Many in this thread are claiming that price fixing wouldn't occur in a "truly free" market. This is misty-eyed naivety.
In a completely deregulated free market, it is even more in the hospitals' interest to form a price-fixing cartel. Any new player in the market trying to set reasonable market prices could be excluded through market pressure tactics (eg, tell distributors don't sell to them or our cartel will no longer use you).
It seems to me that the parlous state of the US healthcare system is in fact a perfect demonstration of the dangers of a completely free market, and claims that "oh no it's not actually free enough" are merely handwaving.
Well you can hardly have a free market for healthcare in the first place. A functional market requires that consumers be vigilant and make good choices. That's hard enough without being sick or injured.
I like to think of myself as a free markets guy, but driving healthcare via the market seems like the worst, most cynical application of the concept possible.
How do you explain other free markets that obviously deliver quality products at low prices? I don't feel gouged when I buy a television, a cell phone or lumber at Home Depot.
Even if there were perfect competition, it doesn't matter much, people don't comparison shop for ERs. If you are having a heart attack, you're not in a position to compare prices at local hospitals.
It's always in the seller's interest to create a complex and opaque system of pricing, especially when the buyer doesn't even pay for the services. This is why free markets aren't the answer to everything. It's free and open markets that drive efficiency out of any process.
The problem here is one of incentives. If I promise to pay you for mowing your neighbor's lawn, and he rarely reviews what you're doing and I rarely check with him, suddenly mowing the lawn gets really complicated and expensive. If, on the other hand, you walk next door and solicit the neighbor to mow his lawn, suddenly it's a very simple transaction. The difference is one of incentives. If the goal is to provide mowed lawns, the neighbor is the guy responsible. If the goal is to provide a rationale for writing a check? Heck, I got all kinds of easy rationales handy. I can play this game all day.
It should be illegal for anybody to pay a medical bill except for the person receiving treatment. If you want universal coverage, that's fine: pay the patient and have the patient pay the hospital and doctor. Once you begin to incentivize other players besides the patient, you're going to create a mess. I'd also recommend completely unbundling hospital services. Patients should be able to buy materials and services on the open market -- and keep the savings they make doing so. Hospitals should provide clean, sterile rooms for independent specialists to work, not form a pricing cabal controlling anything that happens inside the walls and incentivized to game the system.
> This is why free markets aren't the answer to everything.
Perhaps I've misunderstood you here but in my opinion the way healthcare works is sort of the opposite of a free market and if a free marketplace for health services were allowed to exist then things like $500 bags of saline solution wouldn't exist.
The US system didn't become this way because the people involved thought it was a great idea, it became that way because of perverse incentives through which services are paid for.
All you need to do is look at how providers act and you can tell what they make money on and what they don't.
Why do you think nearly all hospitals have emergency departments? It's not because they are providing a service to the population, it's because it's a great source of profit. Same thing with cardiac centers.
The problem with having healthcare under private enterprise is that these healthcare providers do not operate under the free market conditions we assume they do.
There is no "perfect information" allowing consumers to choose the cheapest price. As the article points out the pricing structure is very opaque. Not to mention the "consumers" want the best product regardless of cost, after all we are talking about their lives here.
Given the lack of free market conditions operating on these healthcare providers it is only logical that they would behave like the extortion rackets they are.
It is even worse than that. Lets say you want to open a medical facility that will lower costs. This will end up taking away business from other facilities where patients don't find the higher costs to provide value. In a free market, the new facility goes up, existing facilities have to compete, and consumers benefit.
In 35 states you can't do that. Existing facilities are protected, and you'll need to establish a certificate of need[1] showing that business won't be taken away from existing facilities. The somewhat tortured logic is that they would then have to charge remaining patients more which would raise costs for everyone so this is a cost saving measure.
Like many parts of US business it is good old fashioned protectionism, and not free markets.
There is never perfect information in any market. The continual problem with free market economics is that according to the definition, there has never been a free market anywhere in history. It is ideology with a thin veneer of mathematics.
They dont operate in a free market. Everything is closely regulated and the patient cannot compare costs. Companies which would like to provide lower costs services would not be allowed to advertise them.
I am of the firm belief that healthcare is one of the basic goods that should be provided by a government. Some may cry socialism and argue that free markets are more "efficient", but that assumes people shouldn't have equal right to basic healthcare services. It also ignores the fact that many of the generally accepted principals required for a functioning free market are difficult to achieve in healthcare. In an emergency situation, for example, buyers are likely constrained to the closest hospital, at which point that hospital become a monopoly for that particular buyer. When the the good on offer is survival, it's easy to see where problems might arise.
I live in a country that has been rated the freest economy on earth every year since 1995 [1]. Low taxes, small government, minimal regulation. So what does healthcare look like here for the average person? $13/day. Got a sore finger? $13/day. Intensive care? $13/day.
There is a significant parallel private system that offers all the luxuries and perks that a free market can provide (no waiting times, private rooms, choice of doctor etc.). But it competes with the public hospitals for buyers. In providing a competing alternative, I would speculate that the public system limits the type of monopolistic situations that can arise.
No system is perfect and clearly there are enormous differences between the US and elsewhere, but it's interesting to note that the "freest economy on earth" has universal public healthcare, in addition to a freely competing private system.
One of the big reasons for this problem is Medicare. The reimbursement that Medicare offers is often far less than it costs the hospital. Why does Medicare not cover the cost of a procedure? Usually because it did cover it in the past (to the point of generosity) and providers reacted by shifting their services to maximize the profits.
A good example is the infusion of drugs. Medicare pays ASP+4% (just cut from +6% due to sequestration). If you're a clinic that doesn't get a discount on their drugs (mostly community based clinics) you're often paying more for the drug than the gov't pays you (it's a net loss every time you prescribe the drug).
However, the gov't does pay a lot to infuse the drug. The result? Providers everywhere were starting their own infusion clinics and making a ton of money on it. The profit from infusion clinics would be used to offset the loss from the purchase of the drug. CMS clamped down on reimbursement for infusion services recently, but it's still a profit center.
This happens all the time in the US healthcare system.
So what do hospitals do? They jack up the price on every item they possibly can. Of course insurance companies know what is up, so they negotiate much better rates for all of the items. However, for those who are uninsured, they pay the charge master rate which is very inflated.
The problem with the US healthcare system is not that's a free market, because it isn't. The problem is that's not a free market and it's not a fully regulated market, it's something in between. So what happens is that some regulations are put in place, some of which cause certain procedures to be unprofitable, so providers simply shift those costs to the un-(or less) regulated prices.
I have two active kids and am reasonably active myself. We have probably received medical treatment a dozen times in the last year, a combination of walk-in clinics, personal physicians and emergency room visits, depending on the circumstances. During these visits, the staff have used equipment, given procedures and prescribed medication and have rarely, if ever, inquired about my thoughts on treatment.
When my son jumped off the couch and cut the inside of his mouth open, I wasn't asked my opinion on treatment. And if I had been asked, I would have simply said "you're the physician, do what will make him better the fastest." The same would have gone for when I had pneumonia or had to get a tetanus shot after getting fishhooked while surfing. My goal is simple -- recover the best the fastest.
How does one legitimately comparison shop for a baby delivery? Imagine, for instance, Hospital A says their births average $20,000 and Hospital B says their births average $30,000. Which rational prospective parent chooses the $20,000 option?
Hospital care is not like buying a car, where most people can consider themselves educated enough to make a decision based on competing factors -- perhaps I'm willing to give up some handling for a lower price or I'm willing to sacrifice fuel economy for more power.
The average person knows nada about the medical practicalities of giving birth (or treating pneumonia, or even stitching gums) so they cannot make informed decisions about what are reasonable tradeoffs.
As other people have said, medical treatment is an inelastic need. Parents don't say "you know, I'm cool with 50% less effective treatment for my child at 50% of the cost" and people don't say "you know, 90% functionality of my leg will be just fine if you can bring this in at a discount."
So not only do you have a lack of informed customers, you have a lack of choice in outcomes. A free market solution for medicine is a fairy tale spun by people of certain social and political persuasions.
A few things, specifically about the US health care system:
1) Unlike medical procedures, for dental procedures it's pretty easy to get price quotes from multiple dentists: they will tell you their sticker price if asked. They will also give you the procedure code so you can ask your dental insurance (if any) to what extent that's covered so you'll know what the actual price to you is. People will in fact comparison-shop for major dental procedures, based on cost, dentist reputation, etc.
2) The situation with emergency or time-sensitive procedures (pneumonia, tetanus shot, cut inside mouth) and scheduled non-emergency ones (hip replacement, say, or laser eye surgery) is a priori quite different. It is in fact possible to sanely price-shop for hip replacements if people are willing to tell you prices and there is reputational data available. Unfortunately the medical establishment works hard to prevent both. Laser eye surgery is a particularly interesting case, because there _is_ freely available price information there; you may want to look at what's happened to its price over time. Learning as much about such a procedure as people tend to know about buying cars is not actually all that hard: people don't know that much about cars and there really isn't that much to know about some of the fairly standardized scheduled procedures.
3) People do in fact do the "90% functionality at much lower cost is just fine" thing all the time, with glasses (e.g. buying reading glasses at CVS instead of getting a prescription pair), dental procedures, and some scheduled medical procedures. You're right that "50% less effective treatment at 50% of the cost" doesn't happen much, though. Instead you get 100% less effective lack of treatment at 0% of the cost....
4) Since you brought up baby deliveries.... Sorry, pet peeve. If a hospital is charging you $20000 for a low-risk birth with no complications (which they definitely do!), that's an excellent indicator of how broken the system is. If you shop around for how much that sort of thing costs with people who specialize in low-risk births (birth centers, midwives), you will discover that the typical price for birth plus prenatal visits with no complications in the US is in the $3-5k range. Of course such a setup will not do the various wholly unnecessary things that will be done in a typical hospital birth setting, nor will it be subject to typical hospital billing practices.
5) A good bit of care in the US is end-of-life care, where it is in fact quite possible to make price/time tradeoffs to some extent, as well as comfort/time ones (e.g. hospice vs aggressive cancer treatment that might prolong life for a few months) and people who are in a position to make that choice can in fact make it in an informed way.
In practice, what we call "medicine" is a bunch of separate services that have totally different economics, often being bundled together with completely opaque pricing put on top. For some of them, there is lack of informed customers and lack of choice in outcomes, as you say. For others one or both are present. And even today some parts of "medicine" (e.g. scheduled dental cleanings) work quite different from other parts (e.g. pediatric well-child checkups; try to get a price quote from a doctor for one of these!) for no particularly good reasons that I can see.
The "right" solution to this problem is unclear to me, unfortunately, because as you point out there is a fair amount of emergency medicine where a free market cannot possibly operate. A good example of such a thing is the total lack of any possibility of a free market in emergency ambulance transport, from the patient's point of view. We should stop our attempts at a fake free market in those areas, but we should also try to create actual free markets in medicine where possible. And for quite a few things I believe it is in fact possible.
The article focuses on what can hardly be considered a complicated good: salt water. Medical grade saline is highly regulated, and must be one of the most commodity products that exist in the country today. (The article takes pains to establish this.) It takes minimal effort to understand what it is or to compare prices. And yet, as the article says, there is no functioning market for it.
For something like "set this broken bone" sure, it's difficult to talk about the price for this risk vs. that risk. But for the liters of saline used during the procedure? That ought to be trivial to analyze. Yet it is not.
You are equating higher cost with better quality. There usually is a correlation, but with US healthcare's opaqueness with prices, I wouldn't make that correlation.
Leaving aside that, people do in fact make medical decisions based on cost. For example, for angioplasty there are two options - a medicated stent and a non-medicated, regular stent. The medicated stent is more expensive than the normal one. When it came to choosing one for my father, I chose a medicated one only because I was paying through insurance. But many of the patients out here in India don't have insurance. In that case there is a definite probability that a lower cost one will be chosen. Another example is dialysis. The frequency at which people perform dialysis is directly related to cost and affordability.
It is not always a given that patients would go for the absolute best.
"How does one legitimately comparison shop for a baby delivery?"
How did you and your spouse decide on an ob/gyn when you were expecting your kids? How did you decide on a pediatrician after they were born? Would you be able to rate your experience with both/either after the fact (ie, did the experience live up to the reasons you chose them?)? Would it be possible to use such ratings along with costs to at least create some measure of efficacy for the specific providers or their hospitals/clinics? The outcome may not be a perfect solution, but it at least gives people some data points if they are interested in comparing doctors/clinics/hospitals for whatever their needs are.
And herein lies the true problem of medicine in America. We have the worst possible healthcare system. It is a privately run industry without any real competition. Almost anything would be better - either public healthcare or real competition. Instead, what we practice in America is an exercise in insanity played out on sick and injured.
I agree. When it comes to your or your family's health you will not go with "cheap" even if it is the same level or better service/outcome. This is why the entire system needs to first create a nice feedback loop. Right now there are no metrics on how well certain hospitals are doing that can drive patient selection.
Usually, the patient just ends up going to the specialist their primary care provider referred them to or the closest one home. Until the quality/outcome data is made public there is no hope in steering people to better hospitals/providers.
There are some attempts lately in freeing up this information but I guess only time will tell how effective they will become.
On the bright side, it will only take one good health insurance company (I am thinking more like the type of disruption that a "Virgin" like company may bring to the table) to start using this data and driving some meaningful change.
There was a really, really good (depressing) article I'd read about a year or two ago talking about how group purchasing organizations worked to influence the costs of devices.
The example case was a guy who'd developed an auto-retracting needle, and was screwed out of business by some major manufacturers pressuring hospitals not to buy it.
Free market decisions will work when the patient has a choice. For example, when going for an outpatient visit to a doctors office that is scheduled in advance. One could argue that the patient has time to review their choices, call different providers and come to a decision.
This is not the case when the patient is being urgently hospitalized. They are typically rushed to the closest medical center and are subject to the prices it charges and it's providers charge. Given that they have no choice, whatever system it is that leads to these high prices is unlikely to change - if you are forced to buy something from me, why wouldn't i charge you as much as i feel like for it?
The government could get involved and force hospitals to adhere to a certain fee schedule - but why should for profit institutions have to adhere to this? In a truly capitalistic society they really shouldn't. The best ways to deal with this is to maximize insurance coverage, which is one goal of the affordable care act, and then to really use it as insurance and not to pay for every possible medical service a patient may require. Insurance companies will negotiate reasonable rates for hospitalizations. And if it's really being used as insurance and not to cover regular outpatient services, premiums would remain low as well.
So would there still be stories of the $4 Tylenol tablet dispensed in the hospital? Probably - but in the grand scheme of things, it wouldn't matter as much.
After spending six months in the hospital for orthopedic care for my news it became very apparent that unless you had a negotiated rate with your HMO or were on Medicare, pricing was the wild west. If you could discern what the bills were for via the medical codes, you would become outraged by the overhead. The best part is that hospitals get to hide behind HIPAA as they gouge and steal.
And what about these web sites for thousands of dollars? I mean, if I can throw something together in 30 minutes using MS Paint and Wordpad, how ridiculous is it that a designer charges more than 20 USD per hour?
Ah, I see. It's only en vogue to complain if I don't know anything at all about the constraints of the domain and am pulling stuff out of my ass. My bad.
So this is by design isn't it? The fact that insurance covers everything and the hospitals do not have to eat up any costs begs for this to happen. If the majority of customers (patients) pay out of their pocket then the hospitals would be incetivized to make themselves attractive to patients. Else why the hell do they care? In fact they mark up prices multiple times to offset any unforeseen costs of eating up costs as well. There is no incentive in price transparency, no incentive to compete among hospitals. Honestly if you are covered then as an individual you don't care either. I am not sure what the solution is here.
Serious question: why do you think that hospitals don't have to eat costs?
It's a loaded question in the sense that I've been at various hospitals and they always talk about their budget shortfall which is in part due to non-reimbursed care provided to those who cannot pay and/or have no insurance. But it's also not a loaded question in the sense that I want to understand why people would think hospitals don't eat costs.
Not to defend the costs or the state of the system, but the justification for the prices of medications in hospitals usually includes the time of the nurses, pharmacists, and techs that make the whole administration process happen safely.
Also, hospitals will bill whatever amount they can get reimbursed. Most insurance companies have contracts with hospitals where they only get a fraction of the billed amount. The rest is written off by the hospital. Uninsured patients can usually work out payment plans for lower amounts as well. That said, healthcare in the US is still pretty damn expensive.
I think there are 2 big factors that always seem to be missing from these investigations. The high costs offsets individuals who don't pay for their healthcare. Keep in mind that the hospital must treat anybody who walks in the door and they frequently do not get reimbursed by the government. Also keep in mind that the solution must be perfect when it physically cannot be. Because if there is a .0001 percent chance of failure, every doctor that treated the patient gets sued, the hospital gets sued for several million, the manufacturers gets sued, the middle man gets sued, heck the receptionists probably gets sued too. Think of the costs of insurance for every party involved. Obstetricians often pay $85,000 to as much as $200,000 for malpractice insurance. That's just the doctor.
Reduce the malpractice payouts and shield doctors like other countries do. Make the government absorb more of the costs for care. The price could probably be cut by 200 to 300 bucks.
1. Does the industry need a few Mannings and Snowdens?
2. How much progress in the world is stifled by powerful incumbents blocking competition? Taxi lobbyists tackling Uber, car industry impeding mass transit in LA decades ago, etc?
The TLDR is that an independent pharmacist treating AIDS patients got run out of business by price fixing competitors. He got the last laugh and sued on the behalf of the government and has so far collected $597M in awards (the government has collected over $3 billion).
The behavior of these (very large) firms was outrageous:
> For example, Abbott Laboratories (ABT) sold its antibiotic Vancomycin 1 GM FTV to customers for $4 a dose, according to a joint Justice Department and Ven-A-Care lawsuit. Abbott reported the cost to pricing publishers as $72.48 -- 18 times the actual amount, the lawsuit says.
This is likely going on for other types of drugs and then also in every other segment (medical devices/supplies being a biggy).
So if the manufacturer charges a dollar for the bag of saline, and the hospital marks it up a couple orders a magnitude, hospitals must be absolutely swimming in cash, right? Did I miss that part in the article?
[+] [-] nikatwork|12 years ago|reply
In a completely deregulated free market, it is even more in the hospitals' interest to form a price-fixing cartel. Any new player in the market trying to set reasonable market prices could be excluded through market pressure tactics (eg, tell distributors don't sell to them or our cartel will no longer use you).
It seems to me that the parlous state of the US healthcare system is in fact a perfect demonstration of the dangers of a completely free market, and claims that "oh no it's not actually free enough" are merely handwaving.
[+] [-] gnoway|12 years ago|reply
I like to think of myself as a free markets guy, but driving healthcare via the market seems like the worst, most cynical application of the concept possible.
[+] [-] jdminhbg|12 years ago|reply
I have read a lot of wrong things on HN, ranging from the merely misinformed to the willfully ignorant, but this might take the cake.
[+] [-] jes|12 years ago|reply
[+] [-] pash|12 years ago|reply
[+] [-] mattstocum|12 years ago|reply
[+] [-] unknown|12 years ago|reply
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[+] [-] CamperBob2|12 years ago|reply
I... I just... wow.
[+] [-] DanielBMarkham|12 years ago|reply
The problem here is one of incentives. If I promise to pay you for mowing your neighbor's lawn, and he rarely reviews what you're doing and I rarely check with him, suddenly mowing the lawn gets really complicated and expensive. If, on the other hand, you walk next door and solicit the neighbor to mow his lawn, suddenly it's a very simple transaction. The difference is one of incentives. If the goal is to provide mowed lawns, the neighbor is the guy responsible. If the goal is to provide a rationale for writing a check? Heck, I got all kinds of easy rationales handy. I can play this game all day.
It should be illegal for anybody to pay a medical bill except for the person receiving treatment. If you want universal coverage, that's fine: pay the patient and have the patient pay the hospital and doctor. Once you begin to incentivize other players besides the patient, you're going to create a mess. I'd also recommend completely unbundling hospital services. Patients should be able to buy materials and services on the open market -- and keep the savings they make doing so. Hospitals should provide clean, sterile rooms for independent specialists to work, not form a pricing cabal controlling anything that happens inside the walls and incentivized to game the system.
[+] [-] mahyarm|12 years ago|reply
[+] [-] dopamean|12 years ago|reply
Perhaps I've misunderstood you here but in my opinion the way healthcare works is sort of the opposite of a free market and if a free marketplace for health services were allowed to exist then things like $500 bags of saline solution wouldn't exist.
[+] [-] refurb|12 years ago|reply
The US system didn't become this way because the people involved thought it was a great idea, it became that way because of perverse incentives through which services are paid for.
All you need to do is look at how providers act and you can tell what they make money on and what they don't.
Why do you think nearly all hospitals have emergency departments? It's not because they are providing a service to the population, it's because it's a great source of profit. Same thing with cardiac centers.
[+] [-] coenhyde|12 years ago|reply
There is no "perfect information" allowing consumers to choose the cheapest price. As the article points out the pricing structure is very opaque. Not to mention the "consumers" want the best product regardless of cost, after all we are talking about their lives here.
Given the lack of free market conditions operating on these healthcare providers it is only logical that they would behave like the extortion rackets they are.
[+] [-] rogerbinns|12 years ago|reply
In 35 states you can't do that. Existing facilities are protected, and you'll need to establish a certificate of need[1] showing that business won't be taken away from existing facilities. The somewhat tortured logic is that they would then have to charge remaining patients more which would raise costs for everyone so this is a cost saving measure.
Like many parts of US business it is good old fashioned protectionism, and not free markets.
[1] http://en.wikipedia.org/wiki/Certificate_of_need
[+] [-] moocowduckquack|12 years ago|reply
[+] [-] ekianjo|12 years ago|reply
[+] [-] ddeck|12 years ago|reply
I live in a country that has been rated the freest economy on earth every year since 1995 [1]. Low taxes, small government, minimal regulation. So what does healthcare look like here for the average person? $13/day. Got a sore finger? $13/day. Intensive care? $13/day.
There is a significant parallel private system that offers all the luxuries and perks that a free market can provide (no waiting times, private rooms, choice of doctor etc.). But it competes with the public hospitals for buyers. In providing a competing alternative, I would speculate that the public system limits the type of monopolistic situations that can arise.
No system is perfect and clearly there are enormous differences between the US and elsewhere, but it's interesting to note that the "freest economy on earth" has universal public healthcare, in addition to a freely competing private system.
[1] http://en.wikipedia.org/wiki/Index_of_Economic_Freedom
[2] http://en.wikipedia.org/wiki/Health_in_Hong_Kong
[3] http://www.news.gov.hk/en/record/html/2013/04/20130409_19040...
[+] [-] refurb|12 years ago|reply
A good example is the infusion of drugs. Medicare pays ASP+4% (just cut from +6% due to sequestration). If you're a clinic that doesn't get a discount on their drugs (mostly community based clinics) you're often paying more for the drug than the gov't pays you (it's a net loss every time you prescribe the drug).
However, the gov't does pay a lot to infuse the drug. The result? Providers everywhere were starting their own infusion clinics and making a ton of money on it. The profit from infusion clinics would be used to offset the loss from the purchase of the drug. CMS clamped down on reimbursement for infusion services recently, but it's still a profit center.
This happens all the time in the US healthcare system.
So what do hospitals do? They jack up the price on every item they possibly can. Of course insurance companies know what is up, so they negotiate much better rates for all of the items. However, for those who are uninsured, they pay the charge master rate which is very inflated.
The problem with the US healthcare system is not that's a free market, because it isn't. The problem is that's not a free market and it's not a fully regulated market, it's something in between. So what happens is that some regulations are put in place, some of which cause certain procedures to be unprofitable, so providers simply shift those costs to the un-(or less) regulated prices.
[+] [-] smokinn|12 years ago|reply
[+] [-] bpm140|12 years ago|reply
When my son jumped off the couch and cut the inside of his mouth open, I wasn't asked my opinion on treatment. And if I had been asked, I would have simply said "you're the physician, do what will make him better the fastest." The same would have gone for when I had pneumonia or had to get a tetanus shot after getting fishhooked while surfing. My goal is simple -- recover the best the fastest.
How does one legitimately comparison shop for a baby delivery? Imagine, for instance, Hospital A says their births average $20,000 and Hospital B says their births average $30,000. Which rational prospective parent chooses the $20,000 option?
Hospital care is not like buying a car, where most people can consider themselves educated enough to make a decision based on competing factors -- perhaps I'm willing to give up some handling for a lower price or I'm willing to sacrifice fuel economy for more power.
The average person knows nada about the medical practicalities of giving birth (or treating pneumonia, or even stitching gums) so they cannot make informed decisions about what are reasonable tradeoffs.
As other people have said, medical treatment is an inelastic need. Parents don't say "you know, I'm cool with 50% less effective treatment for my child at 50% of the cost" and people don't say "you know, 90% functionality of my leg will be just fine if you can bring this in at a discount."
So not only do you have a lack of informed customers, you have a lack of choice in outcomes. A free market solution for medicine is a fairy tale spun by people of certain social and political persuasions.
[+] [-] bzbarsky|12 years ago|reply
1) Unlike medical procedures, for dental procedures it's pretty easy to get price quotes from multiple dentists: they will tell you their sticker price if asked. They will also give you the procedure code so you can ask your dental insurance (if any) to what extent that's covered so you'll know what the actual price to you is. People will in fact comparison-shop for major dental procedures, based on cost, dentist reputation, etc.
2) The situation with emergency or time-sensitive procedures (pneumonia, tetanus shot, cut inside mouth) and scheduled non-emergency ones (hip replacement, say, or laser eye surgery) is a priori quite different. It is in fact possible to sanely price-shop for hip replacements if people are willing to tell you prices and there is reputational data available. Unfortunately the medical establishment works hard to prevent both. Laser eye surgery is a particularly interesting case, because there _is_ freely available price information there; you may want to look at what's happened to its price over time. Learning as much about such a procedure as people tend to know about buying cars is not actually all that hard: people don't know that much about cars and there really isn't that much to know about some of the fairly standardized scheduled procedures.
3) People do in fact do the "90% functionality at much lower cost is just fine" thing all the time, with glasses (e.g. buying reading glasses at CVS instead of getting a prescription pair), dental procedures, and some scheduled medical procedures. You're right that "50% less effective treatment at 50% of the cost" doesn't happen much, though. Instead you get 100% less effective lack of treatment at 0% of the cost....
4) Since you brought up baby deliveries.... Sorry, pet peeve. If a hospital is charging you $20000 for a low-risk birth with no complications (which they definitely do!), that's an excellent indicator of how broken the system is. If you shop around for how much that sort of thing costs with people who specialize in low-risk births (birth centers, midwives), you will discover that the typical price for birth plus prenatal visits with no complications in the US is in the $3-5k range. Of course such a setup will not do the various wholly unnecessary things that will be done in a typical hospital birth setting, nor will it be subject to typical hospital billing practices.
5) A good bit of care in the US is end-of-life care, where it is in fact quite possible to make price/time tradeoffs to some extent, as well as comfort/time ones (e.g. hospice vs aggressive cancer treatment that might prolong life for a few months) and people who are in a position to make that choice can in fact make it in an informed way.
In practice, what we call "medicine" is a bunch of separate services that have totally different economics, often being bundled together with completely opaque pricing put on top. For some of them, there is lack of informed customers and lack of choice in outcomes, as you say. For others one or both are present. And even today some parts of "medicine" (e.g. scheduled dental cleanings) work quite different from other parts (e.g. pediatric well-child checkups; try to get a price quote from a doctor for one of these!) for no particularly good reasons that I can see.
The "right" solution to this problem is unclear to me, unfortunately, because as you point out there is a fair amount of emergency medicine where a free market cannot possibly operate. A good example of such a thing is the total lack of any possibility of a free market in emergency ambulance transport, from the patient's point of view. We should stop our attempts at a fake free market in those areas, but we should also try to create actual free markets in medicine where possible. And for quite a few things I believe it is in fact possible.
[+] [-] gbhn|12 years ago|reply
For something like "set this broken bone" sure, it's difficult to talk about the price for this risk vs. that risk. But for the liters of saline used during the procedure? That ought to be trivial to analyze. Yet it is not.
[+] [-] five18pm|12 years ago|reply
Leaving aside that, people do in fact make medical decisions based on cost. For example, for angioplasty there are two options - a medicated stent and a non-medicated, regular stent. The medicated stent is more expensive than the normal one. When it came to choosing one for my father, I chose a medicated one only because I was paying through insurance. But many of the patients out here in India don't have insurance. In that case there is a definite probability that a lower cost one will be chosen. Another example is dialysis. The frequency at which people perform dialysis is directly related to cost and affordability.
It is not always a given that patients would go for the absolute best.
[+] [-] zdean|12 years ago|reply
How did you and your spouse decide on an ob/gyn when you were expecting your kids? How did you decide on a pediatrician after they were born? Would you be able to rate your experience with both/either after the fact (ie, did the experience live up to the reasons you chose them?)? Would it be possible to use such ratings along with costs to at least create some measure of efficacy for the specific providers or their hospitals/clinics? The outcome may not be a perfect solution, but it at least gives people some data points if they are interested in comparing doctors/clinics/hospitals for whatever their needs are.
[+] [-] jostmey|12 years ago|reply
[+] [-] sourc3|12 years ago|reply
Usually, the patient just ends up going to the specialist their primary care provider referred them to or the closest one home. Until the quality/outcome data is made public there is no hope in steering people to better hospitals/providers.
There are some attempts lately in freeing up this information but I guess only time will tell how effective they will become.
On the bright side, it will only take one good health insurance company (I am thinking more like the type of disruption that a "Virgin" like company may bring to the table) to start using this data and driving some meaningful change.
[+] [-] ck2|12 years ago|reply
Even limiting them to 1000% markup would be "wrong".
Yay 'murica.
Be sure to donate blood while you are waiting for your loved ones in the hospital so they can sell it for 10000% markup too.
[+] [-] rokhayakebe|12 years ago|reply
[+] [-] newsmaster|12 years ago|reply
[+] [-] angersock|12 years ago|reply
The example case was a guy who'd developed an auto-retracting needle, and was screwed out of business by some major manufacturers pressuring hospitals not to buy it.
Does anyone have a link to that article?
[+] [-] t0dd|12 years ago|reply
"How the medical supply industry blocks device startups from selling to hospitals"
http://www.washingtonmonthly.com/features/2010/1007.blake.ht...
[+] [-] ucha|12 years ago|reply
https://www.cia.gov/library/publications/the-world-factbook/...
[+] [-] dr_|12 years ago|reply
[+] [-] unknown|12 years ago|reply
[deleted]
[+] [-] socialized|12 years ago|reply
[+] [-] _pmf_|12 years ago|reply
Ah, I see. It's only en vogue to complain if I don't know anything at all about the constraints of the domain and am pulling stuff out of my ass. My bad.
[+] [-] yalogin|12 years ago|reply
[+] [-] carbocation|12 years ago|reply
It's a loaded question in the sense that I've been at various hospitals and they always talk about their budget shortfall which is in part due to non-reimbursed care provided to those who cannot pay and/or have no insurance. But it's also not a loaded question in the sense that I want to understand why people would think hospitals don't eat costs.
[+] [-] elstevo|12 years ago|reply
Also, hospitals will bill whatever amount they can get reimbursed. Most insurance companies have contracts with hospitals where they only get a fraction of the billed amount. The rest is written off by the hospital. Uninsured patients can usually work out payment plans for lower amounts as well. That said, healthcare in the US is still pretty damn expensive.
[+] [-] dude3|12 years ago|reply
Reduce the malpractice payouts and shield doctors like other countries do. Make the government absorb more of the costs for care. The price could probably be cut by 200 to 300 bucks.
[+] [-] thrownaway2424|12 years ago|reply
[+] [-] swalkergibson|12 years ago|reply
[Citation needed]
[+] [-] prawn|12 years ago|reply
2. How much progress in the world is stifled by powerful incumbents blocking competition? Taxi lobbyists tackling Uber, car industry impeding mass transit in LA decades ago, etc?
[+] [-] jonknee|12 years ago|reply
http://www.bloomberg.com/news/2013-08-13/florida-pharmacists...
The TLDR is that an independent pharmacist treating AIDS patients got run out of business by price fixing competitors. He got the last laugh and sued on the behalf of the government and has so far collected $597M in awards (the government has collected over $3 billion).
The behavior of these (very large) firms was outrageous:
> For example, Abbott Laboratories (ABT) sold its antibiotic Vancomycin 1 GM FTV to customers for $4 a dose, according to a joint Justice Department and Ven-A-Care lawsuit. Abbott reported the cost to pricing publishers as $72.48 -- 18 times the actual amount, the lawsuit says.
This is likely going on for other types of drugs and then also in every other segment (medical devices/supplies being a biggy).
[+] [-] idiot900|12 years ago|reply