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US Workers Are Paying High Taxes. But Without Any of the Benefits (jacobinmag.com)
119 points by mjfern 4 days ago | hide | past | web | favorite | 76 comments





Discussed 5 days ago with 504 comments (same author and article, just a different website): https://news.ycombinator.com/item?id=19609191

This isn’t surprising in light of [0]. The core statement in [0] is that american health costs are high. In particular, predictably high based on Actual Individual Consumption.

[0]https://randomcriticalanalysis.com/2018/11/19/why-everything...


Salaries in the US are more than twice as high as salaries in Europe tho. Maybe not having any benefits is a part of the equation to get those salaries? (naive suggestion, I'm not an economist)

(Source for the salaries: https://www.thebalancecareers.com/average-salary-information...

$28,000 for no high school degree -> people with BS gets this kind of salary in Europe. $37,000 for high school degree -> people with MS gets this kind of salary in Europe. Same logic for the other salaries on this chart.)


Maybe, if Salaries in the US are twice as high as Europe, then the average American is already paying more total tax than the average European and thus might expect more benefits.

A lot of the benefits' cost are labour (i.e. doctors, fire fighters, etc), hence are more expensive to provide. It's the circle of life.

If you look at the federal budget, it is easy to see that the federal government is misallocating a significant amount or tax money to purposes that don't really benefit the average American. Interest on the national debt and military spending are the two big ones. There are probably also wasteful spending in most of the other programs as well.

Then there is the issue of too much inefficiency within existing insurance programs. American consumers are not getting a good value for the healthcare dollars that they do spend.

Lastly, I would say that the American education system is too expensive and too inefficient at training new medical staff.


It's easy to rip on US military spending, but it's actually not far out-of-line with other OECD countries. Considering the amount of war-mongering we do, I don't know how anyone expects it to be average or lower. For reference, it's about double the average country: https://www.pgpf.org/chart-archive/0184_ally_defense_spendin...

It's 63% higher than China and ~double France's & the UK's. Russia's is actually 38% higher than ours (not that Russia is a model country for anything): https://data.worldbank.org/indicator/ms.mil.xpnd.gd.zs

Maybe if we could stop starting wars constantly, we could lower our military spending. But it doesn't look like that's the direction the voting population is moving toward.


So, what, you want to just stop paying interest on the national debt? That's going to have some consequences. It also has some injustice to it - the national debt is what we got for previous spending decisions. If that ties our hands in the present, well, past decisions do tend to have that effect.

Military spending is probably wasteful... until it's not. Those who have no military can still die by (someone else's) military. Having a military can be wasteful, but not having one can be very expensive.

> Lastly, I would say that the American education system is too expensive and too inefficient at training new medical staff.

Probably. But you could have stopped after "inefficient", and I would still have agreed. In fact, my impression (from a distance, I admit) is that medical education is more efficient than the rest of the educational system. (I agree that the expense is insane.)


While military spending is up for debate, you can't say that paying off the interest on the national debt isn't in the best interest of the American people if they still want to have a country.

The US cannot default on its debt payments that would be catastrophic to the US economy and to the world.


> As the Mercatus Center noted last year, by implementing a Medicare for All system, the US could insure 30 million more people, provide dental, vision, and hearing coverage to everyone, and virtually eliminate out-of-pocket expenses, all while saving $2 trillion over the first decade of implementation.

This is assuming Medicare would have the same cost structure if it insured everyone that it does right now, which is incorrect because Medicare is currently being subsidized by private insurance.

In order to make healthcare in the US cost less, something that is currently being paid for has got to go away. That isn't primarily "insurance company profits" or anything like that. The profits are a single digit percentage of the premiums.

The costs come from things like the extraordinarily high cost of getting FDA approvals reducing competition between pharma companies, doctors choosing unnecessary tests for liability reasons and patients preferring them when someone else is paying for them and things of that nature. It is not clear how Medicare would change any of that, given that it currently doesn't solve them even for existing Medicare patients, it just pays below its share of the fixed costs and lets private insurance pick up the difference.

You have to actually get the costs down. In theory you could just declare by fiat that you aren't going to pay as much, which would cause something to be cut, but not the inefficiencies that the law continues to require. A "solution" that causes good things to be cut so that existing wasteful things will still fit into the budget is not very good.


This is assuming Medicare would have the same cost structure if it insured everyone that it does right now, which is incorrect because Medicare is currently being subsidized by private insurance.

No, it's assuming that the successful outcomes and cost-benefits of single-payer, as proven throughout the world, can also be applied to the US.


At this point the fact that the whole friggin' rest of the OECD states have managed to come up with something less-broken and less expensive than what we do, and that AFAIK even the most "free market" and incomparable to ours demographically and geographically (e.g. Singapore) have done this with price controls and a "public option" or similar, is such easy-to-come-by and oft-repeated info that "gee I just don't know how this could work in the US" or "more government intervention can't possibly fix anything" can't be charitably interpreted. It's concern trolling or gross ignorance. Period. We've been talking about this for decades. The data are there. They're not hidden. It's not theoretical. Pick a demonstrated-to-work system and do it.

Singapore's system is not even single payer. Why is the only choice single payer or nothing? Also, if Americans could import drugs from abroad, that would greatly lower health care costs as the overseas drugs are made by the same manufacturer and are sold at 1/10th the price in India and elsewhere.

Yeah, there are plenty of non-single-payer ones that work. Probably it'd be safer to pick a system that works for a country more similar to ours (Canada, Australia, even France or Germany) but a Swiss or maybe Singaporean system would likely still be better than what we're doing. Singapore's odd and can do to-us-crazy (that is, restrictive) stuff to improve public health if they need to to keep costs down, so I'd hesitate to advance that as the best choice, but our system is so very bad that it'd probably still be better than sticking with what we're doing.

Price controls, public option, everyone must get insurance. Maybe outlaw for-profit health insurance. Those seem to be the basic, minimum common factors that make these suck less than ours, if you don't want to go single-payer or nationalized.


> if Americans could import drugs from abroad

Free trade for me, not for thee.


I'm in one of the other OECD states and I'd pick American healthcare over mine most of the time. You guys have so many more treatment options available.

Ours is the one where you end up with one hundred bills from a twenty different providers, fighting insurance & hospital billing departments for a hundred plus hours on the phone, and five-figures of out of pocket expenses for a completely normal pregnancy & birth of a child, if you've got decent insurance. It holds back entrepreneurship, and it threatens to take all the money you've saved up, at any time. Inheritance? The hospitals will get it before you do. Your savings for retirement? You're just holding on to it before the hospitals eventually get it. Maybe your kid gets seriously sick and then you just don't retire ever. Freedom! Choice!

It's a huge source of risk and anxiety even if you have insurance. The extreme budgeting uncertainty and stress are hard to put in dollar terms, but they're expensive, on top of what's already the most expensive system around, and getting more expensive at something like double the inflation rate. It's inhumane and unsustainable. If it blew every other system out of the water it might, might be worth all that, but it doesn't, so it isn't, at all.


And yet the U S has a higher birth rate and more entrepreneurs than Europe. Can't be that bad.

What the hell do those have to do with health care?

Presumably you’d only pick it if you had insurance and income to pay for those services. Not if you’re one of 30 or so million without insurance, and I’m not sure how many million more who are underinsured and can’t afford the deductibles. So you can avoid ending up being one of the 40,000 or so Americans that die each year from lack of healthcare access.

Well, you still have to pay a bit out of pocket here. I've been unable to get asthma medication in the past due to cost. I've also had no insurance at all, because it's not actually universal. In fact, right now I've been without an inhaler for a while and won't have one for a long time to come. But I guess this would be no different in the American healthcare system.

I agree though that the American system makes people feel insecure, but on the other hand, you guys can get treated for things like ADHD much more easily if you can afford it.

All I'm trying to say is that it's not sunshine and rainbows in every other OECD country. It might be in others, but not mine.


>I'm in one of the other OECD states and I'd pick American healthcare over mine most of the time.

I'm in one of the other OECD states and I'd prefer my health system to America's, any time.

A&E might be a pain the arse, sure, but an agonising life of medical debt - that I can't hope to pay-off any time in the near future - is a worse fate, I feel.


Sure, but the comment I'm replying to argued that all the other OECD countries are better at it than the US.

I don't think anybody is arguing that the US healthcare system is in a good way. It's preposterously overpriced. But people are peddling nonsense like "just extend Medicare to everyone" as if 90% of the excessive costs have anything to do with that.

We need to solve the actual problems, which is going to eliminate a lot of wasteful healthcare-related jobs, which makes it hard to do. But we still need to do that instead of proposing things that sound like they wouldn't do that but in practice would either do it anyway because it's not "Medicare for all" but "Medicare for all plus seven other things" and it's the seven other things doing all the work, or wouldn't do that and correspondingly wouldn't actually work.


> "just extend Medicare to everyone" as if 90% of the excessive costs have anything to do with that. > We need to solve the actual problems, which is going to eliminate a lot of wasteful healthcare-related jobs

Medicare for All virtually eliminates the private insurers, a significant part of waste in providing healtcare.


Private insurers are not a significant part of the waste in providing healthcare.

Their total profits are around 5% of premiums, which isn't even a dent in the problem even if you attribute no part of them to legitimate value such as taking the risk that actual claims will closely match actuarial expectations even when there may be unexpected events such as regulatory changes.

And their other costs are things that would either still be present with Medicare or provide legitimate value. One of the major costs is that they make consumers price insensitive, encouraging everyone to do unnecessary tests etc., which Medicare only makes worse. They also require doctors to do more paperwork, but the purpose of the paperwork is to reduce the incidence of those unnecessary tests and procedures and to defend against fraud. Medicare can eliminate those administrative costs by increasing the incidence of unnecessary test and undetected fraud, but that does not result in an overall reduction in costs.


Thank you. The above comment is one of the worst pieces of misinformation I've seen on HN in years.

In case anyone wants to read why prices actually are high: https://en.wikipedia.org/wiki/Health_care_prices_in_the_Unit...

To be fair, drug prices are high (possibly and in small-part) due to the FDA. Implying the FDA is entirely responsible or even largely responsible for the overall cost of healthcare in the US is ridiculous.


This is more of a hint than an answer. A real answer would explain what specifically they do for each kind of expense and why the US doesn't match it already.

For example, if they have lower salaries for some things, the US would have to cut them to match what they do. The savings doesn't happen automatically.


> In order to make healthcare in the US cost less, something that is currently being paid for has got to go away.

This is some super back of the napkin stuff. I'm just looking at each aspect of the healthcare industry and estimating how much inefficiency (profit) there is to eliminate by looking at the margins of the largest player in that industry.

Anthem financials: https://finance.yahoo.com/quote/antm/financials/ - $20B profit on $92B revenue. Assuming this is roughly the same as other insurance providers in the $967B industry, there's ~$200B in savings.

Pfizer financials: https://finance.yahoo.com/quote/PFE/financials/ - $42B profit on $53B revenue. The pharmaceutical industry in the US is $935B so there's another ~$750B in savings. We're at $950B now.

HCA healthcare (largest hospital system in the US): https://finance.yahoo.com/quote/HCA/financials/ - $18B profit on $47B revenue. Hospitals are also at ~$1T, so there's another $380B in savings.

So there's $1.2T in savings. There are surely other parts of the US healthcare industry I'm missing but there's also a lot to be saved by vertically integrating everything.


> Anthem financials: https://finance.yahoo.com/quote/antm/financials/ - $20B profit on $92B revenue. Assuming this is roughly the same as other insurance providers in the $967B industry, there's ~$200B in savings.

Anthem is an HMO, not "just" an insurance company. They tend to make higher margins specifically because they're more cost efficient and correspondingly have more profit, so extrapolating from that is somewhat misleading.

But even using your numbers, $200B is not "the problem" here -- that's around 5% of the money being spent, and because of the nature of insurance tends to scale down with other costs and remain at the same percentage of the then lower absolute costs when other costs are reduced.

> Pfizer financials: https://finance.yahoo.com/quote/PFE/financials/ - $42B profit on $53B revenue. The pharmaceutical industry in the US is $935B so there's another ~$750B in savings. We're at $950B now.

People still want Lipitor and Zoloft, so that's all still there unless you regulate drug prices, which you can do or not independent of single payer (but that has its own problems).

And you can't just write off all profits as "we don't need that let's get rid of it" -- it's just measuring risk adjusted reward on capital. To have a hospital you have to put down millions of dollars to buy MRI machines and everything else, which then gets paid back with interest over a period of years. If it's private that comes from the investors and then the "profit" is their interest on the investment. Making the hospital "public" doesn't deprive you of the need to raise money to pay for equipment and then pay interest on it, unless you're going to pay 100% of the costs up front out of taxes in year zero -- and deprive the taxpayers of the interest they would have collected on the same money in the meantime.

TANSTAAFL.


> Making the hospital "public" doesn't deprive you of the need to raise money to pay for equipment and then pay interest on it

But if the federal government is the one borrowing that money from itself (the Fed), it is much cheaper.


> But if the federal government is the one borrowing that money from itself (the Fed), it is much cheaper.

Then you're assuming that an entity that gets all the money it asks for at low interest rates is going to spend it efficiently and not have that cause price inflation. This is the opposite of what we see in practice when we e.g. subsidize student loans.

You're also then taking on all of the risk that the investors had been. You could pay millions of dollars and then lose it to anything from an act of terrorism to having bought a million dollar piece of equipment (or five thousand of them in five thousand hospitals) that then become obsolete overnight when someone releases a phone app that can replace it. But when that happens and you bonded against the government's credit, there is no filing bankruptcy to clear the debt, you still owe all the money even if what you bought with it is now worthless.


Don't forget the doctor's guild limiting supply of doctors.

Health insurance takings don't have to be 'profits' to be waste.

How much unnecessary work happens around crazy billing systems and arguing over who pays what? Those people all draw salaries.


This is the core problem. I'm all for Medicare for all, but what to do with the many physician assistants, nurses, billing specialists that the US is employing and promoting as a middle class career as we speak.

These people will not just stay silent when they become unemployed because practitioners can't afford to keep them. You need retraining programs (in what? Beats me ...), fund unemployment insurance ...

The point is that things don't happen in a vacuum.


You're looking at it backwards. We, as a society, can stop wasting people on this nonsense, and find something worthwhile for them to do.

(Yes, and we have some responsibility to make it possible for them to find a new way to earn a living, training them if needed.)


Anecdotally, I see the situation in France (I'm from there). Unemployment is always high.

People have great healthcare, but they are still struggling with mininum income service jobs. They won't be ruined by a cancer diagnosis though.

I don't think any western countries has figured out how to expand the middle class in recent times without heavy subsidies (in the US, we are effectively subsidizing those jobs with our high costs)


Keep the PAs and nurses, lose the billing specialists. Seems like a really clear cut call to me.

I know they're people, maybe we could have retraining programs, but it's not like private capital says "what about the people?" when trimming the redundant.


Except that Medicare is "insurance" and correspondingly still has insurance paperwork.

Hmm. I have assumed that there would be large efficiencies available here, because (while there would still be paperwork) you wouldn't have the insurance company employing people to find ways to avoid paying the doctor, which leads to the doctor having to hire people to find ways to get the insurance company to pay like they're supposed to. (I literally had an insurance company that denied something like 2% of all claims every month, because many patients would just pay the doctor themselves rather than question the insurance company's rejection.) With Medicare, you shouldn't have that going on...

... until Medicare is underfunded. And, if funding comes from Congress and is therefore a political football, do you really think that it will be adequately funded?


Wayyyy simpler, and it's only one system instead of many conflicting ones.

Medicare and SS move money around much more efficiently than any private system in terms of overhead. Sometimes innovation is a downside.


> Wayyyy simpler, and it's only one system instead of many conflicting ones.

It seems like the real problem is that "insurance" has something to do with <$1000 bills to begin with. The overhead is negligible if the bill is going to be large enough to actually require being insured against, but then we use "insurance" for routine care that wouldn't otherwise be expensive enough to justify it and then no surprise there is unnecessary overhead.

> Medicare and SS move money around much more efficiently than any private system in terms of overhead.

They make the same argument about the IRS. Look how much money it "brings in" compared to the number of people it employees. Very "efficient" -- except that the money they take in was already the taxpayer's to begin with, so moving it around is net of zero and the only thing there is cost. And they don't count the overhead on the taxpayer's side of doing the paperwork either.

It's the same here. Most of the insurance paperwork is to prevent insurance fraud and determine coverage and prevent unnecessary procedures. It's not more efficient to pay for more unnecessary procedures and lose more money to fraud.

And you're still not going to beat the overhead of the patient going in for a $100 procedure, paying $100 for it, and never involving a third party to the transaction at all.


Dude, look at the topline numbers. They are completely fucked.

Meanwhile, 10/10 developed nation socialist healthcare systems are comparatively cheaper and better.

I'm not super impressed by well-written rationalizations in light of those facts.


> Dude, look at the topline numbers. They are completely fucked.

Of course they are. Healthcare costs in the US are completely out of control. But if you want a better system you need to understand what causes it to be the way it is. Keeping every expensive thing about the existing system and just changing how the money is transferred is not going to fix it.

> Meanwhile, 10/10 developed nation socialist healthcare systems are comparatively cheaper and better.

They are cheaper because of specific flaws in the US system that cause costs to be high, which are real and need to be fixed but are independent of socialization. Low deductible insurance that encourages unnecessary tests and involves "insurance" in low cost routine transactions (currently caused by tax laws encouraging employer-provided insurance, but Medicare doesn't make it better), liability rules that encourage doctors to do the same unnecessary tests, certificate of need laws and other limits on the supply of doctors, the high cost of getting FDA approvals, lack of price transparency etc.

And the patient outcomes in the US system are better for anyone who has health insurance. The net outcomes are worse only because the outcomes for people without health insurance are very bad, because the independent flaws cause routine care to be prohibitively expensive and people without insurance often go untreated, which brings down the average dramatically.

That is completely broken and we need to fix it, but how about we do that without throwing away the part where the patient outcomes are better for the majority of people who are actually participating in the healthcare system?


The costs come from things like the extraordinarily high cost of getting FDA approvals reducing competition between pharma companies, doctors choosing unnecessary tests for liability reasons and patients preferring them when someone else is paying for them and things of that nature.

You missed the biggest one: massively overcompensated specialty physicians. We can expect price controls to reduce that. And since there is currently a massive surplus of qualified applicants to medical schools, we shouldn't expect shortages either.


well in some countries they don't allow prices that high for services and drugs. no idea what problems that caused but ATM prices charged for various services and drugs in the USA are 3x to 10x some other countries

> well in some countries they don't allow prices that high for services and drugs. no idea what problems that caused but ATM prices charged for various services and drugs in the USA are 3x to 10x some other countries

The problem it caused is that there is correspondingly less drug R&D and more people die world-wide because they're not paying their share of the research costs.


Given that pharmaceutical companies spend more on marketing than they do on R&D [1], isn't it more accurate to say that the rest of the world isn't paying their share of drug ads? How small would the fraction of revenue pharma spends on R&D for new drugs (excluding generics, which the analysis in [1] doesn't) before higher prices are no longer justified?

[1] https://www.washingtonpost.com/news/wonk/wp/2015/02/11/big-p...


Pharmaceutical research is very broken. It is startling how ineffective all but a few drugs are. Medical Nihilism by Jacob Stegenga is a great book on the topic.

> It is startling how ineffective all but a few drugs are.

Presumably partly for this reason, a bunch of "new" drugs are minor modifications to some existing drug to secure a new patent and create a new branded product whose modest advantages over the old drug (if any) are inflated by the marketing machine into being some kind of revolutionary advance.



> marketing increases the number of "customers" by more than the cost of the marketing (or why do it?), and the extra money is what both encourages and pays for more R&D.

Does it increase the number, or does it just reallocate customers from one company to another? And I'll repeat my question - how high do drug prices have to get, before further increases can no longer be justified because some scrap of the revenue goes towards R&D?


> Does it increase the number, or does it just reallocate customers from one company to another?

The advertising is typically done by companies with a patent, where the competition is an existing generic with no real incentive to advertise, and a much smaller profit margin (leaving less for future R&D).

> And I'll repeat my question - how high do drug prices have to get, before further increases can no longer be justified because some scrap of the revenue goes towards R&D?

The premise of the patent system is that the customer decides this. You have a monopoly on the thing that wouldn't exist if you hadn't put in the money to research it, then the customer chooses whether that's worth your price over the alternatives. Without your research your option wouldn't exist, so the customer can't be worse off with it as a (temporarily) expensive alternative than the status quo which they still have the option to choose.

This is completely broken by low deductible insurance, because now the patient wants the insurance company to pay infinity dollars for only a small marginal benefit, and the drug company is happy to charge that much, and the insurance company gets flack for denying coverage.

But how does Medicare fix it, since it's still low/zero deductible insurance? There is no "negotiate prices" with single payer, it's just regulating prices. Which you could do regardless, but the whole point of the patent system is to let the market set prices so that the things most important to people get funded instead of the things most important to lobbyists.

If you're going to regulate prices you might as well get rid of the patent system and replace it with X prizes or something like that. And then you no longer have high drug prices even with private insurance, but you are also effectively having the government choosing what research gets done rather than the market, and suffer the consequences when they decide to divert the money to something else.


> You have a monopoly on the thing that wouldn't exist if you hadn't put in the money to research it,

My question was how expensive would drugs have to get before we could stop claiming they wouldn't exist otherwise. Is your answer infinity dollars?

> There is no "negotiate prices" with single payer, it's just regulating prices.

There's no "negotiate prices" with a single company having a patent/license to manufacture the drug either. Yet you were happy to count that under "market working as it should", but when people join together to bargain collectively (in the form of government), then the market is broken. How curious that the Market is only said to work when corporations have all the advantages and consumers have none.


> My question was how expensive would drugs have to get before we could stop claiming they wouldn't exist otherwise. Is your answer infinity dollars?

My answer is, the amount that it's worth over the status quo which you still have the option to choose instead.

> There's no "negotiate prices" with a single company having a patent/license to manufacture the drug either.

Sure there is, because there are other drugs. The fact that they're not as good is what makes the patented one worth more than them, but it's only worth as much as it's worth, which is not an infinite amount.

> Yet you were happy to count that under "market working as it should", but when people join together to bargain collectively (in the form of government), then the market is broken.

It's not collective bargaining in this case because the government is representing both sides of the table. On the one hand you have cancer patients who don't want to die even if it costs a million dollars, on the other hand you have taxpayers who don't want to pay a million dollars for someone else's treatment. It's an inherent conflict of interest.

You're not negotiating with drug companies to buy an existing drug here, you're negotiating with drug companies to decide what their incentive to research future drugs will be. "Pay less money" is what the taxpayer wants but not the cancer patient. The only way to make the conflict go away is to align who pays with who receives treatment, so that you decide yourself how much you're willing to pay, instead of someone whose incentive is to let you die so they don't have to pay as much.


> My answer is, the amount that it's worth over the status quo which you still have the option to choose instead.

You are justifying high drug prices by saying the drugs wouldn't exist otherwise, yet offer no proof or reasoning the drugs really wouldn't exist otherwise. No matter how high drug prices would get, or how little of that money would go back into R&D, you'd still say "the drugs wouldn't exist otherwise".

> It's not collective bargaining in this case because the government is representing both sides of the table.

Exactly like insurance companies represent both sides - the people who need the drugs, and the larger pool paying for insurance. If you don't like the government's version of health insurance, you can always get additional insurance, or buy the treatment individually - government-provided healthcare doesn't mean private options become illegal.

And before you claim that, because they must survive on the Market, insurance companies act ever so virtuously in defense of the insured, this is false: http://www.pnhp.org/news/2009/september/testimony_of_wendell...


> You are justifying high drug prices by saying the drugs wouldn't exist otherwise, yet offer no proof or reasoning the drugs really wouldn't exist otherwise.

That is the basic premise behind the patent system.

The drug didn't exist before. Someone has to pay to come up with it, and also pay for the drug trials to establish that it works. So there needs to be some revenue stream to cover the high costs, above the one you get by waiting for someone else to do it and then going into competition with them and driving their margins down to yours.

Some drugs might have been discovered anyway, but it's hard to tell which ones. Disentangling preparation and skill and ingenuity from random chance is not an accounting we really know how to do. But the more expensive it is to develop something, the more likely a financial incentive is required in order to develop it.

Meanwhile the low hanging fruit in medicine is mostly gone now, so new discoveries are generally expensive, and the FDA approval process is crazy expensive to the point that that alone is enough to prevent known-beneficial public domain drugs from becoming available in the US when they can't be patented. So new drugs are the sort of thing you wouldn't expect to happen very often without a significant financial incentive.

> No matter how high drug prices would get, or how little of that money would go back into R&D, you'd still say "the drugs wouldn't exist otherwise".

The patent system is terrible. Monopolies are terrible, they're inefficient and expensive, everyone else hates them and they should be avoided whenever possible.

It sometimes leads to awful seeming inefficiencies like someone spending $10M to secure a patent which they then make $10B from. But the way that happens is that there is a drug worth $25B to patients which requires a $10M investment to make viable and no one will pay the $10M up front without receiving anything in return. So what the patent system is really allowing you to do is to pay $10B during the term of the patent in order to get a drug that creates $25B worth of better outcomes for patients over its lifetime, even though the underlying cost was really only $10M, because we had no other way to raise the $10M. That's terrible, but not as terrible as losing the $25B value entirely -- it's still net positive by $15B compared to the alternative.

This makes us want to put on our efficiency hats and figure out how to convert the $15B gain into the $24.990B gain we see should be possible. But then we need some other way to raise original the $10M. One obvious method is to pay for it with taxes. So let's do that -- we'll pay for it with taxes and not patent it and realize the whole gain. If we can get funding for that.

But there's the rub. If we got funding for it, all the way through to commercialization, then it shouldn't have been patented. (And if it was still patented despite 100% public funding then that was the problem.)

It's only when the government fumbles and fails to fund something worthwhile that it leaves the patent system the opportunity to profit like that. But in that case it's legitimately picking up the slack -- we're back to it producing $15B in net value compared to the alternative, because the alternative was that nobody else paid to fund it.

And more commonly it's companies making far smaller profit margins than that because their overall research costs are in the billions as well.

> Exactly like insurance companies represent both sides - the people who need the drugs, and the larger pool paying for insurance.

Yes, precisely, that is why all low-deductible insurance is problematic, whether it's public or private. The underlying problem is that healthcare is too expensive for most people to be able to afford to pay for out of pocket.

The idea that routine healthcare should be an expense so large that it requires filing an insurance claim is a tragedy. How is it worth paying thousands a year in additional insurance premiums (or taxes) to avoid paying what should be hundreds a year by paying for all ordinary healthcare entirely out of pocket?

> If you don't like the government's version of health insurance, you can always get additional insurance, or buy the treatment individually - government-provided healthcare doesn't mean private options become illegal.

Typically the result is effectively equivalent to being prohibited, especially when (as now) they disallow providers from charging Medicare the amount Medicare will pay and then charging the remainder to the patient. Because then the patient wants a treatment that costs 10% more than Medicare will pay, so the provider doesn't accept Medicare and you have to pay the full cost out of pocket, which you can no longer afford because you're required to pay $10,000+ in Medicare taxes every year despite them de facto covering 0% of your treatment cost.

> And before you claim that, because they must survive on the Market, insurance companies act ever so virtuously in defense of the insured, this is false

Nope, private health insurance companies are garbage. We should stop encouraging health insurance plans with <$10,000/year deductibles and then replace them with nothing. Then watch as healthcare costs fall to what people can actually afford, and the outcomes for people without any insurance improve dramatically.


" it just pays below its share of the fixed costs and lets private insurance pick up the difference."

Is that actually true? I always hear that line but nobody every backs it up with data. If Medicare is losing money for hospitals why do they still take it?


> Is that actually true? I always hear that line but nobody every backs it up with data. If Medicare is losing money for hospitals why do they still take it?

Fixed costs vs. variable costs. It costs a million dollars to have a hospital, then there is a further $250 marginal cost to treat another patient. If there are 2000 patients then the average patient has to be charged $750 ($250 + $1M/2000) to cover costs. If Medicare says $500 or GFTO then $500 is more than $250 and they "make" $250 by accepting Medicare, but if they received that much from the average patient they wouldn't cover their costs.


At a minimum a lot of money would be saved by standardized billing practices and costs. If Medicare pays too little then reimbursement could be adjusted. It would lead to more transparency and less bureaucracy. I think that’s how it works in Germany. There are different insurers but they operate on a set of standards. It’s nuts that in the US every insurance negotiates separately with each provider. It’s extremely inefficient and also makes it basically impossible for the patient to do any price shopping.

Germany saves money by paying doctors $70k/yr. There isn’t a clever, low-impact policy shift that’ll save a ton of money in the US. Something really big has to give.

German doctors have much lower school debt and relatively lower tort exposure. Salaries in Germany are significantly lower across the board, so German physicians enjoy similar financial positioning relative to other professionals, and high social status.

Any attempt to reduce physician salaries in the US is going to have to also address medical school debt and physician insurance requirements & administrative overhead.


I grew up there and the doctors I knew had very nice houses and cars. Maybe they were not as rich as of US doctors but certainly pretty well paid.

Do you have a citation for that? The sources I found suggest that’s the starting salary and it goes up considerably.

Some doctors are paid that little in Germany. Here’s an comparative analysis on 2008 data: average net outflows to physicians are higher, but it seems like US physicians may be receiving a substantially larger slice of the budgetary pie https://www.healthaffairs.org/doi/full/10.1377/hlthaff.2010....

That shows MDs making almost twice what you claimed ($130k vs. $70k). Not as high as Americans but that seems insufficient to explain the huge cost differential.

and on top of that, there is a pervasive risk that a patient's provider (doctor or surgeon) may drop 'out of network' without any notice to patients. If you ever schedule surgery in the US then you need to confirm on the day of the surgery that all the attending doctors are still in network, meaning that your insurance will cover it.

You also have to check any new doctor during and after surgery while you are unconscious :-).

Especially, in my experience, anesthesiologists. They often aren't on my plan, even though the entire rest of the hospital is.

There are citations in the Mercatus paper to government data showing this. Medicare generally pays below cost.

> If Medicare is losing money for hospitals why do they still take it?

Many have stopped. The ones that do presumably are getting paid above marginal cost, but that doesn't mean they're getting paid above average total cost.


This is both for both Medicare and Medicaid (which is notorious for underpaying)[1]:

In 2015, $58.7 billion in Medicaid and Medicare reimbursement shortfalls and high uncompensated care costs affected hospital revenue cycles, the AHA found.

[1]https://revcycleintelligence.com/news/medicaid-medicare-reim...


So let’s raise rates by these 58.7 billion so hospitals don’t lose money. That’s small change compared to how much the country spends on medical.

OK, then that $2T saved in the first decade ($200B per year), get significantly lowered, if the number is to be believed at all.

"...Medicare is currently being subsidized by private insurance."

Did you mean "supplemented"?


Reading the history, They did a great job to make people pay tax without asking question.

Everyone knows this but those that benefit from the status quo also have enough influence to keep it.



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