
Why market competition has not brought down health care costs - Mz
https://theconversation.com/why-market-competition-has-not-brought-down-health-care-costs-78971
======
acslater00
Oh look, another attempt to argue that market forces somehow don't apply to
medical care.

In this one, the author makes the argument that "competition" leads to a
proliferation of firms, a proliferation of firms leads to administrative
complexity, and administrative complexity leads to additional cost.
Supposedly, removing this cost would save us enough money "to provide health
care to all Americans."

It is easy to attempt to verify this claim by looking at actual data.

OECD: "Administration of the US health system alone accounts for about 7%
share of total spending. This is on a par with other systems such as France
and Germany which also have multipayer systems (even if in some of them there
is no or little competition across payers). In comparison, Canada and Japan
devote around 4% of health spending on administration."

[https://www.oecd.org/unitedstates/49084355.pdf](https://www.oecd.org/unitedstates/49084355.pdf)

So, if we adopted a true single payer system, by this math, the total spend in
the US healthcare system would drop by 3%. US healthcare costs have recently
been growing by 6% per year, so this would bring our costs all the way down to
where they were on election day, 2016.

Next.

~~~
xenadu02
Price discovery requires the ability to price some customers out of the
market. For serious healthcare (the only kind that costs a lot of money) that
means life-long disability or death. There is no such thing as a free market
without the ability to set prices for maximal profit (vs maximal coverage).

BY DEFINITION a free market in healthcare MUST kill people (or allow them to
die of treatable diseases if you prefer). Period. Full-stop. Do not pass GO,
do not collect $200.

A free market means if you are unlucky and born into a poor family, get bonked
in the head, and have a retinal detachment then you should go blind. Despite
the massive dead-weight economic loss to our society of converting an able-
bodied person into one with a life-long disability, if you can't pay for
retinal re-attachment then fuck you buddy.

I wish all your free-market healthcare proponents would address this
fundamental inescapable fact. I suspect most don't because the idea is
repugnant and the argument falls apart. Please don't bring out the charity
canard. That's largely how our system functioned in the past (and still does
for some people thanks to states refusing Medicaid expansion) and it simply
doesn't work.

I don't want to live in a society that so prizes the god of free markets that
it is willing to let people suffer and die of completely treatable diseases.
I'm happy to seize as much money as required from whoever is required to make
non-elective healthcare free for all citizens. Fortunately a minor tax on the
top 10% along with a larger tax on the 0.1% is more than enough to cover
healthcare. As a member of the top 10% I say that knowing I will pay higher
taxes.

~~~
MarkMc
> BY DEFINITION a free market in healthcare MUST kill people

I'm not sure this is true. Does a free market in food require that some people
starve to death? Right-wing ideology says that even the poor have enough to
buy food, clothing, shelter and medical insurance. If a poor person buys a
mobile phone instead of health insurance, it's because they value the phone
more than their health - why should you force someone to buy something that is
less valuable?

Perhaps you argue that the poor don't have enough money to buy health
insurance. In that case the right-wing answer is to give the poor money with
which to buy whatever they prefer. _Hypotheically_ everyone could buy health
insurance and noone would die of treatable diseases.

~~~
taylodl
Please cut it out with pretending the poor prefer to buy a cellphone instead
of health care. The most expensive phone on the market, the iPhone, costs less
than _one month_ of health insurance premiums. And most poor people aren't
using iPhones - most are using Androids they bought for a few bucks on a plan.
That is to say, a modern smartphone costs the same as a landline phone of
yore. That's not even getting into the whole discussion of their smartphone is
typically the only computer they have. Try navigating our healthcare system
without a phone or a computer. Good luck with that.

~~~
MarkMc
Actually I'm not pretending anything - I'm just stating the right-wing, free-
market ideology. I happen to support a single-payer healthcare model because
it will reduce overall health costs and maximise long-term GDP. But let me
play devils advocate for a minute and respond your your comment about
smartphones:

Nobody is claiming that a smartphone would pay the full cost of a persons
healthcare. But it would pay for _some_ health insurance - perhaps two or
three weeks, by your count. (And don't confuse this with internet access: A
5-year-old smartphone with a cracked screen costs next to nothing on eBay).
Therefore anyone who buys a brand new phone - either outright or on a contract
- has given up the opportunity to buy a few weeks of health insurance.

And there are many other similar opportunities for poor people, including:

\- If you buy branded goods like Nike or Adidas, buy non-branded clothes and
shoes instead

\- If you drink or smoke, stop

\- If you are overweight or obese, eat less

\- If you buy food from convenience stores or restaurants, stop. Instead, make
a weekly trip to Costco or Walmart and buy food in bulk.

\- Change your diet to the cheapest foods that still provide nutrition. For
example, maybe potatoes are cheaper than bread and just as healthy. Don't like
potatoes? Too bad.

\- Typically the best-paid jobs are in a city or town center, while cheapest
accommodation is far away. So if your total weekly commute and work time is
less than 60 hours per week, live further away from your job to increase your
commute time and decrease your rent or mortgage payments.

\- Look up the top 5 cities in the US with the highest wages and lowest
unemployment, then move to one of them.

\- If there are less than 2 people per bedroom in your household, take in a
paying lodger. If your landlord doesn't allow it, move. If you are a single
person then move into a 3-bedroom house with 5 other single people.

You may think that these opportunities are not valid, or that they still would
not pay the full cost of health insurance. In that case the right-wing
solution is to give money to poor people - and not to force them to buy health
insurance or provide government-run healthcare.

------
leereeves
How much competition is there in health care, really?

An oligopoly controls most of the insurance market, another oligopoly controls
most of the hospitals, and medical schools openly collude (through the AAMC)
to limit the number of doctors.

All sanctioned by a government run by politicians funded by these
organizations.

~~~
ekianjo
Exactly. That's not an exactly free market to operate in to begin with.
Contrast that with the software/hardware markets, or even consumer goods
markets, and the difference in terms of outcomes is pretty obvious. The
problem with healthcare is that there is no direct "pay for service" system.
It's all a mix of insurances, hidden costs, complex pricing systems (with
little to no elasticity once fixed) defined by governments and third parties
that have nothing to do with the end user.

~~~
drewrv
Agreed that it's not exactly a free market right now, but pretending a truly
free market would improve things is a little ridiculous. If you fall off a
ladder are you going to be shopping around for a good price on an ambulance
ride, calling ER's to get the best deal, etc? That assumes there is more than
one hospital nearby, more than one ambulance company, etc. Much of the country
only has one nearby ER. What happens in a "free" market when you absolutely
have to purchase something from a monopoly?

~~~
ekianjo
it would anyway benefit from being more Free than it is right now, no need to
go into philosophical hypotheses of what fully free markets would look like.
This is not my poInt at all.

------
smallnamespace
Kenneth Arrow's seminal 1963 paper[1] is what started this line of argument.
It's not very long, and most of the technical details are left to the
appendix.

[1]
[https://web.stanford.edu/~jay/health_class/Readings/Lecture0...](https://web.stanford.edu/~jay/health_class/Readings/Lecture01/arrow.pdf)

Classical economics mostly assumes that all participants in the market have
access to relevant information to make the right decisions. Arrow's work on
signaling theory really started economics on thinking about what happens when
that assumption is broken.

As anyone who's worked with large distributed systems knows, putting
information where it's needed is key to making it work.

The economy happens to be a large distributed system.

~~~
acslater00
This is definitely true, so far as it goes. For many types of medical care it
is unreasonable to expect a patient to act in a price setting capacity on the
demand side.

However there are many types of medical care where that is very reasonable!
LASIK and cosmetic surgery are classic examples because they elective and have
historically not been covered by any insurance. You can see cosmetic surgery
prices on ads in the NY city subway. Other kinds of care, such as dentistry,
orthodontia, and vision services, also have very well-functioning markets,
largely because insurance has historically not covered these things. Lots of
non-urgent care (primary medicine, pediatrics, dermatology, psychiatrics,
orthopedics, many surgeries) would probably have well-functioning markets if
they were separated from the insurance system.

Now, that's all the cheap stuff. The expensive stuff (hospitalizations,
cancers, chronic disease) that makes up the bulk of the US health expenditure
- yeah. You can't expect a patient to come in and argue with the doctor about
whether they really need that saline drip. But in a properly functioning
market, there is another entity that can and should (and does) act as a price-
setter mechanism on the demand side, and that is the insurance company.

The problems show up when 1\. there is only one supplier in a market 2\. the
insurer is required by law to cover a certain thing 3\. the supplier does not
face a price control, and through (1) and (2) has unlimited pricing power

This is very acute with prescription drugs. Even generic drugs sometimes only
have one supplier because the process of getting FDA approval is so onerous.
It is also very acute when you have hospital and physician consolidation
within markets, so that medical suppliers can effectively act as a cartel.

So - deal with the supply side problems. Stop the cartel behavior. Make it
easier to sell prescription drugs and open hospitals. Allow consumers to act
as consumers when it makes sense (by excluding basic medical services from the
insurance system) and reserve insurance for the risky, expensive, hairy stuff.
This is the path forward, and it all follows very neatly from basic supply and
demand.

~~~
speedplane
I like your comparison to LASIK and cosmetic surgery, which I agree are
functioning markets. But I'm not sure I agree with the rest.

There are two components to healthcare funding: (1) insurance which protects
from the serious unforeseen health expenditures; and (2) healthcare, which
includes routine health checkups, preventative care, and also, the very common
ailments as one gets older. The two are somewhat inter-related (if you're
generally unhealthy, you're more likely to have serious ailments), but makes
sense to separate the two as separate products.

Even for relatively wealthy people, it's difficult to afford serious medical
care out-of-pocket (it can cost >$20k/day in the hospital). So that's one
product people can buy, with its own deductibles.

However, routine medical care that everyone needs no matter what is a
different product, and the cost of that product could be more closely tied to
the value of the services received.

Separating these two products may bring about more competition in each, and
perhaps more efficiencies.

~~~
smallnamespace
One large problem with making preventative care a separate market is that
people who are too poor to get preventative care and get sick usually end up
in an ER, where the rest of society ends up footing the bill.

And a sick person in the ER can easily cost tens to hundreds of times as much
as the preventative care would have been in the first place.

So making preventative care mandatory actually saves everyone a lot of money
in the long run -- even if the preventative care is run extremely
inefficiently and poorly, it would still be cheaper than what we have now,
which is socialized medicine that only kicks in after people get incredibly
sick and expensive to treat.

------
Gibbon1
I always post this in response to articles of this nature.

[https://web.stanford.edu/~jay/health_class/Readings/Lecture0...](https://web.stanford.edu/~jay/health_class/Readings/Lecture01/arrow.pdf)

Which is we knew 50 years ago that markets for healthcare just don't work. And
now we have 50 years of evidence they don't work.

------
mc32
Unfortunately, this article is very light on details and makes some assertions
and comparisons without any serious rigor. I wish someone would publish
something that were rigorous and easy to understand for the average reader.
instead we have either this, or very dry and incomprehensible reports.

According to this article, the main culprit is keeping a for-profit health
insurance system and addressing its shortcomings with ever increasing
bureaucracy which adds more costs (bureaucratic complexity). I'm sure there is
way more to it than that.

------
yalogin
This is right, the problem with healthcare has to be insurance. The biggest
pocket of customers for health care companies don't pay out of pocket. They
are covered by their employers. So they don't see money going out of their
pocket and in a perverse way the higher the amount the insurance company pays
the better the customer might feel thinking they got good service or a great
treatment. So there is no incentive for the health care company to reduce
costs at all. Since people don't care about the costs of procedures there is
no set/prescribed cost for any procedure and everything just gets bloated
every year.

More so, these pocket of customers have no idea how the other pocket, that
pays out of pocket, feels. They have never experienced it and will never know,
so they have no incentive to fight for them. The health care lobby and
republicans are putting a good spin that these out of pocket people are
causing the costs to rise. IF the majority of the people actually pay out of
pocket the costs will immediately come down for everything. Both hospitals,
doctors and medicine. I have seen things in India where most of them pay out
of pocket and the costs are very low. I heard, these days insurance is
screwing things up there as well. Extending that logic, a single payer health
care system where one party has the power to negotiate could actually help a
lot in bringing the price down.

~~~
BoiledCabbage
> Extending that logic, a single payer health care system where one party has
> the power to negotiate could actually help a lot in bringing the price down.

Which was another big argument for single-payer. Medicare is know for
negotiating the lowest prices, and practices prefer higher rate negotiated
insurances than Medicare.

~~~
Jabanga
Medicare does not have market forces guiding it. Consumers are a massive
repository of localized knowledge. Once government takes them out of the
picture, the industry's dynamism is severely limited.

------
pimmen
I like the free market. However, when something has completely inelastic
demand and the people most in need of your product is not your target group
(as in, sick people often have problems making ends meet, since they're sick
and all) and the economy as a whole is far better off if everyone got the
benefits of the system, I think it's super bad to use the free market.

In the US, you spend 17% of your GDP on healthcare, in Sweden we spend 11%.
The US has a lower life expectancy, lower survival rate for most heart
diseases and types of cancer and has healthcare bills as the leading cause for
bankruptcy. It could just be me, but it looks like universal healthcare
systems in the Nordic model runs circles around the US system based on all the
relevant metrics.

[http://www.scb.se/en/finding-statistics/statistics-by-
subjec...](http://www.scb.se/en/finding-statistics/statistics-by-subject-
area/national-accounts/national-accounts/system-of-health-accounts-
sha/pong/statistical-news/system-of-health-accounts-/)
[http://www.who.int/gho/mortality_burden_disease/en/](http://www.who.int/gho/mortality_burden_disease/en/)

------
ghufran_syed
Perhaps we could compare costs for procedures paid for by private or
government insurers, vs those that are not covered by insurance i.e. cosmetic
procedures. Bottom line is that where there is no 3rd party payer, competition
works.

[http://healthblog.ncpa.org/why-cant-the-market-for-
medical-c...](http://healthblog.ncpa.org/why-cant-the-market-for-medical-care-
work-like-cosmetic-surgery/)

~~~
tcbawo
There is a large set of non-optional and emergency medical procedures where
competition will remain nonexistent. Personally, I hope for AI to provide
answers to cost-benefit analysis (treatment costs X, will reduce/improve
chances by Y).

~~~
speedplane
Not sure how AI is gonna help here. For many of these questions, we have
committees of skilled humans with all of the information looking at the
details, and they often cannot come to a consensus.

~~~
tcbawo
Being able to make data-driven healthcare decisions would help to improve the
'last mile' of health care delivery. Not everyone has a committee of experts
at their disposal. I hope that we will rely on more on big data to deliver
smarter and individualized healthcare. There should be a whole branch of
quantitative analysis dedicated to improving outcomes and reducing costs
(unnecessary medication, surgeries, tests, etc).

------
Jabanga
The reason market competition has not brought down health care costs is that
the government actively eliminates market competition in health care:

[http://healthblog.ncpa.org/why-cant-the-market-for-
medical-c...](http://healthblog.ncpa.org/why-cant-the-market-for-medical-care-
work-like-cosmetic-surgery/)

~~~
kaoD
And that's why countries with higher government involvement spend less in
healthcare and have better results.

~~~
Jabanga
I provide a lengthy rebuttal to this claim here:

[https://news.ycombinator.com/item?id=14642625](https://news.ycombinator.com/item?id=14642625)

------
arcbyte
The argument seems to be that ever-increasing administration costs are to
blame for overall health care costs and increases.

Then it inexplicably turns into a bad appeal for single payer.

~~~
noobermin
How is a single-payer not simpler, given that it is exactly as is sounds, a
single-payer for healthcare, which is the government.

~~~
speedplane
I'm in favor of single-payer, but the main argument against it is that in a
government run system, there is little incentive to correct inefficiencies. In
a private system, if you become inefficient, you'll fail and cease to exist.

Advocates of single-payer needs to at least recognize this issue and be able
to account for it.

------
untangle
It seems to me that our US HC system is operating in a manner that optimizes
the wrong thing. It currently maximizes jobs and an odd form of wealth
redistribution. It should be minimizing costs subject to "good" HC (or
"adequate"?) for the target recipients (all citizens?).

Let's name our HC goals (the objective function) and then tackle the
strategies.

The methods are wrong too, and spin off unfair side effects. For example,
corporations by the (insurance) product, not consumers. This gives companies
leverage in employment activities.

Edit-> Some form of tort reform (e.g., limitations of liabilities) would help
as well. I don't have a current number, but layers of malpractice insurance
drive substantial costs.

------
mcbobbington
The healthcare market is not feee enterprise. In fact, it is a government
sponsored Trust. Nobody can practice medicine unless the government says so,
and no one can take medication unless the government says so. No one can give
even medical advice without the governments permission. This is the exact
opposite of a free market, and the reason it is so stinking king expensive.

The regulations are passed through fearmongering, and only serve to raise
prices unbearably. The government created the problem, now wants to "fix" it
with universal healthcare. As with any monopoly, prices will be higher and
quality lower than with the free alternative.

The answer to the problem is to introduce the free market to medicine.

------
tjpnz
As someone who has never lived in the US I'm curious as to why there's so
little debate about moving towards a single payer or universal system. It
seems that the only option ever on the table is tweaking the current system.

~~~
mnm1
How can you profit off of that?

~~~
rocky1138
Why do you need to?

~~~
mnm1
To make a few people rich at the expense of many others' health and lives.
That clearly is the goal of not having a single payer system and the reason
for the private health insurance industry existing in the first place.

------
dibujante
Has anyone considered that perhaps the cost of treating Americans is going up,
too? Notwithstanding existing understood market failures, etc., the growth in
medicaid/medicare spending tracks the growth in obesity very well.

~~~
Avshalom
Well I mean being unable to afford to get your broken ankle re-set when it
heals weird the first or spending a life in chronic pain or never getting
treatment for sleep apnea etc... all seem like good ways to make obesity grow
as a result of in ability to pay for medical care and a good way to eventually
find your way to being on disability, poor and in poor health and then on
medicaid/medicare.

So you know maybe it's a vicious fucking cycle.

Oh wait actually we know for a damn fact it is and has nothing to do with
obesity: preventative care just keeps shit way cheaper that's half the point
of the ACA forcing insurance companies to cover at least some of it (the other
half being a basic belief in human dignity).

~~~
strictnein
The US isn't obese because we all have broken ankles.

------
egwynn
Is that first graph acting super funky for anyone else? I can't really read
past it because it seems to keep growing vertically forever (on my iPhone)

------
throwaway47861
Too much vested interests, I don't see how that's not obvious.

------
lend000
Market competition? As if the US healthcare market was free recently?
Nowadays, many educated people believe that without the ACA, the US healthcare
market is a laissez faire system, which is why it has so many problems.

This could not be further from reality.

We have more government distortions in our healthcare market than countries
with completely socialized healthcare. For example:

Medicare: socialized medicare for the elderly, which alone creates more
distortion than a universal program would cause, by inflating demand/prices
for non-qualifying citizens.

Medicaid: socialized healthcare for specially qualifying poor people, which
creates the same distortion as Medicare.

An oppressive FDA: which, coupled with overly-powered IP laws, grants de-facto
monopolies in the medical product industry. We have an incredibly expensive
and subjective medical equipment pre-approval process (as compared to a less-
terrible FDA that would just be in charge of labeling, preventing fraud, and
maintaining accountability in the event of incidents). Then there's the length
and flexibility of patent protections in our current system (maybe we could
cut those protection times in half, and patent trolling would not be a
lucrative industry).

Oppressive occupational licensing: It's way too hard to become a doctor of any
kind, even the kinds that don't manually put things into your heart. This will
be a major battle as AI comes to the point where it can better diagnose
conditions and largely replace generic/non-specialized pediatrics. Of course,
the government will not make this easy.

Plus a slew of more minor things like malpractice regulation, and now the ACA
(which is not so minor, and which will apparently be replaced with something
similar and even messier).

If we cleaned up/removed all of the problems in the above and replaced it with
single payer, it would be OK and we would have something similar to
Canada/other countries with long wait times, not as much access to
specialists, slow innovation, and a system where a government bureaucrat gets
to decide who gets the last liver transplant and who dies. That would be a
less distorted market than we have today, but ONLY if accompanied by fixing
the aforementioned problems.

OR we could try going the free-ish market approach and try to find a much
freer balance with the FDA/USDA/occupational-licensing/scrap
Medicare/Medicaid,etc., which we do not currently have AT ALL. And maybe even
declare health insurance fraudulent and pay everything out of pocket (accident
insurance makes more sense as a hedge against risk, which is what insurance is
supposed to be, whereas all people are expected to develop health problems at
some point, with a probability approaching one).

