we haven't seriously pursued any of them on a large scale.

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I beg to differ.

There are some "markets" in which Demand can have no consequence whatsoever on Supply, so the latter must be managed by the Government.

In that context, Healthcare is just such a service. War is another. And Education can also be counted in as well. In all three such instances the outcomes are gravely important to the well-being of nation as a whole.

The provision of the three National-Services named above cannot be given alone to a "market-economy" because such cannot perform the service as sufficiently well given the serious necessity of the service for all who partake of them ...

Lafayette said:

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!

Click to expand...

Lafayette:

For profit taking in health care and health insurance see the following:

Which firms profit most from America’s health-care system - Schumpeter

The High Cost Of Insurance Profits ← Health Over Profit

The High Cost of Private Profit in Health Care ← Health Over Profit

For oligopoly and market concentration causing higher costs see:

https://www.healthaffairs.org/do/10.1377/hblog20130306.028873/full/

Expert: Hospitals’ ‘Humongous Monopoly’ Drives Prices High | Kaiser Health News

Cheers.
Evilroddy

From the Economist: Which firms profit most from America’s health-care system - excerpt:

It is not pharmaceutical companies

EVERY year America spends about $5,000 more per person on health care than other rich countries do. Yet its people are not any healthier. Where does all the money go? One explanation is waste, with patients wolfing down too many pills and administrators churning out red tape. There is also the cost of services that may be popular and legitimate but do nothing to improve medical outcomes. Manhattan’s hospitals, with their swish reception desks and menus, can seem like hotels compared with London’s bleached Victorian structures.

The most controversial source of excess spending, though, is rent-seeking by health-care firms. This is when companies extract outsize profits relative to the capital they deploy and risks they take. Schumpeter has estimated the scale of gouging across the health-care system. Although it does not explain the vast bulk of America’s overspending, the sums are big by any other standard, with health-care firms making excess profits of $65bn a year. Surprisingly, the worst offenders are not pharmaceutical firms but an army of corporate health-care middlemen.

In crude terms, the health-care labyrinth comprises six layers, each involving the state, mutual organisations and private firms. People and employers pay insurance companies, which pay opaque aggregators known as pharmacy-benefit managers and preferred provider organisers. They in turn pay doctors, hospitals and pharmacies, which in turn pay wholesalers, who pay the manufacturers of equipment and drugs.

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The American healthcare system is so warped it would take a miracle to change its complexity - from which is due the very high cost-per-American of the entire system.

The US should start a massive rethink of its healthcare system if it wants to significantly enhance the lifespan of Americans, which is presently around 4 years less than for Europeans ... !

PS: Wanna live longer? Migrate to Europe!

distraff said:

the private market creates problems too and just isn't able to limit prices.

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in a private market there is race to the bottom, either you have the lowest price and best quality or you go bankrupt. Make sense?

Lafayette said:

The US should start a massive rethink of its healthcare system

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massive rethink? Intelligent Americans knew long long ago that socialism makes prices high and consumers poor. We need a simple switch to Republican capitalism.

Lafayette said:

a "market-economy" because such cannot perform the service as sufficiently well given the serious necessity of the service for all who partake of them ...

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The more important the product the more you want it regulated by capitalism. That way only the providers who offer the best product survive the competition. Socialism has no such constraints.

Greenbeard said:

As I said, for the most part the American system has not done a good job of encouraging price competition,

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very very simple, let people spend their own money and you have instant price competition that would cut prices 80%! 1+1=2

Lafayette said:

The US could do well to dump the present system that makes medical practitioners demi-gods and institutes a system that is less costly and more generalized amongst the population ...

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present system is socialist obviously, and should be dumped for capitalism. Then you have people shopping with their own money and providers competing on basis of price and quality. Do you understand?

James972 said:

very very simple, let people spend their own money and you have instant price competition that would cut prices 80%! 1+1=2

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...and designing priced care bundles, and removing contractual restrictions on price disclosure, and breaking existing referral networks, and undoing value-based price modifiers, and a bunch of other things.

But no, nobody's taking an 80% revenue dip. Not if we want to have a health system in this country.

James972 said:

in a private market there is race to the bottom, either you have the lowest price and best quality or you go bankrupt. Make sense?

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That is only possible with markets with high demand elasticity to price. Healthcare has very low elasticity. Not all private markets results in the lowest prices and the lowest corporate profits, it depends on the environment and the market.

distraff said:

That is only possible with markets with high demand elasticity to price. Healthcare has very low elasticity. Not all private markets results in the lowest prices and the lowest corporate profits, it depends on the environment and the market.

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Yes, people require health care, food, clothing, and shelter. If profits are high under Republican capitalism it encourages competition until profits are near 0. This is why capitalism makes us rich. Do you understand?

Prices are high for our health care because of govt libsocialist interference with capitalist competition. Econ 101

Greenbeard said:

...and designing priced care bundles, and removing contractual restrictions on price disclosure, and breaking existing referral networks, and undoing value-based price modifiers, and a bunch of other things.

But no, nobody's taking an 80% revenue dip. Not if we want to have a health system in this country.

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If people were shopping with their own money it would go where the price was lowest not where price was hidden. Saintly Donald has ready mandated that prices be published. This is a good step in the capitalist direction.

Switching from socialist to capitalist health care would lower prices about 80%. Do you understand?

James972 said:

If people were shopping with their own money it would go where the price was lowest not where price was hidden. Saintly Donald has ready mandated that prices be published. This is a good step in the capitalist direction.

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Charges aren't prices. Do you understand?

Greenbeard said:

Charges aren't prices. Do you understand?

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no don't understand gibberish. why not try to explain what you mean

James972 said:

no don't understand gibberish. why not try to explain what you mean

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If basic concepts in health care are gibberish to you, perhaps you should read more and opine less.

Hospital charges have to be publicly posted under the ACA. But charges are not prices. Prices are proprietary, negotiated with hospitals by payers. They, along with the network, are what you're buying when you choose an insurance plan. You're buying access to a negotiated set of prices. That's what insurers compete with each other on. Do you understand?

Greenbeard said:

If basic concepts in health care are gibberish to you, perhaps you should read more and opine less.

Hospital charges have to be publicly posted under the ACA. But charges are not prices. Prices are proprietary, negotiated with hospitals by payers. They, along with the network, are what you're buying when you choose an insurance plan. You're buying access to a negotiated set of prices. That's what insurers compete with each other on. Do you understand?

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sure I understand but what is your point? What subject are you on? Did I disagree with you? Think before you post please.

James972 said:

Yes, people require health care, food, clothing, and shelter. If profits are high under Republican capitalism it encourages competition until profits are near 0. This is why capitalism makes us rich. Do you understand?

Prices are high for our health care because of govt libsocialist interference with capitalist competition. Econ 101

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If the government was the reason our healthcare was so expensive then Medicare, Medicaid, and VA would be far more expensive than private hospitals and private insurance. This isn't true. Other developed nations have public insurance and even a lot of government-run hospitals and a lot more regulations on healthcare plans and pricing. So they would be even more expensive than US care because there is more government. However they are in fact a lot cheaper. In addition, nations with universal healthcare with more private universal healthcare systems like Switzerland would also be cheaper than those that are more government-run like the UK. In fact, those that are more government run tend to have lower quality but are usually a lot cheaper.

So why has private healthcare failed to achieve better prices than the government? The government isn't necessary bad at doing things. If you look at public hospitals, public electrical and gas utilities, public transportation systems, public schools, public fire department, public postal insurance, public libraries, public police departments, and the military, the government doesn't go an amazing job but it does do a good enough job but it can give us an ok product at an ok price.

Usually government services can't compete with the innovation and competition in the private market, but some private markets are so bad at controlling costs and providing affordable services to the population that we need government services and regulation of the private market to make it affordable and save for most people. The private healthcare market is so bad at controlling costs, that even the government with its problems can produce a better product for basic healthcare. Other private markets are also not good either which is why we have the public services I listed above like public utilities and public schools.