Hacker News new | comments | ask | show | jobs | submit login
The US spends more on healthcare for no gain says new report from Johns Hopkins (jhsph.edu)
698 points by grecy 9 days ago | hide | past | web | favorite | 514 comments

The book The Healing of America by T.R. Reid, 2010 was a phenomenal look at this subject and the conclusion was this: we are the only developed nation whose government allows for-profit health insurance companies to exist with ZERO regulation to cap healthcare prices. Because of this, we spend 20% of every dollar on "administrative" costs compared to 3%-7% in the European and Asian countries. The goal for American healthcare companies is increasing shareholder value, not reducing costs. IMO healthcare is an obvious example of where a "free market" approach has failed and government oversight is critical.


I read that book too, and agree it's phenomenal. It's not just about capping insurance profits. The countries doing the best also have price controls on the healthcare providers. Doctors make a lot less money. On the other hand they generally don't have to pay for medical school.

France, Germany, and Japan all have similar systems, according to the book. They have private nonprofit insurance, some kind of mandate to purchase it, a government price list on services, guaranteed coverage of anything on the list, and digital medical records.

A lot of German primary care doctors don't even hire office staff. They prescribe whatever they want, swipe your medical card, and they're guaranteed to be paid in a week, no questions asked.

Japan has a clever way to handle the mandate. If you don't pay your premiums, nothing happens, but if you need healthcare you're not covered until you pay your back premiums.

I wish all the Americans who think the rest of the developed world runs on single payer would read this book. None of the three countries I just mentioned use single payer. The book also covers Canada and the UK, both of which are single payer (and single provider in the UK), and while their results are pretty good, they're not as good as the other three.

Absolutely true. As a doc, the US problem boils down to a cultural issue that can be summarized as:

"there is no reason my money should pay for the care of others, but if I personally need care, then it should be of the absolute best quality and should be provided until my last breath no matter what"

The people maintain the system themselves by insisting on that, and that is the root of every other problem. Before alleviating restrictions for med school, US people should think about pulling the plug on the legions of evidently terminal patients receiving maximal care that just prolongs their intense suffering every day around the country.

Why do you think your doc does every exam under the sun as soon as you step foot in the office?

1 - if solo, more money; if networked, makes you look better for the "employer" (insurance company/hospital/HMO, etc.)

2 - if you have too many exams, you will complain on the internet. If you have too few exams and something goes wrong, you will drag the doc into court.

Weigh the incentives and I think even the most conservative person should see a problem.

You: "if I personally need care, then it should be of the absolute best quality and should be provided until my last breath no matter what"

Your healthcare industry: "if you personally need care, then it should be of the absolute best quality and should be provided until your last cent no matter what"

"there is no reason my money should pay for the care of others"

Isn't the cultural issue largely a idealogical issue - things like the UK NHS are avowedly socialist? In the words of Aneurin Bevan, founder of the NHS:

" A free health service is pure Socialism and as such it is opposed to the hedonism of capitalist society."


Personally, at least when it comes to healthcare, I'm a socialist:

"The collective principle asserts that ... no society can legitimately call itself civilised if a sick person is denied medical aid because of lack of means."

Indeed, I think so too. Ironically, people essentially tend to ask for freedom of choice above all in the US healthcare system (I want complete price info, yada yada...) when the US system is evidently already the one offering the highest level of patient autonomy, probably worldwide (regarding the ethics principles of beneficence, nonmaleficience, Justice and autonomy). But guess what? That has a price, who would have thought?!

Another point is that IMO, you can't go extreme on one principle without impacting the others. Nonmaleficience is clearly a problem in the US.

People want complete price information because we don't have price controls, like they have in Germany, France, and Japan. Having a "free market" in healthcare without showing prices in advance of providing services is sort of obviously the worst way to get a reasonably priced healthcare system.

That's somewhat mitigated by negotiations between insurers and providers, but not entirely given out-of-network charges.

Agreed, however there is a solid base of evidence (as solid as medical evidence can be, which is not saying much) that health can't humanely be handled as a commodity.

Plus, providing complete price info itself is not free. Talk about administrative inflation!

So then, go with price controls. We have multiple examples of that working just fine. The answer cannot be that we make people responsible for payment before telling them what the price will be, and it's unsurprising that by doing that, we have the most expensive healthcare system in the world.

Indeed, its why I dislike ideological based arguments - once people commit to an ideology they will stick with it way past the point where it is clearly not effective (and this goes for right wing and left wing ideologies).

Kind of. As a Brit I don't think the UK is especially socialist. Also we don't generally think of the NHS as socialist more than Americans would talk about having a socialist army or police force. The fact that the above are funded by the government from tax in my view doesn't really make them socialist. It's more just a common sense way of funding some stuff.

The dictionary has socialism as "means of production, distribution, and exchange should be owned or regulated by the community as a whole" and I've never thought of health care as a "means of production". Now if the government tries to own all the factories that's socialism.

Healthcare is broadly a service and thus what hospitals, GP surgeries, etc. produce in the economy.

The NHS is a socialised system based on socialist ideas and indeed can be seen as a socialist construct within a capitalist overall economy. Nothing inherently wrong with that, that's just objectively the way it is. Bevan just said it the way it is.

Now, the military and police are regalian functions of the state. The government and regalian functions cannot really be labelled 'socialist', that would make much sense.

"regalian functions of the state"

Sorry to nitpick, but does "regalian" mean something else than emblems or insignia of royalty?

A credible sovereign state generally needs some force projection capability within it's political domain, hereditary monarchy or not.

Hence military is definetly in a different category than healthcare.

The etymology of the term indeed comes from the prerogatives of the sovereign.

"Regalian functions of the state" is a common term that means the basic powers of the state (monarchy or not) that used to be the prerogative of the sovereign. I.e. law & order, military, and taxation. You could also call these "inherent powers of the state".

> "Regalian functions of the state" is a common term

It's really not; I mean, I've got a poli sci degree so I've seen it, but it's not really a common term.

> that means the basic powers of the state (monarchy or not) that used to be the prerogative of the sovereign. I.e. law & order, military, and taxation.

The pre-modern-limited-governnent prerogatives of sovereigns were much broader than law enforcement, defense, and taxation. And, in fact, the principle thing denoted by regalian power is the fundamentally ownership of all land which is superior to all private title, which is the root of all the other (essentially unlimited) powers associated with sovereignty, in a “my house, my rules” kind of way.

The term “regalian functions”, though, is most often used to refer to the three functions Adam Smith identified as essential to the sovereign in The Wealth of Nations, which are still much broader than what you suggest:

“The first duty of the sovereign, that of protecting the society from the violence and invasion of other independent societies, can be performed only by means of a military force.” [0]

“The second duty of the sovereign, that of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice, requires two very different degrees of expense in the different periods of society.” [1]

“The third and last duty of the sovereign or commonwealth, is that of erecting and maintaining those public institutions and those public works, which though they may be in the highest degree advantageous to a great society, are, however, of such a nature, that the profit could never repay the expense to any individual, or small number of individuals; and which it, therefore, cannot be expected that any individual, or small number of individuals, should erect or maintain.” [2]

> Hence military is definetly in a different category than healthcare.

This is true, not in the sense of not being subsumed within “regalian functions”, but in the sense that the military is the first regalian function identified by Smith while healthcare delivery systems that broadly and effectively serve the whole population are in the third.

[0] book V, chap. 1, part 1

[1] Ibid, part 2

[2] Ibid, part 3

> while healthcare delivery systems that broadly and effectively serve the whole population are in the third.

That's your interpretation but that's really a political view, and indeed the definition of that third duty is highly subjective. As I wrote in another comment, the line must be drawn somewhere.

Note that my point wasn't to discuss regalian functions in general but to counter the argument that calling the British NHS 'socialist' was like calling the police or the army 'socialist'.

(Btw, I heard the term "regalian functions" in secondary school/high school...)

> That's your interpretation but that's really a political view

Smith's concept of regalian functions is just as much a “political view”.

> and indeed the definition of that third duty is highly subjective.

So are the definition of what particular actions of sovereign are within the boundary of the what is essential within the other two (and all three expressly vary by context, including available physical and social technologies, as perusal of the relevant parts of the Wealth of Nations makes clear.)

> Note that my point wasn't to discuss regalian functions in general but to counter the argument that calling the British NHS 'socialist' was like calling the police or the army 'socialist'.

Which the reference to regalian functions fails to do: all fall within the broad ambit of what could be considered those functions, and whether the dpecifics of either do is debatable, and, in any case, whether or not a function is within the scope of regalian functions is irrelevant to whether or not it is socialist.

It is very relevant otherwise one might indeed draw a parallel with the police and the military, as already said.

As also said, health are is a productive service that has the potential of being 'socialist'.

I'm not here to argue for the sake of it and I don't see any actual argument on the original points in your replies...

"Hence military is definetly in a different category than healthcare."

Why is that - one is defending the citizens of the state against external threats and the other is defending the citizens against medical threats?

The military is a regalian function (and arguably its first function is to defend the state, not the citizens...), while healthcare is not usually considered a regalian function.

The line must be drawn somewhere.

You can imagine healthcare being provided fully by the private sector without state intervention (how that works for the poor is another issue) but the military has to be controlled by the state even if in fine the state hires mercenaries.

Note that Bevan isn't saying that UK society is socialist (although he was probably in favour of it) - rather than the spirit of the NHS is socialist. Note that I would agree that it seems "common sense" for us in the UK and I'm definitely not keen on basing arguments on ideologies but it clearly doesn't seem "common sense" for people in the US.

And yet, in the U.S. we have a system like the NHS for veterans, plus a system like Canada's for everybody over 65.

Yes, I believe the US government spends more per capita on government provided healthcare than the UK does - even though the end results are only available to a subset of the population.

Doesn't that annoy people?

Paying for the care of others is also the insurance model, which is not socialism. I think where you lose support from part of the population is when the system is being abused. I understand France for instance has an abnormally high number of depressions, as it is a common way for a lazy employee to take some time off at the expense of the system. In the US I understand there is an abnormally high number of people on disability benefits.

The hostility I think comes not from the fact that it is mandatory, but from the fact that if it is managed by the state, it will be badly managed, abused by a minority, and you end up over-paying while getting a bad service yourself the day you need it.

> but from the fact that if it is managed by the state, it will be badly managed, abused by a minority, and you end up over-paying while getting a bad service yourself the day you need it

Fact you say? Sounds like an opinion to me.

Fact, you say? I think you're right about the psychology here but if you're going to assert that state management is factually bad please provide some support to that.

I think have a socialist healthcare improves the capitalist opportunities for people in those countries. Having your job tied to your health insurance means people are less likely to change jobs, thereby not giving their true optimal output to a capitalist society.

A worker who is free to offer his labour to whomever he wants knowing that his healthcare is not tied into their employment has more options and choice to them then someone who can't change jobs.

A point on your last point, people would argue that even in the US you can still access the emergency room when you have no money so no one is turned away due to lack of means.

One of the main reasons why I gave up career in the States and came back to my home country (Japan) was healthcare. I had a day surgery in the US and the whole experience (i.e. bills) just scared heck out of me. I am very happy with the system here. Everything is extremely efficient compared to the US. A little while ago, I had this mysterious headache and went to an orthopedist, dentist, psychiatrist, neurosurgeon then took an MRI. All within one week. My Canadian friend told me that it would be a half-year ordeal in Canada. By the way, I'm not rich.

That fits with what the book described. The author had a bum shoulder and saw a doctor for it, in each of the countries he covered. In Japan he got an appointment immediately and the doctor offered surgery the next day.

Financially they're the most efficient of all the countries in the book.

Just got hemoroids frozen and cut with laser. Cost here in USA under premium insurance was $12,000. Went to Germany got it done on the same equipment in luxury stay for 14 days at $870. Plus $800 plane tickets. Meanwhile a friend of mine had a heart attack. As a Bank of America emplyee he had somewhat goog insurance that paid some. He was left with $180,000 bill.

It's crazy how even with insurance, things are far more expensive in the US. I can get xrays, blood tests, and medicine all together for less than $50 in my current country. In America, even with good insurance, I'd be looking at a couple hundred in fees. A simple piss test and antibiotics there for a kidney infection set me back $300. Here, I'd maybe pay $20 for the same treatment.

American insurance is merely rent seeking. It soaks up money like a goddamn sponge and offers absolutely nothing in return. It's literally worse than nothing since it's driving prices up. There are companies out there with--no joke--hundreds of thousands of employees, just growing bigger by the day, and offering negative value to Americans. UnitedHealth has 270000 employees. That's as big as Apple and Microsoft combined, but they've got nothing to show for it except colossally fat and minimally taxed earnings.

> As a Bank of America emplyee he had somewhat goog insurance that paid some. He was left with $180,000 bill.

Forgive my ignorance but how is that possible? The highest out of pocket maximums for Marketplace plans is $15700 for an entire family.

In a hospital you'll likely be seen by a variety of providers some, or even many of whom are not in your network. You insurer will pay some amount out and then the provider will bill you for the rest...which can be huge. This bill is unrelated to your insurance and is unrelated to any out of pocket maximum. That maximum only relates to copays etc as part of your insurance.

When I had a kidney stone, I made sure to get to Kaiser. Not the closest hospital, but at least everyone's going to be in network.

That's the biggest benefit of Kaiser IMHO, no wacky out of network stuff at their hospitals.

In the UK which hospital you would go to is nearly 100% based on ease of getting there and the facilities they have on hand.

The idea of driving past a hospital to get to another which is more friendly to my insurance plan completely blows my mind.

Only if you use the NHS, private insurance would require you to pay extra if you don’t live there especially for inner London Hospitals.

Have you lived in the UK? I personally haven't encountered anyone who has had that issue. Most people primarily use the NHS and private health insurance is provided only occasionally as an employee benefit (often by American companies). That's nice for perhaps getting faster treatment for minor issues and maybe getting a nicer room but generally not required.

I'm sure that the 1% have other arrangements but that's another thing altogether.

If you get private insurance you pay extra to cover inner London hospitals unless you live there.

I haven’t used the NHS for the 6 years that I’ve lived here tried it once when I was looking for some physiotherapy for my knee got told by the GP that it will take 3 months called AXA which was then my provider and got an approval for 3 sessions which was then extended to 12 the same week.

I don’t even book GP appointments via the normal NHS route any more all of the GPs are technically private anyhow they just accept NHS patients and getting a booking via private health care is just that much more convenient since they see you within 24 hours and evening appointments are much more available.

> If you get private insurance you pay extra to cover inner London hospitals unless you live there.

That's kind of the opposite of what I was saying anyway. It's fair enough if you are making a decision to go to a more expensive hospital for your own reasons.

Yeah, private healthcare in the UK is convenient but far from essential. Physiotherapy was actually exactly what came to mind, I believe it's one of those parts which are always chronically under-resourced.

It’s also the fact that you can’t register with more than one GP so if you don’t live within say 30min of your work going to doctor appointments is a day off essentially not to mention that if you don’t pretend to be dying when you call them they’ll tell you to get some rest and call again in 3 days.

If you go to A&E sure NHS is good enough, but for preventative care and general appointments however it’s pretty poor same goes for any kind of specialist care unless you are getting it at the hospital.

Don’t get me wrong universal healthcare is important single payer universal isn’t, and the NHS’s trust structure is really poor so if you live in an area where the trust is literarily bankrupt the level of care you get is piss poor at best.

I think the biggest mistake the Brits did is to prevent the NHS from providing premium services at a cost like better rooms or cosmetic surgery.

The best healthcare systems in the world are those in which the healthcare providers are non-profit, are required to maintain a specific subset of services defined by the government, aren’t allowed to deny service but are allowed to make money on the side with things that aren’t covered by the government.

That extra money is key because as non-profits the only thing they can do with it is to reinvest it in either their staff or their services there are no shareholders to give dividends too.

This is something the NHS lacks I would much rather pay the NHS the same money I pay to Bupa and get the same service as I can get now knowing that some of that money is going to go into improving the NHS as a whole.

The NHS's trust structure is more about forcing a market into somewhere it has no place than about healthcare outcomes.

When we once elected to go private to queue jump we got to see an NHS consultant privately, in an NHS hospital, and all follow on treatment was on the NHS. So it was a simple case of a few hundred pounds for private scan and consultation.

Most hospitals and maternity units have private rooms as an option. As far as I know they're not restricted or limited in any way, unless it's changed since our experiences. We've not needed a hospital for a while.

Yes but those funds aren’t going to the trust as in the actual public pool.

Most hospitals have private wings, but the NHS doesn’t see any profit from that.

Hmm, I didn't realise this.

If I see an NHS consultant privately they get a little extra personal income. So if I took a private room where does the profit go in the current system? Treasury?

He may have been traveling when he had his heart attack: https://www.wsj.com/articles/john-stockmans-medical-bills-to...

He may have been attended-to by out-of-network practitioner: https://www.nbcwashington.com/news/local/Out-of-Network-ER-S...

Number two for sure. You are almost guaranteed to be seen by an out-of-network provider. It does not matter if you go to an in-network hospital/ER, the providers go out of their way to work a couple hundred miles from home just to bring in the big OON prices. Out of three visits to in-network ERs (in two different states) in the last seven years, how many do you think resulted in crazy charges from OON providers? If you said anything other than all of them you must not be from the states. It is basically impossible not to get fleeced by "health care" in the US.

I’ve been to the ER twice in the last 2 years. Once at the hospital blocks from my house & once while traveling for work 800 miles away. In neither case did I get charged out of network charges.

In fact in the 25 years I’ve paid for mine or my families health care I’ve never seen what you describe over lots of ER visits.

There are lots of things wrong with the US health system, providers systematically trying to get out of network fees isn’t one of them.

Your experience is the only experience. Good point.

Not what kasey_junk said at all. It was responding to someone who said:

> It is basically impossible not to get fleeced by "health care" in the US.

The experience is evidence against this very strong statement. You have uncharitably decided it was making an equally strong statement in the opposite direction.

What’s with the ‘out-of-network’ thing that gets pulled out regularly? Is healthcare really that much more expensive to an insurer if it’s done at one site or another? Sure, they’d prefer it was done in-house so that the ticket can be clipped multiple times, but it’s clearly just made up numbers that are produced currently.

It's not that it's more expensive at one place or another for the most part. When you go in-network you are seeing providers that your insurance has a contract with. This contract includes agreed amounts for procedures. Providers will often grossly overbill (mostly because it's easier to let the billing backend resolve these limits than bill accurately in the first place) and your insurance will respond with the amount covered. The remaining amount of the bill is written off because it was in-network so the provider is not allowed (by the contract with your insurance) to bill the balance not covered to the patient.

Out-of-network does not have this protection. Your insurance will possibly cover some of the bill, normally up to some percentage of what they consider a normal amount for the procedure in the area, and then you will be billed for the entire balance. Say your provider bills $100k and your insurance says they think that procedure normally only costs $50k and you have 80% out of network coverage. You would be billed for 20% of the $50k covered as coinsurance, plus the remaining $50k that would've been written off if you were in-network.

This is generally how people get surprise bills.

For a real world example: last year my insurance got billed ~$3k for a routine blood test for my wife as part of an annual checkup. It was in-network and the insurance paid $27 and the provider wrote off the rest.

I understand this, but don’t understand why millions of people are ok with the system. It has a lot more in common with a protection racket than with patient care in my view.

It's not that millions of people are "OK" with it, but that in practice democratic elections aren't actually about policy. Suppose Alice's policy is to do X, and Bob's policy is to do Y, we might suppose voters who overwhelmingly want X will go vote for Alice, but nope, the Bob voters will still vote Bob and then be annoyed that Y happened, independent of continuing to support Bob. That doesn't make sense, but it's what happens.

This would be a grave defect if the purpose of democracy was to achieve good government, but in fact we haven't the faintest idea how to get good government, democracy is a fix for bloodshed during the inevitable power transitions. So, a bunch of idiots with no clue are still in charge, but now a _different_ bunch of idiots can take over without having to murder a bunch of people to do it.

Propaganda and lobbying by the insurance companies ensure that the will of the people doesn't turn against them.

Not true, because people actually hate insurance companies. The best propaganda is by the hospitals because no one ever seems to complain much about them.

There's been a lot of revealing reporting over the past decade but people don't seem to care: the price of a procedure in two different hospitals in the same city can vary by 10x because they literally pull prices they charge from their asses. They tend to justify this by saying "no one ever pays that price".

But when I got a bill for my wife's surgery that included 15k for 1 hour in a recovery room, another 25k for 1 hour in a surgery room, and 9k for an overnight stay (on top of the 20k from the surgeon, 3k from the anesthesiologist, and 3-5k from random doctors we saw for a few seconds) those words sure as shit were not reassuring.

All my past attempts to get an idea of what something might cost me, even when I knew insurance wouldn't cover it, have failed. It takes days worth of time on the phone only to get the wrong answer. One even told me that I only get the cash price if I don't have insurance even if my insurance won't cover it - and I must have insurance because its illegal to not have insurance so I can't get the cash price. What the fuck man?

Hospitals can fuck off. I have no idea why they don't get more blame in this mess.

I think it's something in the American mindset. It's been said before, but Americans think of themselves as "temporarily embarrassed millionaires" when voting (hence why they consistently vote in the interests of the rich - everyone thinks they'll benefit from those tax cuts when they win the lottery/sell their startup/etc).

Same situation here; "health care costs are for those sick losers. I'm not going to get sick, so it doesn't matter to me how much it costs, and I don't want to pay more tax to reduce healthcare costs for those losers".

I exaggerate, but it does seem like there's something like this going on...

I agree with you in part, but in my opinion propaganda and lobbying are the problem because this is the source of the disconnect. When people got increased protections from the ACA, nobody complained. The insurance and hospitals deliberately shitcanned the healthcare marketplace and MOST pepole don't put much thought into why the mandated insurance became unconscionably expensinve, they just thought "Obamacare is worhtless" because that's what they were told.

I don't think it's specifically an American thing to avoid much thought about becoming really ill. It's an uncomfortable subject.

It is partly a cultural thing - a kind of cult of narcissism.

But those attitudes are carefully cultivated by the media. They don't just happen.

Congress and the Senate are full of corrupt leeches, and both parties are equally guilty.

Votes make no difference. Corporate money buys political careers, and it pays for both sides.

There are a few exceptions, cultivated to maintain the appearance of representative democracy, but they're rarely - if ever - allowed anywhere near policy.

> Congress and the Senate are full of corrupt leeches, and both parties are equally guilty.

No, the Democrats and Republicans are not the same.

Both parties are equally guilty of being more worried about holding on to the reigns of power than serving the public.

No, I reject that equivalency.

One party is suppressing the vote and constantly sabotaging the workings of the government to retain power.

Those aren't the equivalencies I'm asserting. My position is that members of both parties expend far too much energy working on re-election fundraising versus working for the people. That's the equivalency I'm asserting.

Both parties, then, are elected (generally. Republicans tend to depend on the electoral college to win).

Both parties eat food.

Both parties drink water.

What's the point of this equivalency? I identify a moved goalpost. Your initial post was "both parties are equal." We are far from there, down here.

I don't think millions of people are okay with it. I think the vast majority are unaware, those who are aware have no agency, and very powerful interests seek to maintain the status quo.

yeah. Can you refuse treatment from an OON provider in a hospital? Because that would be my first question if approached by a doctor who could potentially bill me $100K

When I go to hospital, on the assumption I'm conscious, the last thing on my mind is deciding which doctor I want

For ER agreed. For anything else that is serious / non trivial, you also want to consider the repuation of the department. Some doctors are world specialist of something, or treat dozens of a particular condition every year. Others rarely do or are simply not good. I don't think there is any way for a layman to know. You kind of need to ask relatives in the profession, who can themselves ask around. I have a few doctors as relatives and they systematically check the reputation.

> Can you refuse treatment from an OON provider in a hospital?

In most cases you will not know that it's an OON provider. You may be under sedation at the time.

The practice is outlawed in many states, as far as I know.

We're not okay with it. And it is a racket. It's not fixed because the racketeers run the place.

It doesn't make sense, but you have to (as a patient) make sure that the provider you're getting healthcare from is covered by the insurance company's (changeable) list. Its indefensible but it's reality.

I cannot wait for reform and I hope it hits before I get old and need it often.

As an aside, even the billing system is fucked up. When I get a receipt for covered care, it often looks a lot like a bill. This has to be by design. Its bad enough that I just ignore both "receipts" and bills and wait for the collectors to call me. That's how I know which is which.

There are interesting cases, where doctors prescribe stuff they get no valuable information from.

I had this in US. Shoulder pain, that was diagnosed via an XRay... But the doctor decided he wanted an MRI. That's no unusual, but unnecessary in my case. Got charged extra $500 for the pleasure. Thankfully I was on an HDHP, so the HSA savings got hit.

>I had this in US. Shoulder pain, that was diagnosed via an XRay... But the doctor decided he wanted an MRI.

Xray is mainly for bone problems. MRI shows well soft tissue. In medicine, if something you suspect even it has a low probability and the diagnostics are not invasive, it is better to check than to miss and regret later. Why are you so sure that MRI was not necessary in your case?

I saw my other doctor, slightly more decorated orthopaedic surgeon, that literally told me that I was blasted with XRay for no reason or my MRI wasn't necessary.

I have an irritating bone spur in the shoulder, that's the only problem.

The doctor ordered both Xray and MRI at the same time, while there was literally no need for one of them.

You are reasoning backwards. Had the cause been something besides a bone spur, such as a tumor or vascular problem, the X-ray might have missed it. Some things like soft tissue calcification don't show up as well on MRI as on a plain X-ray film which is a really low radiation dose these days anyways. Go read up on the terms sensitivity and specificity.

That’s not an unreasonable charge for an MRI and I’d argue that you got off quite lightly. You can’t diagnose many of the potential problems shoulders have from an x-ray but a good clinical examination will catch many of them, with an MRI for confirmation. Labral tears would be an example of this.

For a second I read your comment as liberal tears, and had to do a double-take. :)

Speaking to the 500$ charge, are you saying that is a typical cost around the world for a MRI? Is there something about the machine's cost that justifies this or are you just saying that a 500$ charge is typical in the american system?

And here I thought my last 120 EUR MRI was very expensive... (in France, of course)

That’s impressive. The purchase price and running cost are high. Then there are expensive labour costs (doctor, probably 2x techs and admin/reception staff. Often a nurse is around for more complex procedure too). Peripheral equipment isn’t cheap, with defib, contract injectors, RIS/PACS, reporting stations etc. Scans are slow relative to CT and x-ray so I have no idea how they make that work. Did you pay the whole bill? I am an MR tech.

No it's not an unreasonable charge. The amount I had to go through and the necessity of it was the question.

I got charged with two things - XRay and MRI. One was enough, apparently... And I wasn't in any critical condition to an XRay immediately.

It's 2-3x more than you would pay in a regular civilized country... it speaks volumes about the US system that you think it's not an unreasonable fee.

I’m not sure you are correct in that - MRI scanners are expensive to run as they are rarely as low priced as you are suggesting. See link below which is a little old but gives a spread of prices. Note that the prices cited i this thread is less than half the US average.

Another factor that is relatively rarely discussed is the quality. You can do a fast scan or a good scan. That’s inherent in how MRI works. A good gynaecological, cardiac or liver scan takes about 45mins, and there isn’t much you can do to improve on that as you are limited by metabolic activity (eg liver or heart contast wash-in and wash-out). If corners are cut here diagnosic quality will be reduced.

I regularly see scans that are of such poor quality that they are initially mistaken for the survey scans/scouts that we use to localise the patient in the bore. They are generally from places that you would intuitively avoid for healthcare, but not always.


That negative MRI result can be just as informative as a positive one. Maybe your XRay gave the doc only 80% confidence in the diagnosis, and the MRI was to rule out a larger issue. Like an engineer, doctors work deductively to rule out potential diagnoses, so all that is left is the correct one. Inductive logic brings in subconscious bias and assumptions.

Nope. He ordered MRI immediately with the XRay... and he didn't even look at it, as I was informed by the assistant.

I checked if he needed to do that with my other doctor - he said that only one was needed, not the other.

How is that possible? Is the rest of the bill paid by the state?

No, it's just cheaper labour, has far fewer billing overheads, less profit, and is an actual market price rather than the oligopoly fiction the US calls prices in healthcare.

Should have treated yourself with business class seats...

How was the recovery?

  Went to Germany got it done on the same equipment in luxury stay for 14 days at $870
A "luxury stay" in a plain hotel with no medical services should cost a lot more than $60 a day.

In Canada, if it was serious, half a year is actually even quicker than I'd expect. I'd really love to try out the Japanese healthcare system. As it stands, I'm convinced that healthcare is an impossible problem to solve.

I'm convinced that healthcare is an impossible problem to solve.

You need to travel more. The German system, for example, is very old, very simple and works very well.

I like the healthcare situation in Germany but normally you would have to wait months for a surgery, if it's not very critical. An appointment with a specialist can also mean waiting weeks or months.

That's not that uncommon in the US either though. My mother had an issue that required seeing a dermatologist, and just getting in to see a dermatologist was initially going to take about 6 months. After calling for a month, she was eventually able to get her wait down to 2.

I don't know where this idea comes from. I'm American but my experience with healthcare in European countries where I've lived (England, France, Czech Republic and Switzerland) is unparalleled. I had my gall bladder removed (non-critical) in France; the wait was two weeks and everything about the experience was impeccable.

Weeks is not bad... Months is. And as you said, it's for non-critical stuff.

A mixed system - government-managed for important things, with extra healthcare you can pay on top, like the one we have here in Uruguay, seems to work best.

As far as I can tell, we have the best healthcare for anything but special/rare cases which would be best served by a top specialist from the US or Germany. For the remaining 99% of cases it beats any system I know of.

It's not though, it's solved in a lot of countries. Even - or particularly - those that are economically worse off than the US, such as Cuba.

UK is fine too. Even minor surgery I was scheduled in for 2 days after seeing a doctor.

We are having some trouble due to austerity cuts and freezes by the current conservative government. But in the whole it works.

Germany and the UK have very similar health outcomes [1] but the UK spends significantly less - 9.7% vs 11% GDP [2]. The UK probably should spend some more on healthcare but it's an open question whether that would be more effective at improving health outcomes vs spending the money on reducing poverty.

[1] https://www.commonwealthfund.org/chart/2017/mortality-amenab... (2014 figures)

[2] https://data.oecd.org/healthres/health-spending.htm (2014 figures)

> The UK probably should spend some more on healthcare but it's an open question whether that would be more effective at improving health outcomes vs spending the money on reducing poverty.

There are other policy interventions that could also make a big difference to health e.g. making our urban environment friendlier for exercise by reducing traffic, reducing emissions, introducing dedicated separate cycle lanes, stricter punishment for speeding, and making our mental environment less hostile by e.g. stricter controls on advertising, control of body fetishism e.g. Love Island etc. in the media, limiting development/improving access to nature, etc.

Sufficiently advanced regulation is indistinguishable from single-payer - insurance is completely reliable, covers everything, and is completely fungible. Who cares what name is on the card? The easiest way to accomplish that is just to have a single government insurer. But you can finagle your way in the back door by regulating the shit out of insurance companies too.

One-third of the US population is on a US single-payer system right now.

If you define single payer that broadly, ok. I'll just mention that Japan gives you your choice of about 2,000 insurance providers, which advertise extensively.

> I'll just mention that Japan gives you your choice of about 2,000 insurance providers, which advertise extensively.

How does all of this additional overhead provide more value to the consumer at the end? How are they actually differentiated?

I'm not sure (possibly because I read the book years ago). The other two countries handle it differently.

Japan's healthcare cost is the lowest of the three though, at 5% GDP, despite an aging population of heavy smokers. So there doesn't seem to be that much overhead.

Despite Japan's aging, heavy-smoking population, Japanese people tend to be very healthy for reasons that aren't necessarily related to their healthcare system.

And Americans tend to be overweight and unhealthy. Access to healthcare doesn't automatically shift culture to live a healthier lifestyle (and I suspect it might even do the opposite).

The paper considers that hypothesis and rejects it, honing in on prices not utilization as the problem. Indeed its title is "It’s Still The Prices, Stupid: Why The US Spends So Much On Health Care, And A Tribute To Uwe Reinhardt"


It would be great if gym memberships could be made free for everyone. I bet it would even be cheaper in the long run to buy an Equinox membership for every American than it would be to do nothing.

Free gym memberships are unlikely to result in higher use. I've had multiple workplaces where gym is free and I've rarely used it, thankfully, I am blessed with a skinny physique and parents who inculcated good food habits. In fact, places which charged for gyms explicitly saw slightly higher usage since some folks logic went, since I am paying for it, I might as well get my money's worth.

American health care plans are starting to offer financial incentives for maintaining fitness.

Which seems a bit like a tragedy of the commons situation.

In that insurance company X is paying me for later life benefits that may be reaped by insurance company Y that I have 40 years from now.

We need to hurry up and get to baseline genetic risks, then directly rebate insured out of a central pot if they exceed their expected fitness metrics.

Due to Japan's "metabo law", adults are required to get their waistlines measured every year and those who exceed the recommended limit have to get treatment.


I don't necessarily agree with that policy, however it does appear to be effective in cutting healthcare causes. In the US a large fraction of our healthcare expenses are due to chronic conditions related to obesity.

Germany has a split system between mandatory government healthcare and voluntary private healthcare, once you pass a certain income threshold (about 80% above average income) or are self-employed.

There are differences. The voluntary insurance usually pays 2x to 3x of the mandatory one and covers more treatments that are seen as optional by the government insurance. E.g. physiotherapy is covered by government insurance only for clear indications while private insurances might cover it as a precautionary measure in many more cases. Also private patients can usually skip some waiting time (e.g. days instead of a few weeks).

But (nearly) everyone is covered, government or private, and can go to the doctor without worrying about money.

Even the government insurance isn't a single entity, but you can choose between multiple providers. All charge the same 14.6% of pre-tax income (capped at ~55k income) plus an additional 0.7% to 1.x% depending on the provider. They also compete on additional services. E.g. my provider adds a free professional tooth-cleaning per year and free travel-vaccination among other things.

> Also private patients can usually skip some waiting time (e.g. days instead of a few weeks).

See, now, that just really doesn't sound like a good idea to my ears. Why should someone be forced to sit through weeks of suffering while a handful of others don't, for the sole reason that they have more money to throw at the problem? I can understand buying better or more thorough treatment, or buying treatment from more expensive providers I guess, but line jumping via money just seems immoral when it comes to health care.

Why do you think line-jumping is more immoral than getting worse treatment? In one case you just have to wait in non life-threatening and non-urgent cases (you only have to wait if you actually can wait). In the other case you are actually in a worse physical or mental position.

This is like if the whole town is on fire, but you have enough money to pay the fireman to save your house first. Priority access to universal needs shouldn't be given based on personal wealth. I wonder if the people who wrote this line jumping into law qualified for the public or private insurance.

No, it's not. This analogy would only apply for shorter wait times in emergency cases. And that's not true and I explicitly said that. Everyone gets the same wait time in emergencies and urgent cases. But a significant amount of cases can actually wait.

It's more like your car broke down and you have to wait longer than the guys who pay extra to get a same-day repair. But if you are a taxi driver and depend on it, they repair it anyway on the first day.

The private insured patients also sponsor better treatment for the government insured patients.

It's a good compromise (and I'm saying that as someone who is government insured) and there is law in place like a maximum of 3 weeks wait time for a specialist appointment.

There actually are private firefighting companies which homeowners or insurers can pay to save their houses first.


> universal needs

Not everyone agrees Person A's needs should be paid for by other people. The system described (that pays for everyone, but treats people that can afford it better) may be a reasonable compromise to those people.

That sounds like the UK system, where everyone gets NHS, but those that want to spend £1k a year extra or whatever get private healthcare (BUPA etc)

Yet everyone uses the roads, schools, and safety paid for by everyone to ultimately get to their advantaged economic position. Healthcare is a public effort just like any of the above, and no one should suffer unequally due to class favoritism being built into public efforts. We shouldn't compromise with people who lack the humanity to see this.

To be clear, I'm in favor of everyone having healthcare. To some extent, I'm playing the devil's advocate here. Also to some extent, I think getting from where the US is to everyone having healthcare is a very difficult trip to make. That being said...

- There is no way to support roads without everyone supporting them for everyone. It's not possible to pay for "just the roads I use". - Educating the next generation helps everyone. - Keeping someone else healthy does not help me in any real way (I disagree with this, but it is a viewpoint that can be had).

It does help you in a real way just as existentially as educating the next generation helps everyone. A healthy population is an economically productive population, and ensuring people get preventative care on time prevents strain on emergency services and saves the whole system money. In fact, this is how private insurance works too, your regular bill pays for other customers services, yet private insurance is somehow not viewed with the same contempt by conservatives.

It is already illegal, yet practiced widely because the burden of proof is on the patient that cannot look into the doctor's records because of privacy.

One of the problems with the Canadian system is frankly its proximity to the U.S. A large portion of our homegrown medical talent goes immediately south of the border for higher salaries (see your point about price controls on healthcare providers above).

"In the World Health Organization's rankings of healthcare system performance among 191 member nations published in 2000, Canada ranked 30th and the U.S. 37th, while the overall health of Canadians was ranked 35th and Americans 72nd" [1]

So despite this problem, the Canadian health care system still manages to be superior to the US system. Perhaps in the field of health care, "top talent" is not as pressing a question as is often implied.

[1] https://en.wikipedia.org/wiki/Comparison_of_the_healthcare_s...

Doesn't overall health depend on lifestyle much more than on healthcare?

I don't think you'll find much demographic differences between the U.S. and Canada, apart from a much higher poverty and incarceration rate in the U.S.

Arguably our stronger safety net and better education system, while not technically part of the healthcare system, is also part of producing better health outcomes.

Going south of the border is not necessarily an easy option for any medical professional in Canada. Even though the standards in terms of education are the same, there are licensing and professional standards that needs to be hurdled by the individual.

The problem in Canada seems to stem from an inefficient manner with which health care is being administered. In hindsight, Canada's health care is following the US model, which have for a lot of reasons, failed spectacularly to provide what it was mandated to do - provide health care accessible for all.

If you need talents to stay in your country then you need to pay them more.

The argument being made is that USA is allowing companies and medical practitioners to price gouge, therefore allowing for wages for medical practitioners higher than can be offered locally.

I don't think inflating your own wages to match a system that appears systemically ineffective is the right response, especially when your own system is more effective overall than the one you are losing talent to.

In the USA, medical practioners get paid more and the country might gain talent as a result, but the people pay more for it and it results in it being less accessible and less effective overall.

I think that misses the point.

Germany pays doctors less, and can, because the switching cost is far higher. Canadians get to keep their first language (most of them do at least), stay on the same continent, which reduces travel to see old friends and extended family, and otherwise have fewer culture shocks to adjust to.

Yes you are correct, but that is why Canadian healthcare is less efficient on a cost per dollar basis than it could be (Im Canadian). Canadian doctors dont get paid as much as their US counterparts but are generally higher paid than their European counterparts partly due to this reason already. Yet Canadian healthcare is not as efficient as say UK for example.

I think doctors are paid pretty well, frankly. I also think we need more of a role for nurses and midwives, and less of a focus on centralized hospital based medical care.

But as others have pointed out: we're culturally and linguistically contiguous with the U.S. and have fairly free movement of skilled professionals. It's hard to compete with an economy with a population that is ten times ours.

It's the same in our/my industry. Being right next to the U.S. means the bulk of the quality engineers here go straight south to the valley after getting their very good subsidized university education. This is a problem.

No, the US needs to stop over-paying their doctors.

And doctors need to stop being corrupt by reducing supply of doctors through restrictive medical school entry.

Restrictive medical school admissions aren't the problem. The real bottleneck is in the number of residency slots available for medical school graduates. Every year people graduate with an MD degree but are unable to actually practice medicine because they can't get matched to a residency slot.

Most residency programs are federally funded, although some are also funded directly by teaching hospitals. If you want a larger supply of doctors then lobby the federal government for more residency program funding. And knock off the uniformed conspiracy theories.


Then, you should be targeting lobbyists and politicians. Front line workers (including doctors) are a very poor target for pressure if you want to achieve the same level of care for a cheaper price (including cheaper docs). The only result of your conspirationistic views will be worse care for a higher price.

But, I suppose no one will be able to sway you from your current opinion...

Nobody is 'targeting' the doctors or front-line-workers themselves really. It's the medical professional associations and the power they wield over admissions and thus restricted supply that are a bit of a concern.

There's an odd balancing act in Canada. On one hand it was doctors that fought (tooth and nail) against the introduction of "single-player" (we just call it Medicare) back in Saskatchewan in the 60s, including going on an (unsuccessful) strike. And they are continually in a battle with the provincial governments about rates, because in Canada (unlike the NHS in the UK) doctors are independent businesses and not on salary (unless they're in the hospital system I believe?)

On the other hand, doctors in Canada have become huge advocates of our Medicare system and a big political opponent of privatization and tiered medicine generally. Not completely, but on the whole and through their professional organizations. 50ish years of working with the medicare system and seeing its outcomes, and seeing the failure to our south I think has made our doctors advocates of our system.

Canada's system is by no means perfect. It's probably not a good model for the U.S. as it is. But it's much better than what the U.S. has.

In general wait times here are a product of restricted resources, not institutional inefficiences per se. MRI machines are expensive, and doctors ration their use based on evidence-based criterion. E.g. no MRIs and back surgeries for non-specific low back pain, etc. because medical science doesn't really support it.

It's also worth pointing out that it was a huge battle to get it here. A big struggle that was successful at the time because at that point Canada's left wing was much stronger, and we had no strongly entrenched insurance mafia like in the U.S. Also Canada, as a British ex-colony, had the U.K's NHS as a model, and politics here was still _very_ strongly influenced by U.K. politics, where the Labour party was very strong.

I'm not sure what the path to U.S. single payer would be, but it would be very difficult one.

Is it bad that medical school entry is restrictive? Isn't the idea that you only want smart people to do it.

> A lot of German primary care doctors don't even hire office staff. They prescribe whatever they want, swipe your medical card, and they're guaranteed to be paid in a week, no questions asked.

Any sort of change towards this in the United States (and I agree, it's a good one) will be spun as losing jobs and crushing the economy, which is a very hard argument to defeat.

I haven’t come across a single doctor in Germany who didn’t have at least one office assistant to handle incoming patients, schedule appointments and do the bookkeeping. Most doctors seem to have more though these days as the administrative burden has increased. There’s also a trend for doctors to share office space and have a joint office and reception (also to reduce cost).

That makes sense. But many U.S. medical offices have people devoted entirely to billing insurance companies and fighting with them over what will be covered.

Exactly, plus all the people at the insurance company that are paid to try to find ways to NOT cover it or to pay at a lower billing code.

Ok but why focusing on the insurance systems that are still sub-par compared to Italy, UK and Spain where the single payer system yields even better results for less money?

The book did cover the UK and Canada, and found they did not get better results for less money. The author didn't visit Italy or Spain.

For quality results, the book used rankings by international organizations, based on statistics like "cure rate after diagnosis of major disease." For cost, it used percentage of GDP and cost per capita. Germany, France, and Japan were tops in quality, and Japan was also the cheapest at 5% GDP. Germany spent 13% GDP but with expansive coverage.

Incidentally, the UK is not single payer like we're talking about in the U.S. It's also single provider. All doctors in the system are employees of the NHS, much like the VA in the U.S.

> It's also single provider.

For England that's completely incorrect.

Services are commissioned mostly by local clinical commissioning groups (There are about 195 of these across England), but sometimes centrally by NHS England, but they are provided by a range of different organisations. Some of these are NHS organisations, but they don't have to be. It's possible that NHSEngland and CCGS commission NHS services from non-NHS providers.

Doctors (and all other healthcare staff, and all manager, and all admin staff) are employed by NHS Trusts, or by other provider organisations.

Some examples of non-NHS providers who are commissioned to provide NHS services might be-

Livewell South West, a large community interest company that provides a range of in-patient and outpatient treatment. https://www.livewellsouthwest.co.uk/

Priory Group, a large private provider that also provides some in-patient NHS treatment, especially around in-patient eating disorder treatment or inpatient learning disability "care". https://www.priorygroup.com/

(Note that LiveWellSW are pretty good, and Priory Group are piss-poor and often abusive.)

Even NHS Trusts aren't single provider. They are their own organisation, with their own executive boards and accounts, working independantly from other NHS Trusts. If they're a foundation trust they have a bit more freedom with their budgets and staffing.

Here's a nice description of what the NHS is and how it works: https://www.kingsfund.org.uk/audio-video/how-does-nhs-in-eng...

I'm not sure what statistic you are referring to, but for cancer at least the definition of 'cure' is typically a number of years of life after detection (e.g. 5). In jurisdictions with less aggressive testing, this can give a worse measurement of cancer survival rates than the reality, since earlier detection by definition gives a higher chance of surviving to a time X years after detection.


GPs are not really employed directly by the NHS.

>> Japan has a clever way to handle the mandate. If you don't pay your premiums, nothing happens, but if you need healthcare you're not covered until you pay your back premiums.

Wouldn't it always be a good idea to not pay premiums until you have a major expense then?

You could, but you'd have to keep the money in savings anyway, and there'd be some hassle at a time when you might not want to deal with hassle. In practice, it turns out most people just pay their premiums, at least in Japan.

But if it turns out to be a problem, you could always charge interest.

I think a baseline requirement for these types of systems is that people don't go out of their way to be assholes for negligable gains.

My understanding of Japanese culture is that, by and large, people don't do that. Americans, meanwhile, have a pretty heaping helping of petty asshats. For exhibit A, go look up some of the asinine BS tax protesters try to get out of pretty basic civil responsibilities.

I wonder what they do if someone can't pay.

The system doesn't seem too different from the US to be honest, in that people with poor financial planning skills may decide to skip on insurance premiums and end up not having enough money saved to pay for medical expenses/back premiums when they occur.

Be that as it may, it sounds like the Japanese system is much more effective at keeping prices low.

I'd guess there's some kind of interest/penalty you have to pay along with the back premiums.

Then they’ll add up the premiums?

Unless there is interest or a penalty then you can take all the premiums you've saved + interest and just pay them.

> Japan has a clever way to handle the mandate. If you don't pay your premiums, nothing happens, but if you need healthcare you're not covered until you pay your back premiums.

So what happens when you go to the ER? Obviously if it's a true emergency they'll save your life and try to bill you later, but then what?

Would it ever make sense to deliberately stop paying your premiums? If you can pay "out-of-pocket" for medical expenses, you might be better off saving your premium money until you need medical care that's actually more expensive than the back premiums. That creates an adverse selection problem (assuming that enough of your prospective customers are devious enough to try this). Even if you can't pay out-of-pocket, you could just stop going to the doctor until something serious happened.

Maybe there's a little interest on back premiums. Whatever the details, it's working out very well for Japan. They get great results at very low cost.

Seems completely unnecessary though, just wrap that in the taxes and be done with it.

It's about to stop working out very well for Japan. The costs in their system are exploding higher rapidly and putting everything at risk. Their system won't remain intact for much longer at the rate healthcare costs are outpacing economic growth.

Here's the relevant chart: https://i.imgur.com/s97bp9R.jpg

"Health-Care Paradox Threatens to Add to Japan’s Debt Problems"

"Japanese seniors, who enjoy the world’s longest life expectancy, pay as little as 110 yen ($1) out of pocket for specialist appointments. While these visits may help prevent expensive-to-treat diseases, they’re becoming unaffordable in a country where almost 1 in 7 people is 75 years or older, and annual health-care expenditure grew at a pace 40 times faster than the economy from 2000 to 2016."


Japan has a very unique healthcare crises based on it's aging population. The median age in Japan is over 9 years older than the United States and the population is continuing to get older. This crises would be very hard to deal with in any health care system, and it compounded by other pressures of taking care of an older population. Pensions programs are being stressed as the relative number of young workers are decreasing. Additionally the older population is likely to prefer economic policy that reduces inflation (to make pensions stretch further), making the working generations fight harder in international trade.

Japan's healthcare system doing so well given current stresses is a testimony to it's strength.

It's not "very unique". Germany has a similar median age (47.3 vs 47.1) and low inflation rate, and much of Europe is not that far on both.

> pay as little as 110 yen ($1) out of pocket for specialist appointments

In the UK we pay nothing. I think this article is biased by American thinking.

Not strictly true - we do pay a nominal fee for prescription drugs and NHS dentists (although some classes of people, eg students and retired people, are exempt).

Additionally, a lot of long-term care in the UK is provided by charities (Cancer Research, Macmillan, Heart Foundation, etc) which can be expensive but IIRC doesn't appear in the NHS budget.

True enough. I was thinking of specialist Doctors appointments, which are covered. It seems crazy, in a kind of roll your own adventure way, to pay for diagnosis, per specialist.

I sort of imagine conversations going like:

Doctor A: You might have this other nasty thing, but I'd have to send you to doctor B to check. Doctor B will cost you a hundred bugs. Patient: I don't have a spare $100 Doctor A: we'll just hope it isn't that then. Me: WTF?

No prescription fees here in Scotland!

I presume for people that have jobs, the premiums are withheld. So only the minority never pays up.

That's hardly unusual. I come from a similar system.

There’s nothing innovative about cutting off someone’s health care until they can pay, and it probably wouldn’t last long as a policy here.

>A lot of German primary care doctors don't even hire office staff. They prescribe whatever they want, swipe your medical card, and they're guaranteed to be paid in a week, no questions asked.

It seems to work that way in France too, my mother lives over there half the time. She gets medical appointments and treatment almost immediately for almost anything where in the UK she'd be in multi-month long queues. I'd take the NHS over the US system any day, but there definitely seem to be useful lessons to learn from Europe as well.

I'ma huge Maggie fan, she was our best post-war PM by far, and a good candidate for best PM ever, but her market based reforms of the NHS were utter failures.

Thanks for your great comment and I agree especially with your last paragraph. While reading the book, I was so frustrated with how poorly my county has handled such an important issue, probably the most important.

>If you don't pay your premiums, nothing happens, but if you need healthcare you're not covered until you pay your back premiums.

So what happens if you don’t pay your premium but then have to use the ER? Do they refuse to take you, or are you stuck with a bill? Does that bill go away if you pay your back premiums or not!

Don't quote me, but I've read many places in the US that ER's are required to take you if you are in a life threatening situation and if you cannot pay, the hospital just ends up owning the costs and then passes those costs to everyone else through insurance fees.

I've witnessed this first hand. For a nonemergency even. A friend with bad English went to the ER to have a rash looked at (not understanding what the more appropriate action would have been).

The ER don't doctor spent about 2 minutes with her and wrote a prescription for some topical thing.

Later the hospital sent her a bill for about $1500. I went with her to the hospital's billing Dept, helped her fill out a form that basically said "I have no insurance and no money".

The hospital ate the bill.

Legally the ER can't turn you away if you can't pay, in the US.

What they can do - specifically relevant if you're a US citizen - is send you a bill and then after you don't pay it send it off to collection agencies, which then harms your credit rating for the next five or seven years (I believe various states have different laws on when these have to drop off your credit rating, it's usually either seven years or slightly less). This has improved a bit lately, with new credit scoring updates that considerably reduce the hit from medical bill collections on your credit. However it's obviously still a ridiculous situation.

Most non-private hospitals in the US have low income programs you can sign up for (eg if you go into the ER due to an emergency and run up a big bill), that eliminate most or all of your bills if you fall under a certain income level. That's subsidized by government funding programs. Typically though if you're at that low of an income level, you should just sign up for Medicaid anyway. Those programs are usually most valuable when someone in the eg 22-50% income bracket (the most vulnerable in the US insurance system, where you're above Medicaid and below typical good paying career or job status) is caught inbetween insurance / jobs for a number of months and gets hammered by an ER visit.

Is that in Japan (where the question was asked) or the United states?

Sorry, US. I updated my comment and I'm from the US but I have yet to use my personal medical care outside of my parents when I was a kid

>A lot of German primary care doctors don't even hire office staff.

I have never been to a German doctor who didn't have some staff. It's true however that they usually do not have admin-only staff.

They have, depending on the size (and specialty) of their operation, 1-3 "Medizinischer Fachangestellte" (MFA, qualified medial employees) per doctor and maybe 1-2 "Auszubildende" (people still in training). This a qualified job which requires formal training and a diploma. Usually it's one person in charge of the appointment book and reception/waiting room and additional people helping the physicians.

They are helping during examinations, calling up people from the waiting rooms, keeping appointment books, keeping the patient files and printing out the prescriptions etc (to be signed by the doctor), and to some degree interact with the health insurers. But they also do some hands-on jobs, like they are usually allowed to apply some medications, and operate medical equipment on their own (e.g. last time I visited my dentist, the x-ray machine was operated by an MFA; she had to have a special qualification for that). They are also in charge of writing the invoices for procedures not covered by health insurance providers (e.g. additional checkups).

My GP is a single lady shop, and she hired 3 MFAs. My dentist shop has 3 dentists working there and one "technician" and has an MFA support staff of maybe 15.

So there is still a lot of admin work, after all.

>They prescribe whatever they want

Not exactly. German doctors prescribe an "active agent" (even tho a lot of times they will put a brand name). German public insurers will only pay for a max price for a given agent. So if "generics" are available, the pharmacies will likely fill prescriptions with those.

>swipe your medical card

Eh, you give your card to the doctor's MFAs and they will put it in their card reader, etc. It's not like there is a checkout line where you swipe stuff yourself.

>they're guaranteed to be paid in a week

Usually one month to four months.

It goes like this: Every physician has to be a member in the "Kassenärtzliche Vereinigung" (KV, physicians association, and KZV for dentists) of their federal state. Otherwise, you cannot be reimbursed by the public insurers. There is about 160k physicians and 60k dentists organized in the KVs and KZVs.

The physicians then report all the items (procedures, prescriptions, consolations, etc) they want to charge to the KV, which collects the information, tallies up everything and calculates the earnings based on a complicated "points" system, charges the insurers and distributes the money back to their members.

The physicians are paid once a month (usually the 15th of each month for most KVs) a progress payment, based on the estimated earnings for a quarter, estimated based on previous quarters in particular. The actual final tally is done only once a quarter where any money not yet paid through the progress payments is paid out. In the worst case, this could be a negative number, meaning a physician has to pay back some of their previously collected progress payments. That's why (AFAIK) KVs will usually underestimate the progress payments to avoid exactly this later.

>no questions asked.

The KVs will totally ask questions if your doctor starts billing a lot "funny" items (e.g. if a single doctor would charge a lot of flu vaccinations during the summer months, the KV will ask about it). And last I heard, there are spot checks/(not-so) random audits too. The KVs by law are required to make sure everything is OK, so they also dabble in fraud detection and quality control.

tl;dr: All of my comment is basically agreeing with rndgermandude that the OP's description of German medical care is not accurate.

I co-founded a company that sells practice management software to primary care doctors in Germany. We work closely with the Hausärzteverband -- something like a union for primary care physicians -- and I speak with doctors in Germany, board members of the HAVG, and so on basically every day.

Germany has three different medical/insurance systems -- KV, HzV, and private insurance -- I worked with HzV so am most familiar with that but everyone has at least a passing understanding of KV as well since it was the only one until recent decades. HzV is more popular in certain geographies -- for instance if you work for Volkswagen you'll be in the HzV system and not the KV system under a BWQ contract.

I've never met a doctor in Germany that doesn't have staff. A quick check of the analytics of all the practices using our software doesn't show a single one.

As rndgermandude says, every single one has at least an MFA (and nowadays probably a Vera as well, since they can earn extra money that way). Our analytics shows 2-3 MFAs per doctor is the average but there are always edge cases.

>They prescribe whatever they want

This is not really true. Every insurance contract will have different rules about what can be prescribed. They can't FORCE a doctor to follow those rules but they doctor is monetarily incentivized to do so. For instance, getting a bonus every quarter so long as 80% of their prescriptions follow insurance company rules. The checks are done at run-time, every doctor knows instantly if a prescription is against insurance rules, and practice management software is REQUIRED to suggest alternatives that meet insurance requirements.

>they're guaranteed to be paid in a week

Doctors are basically NEVER paid in a week. They submit their billing at the end of the quarter (here I'm speaking primarily of HzV contracts; I'm not sure how the third option -- private insurance -- works) and then get paid a while after that.

>no questions asked.

No, this is not remotely true.

American healthcare is nowhere close to a "free market".

Have you noticed how there are next to no startups disrupting the health industry? Why can't you sign up for insurance like you can sign up for a stock account on RobinHood?

There's no free market. Government licensing and regulations have created huge barriers to entry. I thought this would be more understood by those technically/entrepreneurially minded.

When things are too expensive, you need to raise the supply to get the price down. Not create price controls and socialize markets.

Read this article because it explains the problem better than I can.


We know that there is an efficient model for delivering healthcare, which is a government provided/heavily-regulated healthcare market. We know this because dozens of industrialized nations successfully operate in this model, with dramatically lower costs than we have here in the US. An existence proof is usually the simplest kind of proof.

Some people talk about a hypothetical second workable model, which involves a massively de-regulated free market system. It's important to note that nobody has successfully deployed this model in an industrialized nation, and it's not clear if it can even be implemented in practice -- for political as well as practical reasons (unregulated medical providers tend to kill people, so voters enact regulations, and then you're on your way out of the sweet spot.)

Whatever your preferences, the important thing to keep in mind is that while both of these two points may exist, the points between them are highly suboptimal. Removing 10% or even 50% of the regulations on our current healthcare system is unlikely to produce a substantially more efficient system. It produces a new system with most of the weaknesses and entry-barriers of our current approach, but replete with massive new profit-taking opportunities and substantially worse protection for patients.

This is why two decades of political infighting in the US have failed to fix healthcare. There is literally zero chance that the working, de-regulated system is going to come into existence. There is some probability that we can get closer to regulated single-payer, since we already have Medicare and it's much more efficient than private insurance, even though politicians have restricted its bargaining power. There is an overwhelming probability that in the process of trying to deregulate the current system, you end up making everything substantially worse.

The US already spends a large percentage of GDP on public health care (medicare and medicaid). It's just that it spends much more in private on top of that.

I quickly found some numbers from 2008. All numbers are a percentage of GDP:

US: 7.4% public, 8.5% private

Switzerland: 6.3% public, 4.4% private

Sweden: 7.7% public, 1.7% private

France: 8.7% public, 2.5% private



kff study:


Just go google "medical coding" and you'll see how your entire uninformed opinion falls apart.

Free market and well functioning market are not synonyms.

Healthcare economy is naturally inefficient if free. Information asymmetries and other market failures emerge without good regulation and mechanism design.

Every market has information asymmetry. Software is probably the biggest one today. Yet software keeps getting better and better...

I agree there are needs for regulations--more like proper norms though and a good tort system.

No it doesn't. You can negotiate the price of software before you buy it, and you can shop around and choose between alternatives, or choose not to buy at all.

If you need a piece of rebar removed from your chest, then you need a piece of rebar removed from your chest. The price doesn't matter, the choice of provider doesn't matter. The "consumer" is completely at the whim of whatever provider happens to be closest. That's not how free markets are supposed to work.

You're engaging in 'all-or-nothing' thinking. The vast majority of medical expenses are not like that. And that's the whole point of insurance--to be covered in case something happens so you don't have to negotiate on the spot.

That's like saying we should socialize food distribution because people can't negotiate when they're starving.

Sure, I chose an extreme example, but it's just a fact that healthcare is way less elastic than food.

If the price of beef is too high, I can buy pork instead.

If the price of a hip replacement is too high, what are you supposed to do? Get an appendectomy instead?

Demand is inelastic? Meh, my brother is living in Brazil and has been using a ton of private healthcare services because it's cheaper. Again, you're engaging in all or nothing thinking. As the price of LASIK goes down, more and more people use it. Americans go to the doctor less because it's more expensive. Healthcare demand is the furthest thing from an 'inelastic'.

Healthcare is bigger than just things that you absolutely need. Obviously, there are those things, but that's what INSURANCE is for. Then, when you are healthy, you can shop around and when insurance is too expensive and has too many items you don't need, you can instead get a barebones plan which would cover the things that you seem to be worried most about.

If a person failed to get insurance, well... that's not good. We shouldn't encourage that as a society. If someone runs out of resources and has to demand it from others, they are a burden and that is bad. If too many people do that, society collapses.

Obviously, there are going to be those people and I'm not saying we shouldn't care for them, but the more we have a socialized system--one that has a shared resource pool everyone takes from--the less efficient it will be because the incentives applying to individual encourage them to use as many resources as possible because they aren't the ones who bear the cost.

There's plenty of industries where the customer often needs something done quickly or in an emergency and they still don't get screwed like they do in medical. Plumbers, septic pumping, auto repair, all have a substantial portion of their customers needing "emergency" services that they could charge whatever they want for. They don't though because there's price transparency and if you get screwed you'll never call them again and tell all your friends they ripped you off.

With medical there's no way to know when you got ripped off because prices vary wildly for the same services and there's no price transparency.

If I broke my leg doing something stupid you can bet your ass I'd call around and get quotes if I could. It only takes ~10min, far less than the EMT response time where I live. The problem is I can't even get quotes.

Sometimes you have no options and you get screwed but the vast majority of medical care is not people who will bleed out if they don't go to the nearest hospital ASAP. If normal services didn't cost an arm and a leg and you could reasonably shop around then healthcare and therefore health insurance wouldn't cost nearly as much because the lions share of services would be priced competitively.

Furthermore, price transparency is not incompatible with any other approach to healthcare since that information necessarily needs to exist.

> If I broke my leg doing something stupid you can bet your ass I'd call around and get quotes if I could.

Quotes for...what? Even with price transparency on actual services, “I broke my leg” doesn't tell you with much specificity what services you need. And that's not even to discuss, “I'm having chest pain and dizziness”.

>Quotes for...what? Even with price transparency on actual services, “I broke my leg” doesn't tell you with much specificity what services you need. And that's not even to discuss, “I'm having chest pain and dizziness”.

Sounds a lot like "my car is making a funny noise" or "my septic is backed up". Diagnosis should be cheap/free depending on how involved it is and then you get a quote for how much it will cost to fix and the quote usually includes some language like "and if X happens we'll stop work and call you/charge X to fix it as well".

Figuring out what work needs to be done based on vague descriptions by people who don't know the subject matter is what professionals do. I don't see why doctors should be held to a lower standard.

And that's why seeing a doctor often involves a battery of seemingly unrelated tests - diagnosis can be difficult and involved.

The fact is "my car is making a funny noise" or "my septic is backed up" are not life threatening situations; they are inconveniences with ready substitutes available. Health care is not a free market like car mechanics and plumbing are.

I would also add that the parent post is internally inconsistent.

>> The goal for American healthcare companies is increasing shareholder value, not reducing costs

Reducing costs increases shareholder value. The shareholders don't benefit from these inflated administrative costs. This is money that could be converted to profit and distributed to shareholders.

This suggests something else is going on

Why would you cap healthcare prices for insurers, they don’t set prices. You mean providers?

Half of US healthcare spending is public payers - Medicare and Medicaid. They do set prices for providers and still spend far more than other countries.

And if you’ve been involved in US healthcare you’d realize it’s drowning in regulations already. It’s not a free market by a stretch.

You cap healthcare prices for insurers because they are heavily influencing the provider prices.

Both institutions work in tandem[0] with one another to establish pricing guidelines. That's why your hospital-purchased ibuprofen is $10 per pill instead of $6 per bottle. The insurer and hospital "work out" a price that let's them achieve the profit needed to pay their administrative costs, plus margin.

In the USA(this is all from a US citizen's perspective), there are regulations that limit what percentage(15% in my state) of an insurer's income can be profit vs administrative cost. This means that a higher hospital price results in a higher profit for the insurance provider. This provides both parties an opportunity to set prices for an optimal profit. With government-mandated health insurance participation, the pool of people paying into this system has increased.

It is what is. Tell your elected official if you think it would help.

0: Anthem, Blue Cross, and UHC executives sit on the Baptist Health(hospital chain) board of directors, and vice versa.

Health insurers and providers negotiate payments for healthcare. They sit on the opposite side of the table - insurers want the lowest price and providers want the highest price.

The only benefit an insurer would have from a higher price is if they have a monopoly position - no other insurer. Otherwise the other insurers will pay less, charge a lower premium and grab all the customers.

That is what networks are for.

When choice is harder, they can play the price game better.

>You cap healthcare prices for insurers because they are heavily influencing the provider prices.

Insurers already have an incentive to limit prices, though, which is essentially what their contracts with providers are. As in, they list how much they'll shell out for CPT codes.

They have an incentive to get discounts, which is not the same as limiting prices.

It’s more complicated, the insurers essentially tell providers how to practice (ie prescribe this generic not the name brand, don’t prescribe 30 day Rx prescribe 90 day and don’t see/treat them in the meantime, etc...) and if the providers don’t listen the provider gets dropped from the network and either the patients are forced to new providers who the insurers control behind the scenes, or more and more the patients are forced to providers the insurers actually own.

Ok, but Americans overconsume health care and are prescribed more procedures than other countries --- that's a dominant factor in our health care costs, unlike prescription drugs and admin costs. How do insurers, which have a direct financial incentive not to fund care, own that problem?

As I said below:

The upward pressure on prices is also from the insurers. Insurers have an "80/20 rule" from Obamacare that only 20% of their revenue can be spent on non-medical expenses (ie. profit, insurance administrative overhead, etc.). They pretty quickly hit the caps, and now only by increasing medical expenditures (the other 80%) can the pie slice that contains their profit grow year after year.

This issue existed before Obamacare 80/20 rule. In a free market the way for a profitable insurer to grow is by growing marketshare -- whether 80/20 rule exists or not. And the way to grow marketshare is to offer cheaper insurance. To offer cheaper insurance insurers have to push service prices down. Somehow this is not happening.

Hey, wait a minute, that's true. The McKinsey study predates the ACA and establishes the overconsumption narrative. The 80/20 ACA thing can't be the problem.

I'm not staying it's the problem; for something as systemically wrong as the US healthcare system there isn't just one thing wrong.

I'm merely debunking your assertion that insurance companies don't have a financial incentive to keep costs high.

What's the financial incentive they had to keep costs high in 2010? You're making an extraordinary claim: health insurance companies are deliberately making themselves liable for provider costs in order to somehow benefit on the backend. You should have some kind of evidence?

What's the trend line since 2010? Since the 80/20 rule went into effect, has the rate of provider costs increased or decreased or stayed the same? If it hasn't increased, does your hypothesis actually explain any empirical observations?

If not, are you concerned this might be a just-so story?

Wow, sounds like one heck of an unintended consequence for that well-meaning 80/20 rule.

Only because of a non functioning market due to federal and state laws.

If there was one health insurance marketplace and set of rules, and everyone, young, old, poor, rich, healthy, infirm, we’re forced to buy from it, then it would actually be possible for insurance companies to compete.

Right now, it’s basically a game of hot potato to try and not get stuck with the million dollar hemophiliacs in each state. A lot of the healthy are separated out into employer based insurance plans, and there’s not sufficient possibility of business to have more than one or two insurance offerings on healthcare.gov.

Insurers control care to reduce costs. The upward pressure on prices is from providers.

In terms of these insurers who control providers, can you give an example?

The upward pressure on prices is also from the insurers. Insurers have an "80/20 rule" from Obamacare that only 20% of their revenue can be spent on non-medical expenses (ie. profit, insurance administrative overhead, etc.). They pretty quickly hit the caps, and now only by increasing medical expenditures (the other 80%) can the pie slice that contains their profit grow year after year.

Insurers are really controlling care to improve their “star rating”. Insurers are given a star rating by many things outside their control and in the domain of providers and pharmacists. That’s why they are dropping docs and pharmacies from their networks and otherwise buying them to consolidate the market and their control.

Next time you go to your primary doctor ask them how many faxes they get from the pharmacist instructing doctors to change prescriptions. Then ask the pharmacists where they get those instructions from to fax to the docs....the insurers.

I’ll admit the star ratings are related to costs, but short term costs. All this watered down care and cookie cutter treatment will lead to higher costs long term (ie hospitializations, waiting until health problems escalate instead of preventative care or proper management).

It’s also why the big groups have reinvented HMO, now called ACO, bc even they don’t want outcomes based payment, so with ACO they can get paid $x/patient per year and make the care fit. HMO failed from a cost and care perspective, again not in the short term but in the long term, and it’s literally being rebranded as ACO by the insurer/provider groups.

Star ratings are for Medicare plans only, not commercial. They are related to the quality of the insurers for the customers, not prices.

Yes but the Medicare plans are private insurance, the same insurers for the “commercial market” as you call it. You can’t separate the insurers dropping providers from networks and buying practices/hospitals from Medicare plans to non Medicare plans.

In other words if you aren’t a Medicare patient and are insured by UnitedHealth for example, you will be subject to the same networks of doctors/hospitals as their Medicare plans, so private is driven my the Medicare plans, because Medicare rules are driving the consolidation of the market.

And yes everyone will tell you star ratings are about “outcomes” not price, but if you knew/know anything about the star rating metrics it’s obvious “outcomes” is marketing/PR for cost cutting. Otherwise I’d ask to point out any metrics that increase star ratings that don’t lower costs, whereas it’s easy to point out the metrics that result in better “patient outcomes”/higher star ratings but lower quality of care.


Yes, and Kaiser has some of the lowest cost healthcare out of all insurers.

I did mean providers, I worded that poorly. US government does not set max prices for procedures, checkups, test, drugs etc as other counties have wisely chosen to do.

The reason we spend so much on Medicare and Medicare is because people are less hesitant to use the service. On a per capita basis, the public payers have reduced overhead and costs compared to the private markets. If you have sources proving me wrong, I’d be happy to look at them.

And while the US market my be drowong in various regulations, it is severely lacking in price control regulation - the whole reasons for this discussion.

The cost of procedures for Medicare and Medicaid is still much higher than for other countries.

Yes, they reduce costs by saying “this is what we’ll pay”, but it’s still much more costly than other countries’ systems.

And I agree with those two sentences - never was arguing that we pay less (compared to other models) in our public markets. But you are not strengthening a counter-point to the conclusion I presented from the book regarding zero price control in conjunction with for-profit insurances which jacks up overall costs through coverage disputes, excess admin work etc, lack of price transparency pre-treatment etc. What is your personal hypothesis for why US healthcare is such a poor value for the price?

If you look at the vision correction and plastic surgery markets, you'll see they function quite well! Providers compete on a combination of quality and cost. So I don't think there is anything intrinsic to the free market that suggestion it's to blame for ever increasing prices.

My personal hypothesis is that Americans get a lot more healthcare than most countries provide, combined with higher prices. Not all of it is all that beneficial.

If you want to read something really eye-opening, check out this McKinsey report, bottom of page 14[1] It basically compares US healthcare spending across categories, adjusting for GDP (expecting the US' higher GDP means we spend more).

For inpatient care (hospital care), the US actually spends inline with what other countries spend. For long term and home care, the US spends less than other countries. Same thing with durable medical equipment.

Almost all the "excess spend" is in the outpatient setting. American's get a shit ton of procedures done that other countries just wouldn't do. Have a hernia? Providers in the US fix that, where other countries might say "we'll do something if it becomes a problem" (for example).


Medicare is dramatically more efficient than private insurance, both in terms of actual health costs paid out and administrative overhead.

"Never confuse an unregulated market with a free market."


(Yes, yes, I understand that to an economist, a "free market" is free of regulation, a product of laissez-faire economics. But to the lay person, a "free market" is one where prices are set by perfect competition, which requires a balance of power, the prevention of monopolization, and information symmetry.)

Really? I thought it was the other way around.

Both are about as real in practice as the Easter Bunny, so it's a distinction without a difference.

Yeah lay peoples definition is the markets which they are used to living with which don't match the technical terms exactly but come close enough for them.

I just use the term "free enough market" to describe it.

We run a health insurance company at my firm for some € 100 in cost per insured per year (the Netherlands). We do full bargaining with suppliers on our risk, give yearly premiums up front and have to accept everyone for a pretty much standardized premium. Dare say we even try to innovate in combination with other private insurances we offer like disability as well. Of course required for this to work is quite massive government intervention. They lay the backbone for proper risk equalisation and we try to work with that. 20% of total health spending would be about a 14-fold increase. (It gets a little murky since parts of health are outside of our market and the responsibility of local municipalities.)

From what I understand, the healthcare market isn't free at all. LOTS of regulation is what has caused this mess I believe.

Its impossible to do an apples to apples comparison but I would imagine by most standards EU health markets are less regulated than American ones, just because the organizational structure is so much simpler and oversight is so much less distributed. Instead of needing policy on every kind of machine you can use in what configuration or parameter codified in law or by an agency by formal declaration the NHS just buys the stuff they want doctors to have.

It is much less free in France or Germany, and they spend considerably less for much better outcomes. You would never get an MRI for a sprained ankle in France, but on the other hand people do not die because they cannot afford insulin.

Ugh. I hate this story. In every popular story I've seen of "this person died because they couldn't afford insulin", it's really been a case of "this person died because they couldn't afford the most expensive insulin, and they weren't willing to switch to the DRASTICALLY cheaper insulins available".

- The story I'm looking at now had someone complaining he couldn't afford his Lantus.

- Lantus is pretty much the most expensive 24 hour insulin available. Last I checked it was something like $275 per bottle.

- Walmart has cheaper insulins R, N(PH) for somewhere in the range of $20-25. They're older insulins and don't work as well, but they are an option for any diabetic that can't afford the newer insulins. (Note, I can't find it on Walmart's web site but, as I understand it, you can't but it online, so that may be why)

For context:

- My insurance doesn't cover Lantus either. I take a generic (to be fair, I don't believe that generic was available at the time of the story) version of it.

- I used to take R and N insulin

The american healthcare market is possibly the most 'free' one in the world. Yet we're still failing with regards to countries that have far more regulations and restrictions.

It's time to stop perpetuating this myth. Especially in a thread directly about how the US overpays for everything compared to literally every other developed country on the planet.

If health insurance companies are the problem, why are administrative expenses --- which we overspend on, to be sure --- not the dominant factor in our health care expenses? They aren't; they're not even in the top 3.

If Medicare managed all of US health care and nothing else changed (that is, if we relied on Medicare for funding and kept the rest of the system we had intact), we'd reduce prices by something in the low teens percentage points. Families upset about the cost to insure their families on the ACA markets would not be mollified by that level of price relief.

> allows for-profit health insurance companies to exist with ZERO regulation to cap healthcare prices.

There's zero regulation on the software industry, and prices have trended to zero. I suspect the problem with the health care industry is much deeper than not enough regulation.

How often do you get rushed to your local software company in need of an immediate node.js webapp or you'll die within the hour?

The vast majority of healthcare costs are not related to emergency care. For that portion, there is indeed an argument for government-provisioned services being more efficient.

please don't foist the entirety of this issue on insurance companies, the states and federal government dictate the paper work to be done and the coverage provided. it is damn easy to mandate paying for procedures when you don't have to pay for them.

California and Vermont found this out when both determined single payer options; read : the state; were not affordable without seriously curtailing care options. As in, when you tell people no it becomes affordable, when you bend over for every little thing it suddenly becomes what we have today.

Americans spend more on healthcare but get less for one simple reason. We artificially restrict the number of new doctors each year through licensing and other government regulations, which reduces the supply of medical professionals. When you restrict the supply of anything and demand is inelastic, prices go up.

This is a totally inaccurate answer. The intricasies of healcare inflation are way more complex than simple supply and demand economics and I’d suggest you read the book I mentioned in the my original comment to be more educated on this subject

There are mutual (policyholder-owned) life insurance companies; why not mutual health insurance companies?

Healthcare is extremely regulated, but poorly. In addition to the much-talked-about “more vs. less” dimension of regulation there is the much more important “better vs. worse.”

It's worth noting that the U.S. market does pay for the lion's share of patented drugs, effectively funding a significant portion of R&D that benefits the whole world years later when generics come into market (at least for those drugs which are not costly to manufacture, which happen to be the majority).

I'm not saying this model is right. I'm just saying that doing away with it will have fundamental consequences to healthcare R&D

EDIT: To be clear, a minority of drugs are either very hard to manufacture (It's been a while for me so I don't recall their exact name, but I think they may be called "biosynthetics" – please correct me if I'm wrong) or researched for a very small number of patients (so-called "orphan drugs"), which confers them additional protection from generics and competitors. These generally have much higher prices than the "standard" drug.

Meh -- If this is the case, it would be far better to explicitly fund research and development in a separate appropriation rather than just mindlessly subsidizing all prescription meds. Calamities like the Valeant fraud would be much less common without the US dramatically overpaying for drugs.


The Valeant fraud was 90% sketchy accounting and 10% price hikes, more Enron than Martin Shkreli.

By anyone's standard, they are not representative of the U.S. Pharma market as a whole.

Without the accounting fraud, they're not far off the US pharma market as a whole...

Teva is doing the same nonsense with generics, Turing did with their toxoplasmosis drug, Mallinckrodt bought Ofirmev then jacked up the price by several hundred percent, Allergan & Pfizer were trying to merge solely to tax advantage of Ireland's (and the US's) dumb IP/tax laws, GSK, Abbott, and J&J have all paid billion dollar settlements for their fraudulent marketing practices. Look at the PBMs that are suddenly worth billions of dollars purely by being middlemen between Pharma and Insurance companies.

There is so much obnoxious 'financialization' and tax optimization to justify share prices.

What is representative of the US market, is the cost of marketing in US.

>Meh -- If this is the case

It is. If the US starts paying what Sweden pays for drugs, there is no one left to pay the cost of developing drugs on this planet.

It does appear to be the case that the US funds most pharma R&D due to Americans overpaying relative to the rest of the word. In some cases (China, India) this is due to weak IP protection, but in other cases (Canada, UK, Europe) it's more to do with our governments having a stronger negotiating position and setting hard limits on what they'll spend for a given benefit to patients.

Some characterise this as freeloading, but looking at the NHS for example, they set relatively clear limits for how much they will pay per quality-adjusted life year that a drug provides. If a drug costs more than this limit, financially more people will lose out if our healthcare system purchases this drug over something else (more doctors, hospital beds, etc.).

Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments?

Also, is it not worth looking at why pharma R&D costs so much? The pharma industry seems to run at a very healthy profit margin compared to most other industries. Maybe the lack of market pressure is allowing the pharma industry to remain fatty? Obviously there's a fear that cutting US pharma revenue would hurt global medical R&D, but I don't see this as being a foregone conclusion. It could just as possibly be market failure and regulatory capture keeping pharma R&D expensive.

> Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments?

It doesn't make you immoral, but it is important in understanding the tradeoffs of suggesting that the US switch to an NHS-style system.

> Also, is it not worth looking at why pharma R&D costs so much? The pharma industry seems to run at a very healthy profit margin compared to most other industries. Maybe the lack of market pressure is allowing the pharma industry to remain fatty? Obviously there's a fear that cutting US pharma revenue would hurt global medical R&D, but I don't see this as being a foregone conclusion. It could just as possibly be market failure and regulatory capture keeping pharma R&D expensive.

They may be doing well, but you may not be seeing all the little pharma companies that die trying. At the end of the day, investors are allocating capital where they think they can get returns. If you reduce the returns of pharma, you reduce the attractiveness of investing there.

I try investing a lot in smaller pharma companies... and they are hammered by the big ones. Not on innovation, but on marketing.

I disagree about NHS type system, that reduces access. A healthy mix is required, though.

A lot of upfront costs are also footed by users and government/non-government funds. And a lot more of those costs are due to government regulation and essential insurance at development.

Pharmaceutics researchers aren't exactly rich, btw. Your dentist probably makes more than many researchers of life saving drugs.

How does an NHS type system reduce access? Everyone is covered and can go to the doctor without worrying about paying thousands in copays.

And also if people wish to pay for private care (whether out of pocket or using insurance) they're free to do that too.

Indeed, what is the purpose of the pharma industry if not making money for the shareholders?

Too often these drugs are hugely expensive and provide marginal benefit over existing treatment. Sometimes they're even worse than existing treatment.

The "freeloading" meme is the creation of public relations groups employed by the pharma industry.

Drugs in the US are priced at the profit-maximizing price. That profit-maximizing price has nothing to do with how much pharma earns in other countries.

And it has absolutely nothing to do with the cost of R&D. R&D is a sunk cost, has no effect on drug pricing.

As someone who works in the industry, you are somewhat correct. Once a drug is approved, it is priced independently of the R&D cost.

However, the decision to bring a drug through clinical trials (the "D" in "R&D") is gated. The potential price of the drug is estimated and the financial costs and potential return are calculated. If the return isn't that great because you can't get the volume or price, the R&D investment isn't made and the drug "dies".

So in other words, price controls on drugs would lower the prices of drugs already approved, but it would likely also kill a number of drugs currently in development.

There's sticker price and there's what buyers with the ability to negotiate pays. I hear the government healthcare suppliers (Medicare, Medicaid and VA) aren't allowed to ask for lower prices for bulk despite being some of the world's largest customers, each.

>I hear the government healthcare suppliers (Medicare, Medicaid and VA) aren't allowed to ask for lower prices for bulk despite being some of the world's largest customers, each.

Yep, that's part of Medicare Part D, in turn part of the "Medicare Prescription Drug, Improvement, and Modernization Act", and went into effect in 2003 under Bush 43.

That's not true in the slightest.

Medicare - gets an automatic discount equal to the average discount that commercial customers pay

Medicaid - gets another 23.1% discount on top of what Medicare gets

VA - lowest price of all customers, get at least a 24% discounts on top of what Medicare gets

And if the anticipated future profit-maximizing price of a new drug isn’t high enough, you don’t fund the R&D and the drug never gets invented.

Yeah. I hear Dr Salk died a multi-billionaire, right? You really need to understand the diminishing returns, when it comes to this issue.

Having $70k HepC healing drug is OK. Having daily medication that's $50 per dose is not, unless the target demographic is exceptionally small.

> And it has absolutely nothing to do with the cost of R&D. R&D is a sunk cost, has no effect on drug pricing.

That's not how this works. Volume is fixed because you effectively already know how many patients there are and COGS is minimal because drugs are generally very cheap to produce, so price and SG&A are the key drivers to determine returns

To save others the Googling: SG&A = Selling, General and Administrative Expenses.

I'm not sure that you disagree with me. The higher the price the higher the returns, but price too high and you earn less money, because volume is not fixed. (I'd bet a lot less Viagra would be sold if it cost $500 per pill.)

That was the genius of Martin S. He felt, correctly, that Daraprim was mispriced. That's why the price per pill was raised to $750 from $13.50.

Volume is pretty much fixed for all health related drugs, particularly since your health insurance will foot the bill most of the time. As a patient, you don't care if the drug costs $100 or $1,000 to the insurance company – you want the best treatment available.

Viagra is a different ball of wax since you not taking it will never reduce how many years you'll live.

I wrote on this above. As an investor in Gilead and a Truvada user, I really hate the fact that Gilead isn't making Truvada an effective vitamin for most of EU. It's an HIV infection prevention drug. It's priced for margin maximization at ~$1600 for 30 pills. I bet most EU countries could get on board with €20-€30 per month and have 10% of the population be on it. And EU has very low administrative costs, as many countries buy centrally.

I consider Martin to be a scumbag, but not much more than your average human being. He's a scapegoat, to the industry that would prefer a flashy Martin to scrutiny of their own actions. He should be free, as his conviction was a witch-hunt.

> The pharma industry seems to run at a very healthy profit margin compared to most other industries.

But not compared to other high risk, capital intensive industries, i.e. tech.

Any those margins only look great if you ignore the billions of investment that failed to produce $1 of revenue.

> Does this make us immoral for "freeloading", because we prefer putting our limited money into cost effective treatments?

It depends on whether some drugs that your system considers affordable today as generics, would have not existed without being funded by US taxpayers, I suppose.

> without being funded by US taxpayers

It's not US taxpayers that are footing the R&D bill, but United States based customers of non-generic prescription drugs. These are technically two different sets of people.

I believe Medicare pays for like half of overall healthcare spending. So at least half of such R&D bill is paid by tax payers.

How does research funded by charity or governments figure in this? How do we know if research funded by these sources leads to profit making drug research?

How is there a lack of market pressure in the pharma industry?

Prices are essentially fixed and heavily influenced by govt. Not a total lack of market pressure, but definitely skewed vs shoes etc.

US GDP is ~19 Trillion. If US Health care spending is 18% of GDP, that's about 3.5 Trillion annually. Pfizer's (largest drug co) net income in 2017 was ~21 Billion [0], less than one percent of health care spending. I didn't tally the rest of the industry up, but I'd be surprised if it hit 10% of total costs.

[0] https://en.wikipedia.org/wiki/Pfizer

Prescription drugs account for about 10% of all healthcare spending. It’s been pretty steady over the years.

Why are you looking at net income? Revenue is the relevant number, which was $52.55B in 2017.

Actually, both revenue and income are proxies for the relevant number, given that I had in mind to address the GP's point of 'effectively funding a significant portion of R&D.' If the article [0] is to be believed, that's about 8-9 Billion for Pfizer, and about 70 Billion for the top 15 pharma companies, about 2% of US health care spending. Even if we cut US health care spending in half (to, say, the UK's level), funding pharma research at current levels would be a fraction of total costs.

[0] https://endpts.com/top-pharma-biotech-research-development-b...

I’m not sure what kind of R&D the $800 or whatever it costs now Epipen is paying for. R&D for lobbyists?

Or profits because the company gamed the market.

I don't know about Epipen, but it can cost billions to bring new drugs to market https://cen.acs.org/articles/92/web/2014/11/Tufts-Study-Find...

I don't know if it still the case but advertising costs were previously considered r&d so grossly inflating those numbers.

Do you a source?

As far as I know, R&D never included advertising.

R&D includes a lot of (most?) but not all advertising. It probably doesn't include things like running DTC ads on TV. But it does include things like:

- Paying doctors to prescribe the drug to patients for "research purposes."

- Paying doctors for their "valuable opinions" about the drug.

- Paying for advertising to recruit patients into clinical trials.

And so on.

I don't think there are any industry-wide statistics, so you'd have to look at the break down for each individual drug (where available). If you read pretty much any book on the pharma industry it will go into this, there are no shortage that you can find on Amazon.

For the first point you mean clinical trials? I wouldn’t call that advertising.

The 2nd point sounds like consulting fees, not advertising.

And the 3rd point is required to recruit for clinical trials. And the drug doesn’t even have a brand name at the point. Doesn’t seem like what the general public would call advertising.

> For the first point you mean clinical trials?

Usually post approval clinical trials. Since pharma companies wouldn't be allowed to pay doctors to prescribe their drugs for no reason, they just spin up new trials after the drug is already approved and pay doctors in exchange for getting the patients to do something nominal like filling out a survey.

> The 2nd point sounds like consulting fees, not advertising.

Consulting is a form of advertising, at least in the way it's actually done in the pharma industry.

I think the argument is that these activities are done in a specifically disingenuous way that achieves primarily marketing and sales goals rather than R&D goals.

Certainly return on capital investment is considered when deciding whether to invest in R&D.

New drugs and their acceptance by insurance companies is much more important to me, than price gauging. I invest in pharma companies.

The ability to raise the price for a single drug is really the last thing I want in a company I invest. I want long lasting customer base or high impact justifiable expenses, that US HMOs and EU governments will gladly pay(reason why I bought Gilead when I heard about their HepC cure). And Gilead's Truvada strategy, why I divested as a result.


I don't understand your point. Obviously it's going toward R&D of new drugs unrelated to the EpiPen. What does the price of an EpiPen have to do with how the money is spent?

That's not how it works. You invest if it's worth investing, not if you just have the money laying around.

Paying a few billion dollars to a big pharma company is not going to make them invest more in research. They will instead pay the money out as dividends.

The goal of patents is to create incentives for future research, but if you change the rules by increasing the extent of EpiPen patents after the drug was created, where is the incentive?

> Paying a few billion dollars to a big pharma company is not going to make them invest more in research. They will instead pay the money out as dividends.

This is a misconception. No investor wants their money back. Investors want a promise of MORE money back in the future. If investors wanted their money back immediately, they wouldn't have bought stock in the first place!

The vast majority of investors prefer (ex: Tesla) a company to spend all their money asap on infrastructure, research, development, etc. etc.

Dividends are a last resort, only to be used if a company doesn't know what to do with its cash. Once a company starts paying dividends, it means that it has run out of ideas for how to invest into the future.

Besides: its more tax efficient to grow the stock price rather than to pay the profits back in cash.


Even a big company will want to at least appear that it is growing even bigger, through R&D funds and what-not. If you start to give out a lot of dividends, investors will probably take it as a bad sign and flee.

You don't have to pay dividends, you can just do a stock repurchase.

Regarding investor preferences, they only want the money spent if it gives them a positive NPV. Pharma companies are already paying dividends, which means they have funds in excess of their NPV>0 projects, which is why they return them to shareholders.

Hell, half of the shareholder activism literature and the policy payout literature is about CEOs overinvesting and doing empire-building instead of returning the money to shareholders..

> Regarding investor preferences, they only want the money spent if it gives them a positive NPV.

Precisely. And cash rarely gives the best NPV. You put money into companies with the expectation that they make MORE money in the future.

> Pharma companies are already paying dividends, which means they have funds in excess of their NPV>0 projects, which is why they return them to shareholders.

And there you have it. It means that Pharma Companies are making more profits than they know how to reasonably invest into themselves. Which is PRECISELY why people get annoyed at them, especially when they have huge marketing budgets and $800 Epipens.


There is a Christian Parable about the man with 1 Talent (where Talents were a unit of Gold in the time of Jesus). The man buried his gold, because he was too worried that he'd lose the gold.

The man's peers however invested the money and grew their Talents. The man with 10 Talents had 20 Talents at the end. The Man who started with 5 grew to 10.

The man who buried the gold ended with just 1 Talent (the only one he started with), and was therefore punished. The religious message here is not to hoard your Talents (ie: Gold), but to invest them and grow yourself, and your masters.


I guess not everyone is a Christian. But if Pharma companies can't figure out where to invest the money, then perhaps they could at least return the money to their customers by lowering the price of their drugs.

Returning the money that they started with is... not growth. Companies are supposed to grow (through new R&D, improvements, etc. etc.).

To be fair, the master in that story was a bit of a jerk.

> You knew that I reap where I have not sown and gather where I scattered no seed?

He took what belonged to others. And, had the servant with 2 talents lost money instead of making it, I doubt the master would have responded to him with "Well, you tried. Good on you."

Paying dividends is not giving investor's their money back. It is paying a return on the investment. Some companies like Amazon espouse the idea of perpetually trying to grow stock price, but that is not what every investor is looking for. Some investors are looking for an investment that will pay dividends every year going on forever.

This depends on the investor. Stock market investor, the one who's purchase of stock doesn't provide the company with any funds, cares not how income is delivered. But you're right on one thing - investors want better future prospects, however those are achieved.

Mylan gross profit in Q1-Q3 2018 was $2.3 billion, and R&D expenses were $600 million [0].

If I'm reading this right (and I may well not be), there is a lot of money not accounted for by R&D expenses.

[0]: Nov 6, 2018. Mylan, NV. Quarterly Fillings. Accessed from http://investor.mylan.com/static-files/2909eb6c-4430-452e-94... via http://investor.mylan.com/financial-information/sec-filings

Except the company that made EpiPen doesn't even make EpiPen anymore. Mylan bought the rights to make the drug in 2007, and then other companies bought it from Mylan. I forget who owns EpiPen now, but the current owner is very far removed from the original researchers who made that drug.

The EpiPen is one of the "hard to manufacture" drugs I mentioned. Although it is top of mind to many, it is not representative of the market.

EDIT: "hard to manufacture" is in quotes because it's what I said in my parent comment (though to be fair I said "costly to manufacture"), but I meant it as an umbrella term for everything that can't be substituted by generics

EpiPen is just an epinephrine autoinjector which date back to the 1970’s. The medicine is much older and very cheap ~50 cents.

In term of cost syringe‘s cost ~15 cents and work fine in experienced hands, but auto-injection makes them slightly less error prone. It’s litterally over a 300x markup for a rare problem.

EpiPens used to cost under $100 for a 2-pack, but now they cost over $600 for a 2-pack. Epinephrine costs like $0.17 per ml, and an EpiPen dose is 0.3 ml.


I feel like it's probably worth, to combat the false exoticism, pointing out that "epinephrine" is just a medical industry name for what is generally known as adrenaline.

There are no "real" implications to calling it one or the other, but people think differently about "a substance I've never heard of" and a common household name.

There are cheap generics all over. The only patent EpiPen has is the applicator. Generics require you to take a syringe and inject it by hand because the patent prevents competitors from using a similar style spring loaded applicator.

The epinephrine used in epipens is extremely cheap to produce.

EpiPen is one of the "hard to manufacture" drugs

Yeah it must be very hard to manufacture when the manufacturer's revenue is going towards paying off a $465 million settlement for deceptive business practices. https://en.wikipedia.org/wiki/Epinephrine_autoinjector#Price...

If it was hard to manufacture, why is it cheaper in Europe?

We overpay for prescription drugs, but they're not even close to the biggest contributor to healthcare overspending. We could make all prescription drugs free and only reduce our costs by ~9%.

I would like to see some hard numbers for this. Otherwise I believe this is just self-serving propaganda by drug manufacturers.

Especially when you consider most pharma companies seem to make around 15-30% profit after all costs/R&D... not many industries manage those kind of numbers.

You are looking at a biased data set is why. You are looking at the biggest drug manufacturers in the world which most likely own the most lucrative drugs. If you want a more unbiased sample then you need to look at the entire industry. For small drug companies most of the time their drugs do not get FDA approval or doesn't pass some regulatory approval and the whole company folds. For the bigger drug companies, the trend isn't to increase R&D spending but rather to simply buy up smaller companies that have patented drugs. This makes sense though because of eroom's law which states that even with advanced technology...creating new drugs or discovering new treatments is getting harder (more expensive) which means that the rate of return for drug R&D is declining.

There's plenty of industries that do. Tech makes much more. In fact, pharma on average spends a greater proportion of revenue on R&D than just about any other industry.

It's true. But the US drug marketers also move lots of money to television companies (watch any non-sports show and look at the ads). They finance lots of perks for prescribers.

Their clinical trials for new compounds are extremely expensive, freeway-tunnel-under-harbor expensive, Carl Sagan expensive (billions and billions).

They pay generic-drug manufacturers to refrain from making competitors to their compounds for which patents have recently expired.

They pull the enantiomer hack. Many organic compounds have a right-handed and a left-handed version of their structures, only one of which is active as a drug. Chemists call these two versions "enantiomers." The first patent on a compound covers the basic chemistry. Then, when the first one expires they patent the same compound, but only the purified active enantiomer. They then send their sales reps out to convince docs the newly patented drug is way better than the old one.

They lobby the US federal legislature to enact health care insurance laws (Medicare Part D) prohibiting the negotiation of prices.

They claim drugs bought in Canada aren't safe, even if they come from the same factory.

And, Purdue Pharma.

Can confirm. And it affects medicine outside the US as well.

A bit over a decade ago, one very popular modern antidepressant drug used to be citalopram (cipramil). This is the racemic mixture (meaning it contains both the left and right-handed versions). The new one, escitalopram (lexapro) only contains the active stereoisomer. Its dosage is exactly half of the previous version because racemic mixture always (?) occurs in an exact 50/50 proportion.

Both drugs work perfectly well. No statistically significant difference in effect or side-effect. You just don't get the inactive half of the molecules.

Escitalopram wouldn't exist if it weren't for citalopram's patent expiring. Or maybe they were just sitting on the purified version, biding their time.

This is a straight counterexample of the argument that the insane costs of the healthcare system in the US somehow pays for new drug research all over the world.

This industry called "drug research" simply isn't motivated to improve health (not just "find better drugs"), they are just researching whatever is driven by profit.

They will just as happily waste billions of research on a drug that is almost literally identical to one that already exists and is known to work, a copy that nobody needed, only so they can patent it again.

At least they replaced it with something equivalent, instead of something worse. Because they would if they could (and given the state of reproducibility of medical research, probably did at some point or another).

That is not research, that is throwing money into a bottomless pit. Which is what the featured article is about.

Drug research in the US is no exception. You could do so much better research if it was done efficiently (and as a bonus take some pride in your work).

The fact that US drug research dominates the world market is not something that the rest of the world should be thankful for. You waste billions upon billions on such an industry, of course it's gonna dominate. Doesn't mean it's good. Other countries could do efficient drug research but if they don't get billions budgets (because you don't need it), they can't waste it on marketing and push their version of a drug no matter what.

Just because something is expensive, doesn't mean it's good.

Exactly. Somebody I know with scientific training and depression was offered Lexapro (escitalopram) to replace a citalopram script: "It works better for some people." She wasn't so depressed that she didn't explain the scam to her doc, who accepted the explanation and stopped prescribing the new version with a reduced concentration of the ineffective stereoisomer.

But this doc wasn't getting visits and kickbacks from Allergan.

Except that every company involved in the healthcare industry in America (drug companies, insurance companies, hospitals, etc.) make hundreds of billions (or trillions) in profit each and every year.

The reason for the high prices is because healthcare in the US is an extremely, extremely lucrative for-profit industry.

That doesn't mean anything at all. The problem is dissipation of rents -- when an industry gets an economic rent, expenses will tend to increase to the maximum allowed by market discipline. This is true for all bureaucracies -- e.g. Universities are always out of money but keep charging more. Hospitals are always out of money but still charge too much. That a firm finds a way to spend the money does not mean that the amount charged is the minimum that is possible in a long term stable solution. Prices are clearly out of line in these fields with OECD averages, yet each specific firm finds that its expenses are great enough that they only earn the market required return.

So where does the money physically go? If I’m a rent-seeker, I still have an incentive to be stingy with my expenses. The only reason I wouldn’t would be if someone else had a monopoly and was rent-seeking on me, but who’s doing that?

I wouldn’t rule out the possibility that it’s rent-seeking all the way down, but you’d have to make that case. Suppose you say, doctors and pharma companies are rent-seeking, and I say doctors don’t really bring home the bacon and pharma has a 5% profit margin. Then you say, well, it’s the bureaucrats, and then I say, why doesn’t some pharma company just fire the bureaucrats and keep the profit margin to themselves? They can’t because of regulations? That’s not even rent-seeking anymore, it’s just over-regulation and you can fix it with deregulation.

OK, well, the doctors have their student loans and the pharma companies have some other requirements that they need universities for, so universities are the real rent-seekers. Except it’s not the universities, who are broke, it’s—well, who seeks rent from universities? I’m not ruling it out, but this is also starting to sound like it leads back to the Rothschilds somehow.

You can’t just say “Americans pay more for X therefore rent-seeking”. There are lots of things that can cause inefficiencies.

Yes, you, personally have an incentive to be stingy.

But when you are talking about a big organization, they find ways of spending money because the managers of the organization are not aligned with the shareholders. Every organization has pressure to keep expanding because there is always more stuff that could be done, and you can hire people to do that stuff up until the total earnings are in line with the market return irrespective of the above average earnings that could be had without all the extra activity. They will keep spending on marginal expenses to "defend" their rents up until no rents are to be had. This is called rent dissipation.

A good example would be education, and count the number of educational administrators, gold plated dorm rooms, activity centers, weird classes, etc. Then go look at hospital spending. Instead of the nurse giving you a tylenol, they invest in a prescription dispensing vending machine that costs $$$, and they hire more administrators. Then take a look at your standard corporation and look at all the odd positions they have that a "lean" smaller company or a start up would never have. Compliance officers, marketing staff, assistant to the marketing staff, support services, travel support, real estate management services, etc.

So you can think of this as a law of bureaucracy, unless there is someone imposing discipline on the cost side, the managers of a bureaucracy are going to grow that bureaucracy until they run out of money. This is how ATT ends up funding basic research and discovering the cosmic microwave background radiation. Because they have all this money to spend. And I guarantee you that at its halcyon days when it was obviously a monopoly and thus earning monopoly rents, ATT was not earning more than the average market return on their investment because they kept "investing" in hiring more staff and more resources up until the total return fell to the market required return.

You know, the more I think about it, the more I like this idea. It's not so much that capitalists are rapacious and sociopathic, it's that most administrators and bureaucrats are prone to mediocrity and only exercise cost discipline when they are under a constraint forcing them to do so.

The robber baron would actually be preferable, in a certain sense, because at least then, someone would benefit from the rent-seeking. The problem being that if you were a robber baron, there are much better ways to get rich. Also, many of these rent-seekers are not even for-profit enterprises.

And as a completely different example, what this principle suggests is that nations with a low interest rate environment will generally see a decline in profits corresponding to the lower rate. So for example Japan, a nation where corporate profits became notoriously low after the period of zero interest rates. Or, for example, China, where various subsidies to the cost of capital result in very low and sometimes negative cost of capital to state owned enterprises (SOE). It's these SOEs that end up doing weird things like a metal mining SOE building a replica of an Austrian village for a tourist attraction (https://www.youtube.com/watch?v=hP-7f1XW7jE). How on earth would a mining company do that except for the fact that they have a lot of money lying around due to earning economic rents? They find ways of spending money up until their return is the market return.

This is completely independent of their pricing power or monopolistic status.

Doctors in the US make almost twice of what doctors in other developed countries make.

If you're saying it's because they have to pay for med school... then maybe it's med school that's taking the bacon :P


And, as rsj_hn, all the bizarre administrative overhead eats a lot of profits which are basically dissipated, it's economic wealth destruction.

They have lower profit margins than most tech companies like apple.

Apples and oranges.

How so? The products they make are different, but at the end of the day they are both industries living in the capitalist society we've created, driven by the same incentives, and largely operating by similar principles. How is it morally acceptable for a tech company to make huge margins and yet morally reprehensible for a pharma company to make margins that are smaller?

The answer to this is so obvious that I almost have to assume that you're not asking in good faith, unless your purpose is to point out the flaws in our society's views on economics. Tech companies like the ones mentioned are known for primarily producing non-essential luxury goods like smartphones or B2B services. The pharma companies under discussion are in many cases producing drugs that people must take in order to live.

> hundreds of billions (or trillions) in profit each and every year.

No company makes trillions of dollars in profit.

Do you have any sources/data for this? I would be very curious to see it. The mentioned costs in this article only point to

> higher drug prices, higher salaries for doctors and nurses, higher hospital administration costs and higher prices for many medical services

I’m not sure if R&D costs are factored in at all for this particular study.

The US spends more on biomedical R&D and produces more drug patents than the entirety of the world combined.


As far as it’s implications on the cost of healthcare in the US I don’t think there is data for it since it’s pretty hard to measure.

200 billion is a lot, but something in the ballpark of just 7%. [1]

I agree, it’s hard to measure, but do you think those estimates are more than 3% off?

Best case, eliminating all drug research saves you 10%.

Although if costs in other areas are bloated, that is a scarier number. [1] https://www.cms.gov/research-statistics-data-and-systems/sta...

The US is also 40% of the world wide revenue which is probably a more important figure.

Good to know, but my question really has to do with if the extra cost for doctors, hospitals, drugs, etc. is used to offset R&D costs.

What I am getting at is that in theory, it should still be possible to do a lot of great R&D work while still providing affordable health care to citizens. I don’t think they are necessarily tied together.

Also more patents is not necessarily a good thing since they can create more legal hurdles and red tape for other pharmaceutical companies who may want to build on top of the ideas and inventions.

Could be but the fact is that still the country with the highest cost of health care is the one that producing more drugs than the rest of the world combined.

The US is also 40% or so of the global pharmaceutical market given its population it literarily funds the profits of the global pharmaceutical industry doesn’t matter if it’s American Swiss or Indian company they all make their buck on the back of Uncle Sam. It’s not clear what the impact would be if the US would say start paying 50% less for health care on the world.

> Do you have any sources/data for this?

Basically all equity research in the Pharma space backs up this view. Unfortunately I don't have any public data that I can share.

The US pharma market is around $300B vs total health spending of $3T. Pharma is a big expense but certainly not amongst the biggest.

Costs for boring health issues like births, broken bones, diabetes and end of life care are what really matter. Oh, and administrative costs are way higher in the US.

Yes, but there are better ways to do it.

A natural group to pay R&D for patent-free drugs is health insurance companies, who would benefit from the lower costs, and perhaps even come out ahead. But its hard for those companies to organize such an effort, because they can get the same benefit even if they don't contribute. It's a classic public goods problem.

Usually we solve public goods problems with taxes, and we could do that here, taxing the insurers and spending the money on R&D for patent-free drugs. Bernie Sanders introduced a bill to this effect several years ago. Iirc it involved "xprizes" for successful treatments, so bureaucrats wouldn't be steering all the research.

If this was the case in the US than birth control, Plan B, and abortifacient drugs would never have been invented here.

The plan simply provides another funding mechanism. There's nothing in the plan to prevent companies from developing patented drugs. So if you're right, it would just mean that birth control drugs would not be free of patents when introduced, just as under the current system.

To the person elsewhere that complained in behalf of little drug R&D outfits, well, bounties vs patents would probably be beneficial to them too.

NIH has also kicked in vast sums of capital to help fund that research, though. And actually considering the scale of healthcare spending (3.5T in 2017), you could probably publicly fund drug development outright within the savings window of something like full public funding of healthcare. Total drug R&D expenditure was like 70B in 2017, it's not some giant gift (though appreciated, temper the enthusiasm, so to speak).

> "biosynthetics"

You're probably thinking of biologics [1]. These include immunosuppressant monoclonal antibodies such as adalimumab (Humira) and secukinumab (Cosentyx), used in treating autoimmune diseases such as psoriasis, ankylosing spondylitis, psoriatic arthritis, MS, Crohn's, etc. They are derived from biological sources such as Chinese hamster ovary cells [2]. They are also extremely expensive -- often several thousands of dollars per month [3].

[1] https://en.wikipedia.org/wiki/Biopharmaceutical

[2] https://en.wikipedia.org/wiki/Chinese_hamster_ovary_cell

[3] https://health.usnews.com/health-news/health-wellness/articl...

That would explain why we pay more for drugs, but as the article notes higher drug prices is just one thing we pay more for:

> The researchers determined that the higher overall health care spending in the U.S. was due mainly to higher prices—including higher drug prices, higher salaries for doctors and nurses, higher hospital administration costs and higher prices for many medical services.

R&D only comes to about $500 per capita per year. That doesn’t amount to a significant fraction of Americans’ inflated costs.

It's not just about pure R&D, it's about all the financial incentive for all the wheels that will be greased by it all throughout the industry. On the outside we don't like it, but we can't pretend the drive for research isn't also built on the back of the drive for profits outside of research.

while it is probably true that US healthcare is subsidizing drug discovery (perks of being the strongest economy), there still seems to be an asymmetry in the US. E.g You spend 6-8 times more in administrative costs and about 2 times more in drugs:


Administrative costs of care (activities relating to planning, regulating, and managing health systems and services) accounted for 8% in the US vs a range of 1% to 3% in the other countries. For pharmaceutical costs, spending per capita was $1443 in the US vs a range of $466 to $939 in other countries. Salaries of physicians and nurses were higher in the US; for example, generalist physicians salaries were $218 173 in the US compared with a range of $86 607 to $154 126 in the other countries.

Most drug research is paid by the US taxpayer through research grants, not by private companies. Pharma company marketing budgets much exceed their drug research budgets.

Do you have a source for this? From what I can find, e.g., [1], the government only pays for about 1/3 of the costs. And the government funding is usually more for the underlying basic science and preliminary results, compared to the drug companies that develop drugs, test them and bring them to market. These last steps, which are ridiculously expensive, have not been a government area of expertise. (The same pattern holds for most any technology, the government supporting the basic research while more applied research and development is left to private companies.)

[1] http://thebalance.com/who-funds-biomedical-research-2663193

This is the common defense, that the US is somehow responsible for an outsized amount of medical progress. Are there studies of such a thing? And do these studies distinguish between healthcare that leans elective vs necessary? Also, the US seems to excel at the very expensive end of life care.

But R&D isn't included in the OECD health spending database as far as I can tell.


I think it wouldn't be explicitly included, but it goes into the bottom line of big pharma companies. There is a very lengthy process of getting drugs through the FDA which makes investment's return-on-investment difficult to justify without raising already available drug prices.

(edit: Having said that, our healthcare costs are out of control and it's not directly because of the R&D. It has more to do with wild overhead in insurance and HMOs where only a small fraction of what consumers pay goes to healthcare.)

Pharma company “bottom line” (or any other measure of pharma companies) isnt included in the OECD dataset. See link above.

>There is a very lengthy process of getting drugs through the FDA which makes investment's return-on-investment difficult to justify without raising already available drug prices.

The lengthy process is there for a reason, it's not some hamper on profits just to hamper profits. Do we believe that the FDA is full of short sellers? Poor Pfizer, they won't get more money than they've spent! The logic here is sinister. ROI on drugs shouldn't be every dollar spent gets you a dollar ten and a drug, it should be you have a drug. The basic research that informs R&D spending has a ROI of zero by business metrics.

It is sad to think that the trajectory of medical advancement is dictated not by what we can achieve as scientists, but what is profitable for businessmen. When Jonas Salk was asked who owns the patent to the polio vaccine he developed, he replied, "Well, the people, I would say. There is no patent. Could you patent the sun?" In 1988 there were an estimated 350,000 cases of poliomyelitis worldwide, in 2018 there were 29 (1). The global initiative to eradicate the disease would not have been possible had the vaccination been for-profit.

(1) https://www.who.int/en/news-room/fact-sheets/detail/poliomye...

If that's the case, then don't forget that a huge part of US drug market is marketing. Those expensive pharma reps are not a usual thing outside of US, and provide no value when it comes to the healthcare system overall.

When it comes to some really interesting drugs, prices and their accessibility are really strange.

Take HIV infection preventing Truvada. The "market" price of 30 pills is $1600 in US. It's a good drug for continuous mass use for Gilead. Instead of making it pretty much ubiquitous as vitamins, they chose to target only US market for the low volume high margins. So... I'm actually annoyed with Gilead over this. I own stock and getting good deals in Europe could get up to 50mil people on daily dose of it. That would push the stock wildly up! With 0 extra marketing, as it's not high on adverse reactions with massive preventative benefits.

We don’t pay for that drug research via insurance though—even worse it’s our taxes that fund big pharma’s research and we give them tax breaks. So it’s even worse that we subsidize them and then allow them extort the public.

R&D should be publically funded like basic research is. We can say 'these drugs are expensive because they are expensive to research' all we want because it's true, but this statement ignores the problem of it all, and that is every step of the way from a customers insurance payment to research and development, there is skimming.

Private health insurance cannot run at cost, private biotechnology companies cannot run at cost either, and this is because shareholders and executives demand it cannot. Every dollar of ROI in their portfolio is a dollar that could have gone to research and development or lowering drug prices, every yearly bonus could have tipped the scales and let one more person afford to save their life. It is tragically terrible that if you had the right books, you can calculate the exact x% of every dollar people spend towards healthcare that goes toward someone else's luxury rather than healthcare or in support of research. And thats ignoring the other half of the problem with private research, in that projects are decided by white collars and not white coats, so research efforts are focused on what will make a profit or what they can put out quickly before anyone else to dominate market share on a novel treatment, and not treatments for rarer diseases that might be backed with extensive basic research and only need to scale, but is marginally less profitable for the company.

However, if money for healthcare is taken publically, then there is no need to skim dimes on every dollar spent to grant someone a third house and a fifth car. Money can be earmarked directly for research, like basic research is, and what happens to that dollar would be of public record. Capitalism and its sole metric of success of infinite growth is inefficient by design and has no place when it comes to universal needs like healthcare.

I'm a diehard capitalist working in Wall Street and I could not possibly agree more.

Healthcare is not like other goods and services because (a) it's an universal need for which price sensitivity is zero (b) no one should have to pay life-crushing bills because they had no luck in the genetic lottery and (c) even for those health risks that people can control (obesity, cardiovascular problems), we have to admit that educating the population to eat better, sleep more and exercise is a pipe dream, particularly in the U.S. where shitty food is everywhere, the lobby for junk food and sugar is rampant, labeling and advertising for food is downright evil and work is incredibly demanding (unbelievably more demanding than in Latin America or Europe).

Healthcare and Education should be entirely subsidized by the government. Everything else can just be regulated to various degrees, always with the dual goal of minimizing state intervention while ensuring the market remains competitive.

Everyone asking for sources fornthis, just think about it. What if Europe decided that iPhones we're too expensive and implemented Single-Payer Phone Care? They'd dictate a price that the government would pay for iPhones in their countries and Apple would either not sell iPhones in Europe at all, or they would sell for the dictated price. They'd do their market studies and possibly conclude that they can jack up U.S. prices and still stay in business in Europe.

With something like pharmaceuticals, of course the U.S. customers are going to pay the higher price, they need the medicine! That means that European countries are of course squeezing the drug companies (which really means squeezing U.S. citizens) as much as they can get away with. They would be dumb not to.

What percent of us health costs are pharmaceuticals?

You also have to factor in that americans take more pharmaceuticals than in other places, likely fruitlessly or even harmfully in a lot of cases.

That is not how any of this works.

>I'm not saying this model is right. I'm just saying that doing away with it will have fundamental consequences to healthcare R&D.

Might not be a bad thing to try it out and see what the consequences can be.

Sorta. It’s not like every other country waits for a generic to come out before paying for IP-protected drugs.

E.g. my health region in Canada will pay up to $50k or so per year of additional life provided.

This has been debunked over and over again. It's just not true.

>It's worth noting that the U.S. market does pay for the lion's share of patented drugs...

And even in doing so, we're getting contaminated meds. See the article at Ars,[1] which is based on a recent study from Kaiser.[2]

[1] https://arstechnica.com/science/2019/01/scary-reality-meds-t...

[2] https://khn.org/news/how-tainted-drugs-reach-market-make-pat...

  we're getting contaminated meds
... from overseas. All the examples in that article were non-US manufacturers.

This smells like pharmaceutical industry propaganda to me.

Even if it's true, we should just fund drug research explicitly.

Yep. This needs to be repeated more.

I've heard this argument a lot, even by diehard conservatives. The amazing thing about it coming from these diehard conservatives (I'm not saying you're one of them, your comment just reminded me of it) is they're basically saying it's OK for the USA to help the rest of the world socialize their drug costs but it's not OK for the USA to help socialize drug costs for their own citizens.

I should say it’s the kind of comment that throws off the whole thread, instead of talking about the article we are all arguing about talking points.

It’s a talking point. Compact. Powerful. No grounding in reality.

My dad is a conservative and his talking point about the house member who called trump a motherfucker shouldn’t have said that because she’s a woman. It’s ok that Trump swears but my dad was literally screaming about this representatives language.

Proof? What about the cost of marketing drugs? What about shareholder profits? Both of those could come down without affecting the R&D budgets.

This is not an explanation. The amount of money spent on actual drug R&D in the US is a tiny blip compared to the excess costs in the whole system.

If this is in fact true it means the rest of the world is freeloading off the US system.

Not saying I'm convinced it is true. I'd like to see a deeper unbiased analysis.

"In Europe, drug prices are set by governments, not by pharmaceutical companies the way they are in the U.S. On average, the difference between the price of one drug in the U.S. and the same drug in France, Germany, Italy, Spain and the U.K. was 50 percent, an analysis by the consulting firm McKinsey has found.

“U.S. consumers are in fact subsidizing other countries’ public health systems, at least with respect to drug pricing,” Jacob Sherkow, an associate professor at New York Law School, said."


Define true, it is true that the US spends more on medical research than the rest of the world combined, and produces more drug patents than the rest of the world combined.


This btw went up fairly recently especially since Indian generics became accepted world wide in the late 90’s and early 2000’s.

The US used to produce 20-30% of the world’s drug patents now its peaking at 60%.

Probably has something to do with the research facilities in US becoming better and better with time.

Since you don't really need to be in US to create drugs for US market.

The US always had the best facilities, biomedical research started in the US the Rockefeller University was the first one in the world iirc.

This doesn’t explain it really what could explain it is that as the cost of developing a drug became higher more and more players dropped out of the game especially as the revenues started shrinking due to Indian generics becoming popular around the world.

> If this is in fact true it means the rest of the world is freeloading off the US system.

It would be if the US system was in fact efficient and good. But it's not. It doesn't work for the people. It's a huge beast that is out of control and costs billions. It will happily "research" identical drugs, worse drugs or unnecessary drugs if it means it can milk patents for a few years longer.

As it currently stands, it's more accurate to say that drug research in the rest of the world is suffering because it's being dominated (because part of the billion dollar budgets go to marketing) by the US pharma industry, including everything that is broken about it.

If we were freeloading, wouldn't we just take the useful results of your research?? But we get the bullshit too, because yes, your pharma marketing budgets are so huge they do in fact reach overseas.

I would say it's more likely that the rest of the world has realized that collective bargaining allows them to set prices far lower than countries like say, America where they're free to gouge the money right out of your wallet.

If you don't play ball with a government, you're denying yourself a lot of potential customers. A single person? A fraction of a fraction of a drop in a bucket.

> If this is in fact true it means the rest of the world is freeloading off the US system.

Sort of. We also export our definitions of diseases, and since the market for new diseases is a lemon market it makes sense that other countries should pay less for the treatments. E.g. if people in other countries can't really be sure whether or not hysteria is really a real disease that affects women, it makes sense that they would be less willing to pay the full price for cure. It's just like how consumers in the U.S. probably wouldn't pay full price for a pill to prevent fan death. Overall though the U.S. probably comes out ahead by exporting its medical model.

I think it is also worth noting that number of drugs patented is not necessarily the best metric for measuring healthcare success.

I think one of the best is perhaps life expectancy - and that's dropping in America, patents or no.

I don't think anyone was arguing it is a success, so not worth debating that non argument. The commenter simply pointed out something that exists.

I am similarly pointing out something that exists, the falling life expectancy in America. I am also pointing out that patents are not a good metric for healthcare success, whether or not the OP intended that it be used that way.

I'm not debating anyone with my comment.

It is true that the US pays for a significant portion of drug R&D for the world. However the vast majority of that R&D is funded by the NIH which in turn is funded by U.S. taxpayers. It is a myth that it is the pharma companies who fund much of R&D even though they do spend some money on it. They set the prices so high because they can. The patents give them a monopoly, and they do everything in their power to "evergreen", or extend, the patents so they can continue their monopoly. One example is first patenting the left version of a molecule then patenting the right version (mirror image). How do they acquire these patents if they don't do their own R&D? They buy them.

> One example is first patenting the left version of a molecule then patenting the right version (mirror image).

Just a small correction for accuracy; they actually patent the 50/50 mixture of both versions first. And then they patent the purified version that only contains the active enantiomer ("mirror image").

Because of how biology works, turns out that the "wrong" mirror image (that is absent from the new version of the drug) was in fact really inactive, doesn't do anything, and thus offers no advantage over the old version, except being covered by a new patent to milk.

These are the kind of drug research "advances" that the rest of the world is supposedly freeloading off of.

It's not freeloading, it's being dominated by a multi-billion dollar global marketing budget.



"In a Journal of the American Medical Association (JAMA) study published in January 2010, the largest study to date to attempt to quantify U.S. funding of biomedical research by the pharmaceutical industry, government, and private sources, researchers estimate that U.S. biomedical research currently stands at about over $100 billion annually.

The pharmaceutical industry is the largest contributor towards funding research, funding over 60 percent. The government contributes to about a third of the costs, with foundations, advocacy organizations and individual donors responsible for the remaining investments."

> "It is a myth that it is the pharma companies who fund much of R&D"

I dont think that statement is incorrect. They spend a ton on r&d (20%), which is more than pretty much any other industry


This is common PhRMA talking point that needs perspective. Large pharmaceutical companies spend twice the their readers h budget on marketing, a good percentage of now is that is spent on patient oriented marketing. (e.g. “Talk your doctor about Xyzzy!”)

If there would be a loss of revenue, any reduction in R & D costs lies purely with c-suite’s priorities.


They spend on marketing because they are trying to sell as much as possible of the drug during the patented years. If people do not realize there's a superior drug out there, they will never part with the money for the improved treatment

Well.. yes. My point was that a person makes the decision to what to cut. Saying that eeasearch will be cut, is the same as saying marketing über alles. Punting and trying rationalize such a decision as saying “must maximize shareholder profits”, is simply myopic post hoc rationalization.

That's a bad argument because the drugs are heavily marketed regardless of being superior or not.

Why do I get that information from my doctor when I'm outside of US? Why do American doctors just throw antibiotics at you, as soon as you sneeze in their office?(Getting a test for bacterial infection is cheap and fast. No bacteria - no effect by antibiotics.)

There's a lot of issues with drug awareness and appropriateness in US.

Why should pharma companies not be allowed to market their products?

Who said that?

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact