One big source of regulation-induced cost: Excess credential requirements.
For example, in the UK, people can start med school in undergrad.
That shaves of years and many thousands from the cost of an education -> more doctors -> you don't have to pay them as much -> lower costs.
This credentialism is ensured by the established doctor cartel (AMA.)
Similar problem with pharmacists.
In general when looking for more costly regs, I'd look at why Silicon Valley has basically not been able to break into the space and make it more efficient, like it's done in other sectors. And I know you quickly run into licensing rules, but I'm sure there are other reasons as well.
UK higher education is overall a much more efficient experience because there is no such thing as general ed requirements. You choose your "subject" (major) before you start undergrad and you never take a class outside of the subject.
The result is graduation after three years instead of four, and better preparation for higher study - one year in law school (plus a two year apprenticeship) to become a lawyer. Four or five years from graduation to a PhD (that is, PhDs are normally awarded at 25 or 26 years old with a masters after one or two years in grad school - the masters makes you ABD)
Medicine is a five year undergrad programme - effectively meaning a two year med school in US terms.
However, the foundation this rests on is a completely different high school experience. General education requirements end after the high school sophomore year (rather than the college sophomore year). High school juniors and seniors take either three or four classes, and undergrad entry will require specific high school classes in this upper tier ("A Level"), so medicine will require biology and chemistry; Physics would require mathematics and physics; law usually expects at least two A Levels to be ones that are examined by essay (e.g. English literature, law, history, sociology, psychology, classics, philosophy).
A typical A Level class is roughly equivalent to a combination of a US AP class and a US freshman 101 survey class. The result is that first-year classes at undergrad are usually at least at what an American would consider 200/2000 level, and third-year classes are often comparable to the early part of US grad school.
Thanks so much for the insight. As someone who did most of my middle / high school years in Europe, can anyone shed some light on why K-12 is so much less rigorous in the US?
Anecdote: my kids do Russian school on Saturdays, and one of the classes is math. In my sons 3rd grade math (top ranked public school), they are just now starting multiplication tables. On Saturdays he’s doing perimeters and areas and formulas and long division. When I kind of joked with the teacher that she’s trying to teach him 6th grade math, she just pulled out the textbook which read (in Russian) something like “basic review of 2nd grade math concepts”.
I'm not sure that is entirely true; US students at the end of 12th grade tend to have a much broader but shallower pool of knowledge than UK students at the end of Year 13 (we start counting from what the US calls kindergarten).
What is true is that other countries are much more prepared to leave some students behind - not by "holding them back" in the US sense of repeating a grade, but by streaming classes, so the top stream will be learning calculus in Year 10 (ninth grade), while the bottom stream may still be mastering basic arithmetic.
There are even separate examinations for different streams. For instance, here is the lowest tier GCSE maths exam (this is the final exam for people who aren't good at maths, taken at the end of Year 11 / 10th grade).
A pass mark of a grade 4 (ie to get the general ed requirement for undergrad entry) would be about 75% on that paper. About 30% of all students don't even reach that standard at the first attempt (about a third of them will go on to reach it at a resit exam; overall about 20% never get a 4).
At the same age, students who want to do A Level maths - a requirement for entry into most STEM subjects at undergrad - would be doing this paper:
The pass mark for A Level entry would be probably a grade 6, which is about 60% on that paper; the grades go up to 9; a 4 is the minimum general ed entry requirement for university (we do have general ed, but it's an entry requirement, not a graduation requirement).
There would also be two more papers at each level taken with a calculator.
Silicon Valley has done a great job finding ways to make money, including off regulatory compliance. I think a large part of the problem is that the system is incentivized towards revenue generation instead of efficiency. Kaiser is vertically integrated and is the "Silicon Valley" of healthcare. I think they've solved a lot of things using what is essentially capitation but they also don't bear the brunt of the un- or underinsured by design. Definitely the best system I've seen, though, and it's no coincidence that they also do a ton of research on healthcare delivery.
I think the big question is why Kaiser hasn't spread everywhere. I think it's most profitable where their "payer mix" is good and density is higher, so mostly urban-ish areas. I don't think rural medicine can even exist now without massive subsidy. If we do single payer it would probably use KP as a model just like they used it for some aspects of the ACA.
Consolidation in the industry is rampant but more in ways that create monopsony instead of system integration.
I should add that I don't work for Kaiser but, rather, for another hospital system. They historically don't have many job openings and those they do have often get filled internally off a wait-list of part timers. Though right now labor shortages are so acute that even they're having trouble filling spots.
The problem with "negotiating" for more efficient parts of the BBB plan is that the obstructionists (Manchin and Sinema are not representing any honest "centrist" positions) are mostly not doing it out of policy or political goals, but out of corruption. Sinema has gotten a substantial amount of money from the pharmaceutical industry and that is presumably underlying her opposition to price negotiations. Manchin and his family get a lot of income from the coal business and that's why he opposes clean energy initiatives, which must stop coal use first and foremost. The only obstruction which seems honest is Manchin's demand for tight means testing on child credits, which is probably good politics in super-conservative West Virginia.
I don't see any way to "negotiate" with that other than counter-corruption, which isn't really available to the Dems. Manchin could possibly be bought off with a "clean coal" boondoggle with enough plausible deniability but there's nothing the Dems can do to buy off Sinema. Since she's not already wealthy like Manchin and his family they can't offer a boondoggle to benefit her business and they can't give her or her campaign money directly. She could get many times as much money being a darling of the grassroots left, but she apparently isn't bright enough to realize that.
It demonstrates a significant lack of empathy and understanding to believe that the only reasons people could oppose something is because they are corrupt. The Medicare price negotiations are an interesting example to me of this. I am strongly in favor of Medicare negotiating and would propose an NHS like agency using QALYS to determine what the government would pay. That being said, if I were in congress, I would oppose the current legislation because 1) its not so much negotiation as price fixing; 2) we're outsourcing our price fixing to other countries; 3) it could (and likely will) be gamed immensely. Who looks at this approach and says this is what we should do? Yet, if I were to oppose it in Congress, you would almost certainly declare I was a corrupt and in the pay of big pharma.
This is just not true. The price in Europe is negotiated. We are piggybacking on that price (which will end up being renegotiated). There may be legitimate reasons to oppose this bill but this isn't a reasonable one.
I'm assuming you mean my first point. If the government went to sellers of houses, food, TVs, literally any other thing in and told them that they were going to allow sellers to sell for the "median price available, during the most recent 12-month period for which data is available...in Canada, the United Kingdom, Germany, France, and Japan" would you say they negotiated a price with the sellers or would they be fixing a price? If you were told "the people in other countries are negotiating those prices" would you consider that a compelling response?
To my broader point - do you, REF, believe that this is a good way for Medicare to negotiate drug prices?
I think that we should not be subsidizing pharmaceutical prices for the wealthy European countries. I think that this is a somewhat roundabout way of accomplishing that but a way nonetheless. I am curious how you believe it would be gamed(I am not an expert and genuinely curious).
My understanding was that the bill said we would not pay more than the median price in Europe. If that is correct then there is still 2 negotiations involved. Also, who is it that would declare you were corrupt and in the pay of big Pharma???
The price is set by looking at the median price in those countries. Since we are actually outsourcing that, those countries could easily negotiate a high price for the drugs with a company, but be given lots of "free samples." Since its a simplistic formula in the law, it could easily be gamed.
The other way it could be easily gamed is that the penalty for not paying the price is to be fined up to 95% of the revenue from selling the drug. If a company was selling the drug for $5 a pill, they could simply raise the price to $100 a pill and it would work out to be about the same.
I agree with your broader point that we are subsidizing the rest of the world. My solution to that is to simply setup an agency that negotiates directly based on the quality of life value of the drugs. Included in that negotiation would be a policy that you may not sell a drug in the US and also sell it for less than a GDP per capita adjusted amount elsewhere. So a drug selling in the US could not be sold for less than 70% of what it sells for in the US in Germany (63.5k gdp per capita vs 45.7k gpd per capita). You couldn't set a specific law to that effect, you would need to empower an agency to set that as a goal. It would also allow for very poor countries to be have very low prices (assuming they can negotiate them with pharma companies).
I agree that this sounds like a better solution. However, the existing proposal seems to get us halfway there. Had it passed, perhaps it would have proven unworkable and required adjustments. I still think this is a better result than to have nothing pass.
Noah: You're really badly wrong about education. The reason for high costs there is that the regulatory bodies - accreditation commissions - essentially behave like cartels.
The professionalization of the administrative class which started in the 50's, led to a takeover in the 70's and 80's of the commissions. From there, it became a spiral of circular logic: "Why do we need a huge student health center?" "Because otherwise we'll lose our accreditation! The commission said so." "Who's on the accreditation commission?" "Our university's president and all the other major university presidents in the state."
In fact, aggregate professor salaries adjusted for population and inflation haven't actually changed since the 80's; administrative costs are what exploded. You're not paying for your professor, you're paying for the student health center, a dozen or so "cultural houses", a huge football stadium and fitness center with a rock wall and lazy river, and the salaries for all the administrators who need to administrate these amenities - as well as the university president's salary, which is the most bloated of all because "look at all these amenities I have to administrate!".
It's not exactly the Cost Disease, but it's VERY regulatory.
Supply-side progressivism/liberalism seems like really bad marketing since the left has spent like 40 years trying to make "supply-side" a trigger word.
I can't find the source, but I remember reading a claim on Twitter that in countries where the government pays for college (Germany was the example used, I believe), colleges have less luxurious amenities and cost less as a result, because the difficulty of passing a law to obtain more funding leads to fiscal discipline.
This would seem to cut directly against the "Cost Disease Socialism" argument, so it's probably worth looking into whether it's actually true or not. It shouldn't be that hard to compare colleges in the US to colleges in Germany or any other country that already has government-funded college.
I'd caution against conflating Cost Disease Socialism with actual socialization of goods and services. CDS is about subsidization, not direct control. The key example here is how subsidizing student loans ended up pushing up tuition in America.
I'm always surprised by how lightly we let off universities in this story. They are essentially bilking students and the government out of money. Its especially bad for low income students as they are taking on loans that they often cannot get out of. Its worse than payday lenders. Yet they remain quite respected institutions.
It's not "universities", though, it's a subset of parasitic administrators who were happy to give everyone what they wanted in order to bloat their own power.
It's literally, to a beat, the exact narrative on the right of "liberals will promise everyone everything based on other people's money". And what did the right do? Make hay out of every little issue as a culture war, instead of instilling fiscal responsibility or breaking the cartel (the accreditation commissions). Many of the right's establishment went out and BECAME the commissioners and administrators in order to cash in on the bonanza. And plenty of those small college towns' local, more right-leaning politicians were more than happy to endorse the construction booms and big manly football stadiums.
The right failed to actually be conservative and keep these universities accountable, just as it has been doing for several generations now. They were more than happy to poke fun at the campus left and whine about liberal indoctrination while the foxes were raiding the henhouse.
If you go look at most universities in the country, I would say that 70+% of them are in places dominated by the left. The institutions themselves are dominated by the left. Bringing the right into this is a distraction IMO.
And blaming the entire thing on a "subset of parasitic administrators" is similarly allowing far to many involved, invested, and powerful individuals within academia off the hook. Its like saying that only the c-suite people in the banks were responsible for the subprime crisis when you had a lot of bad actors throughout the system.
That would suggest they are running a profitable operation or using $ to enrich themselves which in my experience is not true for most places. Please consider not just the sticker price but the average discount they are offering students - effective tuition has gone up at a much lower rate than sticker. Yes I do think administrative bloat is real, but in my experience this is largely due to private sector management techniques not yet having propagated across higher Ed - they may not know what they are doing (yet).
How can you have the news and academia reporting and discussing how the price college has escalated dramatically and then hold blameless the institutions that are receiving all that money? People were right furious with the mortgage industry for issuing predatory subprime loans. How is this any different?
When I was walking the campus of my alma mater and marveling at the palatial spaces that didn’t exist during my time there, the head of planning responded by saying: “well we are all competing for the same students” - which I think after I thought about it for a while explains a lot.
But what if instead of material abundance, we mixed cost disease socialism with a jobs guarantee so we could create a society of party loyalist clock punchers? I mean, it’s worked so well in the Middle East!
Any time you have a procedure or test at a hospital, it will cost a fortune because of the way hospitals amortize costs.
Get your doctor to write the prescription to a stand alone imaging center and call them before you have it to find out cost.
BTW, I bet you the hospital won't be able to tell you beforehand what a CT costs....I tried it, on phone for an hour or so, transferred a bunch of times, no quote after all that.
I don't think anyone knows what a CT costs. I mean this literally. I've tried to figure out "does X make money or lose money" and not even the CFO could find an answer to the question. The hospital negotiates with each insurance company and it's somewhat a crap shoot whether the test gets covered and for how much. Some insurers pay through the nose and others pay Medicaid (below cost). The chargemaster (published "cost") is pointless because no one pays that. Even uninsured people often get a "cash discount" that will, of course, be removed if it disrupts the accounting shell game.
I honestly don't see any way to fix this mess without the government setting some sort of price controls. I'm a physician who is just kinda burned out from hearing administrators saying things like "record year of revenue" and "we're broke" and both somehow being somewhat true. They sent me a form showing that they collect only 23% of what they bill in my name...and that's something I have zero ability to impact since all my patients are referred from within the hospital.
I eventually landed in the single-payer club because it's the most direct way I can think of to slice through this foolishness. But I'll support just about anything that makes sense.
I had to have an MRI a couple of months ago. Paid cash. Had I used my big corporate insurance (where I used to work), it would have been $1,000 because of deductible. Cash was around $500. That's in Texas.
Yup. And notice you had to go out of your way to price that out. In your case knowing the deductible made that decision. But if you were above that already you would likely have no incentive or ability to compare prices. And, of course, doctors have zero clue about it so they just write a script (and hope we actually get results) or refer to places where they can facilitate scheduling (often within their home system). No kickback, just what's easiest or what they are familiar with.
I have no proof but I am fairly confident that one reason for ballooning health care costs is an unintended consequence of a well intentioned piece of the Affordable Care Act. Insurance company profits were capped at 20%, but the golden rule of capitalism is that you have to grow your profits substantially in each quarter. With an essentially fixed customer base, the only way insurance companies can grow their profits is to pay out more. I believe they are doing this on purpose, especially soaking the better policies with higher prices and sometimes nonessential testing and treatment. Also doctors should be strictly forbidden from owning testing facilities. Many of them derive exorbitant profits from prescribing unnecessary testing. (Just to be sure,,,, ha)
As the insurance companies pay out more profits rise and policy costs balloon. This is why many nations do better with a fee for our ones model than a fee for service model.
"Where Ponzis involve the transfer of savings, Conduits are debt transfer machines. Repayment obligations are assigned to the conduit with the benefits directed from the lender to third-party recipients. The conduit is responsible for servicing and retiring the debt: it’s his debt, someone else’s benefit."
I've been thinking about this a lot. Cost disease is such an intractable problem because it's linked to the ascendance of the "professional-managerial" class in the west after WWII. We send an ever greater proportion of people into university and the accredited professions, and these clever people find more work for themselves. Ask anyone who works in a large institution what frustrates them and the answer is always the same - no one charge, there's no plan/strategy, most of their job is bullshit. This won't change unless we disempower the administrative class to which most of us belong - the 10% - that runs western democracies. It's extremely depressing. The top 10% have more wealth (39.4%) than the 1% (30.4%).
Using healthcare in these examples is always tough. Probably a big reason your CT scan was so expensive is you probably got it at a hospital, and hospitals "overcharge" for those kinds of services to make up for other services they are forced to perform but don't get enough revenue for, like running an ER or dealing with Medicaid patients. Your standalone CT shop doesn't have that issue.
a. What did your insurer actually pay? The initial medical bills are often severely discounted later.
b. Why is whoever pays for your insurance not insisting on reference pricing? In this approach, very common in Germany, the insurance pays the cost of reasonably priced care. Extra costs hit the patient.
High US medical costs have a number of explanations. Just as wealthier people spend spend larger shares of their incomes on health care, wealthier countries spend larger shares of their GDP on health care. The gap between the US and "other rich countries" is exaggerated by comparing the US to countries that are significantly less affluent; Switzerland and Luxembourg are probably the fairest comparisons. Culturally Americans are more defiant and disbelieving in the face of death than Europeans and so Americans spend especially more on health care in the last year of life. Insurance fraud is more rife in the US, which is what your CT scan case sounds like, and insurance-funded health-related court awards and out-of-court settlements are larger. The US has vastly greater military health costs. US health-care education is more extensive (especially for doctors) and expensive, and whereas European medical healthcare education is paid more out of the general tax pool, US healthcare education is paid more with higher doctor and other medical worker pay that pays off the student loans. The US has stricter barriers to medical worker immigration, reducing supply and driving up pay. The US is not less regulated; actually public systems are typically more self-regulated than private systems (and that's often not a good thing - public institutions often get away with worse abuses). The US system has a complex mix of public, private non-profit and private for-profit components that invites corruption and makes cost-control somebody else's problem. In short a whole lot of unpopulist technocrat work that our political system is uniquely incapable of addressing.
The tweet that kicked off the storm of tech bros feeling superior and patting each other on the back was in response to a stupid tweet from Amy Klobuchar. It labeled the graph as a demonstration of how politicians/government cause price inflation and the awesome tech sector disrupts and reduces prices.
To me the funny thing about the graph in that context is it's pure infographics as propaganda. Take a bunch of stuff where we've outsourced production and a few things that were emerging tech at the beginning of the period (cell phones and software) and compare against a few things where outsourcing is not possible and a handful of other things where prices are insane in the US but in every other rich country prices are reasonable and government is if anything more deeply involved (health and higher education sectors). Then conclude that the one thing common between the US and all other rich countries (government involvement in the sector) is what explains the US being a price outlier in those sectors.
One big source of regulation-induced cost: Excess credential requirements.
For example, in the UK, people can start med school in undergrad.
That shaves of years and many thousands from the cost of an education -> more doctors -> you don't have to pay them as much -> lower costs.
This credentialism is ensured by the established doctor cartel (AMA.)
Similar problem with pharmacists.
In general when looking for more costly regs, I'd look at why Silicon Valley has basically not been able to break into the space and make it more efficient, like it's done in other sectors. And I know you quickly run into licensing rules, but I'm sure there are other reasons as well.
UK higher education is overall a much more efficient experience because there is no such thing as general ed requirements. You choose your "subject" (major) before you start undergrad and you never take a class outside of the subject.
The result is graduation after three years instead of four, and better preparation for higher study - one year in law school (plus a two year apprenticeship) to become a lawyer. Four or five years from graduation to a PhD (that is, PhDs are normally awarded at 25 or 26 years old with a masters after one or two years in grad school - the masters makes you ABD)
Medicine is a five year undergrad programme - effectively meaning a two year med school in US terms.
However, the foundation this rests on is a completely different high school experience. General education requirements end after the high school sophomore year (rather than the college sophomore year). High school juniors and seniors take either three or four classes, and undergrad entry will require specific high school classes in this upper tier ("A Level"), so medicine will require biology and chemistry; Physics would require mathematics and physics; law usually expects at least two A Levels to be ones that are examined by essay (e.g. English literature, law, history, sociology, psychology, classics, philosophy).
A typical A Level class is roughly equivalent to a combination of a US AP class and a US freshman 101 survey class. The result is that first-year classes at undergrad are usually at least at what an American would consider 200/2000 level, and third-year classes are often comparable to the early part of US grad school.
Thanks so much for the insight. As someone who did most of my middle / high school years in Europe, can anyone shed some light on why K-12 is so much less rigorous in the US?
Anecdote: my kids do Russian school on Saturdays, and one of the classes is math. In my sons 3rd grade math (top ranked public school), they are just now starting multiplication tables. On Saturdays he’s doing perimeters and areas and formulas and long division. When I kind of joked with the teacher that she’s trying to teach him 6th grade math, she just pulled out the textbook which read (in Russian) something like “basic review of 2nd grade math concepts”.
I'm not sure that is entirely true; US students at the end of 12th grade tend to have a much broader but shallower pool of knowledge than UK students at the end of Year 13 (we start counting from what the US calls kindergarten).
What is true is that other countries are much more prepared to leave some students behind - not by "holding them back" in the US sense of repeating a grade, but by streaming classes, so the top stream will be learning calculus in Year 10 (ninth grade), while the bottom stream may still be mastering basic arithmetic.
There are even separate examinations for different streams. For instance, here is the lowest tier GCSE maths exam (this is the final exam for people who aren't good at maths, taken at the end of Year 11 / 10th grade).
https://filestore.aqa.org.uk/sample-papers-and-mark-schemes/2017/june/AQA-83001F-QP-JUN17.PDF
A pass mark of a grade 4 (ie to get the general ed requirement for undergrad entry) would be about 75% on that paper. About 30% of all students don't even reach that standard at the first attempt (about a third of them will go on to reach it at a resit exam; overall about 20% never get a 4).
At the same age, students who want to do A Level maths - a requirement for entry into most STEM subjects at undergrad - would be doing this paper:
https://filestore.aqa.org.uk/sample-papers-and-mark-schemes/2017/june/AQA-83001H-QP-JUN17.PDF
The pass mark for A Level entry would be probably a grade 6, which is about 60% on that paper; the grades go up to 9; a 4 is the minimum general ed entry requirement for university (we do have general ed, but it's an entry requirement, not a graduation requirement).
There would also be two more papers at each level taken with a calculator.
Silicon Valley has done a great job finding ways to make money, including off regulatory compliance. I think a large part of the problem is that the system is incentivized towards revenue generation instead of efficiency. Kaiser is vertically integrated and is the "Silicon Valley" of healthcare. I think they've solved a lot of things using what is essentially capitation but they also don't bear the brunt of the un- or underinsured by design. Definitely the best system I've seen, though, and it's no coincidence that they also do a ton of research on healthcare delivery.
Why do you think more of the healthcare sector has not adopted the Kaiser model? Is it more / less profitable?
I think the big question is why Kaiser hasn't spread everywhere. I think it's most profitable where their "payer mix" is good and density is higher, so mostly urban-ish areas. I don't think rural medicine can even exist now without massive subsidy. If we do single payer it would probably use KP as a model just like they used it for some aspects of the ACA.
Consolidation in the industry is rampant but more in ways that create monopsony instead of system integration.
I should add that I don't work for Kaiser but, rather, for another hospital system. They historically don't have many job openings and those they do have often get filled internally off a wait-list of part timers. Though right now labor shortages are so acute that even they're having trouble filling spots.
The problem with "negotiating" for more efficient parts of the BBB plan is that the obstructionists (Manchin and Sinema are not representing any honest "centrist" positions) are mostly not doing it out of policy or political goals, but out of corruption. Sinema has gotten a substantial amount of money from the pharmaceutical industry and that is presumably underlying her opposition to price negotiations. Manchin and his family get a lot of income from the coal business and that's why he opposes clean energy initiatives, which must stop coal use first and foremost. The only obstruction which seems honest is Manchin's demand for tight means testing on child credits, which is probably good politics in super-conservative West Virginia.
I don't see any way to "negotiate" with that other than counter-corruption, which isn't really available to the Dems. Manchin could possibly be bought off with a "clean coal" boondoggle with enough plausible deniability but there's nothing the Dems can do to buy off Sinema. Since she's not already wealthy like Manchin and his family they can't offer a boondoggle to benefit her business and they can't give her or her campaign money directly. She could get many times as much money being a darling of the grassroots left, but she apparently isn't bright enough to realize that.
Well, you ain't wrong
Assumption of bad faith is rarely a good approach.
It demonstrates a significant lack of empathy and understanding to believe that the only reasons people could oppose something is because they are corrupt. The Medicare price negotiations are an interesting example to me of this. I am strongly in favor of Medicare negotiating and would propose an NHS like agency using QALYS to determine what the government would pay. That being said, if I were in congress, I would oppose the current legislation because 1) its not so much negotiation as price fixing; 2) we're outsourcing our price fixing to other countries; 3) it could (and likely will) be gamed immensely. Who looks at this approach and says this is what we should do? Yet, if I were to oppose it in Congress, you would almost certainly declare I was a corrupt and in the pay of big pharma.
This is just not true. The price in Europe is negotiated. We are piggybacking on that price (which will end up being renegotiated). There may be legitimate reasons to oppose this bill but this isn't a reasonable one.
I'm assuming you mean my first point. If the government went to sellers of houses, food, TVs, literally any other thing in and told them that they were going to allow sellers to sell for the "median price available, during the most recent 12-month period for which data is available...in Canada, the United Kingdom, Germany, France, and Japan" would you say they negotiated a price with the sellers or would they be fixing a price? If you were told "the people in other countries are negotiating those prices" would you consider that a compelling response?
To my broader point - do you, REF, believe that this is a good way for Medicare to negotiate drug prices?
I think that we should not be subsidizing pharmaceutical prices for the wealthy European countries. I think that this is a somewhat roundabout way of accomplishing that but a way nonetheless. I am curious how you believe it would be gamed(I am not an expert and genuinely curious).
My understanding was that the bill said we would not pay more than the median price in Europe. If that is correct then there is still 2 negotiations involved. Also, who is it that would declare you were corrupt and in the pay of big Pharma???
The price is set by looking at the median price in those countries. Since we are actually outsourcing that, those countries could easily negotiate a high price for the drugs with a company, but be given lots of "free samples." Since its a simplistic formula in the law, it could easily be gamed.
The other way it could be easily gamed is that the penalty for not paying the price is to be fined up to 95% of the revenue from selling the drug. If a company was selling the drug for $5 a pill, they could simply raise the price to $100 a pill and it would work out to be about the same.
I agree with your broader point that we are subsidizing the rest of the world. My solution to that is to simply setup an agency that negotiates directly based on the quality of life value of the drugs. Included in that negotiation would be a policy that you may not sell a drug in the US and also sell it for less than a GDP per capita adjusted amount elsewhere. So a drug selling in the US could not be sold for less than 70% of what it sells for in the US in Germany (63.5k gdp per capita vs 45.7k gpd per capita). You couldn't set a specific law to that effect, you would need to empower an agency to set that as a goal. It would also allow for very poor countries to be have very low prices (assuming they can negotiate them with pharma companies).
I agree that this sounds like a better solution. However, the existing proposal seems to get us halfway there. Had it passed, perhaps it would have proven unworkable and required adjustments. I still think this is a better result than to have nothing pass.
Noah: You're really badly wrong about education. The reason for high costs there is that the regulatory bodies - accreditation commissions - essentially behave like cartels.
The professionalization of the administrative class which started in the 50's, led to a takeover in the 70's and 80's of the commissions. From there, it became a spiral of circular logic: "Why do we need a huge student health center?" "Because otherwise we'll lose our accreditation! The commission said so." "Who's on the accreditation commission?" "Our university's president and all the other major university presidents in the state."
In fact, aggregate professor salaries adjusted for population and inflation haven't actually changed since the 80's; administrative costs are what exploded. You're not paying for your professor, you're paying for the student health center, a dozen or so "cultural houses", a huge football stadium and fitness center with a rock wall and lazy river, and the salaries for all the administrators who need to administrate these amenities - as well as the university president's salary, which is the most bloated of all because "look at all these amenities I have to administrate!".
It's not exactly the Cost Disease, but it's VERY regulatory.
Supply-side progressivism/liberalism seems like really bad marketing since the left has spent like 40 years trying to make "supply-side" a trigger word.
I can't find the source, but I remember reading a claim on Twitter that in countries where the government pays for college (Germany was the example used, I believe), colleges have less luxurious amenities and cost less as a result, because the difficulty of passing a law to obtain more funding leads to fiscal discipline.
This would seem to cut directly against the "Cost Disease Socialism" argument, so it's probably worth looking into whether it's actually true or not. It shouldn't be that hard to compare colleges in the US to colleges in Germany or any other country that already has government-funded college.
I'd caution against conflating Cost Disease Socialism with actual socialization of goods and services. CDS is about subsidization, not direct control. The key example here is how subsidizing student loans ended up pushing up tuition in America.
I'm always surprised by how lightly we let off universities in this story. They are essentially bilking students and the government out of money. Its especially bad for low income students as they are taking on loans that they often cannot get out of. Its worse than payday lenders. Yet they remain quite respected institutions.
It's not "universities", though, it's a subset of parasitic administrators who were happy to give everyone what they wanted in order to bloat their own power.
It's literally, to a beat, the exact narrative on the right of "liberals will promise everyone everything based on other people's money". And what did the right do? Make hay out of every little issue as a culture war, instead of instilling fiscal responsibility or breaking the cartel (the accreditation commissions). Many of the right's establishment went out and BECAME the commissioners and administrators in order to cash in on the bonanza. And plenty of those small college towns' local, more right-leaning politicians were more than happy to endorse the construction booms and big manly football stadiums.
The right failed to actually be conservative and keep these universities accountable, just as it has been doing for several generations now. They were more than happy to poke fun at the campus left and whine about liberal indoctrination while the foxes were raiding the henhouse.
If you go look at most universities in the country, I would say that 70+% of them are in places dominated by the left. The institutions themselves are dominated by the left. Bringing the right into this is a distraction IMO.
And blaming the entire thing on a "subset of parasitic administrators" is similarly allowing far to many involved, invested, and powerful individuals within academia off the hook. Its like saying that only the c-suite people in the banks were responsible for the subprime crisis when you had a lot of bad actors throughout the system.
That would suggest they are running a profitable operation or using $ to enrich themselves which in my experience is not true for most places. Please consider not just the sticker price but the average discount they are offering students - effective tuition has gone up at a much lower rate than sticker. Yes I do think administrative bloat is real, but in my experience this is largely due to private sector management techniques not yet having propagated across higher Ed - they may not know what they are doing (yet).
The administrators knew what they were doing and DID enrich themselves by using the bloat to justify ever-larger salaries.
How can you have the news and academia reporting and discussing how the price college has escalated dramatically and then hold blameless the institutions that are receiving all that money? People were right furious with the mortgage industry for issuing predatory subprime loans. How is this any different?
When I was walking the campus of my alma mater and marveling at the palatial spaces that didn’t exist during my time there, the head of planning responded by saying: “well we are all competing for the same students” - which I think after I thought about it for a while explains a lot.
"Star Trek or Brazil" will be my shorthand for this debate from now on
But what if instead of material abundance, we mixed cost disease socialism with a jobs guarantee so we could create a society of party loyalist clock punchers? I mean, it’s worked so well in the Middle East!
My favorite "un-PC" adage is that "the military is essentially a universal jobs program for rednecks".
I’m pretty sure the “un-PC” adage about the US military is that it’s an “Army of Juan”
Noah, how much do you think the underlying issue is tied in with broader political dysfunction vs. a systemic, economic issue?
Any time you have a procedure or test at a hospital, it will cost a fortune because of the way hospitals amortize costs.
Get your doctor to write the prescription to a stand alone imaging center and call them before you have it to find out cost.
BTW, I bet you the hospital won't be able to tell you beforehand what a CT costs....I tried it, on phone for an hour or so, transferred a bunch of times, no quote after all that.
I don't think anyone knows what a CT costs. I mean this literally. I've tried to figure out "does X make money or lose money" and not even the CFO could find an answer to the question. The hospital negotiates with each insurance company and it's somewhat a crap shoot whether the test gets covered and for how much. Some insurers pay through the nose and others pay Medicaid (below cost). The chargemaster (published "cost") is pointless because no one pays that. Even uninsured people often get a "cash discount" that will, of course, be removed if it disrupts the accounting shell game.
I honestly don't see any way to fix this mess without the government setting some sort of price controls. I'm a physician who is just kinda burned out from hearing administrators saying things like "record year of revenue" and "we're broke" and both somehow being somewhat true. They sent me a form showing that they collect only 23% of what they bill in my name...and that's something I have zero ability to impact since all my patients are referred from within the hospital.
I eventually landed in the single-payer club because it's the most direct way I can think of to slice through this foolishness. But I'll support just about anything that makes sense.
I had to have an MRI a couple of months ago. Paid cash. Had I used my big corporate insurance (where I used to work), it would have been $1,000 because of deductible. Cash was around $500. That's in Texas.
Yup. And notice you had to go out of your way to price that out. In your case knowing the deductible made that decision. But if you were above that already you would likely have no incentive or ability to compare prices. And, of course, doctors have zero clue about it so they just write a script (and hope we actually get results) or refer to places where they can facilitate scheduling (often within their home system). No kickback, just what's easiest or what they are familiar with.
Just read this interview with Kenneth Arrow from 2016 (he died in 2017) and he still got it 50 years after his original article.
https://promarket.org/2016/03/15/there-is-regulatory-capture-but-it-is-by-no-means-complete/
I have no proof but I am fairly confident that one reason for ballooning health care costs is an unintended consequence of a well intentioned piece of the Affordable Care Act. Insurance company profits were capped at 20%, but the golden rule of capitalism is that you have to grow your profits substantially in each quarter. With an essentially fixed customer base, the only way insurance companies can grow their profits is to pay out more. I believe they are doing this on purpose, especially soaking the better policies with higher prices and sometimes nonessential testing and treatment. Also doctors should be strictly forbidden from owning testing facilities. Many of them derive exorbitant profits from prescribing unnecessary testing. (Just to be sure,,,, ha)
As the insurance companies pay out more profits rise and policy costs balloon. This is why many nations do better with a fee for our ones model than a fee for service model.
The cost problem is a consequence of expanding cartelization and associated conduit schemes:
https://www.economic-undertow.com/2011/10/18/enter-mr-conduit/
"Where Ponzis involve the transfer of savings, Conduits are debt transfer machines. Repayment obligations are assigned to the conduit with the benefits directed from the lender to third-party recipients. The conduit is responsible for servicing and retiring the debt: it’s his debt, someone else’s benefit."
I've been thinking about this a lot. Cost disease is such an intractable problem because it's linked to the ascendance of the "professional-managerial" class in the west after WWII. We send an ever greater proportion of people into university and the accredited professions, and these clever people find more work for themselves. Ask anyone who works in a large institution what frustrates them and the answer is always the same - no one charge, there's no plan/strategy, most of their job is bullshit. This won't change unless we disempower the administrative class to which most of us belong - the 10% - that runs western democracies. It's extremely depressing. The top 10% have more wealth (39.4%) than the 1% (30.4%).
Using healthcare in these examples is always tough. Probably a big reason your CT scan was so expensive is you probably got it at a hospital, and hospitals "overcharge" for those kinds of services to make up for other services they are forced to perform but don't get enough revenue for, like running an ER or dealing with Medicaid patients. Your standalone CT shop doesn't have that issue.
I pointed that out!
Sorry, I read it fast as I was going out the door.
Two questions on the $20,000 CT scan:
a. What did your insurer actually pay? The initial medical bills are often severely discounted later.
b. Why is whoever pays for your insurance not insisting on reference pricing? In this approach, very common in Germany, the insurance pays the cost of reasonably priced care. Extra costs hit the patient.
High US medical costs have a number of explanations. Just as wealthier people spend spend larger shares of their incomes on health care, wealthier countries spend larger shares of their GDP on health care. The gap between the US and "other rich countries" is exaggerated by comparing the US to countries that are significantly less affluent; Switzerland and Luxembourg are probably the fairest comparisons. Culturally Americans are more defiant and disbelieving in the face of death than Europeans and so Americans spend especially more on health care in the last year of life. Insurance fraud is more rife in the US, which is what your CT scan case sounds like, and insurance-funded health-related court awards and out-of-court settlements are larger. The US has vastly greater military health costs. US health-care education is more extensive (especially for doctors) and expensive, and whereas European medical healthcare education is paid more out of the general tax pool, US healthcare education is paid more with higher doctor and other medical worker pay that pays off the student loans. The US has stricter barriers to medical worker immigration, reducing supply and driving up pay. The US is not less regulated; actually public systems are typically more self-regulated than private systems (and that's often not a good thing - public institutions often get away with worse abuses). The US system has a complex mix of public, private non-profit and private for-profit components that invites corruption and makes cost-control somebody else's problem. In short a whole lot of unpopulist technocrat work that our political system is uniquely incapable of addressing.
The tweet that kicked off the storm of tech bros feeling superior and patting each other on the back was in response to a stupid tweet from Amy Klobuchar. It labeled the graph as a demonstration of how politicians/government cause price inflation and the awesome tech sector disrupts and reduces prices.
To me the funny thing about the graph in that context is it's pure infographics as propaganda. Take a bunch of stuff where we've outsourced production and a few things that were emerging tech at the beginning of the period (cell phones and software) and compare against a few things where outsourcing is not possible and a handful of other things where prices are insane in the US but in every other rich country prices are reasonable and government is if anything more deeply involved (health and higher education sectors). Then conclude that the one thing common between the US and all other rich countries (government involvement in the sector) is what explains the US being a price outlier in those sectors.
Sound, principled analysis as always from AEI.