He <I>opposes</i> euthanasia, so why would he support suicide, particularly?
(He seems to be against expensive or elaborate care for old people, not for killing them like an elderly Logan's run.
And one should note that this is not entirely nonsensical as a <I>personal</i> position; doctors themselves are famous for refusing "heroic" measures on their own care plans.
A lof of very expensive and painful stuff in old people still leads to their near-term death.)
I think you're conflating "heroic" with good here. In medicine heroic measures tend to mean the last ditch effort to save a life e.g. amputating a leg to stop gangrene. Heroic measures means this will probably do more good than harm but it will do significant harm.
I think it's tempting to leapfrog the semi-private ones because people don't like the idea of a "two-tiered" system, that you get something better if you have more money. Me, I'm happy to let the people with more money have their better things if there's a reasonable chance for me to get it just by paying some money, instead of having to scheme or get in endless lines or go abroad or just wait.
Also, the "publicly funded but privately run" is how Medicare Advantage and, increasingly, Medicaid is run in the US, where the state/federal gov't contracts with an insurance company and pays them some kind of risk-adjusted "per capita" rate per enrollee, and the company assumes all the risks as it tries to enroll the public plan beneficiaries.
Also, one thing that makes the US system worse is its being tied to employment; I wonder how many issues with the private market might be at least partially resolved with a new equilibrium where the employer-sponsored plan is no longer required nor tax-privileged.
EDIT: Medicare ADvantage is an alternative style of Medicare plan (for old people) where all your care is covered and handled by a company, instead of the government directly. The companies offering these plans are "at risk" for all the costs, which they're expected to manage through "value-based incentives" and things like that; and they have a limited menu of incentives they can offer to get you to sign up, like free transportation and gym memberships. But it's totally voluntary for seniors to sign up. The hope is that this can optimize and streamline costs in a way "Traditional fee-for-service" Medicare can't.
> Me, I'm happy to let the people with more money have their better things
The issue with this is it means the people with money (i.e. the people who have the most say in society) have no stake in the public system, and a big incentive to actually want as cheap and terrible a public system as possible because it will mean cheaper taxes for them.
I mean, according to the above, Netherlands and Germany manage to have a private option which, anecdotally from a German friend, affords better treatment if you have the nice private coverage than the public option.
You can still tax high and have a decent public option, but if you outlaw all or most private payment or operation of healthcare, you make it possible only for the very rich to access anything other than your public option, which seems to be an issue in UK and Canada.
A nice thing about a private option with a genuinely good public option is that it at least in theory lets moderately well-off people go a lot more a la carte and spend in the areas that mean a lot to them (or not spend for things they don’t care about).
One of the obnoxious things about post-Obamacare private insurance is that there are no options available between “literally nothing” and “expensive because they wanted everything notionally covered”.
Permanent short-term health plans have been a thing since... 2017 or so? They might go away again, considering they haven't been Thanosed out of existence yet they might just quietly continue along.
These are the plans that are in between that you were looking for.
Right, but because I have employer provided health insurance, because my employer is legally required to offer it, I don’t really have that option (or I do, but I’m leaving a pile of compensation on the table if I take it).
They just choose to offer it. They could pay a small fee (2.5k per head after a certain number I believe) and opt out. You could seek out an employer that doesn't tie compensation to a non optimal system.
In The Netherlands we don't have a private system. We have the government literally set the price for 'basic insurance that the government deems is necessary', you can adjust kind of a slider between monthly cost/deductable, and that's it. Insurance companies mostly compete on like 'ten free yoga lessons!', 'we are known for better service', '$100 off your first year'.
The big exception is dental, which does not fall under basic healthcare, so companies offer extra packages, which they also do with things like a shrink or fysiotherapy, which are normally only covered when your GP says you should go.
Yep, sounds familiar to our German way. The "secret" seems to be to have the insurances compete on low administration cost. (Some smaller insurers who run into troubles here are regulary "integrated"/"bought" by bigger ones - and some "new" ones try their luck growing on streamlined procedures). - Those funny extras they throw at us to lure us into swaping are very secondary. - The docs have much less hassle cuz it is all one price (or two: "insured" vs. "privately insured"). Imagine a doc had to deal with dozens of prices, some insurances not covering certain stuff others do! Nightmare! And hell of extra-costs). - The docs love private (insured) patients, as they can charge them around 75% more plus for some less cost-efficient stuff. (Dermatolgists loved looking all over my skin when I was young and private. Nowadays ... - well thanks for letting me know I enjoy the best health care in the world. ) - Fun fact: many Germans with private insurance (self-employed or high salary) stay unmarried. As their partner+kids would be forced into theit contract and make it much more expensive.
Kinda. And the premiums go up with age, of course. I got out by no longer being a Beamter (civil servant) - a fate I could not bear for more than a year. But it is complicated - wikipedia (and the book) should have more info.
(And the government subsidises the basic premium for those on low incomes). However, for me this fits the category definition "Individuals use their own money to buy insurance from private companies" a la Switzerland. It certainly doesn't fit "the government pays 100% of your costs". You're going to pay 80-200/month for insurance - to a private company - plus probably some out of pocket expenses/deductible for usage. What is the distinction being drawn between these two systems? Is it saying that the government acts as a middle man - they pay the hospital/doctor, insurance reimburses government?
It seems like it would only work if your politicians aren't already captured/corrupted. If they are, then the public system would suffer as Angus said. Arguably this wouldn't work in the US for this reason.
I second that anecdote. I'm privately insured in Germany and it's GREAT (for me, that is. although I do subsidise the publicly insured people to a small extent, so not exclusively for me).
And I had that issue you describe in the UK - I didn't want to wait as long as I would've had to for a specialist whIle living in the UK, so I looked for private options (which my German insurance, under certain circumstances, like those I was in, would cover).
It was possible, but there was little choice, and it was a lot more expensive than in Germany.
As it stands I'd say the only people with an actual stake in the healthcare system have that stake going in the direction of: "Make things more expensive" -- as much as the populace at large would like things to be cheaper their interest is diffuse.
If your moral or intellectual model of healthcare is that healthcare is perfectly inelastic then private options are unethical since it's more money chasing the same supply of goods, and the only ethical choice is to ration it at the lowest price point possible. Plenty of voters probably think this way subconsciously and plenty of economists will probably argue it explicitly.
If the supply is sufficiently elastic, and you combine private healthcare with a sort of sales tax that finances the public option, then the existence of
Everyone in the US with a concrete stake in the healthcare system would want something like a (legally instituted or not) perfectly inelastic supply of medical services plus a government that pays "The market price"
Except healthcare isn't perfectly inelastic. I do software development for a living and volunteer in EMS. If pay in EMS was to outdo my software engineering job I'd do that for a living. And if doctors were paid more I'd go to medical school. (Opportunity cost is a bitch)
I think that's a real theoretical worry, but we can see how it has actually worked and it doesn't actually seem to work that way where it's been implemented. And you also have to say 'Compared to what?' In the Private US system, basically young(-ish) people with money just don't care at all that there even is a system available for people who may fall through the cracks.
It has worked that way in plenty of places. Chile and India come to mind. Also Russia iirc. From my conversations with people from those countries, the public option is horrible and you essentially have to go to the private to get anything like reasonable care.
So maybe not in first world countries, or maybe just not yet, but saying "it doesn't happen" is not accurate.
Looking at incentives is so important because it shows you how the system is going to trend over time.
Do the "people with money" ever have a stake in the public system? I mean, it sort of depends on how you define "people with money", but I suspect that in all of the surveyed countries the 1% are basically going to go to whatever doctor they like best and get whatever medical treatment they want (or that their doctor tells them to), and if the public system wants to pay for it, great, otherwise they'll just pay themselves because is there any better use for their money than (perceived) better health care?
So, they'll *prefer* the public system to be generous in paying for high-quality health care. But being in the 1%, they are almost by definition net taxpayers, particularly in health care. So they'll know that any plan that ends with "and the public system can now afford to provide €1,000 per capita additional high-quality health care", is going to start with >>€1,000 per year additional taxes from their 1%-er selves.
“Also, one thing that makes the US system worse is its being tied to employment;”
This seems so obviously true that I was shocked that Obamacare went all in on entrenching it even further by MANDATING that most employers provide a particular level of insurance.
Portability from job to job, and state to state seems like a thing to definitely try.
For many employers, paying the penalty is cheaper (and provides cheaper insurance) than paying for the employee's insurance. Too bad it's phrased as a penalty. When Biden increased the Obamacare benefits I kept wondering if the strategy was to just keep turning up the value of Obamacare over traditional employer health care until enough Accounting/HR wonks just decided to flip the switch and suddenly you have a bloodless healthcare revolution.
Too bad there aren't enough wonks out there and public image is still a cost consideration.
My theory is that the nature of law being written in the US is - gather all the stakeholders [with lobbyists/organizations] - American Hospital Association, American Medical Association, Disabled Veterans' Groups, AARP, large health insurers or their representatives, and big pharma - and split the difference between all those interests, with tons of special carve-outs and special interests to go around. Hence you get gigantic unreadable bills that benefit specifically health insurance companies and heavily favor health system consolidation/monopoly formation, and increased bureaucracy. There aren't actually all the actual stakeholders - just the ones with institutional knowledge, but also resources to communicate that knowledge, connections, and political pull.
(This is also why I assume that US version of "Medicare for All" will be government-paid private plans and you pick one, run by insurance companies who are "at risk" for your costs and therefore with incentives to deny your claims and pay as little as possible - meaning it won't really improve quality or accessibility as much as proponents claim.
Medicaid is government paid private plans where you pick one and they are run by an insurance company. The only information I see out there (5 minutes googling) about denied medicaid claims in Texas is on the provider's end, not the patient.
No, I'm not quite sure why there are several different private insurers to choose from under medicaid. Especially considering you can change them at any time and BACKDATE your change. It's weird.
Perhaps the more accurate claim would be, that the incentives stack up and point towards denial, or reduction of care (or selection of patients). If the plan is at risk for all the costs, they will of course try to manage the costs (subject to regulations - they can't just deny every claim, because they get reviewed regularly by the relevant regulatory body on tons of metrics). They have whole "utilization management" and clinical review departments - "managed care" in a way that other countries definitely weren't doing, at least not recently.
I worked for a large managed care provider, they were all about "disease management" programs and value-based incentives, including capitation-based reimbursement to primary care where possible, diverting care to "high-value" practices, using various sorts of approaches to reduce expensive care, emergency department admissions, directing to more cost-effective post-acute facilities.... Some of these might significantly reduce costs without compromising quality of care, but it's hard for me to believe that something doesn't get cut somewhere - e.g., access to more expensive drugs, novel or additional treatments, out-of-network specialists, and so forth. I didn't delve into it too deeply, because that wasn't my direct job; but it seemed like the positive programs - data-based disease management programs, care coordination initiatives for high-claims individuals, community outreach, etc. appear high-touch and therefore expensive: great outcomes, but I don't know if cheap, necessarily (if they're to be done well). This is very different from "traditional Medicare", which basically covers most things that fall in its purview. Maybe someone who is an expert in managed care specifically can weigh in, but again my strong bias to believe that a company that's on the hook for certain costs - facing a fixed reimbursement rate per person (perhaps adjusted based on how sick the person is) - will seek to minimize those costs any way they legally can, balancing it against regulation and reputation, of course.
Hey, would you be open to talking to me about your experience working for a managed care provider? I am researching the incentive landscape around psychiatric crisis care and am really lacking an understanding from the insurer/payer side. (if so, DM me on Twitter--I'm @utotranslucence)
Yes, exactly -- mandatory employer-provided health insurance is the one clear and obvious way we are different from the other countries being studied. Almost no decision-maker has to bear the full cost -- not for care, not for premiums. And Medicare, which could be a disciplining influence, instead bases its formula on what insurance is paying. We have market power among hospitals, market power among insurers, and pharmacy benefit managers who do...what, exactly?
Come to think of it, considering how arbitrary and made-up the prices are for hospital services here, when we are able to find out what they even are, it's not surprising that alternative arbitrary budgeting methods actually work just fine.
Well, that was the point of the public option, which was originally part of Obamacare but got killed by Joe Lieberman. Without a public option there wasn't much choice but to freeze the current system in place, or else you would risk there being no options at all for large swathes of the employed public if private insurers chose not to enter the market in a given state. I think had the public option passed, there's a good chance the employer mandate would not have been included (and I definitely would have taken that trade; I wonder whether Joe Lieberman would have).
At the time there was definitely political pressure to "save" employer health insurance too because many people didn't want disruption to their existing health plans even though they almost certainly would have had better options waiting for them if the employer-insurance link was broken. One of the biggest complaints about Obamacare right after it went into effect was people upset that their employer plans were being modified/replaced.
There are two-tiered private systems where richer people get nicer things (eg Australia), but I don't think that's what's happening in Germany and the Netherlands.
My impression is that Germany and the Netherlands are like charter schools in the US, where the government pays for everybody but you can still choose which of several competing institutions you want to use.
This description describes the private option as follows, towards the end of the blurb:
"Germans earning more than $68,000 can opt out of SHI and choose private health insurance instead. There are no government subsidies for private insurance."
From what I've heard, it includes quite a lot of people because there are quite a lot of civil servants because Germany likes to class people as civil servants.
So there *is* a two-tier option, but there are choices within each tier. About 10% of people (see link) choose the more expensive tier, it comes with lower waiting times etc.
Edit: I should add that a friend of mine is a doctor in Germany, and told me that apparently they lose money on the non-private patients, and make money on the private patients because private patients pay a lot more. Nobody is really happy with this situation, but it has been this way for a while.
They often claim that, but it’s not true. Doctors can easily chose to accept only private patients, however, it is pretty rare to do so, because the number of patients with private insurance is too low to provide enough volume.
Maybe its true for some doctors with higher costs but not others.
Edit: comment below claims " Also, doctors are only paid for a certain number of mandatorily insured patients per quarter – they can treat more, but they won't get paid for it " so in terms of marginal cost once they've filled their quota, they make zero money on the non-private insured people.
I'd guess that if this is true at all (which I'm skeptical of) they 'lose' money in the same way that McDonald's 'loses' money when someone buys something from the dollar menu, rather than one of the more expensive options: ie, if everyone used the lower cost option, the fixed costs wouldn't be covered, but it still brings in more money than the variable costs (obviously, since if they were losing money on the variable costs they wouldn't be doing it in the first place).
I think that thinking of the German system as "ACA, but the mandate is enforced so nobody is ever uninsured" is a good approximation (the "single payer part" being the subsidies for lower income individuals that also exist with ACA). At least for white collar and unionized jobs, you get private health insurance from your employer that is significantly better than the basic public one much like in the US.
That is a better approximation, but an important thing is missing: There are only two (mostly overlapping) „networks“. Doctors, hospitals and pharmacies all charge according to the rules of either public or private health insurance. Most accept both types of insurance. So „out-of-network“ issues are almost nonexistent. Pricing for one type of treatment is the same at every hospital for everyone with the same insurance type. Because of that Hospitals and doctors don’t compete on price, but on the quality of service.
Yes. Though there are a number of specialists that only accept private insurance, this is communicated and checked very clearly and in advance so I've never heard of anyone ending up in the wrong category by mistake.
Germany has two parallel systems. One is the single-payer-through-private-companies that you described. In that system (called something like "mandatory insurance" in Germany) you pay a certain percentage of your salary and get health care. The other is a "private" system but there are still lots of rules, I think. Doctors get more money when they treat these private patients but this is also capped at, I think, 2.5x the money they would get from a mandatorily insured patient. Also, doctors are only paid for a certain number of mandatorily insured patients per quarter – they can treat more, but they won't get paid for it – whereas they always get money for the privately insured patients. The result is obviously that doctors give preferential treatment to those with private insurance. But also that privately insured patients are subsidizing those with mandatory insurance in a way.
You are allowed to get private insurance if you earn more than a certain amount or if you are self-employed. The system is either-or: either you have the mandatory (single payer) insurance or you have the private one. Though, if you have the mandatory insurance, nothing stops you from telling your doctor you are privately insured so that they send you an invoice which you then have to pay for by yourself. It's just that most people can't afford that (or rather that it's risky).
(As a side note, if you look at this from the Hansonian perspective on healthcare, then it doesn't necessarily result in better outcomes for those with private insurance. It's true that those patients get _more treatment_ but a lot of it is useless and only happens so that the doctor can earn more money. As someone with only mandatory insurance, you will likely get less treatment but you should always be able to get the really life-saving care, so you might come out basically the same. My mother has private insurance because she is a teacher – who always have private insurance for historical reasons – and every time she goes to the doctor they find some treatment they could do, whereas my father who has mandatory insurance gets told to drink water and rest.)
Just adding my two cents: The insurers in the German mandatory system aren't really private companies, but public (as in "delegated by the administration with public tasks") corporations. They are entities under public law and can't fall into insolvency for example. Comparing them with private insurers really underestimates the grade of socialization in the German economical system. This also explains their bargaining power, because all the public insurers negotiate as bloc with the manufacturers, representing >85% of the market.
You are right about their legal status and that they got huge bargaining power, but not everything is negotiate as a bloc and there are many different public insurance companies. This is not the kind of „one-size-fits-everyone“ socialism.
I would argue that the segmentation in many different public insurers has mainly historical reasons and isn't a fundamental weakness or strength of the system, because by and large the indivual differences between the insureres are marginal.
The price of pharmaceuticals is bargained on the insurers' side by the collective umbrella corporation, the GKV-SV.
You are technically correct (the best kind of correct) on insolvencies, but the insolvency proceedings of public insurers differs so fundamentally from private companies that they aren't comparable, mainly because claims against public insureres are backed by a collective fond.
The insolvency rules are different, but they still get an important job done: Inefficient players are removed from the market, which is also one of the reasons why the differences between the insurances are so small. While the large number (97, used by more than 1000) of insurances has historical reasons, and a much smaller number could work just as well, or even better, I argue that it is an important feature of the German system to not just have one large insurance. With multiple insurances, they will compete on the efficiency of the administration. Inefficient players have to improve or will be forced to leave the market. However, if all or most of the insurance providers struggle you know that the system needs more money. While if you had a single big insurance and it is struggling, you don’t know if this is due to inefficiency or because not enough money is available for the task.
Another thing: the rate of the mandatory system is ca. 15% of your gross income (employers pay half the amount).
Lowest income the assurances assume is about 1200€/month and if you earn more than 63000€/year the rate is capped, so you pay a maximal rate of 756€/month yourself and your employer pays the same amount.
So both companies and workers are interested in low rates.
Your insurance may ask for 1-2% or/and offer some additional treatments (some pay for homoeopathic "medication" e.g. LOL) People are allowed to change once per year, so this is not a monopoly but earnings are capped.
The good thing about the mandatory system: your family might be insured as well (kids until 25 resp. end of study/apprenticeship, your partner in a marriage if they have no income of their own) and they do not care about your health status.
Private insurances start often cheaper if you are young but get more expensive every year. Of course if you are disabled or have a condition, you smoke, are obese etc. the insurance is expensive immediately.
So the mandatory system has more people who are sick and the private ones the more healthy and rich.
Just to be clear, the UK has a private medical system including hospitals totally separate from the NHS where you can buy top up medical insurance to the NHS, which allows you to see specialists and get treatment quickly. Emergency cases though are usually treated on NHS. About 10% of the population pay into this or get it through work. It doesn’t seem to cause much resentment. There is little regulation on the cost and content of these plans, though of course the medical care can’t deviate from UK standards. For a family of 4 annual costs are around £2,000. To me the UK system is a good compromise between looking after the less fortunate with some pretty good health care at a low cost for the country but allowing those who want a higher standard of care without too much regulation.
Yes, I know that you can get private insurance in the UK, but you can't opt out of the NHS, right? I'm not completely sure whether that is a meaningful difference, but when you get private insurance in Germany, none of your money flows into the "single payer" system. Also, people with both kind of insurance go to the same doctor in Germany – I have never heard of a doctor or hospital that only takes one or the other kind of insurance. But in the UK there are private hospitals that only take private insurance (or rather, they send you an invoice and you have to pay the money somehow), right? And you couldn't just go to an NHS doctor and say you want to pay for yourself, right?
Note that I'm not making any sort of claim about which system is better, but they do seem clearly different to me.
sample size of 1 but my experience of the system is:
My work offered private (probably quite a cheap plan) - I turned it down as the main benefit was access to GPs quickly. I didn't have to pay for it but i did have to pay tax on the 'value' of the benefit and even that was too much. They would let you go to in network private hospitals and you might have shorter wait times but they were only covering stuff that you'd get on the NHS anyway and my experience with the NHS has been good.
My wife has given birth in NHS, I've had 2 ops and an ongoing blood condition. All times I've been pretty impressed at the level of service. A friend of ours got cancer at 30 and I was also impressed with his care.
Another friend has ongoing problems with something vaguely IBS shaped. He has been to his GP a bunch of times but they aren't showing much initiative. Another friend with mental health issues had a similar story.
I think my blood condition got a lot more traction because there was a binary test and if the test was positive there was a protocol to follow. Refer to this specialist, give this medication until this number is in this range. For more subjective stuff people tend to have worse experiences. Maybe going private in these cases would mean they would but more effort into finding what is actually going on.
If I wanted to see a GP I could:
* go through the NHS process and get a 10 min appointment. If it isn't 'urgent' (which has quite a low bar) it will take weeks to be seen. If I just give vague sysmtoms I feel its likely I'd be 'fobbed off' with something like 'drink more water, do some more exercise and come back in 3 months if its still an issue'
* go privately and see a GP immediately (who almost certainly does NHS work too). I could pay for just that visit or if i was part of a private scheme this would be covered by that. I've never done this but I would expect them to be a lot more proactive.
I've mentioned ages in all the previous examples because I'm aware of the level of service not being as good for retirement age people. My grandfather was in a hospital for about 3 month until he died recently and I can't say the quality of care was very good. From a completely dispassionate perspective I'm not sure spending money on better care for him would be cost effective.
I think one of the benefits of the NHS is that it has to prioritise so minimising the number of unnecessary treatments, this is overall good for society but of course if your treatment is the one being deprioritised it sucks.
I think it's worth noting that in Australia the private system only offers some services, with the most specialised procedures (transplants, major trauma, most paediatric specialties etc) only offered through the public system.
The private system we have, imo having worked as a doctor on both sides, is great for bulk surgical procedures like knee replacements but not very good at looking after people who are acutely unwell or have multisystem long term illnesses. Private medicine has very little oversight (you are treated by one attending/consultant who can basically do whatever they want) compared to the public system where departments and the presence of trainees act as a kind of peer review which I think leads to better medical care. If I was seriously sick I would rather be looked after in the public system.
I think there's a fair argument to be made that the private system skims off the healthiest and most straightforward cases and dumps the rest on the public system. I don't know whether this is cost effective or not - obviously there are efficiencies which come with higher throughput, but there is definitely overservicing and waste in the private system. It's a source of resentment.
Much of what you say is true of the UK as well. I would come down on the place that there is a political limit on the amount of funding for a national health service so people who go private are releasing resources for those who do not. Like school systems. So it is a good thing. But I can see why communitarian leaning people don’t like people who have a limited stake in the success of the state system.
That was my thought too - I spent a year working as a junior doctor in the UK and IMO the public systems are almost identical, we just spend a bit more in Australia.
My view is that on average private patients don't get significantly better medical care (just a nicer room and marginally better food), so while I think the communitarian argument has its merits I'm not sure how relevant it is here.
I think it would be fairer if the government ended subsidies for private insurance and let the companies/hospitals really fend for themselves. As it is they have negotiated a cosy niche where they are paid to provide the highest yield procedures but shift costs back to the state when it suits them.
I don’t know about Australia but I don’t think there are any subsidies in UK for private medical. But of course overall the NHS is a regressive system, I am always amazed every time I get free medicines even though I could well afford it. A system that charged high earners more would be more fair, although I guess since most of the top decile has private maybe it works out.
In the Netherlands individuals pay (order of 100euro per month) for insurance. If you have low income the government will subsidise this. The price for insurance is basically fixed by the government, and insurers can’t refuse people. And you are legally required to be insured.
I don’t know how true this is, but among people here I know the Dutch healthcare system has a bit of a reputation for just ignoring problems that would be treated in other countries. I’m slightly skeptics of satisfaction ratings, as they are relative to expectation (Dutch food being an example where this may play a significant role…).
Actually, in the Netherlands, the government decides what will be covered in the basic plan, and every insurer then sets their price. Every 1th of January, consumers can switch healthcare insurers, and price is an important consideration (and prices are widely advertised in November/December). Some plans are cheaper because not all providers are covered, meaning that, for example, you might not be able to go to your hospital of choice. Still, I have a limited plan, and always could go to the providers I wanted.
GP's in Holland seem to be more reluctant than their colleagues abroad in prescribing drugs and treatment ("Let's see how it goes before we do something"). I think this is more a question of medical culture than to limit costs, and I like it, because in general, it is a good thing to be reticent in prescribing stuff.
Insurers bargain with providers over prices. The government bargains with pharma over drug prices.
Waiting lists for many procedures can be long, but I can't compare them with other countries.
Dental is included in the basic plan for children under 18.
Insurers and health providers are private entities, but government sets many rules limiting their behavior. Still, they can go broke (and sometimes hospitals do).
My understanding is that the Dutch system also has the unique property (though it gets muddled in practice) of separating out short-term and long-term care. Where long-term is more fully socialized and short-term is more market oriented. I could imagine something similar in the US where you have the government provide something like catastrophic coverage on a universal basis, which would free-up insurance companies to have more competitive plans for the remaining (capped) coverage.
The other big factor is that "Single Payer" is a massive stealth transfer of wealth, and so this appeals to the sort of people who want to do massive transfers of wealth.
Thats technically true but for me at least isn't a useful lens.
I don't feel the same about:
* giving everyone access to a minimum standard of healthcare
* giving poor people the same amount of money it would cost to given them a minimum standard of healthcare.
Maybe its because I'm in the UK and we've already done the 'wealth transfer'. To transfer it back, and have less fortunate people be vulnerable to crippling medical bills for minor problems so I can save on national insurance, seems incredibly selfish
In countries with private and public systems the private system can sometimes get you into surgery quicker for elective surgeries, or you get a nicer room, or sometimes more options - like cosmetic surgery. If you are hospitalised in those systems in an emergency then there’s no difference in care.
At least in Germany, comparing it to economy vs. business class might be a good comparison. Both tiers will get you from A to B, you won‘t be more likely to get into fatal accident if you travel coach rather than business, but the process can be much nicer in the more expensive tier.
That's not what people mean by a two-tier system, though. What you're describing is fine - so long as everyone uses the same hospital and same doctors, and the only thing you can pay for is frills (private room, better food, whatever), then you're ok.
A two-tier system is you can take the government DC-3 that's held together with bailing wire and twine and one of the wheels is just a skid, or the the private 777 with proper maintenance and flight crew.
And in healthcare that looks like a public hospital where you have to bring your own bandages and medical supplies because it's so poorly supplied vs the private hospital that is, you know, a hospital.
Hey! I wrote a longer comment below, but there's some good evidence that you can't just get better healthcare in the US by paying more money; in other words, the care that the richest Americans get is about equivalent to what average folks in other rich countries get: https://bit.ly/3nGRHL8. In other words, there is no reasonable change for you to have better things just by paying some money; in the US even if you have access to top tier healthcare what you're getting is something like average French or German healthcare.
Even the "socialist" UK has a private option, often based on cash payment rather than insurance (thought that exists too.) Because it has to compete with free, it tends to be quite a lot cheaper than in the US, sometimes even less than the co-pay for insured patients in the US.
I am in favor of universal free healthcare, but I don't see a problem with people also paying privately if they want to. The alternative would be banning all health care outside the government system, which seems draconian. I think that paying for private healthcare when there's a free government alternative is a lot more justifiable than paying for private education, which seems much closer to zero-sum competition.
More money incentivizes more supply, and this is true even if the constraint is a fixed number of staff. For example, there are doctors who work full-time in the NHS and then see cash-pay patients on the side for a few hours a week. I guess in an ideal world, the NHS would have so much money that no-one would need to go private, but I'm not aware of any system that works this way.
Since I had no idea who Dr. Ezekiel Emanuel was, my immediate reaction was "He's either Jewish or African, I'm not sure which" 😀 So I had to look him up and went "Oh, *he's* your brother?"
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
That's... certainly one way to look at it. I think the view in the UK would be (a) various governments have and are trying their best to privatise chunks of the NHS - there is some concern that large American healthcare businesses are competing for contracts and buying up lots of healthcare provision which they run for-profit, funnelling British taxpayer money back to the shareholders:
(b) there is constant meddling with the structure of the health care system in Britain which ends up with layers of bureaucracy and lack of efficiency (c) health is one of the huge drains on the budget, along with social welfare and education; no matter how much money you put into it, it always requires more (d) various Health Secretaries have been very unpopular, see Jeremy Hunt (and the, um, rhyming slang version of his name)
Does this review and book not refute that the NHS is expensive and inefficient, at least compared to peers? The table shows it’s pretty much the cheapest option. To me that suggests:
A) bureaucracy exists In all systems - the NHS probably avoids a lot of bureaucracy by removing the insurer/claim dynamic, but instead gets the public sector bureaucracy cost add on
B) People hate taxes and perhaps paying for healthcare through a general tax (paying for everyone) makes people feel more negative about it than paying for your own insurance only (paying for me only). Bit the lesson from the review here is seems to be you can eat your dinner hot or cold, but you have to eat it.
The theory I heard for why the NHS is cheap is that it was founded many decades ago when healthcare generally was cheap, and bureaucratic inflexibility meant it resisted changing its tightfisted ways for a long time (though it has more recently become less of an outlier as it got more expensive).
Is there an argument for preventative care. Most developed countries don't want to just let people die so hospitals are obliged to get them stabilised before letting them go. Given their problem wasn't actually fixed how long will it be before they are back in the ER?
These visits are expensive and have to be subsidised by higher fees for paying customers. Maybe its just cheaper to give anyone treatment that needs treatment (from a menu of pre approved cost effective options)
I tried to find some numbers. The best I could do was that us spends roughly ~35B a year on 'uncompensated health care services' which is pretty small change compared to the $4.1T it spends on total health care.
So thats definitely not the main reason UK care is cheaper than US care
I feel that proactive care should do more than save us $100/capita. Maybe it isn't captured in these figures but does lead to a healthier more productive workforce...another nice idea I have no evidence for
It depends. Getting diabetics to be compliant with their medication could save tens of thousands of dollars per year. Most, in practice, will save little. The problem is that the people who are non-compliant are usually that way because they choose to be, rather than due to cost or anything else.
Sort of - healthcare was cheap as the number of conditions that could be effectively treated, was really quite low - the NHS was created in '48 after the discovery of antibiotics and their initial use during the war.
The relative cheapness is the capital cost - the British Government anticipated really quite high, bordering upon truly massive, civilian casualties during the war, partially down to the expected use of poison gas, and over-estimating the effectiveness of aerial bombing. So, an awful lot of capacity got built out quickly, of varying, ah, quality.
Neither of those scenarios actually occurred as expected. So, a great wodge of stuff was there to be used after the war. F'rinstance, the hospital where I was born in '69, and had some broken bones sorted out (at age 7 and 16), was a building dating from around 1920 or something, and a whole load of Nissen huts. For all I know, those huts had been there, in use, since 1940.
The other part is that some number of hospitals had effectively been built/created much earlier, essentially in acts of Victorian (or possibly Edwardian) philanthropy. And they were operated as charities.
For those, there were no identifiable owners - so no compensation paid upon nationalisation.
This gave rise to a number of voters, in my grandparents generation, who utterly despised the Labour Party on the grounds that "they stole our 'ospitals".
Zeke and Rahm have another brother, Ari, who's a Hollywood agent that I believe even had a TV show about him, called "Entourage": https://en.wikipedia.org/wiki/Ari_Emanuel
I found out that Singapore has one of the more reasonable healthcare systems out there, with only 4% of GDP spent on world-class service. Basically, it requires the citizens to pay a small part of the healthcare costs out of pocket, and the rest is financed by taxes. There's a lot of interesting intricacies that make it work well, all detailed in this 16-minute video by a good economics youtube channel: https://youtu.be/sKjHvpiHk3s
Even granting that, it would remain true that 3/4 of the population gets very good healthcare for 1/4th the cost. Maybe there's an access issue but the core design is very good imo.
The core design is decent except it still relies on private insurers, which is odd on an island of 5 million, and you can get denied for pre existing conditions. Additionally, the fact that foreigners are not part of it is a problem.
in what way does it *rely* on private insurers? yes, people may choose to get supplemental insurance or to participate in private providers, but this is true in every country with nationalized healthcare. it would be insane to outright ban private insurance (as Bernie Sanders has suggested).
This is not a valid criticism of the efficacy of the Singaporean healthcare system. This is a criticism of their value system with respect to public spending.
(and imo, a meritless one; what's the issue with the Singaporean government restricting access to social programs to Singaporeans?)
I think I agree with you, but it's interesting to consider that Singapore has such a large number of expats. Something about the place requires a lot of non-singaporeans to be there doing stuff. Not because the citizens don't work, but just becauese the culture has evolved to live off a supply flow of outside blood.
So Singapore is refusing to offer health care to a population that is a vital and organic part of it's fabric. I think that's morally fine, but it's still interesting.
You're there of your own accord, but the large majority of non-citizens in Singapore are lower-income, some even there for generations, and have much more limited options. Upper income non-citizens are clearly a different group and not really who is being discussed. This is a somewhat less extreme version of being the British banker in Dubai who says foreigners have it great there; true for British bankers, perhaps, but absolutely not true for Indian manual laborers, who far outnumber the British bankers. It's hard to take any policy advice too seriously from places like Singapore or Dubai that rely so heavily on low-wage foreign workers who are always excluded from public benefits to make their economies run.
Well, the construction labourers from Bangladesh and India are here because their other options are less enticing. Even low wage in Singapore is good by their local standards.
Similarly, I am in Singapore because my other options are worse.
You seem to imply that it is bad of Singapore to let poorer people work here? Countries like the UK which don't let poor people from India work there are even worse for poor people from India.. Alas, out of sight is out of mind.
I do agree that it would be better for humanity if Singapore, and other countries, opened themselves more to (economic) migration.
If the UK could let more people in to work, and somehow use that to make the NHS cheaper and better for locals, that would be great! Even if they don't open the NHS to the foreign workers.
That is the standard argument for extending national coverage to non-nationals (ie, that they contribute to society so they should be included). But as alluded to by Matthias, I think freedom of exit satisfactorily addresses this point.
How do non-Singaporeans access medical care? Do they pay doctors out of pocket every time they go for a visit? Or are there insurance options available for them?
I often pay out of pocket, but there are also insurance options available.
Many expat white collar professionals get medical care through their employer as a benefit. But that's not mandatory to offer.
If you employ a foreign domestic worker in your household, the government mandates some insurance; and there are multiple competing private insurance providers for that.
I don't know about foreign blue collar workers. Though in general, the government is more paternalistic for poorer people, than for richer people or richer expats.
Lived in Singapore for 5 years, doctors were good, if expensive, but the biggest issue was that as a foreign resident, you don't get to take part in all of the parts of it that keep costs down. Foreigners don't get the HSAs and they don't get the basic government Medishield coverage. So, as a foreigner, you are in the same boat as the US system where you pay for expensive private insurance on your own, or you are reliant on your employer to do it.
A big part of it seems to be the compulsory savings accounts that can only be withdrawn from for healthcare expenditures. I'm not American, but I do not think most Americans would agree that this is a "reasonable healthcare system".
HSAs are very popular for higher income americans due to the invective of tax savings. There probably is a way to scale them down, but it gets problematic once you have people living paycheck-to-paychecks with savings available (even if you pay a penalty to remove it).
we literally have compulsory retirement/health "savings" in the form of payroll taxes, although we do not get to keep the premiums (nor earn a guaranteed return). I would much prefer my 6% of income to go to a 401k and an HSA than to the pyramid schemes known as Social Security and Medicare.
Singapore is a strange omission here, given that it a) is unusually cheap, b) works well enough, in that it hasn't kept Singapore from consistently being near the top of the life expectancy rankings, and c) actually is very different from the others; among other qualities it has a very high proportion of out-of-pocket spending.
That said, the cheapness of Singapore's health care system is probably overstated due to its GDP being inflated by Singapore's finance industry.
High GDP might be a part of the explanation. In absolute numbers, healthcare spending in Singapore is $4,439 per capita. Quite expensive with #20 spot globally, but still below most of the countries analysed here, save for China and Taiwan.
> People talk about how the US system is “privatized” and the Canadian system “socialized”, but a lot of this comes down to whether your payments for the same basic package are marked “paycheck deductions” vs. “taxes”.
Having compared what is for sale in America to what is provided under OHIP, this is very much not the case. OHIP provides far more comprehensive insurance and greater peace of mind than any insurance I was able to find for sale in the US. You quite literally cannot buy the kind of insurance I have in Ontario in America.
Could you clarify? I'm very interested to know about it. In the US I can buy a plan with no (apparent) limits where I pay $6,000 at minimum and $14,000 at maximum ($0 at minimum and $8,000 at maximum after subsidies). Or I could spend a few hundred more and get a different selection of doctors.
What actual content for the insurance ("more comprehensive") is different in Canada?
Maybe things are different now? When I looked I couldn't find anything this good.
OHIP offers:
- no deductible
- no limits of any kind
- any specialist, any diagnostic covered
- hospital stay, surgeries, etc. fully covered
- no gotchas
- no having to sift through options (honestly this is huge for me, ymmv, but I don't think you can underestimate the importance of knowing that your coverage is good with no effort)
- no "out of network" BS, I can go to any doctor or clinic or hospital without any restriction
- no signups (e.g. I'm trying to find American insurance plans to compare, and I'm seeing "Open Enrollment for 2022 health insurance has passed", what the fuck is that lol)
I just spent some time trying to find a provider, and holy shit that was a nightmare. Best I could fine before getting too aggravated was $6000 US/year with all kinds of caveats, deductibles, copays, in-network-out-of-network bullshit... Copays on every kind of diagnostic into the hundreds of dollars. Like, what exactly am I even paying for at that point?
I would call that $6000 for a very much worse plan.
Deductible: it's a pro, not a con to me. In years I don't have medical bills I pay less, in years I have medical bills I pay more. If you consider the top number in the plan the "price" for the plan and then end up spending less, then you have the peace of mind that the most you can spend is X and if you get a little back into your retirement account then that's nice.
No limits: there's no dollar limit in the US. I suppose there might be some weird loophole where they decide spending one billion dollars on you to extend your life 30 minutes isn't kosher, but I imagine Canada has the same setup.
Any specialist, any diagnostic: Yeah, under the maximum price anything and everything that's legally medicine is covered.
Hospital stay, surgeries: yup, same
No gotchas: Ugh, we had a weird loophole gotcha a couple of years ago here where these hospitals would be "in network" but the people that worked at them wouldn't be, and they'd bill you beyond your cap. We closed that loophole one way or another in all the states (AFAIK, maybe one or two is lagging), but honestly that was something we should have raked the hospitals over the coals on. This whole "we just rent out the stage to the performers" setup is terrible.
No having to sift through options: I like choices. I like being able to find the setup that's right for me. I understand that others don't and just want someone to take care of it for them, but that's not exactly impossible to find at any price. Just pick the most expensive or cheapest plan (as your heuristic demands) and go for it.
No out of network: Yeah, that's still there in order to give teeth to negotiation. I don't think it's that big of a burden. I go to brand X doctors. If I really wanted brand Y I change insurers. If I wanted X+Y I would just pay more and get a more expensive insurance company. In Canada how much choice do you have over what doctor to go to? In the US I just pick any one that's on my plan (or change insurers and pick any one on theirs).
No signups: Once a year you pick your insurer/plan. Or you just ride with whatever you had last year.
If the argument is "It's impossible to pay for the same thing" the answer is no, you can pay for the same thing. You can also choose to pay less and get less (my preference). The cost is that you do have to actually make that choice instead of just being told you're getting what you are getting.
Deductible: you're paying money, I'm not. Keep in mind that you pay the same in taxes on healthcare as I do, AND you get to pay for private insurance. That's how bad the US system is.
No limits: I think that's new with the ACA, pretty sure there used to be limits. But sure.
No gotchas: yeah until the next one...
No out of network: I can literally go to any doctor in the country. You say you like choice, but apparently not that much lol.
I was not able to find a plan that offers no deductible, no out of network BS, no copay. Maybe it exists, but I picked a nearby state (Pennsylvania), and nothing like that was offered on the State clearinghouse. Not for any price. Happy to change my tune if you can find that plan, but the fact that it's not a) easy to find and b) the default that's included in your taxes, is a complete and abject failure of the system.
Shifting goalposts. You said for any price. What is the difference between a plan that costs 14k and a plan that costs 6k with an 8k deductible/out of pocket max.
Where do you get that we pay the same on healthcare taxes? I honestly have no clue what Canadians pay. Toronto Sun says about 9k if you make around 90k. Don't know how accurate that is but I make about thay much and would only pay that much if I maxxed out the plan that year.
I wasn't able to find such a plan. Doesn't mean it doesn't exist, but it does mean it's not readily available.
You can look it up, but Americans pay the same in tax for your shockingly efficiency Medicare system which covers a few people as we pay for our system which covers everything for everyone with no deductible...
Show me a link to a plan that has no deductibles and no copays for anything, no out of network nonsense, and so on. And is also included in your taxes lol.
You're misundering. They're saying there's *no such thing* as an out of network doctor, no that there's no access to out of network doctors. Out of network simply isn't a thing up there.
I've been thinking about this response for awhile. I assume that there are some cases where this would be a problem but... for the circumstance I'm talking about (US insurance not attached to your job, bought through the marketplace), this seems very minor.
1) When you choose your plan you choose the plan with the doctor in network you have been seeing.
2) If your doctor drops the plan because of failed negotiations, that's generally limited to the end-of-year period, which is when you are free to change plans to follow them.
3) There is a chance that maybe you want to see both doctor A and doctor B and no plan has both A and B in their network. That would be a problem, although I suppose the "at any cost" at the root of my comment comes up, in which case you sign up for both plans.
4) There is a chance that mid-year you discover you need to start seeing a doctor, and you only want to see a doctor that isn't on your plan. That would be a problem, but only until the end of the year. If it's a chronic problem then I can understand wanting to make sure you are with a doctor you can form a connection with, but for one-offs it seems like you should be able to find someone on your plan that does a good enough job.
I have personally known people who have had their lives negatively impacted in large meaningful ways because of having to change providers. It's not really a hypothetical so much as a real thing that happens.
Don't know what you're talking about. My insurance isn't attached to my employer. If you have a choice between spending 8k and having everything covered and spending 0k and having everything but the first 8k covered, the latter is strictly a better deal.
And again: the original comment was about not being able to buy the same thing for any price.
> If you have a choice between spending 8k and having everything covered and spending 0k and having everything but the first 8k covered, the latter is strictly a better deal.
Sure, if you have to pay for health coverage regardless of your employment status. However, you were replying to a post that listed OHIP's coverage where there is no deductible, and you replied saying that a deductible is a feature, but it's not in that context.
Under OHIP you end up paying into the healthcare system while employed and don't have to pay a deductible, but if you become *unemployed*, say because of a serious medical problem, then you *don't* pay for health coverage *and* you don't have to pay a deductible. In principle, it's absurd on its face to expect people who can't be employed due to medical issues to pay deductibles to get the help they need.
So like I said, a deductible is not strictly a pro, and definitely not a pro for a system like OHIP.
I have an option everything except for the signup problem. Open season is necessary, otherwise you wouldn't have health insurance until you're diagnosed with cancer or something. The option that has all that is more $6,000. It was $7,500 with my employer paying 70% on top of that. But they are available, just expensive.
There is SOME level of out-of-network issue. Move between provinces and you can end up in a very nasty game of pass-the-parcel where each province tries to claim they don't have to cover you. And medical care on vacation is often a similar situation.
As someone who grew up in Ontario and now lives in the US: thank goodness!
The experience in Ontario was terrible. Long, long lines. Multi-month waits to see your doctor. Unless you want to see the doctor on-call at which point you are still waiting hours. A continual lack of specialists. And unconscionable waiting times for things like hip replacements.
It might help to put healthcare within the context what the "public health" system is for each of these counties. Listen to Zeynep Tufekci's recent interview with Ezra Klein. She has an ability to put healthcare for individuals (whether public or private) within the context of the public health infrastructure of different counties. This begins to show why the US has done so poorly with Covid. Even countries like Vietnam have dealt with Covid better than the US. She doesn't say this but I do, if the concept/mindset that the government can't do anything right and we shouldn't invest in public institutions, then we won't be prepared for health emergencies. This seems obscene for the richest country in the world.
Disagree, US had fewer COVID deaths per capita than UK (most socialized health system in the developed world) up until the vaccines came out. US COVID problems relative to most other countries are mostly vaccine refusal problems.
That sounds a little bit like special pleading. The point about *public health* is that it has a heavy political and cultural element. If America is less healthy because of X, then X is part of the public health equation.
The discussion seems to be about "Which Country Has The World's Best Health Care?". Even the parent post specified "within the context of the public health INFRASTRUCTURE of different countries" [my emphasis]. I do not see how it's at all special pleading to point out that "cultural elements" (ie, personal decision to not get vaccinated), ie NOT healthcare design, was primarily responsible for the different outcomes.
This honestly seems like it might be a partial answer to Scott's entire question of why US healthcare sucks so much when it's similar to systems that don't. Maybe Americans are just less healthy and it's harder and more expensive to provide care to people with worse health habits and lifestyles. The only developed nation I can think of with similar lifestyle/obesity habits is Kuwait. What lifespan outcomes do they get for dollars per capita?
It's analogous to why do we have so much more gun violence than Canada even though our laws are similar? We seem to just be culturally more violent.
Along similar lines, what about credential systems? Is it easier to become a doctor in other countries? What about other levels of providers, such as nurse-practitioners or PAs. What about pharmacies that can diagnose and proscribe to address a limited range of ailments? What about the prevalence of parallel traditional-medicine systems?
I think vaccine accessibility was a big part of the problem in the US, due to the piecemeal healthcare system. People were building third-party tools to share vaccine availability data, since the official ones were so lacking or awful: https://www.technologyreview.com/2021/02/01/1016725/people-are-building-their-own-vaccine-appointment-tools/ By contrast, the NHS really shone here: we all waited until our age-prioritised blue envelopes arrived through the post with our vaccine appointment details, then went along to GP surgeries or newly-created mass vaccination clinics in village halls and conference centres and got jabbed. It worked great until they got to the under-30s, who are much less likely to have stable addresses or to be registered with a GP (and thus harder for the NHS to get in contact with).
I don't think you can put COVID deaths down to the NHS vs Medicare though. COVID deaths are mostly down how fast/far COVID, which is not something hospitals have much control over.
If the UK had stayed locked down during the winter of 2020 rather than the start/stop thing they did deaths would be a lot lower. That's entirely unrelated to how doctors are funded.
I think that two things: the US style and culture of government, specifically, means that I inherently don't trust its government programs to be implemented as effectively other countries, even if the initial design is similar.
Two, I wonder if the ethnic makeup of the US vs. other countries had an impact on the Covid outcomes? COVID was very bad for Hispanics and African Americans, at least based on acquaintances on the ground e.g. in NYC hospitals. Did other developed countries have worse outcomes among their minority/indigenous populations? Is that just a factor of people being sicker (e.g. overweight, diabetic), more exposed (e.g., more crowded living conditions), or inherent predispositions? I've heard it argued that these factors are contributory to how Asian vs. non-Asian countries did with COVID, and how US vs. other European countries did with COVID, but I haven't really checked the numbers myself.
COVID vaccine distribution seems like something the US actually did better than most other countries (with a few exceptions like Israel). Both initial shots and boosters were widely available sooner than elsewhere. The vaccines are also given away free without any need for health insurance, and the problem quickly became limited demand rather than supply.
This doesn't excuse the slowness of the CDC and FDA in approving vaccines and boosters, of course. It just means that other countries were even worse, or perhaps that the US was able to outbid them.
I read the comment "No country except the US pays anything like a market price for drugs[,]" and had to ask myself, "What does 'market price for drugs even mean?"
As I understand this section, in some countries, the price is set by government fiat. In other countries, the government or an entity indistinguishable from government negotiates the price. Neither of those seem like they could define “market price.”
The United States is different. But it seems suspect to say that the price paid in the US is the “market price,” since the combination of all of the other countries is (I suspect) a larger population and therefore a larger “market.”
And in the United States, the vast majority of consumers are not negotiating the price, their insurance is. I differ from Scott in as much as he says “Consumer’s don’t for drugs directly.” A small subset do, and they are paying a higher amount than those with access to insurance. So is the market price the price paid by the smallest, weakest part of the market?
I’m an economics near-illiterate, to say that almost everyone is paying below market price seems backwards.
ETA: I should say, can some explain this to me as if I am five, because my inability to figure this out indicates to me that I missing something. What would the proper measure of the "market price" of a drug be?
It's hard to say what the market price would be, since many drugs are monopolies. Out-of-patent generics tend to be quite cheap, monopoly-produced new drugs tend to be quite expensive. That suggests that the actual "reserve price" of most drugs is quite low (i.e. the price below which it makes no sense to sell it as you're not making money), and it's only monopoly power that makes the drug expensive.
That further suggests that in a competitive environment where anyone could produce the monopolized drug, its market price would probably be fairly low. And that for monopolized drugs, the idea of a "market price" is kind of nonsensical.
Indeed. As far as I understand, after a drug has been deemed useful and safe the actual cost of producing, distributing, and marketing is usually not particularly high. The problem is that getting from the idea for a new drug to the point where it can be prescribed or used is incredibly hard, expensive, and annoying, at least in the USA. And furthermore it fails for some non-negligible percentage of drugs. So the saying goes that pharma companies won't even try to do that work unless they get free reign to set the price for 20 years or so. But then what is happening in these countries where drug prices are low? Is it that getting drugs approved is easier or cheaper? Is it that they import all of their drugs and don't need to incentivize any pharma company? Something else?
It varies from country to country usually some combination of
a) They don't get the drug
b) They don't get the drug for a long time (maybe 20 years)
c) They don't get the drug for a short time (maybe 6 months after first to market)
d) They only get a limited supply of the drug and then have to decide who in their country gets to use it (similar to how COVID vaccines were for the first 6 months or so)
e) They get as much of the drug as they want at a lower price than what is paid in the wealthier countries
Option e is great when it happens but it doesn't always happen...
Option e often happens, as long as it is a sufficiently big market and the offered price is still way above cost. If you can manufacture and distribute a drug for $10 and you want $100, but you get offered $20, it would be stupid to not accept that offer, because that still offers you a $10 profit. Withholding the drug to get a better offer, only works, if your drug is really much better than everything else on the market, which is usually not true.
Wouldn't that tend to imply that the amount of money a country spends on a drug isn't really the cost of the drug, but instead effectively the amount the country is willing to invest in the development of drugs?
And by everyone else, you mean the USA. Per Cato, "the United States accounts for approximately 78% of worldwide drug industry profits". Since most profits are re-invested in research, America is basically saving the world.
You need to distinguish the price at which it pays to produce and sell a drug that is already discovered and approved from the much higher price at which it pays to bear the cost of developing a drug and getting it through the FDA approval process. Hold the price down to the former and you get no new drugs.
AFAIK whatever price anyone is willing to pay for a drug, is the market price 𝐢𝐧 𝐭𝐡𝐚𝐭 𝐦𝐚𝐫𝐤𝐞𝐭. Since it is illegal* for me to import a cheaper drug from another country, whatever the price for the identical drug is in Canada is irrelevant here in the U.S.
That article is a bit weird - it starts from an assumption that those drugs "often have not been approved by FDA" and discusses the consequences, limitations and exceptions of that scenario while absolutely ignoring the very reasonable case where the drug is actually identical and *has* been approved by FDA, choosing (IMHO intentionally) to not give any answer whether that is legal or not.
Perhaps Americans pay enough for drugs for the companies to recover the research and FDA-approval expense, plus the profit their shareholders require. Prices in other countries can be as low as the marginal cost of production.
Sure, but where the research happens isn't a factor in what Steve said. If the drugs developed in other countries are priced similarly to the drugs developed in America, it's plausible that the higher American price is subsidizing development of new drugs in those other countries as well.
Researchers in countries around the world develop new drugs in the expectation that US insurance companies will pay them enough to make it retroactively worth their while, yes. US insurance companies have deep pockets and don't care where the drug is developed.
Typically the market-price is the level that people are willing to pay for the benefit.
If we had a government-run health-care system except that it issued prizes to people who could provide cures [1] for diseases, the government would rationally offer $1 less than NPV of all their future expenses on that disease. Tee company spends some fraction, gets a profit on the rest, the government saves a buck, and the citizens are cured of the disease.
[1] just to keep the model simple, assume that complete cures are on the table and we can recognize them as complete cures
Exactly. The markets are just different. The seller is typically a single monopolist drug company. The buyer can either be A) a collection of smallish independent actors (insurances), or B) a single committee acting for the whole country.
In both cases, the buyer is pretty desperate to buy (access to) the drug. But in the second case, the buyer has still much more negotiation power, because the seller is much more desperate to sell the drug. For two reasons: it is a higher chunk of the market that the drug company would lose. But also because denying a drug to a country is a PR desaster, but denying the drug to one out of 50 insurances is not so bad. (In that case, it would obviously the fault of the insurance, right? Because the others do get the drug. Stupid insurance!)
So the market price in B is lower than the market price in A.
It seems like the size of the administrative body might play a role here. I don’t know how to make the connection or if I’m just restating a prior, but it’s easier to imagine 50 US states, some being well managed, some not so much, as opposed to the single US regulatory agency outperforming.
Maybe the summary is “picking a spot on the Pareto frontier involved value tradeoffs and the more people you have knocked, the more likely you’ll end up further from the frontier , since this lowers the number of pissed off stakeholders.”
Reading between the lines here, there are (presumably fascinating, enraging, etc) reasons for the differences in pricing, but the author didn’t have access to the driving forces behind the negotiations.
Ex post, the different systems have a story about why good X is costing them price Y. But that’s a justification, not an explanation.
It’s a bit like saying the border between these two European countries follows the river; the fact that it follows the river is the outcome of the forces one really wants to understand.
The Schelling point mechanism already does a lot of work:
It suggests why the lines aren't totally arbitrary. Or why, unless something big and important happened, the border will stick to the river, instead of deviating with little bumps and detours.
You are right that it doesn't tell you which river or which watershed gets picked. You need more contingent information for that.
But the Schelling point mechanism (or simplicity in general) does account for the vast majority of bytes in the border specification.
Life expectancy is a poor metric for healthcare outcomes, and varies a lot based on how countries calculated it. In particular, the US tries to save babies born very very prematurely, many of whom die, and this really brings down the average life expectancy by putting in a bunch of extra zeros that most of the world calls “miscarriages”.
Secondly, satisfaction with healthcare is a function of the PR and patriotism ala NHS as the UK’s National religion, not actual quality of care delivered. I remember seeing this “study” that purported to find the NHS as the best healthcare across a dozen western countries which seemed odd until you realized most of their survey was fuzzy metrics like “do you feel it’s affordable” or “how much do you like it” and not “what are your chances of not dying from cancer and can you even get a surgery for it scheduled”. Health outcomes were only 1/11 of the survey metrics and NHS did quite poorly on that.
There’s a reason the rich of the world come to US hospitals to get their serious procedures done.
I think you're right that life expectancy is a poor health care measure as it includes things like diet, exercise, and maybe even genetics, but it seemed fairer than using any more specific statistic when there's so much noise in all of them.
I agree the top levels of US healthcare are able to offer excellent service to the rich.
“I agree the top levels of US healthcare are able to offer excellent service to the rich.”
Is it really just “the rich”, or is it like 90% of the professional class? How many people are dissatisfied with US healthcare because of objective reasons that are actually better, vs checking the “no”box because that’s the Blue Tribe thing to do?
How confident are you that you aren’t suffering from a grass-is-greener problem where you live the worst parts of US healthcare every day and only hear about the German system from advocates?
I'm mostly going off of the statistics I find at https://www.commonwealthfund.org/international-health-policy-center/system-stats, the Emanuel book, the patient satisfaction ratings, and my own experience as a healthcare provider and patient in US and Ireland. I agree it's possible all of those are deceiving me, but at some point I've just got to go with my best estimate.
That’s fair. I think the “personal experience as a provider” (without corresponding experience in a different system) and “public satisfaction” are highly likely to bias you in a negative direction. The first because you see how the sausage gets made (but only in the US), the second because griping about how terrible the backward US healthcare system is compared to our enlightened Euro betters is what all the cool kids do.
In light of that, and statistics which are very real but require some interpretation, might you be susceptible to confirmation bias? I certainly trust you more than most to have considered this though, so this is maybe unjustified quibbling on my part.
Commonwealth fund is quite biased tho, full of anti racist healthcare for All and similar rhetoric. Here’s the article pointing out how they ranked the UK the best (since they scored high on equity and affordability) while scoring poorly on 5 year survival rates conditional on stroke, cancer, etc.
As I said elsewhere, you can die for free without a fancy system. What you should be paying for is one that actually keeps you alive when bad things happen. The US system is really good at that, which is why when the global elite get old and need procedures, the top US hospitals are often their choice.
Small differences in lethal condition survival rates are not really totality of the healthcare system. It is really small part of it.
"As I said elsewhere, you can die for free without a fancy system." - yes, because NHS does absolutely nothing for your survival rates, you could have just stayed home ? That is a pretty bad argument.
I have a lot of problems with Commonwealth's methodology (basically they're similar to my critiques of Emmanuel's comparisons as well, I just don't think most of the things that differentiate systems in quality are easily quantifiable KPIs or macro level things like private vs public), but this Mises critique is substantially more biased than anything Commonwealth has ever put out.
FWIW, the 2021 Commonwealth report had the NHS drop by 4 places, with Norway, Australia, and the Netherlands now as their top picks. I don't think that's because their methodology suddenly got better, but I do think that's closer to accurate even if accidentally.
Which shows the US is the middle of OECD by age 65 conditional life expectancy. But the US has way more obesity and diabetes than a lot of the rest of the OECD, so in some sense our life expectancy is a testament to our healthcare system, and we achieve it in spite of our poor diet, exercise, etc. how many Big Macs per day did those Japanese get to eat if they want to make it 22 years from 65 instead of just 19? :)
"I agree the top levels of US healthcare are able to offer excellent service to the rich." <---This might not be true! I'm posting this link all over the comments: https://bit.ly/3nGRHL8. It's a paper (by Zeke himself, published after the book you reviewed was published) that shows white residents of the wealthiest top 1% of counties achieve outcomes that are about average for our peer wealthy nations. I wrote a longer comment below going through some of the findings.
Before I read this paper, the probability of truth I assigned to the statement, "Rich people in the US get just about the best healthcare in the world" was 99%. Now it's something like...40%?
Unfortunately, it seems like in order to deliver good health outcomes, you need effective healthcare systems. I am a critical care doctor and I feel like the quality of care I deliver generously is responsible for 20% of patient's experience? The other 80% being made up by interactions with nurses, their follow up outside the hospital, how easy it is to coordinate their care with their other physicians, how much hassle it is for them to get things that they need, etc. So unless you're so rich you can buy a wing of a hospital, you really are stuck with many of the elements of healthcare that everyone in America has to deal with.
This topic is always a tough one and the details matter *a lot* to policy changes. People are constantly writing about how the US health care system performs the way it does because of one big thing, but in reality, it is a million little things.
Start with the US being an outlier in a lot of ways: it is much, much richer than the other countries on the list: US GDP per capita is 40% higher than Germany, and doctors aren't any more productive, so health care would be more expensive under any system. See Baumol. People in the US on average are fatter, etc., which kills the utility of most of your statistics.
Add to that what gets measured and what doesn't. I can only speak from my experience in Belgium, where I could see a specialist relatively quickly, but getting something like an MRI took five months. Sure, I didn't *die*, but I was in a lot of pain and had limited function for an unnecessarily long time. And satisfaction numbers wouldn't tell you much, because all the Belgians I knew didn't realize it could be any different (hedonic treadmill!).
Pile on top of that that what a realistic US implementation of these other systems would be... Most of these countries subsidize medical education while the US... Puts a cap on residencies? Medicare is a giant insurance plan but it just pays some weird list-price-based formula for drugs? And have you seen the insane paperwork for Medicare that makes private insurance claims look like nothing -- backed up with criminal penalties! Certificate of need laws... Medical boards that until the pandemic made telemedicine nearly impossible, have stopped nurse practitioners from expanding care access... Medical malpractice tort liability!
It would be great if passing Medicare for All immediately made all these things go away. I'm not going to hold my breath.
I live in America. I hurt my back when i was ~4. I don’t remember how. I just remember a flash of white and never having a second of not-agony since.
It took over thirty years to get an MRI.
We need universal healthcare. We need healthcare that is so easy to navigate that children in agony can get medical even when their parents don’t believe them. If that’s not realistic, then it needs to be navigable by thirteen year-olds who can’t jump through hoops, but did manage to get to an ER.
I agree that satisfaction is probably a poor metric to objectively compare healthcare systems, it says more about feelings than facts, but at the end of the day it's probably the only metric that matters from a political perspective?
This doesn't seem completely true. It's extremely common to the point of being a trope that US pro athletes go to Europe for all the latest greatest orthopedic treatments keeping them playing into their 40s now that are still considered experimental and not approved in the US.
This is an interesting point, I do hear that a lot. Do we think 'European doctor' could just be a code for 'steroids & HGH treatment for a month outside the practical range of American drug testing'?
If two countries provide the same standard of care and one charges more, I would not be surprised if people were more satisfied in the cheaper country, even if satisfaction is not meant to measure the price trade-off. Which is to say, satisfaction is a function of expectation, and expectation is a funcion of cost, and so you can't look at the cost and the satisfaction as independent variables.
But also, it's become kind of a meme that healthcare in the US is terrible, which I imagine brings satisfaction scores down.
That's not as big of a deal as it used to be. Few people leave a job with health insurance benefits for one that doesn't. The reason this used to be such a big deal was that health insurance companies would frequently refuse to cover expenses associated with a pre-existing condition, so if you, say, developed diabetes at 40 and then tried to switch jobs at 42, that meant you were going to have to pay out of pocket for all your insulin and test strips and whatever else. The Affordable Care Act put a stop to that, though. I think the only time it's really a problem now is if you switch jobs and your current doctor is out of network with your new insurance. I don't know how important this really is, though, because I'm relatively healthy and I don't have the highest opinion of the medical profession in the first place. Swap one mediocrity for another and quitchyerbitchin'.
Yes, you're totally right about protection against being punished for pre-existing conditions helping things quite a bit.
I'm a psychotherapist and so I think we see more of the difficulty of employer-contingent health insurance than other healthcare providers, so my view is biased that way. People tend to have somewhat stronger and more personal preferences about the therapist they work with than other healthcare providers they see, generally speaking. At the same time, many (most?) psychotherapists are solo providers who are not able to accept all forms of insurance (because of the paperwork load, among other things). That means that when people change jobs, it sometimes means they have to end their work with a therapist right at the moment that they're going through an often stressful life change. Every year I have to see several clients through this unnecessary disruption in their care and it's a kind of harm that is completely avoided in other healthcare systems.
The other thing I notice not specific to mental healthcare is that a person's deductible re-sets when they start a new job as well as at the start of every calendar year. Particularly in working with people more in their 20s and 30s, I see people chronically unable to meet their deductibles and therefore to have any costs covered between job changes and calendar year changes that keep re-setting their deductibles. People in their 20s and 30s tend to have lower incomes than people in their 40s and 50s and so are less well-situated to encounter these repeating out-of-pocket costs.
I work with quite a few people who when taking a new job have gone to check the marketplace to see if they could pay for and choose their own health insurance, or opt to not have their health insurance change, but the incentives right now are so strongly in favor of employer-provided health insurance, that effectively a person has no choice in their insurance company. That seems really bad for competition.
If a person doesn't like their psychotherapist or doctor, it's so easy to change to another one. If a person doesn't like their home insurance or car insurance company, it's so easy to change to another one. If a person doesn't like their health insurance company, they're s*it out of luck. It seems to me if one is going to have no choice of carrier, then they ought to in exchange at least have stability of benefits, but currently many people have neither.
I've also seen many patients who experience dramatic and unanticipated shifts in their health insurance coverage because their employer found a better deal with a different insurance company. Employees are not consulted in that process. It seems unfair to me that all the choice of product is in employers' hands when the costs are shared and the impact is entirely on the employee's body and mind.
If we're going to have private insurance, it seems to me it ought to be aimed at competing for the people who consume it and not intermediaries (employers) who have entirely other incentives.
> Few people leave a job with health insurance benefits for one that doesn't.
Isn't that the point? Lack of portability means that you're stuck in your job. I guess you have the option of switching to a different job that has similarly good health insurance, but it makes it hard to quit work and start a business.
No, my point is that above a certain threshold of education requirements, compensation, or status/prestige, almost every employer offers healthcare benefits because of the tax advantage. Once you've crossed that threshold, why would you accept a job below it? A senior attorney is not going to quit his job to go be a paralegal somewhere, for example. I'm sure you could think of situations where something like that actually does occur, but my contention is that these are relatively rare and thus not terribly important. Starting a business is not one of them, because then you can buy whatever kind of plan you want; you're the employer.
Satisfaction seems to largely be about "is this currently a political football?" rather than actual outcomes. Most people have never dealt with another country's health care system and have no idea what they're comparing to. But if they're forever being told "Health care sucks and it's [other party's] fault" then they're going to think that their system is particularly bad.
Right now in the US everything is a political football, so US people seem to be under the impression that their country is particularly bad at everything.
It's impressive to me the mental gymnastics people will undertake to defend the American health care system which is so obviously worse to me than the one I came from in Germany where we take care of everyone no matter their employment status or bank balance. Many people in the US live without insurance and do not go to the doctors simply because they can't afford it. Unthinkable in Europe.
Only 8.5% of Americans didn't have health insurance in 2020. Of those, a significant fraction probably would have been able to get free or reduced price coverage if they had only bothered to sign up. Massachusetts, for example, has a state level universal healthcare program, and yet it still has a 3% uninsured rate, because not everybody who was eligible signed up. So extrapolate that to the rest of the nation, and you're left with roughly 5.5% of people who wanted health insurance but couldn't get it. Maybe that seems like a grave injustice to someone from Europe, but I think a lot of Americans look at the situation as "hey, 94% of the population has coverage or could get it easily if they wanted; that's pretty good."
Especially true since the Commonwealth Fund's survey question was "Which of the following statements comes closest to expressing your overall view of the health care system in your country?"-- not "How satisfied are you with the health care you get?"
It all comes down to what question you're trying to answer, really. If you want to know how much political heat your system is likely to come under, the Fund's question is fine. But if you want to know how your system is actually treating people, better to ask them about their own experience rather than their guesses about other people's experiences.
That much charity is unwarranted given that their what they say they want to do, which is to explore "performance indicators". You'd have to stretch it pretty far to include questions that get at how much political heat the system is likely to come under. From what I can tell, they're one of the many respectable propagandists of the day.
>Today, the mission of The Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, and people of color.
>The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. An international program in health policy is designed to stimulate innovative policies and practices in the United States and other industrialized countries.
>Explore comparative data on key health system characteristics and performance indicators such as overall health care spending, hospital spending and utilization, health care access, and more.
Us health spending indirectly funds drug development, and the US is by far the world leader in drug development. So in essence, many other countries with good healthcare and benefitting from America's healthcare system while also getting to act like their system is superior.
A comforting tale of self-aggrandizing martyrdom for Americans, but drugs being only 10% of healthcare spending, also an insufficient explanation for the discrepancy
I'll add another comment on why I think health care doesn't work like "normal economics". I think it does, but if something's completely regulated in a very complex way, you can't really predict specific effects or estimate any "market prices". (Relatedly, I remember wondering what actuaries working for health insurance companies even did, because they are very regulated on what they can rate on and what they have to cover anyway.)
My personal hypothesis, not one I have the resources to check, but that the source of "cost disease" is - when the majority of players in a market have a ton of money, like large corp/gov't level money and not individual/small business levels of money, then everything costs that much - and anyone smaller who tries to play in that market gets shafted. To me, the cost of e.g. college is directly driven by unlimited student loans and (ironically) things like the GI bill; and healthcare in the US driven by the fact that the payers are very large insurance companies, paid primarily by very large corporations/unions/governments, and large government payers themselves (CMS being the biggest one). If every reimbursement schedule is pegged to Medicare ("120% of Medicare, 90% of Medicare") it's not really market-based. If every hospital has 20 agreements with 20 different payers for how much they get paid, and these agreements all demand the "lowest price" or some kind of deep discount off "ticket price", of course price transparency will be lost.
On the subject of drugs, it seems like the US is basically where Pharma makes their profits. If everyone is trying to peg their price to "at cost" or "the average of everyone else", the money has to be made somewhere, and if you cut off the source of profit entirely, you lose the development pipeline -- which is primarily in the US (as far as I can tell), but can always migrate to less developed and more adventurous countries, like China or India. Further, the costs of getting drugs developed and approved in the US is driven up at least in part by the prohibitive hurdles to get anything approved, which you have documented often on your blog -- the whole system creating this government-pharma cabal, if you will, which eats up a lot of money and gets more and more entrenched with every new incremental policy change, regulation, etc. Again - too complex for simple modeling of specific prices or effects, but you can see the general direction of incentives and how it will affect costs.
I say this having worked in a health insurance company for a couple of years, but not at a high level or anything.
> On the subject of drugs, it seems like the US is basically where Pharma makes their profits.
This is an old trope, but for it to be true, you would have to accept that they're selling at a loss everywhere else. Makes no sense why they would do this.
You can also see from generic drugs that, in general, pharma products are actually very cheap, and that the high prices charged by monopoly holders are just that - monopoly prices.
Drug companies often will make the majority of their revenue from selling their drugs in the U.S., then they might sell as large a volume, or more, in other high income countries, which will wind up being the other 40% of their worldwide revenue.
Both are profitable, the U.S. is much more profitable. It's not really that complicated?
This is correct, from what I can tell. Also, the high prices of non-generic drugs are the reason why those drugs exist. Financial incentives from US prices motivate the industry to innovate and create drugs that benefit the rest of the world. Of course, those incentives aren’t perfectly aligned with general human welfare, but it has been working pretty well overall.
They might sell a little above cost in the other places, but the majority of the profits can come from the US. If those profits were lost, it would probably have significant effects on drug production.
The difference is, as BronxZooCobra suggests, the difference between average cost and marginal cost.
70+% of the cost of a drug is usually in development, not manufacturing, which makes it not affect the marginal cost of producing an additional dose. Even most of the cost of manufacturing is in fixed upfront infrastructure costs, which again impact average cost but not marginal cost.
Someone has to pay for the 80+% of a drug's cost that doesn't scale with # of doses produced for the drug to be economically viable. The average cost does need covered. But selling to a market that's more price sensitive at a lower-than-average-but-above-marginal cost isn't selling at a loss.
This is also one of the big drivers for generic drugs being cheaper. Noone has to pay the fixed cost for drug development, so prices are naturally 25% or less of the non-generic cost. There are also some issues with monopoly pricing which can absolutely come in to play sometimes, but even without that we would expect generics to be massively cheaper.
Yes, I'm aware of all that. Given the obscene profitability of big Pharma, though, I'd say monopoly pricing has a lot more to do with it than development costs.
What would be interesting would be a patent system that expires when the development cost is paid off, not after a certain number of years. Since that's the justification for the monopoly, there's no need to extend it further.
If you're aware of it, you really shouldn't be saying things that are wrong in light of it (like that if American's higher prices are subsidizing drug development costs, pharma companies must be selling at a loss in countries that force a lower price.)
I didn't say that. The implication by op was that without the noble Americans paying obscene prices for drugs, there wouldn't be any. That's crap.
My point was that Pharma companies don't "make their profit" in America (which implies they're selling at cost of a loss elsewhere), they make their profit everywhere they sell their drug.
>they make their profit everywhere they sell their drug.
I think either you didn’t understand their point or you have in mind a different definition of marginal cost.
If I’m following the discussion correctly, their point is that the revenue from the drugs sold in countries outside the US only exceeds the cost of those very same drugs that are sold. It doesn’t include the cost of making the blueprints of those drugs, getting it approved by the FDA, and the physical factories that produce those drugs. Eg, the amount of dollars exchanged for, say, 1000 pills of X drug in Norway only exceeds the cost of making those specific 1000 pills.
Most innovations are government or university financed already. Privatize the profits, publicize the risk is the mantra of any industry that can figure out a way to do so.
Most pharma companies could almost entirely fund their R&D departments by cutting their marketing and sales departments, which honestly I think are a little unconscionable.
I somehow doubt that the marketing and sales departments are loss centers. But even supposing that there's money to be made by getting rid of them, the questions arise: (1) Why haven't they done this already, and (2) Why wouldn't they distribute the money to the shareholders, instead of financing the development of new drugs on which they will only be allowed to break even if they succeed, but will still be out the entire cost of trying to get them approved if they fail?
> Most innovations are government or university financed already.
This is not true. Not remotely true. The most expensive parts of drug development are the human testing and refinement for pharmokinetics and manufacturing which are almost entirely borne by the pharma industry.
It's worth noting here that roughly 90% of drug candidates that pharma companies take to the clinic for testing in humans *faiI*. The exact percentage varies based on the field, but it's never even a 50-50. The vast majority of drug development costs are spent on drugs that eventually fail. It's an absolutely critical part of the drug development funding problem, especially in legitimately difficult diseases like Alzheimer's (where billions have been spent by dozens of companies with NO real hits.)
Who should pay to keep pouring money down the Alzheimer's drain? Or do we just give up on treating it?
Also on the subject of drugs! The US does indeed pay about a 60% premium on medicine compared to our peer countries, per capita. That 60% premium is equivalent to about $500 per capita (~1300/per person in US vs. 800 overseas; here's my source: https://bit.ly/3nHv7Cj, seems legit but please someone tell me if there's a better source somewhere!). So even if I could wave a magic wand, and for some reason used that magic wand to make drug prices line up with what is paid in peer countries, it wouldn't really move the needle much in terms of per capita health expenditures, and certainly wouldn't change our rank on these lists of who spends the most on healthcare. For what it's worth, the biggest absolute difference is in bills for inpatient and outpatient care, which are ~$4k higher in the US relative to our peer countries.
That's not to say that drug pricing isn't interesting (it is!) or that it's fair (it most certainly is not, especially if you are uninsured and need a life-saving or life-changing medicine). But it does mean that if you're interested in making huge differences in healthcare costs overall, drug prices are probably not the first place to look. BIG PHARMA is only responsible for about 10% (in dollar terms) of the reason we pay more than other countries for healthcare.
Also relevant disclosure, I am a practicing physician but I am taking a job at a pharmaceutical company soon, so this might be motivated reasoning because I'd rather not think of myself as evil! Very eager to hear good arguments as to why I'm not thinking of the above correctly.
Lets say it costs $1 million to do the research to develop a new drug. And $1 to create, package, and sell one pill.
If you sell a million pills to the UK at $1.50 you make half a million after manufacturing costs, not enough to recoup your RND investment.
If you sell a million pills to the USA at $10 you make nine million after manufacturing costs, enough to recoup your RND investment and make a tidy profit.
And if you sell a million pills to the UK at $1.50 AND a million to the USA at $10. You're making nine and a half million after manufacturing, why say no to the extra half million of profit?
I don't know if this is how it works in reality, but it's not an unrealistic theory.
Our healthcare regulations are sometimes justified on the basis of "adverse selection and moral hazard", but don't actually do anything to help with those.
The mandate was supposed to prevent people from avoiding paying for insurance when healthy and then buying it when they need it, but Congress zeroed it out (which was popular because voters prefer getting stuff for free vs paying).
Many energy generators have very high market power, and it's hard to think of a universal way to get around this. If you think the energy coming from your coal plant is too expensive, too bad, it's the only one connected to your network.
Regulators get around the problem by *literally declaring that generators must offer the market price(EDIT: maginal cost)*. For example, the Western Australian market rules say:
"6.6.3. A Market Generator must not, for any Trading interval, offer prices within its Portfolio Supply Curve that do not reflect the Market Generator's reasonable expectation of the short run marginal cost of generating the relevant electricity when such behaviour relates to market power."
Bulket 1 isn’t really correct. Many years ago the UK spun many of its hospitals off into Trusts which operate pretty much like the 80% of US hospitals that are non-profit. They have a local board, they hire a CEO, they make a lot of their own decisions.
Yes - and some of those Trust areas offer some of those services to other, neighbouring areas. Obviously, they can also withdraw those offers, or the service entirely.
Also, the NHS isn't as monolithic as it once was; there is now NHS England, NHS Scotland and NHS Wales. They get managed differently according (partially) to decisions taken within the devolved areas. NI is different again.
Although Scott probably wrote it that way for simplicity, let alone brevity (healthcare within the UK was never entirely single-payer/single-provider from the off).
I can explain a bit about the Australian drug bargaining system. The outcome isn't always "we get the drug at a low price".
In terms of how the price gets set, we have algorithms we use to decide what we'll pay for drugs, based on the benefits to patients (compared to other options), how many patients in Australia would need them and what the budget hit for the government would be, etc. This is based on quality adjusted life years and the company has to provide evidence to the government about the benefits of the drug to justify the price they want, and we have a (slightly rubbery) limit on how much we'll pay for a given level of benefit.
Often this means that drugs will only be subisidised for a subset of patients, e.g. those with more severe disease or certain conditions. So for example bupropion is subisidised for tobacco cessation, because there aren't a lot of other options for that, but it isn't subisidised for depression, because there are. Some drugs are only subisidised if other (cheaper/more effective) treatments have been tried and failed, or if you have severe disease and will therefore get a large benefit that justifies the cost from the government's perspective.
If they can't come an agreement, there are a few possible outcomes.
Firstly, drugs that aren't covered through the government subsidy system are often still available, the patient just has to pay full price for them. This is often lower than the price in the US, because my understanding is that some elements of the US system hugely inflate the price of many drugs, so for example an anti-inflammatory that cost me $8 in Australia was like, $80 in California*. This happens a lot with stuff like anti-depressants and the pill, where the government won't pay more for something with equivalent outcomes if there are a bunch of cheap options that are already subsidised that do basically the same thing (on paper, if not for an individual patient).
Secondly, sometimes drugs do get covered, but there's a delay while the government negotiates with the company. This happened with the new hep C treatments when they came out - ultimately we got them at a great price and they're covered for everybody in Australia with like, a $20 co-pay from patients (the standard for our subsidised drugs), but we got them a couple of years later than they first became available in the US.
Finally, sometimes a drug isn't covered and that means it just isn't available here. This happens with expensive drugs for rare conditions, like some third-line chemo agents for rarer cancers, weird treatments for rare genetic conditions etc. If it costs $80,000 per course and the government won't pay for it, you just can't get it. I guess maybe sometimes rich people make special arrangements to access things at that cost, if they can find a private doctor who will help them sort that out, or maybe private insurance covers it in some cases, but most really expensive things like cancer treatment are done entirely through the public system anyway.
Because we're a small market, companies can walk away from us if they're not going to get a good deal on a drug for a rare condition - they don't really care if they miss out on sales for like, 500 patients. But for common conditions it works well.
*I think the reason for this is that in the US you have all these private insurers who will pay insane prices like $80 for an anti-inflammatory, because you don't have a single payer with huge bargaining power to keep prices down. So the companies can just try it on, some insurers will pay it, and patients without insurance will miss out. Whereas here, because private health insurance doesn't cover non-prescription medicines, if they charged $80 in Australia they just wouldn't get any sales at all. And for prescription medicines, insurance companies won't cover anything that's covered by the government, so again, there's no parallel private market to sustain high prices. The only medicines private insurance covers here are the ones that the government doesn't cover at all. But I suspect Australian patients' and insurance companies' low tolerance for high prices in general probably means they're still cheaper here than it is in the US.
I am an American and live in the Dominican Republic now. I don't have insurance. When I need drugs (for myself or others) I walk into a pharmacy and pay whatever they say.
THE PRICE IS ALWAYS LESS THAN THE US!
Sometimes remarkably so.
I doubt that the inept and corrupt Dominican government is doing any fancy negotiating either.
Perhaps the prices are lower here because the public is too poor to pay more.
The drug companies know they can't get any more money out of the DR so they don't bother, and 'refusing to sell to poor countries because they don't have money" is bad PR
Also, as long as the marginal profit they make there is non-zero, it's worth it to sell at that price, unless it's so easy to buy it across borders that they would lose out on some full-price paying American customers.
As much as I've tried to approach the discussion of healthcare systems with an open mind, i.e., not applying my very libertarian defaults, I've never, ever heard a very convincing case as to why health care should be any more managed than grocery store products/prices. Lots of hand-waving about market failures without any convincing empirical data.
People love yelling "asymmetric information!" while ignoring that there is similar asymmetric information everywhere and also ignoring that the quintessential case of an asymmetric info market failure, the used-car lemon, seems to literally be the worst case you could pick, as I've never seen any analysis conclude something other than buying a car that has been used 2-3 years is your best value for the money.
People also love to talk about how you can't negotiate in an emergency, while ignoring that emergency care is but a sliver of overall costs, and 99% of the time you go see a doctor you have plenty of time to pick and choose, review, get second opinions, etc.
>People also love to talk about how you can't negotiate in an emergency, while ignoring that emergency care is but a sliver of overall costs, and 99% of the time you go see a doctor you have plenty of time to pick and choose, review, get second opinions, etc.
What happens if people don't do that, though? The mental image of people jumping around between doctors and hospitals searching for the best price/treatment is certainly a mental image, but I believe it happens very rarely on the whole. I think people just assume their doctor is on their side and doing their best and don't look further unless they get actively bad care.
Certainly, when I've been in a doctor's office, I've never felt an impulse to flit away and find a cheaper price. Particularly given I have to pay for an appointment in the first place.
When it comes to pregnancy and birth care people do shop around. There are many options for providers of different types (OBGYN, mid wife, etc). The services are offered in different locations too (hospital, birth center, home) and the type of care offered is highly variable. I don't have data on what this does to prices.
I think most people don't shop around because it is a huge pain in the ass mainly due to the existing system. I don't think we can reason about what people would do under a different system.
Finally, people do shop around when purchasing other expensive and complex goods and services. Cars, houses, mortgages, education, etc. I don't have any data on it, but I would be surprised if this behavior is substantially different based on income. In fact I bet when it comes to cars, lower income people have to shop around more to find not just the right vehicle but the right seller who is willing to work with someone with lower income and possibly bad credit.
I think the main reason is the insurance system, something like:
- Most people really want good treatment if they get cancer. Good cancer treatment costs $1 million (or whatever). Most people don't have $1 million. But there's only a small chance you'll get cancer. So it's natural to buy insurance instead of paying health costs out of pocket.
- Some stupid or lazy people would just not buy insurance, and then they'd get treatable diseases and die of them. You can argue this is justice in some kind of cosmic sense, but it would be hard sell to the population. And also, I say "stupid or lazy" people, but I myself screwed up getting renters insurance on an apartment when I was younger and almost went bankrupt when it flooded, so the bar for being "stupid or lazy" is pretty low.
- But also, some people will get pre-existing conditions genetically, or as a kid, and then not be able to afford insurance. For example, a kid might get diabetes, their parents hadn't gotten them insurance yet, and then when they turn 18, they can't afford insurance because insurance companies know that it would be too expensive to treat their diabetes.
- If the government said that insurance companies had to offer everyone the same price without discriminating based on pre-existing conditions, this would be unfair to the insurance companies, because sick people would disproportionately want insurance more than healthy people (the "adverse selection" problem). Also, the price would be very high, because it would be the average of you and a bunch of very sick people, meaning it might not be worth it for you, meaning only very sick people would buy insurance, making the price even higher in a vicious cycle.
- The main solution anyone's had to this problem is for the government to require that everyone get insurance, so sick people can't preferentially select into it. The only alternative solution anyone's been able to come up with is to have employers have all their employees get insurance together, which works badly for the unemployed, the self-employed, and everyone I talked about at https://slatestarcodex.com/2020/04/24/employer-provided-health-insurance-delenda-est/
I'm not sure government-sponsored insurance is the only possible way to solve this problem, but I think the problem is real and a good explanation of why health care is less amenable to free market solutions than other industries (without some additional clever hack).
Maybe. But the "clever hacks" in most of these cases seem much less like clever hacks and more like just eliminating the laws that prevent companies from doing obvious things.
I'm open to being proven wrong, but without even looking into it, I'm guessing there's a law or set of laws that prevent people from being able to purchase portable insurance at 18 that lasts for life and isn't inherently bound by state lines. For that matter, what stops companies from offering lifetime insurance for people who aren't born yet?
I'm guessing it's not their failure to think of it.
To follow up a bit, you mention some lazy/stupid or even not so lazy/stupid might fail to buy health insurance. OK. Well, lazy/stupid people might fail to buy food and starve to death, so...
You can reasonably counter than failing to buy food to the point of starvation would require unrealistically extreme and repeated neglect. But why doesn't that apply to health insurance? One has to typically fail to buy health insurance for a loooong time to get hit with this, right?
Not really. Since health insurance isn't portable in a lot of ways, the way most people end up not insured isn't because the *never* bought insurance, but because they haven't yet bought *new* insurance since their last move/job change/divorce/graduation/etc.
If it's lazy/stupid as opposed to utterly indigent, then as Nancy says at the time you start getting really hungry, you go out and buy some cheap food. We've got plenty of that, some of it even nutritious. But by the time lazy/stupid can't help but notice the big lump, it's too late for them to go out and buy some cheap health care or health insurance(*). But the rest of us are mostly either kind or squeamish, and either way aren't going to tolerate some poor SOB dying of a treatable disease, so we're going to pay for their care one way or another. We don't want to do that, so we try to find ways to get them to pay for the insurance up front even if they are lazy/stupid.
The utterly indigent, we're going to pay for their food *and* health care, but that's a separate issue.
* Barring extreme regulatory redefinition of what constitutes "insurance".
1. Systemic Risk: If life expectancy in the US at the moment is 77 in 2015, but in 2040 it will be 75, then all your calculations for how much to charge get fucked up. If you estimate 2.5%/annum return over inflation on your investments but you get 2%/annum instead, same deal. There are many such possibilities and you have no ability to correct for them. If you offer such a plan broadly, you're going to get screwed eventually, and it will tank your company when you have people born in X year actually cost 20% more than you expected. That can't really happen if people are paying month-to-month and you can hike up their rates regularly.
2. Nobody Actually Has A Big Pile Of Money Sitting Around. I pay ~$400/mo for insurance. If we transformed this into a perpetuity at 4%/annum interest, I would have to have $120,000. I have never had $120k at any one time in my entire life.
1. Insurance companies have a natural way to adjust, though. Old clients die, and new clients are coming on constantly. They can adjust rates of the new clients to account for old miscalculations. Insurance companies that do a better job forecasting will have to adjust prices for new clients less, giving them a competitive advantage.
2. If a company is setting premiums across an entire lifetime, they will naturally be cheaper on average. Also, I don't see why there's a need to pay up front. You agree to pay $x/month until you die for insurance until you die.
1. Example scenario: Company A underestimated how much it would cost to pay for the "people born in 2002" cohort, and is now losing money. They raise prices. Company B did not underestimate it, or did so less significantly, or isn't doing some insane lifetime plan, so they do not raise prices, or don't raise them as much. People buy from Company B, since they're cheaper, and Company A goes out of business.
2. I don't see how this proposed insurance plan could possibly be significantly much cheaper. My insurance was ~$300/mo when I was 26 and first had to start buying insurance. It seems completely absurd to imagine that it would be much cheaper for a lifetime plan that's going to have to have the money to cover me when I'm 77 and on chemo. People would realistically not buy, say, a $800/mo plan in preference to an equivalent $400/mo one, even if they're told it's a ~lifetime set rate plan~, particularly given the strong suspicion it is not (what if the company goes out of business? What if I don't have the money for a couple months?).
1. Sure, it's possible a company could go out of business. I would expect some to. That happens and sucks. If we feel back about it, we could give stipends to people whose long-term insurance goes out of business to help them buy new insurance in the same way that we hand out food stamps. But food stamps are a looooong way away from the deep entanglement that exists between government and healthcare.
2. It's going to be much cheaper because in a system that hasn't been so thoroughly stupid-ified, health insurance would actually be insurance: low premiums to handle rare but catastrophic outcomes. Instead, insurance now is just a useless third party intermediary for all health costs, which hospitals and doctors also use as a source for indirect redistribution (overcharging insurance companies to subsidizes the uninsured).
I think this still fails everyone with genetic diseases and everyone who got diseases before age 18. It less obviously fails, but I think still presents a moral hazard around, people who can't afford insurance at exactly age 18, or are too absent-minded to get it.
Because you can't get that superior risk pooling without the humongous list of massive inefficiencies and absurdities that drive every discussion of healthcare systems?
This might work, but only if you are irrevocably locked into that one company (and paying its premiums) for the rest of your life. Though then it's a bit like government insurance except (a) you have a once in-a-lifetime chance to choice your poison, but (b) you have to worry about your insurer's possible bankruptcy at some later date.
Otherwise, you have the classic death spiral danger. (In short, what follows once another (or "another") company advertises cheaper rates for 28 year olds, say, who switch to them - but only accepted if they are in good health (which is why they can be cheaper)?)
Why are you locked into one company? I have a life insurance policy through my employer, which ends if I change jobs, but I also have a separate policy I bought myself. There's no reason a person couldn't buy redundant insurance for the same reason you buy insurance at all..."just in case".
There's no reason why we wouldn't expect insurance insurance to spring up, that is a policy that pays out a lot of money to you if your primary health insurance company blows up.
Your point about adverse selection for healthy 28 year olds makes sense, but there again seems like an obvious solution, very much akin to pre-payment penalties for real estate or penalties for breaking a lease: charge people a lump sum to cancel their policy.
I'm technically wrong about both the 'locked' in and 'one company' part, but I think I'm practically as correct than not.
You can maintain as many health insurance policies as you want, yes, but the average premium for an individual is $500/mo. Unlike life insurance the benefits aren't additive, so this is nearly wasted money (but is protection against bankruptcy or something?)
A cancellation fee certainly addresses my other issue, so you don't need to be locked in. My back of the envelope calculation would put it as somewhere north of $50K at its peak (it would vary by age, rising then declining.) But is it socially or legally viable? An insurance company presumably can't predict its premiums decades into the future (medical advances, if nothing else). So when I get my premium notice at 40-years old, do I just have to accept it whatever the number is (unless I pay $50K or whatever exit fee). It's not as if I signed up for that particular premium back when I was 18 - will the courts even enforce this?
Insurance-insurance sounds viable, if purchased while healthy, and would be a better alternative to buying two policies. Maybe it's another insurance company who charges a smaller premium to be backup-until-the-primary-goes-bankrupt. I wonder how many people would buy it? It faces double adverse selection, so would probably only be offered to very healthy people in very sound (-seeming) insurance plans, but if you buy it at 18 with your main policy it seems like it could work.
Pre-birth, lifelong insurance seems like the sort of service that could only be reliably provided by a government, though, right? Especially in an unregulated marketplace, the switching cost would be enormous--insurers would not be motivated to take on high utilizing patients in mid-life, and those would be the people most likely to be dissatisfied with their insurance. Furthermore, what company would you trust to deliver a complex service 40-50 years into the future, especially in an industry as rapidly evolving as healthcare?
Seems to me a government catastrophic insurance system that had a deductible set at say 10% of household income over the poverty level each year and then covered 90% of expenses over the deductible up to say an additional 10% of income annual cap would cover most of those issues while allowing market forces to do a lot of work.
For chronic diseases (like type I diabetes) you could also add some kind of lifetime or 5/10 year cap.
I find it very strange that our solution is to make everyone get insurance instead of directly attacking the problem by making everyone go to the doctor?
Also, at least when it comes to children there are many charities that provide free medical care even for extremely expensive procedures like cancer. I am thinking primarily of St Judes.
To clarify, the market failure case for healthcare is not traditionally the goods or services, as one would find in used car markets or grocery stores. It is regarding insurance markets in healthcare. In that sense, the Canadian system would agree with you in some sense.
Its specifically adverse selection that 'public' health insurance systems (single payer) solve because it uses the power of the state to force everyone to be part of a plan. Which admittedly is not a great case for a libertarian to hear!
The other, less (un?) explored option is to not de-facto require people to go through insurance to secure these goods and services. We don't make car insurance cover gas and oil changes - not sure why we have medical insurance cover basic routine care.
Keep in mind that a lot of non-emergencies still involve being very sick. And if you’re very sick you often don’t have the bandwidth to deal with searching out prices and comparing doctors.
The difference is that you can substitute all kinds of different food products just fine. For the health care scenario, if you happen to need strawberry flavored yogurt, then you need just that, milk or cheese won't do, and if raspberry flavored yogurt is ten times cheaper then maaaaybe it will work, but have a bit greater chance of dying.
I.e. even for non-emergency medicine, if you'd treat it as a grocery store, there would be a big difference because you don't have a connected market for food where any outrageous pricing gets corrected by substitutes, but you have a collection of many small oligopolies or even monopolies.
Less than 5% (a *lot* less than 5%) of US healthcare costs are incurred in an emergent/emergency situation. And a great deal of the emergency costs overlap with non-emergency care - buildings, lab tests, basic supplies, standard nurse training and salaries, etc.
Also - people manage to get car repair, animal repair, and a great deal of other 'just in time' services at market rates, apparently just fine.
Right, but the difference is that with cancer you'd have time to call around to a few different hospitals to find out pricing (in an alternative world where prices weren't retrospectively determined through voodoo, that is).
"Situations where if you fail to pay you will be at risk of severe injury or death" still doesn’t separate healthcare from many other goods and services. To use the comparison by OP, you are constantly at risk of death by starvation unless you buy food. There are other aspects that make healthcare different from food, but “is your life on the line?” isn’t one of them.
The key market failure are not in the health care market, it is in the *insurance* market.
Adverse health events can require ongoing streams of payment for decades after they occur. These streams of payments are incredibly uncertain and especially so far into the future. Not only is there a lot of individual uncertainty (which would not be that hard to insure), there is a lot of highly correlated collective uncertainty because of the invention of new treatments in the future.
For example: let's say I would like to insure myself against the risk of developing a particular medical condition X. X requires some degree of immediate and ongoing treatment (eg insulin for diabetics). But X also increases my risk of certain cancers, and of heart disease, and of obesity, which ultimately increases my risk (in old age) of falling and injuring myself, and so on.
The moment I learn that I have medical condition X, *today*, all of the incremental risk due to X is known and in a fully unregulated market would be "priced in" by insurance companies. If I develop condition X and then *after that* try to go buy insurance from an insurance company, they'll charge me a lot more because they are aware of all those increased costs.
That means that if I want to buy insurance against medical condition X, that insurance needs to provide a lifetime guarantee of coverage for all of the costs downstream of X. This is not something that insurance companies can practically offer.
And the on top of this is the problem of buying insurance before you are born for conditions that you have at birth.
I think if people step back and look at the back and forth below, it looks like the kind of conversation we'd be having about *any* product the very first time anyone ever suggested the benefits of a free market. The implicit idea behind these "gotchas", I think, is that a person has to plan out in advance the detail of how every kind of product or service would be provided or implemented before people will say "OK, let the market sort it out".
But we know that's impossible! The whole idea behind letting the market work is that central planners without a profit motive *cannot* do this.
Suppose that by historical accident all food production and sales were handled by the government in the way health care is in all modern economies. If I came along and said "Guys, this seems silly. Let's just let the market handle all of this like we do with personal computers", I can't help but feel we'd be having these same sorts of conversations.
"Food is different because we need it to live, and we need it constantly."
"When you're hungry you don't have time to negotiate prices."
"There's no good way for people to know if the food they're buying is good."
it is almost impossible to find information on how exactly it is decided how much money hospitals get in Germany but I think I found it: the combined insurance companies bargain with the hospital organization on a price. The compensation was based on the cost of providing these services. I think practices often get a flat amount per visit (limited to 1 per month per customer) and private insurers pay per service provided (much more money). The amount of practices per city is set by the doctors association.
Im not quite sure everything I've said is correct but I am reasonably convinced that the gist of it is. And yes - everything is a 3 letter acrynom. It's horrible.
I can imagine some of the issues with drug pricing being related to countries and companies having a lot of experience of what an “acceptable” price for drugs is. No drug company is going to sell atezolizumab or lisdexamphetamine for $5 a pop when they have patents on it and spent lots of money on trials etc. The NHS and NICE knows this, so their offers are likely to be somewhat reasonable so that drug companies are at least making a nice profit. Drug companies on the other hand know that the NHS will not let it’s eyes be gouged out by new cystic fibrosis drugs that cost too much (Or Alzheimer’s drugs that don’t even work), so there is a mutual understanding of what prices are likely to be, and then negotiation ends up in a much more narrow range. Related to this fact, it’s not unheard of for the nhs to not publicise what it’s paying for drugs as part of the agreement with the drug company (presumably for political reasons and also maybe to mess with other countries average algorithms). It’s not quite as random a process as it sounds.
One thing I don't understand and perhaps someone can help me here
What on earth is the justification for private insurance? You have 50 different electrical car companies, 10 years later you have the world's best set of electrical cars.
What do 50 different health insurance companies get you???
The value-add of an insurance company is supposed to be risk estimation (not "negotiation" - if anything this is a waste). A company that does a better job of risk estimation will be able to charge cheaper premiums, and maintain the same margins.
However, in the US, I get the impression that health insurers are basically forbidden from doing this core function, due to laws saying what premiums you can charge to whom.
So, the industry could provide value, but right now it's all just wasteful paper pushing.
Insurers are the negotiator that acts between hospitals and employers. Otherwise employers would have to negotiate directly with providers if they didn’t want to pay whatever price a provider thought up.
So insurance is basically paying someone to negotiate on your behalf?
Like paying a lawyer? To force the other person to cheapen their price?
Best lawyers get the best prices in this paradigm
Theoretically, you cut out the insurance and just have the government subsidize and negotiate, you may have the same (crap or better) outcomes at a far cheaper cost. There doesn't seem to me any reason insurance agents should act like lawyers as if there is some ambiguity in whether the patient is guilty or not. One man's cancer is another man's cancer, not that one is innocent and the other is lying and just has a fetish for cancer drugs. There should be a single, strong but reasonable negotiatior not 50.
In theory you can also get a risk/benefit profile that matches your lifestyle. One company might say having no legs is 90% QALY discount, another a 30% discount, but they swap for arms. I don't know the right answer for everyone, but people could choose on those.
Another is that private companies are better able to keep down waste; they do not need a government regulation that says exactly what level of employee stealing pens is worth it to demand a TPS report for each pen, which corporations can make those decisions on their own.
If the government denies you something, you're SOL, only able to sue it if the government agrees to be sued. You can take corporations to court, or tell other people not to deal with them if they aren't meeting your needs.
It is...our very conversation will decide the future. Millions of lives hinge on our very words.
"Another is that private companies are better able to keep down waste; "
It seems this is mostly true for companies that provide goods, kind of true for companies that provide services but I don't see what efficiency is occurring with insurance, health insurance to be precise. It seems jts only adding to the systems innefficiency
Well, I think the theory is that the competition for customers among insurance companies provides ample incentive for them negotiate the most advantageous rates with healthcare providers, keep overhead costs low, and root out waste, fraud, and abuse. I don't think this actually works well in practice, given how much healthcare costs have grown over the past 40 years or so, but I don't know that the federal government could actually do the negotiating part much better. Consider that when the Affordable Care Act was passed, one of its most important provisions was the creation of the Independent Payment Advisory Board, which had the power to cut payment rates for various types of services in order to reign in Medicare spending, and whose decisions could only be overruled by a super majority in Congress, in order to insulate it from political pressure.
This wasn't foolish. The American Hospital Association is one of the most powerful lobbying groups in the US, as its well funded, and every member of congress has at least one hospital in his/her district, and which is almost always one of the five largest employers in that district, also, so it represents a chunk of potential votes, too. Here's from the wikipedia page on the IPAB:
"Henry Aaron, a health care expert at the Brookings Institution, said that many observers saw that some in Congress are "in thrall to campaign contributors and producers and suppliers of medical services" and most are not well enough informed to wisely use Medicare's buying power to reform health care.[9] The idea behind the IPAB was to take power away from Congress (and special interests[10]) in order to give it to those knowledgeable in health care policy."
Needless to say, Congress killed the IPAB in 2018. "Just have the government negotiate lower prices" is not a policy prescription that works in practice. Oh, the joys of democracy.
The term "insurance" with regard to healthcare and specifically the US, is somewhat buggered, ie. wrong.
There is insurance, paying away a premium in order to regain the cost associated with an event which is relatively rare, and the cost is relatively high.
Then there is assurance, where the premium is paid to cover the cost of an event which is relatively common, or actually nailed on given enough time, and the cost is relatively low.
The terms get badly muddled, but an insurer and an assurer have to consider the risk of the event happening, and the likely cost of the pay out and how the payout is ultimately affordable, and are those are different.
At a certain point, depending upon, at the very least, how many customers an insurer or assurer has, and what the events are, then one begins to look very much like the other. An insurer has a portfolio of events, at least some of which are absolutely guaranteed to require a payout in any given time period, say 14-23 year olds breaking legs playing football, or broken noses or gouged eye sockets playing rugby, which doesn't occur at the same frequency for 24-45 year olds. Premiums paid across the two segments effectively balance out, but they are events that are always going to occur with different frequencies between groups.
At scale, single-payer will work. Yet single-provider may or may not.
This is one of the issues that the current US solution has - no single insurer/assurer can achieve the scale necessary to make this work across the entire country - which isn't a unitary state. So each insurer ends up having to determine a sequence of exceptions for events that they will not payout, and also for things that they will (but quibbling the amount).
Essentially, you end up with people who are good at negotiation, and not that much else.
Living in Switzerland for many years: this is most certainly not true. Salaries are higher than neighboring countries, but so is cost of life. I have known people living in the fringes, and there's definitely plenty of misery. (It is less bad than what I know from Mediterranean countries, and government help does its job for those who know to seek it, but still.)
This overall higher cost of living / income helps with some stuff, like buying drugs that have the same price everywhere. But everything that involves a human is proportionally expensive. If at the end of the day it remains affordable, it's because insurance franchises are low (which doesn't happen without a fair amount of regulation), and because the government does subsidize those who can't pay it.
Not quite true, no, but in fairness it's far from the worst. Any chance that came up during last summer Zurich's meetup? I recall some conversations about healthcare there, and opinions were very different between people who'd been born Swiss and were mostly exposed to Swiss social circles than to those that came from abroad.
To give concrete numbers about the franchise, the top tier it's about 2000-2500CHF yearly with a monthly premium of 350-450CHF. As people get older they choose lower franchises with higher premiums, since they'll use them up anyways, but all young people I know have the highest possible of 2500CHF.
Compare with people paying 1000CHF-2000CHF for rent in a place like Geneva. With respect to income, from net monthly salaries I know, a social worker gets around 3000CHF post taxes, a postdoc around 4500, a school teacher 5000, a junior developer 6500, and a mid-level programmer can go up to 10k net. Then e.g. that social worker would be eligible for government subsidies on the premium.
This means that even in the worst-case scenario of having to be hospitalized for several days, the bills for the whole year will be less than one month's salary.
There are a couple of surprises in the system, e.g. ambulance transport is not covered by default. They're covered by just a dozen francs more per month on the premium, but if no one tells you (such as the shadier and cheaper insurance companies do) then it can be a really nasty surprise if you ever end up having an emergency.
On the plus side, they offer international coverage by pretty much nothing, I guess assuming that paying doctors elsewhere is nearly always going to be cheaper than paying them in Switzerland.
Ah, I may be mistranslating something. The insurance company does not cover the first X costs per year (the "franchise", in this case 2500CHF), above that it covers everything. So if I'm normally healthy and I need to go to the doctor for the first time in a year because I have a headache, the 200CHF bill will be on me (and it'll get deducted from that year's franchise). If they send me to a specialist that charges 1000CHF in tests and whatnot, it's still on me. But if after that I need to be hospitalized, whatever the hospital bill is, I'll only pay 1700CHF (the franchise minus the 1200 I've already spent), and everything above from that is taken care of by the insurance.
I am Swiss, and have many family members and friends who also lived for a while in the US (including many US-born kids).
Putting the US and Switzerland in the same bag MAY make sense at the macroeconomic level; but for the persons who lived in both countries, how they experienced it is completely different. For healthcare, we are a practically a socialist country when compared to the USA; some people have difficulties paying their health insurance premiums, but hospitals will take care of everyone. Except a few edge cases (e.g. experimental cancer treatments not yet reimbursed by insurances), nobody will die because they don't have the money.
I personally don't think it makes that much sense at the macroeconomic level either. Sure there are a couple similar metrics. But it looks like inequality levels are much more reduced in Switzerland, it has a very particular economic relationship with its neighbour economies, it has to deal with different inmigration issues... Then internally there's things like the really good public education system, good public transport, etc that tell you it really cannot work in the same way.
To be clear
> nobody will die because they don't have the money.
I absolutely agree with this. I was just raising the point that "everyone is rich in Switzerland" is not quite correct, and it sends the message that problems here are solved because people can just throw money at them. This diminishes the merit the country has for solving problems because it has functional institutions and decent civic organization.
Switzerland may be rich compared to most of Europe, but it's not that much richer than the US. By some measures, the US is richer. So we shouldn't use this is explain why Switzerland's health care system works better than America's.
From Wikipedia:
Switzerland's GDP per capita is $76k, the US's is $68k, Germany's is $57k, France's is $49k, and the UK's is $47k.
The US's median disposable income is $43k, Switzerland's is $39k, Germany's is $31k, France's is $29k, the UK's is $26k.
But the claim is "nobody is poor in Switzerland". If you look at income inequality, the gini coefficient of Switzerland is 29.3 (18th), while the US is 37.8 (59th, according to worldpopulationreview.com). If Switzerland's health care works because nobody is so poor that they can't afford it, that would be a good explanation.
As a cashier at an ALDI supermarket in Switzerland, you earn more than 4000 CHF per month, which is roughly 4000$ per month. There are a few jobs that earn you less than 4000 CHF per month, but very few that earn you less than, say 3500.
In the US, there are a lot of jobs that earn you less than 3500$ per month. It is not trivial to find a job of >3500$ if you have no qualification. In Switzerland it is.
The data you give is correct, but it misses this point. As Scott emphasized, nobody in Switzerland is poor, other than in the US.
The valid pushback on this statement is what others have made: prices for services are extremely high, and rents are Too Damn High. I don't want to downplay that "poor" people in Switzerland really struggle with that. But being poor in Switzerland is a completely different level than being poor in the US.
As per the Norway-gets-cheap-drugs issue, beware any modeling that lacks accounting of (1) scale and (2) iterations of equilibrium. Where one inquisits: "Emanuel praises this as a good decision. But Norway does even better: they take the average of the cheapest three countries in their basket. Obviously this works, but then why not the cheapest two? Why not just say your drug price will be Norway’s price minus one dollar? Half Norway’s price? I didn’t get a good sense of why some countries had cheaper algorithms and baskets than others. Maybe they had tougher negotiators?", I hope this is another one of those tongue-in-cheek digressions intended as irony to the insiders. Let's add scale and iterative considerations.
Norway is ~5 million people, or something like 0.5% of the wealthy population, and a rather smaller percentage including the not-quite-wealthy-but-not-exactly-poor, e.g., including China. Thus, to consider scale: an international drug manufacturing concern is unlikely to spend much sweat over a fractional loss of profit in an already tiny fraction of the market, especially where a failed negotiation has a large cost in goodwill (we can presume that the lowest-price drug markets are still profitable ones; this is unlikely to invoke a loss-leading strategy). Then, consider whether this equilibrium iterates: if the biggest, wealthiest markets (USA, Germany, &c.) banded together and demanded the Norway price, the manufacturer could easily be incentivized to swap its chemical engineering to some other, now-more-profitable task; that is, the negotiating power of the small+wealthy markets is floated along by the insouciance/indifference/sheer wealth of the large+wealthy markets.
A key factor for the US is that we have a large number of middle-men organizations, such as PBMs, which drive up costs. Other countries systems are complex and also have middle men organizations, but a key difference is that theirs are and have been non-profit for some time, while ours are for profit. One of the reasons the Left desires the seemingly large shift from our current system to Medicare for All is it would eliminate/minimize the role of for profit middle men, sidestepping the incredibly difficult seeming process of reforming them. To be reductionist, expanding an efficient government program to all is seemingly easier than reforming our current gnarled system, political considerations notwithstanding.
Are “profit margins” really high enough to account for the difference in cost? I don’t get the impression that health care systems are particularly profitable overall.
Healthcare administrators/executives take up some of the excess, which from a balance sheet standpoint is not profit but salary. A larger factor is the fact that doctors, especially certain specialists, are paid handsomely in the US, more than in other countries. This incentivizes the best doctors to come here and gives us the best top end service, but also inflates costs.
Good question. The absolute increase in supply is very small, but those that do come do so because with their skills they can command a premium for their services in our healthcare system, raising cost ceilings and average cost. It’s not a con but a trade off. Think of it this way: an inordinate amount of supply is added on the top end, which shifts the average cost of specialized medicine upwards, and since as Scott mentioned pricing is often circular in healthcare, this inflates costs.
It reduces costs per doctor relative to a US healthcare system with no immigration, but not relative to other healthcare systems that don't gate medical licensing as stringently as the US and have more overall providers per capita even if they lose some small number of them to the US.
The problem is that Medicare is barely sustainable for providers. Medicare also freeloads off of a bunch of legal regulation which isn't available to regular insurance companies.
So the US basically has 3 systems working in parallel: VA (socialized medicine) Medicare (single payer) and (heavily regulated) private. Maybe 4, if you split out whatever Obamacare is (community pooling, notionally private but heavily subsidized and even more heavily regulated).
Which of these systems works the best in the US? Does the US “single payer” flavor compete with other countries that do single payer? If not, is there just something uniquely challenging about delivering healthcare to USians?
I kind of think it might be the last one? We spend a crap ton on health care because we have a fraction of really rich people who demand the best and have more disposable income to throw at it (some of this flows down and makes everyone’s care more expensive since you generally don’t have a rich person ER and a poor person ER - the docs and facilities and procedures are the same). But you also have a really poor population with generally shitty health outcomes.
So it looks like the US pays a lot for shitty outcomes. But what if the people paying a lot, and the people getting shitty outcomes, are just different people?
There's also Tricare for the active duty military, which is single payer, publicly funded, and free to the consumer, but routed through private insurance companies that in turn pay a hybrid system of on-installation military healthcare providers, some uniformed and some civilian, directly employed by the government, but also allows you to seek out private care from providers off installation who accept Tricare, understanding they'll get lower reimbursement compared to other insurance providers.
The US is also 50 different states each with their own set of regulations which further complicate things. This doesn't even get to regulations which actually impact care such as rules allowing existing hospitals to essentially veto new hospitals entering the market or rules over who can perform what procedures which drive up costs.
How different are the US states in practice? I've lived in a number of a different states, and while there are differences, they seemed marginal ... such as required coverage areas. That certainly matters if you happen to have a relevant condition ... but are there are actually structural differences or just slightly different details between states?
I am not an expert, so this is only based on what I have read or experienced living a different states.
A big one is that different states have different licensing requirements for doctors and insurance companies. So you don't always have as many options as you could in every state. Or the rules inhibit innovation, especially with modern technology. For example my child's doctor offers telemedicine appointments - but only if we are in the state that we live in (where they are located as well). So when our son was sick over Christmas and we were visiting family we couldn't do a telemedicine appointment because we were in a different state.
The insurance company are also not always licensed in every state so that can make it hard to find in-network care if you are in a different state. Or, like in my case, work for a company located in a state where you don't live - the insurance provided by the company is only licensed for that state. Luckily we have Blue Cross which is big enough that I can find in-network providers where I live. An interesting note on Blue Cross/Blue shield is that they are actually a membership organization, not a singled company, made up of many different companies operating in different regions.
Each state also has different laws when it comes to care. Some require hospitals to publish prices. Some explicitly prevent hospitals from publishing prices. Some states allow existing hospitals to effectively veto new hospitals opening in the area.
Some of these rules are good, others maybe not. But it does create a lot of complexity which is rarely good for consumers. It may not impact consumers directly but I think it does reduce innovation or at least concentrate it to major cities or specific states that have regulation schemes that are easier to navigate.
The US had similar sets ups in banking and telecom in the past where each states basically was its own country. This forced up prices in these industries before the markets were opened up (telecom of course has its issues but mostly related to the network effects of spectrum and other structural characteristics).
I don't know much about how to compare systems but I do know for years Canada's system has always lagged others according to studies from the Fraser Institute, CD Howe (two think tanks here) and the OECD. It's especially very pedestrian relative to the bragging. Oof, the boastful antics of Canadians regarding 'free' public health. It's so great we lost our civil liberties and wrecked the civil order to avoid 'overwhelming' the 'fragile' system - particularly in Quebec. Years of sheer corruption, mismanagement and ineptitude meant 15 days was never going to be enough and that the unvaccinated were to be blamed for its sorry state. Just my two pennies.
Life expectancy seems like a pretty rough and imprecise measure of healthcare quality. Like I would guess that part of the reason the US has lower life expectancy than other developed countries is due to non-healthcare factors, like violent crime, suicide, car accidents, etc.
If you look at more direct measures of healthcare quality, like 5-year cancer survival and heart attack survival, the US doesn't seem so bad:
Cancer survival is a very flawed metric. If you do a giant amount of mammograms and remove lots of benign tumours, you will tremendously increase your survival rate without adding a day to anyone's life. Same issue with other cancers.
A while back I tried to get a good answer to "how much is the US death rate reduced by murder/accident" to win an argument on an earlier comments section. The most recent I found was this paper, which estimated a combined 1.2 years lost due to violence, which they define as murder, suicide, and accidents, in the year 2000 in the US (see Table 4):
The National Health Service doesn’t own and run all the hospitals in Britain - there’s a large and thriving private sector offering both insurance and treatment. Who blundered in claiming it does - Scott or Dr Emanuel?
As far as the quality of the NHS is concerned, complaining about it is a national pastime but it’s political suicide to even hint at wanting to scrap it. Of course, the system can perform only to the level of funding it receives and it has been underfunded since the Cameron administration’s austerity era. BJ has the political savvy to see the danger and has begun to address it.
I hear this claim a lot, and I'm always curious as to when it *became* underfunded. Because its funding has been increased, in real terms, per person in Britain, every year since 1996. The above-inflation increases were not as far above inflation under Cameron as they had been under Labour, but I remain unconvinced that the second derivative of healthcare spending predicts healthcare outcomes.
I can’t find data for inflation adjusted per-capita spending on the NHS. Perhaps you can cite your source. Can you confirm that inflation-adjusted means adjusted for inflation in medical costs and not for a general basket of goods for which inflation has, for decades now, been lower.
Reliable data on the percentage of GDP Britain spends on the NHS shows strong annual increases 2000 to 2009, and sustained decreases under Austerity 2009 to 2018.
BJ’s administration substantially increased the percentage of GDP spent on the NHS in 2020 in response to widespread dissatisfaction with wait times and care. I doubt he’d have done that if the perception wasn’t that not enough was being spent to keep standards in line with medical advances and to pay for the increasing costs of such services.
In two systems of equal scope and efficiency but with marginal constraints, it stands to reason that spending more on one will achieve better outcomes. I think you’d need to present evidence to contradict that
I'll dig out the sources later. Real terms means adjusting NHS income for headline retail price index though. To adjust it for NHS expenditure seems a strange thing to do. Cost disease is a fundamentally different problem from underfunding. If bandits are determined to charge the NHS the maximum they think the NHS can pay, increasing the amount the NHS can pay doesn't help.
The NHS underfunding is relative to what governments in other comparable countries spend on healthcare. Even the US government spends more per capita, despite a large fraction of Americans needing to rely on private insurance.
The UK government isn't "the sole employer for doctors and other health professionals" - we do have private hospitals, private health insurance, and doctors who do NHS work and private work in the same hospital. Most people use the NHS, but private healthcare is a minority option, a bit like private schooling. It sounds like how you describe the Australian system.
(I'm not sure whether Emanuel missed that, or you misunderstood him, or I misunderstood your categorisations.)
I came here to say this too. What we have in Britain is pretty much exactly what's described in "Single Payer With Substantial Private Insurance." The only difference is that it's not really substantial. Only 10% of the population in the UK have private health insurance, compared to 44% in Australia.
+1. Just this month I had a private doctor in a private hospital stick a camera up my nose and charge me £130. I assume if I didn't pay he was going to leave it there.
No country as far as I know forbids consenting adults from buying healthcare out of their own pocket from basically whoever, nor from insuring themselves against that expense before they foresee it.
The qualitative difference between 1 and 2/3, if it existed, would be the option to get a tax rebate by opting out of the universal scheme. I'm pretty sure that doesn't happen anywhere, as it would create all manner of perverse incentives.
The confusion over the NHS being the sole employer may come from the fact that, if the NHS pays for your training, then they own your soul. You may purchase your soul back from them, but for a price that exceeds the salary junior doctors start on.
Certain provinces in Canada don't allow private healthcare. (Part of the complexity of having 'Canada' as a healthcare system is that it's a provincial responsibility, and rules and coverage differ, albeit I acknowledge that they're generally more similar to each other than to other countries' systems)
I'd love to see Scott review of RFK Jr's The Real Anthony Fauci. If even 10% of it is true then Fauci should be locked up for crimes against humanity. It goes a long way toward explaining why science is so politicized (hint: it's the money). And why the American healthcare system spends so much for such mediocre outcomes and .
The thing that sprung out to me on why this doesn't make any sense may be that the information in the book is either wrong or only technically correct but not how it actually works in practice. Maybe you need to have been a citizen of a specific country or at least experienced the intricacies of its specific system for a couple months to be able to begin and understand it. I can only speak for Germany here, where even the most high-level view seems to be wrong: going by the descriptions, it fits much better into bucket 3 than 4 (the appropriate three-letter acronyms in this case are GKV and PKV). If Emanuel managed to get even that part wrong, I don't have high hopes whether any of his other opinions or facts on this matter can theoretically be correct.
As for one of your other questions: "Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Hospitals that allow any of the government insurance companies have to allow all of them by law. There are basically two ways of being a health care provider: you serve everybody and are allowed to receive money from the government insurance companies (what exactly each procedure is allowed to cost is defined by law as well) OR you work in private practice and take only upfront cash (although with citizens, invoicing is usually preferred; the upfront cash part is only really used for foreign nationals) for procedures, where you (sometimes) have to use the same cost tables as with government insured people but are allowed to have a higher multiplier on the base rate. Those with private insurance can then get a reimbursement from their insurance if they so choose.
These systems feel so vast in the end that whatever emergent properties they developed could just be pure chance and the US just happened to get the worst deal? Or maybe that other popular theory by proponents of the US system may even be correct, i.e. that it's the US that's basically subsidizing the world in health care and multinational drug companies just accept different government prices around the world because they can always sell their pill for $10k a pop in the US? That's only the drug cost part of the problem obviously ... but honestly, I have no idea.
(EDIT: I've since seen some other comments claiming this is true of the UK as well. This makes my estimate of the trustworthiness of the purported facts from this book go down even more.)
I'm far from an expert on Germany's system but I agree the description above feels off. Germany has 3 systems -- KV, private, and HAVG.
Private insurance is basically a scam on young people. You pay a reduced rate when you're young but are forever locked out of the KV system and end up paying massive amounts when you're older and have no options. Everyone I've met using private insurance loves it when they are in their 20s and hates it when they are in their 40s.
HAVG is a weird one. It is basically the result of intense lobbying by primary care physicians who were mad that specialists were making more money. But it does have some good points, in theory, by trying to lower costs by driving more stuff through a primary care physician instead of a bevy of specialists.
The KV system technically has private insurance companies but they always felt like they didn't do anything except coordinate paperwork between the care giver and the KV fund. From what I could tell they have zero discretion on anything. The whole KV system felt a lot closer to the NHS than anything in the US.
"Private" sounds like a German version of a US we're-in-it-to-skim-off-the-low-risks insurer - targeting young people is a cost-effective way to screen out most high risks. So this would be how I would assume the market to function, i.e. that some entrepreneur should sooner or later come along to break with the posible German "gentleman" agreement between insurers of not trying to lure low risks away from each other.
HAVG seems like it is structured like the Great Britain & Scandinavian public health care systems, which demands that you have to see a (not that expensive to train) General Practitioner first, and he/she acts as a doorkeeper to more advanced treatment in hospitals (where there are more-costly-to-train specialists). Using often self-employed GPs as doorkeepers is a way to keep costs down, by relegating most consultants to the European equivalent to barefoot doctors (I mean GPs).
...unlike in "traditional" health insurance systems, public as well as private, where you can often start by going to a hospital right away (i.e. you are covered by the insurance if you do that), you do not have to go to a GP first in order to get access. Which in Great Britain and Scandinavia is regarded as a non-efficient way to use specialized (hospital) labour.
...If I assume right that in the KV system, you can access a hospital (with specialists) right away?
I've never even heard of the HAVG (german here). The Gatekeeping happens anyways - i.e. you need to see a GP to get a receipt for a specialist. Of course if you need to be rushed to hospital you will be but other than that - GP first.
My implicit reference here was to how (I believe) health insurance works in some middle-and low income countries, e.g. Mexico. Although also here I admit my knowledge is a bit sketchy, since I usually rely on translations plus feedback from my students from middle- and low income countries.
If GPs serve as gatekeepers to more specialised services also in Germany, one wonders what exactly is the "selling point" of HAVG then. (..otherwise a "selling point" could be that HAVG might be cheaper for the customer, By channeling more of health care services to be done by GPs compared to realtively speaking more expensive hospital doctors & staff.)
...but since you have never heard of HAVG that might be the point; this insurance product has not really taken off: Not enough demand...However, Tran Hung Dao might have more knowledge here?
I have been trying to understand the German system for some time now, so thanks for these insights.
A follow-up question: Related to Scott’s point about the adverse selection problem, do you have any good explanation why German insurance companies to not compete by trying to offload high/bad risks elsewhere, and chase after the low/good risks that are presently members of other insurance companies?
…since this in my opinion is a main underlying problem in all countries (such as the US) that allow several competing insurance providers “all the way down”, rather than to have a public insurance system (single-payer system) “beneath” the competing, private insurance companies offering insurance top-ups.
Framed differently: My puzzle is why Germany and the Netherlands who like the US (and unlike most other European countries) have competing insurance companies all the way down to the basic level, have not experienced the similar market-type logic than in the US: i.e. that insurance companies (including the not-for-profit-ones) are forced to differentiate premiums by luring low risks away from others & discourage, or charge the white out of the eyes, of high-risk members – in order to survive in the market.
(..since if you instead try to be “noble” and think it beneath you to chase after low risk-customers elsewhere, and/or for private ethical reasons do not want to give your low-risk customers a better deal than your high-risk customers, you are bound to lose in the long run to a less-noble competitor coming after your low-risk customers. )
…I have speculated if it is a “gentleman’s agreement” in Germany that insurance companies do not try to lure low risks away from each other. However, Germany has approx. 80 million people and it is hard to see how an informal agreement should stick in a country that large?
…Or if the explanation is “tradition”, i.e. that lack of dog-eats-dog competition among insurance companies is due to the social insurance tradition from Otto von Bismarck onwards, that white-collar workers do not mingle, insurance-wise, with blue-collar workers, or artisans, or farmers, or (more generally) “those other people”?
(But then again, a modern-minded capitalist German insurance-entrepreneur should be able to spot the possibility of making a killing by breaking this tradition, and launch an insurance company for low-risk (mainly young) people. So if “tradition” is the explanation, why has not German capitalism destroyed this “tradition”?)
….Finally: It the reason legislation? My hunch is that it must be. But if so, how does the German legislation achieve killing off this type of competition between their many insurance providers?
I am asking because if it is legislation, then other countries (including the US) who similarly do not have a bottom-floor, universal single payer system, might have something to learn from how the Germans do it. (While if it is a gentleman’s agreement or “German tradition/culture”, the solution is far less exportable.)
While at it: If I understand the Dutch system correctly, they have created a “functional equivalent” for a bottom-floor, universal/mandatory public system, by compelling everyone to buy a basic insurance package. Dutch people can choose their insurance provider for this basic insurance package, but what it offers, and how much it costs, are both so heavily regulated that you cannot “steal” low-risks customers by offering them a better deal for this basic part.
(You can for the supplementary part, but then the Dutch system becomes de facto similar to “single payer” European countries, who all also have voluntary top-up insurance systems. The difference in Europe is then reduced to the difference between countries where the basic insurance package is generous, so that top-up insurance is mainly “luxury health care consumption” (as in Great Britain and Norway); or if the basic insurance package system is not so generous, implying that it matters a lot which supplementary plan you buy (which I believe is increasingly the case in the Netherlands – rumour has it that the Dutch government is scaling down the basic insurance package you have to buy for the fixed price).)
…I give this Reader’s Digest view of the Dutch system (which I admittedly am not 100 per cent sure I have got right), since I wonder if the German solution is perhaps rather like the Dutch?
Grateful for any reflections or comments!
For the record I work on the comparative research - side of welfare systems (broadly defined), and my main take-home lesson from comparing health care systems in particular is “it’s complicated”.
The semi-private insurance companies do not off-load risky people, because they are not allowed to. They have to take everyone who comes. (Except for some edge cases like self-employed, Beamte (most civil servants), and soldiers, who are out for historical reasons)
But can they get rid of them by charging prohibitively large contributions (premiums)?
...if I remember correctly, the US also prohibits insurance companies from denying insurance to high risks (such as the born disabled or people with pre-existing conditions). But they can - eventually after a while - charge them very high premiums, and get rid of them that way.
...perhaps Germany does not allow the "semi-private" insurance companies to use this strategy either, i.e. that premiums are fixed regardless of risk?
Premiums are tightly regulated: https://www.gesetze-im-internet.de/sgb_5/__242.html The legalese makes my eyes glaze over, but the gist of it is that insurance companies are allowed to adjust their premiums based on income and a government agency may approve, deny or demand an increase in the premiums. (The law appears to be written from the perspective that insurance companies might prefer running a deficit instead of raising premiums and the government might have to force them to.) Directly targeting high-risk individuals with higher premiums isn't possible that way.
They're allowed to give bonuses to low-risk individuals, but that is contingent on making them participate in preventative programs and the bonuses have to be less than the savings caused by the preventative programs. https://www.gesetze-im-internet.de/sgb_5/__65a.html I guess an insurance company could try to target healthy people for a check-up that doesn't make them healthier, but allows them to claim that participants were healthier than average and then pay them a bonus for their participation. Even if that works, this possible loophole seems quite a lot harder to exploit than direct price discrimination.
Interesting, thanks for this piece of information Yorwba.
Despite your reading that this regulation (officially?) is “sold in” as a way to encourage insurance providers to raise premiums (rather than them running a deficit), I would guess the real purpose is the opposite, to prevent insurance companies from freely raising premiums in order to get rid of high risk-customers (since that regulation ambition makes more sense).
I would not be surprised in some of the hundreds (thousands?) of regulations concerning US insurance-company behaviour have similar rules. (Perhaps people more knowledgeable about US regulations than me would comment on that.) Here is the thing, however:
…such regulations set the stage for a regulators-and-insurance-providers “arms race”, since there is a benefit to be had for insurance providers who manage to circumvent such regulations (finding more subtle ways to ditch or discourage high risks), which sets the stage for a new round of regulations to block the subtler ways to avoid high risks, and so on and so on. “Come play the regulation game with us, for ever and ever”.
…the debris of this regulatory arms race is an ever-thicker manual of regulations, plus increased administrative costs on behalf both of both government administrators and the hired hands in insurance companies.
Allow me some loose speculations here, on German insurance competition versus US insurance competition (and I would really welcome comments if I am totally wrong or on to something):
I have the feeling (and it is only a feeling) that this “regulatory arms race” is less extreme in Germany than in the US (at least so far).
Competition between German insurance providers seems in a sense more “civilized”.
Related: I have a gut feeling that the Friedmanesque ethos “the ethical obligation of a company is only to make profits for its owners” is accepted among (at least some) US insurance providers - and it only takes a few for the rest to have to behave similarly, in order not to lose business.
...While German private insurance culture is still more “gentlemanly”, perhaps due to social democratic as well as Christian democratic “capitalism with a human face” way of thinking. (Which I link further to the importance in Germany of the long ideological shadows of Catholic social doctrines.)
Anyway. It’s a theory. Went off on a tangent there, admittedly.
…One final reflection on insurance competition the US-versus-German way: If my sources are right, this issue – i.e. to secure “reasonable” insurance premiums for the born disabled & people with previous conditions – is driving a wedge within the Republican party. The “Christian faction” within the Republican party is deeply unsettled by a market that places intolerable financial burdens on the born disabled and people like them.
If so, there might in the distant future still be room for a stable & less peculiar US health care system - through a coalition between these factions within the Republicans and the Democrats.
In addition to what Yorwba said: The premium the inssurances can demand, is a fixed portion of a customers income, plus a small adjustment (I think +-0,5%). But this adjustment has to be the same for all customers.
So my insurance takes 14.6% of my income (+the same amount again from my employer) and an extra adjustment of 0.3% "because of extra costs during the pandemic" (it was 0,15% before the pademic). My father was with the same inssurances, and his premium was calculated the same way, until he retired last year.
For people in social security programs the state pays an fixed amount. Children pay a percentage of their parents premium.
I think that the term "semi-private insurance companies" is confusing with regard to the German system.
Private Krankenversicherungen (PKV, Private Health insurances) are offered by private companies (often publicly traded companies) which are regulated (as other private insurances) by the Versicherungsvertragsgesetz to some degree. Calling them semi-private is wrong because they *are* private companies (aiming to increase shareholder value) choosing to operate in a somewhat regulated sector of the economy -- just as SpaceX is choosing to operate in the somewhat regulated aerospace industry. They are very much competing with each other (and the GKV) based on premiums (e.g. 177,75 € - 572,65 € for a hypothetical (healthy) employee born 1990 [0]), coverage and extras (like single bed hospital rooms, and being treated by the Chefarzt (head physician)).
The PKV are allowed to screen prospective members for health problems (and increase the premiums, exclude certain health issues or reject the applicant altogether), but after you become a member, premiums are fixed (unless costs increase or something), I think.
Gesetzliche Krankenversicherungen (GKV, law-based health ensurances, also "Krankenkassen"), on the other hand are Körperschaft des öffentlichen Rechts (juridical person appointed by the state, who (mostly) are tax-exempt, public universities might be another example). While there is some competition between them (based on the insurance rates, which ranges from 15.25% of income to 17.1% [1] (half of which is payed by the employer), and eligible coverages e.g. dental health plans) they share a health fund. They are governed by Fünftes Buch Sozialgesetzbuch (SGB V, linked by Yorwba below). They are not private in any sense of the word. For employees who earn less than 62.550 Euro a year, the GKV is obligatory (Pflichtversicherung). Other groups can be elective members of the GKV (freiwillig versichert).
The transition from the PKV to the GKV is generally limited to avoid people moving there when they get old. These only depend on age (55 years seems to be an important number) and on formal conditions (are you self-employed, how long where you in the PKV, etc), however.
Many thanks for these claraifications quiet_NaN. I have a follow-up question, if you have time. You write:
For employees who earn less than 62.550 Euro a year, the GKV is obligatory (Pflichtversicherung).
Question: What is the sanction from the government if someone fails, or is unwilling, or unable, to comply?
...this is relevant in a US context, since a major issue with the Affordable Care Act was what to do if people failed to comply with the duty to buy health insurance. (There was initially an economic sanction, but that was removed by Trump, leading to a major weakening of the Act.)
...so how do the Germans do it? Could be interesting to know for many of us!
Or is this something that "simply never happens"? (Which would also be interesting to know!)
...Incidentally, having to buy basic insurance whether you want to or not, seems to be very similar to the Dutch approach - the Dutch and the Germans being the two "odd countries out" in a Europe otherwise dominated by public first-tier health care systems. I am not Dutch muself, but I have a bright master student from the Netherlands who wrote a paper on her system, describing this as a core feature. I will not wouch 100 percent for her description to be correct (comparative health care research "is complicated" as we all know), but if correct this sounds rather similar to the German approach, as you describe it. Quote from her paper:
"Everyone who lives or works in the Netherlands must take out basic health insurance (basic package). The government determines what is included in the basic package. This is medically necessary care to which everyone is entitled. Health insurers determine themselves what is included in supplementary insurance.
The basic insurance covers standard care provided by, for example, a general practitioner, hospital or pharmacy. A deductible applies for most care in the basic package.
....
- The basic package is the same for everyone. The premium of a policy is the same for everyone. Everyone with the same policy pays the same, regardless of age or health.
- The basic package is determined by the government. The content may change annually. The government also determines the amount of the deductible and the amount of the health care allowance. There is no deductible for certain care, such as GP care or obstetric care. The government also determines for which care you have to pay a personal contribution. This is completely independent of the deductible.
- A health insurer must accept you for the basic package .
...
Health insurers must accept everyone as insured for the basic package. Age or health should not play a role in this. Everyone contributes to health insurance. Healthy young people, for example, help pay for specialist medical care that the elderly often need. And the elderly contributes to the maternity care that is important for young mothers.
....
. Insurers negotiate with healthcare providers about the price of care provided..... Insurers must reimburse care if an insured person is entitled to it. This is stated in the Health Insurance Act.
.....
You cannot (even if you are very rich) not take [basic] health insurance. This way people are not taken by surprise with the enormously high costs of health care. And with that, people cannot get into debt to pay their health bill. To help people with paying for the cost of the health insurance the government will give an X amount of money to people that have less income. This way the poorer people (that are usually more likely to live life less healthy and need higher insurance coverage) can still pay their health insurance.
...
[If you cannot pay the price of the basic package you may be entitled to a health care allowance.]To be entitled to health care allowance, you must in any case have Dutch health insurance. You should also not earn too much. For 2021, if your yearly income is less than €22.000 you receive €111 healthcare allowance (Belastingdienst, 2021).
...
[In addition to the basic package, you can buy supplementary health insurance. this is voluntary, and here the adverse selection problem kicks in.]
...does this seem rather similar to Germany?
...And it is not that different from how the US Affordable Care Act was initially supposed to work, I might add.
> Question: What is the sanction from the government if someone fails, or is unwilling, or unable, to comply?
I had a look in the penal section of SGB V, but did not find anything on that. I think if you are employed and fall under the mandatory GKV, it is the responsibility of your employer to sure you have health insurance. Otherwise, you are basically employed illegally.
I guess if you fall under compulsory GKV membership and are not employed, and do not actively chose a GKV, you will simply be enrolled to the GKV which is deemed responsible for you. Probably your last GKV or the local AOK. They will just bill you, and if you fail to pay them, things will not go too differently from what generally happens if you fail to pay bills.
> ...does this seem rather similar to Germany?
This is the case for people which fall under mandatory insurance, but other people (mostly with high incomes) may opt out of this altogether and go to a PKV instead, not contributing to the public health insurance at all (except for their taxes, which are used to generally keep the GKV premiums stable).
Off-loading risks does exist to a small extent in Germany. While I was in my 20s in Germany, I was covered by a public insurance (IKK, three letters) which had more young people than average, and had mildy lower prices.
But it only goes so far. As Dark_Tigger pointed out, insurances in Germany have to take everyone, so getting younger people works basically because the difference is not too large. Young people like me (back then) looking for the first own insurance of their life will go for small differences. Older people mostly stick to the current insurance. But if the difference would become really large, then old people would start switching as well, and the advantage get smaller again.
But the basis of all this is regulation. All public insurances must offer the same product. They don't decide themselves what to cover, that is given by regulation. (Very minor deviations in strictly specified areas are allowed.)
Insurances can offer *more* than this basic insurance, but those are mostly luxury items, like avoiding multi-person rooms in hospital. And this is simply a different contract than your basic insurance, and is pretty independent. (And the market for those items is very different, and much more like you describe.)
Small note...the UK is not 100% socialised. Bupa and Mayo have surgeries/clinics here. Also, many employers offer supplemental private health insurance. Knowing this, it makes me question the analysis on the other types of health care systems. (and if politics was injected into the analysis)
Think about prices from the perspective of the pharma and med device companies. Unit costs are almost nothing. Research and dev costs are very high. When they succeed in bringing a drug to market, they make the large majority of their profits in the US, where they can set basically any prices they like. They take a relaxed approach to pricing with non-US countries because the US is the golden goose. Change that dynamic and the prices will either increase elsewhere or the investment in new drugs will sharply fall. If you try to make the US like the other countries, the whole system will have to adapt, likely to the detriment of other countries.
I elided this, but most countries regardless of system have some supplemental private insurance for things like vision and dental. I think Dr. Emanuel was saying that the key feature of Germany's system is that the government insurance is channeled through sickness funds.
Yes, government insurance (GKV) has ~8.4 times the number of members than the private insurance (PKV), this means full coverage, not private supplementary contracts. Numbers 2014..2020 (page in German):
I think there's 3 different kinds of private insurance (that sit on top of a more socialised system) worth distinguishing between:
Pure supplement, doing what the public system does but a bit better, you still have to pay for public healthcare the same as anybody else. (e.g. Bupa in the UK).
Vision, dental etc.
Private insurance that exempts you from having to pay for public healthcare. (e.g. German private health insurance).
There are two different versions of private health insurance in Germany: the supplemental ones to the GKV (extra health care etc), which can be brushed under the carpet.
But the full coverage private health insurance (PKV) is very much a thing in Germany, (even if only a small fraction of the people are in it, as pointed out by Obiter Dictum below).
I get that you are summing up lots of different countries, but "Single Payer Channeled Through Private Insurance" is a very confusing because in Germany, there is on the one side the GKV (emphatically not private in any sense of the word), and then on the other, smaller side, there is the PKV (private, for-profit, but regulated).
"Single Payer With Substantial Private Insurance", while omitting the fact that there are several options for government insurance (GKV), and overemphasizing the impact of private (PKV) would be a much better description of the German system, I think.
While the PKV in smallish in terms of insured percentage, I would also argue that it is larger in the headspace of health care providers. PKV members are generally seen as cash cows. Some practices will have separate, nicer waiting rooms for PKV members (which also means that the GKV members will not notice as much that the PKV people will have shorter waiting times). So I would argue that there is a strong two-class medicine vibe in Germany.
The reason the drug prices are lower in non-US countries is that each country is functionally its own market, in which either the government or some central cartel representing the whole health industry is a de facto monopsony (the only person buying the drugs) from the manufacturer’s perspective. The perfectly orthodox economic result is that a monopsony can buy at marginally above cost prices - few of the raw materials involved in drug manufacture are scarce, and the manufacturer’s choice is “sell at this price or don’t sell.”
The reason Germany and Germanesque countries’ systems don’t have inter-provider friction will be (I say confidently while knowing nothing about German healthcare) that the government lets them operate as huge cartel-like trade associations that do all the negotiating centrally and pressure everyone to join the associations. This probably wouldn’t work in the US for cultural reasons (e.g. the idea that the sole purpose of a business is to make money; businesses should be free to conduct their own separate negotiations). This system where everyone has to come together to semi-plan their own economy with government endorsement/instruction but not as a branch of the state is basically ordoliberalism, and is impossible for Anglo-Saxons to comprehend.
(More accurately, ordoliberalism is the result of their attempt to understand what we’re doing, then copy it but rounded off and fiddled with so it makes sense in their context)
Having worked in an insurance company (albeit not a US one), organizational inertia predicts that it's pretty profitable being an insurance company and trying to squeeze out a few percentage points more, but also having to deal with the "barbarian chieftain" of the competing insurance company is just too much work for too little gain. (Especially if your bonus doesn't depend on that. Maybe the next CEO will be in the mood for building up a monopsony.)
In Texas there is a percentage limit to the profit an insurer can make. And if they exceed that they have to reimburse their customers (typically the employers who may or may not choose to pass it along to their employees).
So no, in order to make a larger profit the insurance company needs to spend more money. So that it can charge more money. But not so much more that it's out of line with its competitors such that customers jump ship.
When I had employer based insurance I used to get so angry at all the high-quality wellness program advertising/webpages/apps/bonus trinkets they developed and sent out (ALL THE TIME) as both a marketing tool and a way to spend more money on a notionally health-related product. I doubt anyone was interested in seeing how much QALY this money being spent was generating.
I suspect the main answer is they’d fall afoul of the Sherman Act, but the other problems are probably (in order of likelihood):
1) The noninterference clause for Medicare Part D means a massive chunk of the healthcare market would be bound to pay more
2) If a doctor says a patient needs a drug, a US insurance company will probably have to cover it - in some systems (e.g. the UK) the same body that sets care standards sets drug prices, or calculates what the acceptable/worthwhile price of the drug would be (e.g. Zoloft is only worth it for under $10 a pill, any more than that and it’s not worth the cost of treating people with it)
3) Whichever company/plan defects and buys the drug at a price the cartel won’t pay would have a competitive advantage over other companies/plans - this would probably bite even in a broken market, as “they have that drug I need to not die” must push people to comparison shop for plans, even in the real world where no-one comparison shops, and even with an employer-based system
4) No-one could corral a whole American industry efficiently enough without the kind of governmental soft power over industry that the US doesn’t really have
5) No American concept of a price-setting industry association being distinct from a shady cartel; a shady cartel would presumably have better things to do
I would like to see someone like Emanuel analyze a libertarian/free market system of the type proposed by various economists -- basically, government financed "catastrophic coverage" for big and unforeseeable expenses (cancer, heart attacks, major accidents, etc.), but with individuals responsible for paying cash and making consumer cost-benefit decisions for everything else (with the help of self-directed "medical savings accounts" that could be subsidized for lower income people).
The main idea is to bring market forces to bear in order to make the system more cost conscious and efficient, and to eliminate the massive transaction costs of insurance.
Russia uses the 1st model, where the state insures everyone, taxes everyone and pays for everyone's healthcare. Except that there are 1) sort of co-pay for some procedures, which can go really high for things like complicated surgeries 2) fully private hospitals where you pay completely out of pocket. As far as I know other post-soviet states have something similar.
The government-funded part is pretty bad, definitely way worse than the US system in terms of quality, but of course cheaper. Hard to compare wait times, I don't have much experience on either side. Doctors are horribly overworked, payed relatively low - better in the last decade or so I hear, but still the salary is similar to other non-glamorous intellectual jobs and probably a few times lower than programmers. There is a decent amount of corruption, and a huge amount of nepotism, where to get good (or in extreme cases any) medications, or better room in a hospital, or get to the head of the line for some complicated procedure you need to know the right people (and then perhaps you may need to pay them some anyway, but it depends). Wait times can be long, depending on the procedure, and don't expect anybody throughout the system to be polite to you - they might, but that's more of an exception.
Private hospitals work reasonably well, and there's some variety of options for different budgets, so some fields like dentistry and gynaecology/urology are probably dominated by private clinics, at least in larger cities. You definitely *can* get more serious procedures in a private clinic as well, but I'm not sure how common is it or how does it work or how much it costs except it's a lot. Their doctors are paid notably better and don't work crazy hours. Wait times are usually short to nonexistent, thanks to higher prices.
There is also private insurance system, called "Voluntary Medical Insurance" (as opposed to government-run "Mandatory Medical Insurance"). You can buy VMI policies from a number of providers and get access to better service at state-run clinics or at private ones (my employer offers this).
In general, the system is greatly geared toward pensioners with their constant, but usually minor problems (and lots of time, but no money at all to spend). You will find a long queue of babushkas at most every doctor's door in state clinic. Some lonely souls even use it as a kind of social club and go weekly or at least monthly.
As for doctors' pay, it depends a lot on experience and specialization. Top surgeons and oncologists earn comfortable living even in state-run hospitals, but lowest-rung personnel barely survive. Currently, Russian public healthcare system is in process of being re-staffed mostly by immigrants, because only they are willing to work for the low salary offered (which is still better than they would get in various *stans where they come from). Though maybe pandemic will reverse this trend, as immigration channels aren't as wide open as before, and the whole country experiences labour shortages.
I feel like this post is going to cause a lot of people to start commenting on the situation on their country instead of going to sleep like they should.
As to why normal economics doesn't seem to work for health care in general, and as to why other countries have such low prices for drugs in particular, I have a very strong intuition that the USA subsidizes all of the world's healthcare.
To be very clear, I know nothing about any of this, and I am almost certainly wrong about virtually all the micro details and the vast majority of the macro ones. Which is why I would greatly appreciate the opinion of someone more knowledgeable on the subject.
But as to how this world-wide subsidy would work in general, I can't really say, but as to drug prices it seems much more straightforward: there are only a few big pharma companies, all of which develop and manufacture the drugs everyone needs. They upsell in the USA because they can, and they accept the low prices in other countries because the USA's overpayment makes the numbers add up.
As an American currently making the transition to living in the Netherlands but who otherwise knows essentially nothing about healthcare, I don't think it's quite accurate that the government pays 100% of your healthcare costs.
The Dutch healthcare system seems more like Obamacare, if the Obamacare mandate actually had teeth. There's a government-mandated health insurance package that's basically the same whoever you buy it from, though you can buy fancier insurance if you want. Whichever option you go with, you have to pay—a little bit more than €100 a month for the basic package. There's also an annual deductible, which varies inversely with your premium. Employers also have to chip in part of the cost. If you don't buy an insurance policy, you get a letter from the government that says you have to; if you still don't do it, you automatically get enrolled in an insurance policy (I'm not sure which one) at a higher cost than if you had just listened and bought insurance in the first place.
The main reason the US private insurance is different from the Netherlands or Germany is because most Americans get insurance through their employers, which significantly screws up the incentives insurance companies face. Unlike every other aspect of US healthcare (e.g., Medicare, VA), no other country in the world does anything like that. It's not for nothing that it's called "the original sin of the American healthcare system".
As I understand it, the drug price thing is heavily influenced by the fact that the US doesn't negotiate lower drug prices. The general argument is drug companies make enough off of America to cover R&D, so they can sell to the rest of the world at marginal cost. I haven't investigated to confirm that, but it sounds plausible.
Qualifications: I have a PhD in Econ, health econ was one of my fields in grad school, and I've taught undergrad health economics.
I received better and cheaper care out of pocket in Mexico (n = 2) than I ever did in Germany (n = 30-50) - and I've been both in the public and the private system in Germany.
Also curious: what's exactly how the question is worded for the public opinion data? I wasn't able to find that looking at the source.
If they asked "How satisfied are you with your health care system?" I suspect national pride has an influence on how respondents answer the question.
The "contrarian take" Scott linked above from Random Critical Analysis claims that wealthier countries spend an increasing fraction of GDP on healthcare, but that the results are no better once you reach the level of roughly Spain (consistent with Robin Hanson's argument about healthcare not having a marginal benefit on actual health). So Mexico being poorer means their system is cheaper, although I think since it's poorer than Spain he wouldn't expect it to be better either. Baumol's cost disease should mean that the labor supply of healthcare workers should be available and not bid away by other industries.
"Results are no better" is worth digging into a little.
I suspect that beyond a certain point, spending more money doesn't significantly improve measurable outcomes (death rates etc), it just improves patient comfort. Things like private rooms, shorter waiting times (outside critical situations), decent food et cetera add a lot to costs but don't have much effect on prognoses. In my limited experience, US hospitals (due to incentives) do invest more heavily in a pleasant experience for patients.
Patient comfort is expensive; on the other hand, the patient experience in a bare bones hospital is pretty hellish. I don't know if there's a right answer to how much money should be spent on making patients' stays better; I know that I'm happy to spend my own money on increased comfort, but I'm not that keen on spending my money on other people's increased comfort.
I wonder though: is the idea of "out of pocket" naive? What I had in Mexico was pure out of pocket, no third-party involved.
And it was amazing. Probably more expensive on a PPP basis for an average Mexican, but still I paid only $20 for almost 1h of a high-quality consultation on my backpain with the most high-tech equipment for testing I've ever seen (like real-time data on which areas of my back are how functional).
People pay out of pocket for basically everything else in their lives. Seems like their opinions have been set based on something other than experience.
> [in the US] "Consumers don’t pay for drugs directly; only insurance companies pay for drugs."
This is not true in the general case. Insurance companies decide to cover, cover with copay, or not cover drugs, just like any other healthcare, and a quick googling suggests it's roughly a quarter to a third of Americans that have prescription medications that insurance doesn't cover.
Yes, thanks for adding this, was going to say as well. The inconsistent coverage of drugs in the US leaves a lot of people in a terrible spot relative to a thing they can't live without.
"Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply."
Kind of true! The critical thing to understand is that "normal economics" usually means "economics with competition". Most of the principles of economics you probably imagine are really just stuff that happens under the particular (but overwhelmingly common) case of perfect or near-perfect competition. "Less money, less stuff" is one those things! In a competitive situations, goods tend to be produced for close to the cost of producing them; if you demand people give you the goods for less money, it isn't possible, and less stuff. But this isn't true of all goods! Monopolies and Oligopolies are the usual counterexample: they tend to already be charging prices substantially higher than the cost of production, so regulators can often force those prices lower without doing any harm. You can't generally do this sort of thing for ever -- eventually you lower the price down to close to the cost of production, at which point "less money less stuff" starts to bind. Think about, say, paperback print copies of Harry Potter. Setting a price cap that slightly reduced the price probably wouldn't affect sales, because it's still profitable to sell them; just the publisher or JK Rowling gets less money. But if you reduced the price enough, you'd start to cut into fundamental costs -- paper, bookbinding, shipping, shelf space -- and you'd get a reduction. (There might also be some long-term effects on future authors depending on how exactly this is done but those interactions are often weird and tricky to predict.)
Generally the amount you can influence the price of something through policy is a function of how close the price of the item is to its efficient production cost, which is often the same question as "how close is this to perfect competition". Healthcare is pretty far from perfect competition! On-patent drugs are fundamental monopolies. Providers, doctors and hospitals are often wildly imperfect substitutes due to variations in their quality. The common disconnect between the person who chooses the service (the patient) and the people that pay for it (the insurance, the employer) also has weird effects on the competitive process. There are often very high startup costs (especially for hospitals) both in terms of money and in terms of navigating a very complicated regulatory environment. All of these things push healthcare away from perfect competition and make a lot of the patterns you reasonably imagine should apply not apply. So a LOT of stuff can be possible that would never, ever work if you were instead trying to regulate, say, energy or food.
This distinction between what is essentially efficient and inefficient markets is often a point that gets overlooked in economic discussions and curriculums. One of my professors liked to say that any economics department will teach you about markets that work; only a good department will also teach you about the ones that don't.
I would think there are lots of markets for things that aren't perfect substitutes. People inspect houses before buying them because they vary a lot, and of course one of the most important factors behind their prices is a location that you can't substitute for elsewhere.
I'm also skeptical that you need to be all that close to "perfect competition" for results to be close. In one example, the difference between having one firm in a market vs two was greater than the difference between two and twenty:
To clarify a point, I'm not saying that there aren't markets for things which are imperfect substitutes. I'm saying that in those markets, it's more possible for policy interventions to move prices without imposing tradeoffs, or at least with less severe tradeoffs.
Which, now that I think about it, is probably wrong. I think I actually confused two points in my original comment, which your response has helped me to see (thank you!). It's actually whether the goods are being priced at close to their cost (total cost, including overhead, R&D etc) that determines whether a policy intervention would be good. But I conflated the not-priced-near-cost case with the not-perfect-competition case, which is not quite correct. I've edited the original post.
I have an American friend who has been an NHS doctor in London for 20 years (MD from Penn). He is a big, big fan of the NHS, especially compared with the US system. FWIW from a provider perspective.
I have always assumed that all the other countries are able to pay such low prices *because* the US pays such high prices. That is, the drug companies develop their drugs with only the US market in mind, and everyone else is gravy. I think it's very likely that if the US started negotiating harder, either prices for everyone else would have to rise substantially, or we would get far less drug development. The US market (note: not necessarily US researchers/companies) is responsible for the overwhelming majority of innovation in healthcare, and every other country has essentially been leeching off of that largesse.
In the UK, at any rate, the National Institute for Clinical Health (NICE) determines its willingness to pay by the benefit to patients. If the US had a similar system, you would expect fewer drugs like Aducanumab, but not necessarily any less of the sort of innovation that benefits patients.
Re. Aducanumab, On 16 December 2021, the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a negative opinion, recommending the refusal of the marketing authorisation for aducanumab (Aduhelm), a medicine intended for the treatment of Alzheimer’s disease. Consequently the first appraisal committee discussion of this topic has been cancelled and NICE has suspended the appraisal.
I'm not sure I agree with that. Drugs are not funded in the hopes that they won't help anybody. Drugs are funded because the company believes that they will help people, and that was the case for Aducanumab just as for most other drugs.
If you squeeze drug companies ability to recoup their investments, they have to either just lose money, or stop researching. There is no third option. Look at their margins - Drug company margins are good, but they're not *that* good. Pfizer's net margin is currently 33%. Reduce their revenue by more than that, and they're no longer profitable.
Anyways, which *kinds* of drugs you might get wasn't my point. My point was about cost reductions. If the US starts paying less for its drugs, other countries will have to pay more, if we want to achieve the same level of pharmaceutical output. The financial math for this is pretty straightforward.
I am not sure how much the world should pay for drugs in total. My point is that you want to incentivise drugs that benefit patients. Curing cancer or Alzheimer would make pharma companies money, but so would any number of useless or nearly useless drugs that get through the US regulatory systems, and that Medicare and most private insurers end up having to pay for. State buyers like NICE that pay for benefit to patients nudge drug companies away from useless drugs towards more useful ones. If the US were to do the same, you would end up with more useful drugs for whatever money you are willing to pay in total.
Ya I agree that breaking the "reward hacking" dark patterns of the US system, to put it in terms of Scott's post yesterday, would be great. My point was only that the US is subsidizing pharmaceutical innovation for the rest of the world. However, you're right, it is also incentivizing misallocation of resources, to a degree at least.
I mean, you say 'any number', but I can only think of one example right off (escitalopram, which is a derivative of the now-generic citalopram with minimal if any difference in effectiveness.) I don't think this is especially common. Plus, effectively copycat drugs like escitalopram presumably take very little development effort compared to brand new useful drugs, so I'm not sure they would be a major component of drug company expenditures even if they're more common than I think.
(Not counting Aduhelm because it had about as good a shot of being useful when it was being developed as any other current Alzheimer drugs. That entire field is a graveyard of hopes and dreams, and Biogen's shame is that they didn't just let it die when it was clearly DoA, and instead have dressed it up in fancy clothes and declared the rotting corpse to be alive.)
The US is generally good at innovation, but is no more an innovator in healthcare than it is in other technologies. Probably less so. One example: of the three leading Western COVID vaccines, only one (Moderna) was developed in the US, and two (Pfizer BioNTech and Astra Zeneca) were developed in Europe. By contrast, virtually all major hi tech companies are American.
Why would you expect the effect of higher US drug prices to only affe t innovation by US companies? This estimates that US consumers account for 65 to 78 percent of all pharmaceutical spending: https://www.brookings.edu/research/the-global-burden-of-medical-innovation/ Maybe the marginal impact of additional money at this stage is low, though I'm not sure how you would show that. (Pointing to individual dud drugs like Aduhelm obviously doesn't cut it.)
The foreign drug companies still make a majority of their money selling to America. No matter where the firms are located, American consumer are funding their drug development.
Health systems also in the extent to which everyone has a GP who is familiar with their health, is a trusted source of advice, and can coordinate the care they need. And related to this, do chronic patients have nurses visiting, checking that they take their medicines, keep their blood sugar under control etc? Such community level services not only improve care, but also reduce costs, since the alternative is for these patients to regularly shuttle in and out of hospital.
"In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America? Is the problem just that this would be a monopoly (technically a monopsony, I guess?) Is only antitrust law preventing them from trying this?"
This does happen in the US. Pharmacy benefit managers (PBMs) do this as one of their core services. They essentially negotiate volume pricing with the drug manufacturers on behalf of their plan sponsor clients (i.e. the insurance companies). If they don't reach an agreement then the drug will not be included in the plan formulary (i.e. the list of drugs covered). There used to be independent PBMs but they're mostly gone now. Express Scripts was the last big independent one but they got bought by Cigna. United and CVS also have very big ones in-house. PBMs occasionally catch heat politically because the drug companies like to blame them for being "middlemen driving up prices." In my opinion that's not true. Really it's the opposite. But PBMs are often the reason why there's some very high "list price" for a drug that nobody actually pays.
And note it's not just private plans. PBMs negotiate on behalf of Medicare Part D plans and managed Medicaid.
My impression (see my comment above) was that PBM's drive up costs by being for-profit and adding friction to the process, but your comment if accurate makes that less true. I know their has been enormous amount of vertical integration in healthcare and I suppose in house PBM would be incentivized to be efficient. I now have two questions:
1. Do PBM's not talk to each other? If one PBM is paying more for a drug than another, they can simply say to drug companies "I have it on good authority you offer this drug to other companies for such and such price" and demand a lower price. If refused, they could combine orders or something to that effect.
2. Why would CMS not just do this in house? To what degree are PBM's not lawyers+scientists+actuaries?
IMO PBMs DO drive up costs, because they make more money the more expensive drugs are. The general revenue model for a PBM is that they take a % of the cost of any branded drug. That means that they make more if a drug is $10000 (and they keep 5%) than if a drug is $1000 (and they still keep 5%).
In response to your questions: 1) they sorta do! CVS/Caremark formed a "GPO" called "Zinc" which is used by Anthem's IngenioRx. Express Scripts formed a swiss GPO called Ascent (iirc) which Prime Therapeutics uses. I'm 99.999% sure that the express scripts/prime agreement is illegal under the Sherman act, but... I'm not a lawyer and until a year ago, no one cared about the Sherman act.
2) When Congress created Medicare Part D in 2003, they specifically forbade CMS from "interfering" in the negotiations between PBMs and manufacturers. CMS doesn't have the authority to do drug price negotiations (in Part D - they do have authority in Part B which are drugs that you get administered at a hospital outpatient department or at a doctor's office).
Obviously opinions differ on this topic. I think they were never the bogeyman they were made out to be. That objection about the PBM clipping a fixed % of the drug price was common when PBMs were in the spotlight a few years back. But I think you have to keep in mind, the PBM has to drive good pricing to actually add value to their plan sponsor clients. Notice how if the PBM is acquired by an insurer and moves in-house, the optics of negotiating volume discounts get much better, even though the economics of the situation are largely unchanged. It's true that the rebate model created weird gross price vs. net price situations that played badly in the press (like Gilead's Sovaldi).
Also, as I understand it, PBMs have been moving away from a model that involves fixed % rebates, precisely because it was putting them in the crosshairs unnecessarily, and they can accomplish the same thing without an arrangement that could be construed as perverse.
1. I think technically information is secret and proprietary but information is decently porous in these negotiations. Keep in mind there are only a handful of big PBMs left at this point.
2. As Benjamin pointed out, Part D is set up so that everything is negotiated by PBMs, and CMS can't jump in and negotiate directly. Part B uses a formula based on an average price in the market, plus a margin.
Nit: It makes sense to set China aside since that's still a relatively poor country, but it's very strange to exclude Taiwan for that reason in 2022 (though a PPP adjustment may be in order).
On the point towards the end of Part I in the post - why do the systems in Germany in the Netherlands work when they seem to only fix part of the problem.
I'd say it must be because of the broader context of their nations. Many seemingly impossible things happen there due to some social factor which 'works' in ways that are totally non-intuitive.
If you look at German housing and property, you'll find many cooperatives and groups of tenants owning and managing theri units in unusual ways. Groups of renters have some inexplicable legal structure in which to operate and the people take advantage of that structure to do things like get solar panels on apartment buildings which they own through their coop.
In Germany the workers and unions are incredibly strong and if you compare economic inequality and the legal structure of the boards of companies where the unions are given formal seats and votes as any other executive with some government relations person sitting in as a sort of tie breaker.....that's may vague understanding of it at least....then you can see the negotiation and strategy and emphasis in terms of how they deal with insruance companies is very different.
The very idea of the union having a government mandate to sit on and comprise half of the corporate board would send western neo-liberal autocrats into fits of panic frothing at the mouth. When a US company negotiates with an insurance company for health coverge for their workers....the people doing it don't give a shit. It is jsut some salary package perk and anyone taking the job will just take it anyway. The US has a fully broken model in terms of incentives and who is pulling the levers of power. Random HR folks who couldn't care less and get better paid special plans for themselves.
It is the same with the apartments....why do apartment buildings get run by slumlords with nothing fixed and shitty builds with no closets or extra spaces for the people who live there? Because the types of property developers with enough funding to build apartment buildings...they don't live in the places they build. But when a German apartment cooperative spends a few years with members who get a custom small apartment complex made to their own needs and specifications....they don't skimp on themselves!
I truly have no idea other than saying 'something something, culture, culture' to describe how and why many things work so much better in Germany. People have power, they have tools, they have a very high self-organisation cost....and they somehow meet it without everyone arguing and everything falling apart.
In this way they are able to make a private healthcare and insurance model full of many negotiations work...because nearly all of the people engaging in those negotiations are direct 'stakeholders' and they actually care about what they are doing because it affects them personally. It is always inexplicable to me and overcomes many of the 'too hard' and 'people wouldn't cooperate' problems so often described in the anglosphere.
I suspect similar factors take place in the Netherlands where most of the people I've met from there and the brief descriptions of their legal and living environment seem more alien to me than I would have thought.
> I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, ... your care gets worse every year, but in real life this doesn’t seem to happen
I've talked a bunch to a (US) radiologist about this... they read a *lot* more images than they used to, and are reimbursed *much* less per image. Some of it is computers making it cheaper / faster to develop / read images than film, and some of it is just pressure to just read things faster (which probably has a quality trade-off).
> Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price
I wonder in what % of health care spending the price is tied to the cost of production? On-patent drugs have a monopoly and are sold much higher than the unit production cost (low prices might affect what new drugs are invented, but that won't show up in a comparison of health systems).
The supply of doctors is usually bottlenecked by medical school / medicare-funded residency slots, etc. Salaries could hypothetically be cut while maintaining supply until there are no excess applicants to medical school (if you made medical school free and/or shortened+combined it with undergrad like some European countries, you probably could cut salaries even further).
Scott, you read the wrong book. My 2006 book, Crisis of Abundance, has real health care economics. On the 23rd on my substack, I'll try to summarize the main points.
I haven’t read Emmanuel’s book, but it does seem thin. Per my other comment to this post, my recollection from grad school is that the Commonwealth Fund data/analysis is rather week. But, I could very much be wrong on that front.
-In grad school, I seem to recall my health policy professor giving the Commonwealth Fund’s data and analysis little credence. Things could have changed since then
-Two of the Commonwealth Fund’s data points seem suspect. Life Expectancy at birth of course captures all types of factors outside just the health care system. The US is way more violent than all other countries on the list. We’re also fatter.
-The % Satisfied figure seems way too low for the US. I’m guessing it’s pulled from a generic question of “Are you satisfied with your country’s healthcare system?” Seems like a reasonable question but this is a politicized topic in the US where the left thinks we have a hyper capitalistic system and the right thinks it’s governed by death panels. A better (but still flawed) approach would be to aggregate patient data about patient’s interactions with their providers. I’ve seen hospital survey data, and I don’t think I’ve ever seen 19% overall satisfaction. Probably never below 50%. Now, the downside to this approach is that it misses people that forego care which is real. Also, you would want to have survey data on members’ opinions of their health insurers. I still don’t think 81% are unsatisfied with their health insurers (but maybe, as I haven’t seen that data).
I've been following the Commonwealth Fund reports as they come out for about a decade now. They're definitely better than they used to be, but at the end of the day still pretty thin. I wouldn't go so far as to say they're /completely/ useless, and the 2021 report I do think the produced a ranking that looks similar to whatever a "correct" ranking would be. But this is just a question that I don't think lends itself well to this type of high level analysis.
The actual statistics you can gather about health system performance are all hopelessly confounded, and in some cases might not even be meaningful if they weren't. Really meaningful information that can't be easily quantified gets ignored- recall some of Scott's early posts about working conditions for residents in Ireland vs the US. And there's probably something that looks like state capacity at play that's much more important than macro system design- on paper Germany and the Netherlands look very similar, but having talked to a few people who've practiced in both systems, they think things just work better in the Dutch system, with no consistent reason as to why.
I don't know what the right way to approach these types of questions are, but I definitely don't think it looks like the types of analysis we usually see. And I think the principle here probably applies to a bunch of other stuff- trying to compare responses to Covid-19, as an example.
"A better (but still flawed) approach would be to aggregate patient data about patient’s interactions with their providers."
In any country where patients are expected to wrangle their own medical bills (even if, ultimately, someone else usually ends up paying the bulk) and where patients' health may depend more on keeping prescriptions and medical devices up-to-date than on interacting with providers per se, I don't see how you can limit patient satisfaction to provider interactions, excluding medical billing and pharmacy/device provision.
I'm an asthmatic with a rarely-diagnosed connective-tissue disorder, EDS. Once I factor in that EDS is a "heartsink" diagnosis, one doctors can't do much for and might understandably pass the buck on, I'm fairly well-treated by the providers in my hospital system. Its geneticists were the ones who finally diagnosed me correctly, and I'll forever owe them. But the billing?
Crikey, the billing! Then the claims adjuster who calls me to check *I'm* not committing shenanigans is not the claims adjuster who can check whether the *hospital* is committing shenanigans — and can't connect me to that adjuster, either: different subcontracts. My husband and I both have math degrees, and despite the hours I sunk into it, I never did figure out who at my health plan I alert if I suspect systematic upcoding.
We've paid huge hospital bills that seemed incommensurate with what the hospital actually did, apparently not just to us but our benefits plan (judging by what the plan paid). This is after our trying to use urgent rather than ER care whenever possible so as to reduce costs and avoid clogging the ER. (Doesn't work if urgent care sends you on to ER anyhow.) We've made an effort to keep current on the cost-conscious consumer advice our benefit plan publishes for its members, and we're *still* continually wrong-footed on billing. Why bother trying to be cost-conscious, then?
And then there's the merry-go-round asthmatics on steroid/LABA devices and their doctors are put through when pharmacy benefits updates its purchasing. I grew up thinking "go generic" was the way to save, and was excited by the announcement of generic steroid/LABA devices. So far, though, generic has never been preferred through our benefits policy, the financial penalties for not selecting the preferred brand are punishing, and doctors can't just write a prescription for "whatever dose-equivalent steroid/LABA device is preferred by patient's plan". Once a year — sometimes more often, for reasons opaque to me — asthmatics and their doctors risk a turn on the, "No, really, which is the preferred device on this plan?" merry-go-round. I hate it. My doctor hates it. Who loves it?
So yeah, I'm dissatisfied. For reasons unrelated to usually OK-ish (often unusually good for EDS) interactions with my providers. For reasons mostly unrelated to our total healthcare expenditure, too, which we could budget for if it were "really what it cost". Only there seems no rhyme or reason to what it supposedly "really costs".
Or any sense to non-cost gatekeeping, either: EDS patients have been advised that the doctors in this hospital system who diagnose EDS don't treat it, and if patients expect to see the rheumatologist who *does* treat in EDS in this system, patients must be referred for something *other* than EDS. I'd say this was merely an isolated case of a niche condition coming with niche absurd hoops, but if so, half of America is niche, judging by neighbors' stories. Most American families, it seems, have stories like mine.
I was still misdiagnosed, but more satisfied, when I saw a private practice that billed me the estimated cost up-front, managed my medications, and managed to palliate some EDS symptoms despite lacking a correct diagnosis. Between that and a local urgent care with transparent pricing, I lived a half-decade not fearing the mailbox over medical debt. Then the practice closed. We moved. Hello, new hospital system, in theory easier to navigate because all services are "under one roof"! I've clawed my way out of medical debt once before and I still fear it.
Medicare and Medicaid cost over a trillion dollars per year which comes to about the same per capita as what the NHS costs, except they only cover about half of the population, so it actually costs twice as much. I can't stand how people in the US just ignore these garbage programs.
Medicare and Medicaid, by definition, cover most of the sickest and oldest people, that is the people who use the most healthcare. So on priors we should expect them to cost more than the private insurance companies do per capita.
Greg's "per capita" denominator was the total population, not people covered. The American private system spends about the same as the US government to cover the healthier half of the population. It doesn't have a lower per capita cost.
it's also noteworthy that Germany has about twice as many doctors per capita as the US... much easier to become one and to emigrate there as a doctor from a poorer country.
From my experience here in Czech Republic the private insurance companies that were created after the "privatization" seem mostly pointless and possibly a negative thing compared to having one state-run insurance company. How it works here is that the state distributes the public insurance money between them and they are supposed to compete on the administrative cost and thus provide value. What actually happens is that they just pick the healthy people to insure and the chronically sick and risky ones are left for the state-run insurer.
I would say that for the mandatory insurance they are completely useless overhead providing no benefit. I can see their value for people buying additional benefits and that should be their role.
Basically it seems to me that this solves (to some degree) the issue of bad political incentives of rich people having completely separate insurance. This way they pay for the basic insurance in the public system (with only one public insurer), and they can buy additional benefits with private insurers.
This would obviously limit what they could offer as additional benefits. They could not offer you to skip the line and get preferential treatment medically, but things like better rooms and treatment of things that state does not cover.
Interesting. Some countries in the book worked like this, but the government had complicated rules adjusting how much insurers got paid based on demographic factors so that insurers couldn't make more money off of healthy people than sick ones. I was surprised these worked but Emanuel said they did.
Yes, the government has such rules. The companies are not making ridiculous amounts of money on it. They do ok, probably by being somewhat better at the statistical wizardry and the state wants to keep them existing so it probably does not push too hard. But they definitely are picking patients, so I assume it brings them more money, otherwise they would not do it ( or they are bad at making money ;) ).
Obviously to actually determine if the situation would be better with just one state insurer, we would need to test it. And between-country comparisons probably lead nowhere, too many confounding variables.
Just to illustrate and to describe some post-communist healthcare systems :
Czech Republic has probably one of the most "socialized" systems. Doctor visits are free, there is some co-pay for some prescription drugs and there is no private insurance (as in providing different/better services, like Germany) really. System provides really good results for how much we pay for it. Even in communist times we had some really good indicators, like top 4 (I think) infant mortality and such. As #1 Covid case country in the world at some point we never really had any situation like Italy or Spain or NY. The system is I think unsustainable in the long run, because it basically runs on doctors being badly paid and the young doctors are just leaving for EU/Britain and old doctors will at some point retire. Stopgap is using doctors from Slovakia/Poland/Ukraine which creates interesting movement of doctors on the European continent :) Though I am not sure where Ukraine will get its doctors from. Maybe UK to create closed cycle :) I think the issue is solvable with some more money put into the system, but we will see.
In contrast Poland has one state insurer, but it basically runs parallel private system, since the public system is just terrible. Public system is basically used for things that you cannot pay out-of-pocket (cancer, surgeries,...). People often pick as their private specialist someone who also works in state hospital, because they know that it might come in handy if they ever need to use the public system. And some doctors work part-time in state hospitals because they know it will help their private practice due to the above. The results in the private sector are I would guess on par with the Czech counterpart (which is public), but the Polish public system is really bad compared to Czech one. The difference was already present in communist times. It is interesting because the countries are now much closer in wealth, the basic principles of both systems are similar, but the differences are still quite large. Poland spends less money, but I am not sure whether the statistics actually capture the parallel private system very well.
The cream-skimming is not happening though. Health insurance companies in the Czech Republic function on the principle of so-called 100% redistribution since 2008 [1]. That means all of the insurance payments to all insurance companies are pooled and then redistributed among all insurance companies depending on the age and health status of their clients, independent of the amount of money each insurance company actually collected. I think that completely negates the point of having multiple insurance companies.
[1] Check Act 145/2017 and the yearly redistribution governmental orders, such as 176/2021 for year 2022
Thanks, the info I based my opinion on was from quite some time ago (from some doctors), though I thought it was newer than 2008. It can still be happening since the redistribution calculations are probably not perfect. I will have to investigate it though.
But I agree that it negates the point of multiple insurance companies. Though I do not see much use for them in any completely public (insurance-wise) system. Theoretically there can be some administrative savings through competition, but I am doubtful that it will offset the administrative overhead of multiple companies. Probably depends on how well the country works, with high level of corruption the state insurer might become too wasteful.
"Is this some kind of weird horseshoe theory situation where the maximally socialist response overlaps with the maximally libertarian one?"
health care in many respects acts like a 'non-competitive market' in that the consumers have (relative to other markets) weaker ability to make competitive choices. Usually, there is one or very few 'best drugs' to deal with a given problem, making the patents/ip behind drugs the actual 'valuable thing' rather than the manufacturing processes. To the extent that the value of the static information is greater than the value of a given manufacturer's competitive competencies, 'socialization' (governments bidding the price down) will not cause any deadweight loss. Similar logic to the weird socialist-libertarianism that we see in georgism, which also deals with 'scarce resources that we need to continue existing'. what is 'efficient' gets loopy and strange when supply gets more and more fixed.
I'm surprised that the 80/20 rule isn't mentioned.
In the US, this rule means that most insurance companies must spend at least 85% of the money they take in from premiums on health care costs. So the ONLY way insurance companies can increase their profits is by increasing their spending. This means that they have only 2 ways to increase profits: either get more customers or spend more money per customer.
It seems to me that this creates a weird alignment problem with insurance companies. They want medical care costs to increase. If medical costs go up, they can raise premiums, and also increase their profit.
Insurance companies are disincentivized to negotiate prices for medical care and drugs.
That rule went into effect in 2013 but I'm pretty sure the US had perplexingly high per capita costs relative to comparable countries even before that.
Isn't there a really simple explanation for all the weird things: medical spending really quickly reaches a point of *severely* diminishing marginal returns. In other words, after you've got the basics most medical spending only has a minor effect on outcomes that's swamped by differences in eating, exercise and genetics between the countries? Well, probably there is some effect of a few new drugs but the drugs with the biggest health impacts are pretty much never not available in any of these countries.
In other words, from an EA point of view, most medical spending is probably wasteful. From a selfish POV those 'minor' differences might be quite significant even if it's only a year or two. But, I wouldn't be surprised if there aren't substantial differences between these countries about the experience of treatment (both the anxiety of having to pay as well as the issue of how quickly pain/depression gets alleviated).
By the way, have you read "Catastrophic Care", that began as a series in The Atlantic Monthly, written by a guy (David Goldhill) trying to figure out why his father was killed (like hundreds of thousands of others are, apparantly) unnecessarily, in a healthcare system where the individual components of the system all worked very well individually.
I think a big part of the bad US performance is the trouble we have with our primary care workforce: access is poor, continuity is poor, care coordination is poor and comprehensiveness is poor. See the late Barbara Starfield MD for characteristics of high quality primary care.
I'd add that I am very concerned that if the US goes single payer we lose a very very important market signal for drug prices. I'm sure we will still somehow manage to incentivize funding cancer drugs (to some extent) but I worry that without the US providing a market signal drugs that 'merely' improve someone's lifestyle (e.g. viagra) won't be sufficiently compensated. Sure, competition between insurance providers isn't great in the US but it does exist and lots of people do buy drugs without insurance providing insurers with a price signal. Maybe I'm being crazy but I worry that without at least one country providing such a signal we'll instead see drug prices being determined by what 'serious' people think they are worth ... meaning mere 'lifestyle' drugs will be undervalued even though I suspect they have huge well-being effects.
Unless your single payer system would ban buying Viagra over the counter, the price of lifestyle drugs won't drop below what people are willing to pay out of pocket. This seems like exactly the correct value.
If the US stopped subsidizing pharma research it would be a disaster for world health. Unless other countries stepped up new drug development would grind to a halt.
You might also like In Search of the Perfect Health System by Mark Britnell. It's a similar comparison of the healthcare in different countries, but has a wider range (25, about a third each of high income, middle income, and developing), and goes into more detail on the tradeoffs involved in design.
"Third, China also underpays its doctors, and they compensate by being corrupt and demanding bribes before treating patients."
There's been a major change in this, at least in the nice city where I live (Xiamen, southeast coast). 15 years ago, when my son was born, we gave the doctor an envelope stuffed with cash; today, that doesn't happen. I don't have a lot of contact with the healthcare system because we're all very healthy, but on the couple of occasions we've tried to "expedite" procedures (by offering money over and above the hospital bill) in the last few years, we've been cheerfully rebuffed.
It's still true that China underpays its doctors (though there are some poorly-understood perks); but a lot of the blatant bribery associated with day-to-day transactions that were common 20 and even 10 years ago have now vanished from (middle-class urban) life in China.
The most obvious reforms in the US health system are probably things like training more doctors, making it easier for foreign doctors to practice, and letting nurses do more things that needlessly require a doctor to be involved. These are things that 99% of health economists would support, whereas there'd be a lot less consensus about structural reforms.
Also: get rid of the undergraduate requirement to be able to go to medical school. It's a huge opportunity cost and the courses which need to be taken could be done in a single year.
> corresponds to a health care budget of $1 billion or whatever. Then doctors submit reports on how much health care they’ve done, ie “we have done 500,000 units of health care”, according to some list where a blood test counts as X units, a heart surgery as Y units, etc. Then the government says “Well, we said the budget was going to be $1 billion, doctors did 500,000 units of health care, so we’ll reimburse doctors $2,000 for each unit of health care they did”.
Scott has problems with this, but it seems straightforward to me. The budget is not going to plummet from year-to-year, and doctors and not going to double the number of health care units they do a year.
I see problems with it, but they're the normal problems you have in any market.
"He opposes euthanasia, which I interpret as demanding state-sponsored coercive violence to prevent torture victims from escaping, but I know other people interpret it differently."
You may know better than me about this, but my understanding of his opinion is that he believes (and I don't know if this is research or personal experience or what) that it is a complete myth that patients that use or want euthanasia do so because they're in pain. So your interpretation of his view seems misleading. He claims that people who seek euthanasia are generally depressed people -- and it seems weird to enable depressed people to kill themselves when we generally try to stop depressed people from killing themselves. I don't know if he's correct in his "euthanasia is mainly sought by depressed people rather than people in physical pain" thing -- but I live reasonably close to the Netherlands and the few people I knew of who wanted to use go on a one way trip there were depressed and not in physical pain.
"Autistic people suffer. They suffer because of their sensory sensitivities. They suffer because of self-injury. They suffer because they’re in institutions that restrain them or abuse them or just don’t let them have mp3 players. Even if none of those things happened at all, they would still suffer because of epilepsy and cerebral palsy and tuberous sclerosis. A worryingly high percent of the autistic people I encounter tend to be screaming, beating their heads against things, attacking nurses, or chewing off their own body parts. Once you’re trying to chew off your own body parts, I feel like the question “But is it really a disease or not?” sort of loses its oomph."
The vast majority of people getting euthanasia in The Netherlands have cancer (2020: 64.6%). Only a very tiny fraction have psychiatric issues (2020: 1.3%)
Even when you have terminal cancer and request euthanasia, they will still make sure you aren't depressed and refuse your request if they think it is because of depression. Personally I think this is ridiculous.
Source: I live in The Netherlands and have metastatic cancer and spent several months of last year studying on euthanasia. My conclusion was that it isn't nearly liberal enough. As a consequence I bought two helium tanks for a DIY euthanasia when the time comes.
If you're comfortable talking about it, could you say more? I'm completely ignorant about this.
So why are so many people with cancer wanting euthanasia? Is it because of quality-of-life is low? Is it pain? Is it the fact it's terminal? How will you personally know when the time has come? Is it how you feel or is it when you lose a certain level of functionality?
As a purely practical consideration -- how do people distinguish between suicidal depression and suicidal non-depression? Is the distinction that we find their desire to commit suicide more sympathetic somehow? Or is it that if they're close to death either way then there isn't much in it? Is there a difference in the sort of people who commit suicide outside of euthanasia and those within?
"Personally I think this is ridiculous"
So you think anyone should have access to euthanasia? Or more people like yourself? Why were you turned down? In my head I guess I figured anyone with terminal cancer could get it -- so I'm way off here.
Sorry if my prying is offensive in any way -- totally unintentional; and sad to hear about your metastatic cancer.
The percentage of people that get euthanasia because of cancer is high, but that doesn't necessarily mean the percentage of people with cancer that get euthanasia is high. I don't know the numbers, but I'm sure the vast majority of people with terminal cancer die without euthanasia.
Of those with cancer that do choose euthanasia, pain is almost never the primary reason. I don't know the exact reasons and the reasons specified are colored by what is required to get euthanasia. There is a strong selection effect. If you know the right things to say you have a much higher chance to get euthanasia if you really want it.
Personally, I dread the idea of becoming dependent on others, so I definitely want to die before I need any level of help with my daily activities, but probably even sooner because I also don't want to run the risk of getting into a position where I wouldn't want to live anymore but don't have the physical capability of ending my own life. I'd much rather die too soon than too late.
I don't know how they diagnose depression in terminal patients and I don't really believe it is meaningful anyway (that's why I said it's ridiculous). I don't consider being depressed in response to a terminal illness to be a malfunction.
I do think everybody should have access to euthanasia. I think that the current situation where doctors have a monopoly on euthanasia and assisted suicide is insane. Suicide is legal (and rightly so), so assisting someone should also be legal (obviously with the caveat that it should be clearly proven that the assistance was requested.)
I was not turned down. Just doing my homework. Besides the obvious (and not so obvious) side effects being castrated (to slow down prostate cancer) I don't have any symptoms currently. I think I know the correct things to say to get euthanasia, but the problem is you can never be sure because it is such an arbitrary system. So that's why I'm prepared to do it myself. I do prefer euthanasia because it is beter for the family. With euthanasia they can be present without risk, when I take my own life I don't want them to be present because they run the risk of being suspected of assisting me. When you are grieving a loss, you don't need a criminal investigation hanging over you. This is not just theoretical, it happens extremely rarely, but I definitely don't want them to run that risk.
It sounds like the laws on assisting suicide are similar in the Netherlands to the UK. I was with my mother when she ended her life and as a result I was arrested and spent five hours in a police cell on suspicion of 'aiding the suicide of another'. As it happens it wasn't a particularly bad experience, and one I'd happily have signed up for so that my mother wasn't alone during her last days, but it seemed quite ridiculous.
However, the chances of any serious consequences were tiny and I would guess that some written statements by yourself in advance would reduce those even further for your family - if you and they wish them to be present.
It will put them under great stress to discuss this, so I don't want to do it unless necessary. However, there was a case here where the family members where under investigation for four months (and then the case was dropped), combined with things our lead public prosecutor has said about euthanasia I'm not comfortable that they can be trusted.
Cultural factors may be at play here also. For example, in the Netherlands, doctors are famously stubborn at taking complaints seriously. Stereotypically, a Dutch doctor will send you home with an aspirin when your leg is falling off, and they laugh off many symptoms as "ahh that's just a sign of getting older".
I imagine that might 'reduce costs' significantly, which could be being masked by the general good health of the population due to frequent daily exercise (e.g. cycling).
As I have gotten older and engaged with the US healthcare system from different perspectives I have only come to view it with a less and less favorable lens over time.
I have been uninsured, insured at a tech company with good insurance, paid out of pocket for a high quality insurance plan (very expensive), and now been the owner of a small business having to deal with insurance for my employees.
The strong coupling of business with insurance is definitely a huge negative for the system as a whole, and for small business. I think any system that moved us more in a direction of decoupling medical insurance from your place of employment would be a large positive.
Part of what may be going on with drug prices is that the U.S., as the largest market, ends up as the "privileged minority" producing the public good of making it worth the cost of developing new drugs. If the U.S. insists on paying low prices the companies produce fewer new drugs. If Austria pays low prices, the effect is much smaller. Think of it as a bargaining game among countries where everyone else ends up free riding on the US expenditure.
Perhaps stating the obvious, but the "efficient market" assumption where price = marginal cost is an idealized case with lots of buyers and lots of sellers and various other assumptions.
In real life, you often have a transaction where there's space between the maximum price the buyer would pay and the minimum price the seller would accept, which is why haggling was invented. Saying in a stern voice that you refuse to pay more than X is just haggling.
Also the thing where you create a pool of money and then divide it among workers proportionally to work done without adjusting the total money for the total work sounds a lot like how Amazon pays authors for Kindle Unlimited, AIUI.
Part of what may be going on with drug prices is a bargaining game among countries. If nobody pays high prices you don't get new drugs. The smaller a country is in the drug market, the less the effect of the prices it pays, so the biggest player ends up paying the most — it, and everyone else, knowing that if it refuses there will be fewer drugs. That makes the US a "privileged minority" in the production of the public good of getting new drugs produced.
I’ve heard great things (from people who use it) about Hong Kong’s system, which doesn’t seem to be covered in the breakdown of systems. It’s something like China or Australia except the private insurance is optional and opt-out, between the customer and the insurer, and paid as a reimbursement. It functions like private school vs public school in the US — if you could somehow buy insurance to reimburse you for attending private school (and attending school was an occasional thing). That is, you can go to your locally zoned government hospital for “free” care (featuring student doctors, waiting lists and multiple patients per room) or choose from multiple levels of private care (featuring top docs, no waiting and private suites) and pay out of pocket, getting reimbursed later in whatever way the insurance you bought covers you. Because capitalism, the cost of private care and insurance is relatively cheap/affordable. Because socialism, no one dies in the street. It appears to be the best version of all systems, one where you can spend time or money to get care.
Looking up data from Gapminder, and comparing spending PPP$ per person vs. life expectancy, the pareto frontier includes South Korea, Israel, Singapore, and Japan; with Malta, Spain, Italy, and New Zealand also doing well. So if I was looking for the best system, I'd look to see what those countries are doing.
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
So in UK politics rightists and centrists are very conscious of healthcare eating up a larger and larger part of GDP -- so there's an effort to make it sustainable to avoid an apocalypse where either everyone is dying on the streets, or the country goes bankrupt.
For this reason there's a mindset to avoid costs. GPs are gatekeepers. They don't quite turn you away three times to ensure you really in your heart know you need treatment -- but it's not so far off. A while ago my young son accidentally got acrylic paint in his eye. I cleaned out everything I could see but was worried. So I took him to the hospital. We were in the waiting room for four and a half hours. I'm told by doctor friends that sometimes they allow you to wait for a few hours to deter time wasters.
Friends of mine from the US or Germany get very angry about this and feel mistreated.
Anyways, that's some context.
I dispute that the NHS doesn't do anything silly though. I've probably told this story before, but I will repeat it here: a friend had certain health problem; and was told by our local hospital that they had ceased to offer treatment X (which he preferred), only treatment Y. My friend was annoyed because a recent meta-study done in the UK had shown that treatment X was at least as safe, and about two orders of magnitude cheaper (in medical costs, for the taxpayer) than treatment Y. He wrote a letter to his MP. Who had a meeting with the Health Minister, who called the head of the hospital. They then looped back and he was told by the MP that the head of the hospital confirmed that the procedure was safer and orders of magnitude cheaper, but they were now refusing to offer it because only doing treatment Y would improve the hospital's finances because the government paid them fixed rates per procedure -- and to the hospital's finances only the margin matters.
I would also say that there is a difference in culture I perceive between the US and UK medical establishments. (Can't comment for Europe.)
The UK has a steady stream of medical scandals where either the NHS did something awful intentionally (such as experimenting on children in a boarding school, most of whom died from being given blood that was known to be infected -- the doctors recorded the progression of their illnesses and gave this information to research institutions) or the NHS realised something it was doing was bad and its instinct was to cover it up (for example, the NHS realised a few years ago that its vaginal mesh operations were doing much more harm than good -- and decided the best thing to do would be to cover it up, and keep doing the operations that were known to be harmful). I have never heard of any criminal prosecutions, lawsuits, and so on, over this. In both these cases the current Minister of Health gives an apology -- when he had nothing to do with it in the first place. I get the impression that in the US they'd be quite hard nosed about it and people would just be sent to prison for this sort of gross malpractice?
I do like the NHS, but long wait times are just expected, especially for non-scheduled appointments, probably for the reasons you mention. Actually visiting the GP didn't involve too much of a wait last time I went, although I was fortunate in that my working hours were flexible enough to allow me to go in the middle of the day.
I remember the time when I was unsure of whether or not I'd broken my arm (turns out it was just sprained, but I still needed a sling for a week) and I made sure to get lunch first, the doctors wouldn't be in a rush so there's no reason I should be.
I believe you, but I don't know whether that's reassuring or the opposite. I was thinking that in the US it would be harder for hospitals to cover stuff up for decades, and if they did, then heads would roll. But maybe this is a grass-is-greener thing?
I tried to find statistics. But failed. I tried to find medical malpractice insurance rates. But failed.
Speaking as a British person, I do think it's particularly egregious when it's the NHS, a public institution. I expect corporations to try to cover up their misdeeds, they serve only the bottom line, but the NHS is meant to serve us, not protect itself from embarrassment at the expense of the country's health.
I dunno about that post about bioethicists... I wouldn't say I was reflexively *hostile* to the idea before hand, but it left me feeling with more confidence what I already felt before I read it, which is "what's the point?". I guess the message for you was, don't consider them as your outgroup because they're not that different from you. That's fine. But I still don't have any particular respect for the field. Although I'm a person who already doesn't see the point of academic philosophy in general.
Having lived in Germany and Switzerland (and now going back-and-forth between the US and Canada), I think I can give some answers as to what's happening:
1) Standardisation: in Switzerland your health card is a smartcard that is fully standardised. All doctors can read it and it contains all basic information about you.
Reimbursement forms are also standardised: when I went to the doctor, the secretary gave me the choice of sending the payment directly to the insurance (in which case I pay nothing on the spot, and the insurance will bill me monthly, somewhat similar to a credit card company), or I can pay myself and keep a copy of the itemised invoice, which I would send as-is to the insurance, without having to fill any form whatsoever. The insurance either OCRs it, or they have data-entry people. I didn't have to care because the invoice already contains everything the insurance requires.
2) Doctors' autonomy: doctors are fully in charge of the treatment plan, meaning that in most cases they don't have to ask authorization to the insurance to order a certain test or treatment. Exceptions are made for very expensive surgeries. This means that the admin personnel of insurance companies is much smaller than in the US, which lowers costs.
3) Non-profit: in Germany most insurers are non-profit foundations, or are part of a larger insurance company which voluntarily runs the healthcare department at cost. In Switzerland, by law, healthcare insurers are mandated to be non-profit: most are departments of larger insurance companies, but they have entirely separate budget and all surplus must be reinvested or distributed as bonuses. The insurers compete on low admin costs and posh benefits for the supplementary care, and use the efficiency and good reputation of their healthcare unit to lure customers into life/house/car insurance which are quit profitable. Most Swiss stay with the same insurance company their whole life or maybe only change when they get married, and only the poorest shop around annually.
4) Price control: not just medicines, but the prices for medical services are set by the government. For example, the kantons set the maximum price for a 30-minute dermatologist visit and the doctors must give the same price to everyone, which means that insurance companies don't negotiate the prices of mandatory services with doctors or hospitals directly (as far as I know).
They might negotiate for some non-essential surgery.
5) Concierge service: wealthy people pay more for posh service, like a semi-private or fully private room in case of hospitalization, or being treated by the head of department instead of a lesser experienced doctor. Insurance companies lose money on regular patients and balance their budget (remember, no profits) with the "business/first class" patients.
6) Lower salaries: medical schools are essentially free in Switzerland, so doctors don't have huge debts to repay. Switzerland doesn't graduate enough doctors for their needs, but it attracts many foreign-educated doctors and the barriers for degree recognition are reasonably low (contrary to what I read about US and Canada where the doctors' associations have been very successful in blocking degree recognition). I don't have hard numbers, but my impression is that Swiss doctors make 60-80% of their US counterparts.
7) Focus on generic drugs: doctors are strongly encouraged to prescribe generics, which keeps the prices down. The kickbacks that US doctors get for prescribing very expensive drugs are non-existent for the most part.
I was happy to pay 480 CHF a month for a semi-private plan (and rarely using it), when other colleagues my age went for cheaper options around 220-240 CHF. My total annual deductible was 7000 CHF, which amounts to a maximum annual expense of 7000 + 480*12 = 12760 CHF (13900 USD).
If I were sicker I could opt for a 1500 CHF deductible and less fancy service, which would cap my expenses in the range of 5-7000.
It's still cheaper and higher quality than the US, especially considering Swiss salaries.
Very good summary. The system is not entirely straightforward and rarely ever characterized properly.
One nitpick: not sure how you get to a deductible of 7K, the mandatory basic plans have at most 2.5K and for the first 7K above that you have 10% copay.
As for accessibility: I have a hard to treat chronic disease and ever since they finally managed to diagnose it (don't get me started) access to expensive biologics, frequent lab tests, radiology and specialist appointments has been exemplary. And while I happen to have top notch supplementary insurance, 99% of that was covered by the basic, mandatory plan.
Oops, I believe you're right. I didn't remember the copay calculations correctly.
For the accessibility, my experience matches yours (with SWICA in Zurich). I could get an MRI for the next day. Here in Quebec I'm lucky if I can get an appointment in 3 months unless I'm willing to pay 700 CAD entirely out of pocket (compared to the 120 CHF in Zurich).
Scott how much did the book account for the fact that it is easier to have low wait times when people just don't bother to go because they can't afford it?
Or because the threshold for going is not the same. Within a country, this threshold already is incredibly variable, due to a combination of general heath, eagerness (or reluctance) to visit doctors or hospitals, and price /revenue. This means that the default theory is that the per country average also strongly differ...which mechanism would make that roughly constant, when countries demography and cultures are not the same?
The combination of a system that's fee-for-service, looking for things they can charge you for at the highest possible price, and a public that's unwilling to bargain or accept limits on consumption. There are some moves to improve this with 'capitation' where you go in for some surgery and instead of charging you for every test and consultation and procedure and meal and other thing that gets done during that visit the insurer has a tariff: For this kind of surgery, they pay the hospital this much per patient. You win some you lose some. Hospitals that are efficient and avoid complications do well in the long run.
I also suspect, but have no data, that expenses balloon at the bottom and the top of the utility curve. At one end, pharma companies selling drugs that aren't needed to people who aren't ill. At the other end, extremely costly treatments and repeated surgeries in an undignified attempt to prolong life and extract the maximum 'consumer surplus'. Other systems would ration care based on too low QALY for the cost, and individuals in other cultures like the Amish that you mention would say you know what, I don't want to die in a hospital.
I live in The Netherlands and have some experience with our healthcare system (I have metastatic cancer) and if what I'm getting is top-tier, you all have my sympathies.
No one else is commenting on this particular thing, so I guess only my brain is failing to work here, but:
>"I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, then you stop doing all the health care with a value of between $1,000 and $2,000 per unit[...]"
Why? WHY? Why is this not making sense to me?
Wouldn't this rather make you stop doing health care with a value of > $2000/unit in 2020, and > $1000/unit in 2021?
Maybe I'm confused by what "value" means here. We're looking at what providers would do when the government assigns a value to their per-unit healthcare, right? So "value" can't mean "government-assigned value for this year" — it must be referring to the amount the unit costs to the provider. But if that's the case, I don't get the reasoning above.
I had an aha moment when I thought "wait... maybe it refers to the *value to the provider!*" — i.e., profit. But no, providers are compensated by the government in this model, right? They aren't profiting otherwise. And if it were profit, anyway, you'd want the highest regardless.
I'm clearly missing something. Boy, I feel dumb as hell.
I know everyone just wants their own country talked about, but I'm disappointed that Israel doesn't get a mention mainly because I'm curious how they measure up. The system seems to work remarkably well (compared to other countries and compared to other Israeli government services). Its super cheap. And since Covid I've realized how impressive it is that everything is universally synced in a robust online system.
One of the amazing things about our system in Israel is that we have these semi-public HMOs ("Kupat Holim") and their incetives are somehow well aligned with the patients'.
For example, most people don't switch HMOs their whole lives because they are nearly identical, so the HMOs have an incetive to care about the long term health of their patients, and they invest in preventive measures such as check ups, anti-smoking courses, etc.
The Health law in Israel is from 1994. It mandates a "health-Tax" on all incomes, of about 3-5%., depending on salary.
The State adds to this budget and determines a total health budget, usually by some formula depending on the population size, age brackets - and available budget.
This budget is then divided to what is called the "health bucket". The health bucket defines all the services that would be provided by the state, and the patient cost for each. Usually the patient cost is trivial, a few dollars for a service like a doctor meeting.
Treatments get into the bucket according to cost effectiveness, so expensive treatments would just stay out of it. This puts pressure on Pharma companies to reduce prices.
The state doesn't provide the services directly, those are mediated through some kind of HMOs, called "Boxes". There are 4 of those, and each resident can choose which one to go to, and they can't refuse. They compete between themselves, and the budget the States provides depends on the amount of patients each manages.
In addition, there is a private health system, that is much smaller. Most Doctors would work part time at the public system and the private system, but used mostly for Dental service for adults, to shorten lines and to choose your doctor. The same Hospital and the same doctor could work in Public in the morning and private in the afternoon. There is constant worry about resources going over from the public system to the private system.
Doctors and nurses and most other health professionals in the public system are unionized, with a fixed salary - that means there is no economic incentives for doctors in the public system, only in the private one, where they do get paid per procedure.
There are various incentives built-in into the system - for example for a lot of procedures the HMOs ("Boxes") have incentives to reduce sickness and treatment because they get a fixed budget according to number of patients.
Going to ER is free with a reference with a doctor, or if it was deemed an emergency, but frivolous visits can be pretty expensive (~700$).
The main thing I take away from her is path dependency effects. Almost impossible for US to cut costs because Healthcare professionals make too much already (and it's almost impossible to cut wages), hospitals have already been overbuilt with excessively swanky facilities (a problem that I see also with US colleges - these hotel grade dorms / top end gyms built in recent decades will make it almost impossible in future to cut cost of college) etc.
Separately, there is the argument that other countries can negotiate lower prices w/ drug makers largely because high prices in US subsidise whole system - basically Norway, UK etc. are just low marginal cost markets for drug makers who have already recouped all their costs and then some in US alone. If US also started to negotiate hardball the system wouldnt work, lots of new drug development would become uneconomical and get canned etc. Hard to prove how much this argument is true as opposed to drug industry crying poverty, but having invested in drug development in my previous life I could see that some of the argument is definitely true.
Btw. just wanted to mention that I've lived under the US, UK, Swiss and Taiwanese health systems now (as well as Germany but that was when I was a kid so don't remember much) so have direct experience of quite a few of the systems studied in the book. Personal experience is that for a regular guy with relatively high income and few serious health problems all these feel about the same. I get feeling it's around the edge cases that specific systems fail to deliver.
Which makes a distinction between insurance (pooling risk for unlikely but severe healthcare needs) and assurance (paying for things we will all need eventually, doctors appointments and old age care), and which rates the system used in Singapore highly.
I have some broad anecdotal experience having lived in or received medical care in many different countries:
- USA (20 years)
- Singapore (2 years)
- Kuwait (5 years)
- France (1 year)
- Switzerland (4 years, son was born here)
- UAE (4 years)
- South Korea (ad-hoc)
- China (ad-hoc)
I can't say I even know 1% of the regulations involved in these systems, but I have an overall impression from participating in them.
South Korea was by far my best experience - as a combination of quality of care and low price. They have a public system with private add-ons, but if you don't get regular check-ups then you can be denied care. They also have this incredible system for annual check-ups where you rapidly go from station to station with a mob of people and see more than 10 doctors in a couple of hours running all kinds of tests.
China was the worst experience. An overflowing hospital and waiting in line for six hours to get 3 minutes standing in front of a doctor who just prescribed a bunch of antibiotics without checking on my infant son.
Switzerland has high quality care but is very expensive - minimum $~400 per month for the basic insurance. But they also make the rules transparent and they encourage you to do preventative steps, like subsidizing gym memberships.
UAE is also great if you get coverage at a good hospital. This is done through my employer and we have 10-15% co-pays.
Singapore was a long time ago, so I can't remember if I had to pay anything, but I remember feeling that doctors unnecessarily prescribed antibiotics for everything.
Taiwan has a GDP of close to $33K per capita (and a lot higher using PPP). Not sure if excluding it for being poorer/less developed than other countries makes sense here. I've lived under the Swiss, American and now Taiwanese health care system, and Taiwan certainly holds its own.
Same here. They definitely work hard, but they don't seem overly tired. This is all purely anecdotal, but I've had an operation and several check-ups here, and my wife gave birth here as well.
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?
I am not an expert, but I do live in Germany. The reason this doesn't happen is that there is a law that if you accept patients from one "public insurance company" you must accept patients from all of them.
There are a few luxury clinics in wealthy areas that only accept privately-insured patients but as far as I know there are no actual hospitals that do that since there are very few people who are insured privately. The reason the privately insurance population is low is that you are only allowed to have private insurance if you make above a certain income threshold (I believe it is 150% of median income). Ironically private insurance is usually much cheaper than public insurance (~€150 vs ~€300 per month at the max cost-to-income scale), but there are some downsides which make most people reject it even if they are eligible. Namely, it is very difficult to return to the public insurance system, you need to pre-select a "menu" of coverage you think you'll need instead of just being covered for everything, it does not cover your partner and children for free, and the price scales with age. So a wealthy middle-aged person opting for private insurance is basically betting that they will still be wealthy as they age. If they have some misfortune and end up poorer when they are elderly they can have crushing medical insurance costs and be unable to switch back to the subsidized public insurance scheme. Germans, being frugal and cautious by nature, view this as a terrible bargain so most privately insured people are either Actually Rich or foreigners who do not intend to grow old in Germany.
The public insurance companies which cover ~90% of the population bargain collectively for acceptance with all doctors/clinics/hospitals/whatever and have extreme coercive power. However, this is balanced by the government basically setting prices for medical procedures in advance. This is done similar to the way they set prices for drugs.
I think the main reason that this works is the _style_ of negotiation. In US healthcare you have a multi-party _adversarial_ negotiation where if a bargain can't be struck then one party walks away and all their associated patients suffer. In Germany the parties are pretty much permanently legally bound to each other (or at least the law creates such a disincentive to walking away that it is effectively impossible) so instead it is a _cooperative_ nationwide negotiation between three roughly equally powerful parties: the German Health Ministry, the Health Insurance Association, and the Healthcare Provider Association. All of them need each other to exist and all agreements are "one for all and all for one" so there is no room for defection.
The result is a fairly functional, if a bit ponderous, healthcare system that most Germans are relatively satisfied with (insofar that a German can be satisfied with anything).
> The reason this doesn't happen is that there is a law that if you accept patients from one "public insurance company" you must accept patients from all of them.
Right. But then why doesn't an insurance company turn around and say they are only going to pay $1/visit or something? After all, they *must* be accepted.
Then the government steps in and says "you don't cover the cost the doctor is charging? You are not really a health insurance company and can no longer operate."
Correspondingly if the doctor charges to much the government would also say "you charge more than the set price window for this procedure, you can no longer see publicly insured patients."
The shaky leg of this tripod is the government price controls. Which need to be set high enough that the doctors can have a sustainable business. But low enough that the health insurance companies don't go bankrupt. This is where most of the "cooperative negotiation" occurs. But since all parties have an interest is figuring out the "proper" price it works pretty well.
I know a guy who's lived in Portugal, Brazil, US, France, and UK. He confidently ranks US healthcare as the worst of these (unless you're rich) and France as the best, followed by Portugal and then I don't remember.
As a long-suffering user of the NHS, I wanted to add that the system in the UK isn’t quite how Scott / Emanuel characterises it.
Yes, most hospitals and doctors surgeries etc are run (awfully) by the government, but there are a substantial number of fully private hospitals / facilities, and, in addition, most of the best NHS hospitals have their own private wings, which help to subsidise the public sector care. Most doctors will also get some private work in as soon as they have enough experience, because the pay for highly trained medical professionals is *LOL*, when compared with equivalently smart / educated people doing things like Law / Finance / etc. In dentistry (also under the remit of the NHS, but in an inconceivably more stupid way), _everyone_ does private work; if you try to do only NHS work, you will either (a) commit fraud or (b) go bankrupt. There is no way for dental professionals to make any money on the NHS, so they use NHS patients as a funnel for private work (“Would you like a white filling? That’ll be £xx extra”). So, although it is different from Option 3 as listed above, I think the system also does broadly fall into that category, rather than standing alone as a purely socialised system, which it both is and isn’t.
Anyone who can afford to have insurance and go private, does; it took me personally one morning to complete some private appointments and tests, which would have taken me ~6 months to have completed and reviewed on the NHS (pre-COVID). Other than for emergencies (even then, call out times can often be multiple hours), no one would ever choose NHS care over private options
I think there is an orthogonal question of morality here that cannot be resolved merely by looking at how well each system performs. I maintain that it's unethical for government to be involved in healthcare of its citizens, and I see that I saw no country even close to following that model of non-involvement (despite what people think about the US, the US doesn't do that).
Even if in all the countries examined above, government had no role in healthcare beyond enforcing contracts, we may see different levels of performance and it is wrong to think that the relationship between government involvement and performance is independent of many other variables.
> 4: Single Payer Channeled Through Private Insurance is typical of Germany and the Netherlands. I think this is kind of like how charter schools work in the US: the government pays 100% of your costs,
This doesn't sound like the Germany I remember.
In Germany you have to pay for what they call "public" health insurance, but actually you are paying a private company of your choice. On the other hand they are so tightly regulated that the choice doesn't matter much. IIUC, it might seem like the government pays, because most people have the payment taken straight out of their paycheck, but if you are a self employed, you have to pay them yourself.
It strikes me as very similar to the post-Obama system in America, except presumably more orderly and, because it's German and not American.
You wondered how Germany avoids patients going to out-of-network doctors.
There's an official price list for (basically) every procedure a doctor might perform. Doctors are allowed to apply a factor to every price., but this factor has to be negotiated before the treatment.
In practice, the patient hands over their insurance card before the appointment, and the doctor sets the factor to whatever the insurance allows. This incentivizes doctors to give better treatment to high-factor patients, so that they don't go looking for a different clinic.
Some doctors state outright they will only work for a minimum factor*, then the patient has to cover the difference if its above their insurance's max factor, or negotiate, or go somewhere else.
* it's usually phrased as "we only accept these insurances: ..."
To the question of "why doesn't Germany suffer from higher costs", the answer is price controls. Costs for any particular intervention are set by a process of sectoral bargaining between the health insurance companies, hospital industry groups, and doctor's associations, with a healthy helping of government regulation and cracking the whip to make sure everyone comes to a reasonable compromise. It nestles nicely into Germany's cultural corporatism, where everything is subject to tedious consensus-building in highly centralized representative bodies that reach decisions that individual agents are required by law to adhere to (unless they fall into a narrow band of exceptions, in which case there are basically no rules but they tend to follow them anyway because Germans love following rules).
This is similar to how German wages are set: if you hire a metalworker, you have to pay them the union rate even if they're not in the union, but unions and employers' associations are generally very cozy with each other and work stoppages, when they happen at all, are symbolic; everyone knows eventually they'll meet in the middle and go back to work.
Basically, the German love of order and consensus prevents a lot of rent-seeking defection. The American culture of chaos, defection, and adversarial relationships is unlikely to be able to adopt much from the system without incurring severe psychological pain.
I'm telling a very culturally reductive story here but after a decade in Germany it's a little bit hard to come to any other conclusion. Germans are just wired differently than Americans, and that has upsides and downside. They're great at manufacturing but terrible at UX design. Go figure.
Regarding the german system: The adversarial vs cooperative point by @Atticus is excellent and can not be understated. To add some points on the german system (I'm also unsure about its correct catgorization in the book, but don't know enough about the used system to be sure enough):
- Doctors are free to reject patients with the statutory health insurances (which pay the predetermined rate) and only take privately paying patients, but the vast majority just take everyone and offer benefits to the (economically more viable) privately paying.
- Most doctors are not motivated primarily by money. One of the "people dying in germany while on the waiting list for a specialist" is a myth - every doctor I know triages referals to specialists (some specialist professions have notoriously long waiting lists), so that patients with a need for a speedier specialists opinion of treatment are referred faster by calling the specialist in advance and ask for an urgent appointment for the patient. An example would be dermatologists, who usually are booked full 3-4 months in advance (because they do often prioritize privately paying patients that want beauty treatments) - but if your general practitioner finds a suspicious skin change that might indicate a fast spreading skin cancer type, they just call the patients dermatologist and usually get an appointment on the next day. Note that this is all without looking at emergencies, which are treated non-discriminately immediately by everyone, *and* that this kind of triaging is neither charged extra or bonused in any way nor is it regulated by law. My only explanation here is just that doctors in general are simply philanthrophs in germany and make enough money to stay motivated - as well as people here not feeling the need to show off to everyone else how rich you are as it seems custom in the US.
- The rate for one insured "unit of work" is not as fixed as I've read between the lines here, but there's a negotiated, fixed base rate, that the doctors are able to multiply by a "difficulty factor" to adapt their work to the time needed. If a doctor is known from an insurer to have a statistically higher cost due to always using a high difficulty factor, they will get more and more trouble with the insurances, because these can challenge the factors to prevent fraud.
- The base rate and even which medication and treatments are payed for by the statutory health insurances based on their effectiveness for certain medical issues is regularly negotiated in a common nationwide commitee you already mentioned (Gemeinsamer Bundesausschuss). They *have* to base this on the effectiveness by law, which *has* to be based on scientific studys.
- If you are an edge-case where no treatment is being payed according to this committee, you have an independent escalation committee (Medizinischer Dienst der Krankenkassen), where you can appeal your specific case and get the treatment payed by anyway. This committee can also be called upon by your employer or your statutory health insurance, if they believe that you are fraudulently sick or otherwise trying to cheat the system - countering one of the often used arguments against a "quasi-socialized health system", where everyone "would just stay sick at home". You still have the right to sue for payment of your treatment afterwards.
- statutory health insurances' members are paying their insurance rate as fixed percentage of their income (14.6%), up to a maximum of 4.200€ of income. So the wealthier upper class is incentivized to still be insured in a statutory health insurances (because their effective rate is reduced with higher income due to the maximum).
- The statutory health insurances *are* able to pay for medical treatments and medication, that is *not* sanctioned by this committee, *but* they have to pay this out of their own pockets. For this, they are allowed to charge their members a monthly premium (which is around 0-2% of the income of the insured member). Each year, the insurances are rated against each other in their effectiveness (cost per insured member) and their premium is redistributed. This self-regulates each insurance to keep their effectiveness high.
- There were an absurd number of statutory health insurances in the past, but they have been reduced through mergers a lot in the past five decades to promote more efficiency (from ~1.800 in 1970 to 103 in 2021).
TLDR: The system in germany works so well, because it is capitalist based, heavily regulated by the state, with self-regulating feedback-loops to get the best outcome for the patient, while still balancing it with the necessary cost effectiveness.
"This committee can also be called upon by your employer or your statutory health insurance, if they believe that you are fraudulently sick or otherwise trying to cheat the system - countering one of the often used arguments against a "quasi-socialized health system", where everyone "would just stay sick at home"."
In theory this may be true but malingering absenteeism is still endemic in Germany. Only in extreme cases does this get used, ie someone submits a sick note and then posts pictures on Facebook from Malle.
It's actually quite easy to be send to the MDK as a sick person and it doesn't need much effort from the employer or the insurance. All that is needed is probable cause, which can be as little as a written statement containing a hard-to-disprove lie like "I've seen the employee that has been sick for the past weeks due to backproblems carrying groceries". Straight-out lie, no further pictures or even a written lieu of an oath necessary.
In general, these edge-cases that the MDK is covering work both ways, the committee is truly independent (only consists of doctors that are forbidden by law to disclose any medical information they gain, cost covered by the insurance) and while there obviously will be the occasional wrong decision they make, it's the best system I can think of when regarding the cost-benefit-ratio.
I would add an additional point, which is that Americans, as a rule, live stupendously unhealthy lifestyles compared to these reference countries and that is going to be reflected in health outcomes and costs connected to things like care for chronic conditions. Terrible diet and sedentary lifestyles are the norm, notwithstanding the narrow sliver of society that is fitness-obsessed. It's not even a choice, really; unhealthy food is cheap, healthy food is unsubsidized, and most areas are hostile to non-automotive locomotion. I lost fifteen pounds without even trying when I moved to Germany.
> I spent a long time staring at this system trying to figure out how it could possibly work.
Someone else probably said it better already, but the answer is "Not very well." At least here in Germany there are dozens of small and less small problems that come from this system.
American expat in London here. I moved from an Anthem PPO plan in San Francisco to just plain NHS with no private insurance, and quite frankly the UK NHS is far better (the French system that I also have experience with is better yet, the Dutch is worse). I get access to physicians or hospital services much faster, including expensive tests like MRIs, my prescriptions for a chronic condition are completely free, and more topically so are Covid lateral flow tests. Not having to waste half an hour at the beginning of each appointment filling out insurance and HIPPA paperwork is also a boon and helps with the blood pressure :-)
They take preventive medicine seriously, and even the facilities are in better shape than the expensive SF CPMC or UCSF hospitals, despite the NHS being a cost-optimized cheap-and-cheerful basic service.
I do use private dentistry, but even the idea of free basic dental care would blow most Americans' mind.
I find this difficult to believe, given that literally every other post by a British person on this article is 'the NHS is terrible & you have to wait forever for everything, if you can afford it you get private insurance immediately'. I think I read 10-15 comments saying this exact thing before reaching your comment saying the opposite
Some notes on drug pricing regulation in the EU. The situation is interesting that even though it looks like monopoly/psony in a single country on the EU level it is much more competitive. Most drugs sold in the EU have EU universal (or almost universal) registration. If you are a pharmacy you can buy a drug in one country and repackage and sell it in another. In case of significantly different prices among the countries (south and east prices tend to be lower) that can lead to a deficit of the drug in low price countries and a huge second market that in reality is tiny (I have a client who runs a second market platform for pharmacies).
I haven't seen a comment yet on France (we are of course half a day ahead of you) so here are a few thoughts. I'm not sure I recognise the system from the brief description in the essay.
The basis of the French System is Social Security (the "Sécu") which covers everybody for most things and gives you a green card with a SS number and microchip which can be read by any pharmacy or any health provider in the system. This has all your medical details and all of your prescriptions. Because not all costs are covered (eg about 70% of the cost of the average prescription) almost everybody has a top-up system, known as a "Mutuelle", sometimes run as a wing of an insurance company, but also as friendly societies linked to professions (there's one for education, for example). This tops you up to 100%. In my case I pay the equivalent of about $100 a month for this insurance, though this figure reflects my age( I am 70). After that, I pay essentially nothing for medical treatment. At the pharmacy I give them my card and the prescription. They give me the medicines. That's it. The kinestherapist gives me a bill every six weeks or so, and by the time the cheque is cleared I have already been refunded. There are certain procedures that are not covered by the Sécu, and non-routine dental care can be quite expensive. Some drugs are not reimbursed, though you can pay for them if your doctor is really convinced and so are you. There are subtle nudges also: generics are provided free at the point of collection, whereas non-generics have to be paid for and then reimbursed. Some Mutuelles pay for special treatment (eg osteopathy), others don't. The French complain about their health services a lot: some of the bureaucracy that goes on behind the scenes is incredible, but it all seems to work. It's also true that successive governments have starved the system of resources and we are seeing the consequences.
However. And it's a big however. What the French and the UK system have in common is that they exist to look after you, not to make money. Whoever you are, and no matter how much or how little money you have, you will be taken in and looked after. The reality is that people don't think of their health, or of health care in general, like an economist, but like a citizen and a possible patient. To that extent, I really wonder to what extent health care economics, for all that it may be a nerdish subject of interest to specialists, should be allowed to inform policy-making. Thirty or forty years ago, when the NHS just concentrated on care, the system worked much better. With every attempt to introduce budgets and management, it's got worse. There's a lesson in that.
While I can't say anything on the UK's NHS, the french system sounds completely similar to the german system. Do you know of any major differences without nitpicking? Is the prescription still paper-based or does France already use an electronic system based on the your green smartcard? I remember that France started a decade a go with a nationwide electronic patient file, but that it was never accepted by the general population (same as the current efforts in germany - even in that regard we seem to be similar).
Belgium is also very similar. I wonder if large part of the observed differences is more linked to population and doctors "health culture" rather than the health systems. Like : how often and quickly do you go to the hospital? To a doctor? To your family doctor? How much do you demand / reject different types of interventions (antibiotics, psychotrops, vaccines, other, chirurgy, imagery,blodd analysis, ...). In the end, what will happen is an interaction of patient expectations, doctors practices and health system incentives. Assuming the first 2 to be the same if they are not will make comparisons of the third extremely difficult, if not impossible. Maybe that's another reason why health systems do not seems to make a lot of sense economically speaking...
And then you also have demographic and general health difference. A country with a population 10y older can not expect that replicating the health system from a country with a younger population will gives similar results. Not sure how this was taken into account, but if you don't (or do it wrong), comparing health systems is doomed...
There's very little paper. My own "patient file" is on my green card, and that's the master document, to which only medical professionals have access. I don't think there's any master paper file anywhere, not least because (another complexity) the SS system, whilst national, is administered by the Department you live in. I have a paper prescription, and printed results from laboratories (though I actually get them by mail in PDF format). For dentists and opticians (and I should have said that if you want a decent pair of glasses you have to pay most of the price yourself) you'll probably be given a paper copy of the diagnosis and the bill, but everything is also held electronically. On the whole the system works well - it can be laborious going to a new health provider, but in principle all the systems talk to each other very well. But I actually think the similarities of European systems are greater than the surface difficulties: all of them are systems designed to help the patient, rather than to make money.
A few data points on the Sécu and mutuelles: with only the Sécu, I get reimbursed something like 15€ for glasses that cost ~350€, the vast majority of the cost coming from the lenses (~310/320€) and a small part from the frame. With my mutuelle, I pay 0€ for my glasses.
For 28 x 10mg pills of escitalopram, with my mutuelle, I pay 1€. Note that since I have my green card ("carte vitale") and the mutuelle paper with me, I don't have to pay and then get reimbursed, I only pay the part I have to pay.
I pay ~215€ a month to the Sécurité sociale, my employer pays ~300€ (on a net salary of 2210€), I pay ~120€ for my mutuelle, my employer pays ~180€.
For people not familiar with the French system, my employer pays ~4300€ a month for me, my take home pay (after taxes) is ~2000€. Part of it goes to the sécu, part of it to the "assurance chômage" (some pay if you're unemployed, socialized), some of it goes to a retirement fund (also socialized, I'm paying for people retired right now, and I pray that the next generations will pay for me. The fun part is that the rules are not the same for everyone: before retirement was at 60, now it's between 62 and 65).
I'm ~25 and working in software, not in Paris, and probably slightly under market rates. I pay ~700€ a month in rent for a 2 bedroom appartment of 55m², have a garage, I can walk to the city center in ~15 minutes, have a few shops around me. The neighborhood is relatively safe. Food can vary quite a lot, I'd say it can go as low as 100€ a month, to as high as a a few hundreds, average is ~200€ a month. A restaurant is ~10€ to 20€. A quick meal on a weekday can go from ~3€ (sandwich) to ~8€ (nice salads with salmon and stuff like that) if you buy it "outside".
Not a lot of hard facts here, but for people that don't have any idea on "what money means" in France, it can help get a better feeling of things.
The discussion of the arbitrariness of health care budget setting reminded me of my experience negotiating with hotels to hold conferences. The complete arbitrariness and flexibility of the prices charged for the use of meeting rooms was a bit disconcerting; it bore no relationship to anything driven by costs, the way food service prices did. You might get some idea of this from the variability of cost of sleeping rooms, though that's driven much by supply and demand, which wasn't so much a factor in meeting rooms, as they weren't in such regular demand at least with these hotels.
For food service at your conference the majority of the cost is for the food itself, its preparation, and serving it. If you don't have food the hotel is stuck only with the cost of the additional kitchen space that wasn't necessary that day.
For the conference room, on the other hand, the marginal cost in setting it up is relatively low as compared to what the hotel pays for the the space itself (lease or capital costs for the land area and that part of the building, taxes, etc.), and those latter costs are paid whether anybody uses the space or not.
Situations with high fixed and low marginal costs generally have funny pricing structures as the sellers attempt to balance making a bit of extra money to put against the fixed costs with not selling _everything_ at so little above their marginal cost that the fixed costs aren't covered. Seats on scheduled airline flights are a classic example of this.
Yes, I know that high fixed and low marginal costs is an explanation. But it still doesn't dictate the weird flexibility of this. Airline seats, like hotel sleeping rooms, still isn't quite the same thing because of the supply-and-demand factor, and because there's no negotiation involved. You can shop around for different prices, try at different times, etc. But the price is still whatever it is when you find it. That's not like sitting down with the hotel's conference manager and having her suddenly cut what had seemed like a fixed price in half, just because of something else you were getting, or just to tempt you and keep your business.
I don't understand your point there. The price was what it was when you found it at the start of when you sat down with the hotel's conference manager, and it was what it was when you found it after she made the sudden cut; this seems no different from checking the price of an airline ticket on a web site and then checking it again five minutes later to find that it had changed.
In both cases, the seller seems to have encountered some information that made them decide to change the price. Perhaps the flight filled up, or a group on that flight cancelled. Perhaps the manager realized that they make a lot of money on something else you just decided to buy so they can offer a more attractive price on the conference room, or perhaps they know they're not likely to book it with someone else and have the feeling you won't take it at the price they offered.
Remember, the seller doesn't have perfect information (in fact, in your case, the seller probably has terrible information), so the price change does not necessarily reflect the actual market conditions. You may know that in that meeting you paused to think about what fun things you were going to do with the money you saved on the cheaper-than-expected conference room, but if the seller thinks you paused to think about where else you might be able to go to get the room cheaper, they may (incorrectly, from your point of view) lower the price to mitigate this perceived problem.
(If the airlines seem to be doing a better job, part of that is likely due to the fact that they have a staff of economists dedicated to pricing the seats they sell.)
No, there's a huge difference, which is that when you sit down with a hotel manager you're part of the process of negotiating the prices. When you look them up on a website you're just a passive receptor.
Another big difference is this: the rates were originally presented to me printed on an informational sheet, and one that looked like it was pretty standardized (not like a "today's offerings" menu would). They didn't look like they were subject to massive change. If you're new at this, which I was, it takes you by surprise when abrupt changes are made. Later, as I became more savvy, I learned to expect this sort of thing, but it's not like airline prices which change the next day or are already varied depending on when you fly, or hotel sleeping rooms which are similar.
You're writing mostly about -why- these changes are made, but I'm not asking why. Once I know it happens, I can figure out why. I'm just remarking on the unexpected arbitrariness which is what Scott's discussion of health care budget setting reminded me of.
1. UK GPs are independent contractors, and self-employed. Hospital doctors are employees. All can do private practice as well as NHS work, but if they do both they must not spend more than a small portion of their time on private work (they can do 100% private if they have the desire and the reputation for it). Consumers often have private insurance either for add-on services, or in gold-plated versions, that pay for private health care.
2. Canada confusingly refers to some of its separate provincial health care arrangements as insurance. It isn't: it's just taxation and government spending. Traditionally, doctors have been self-employed independent contractors (again with only one client). Negotiations take place at a provincial level between a medical society/union to set fees for all paid via fee for service. This is being gradually replaced by alternative funding plans where a group of physicians (say all the surgeons in a teaching hospital) get together and negotiate a pot of funds for their services in return for certain promises of work. They then split it up how they like. In effect, they become salaried employees but with no benefits as they are still, technically, self-employed. Government knows what the costs will be, rather than the open-ended fee-for-service system, and pays the docs less than under FFS, and the docs get to work much less for their income.
3. I'm not sure any Canadian hospitals are privately owned any more. Some may still technically belong to, say, a Catholic charity, but those just become a free building for the government to use as it sees fit. Attempts have been made to set up private surgical clinics, but the provinces always get them shut down. Privatised medicine is illegal in Canada, though tolerated in Québec. Consumers do have private insurance, for services not covered by government (drugs, dentistry, eyeglasses etc).
Re: Canadian hospitals, there are a few that are actually really private still. They tend to be very specialized like Shouldice in Toronto. I agree its confusing when analyses like these refer to our hospitals as private since they're functionally an arms-length Crown corp. However I think that type of mistake is always going to come with the territory of this type of analysis- this one feels obvious, but I'm sure there are lots of less obvious ones too. I guess the hospital one can also be complicated by things like the P3 shift that Ontario especially has embraced, where the healthcare providers are de facto public, but the operations and ownership of the physical building are privatized.
Also the NHS sometimes outsources treatment to the same private hospitals that do add-on stuff. Anecdotally, I've heard they don't have the same ability to deal with complications as NHS hospitals do.
Explanation to why there is no "out of network" in Germany:
Doctors need a license to treat publicly insured patients (~90%) which limits their ability to reject patients or treatments.
Otherwise they they limit their clientele to a small more lucrative group of privately insured patients.
Since the doctor has to bill treatments based on a catalogue not specific to the insurer he has no incentive to exclude patients for that reason. The catalogue is the same for private patients, doctors are allowed to apply specific factors between 2.3 and 3.5 tho. Because of that there are reduced wait times for private patients and it's easier to be taken on as new patient.
There are specific treatments the doctor can offer which the patient has to pay out of pocket. Those can't be compulsory and are usually pointless.
Explanation why hospitals or doctors don't go bankrupt when costs rise:
One direct reason is that treatments can be made made more profitable with modification, e.g. the first night in the hospital is very lucrative and can be added to treatments which don't necessarily require it.
Some speculation on the topic:
I don't know the situation in the US, but I feel generic drugs are also widely accepted and handled sensibly in Germany and the EU which puts price pressure on the pharmaceutical companies.
A lot of hospitals are be ran by the state (university clinics) or charitable organizations so commercial hospitals can offload unprofitable treatments to those when they start running a deficit.
I've just spent four years in the Netherlands, after 3.5 years in Singapore, and much of my life in the UK before that.
The Dutch system is very good in many ways. The insurance costs can be high, but the facilities are often very good - modern, well-equipped hospitals etc. But Covid has shone a light on some structural problems: 1. Insurance funding starts to fail when a pandemic hits. Big time; 2. The Dutch system has little central control (parts are run on religious lines) and this was a problem in coordinating a pandemic response; 3. Worse, the Dutch government is good at sensible technocratic problems (water, normal health care) but bad at difficult and unpredictable crises (Covid), and this feeds through to the health system; 4. The Dutch aren't very good at being told what to do - Over the last two years I was in hospital for various reasons at various points (check-ups, a minor operation) and over all these points I'd guess at maybe <50% of people wearing masks (including staff!!!!); 5. The Dutch don't seem to rely heavily on pain relief - so you'll be given maybe 75% of the dose that you might receive elsewhere (a big deal for some procedures!). So it's a good system for normal times.
Singapore was terrific, and the insurance system works on very different tiers so the system isn't monolithic. They picked up a couple of big health problems that even required a full-scale exploratory operation - something that would never have happened in eg Britain. I suspect the nurses aren't as highly skilled as they can be (ie developing a nurse-practitioner career path) but that is certainly true of China and elsewhere in East Asia.
Britain has a terrific system of a sort, but its major flaw is political - it's so wedded to the NHS system that it's found it difficult to reform and to introduce mild market-led reforms (for instance involving insurance). This is a massive handicap! Even going through the GP doctor system to get the referral to a private doctor is difficult, as you're often faced with a degree of scorn from the medical staff (for jumping the queue, for undermining the secular religion of the NHS). They also let me and my family down badly on several occasions (this can happen, but these were preventable).
I think Random Critical Analysis' detailed and excellent work deserves much better than a 'see here for a contrarian take'. I spent a lot of time engaging with it a couple of months ago, and the strength of their arguments and analysis helped change my mind on a topic that I knew quite well, which is rare and wonderful. In fact, their collected posts should get a book review of their own!
Thesis: The governing factor in US healthcare is geography. No country with the geographic distribution of people similar to US have solved healthcare adequately.
To unpack: fundamentally, the screwed-upness is about insurance (which is about ~$1T revenue industry); which in turn, is about population density (or more precisely, the lack thereof), and the geographical distribution of population in the US, which makes a single-payer-system uneconomical. To unpack: you look at population density in the EU, you drop a hospital in any city >10K population, and it can also provide timely support to the neighbouring 5 villages, meaning you have reach of ~50-100K people. Quantitatively: US pop density ~36 per km^2 vs EU pop density 117 per km^2. You look at eg Utah on https://lh3.googleusercontent.com/fjk6tl9Zz-6PnzxKh-TmRj8McEd5nV_jidjuPvLTEMaiObBNKWuiXyHFu_aMG7QOzg earth at night, and it is infeasible to give coverage on an economical basis; which makes single-payer system impossible, or at least dependent on private sector, which in turn, asks for profit-maximization; which, in turn, pulls in insurance for revenue generation, which in turn gives rise to the misalignments we can all perceive.
To address objections: Canada doesn't count, being essentially a few hundred km^2 of population, and rest populated by polar bears. Russia's healthcare system is administered down the pub in the form of vodka (and months and months of queues); and China is practicing "traditional chineese medicine" in all non-Tier-1 areas. Probably the biggest anomaly is the US's insistence and enforcement of scientific-based healthcare practices -with all the full costs it entails.
I do think Canada (and Australia) are relevant counter examples. Both countries have high concentrations of their populations living in a small share of their geography, but that actually makes things more challenging for provision of care for everyone else. If you live in a remote village accessible only by plane; the government still has to provide you healthcare- it just comes with the additional cost of flying providers out there for temporary rotations at much higher pay, and flying patients to a more populated area for hospital based care.
Where I think there's a stronger case isn't from America's geography or density but its large population size. If you list the highest population countries in the world, the first one that has a "good" healthcare system is Japan at 11. I don't have a theoretical reason of why a high population might make it more difficult to administer healthcare (in a sense it should be easier because of better risk pooling), but it does seem notable. Maybe there are diminishing returns to risk pooling above a certain population size, and after that a high population just becomes too administratively tricky?
It does make it more challenging for provision of care for everyone else, but if "everyone else" is a tiny fraction of the population then they can die five years younger and still not significantly impact the statistics.
> If you list the highest population countries in the world, the first one that has a "good" healthcare system is Japan at 11
If you list the highest population countries in the world then they're all poor, except for the US and Japan (and Germany in 19th place).
Not many Canadians live in the hyper remote areas, but about 20% of our population lives outside of urban areas- Saskatchewan isn't that different from Utah. For the US its about 18%, for Australia about 23%. I just don't think geography has much explanatory power for the US's poor outcomes.
The fact that many of the largest countries are poor is a big confounder. The US is unique in both having a large population and being rich. But healthcare wouldn't be the only area where it shares more characteristics with other high population countries than with other rich ones.
I want to push back on the assertion you made, Scott that "Certainly rich people in America get good health care." After he published this book in June 2020, Ezekiel Emmanuel published an article in JAMA IM (link: https://bit.ly/3nGRHL8) called "Comparing Health Outcomes of Privileged US Citizens With Those of Average Residents of Other Developed Countries." He wanted to test the commonly stated trope that a feature of the US healthcare system is that the rich here get the very best care in the world. To do that, he looked at outcomes across six benchmark diseases (heart attack, colon cancer, breast cancer, infant mortality, maternal mortality, and pediatric acute lymphocytic leukemia). He compared outcomes for white people in the 1% of richest counties in the US, 5% richest counties in the US, and average outcomes in 12 rich countries (i'm not going to type them all out but they're places like Australia, Canada, and Germany). The results were...not so great for rich Americans!
While rich people in the US do better than average people in other rich countries with breast cancer, RICH children in the US have outcomes worse than AVERAGE citizens in 11/12 of this group of rich countries. Rich people in America have about the same outcomes after heart attack that average people in other rich countries have. In other words, in most cases, you're about as well off having a heart attack being the average bozo in France (for example) as you are having one in one of the wealthiest counties in the US. I was pretty shocked when I read this paper.
The reason I think this is important is because I think it's extremely politically useful sometimes to be able to claim that rich people in the US get great healthcare! People like to imagine themselves as more privileged than they are, and think that, if and when they get sick, they'll have access to this incredible care. So we should reframe from "average care in the US is shitty but care for the upper echelons is the envy of the world" to "average care in the US is shitty, and also in the upper echelons we are about the same as the average person in America's peer countries."
The whole article is worth a read (link again! https://bit.ly/3nGRHL8) as it's very relevant to the discussion here. It also touches upon the "satisfaction paradox" that many folks have commented on--satisfying healthcare isn't necessarily good healthcare:
"Choosing a concierge cardiologist or a hospital ranked highly by U.S. News & World Report may ensure prompt service and personalized attention, which have value, but it does not ensure the world’s best clinicians at each stage of care, at whatever facility is providing care, and does not ensure the best outcomes. A well-off US citizen cannot “buy out” of the uneven quality of care provided by the US health care system."
This is interesting, but I’m a bit concerned that he chose only 6 outcomes to measure https://xkcd.com/882/. This, with the results being absurd, makes me skeptical of the results.
Related to this, I don’t think he ran any statistical tests. This may not matter because of the large number of people, but it may also matter because he only used n=152 counties.
Also, why use counties? This should bias you downwards of the true number in your estimate, since counties do not hold all the same income-level people.
Hey! Good points. Let me try to address them best I can. Obviously you should be more skeptical about surprising results, especially if you don't have subject matter expertise! But I don't think the study is poorly done. I am a doctor and a researcher (not that this makes me any more qualified to judge a good argument form a bad one!) but let me make the best possible case that I can that the results presented in this study are interesting and compelling.
First, the 6 illnesses seem, a priori, pretty relevant. Will the exception of pediatric ALL (which is useful because it is a non-adult condition that relies on specialists for delivery), these are all extremely common conditions. While the xkcd comic is very funny (they always are), I don't know that it's relevant here? They're not cherry picking a small feature of a bigger phenomena and then claiming that that cherry picked thing is driving the whole phenomenon; rather they're using some representative conditions to try to understand ways in which healthcare in the US may be surprising.
Second, I think any of the results individually are surprising! Remember, this isn't an association; it's a comparison. If I asked you, based on priors, who has better outcomes after a heart attack, white people in the richest counties in America (average income ~$100k), to people in Denmark (average income ~$51k) (see the supplement for some of this data: https://bit.ly/3KsUP71), I think most people would say America? But Americans die about 12% of the time when admitted for a heart attack compared to 10% in Denmark. In other words, the design of the study is HEAVILY biased in the direction opposite of the results we see.
Why use counties? I think it's because that's the data that was available, which is a limit to a lot of epidemiological research. You draw conclusions as best you can from the evidence you have. That said, any bias within counties should also apply as much to entire countries. Furthermore only considering whites (demographically wealthier), also again biases in the opposite direction of the study findings.
Finally re: statistics, I'm not sure what you mean? Maybe you mean he didn't publish P values? There are 95% confidence intervals for many of the measurements. Furthermore, because of the design of the analysis, a lack of difference IS a surprising finding; if there are statistical tests that are relevant that you think should have been included but weren't, I'm eager to hear your thoughts!
So I agree, the results are absurd! It is absurd that, despite spending much more than any other country in the world on healthcare, the richest Americans don't even have access to what would be average outcomes in any of a number of our peer counties. But I don't think there is anything misleading here.
You’ve addressed my points. Thanks. I’m tentatively convinced. Though the study still seems oddly specific, my gripes are no longer with the study, and my skepticism is now just the blanket “but will this generalize” type which comes from most social science research.
Sure thing! But even if these results don't generalize, they should still prompt some re-evaluation of the idea (which most people accept uncritically) that wealthy folks in the US get better healthcare than anyone in the world, which it seems might not be true!
I don't really think this is a question that could even be answered usefully in a statistically rigorous way, but I'll add that Peter Attia- a Canadian physician who currently runs a highly specialized clinic for the ultrawealthy in the US- has said something somewhat similar based on his experience (it was in a podcast episode, I don't remember which one, so you're going to have to take my word on it).
His take was basically that if you're wealthy enough to get care parallel to the formal healthcare system rather than within it, you can get the best care in the world in the US. But if you're "merely" a millionaire with a Cadillac insurance plan, you'll get worse care than what the average person in Canada gets.
The take might be incorrect, and it might also be out of date- even pre-pandemic, the last few years have not been kind to Canada's healthcare system. He specifically gave the example of having a heart attack and showing up to an emergency room as a case where its better to be Canadian, which DEFINITELY feels out of date. But it broadly fits with what I've heard a lot of providers who have practiced in both the US and another developed country say.
This doesn't look very rigorous: in particular, I don't see a clear distinction between payment systems for health care vs. health care provision.
And note that single payer blaberty blah is irrelevant.
Japan has a national single payer setup. However, they also have a medical pricing board which apparently pretty much all Japanese doctors/hospitals follow in their pricing. Kind of like Medicare but without the gigantic opposing negotiator component.
Thus any real measurement of health care should be looking at:
1) How bills are paid
2) How health providers price
To these I would add:
3) Relative supply of health care provision capability - which the book does indirectly reference via wait times
4) Private vs. Public choice - which can be public only, public or private, private only
2) matters because I 100% believe that private health care practitioners will base their pricing relative to public health care costs, if such costs are transparently available - if for no other reason than their customers also will be aware of their options.
I've lived in the US, China, Australia, Singapore and Spain. I'm really surprised that the book didn't even consider Spain, which has a pretty cheap system, the world's highest life expectancy at birth and, by far, the best health system of all those I've had a first-hand experience with. No need to tell you much about the US, and Australa's system is, in my limited experience, marginally better. Singapore is hyper-expensive and hyper-effective and anyone who includes China in such a comparison must be doing it for the laughs. Very expensive and second-rate at best in big cities, third-worldist for hundreds of millions in the countryside.
I’m an American and lived in the Netherlands for several years (2012-2018). The Dutch and also the expats loved to complain about it, but I thought the Dutch system was pretty great. By far the best part of it was the transparency. My health insurance actually covered my needs- I never saw a bill. No copays, no surprise mystery bills of the kind I’ve always received in the US, even with “Cadillac” level insurance.
It’s hard to measure expenses and satisfaction across systems because you’re dealing with such different expectations. One common complaint by my fellow American expats was that doctors didn’t “do anything”. This is what the non-interventionist default of Dutch doctors feels like to an American.
But “go home, take some Tylenol and come back if you don’t feel better” is actually quite an effective strategy in this GP-as-gatekeeper model. Most of your patients feel better and don’t come back, as you couldn’t have done anything for them anyway. This keeps costs down and keeps the emergency room just for actual emergencies.
Dutch people’s complaints seemed largely rooted in the perception that Germany and France had better healthcare. I’ve never lived in either place, so I can’t say. But the handful of people I met in the Netherlands who had been seriously sick, e.g. childhood cancer or a major injury, had much nicer things to say.
See also: the guy I know in the Netherlands who was able to get his severely autistic son into a residential program for children where he could receive 24-hour care. Almost nothing like that exists anywhere else, and I believe it was covered at least partially by insurance. I wonder how many of the satisfaction survey participants even considered the existence of such programs as part of their healthcare system.
> In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America?
Since the ACA, health insurers in America are limited to making 20% profit on insurance premiums. If they want to make more profits, the only way they can do this is by spending more on healthcare. Not sure why anyone thought this was a good idea. See the 80/20 rule here: https://www.healthcare.gov/health-care-law-protections/rate-review/
No one has mentioned the regressive nature of US healthcare financing. Scott is right that what we call "premiums" are effectively just payroll taxes. For the typical American worker, healthcare-related premiums/taxes aren’t just “big.” They’re bigger than all non-healthcare-related income/payroll taxes combined. Healthcare is THE thing impacting take-home pay.
-- If we call employer-sponsored health insurance what it is - a tax - then about 70% of taxes taken from the paychecks of a typical American worker with family coverage go to healthcare. If the worker has individual coverage, that number is about 51%.
-- In hard dollars, the healthcare industry takes about $26,000 from the total compensation of a worker with family coverage whose salary is $50,000 (whose total compensation is actually about $70,000).
-- The structure and branding of healthcare financing (having the employer pay the bulk of it, and calling it a "premium" instead of a "tax”) leads the typical American to grossly underestimate 1) their healthcare costs and 2) their total taxes.
-- Because the US healthcare system is structured to overpay by 2x, this typical worker is overtaxed by about $13,000.
This is a really good comment and I hope other people read it. American's perceptions of their healthcare costs are way out of whack and it deeply affects the politics of how we discuss reform.
"Medicare For All asks that we go from one of the most privatized health systems in the world to one of the most socialized, leapfrogging over successful semiprivate ones like Germany and the Netherlands. This is especially odd since those systems seem to be some of the best performers. Why would this be tempting? Absent a theory of why Germany and the Netherlands work so much better than the US, I’m not sure."
Absent a theory of what's so great about the German and Dutch systems, you can't ask that the government to implement that theory. Probably the people calling for medicare for all don't actually know anything about the diversity of European systems. But what good would it do them to know which systems are best?
IMO, the most interesting model I've heard of is Israel's – consumers choose one of 4 non-profit HMO's to belong to, who are paid by the government per person who subscribes. HMO's offer much better incentive models for overall quality of care, and the competition keeps services consumer-oriented (compared to fully-socialized systems like the NHS).
So, I am curious about the percentage of uninsured people in each country and how this relates to overall health care costs and life expectancy? Also, what about Japan?
While reading the Amish healthcare link on SSC, I had an idea on how to keep costs down:
A members-only prepaid hospital. No obligation to treat any non-members. Accepts no insurance. Membership fees would cover the fixed costs of running the hospital plus help cover catastrophic things way below marginal cost. Everything else would be a fee-for-service near the marginal cost, prepaid by the patient with their payment-methods-on-file. Make all the members sign an arbitration clause forfeiting their right to lawsuits to the maximum extent allowable by law.
Then there is no need to ever pay:
* lawyers
* insurance overhead on either the hospital side or the insurance company side
* debt collectors
* people who process paperwork of newcomers. It'd all be done on a website before they ever visit the hospital.
* paying extra to compensate for those who who scam the hospital or can't afford to pay.
I'm not sure this would be entirely legal in the US, but it should be.
"fee-for-service near the marginal cost" - this means the system still fails to act as a true replacement for insurance, since you have a low chance of incurring astronomical costs due to expensive-to-treat conditions.
But then you could cover this by buying private insurance that's "just insurance"--no principal-agent issues, no collective bargaining, just pure risk-pooling.
The catastrophic hospital-related stuff is subsidized by membership fees. The other thing that can get really expensive is prescriptions. In the worst case you can import it from Canada or India to circumvent US prices. Many expensive prescriptions are unnecessary, non-superior-to-generics, me-too drugs, which no informed person would ever buy with their own money. Pharma reps wouldn't bother mindfucking doctors at a hospital where everyone pays out of pocket.
I like most/ all of that. It misses on a few edge cases.. but details. I will say it's a small step from that to having everyone in some larger community (even state sized) pay some fee (tax) for hospitals and catastrophic care, and then fee-for-service. Which is how I get my dental care, and I like my dental care here.
I like that approach as well, and would probably be willing be pay a chunk for membership.
The ability to drop your membership in year n+1 in this private prepaid hospital, and decide what you want as an alternative (without needing to move your residence) is quite a bit more than a small step away from a local health care tax.
Re: legality, freedom of contract permits such a hospital and pricing/membership model. There are obstructions to exercising your freedom of contract, but those can be eliminated or sidestepped with enough effort.
As a data point, here's my experience in Germany. I've been living in Berlin for 1.5 years.
As an employee, I pay 8% of my gross salary on health insurance. This is just 50% of the total cost, with my employer paying the other half. As long as you make less than 64.350 euros gross a year (and the threshold grows every year) you are compulsorily insured with public insurance. If you make more, you can switch to private. If you're young and fit, it will cost you much less than public insurance. But if you get in trouble and want to switch back to public, it can be very difficult. However, if your income falls back under the ever-growing threshold, you are forcibly switched back to public.
Even with public insurance, you must choose a provider, but like Scott said, they are all very similar, so the choice is easy. I chose my provider because they speak English. I can call them or write them at any time and they are very helpful.
I don't have health problems, but I've been doing a lot of medical exams. The system is smooth and efficient. I always come out very impressed. Like most people, I book my appointments on a popular online platform. I am not tied to a specific family doctor: I can go to anyone who has a free spot, so there's always a way to get an appointment within a few days. I can also directly book visits with specialists without going through a family doctor.
The clinics ooze a sense of wealth and high quality healthcare. Wait times are short and the doctors all speak English. Processes are streamlined as needed: in one case, a doctor wanted to send me to a specialist, so he just gave me a piece of paper and told me to see his friend downstairs. Ten minutes later I was done. In another case, a family doctor spared me a visit to a specialist and accelerated the waiting time for some physicals so I could get a vaccine sooner.
I am very prudent and careful about my health. I find that doctors here are understanding and willing to conduct exams. They have time to listen and engage and don't seem overworked.
There are almost no added costs. This includes dental work: I've had two or three cavities removed. Oh, and mental health: you can get at least 80 hours of therapy on the public scheme, with a therapist of your choice.
The drawbacks: the health scheme is extremely expensive, both for the individual and for the state. And the system was mostly designed with employees in mind, so it can be extremely burdensome for freelancers and the self-employed. As self-employed, you need to pay 14.6% of your gross income! And this on top of all the other taxes, which are very high in Germany!
As for Scott's questions:
"Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs?"
I don't know, but I assume it's because these industries are heavily regulated and don't have room for maneuver.
"Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Again I don't know, but from the user's viewpoint, public insurance is a monolith. It doesn't matter which provider you have. When looking for doctors, you only have to check whether they accept public insurance (most do). I assume that providers are forbidden from not reaching agreements and imposing out-of-network costs.
>As self-employed, you need to pay 14.6% of your gross income
Yikes. 14.6% of freelancing income assessed in health taxes just sucks.
APAC Comparisons
The health tax rates in Singapore for freelancers are 4%-10% in theory, but capped at (US)$5k-$6k per person. Works out fine for freelancers.
The 15-22% income taxes on income in SG look reasonable. If your freelancing income isn't assessed by the CPF board, well then you get to not pay 17% into the Central Provident Fund, and you win. If you're an employee and SG citizen or PR, your relatively low income tax is more than doubled by a 20% CPF tax.
The health tax rate in Taiwan for freelancers is 5.2%. And paying that tax provides NHI eligibility for a single taxpayer, or a married taxpayer with 10 kids. Employees pay a fractional amount of 5.2%. Works out really well for freelancers or employees.
The income taxes for freelancers and employees in TW are steep, though, from an American perspective - 12% for low paid work and 40% over $150k. Compensated for by zero tax on capital gains in equity. My German friends here are happy with the TW and SG systems as compared to the German taxation and health care quality.
Another idea: abolish the patentability of obvious me-too drugs. The patent application would have to prove the drug has a different mechanism of action than the prior drugs.
This might be counterproductive to the extent it succeeds in reducing incentives to develop me-too drugs: I'd expect me-too drugs to lower drug prices, not raise them, since the me-too drug is by definition a close substitute for the drug it's a clone of, and the differences between the me-too and the original allow the former to escape the latter's patent protection. That is, the me-too serves to weaken the original drug's monopoly before generics become available.
On the other hand, second order effects from discouraging me-toos might have improved patent protection increasing the incentives for development of truly novel drugs.
On the third hand, close substitutes are not perfect substitutes. Me-toos can still have substantial therapeutic value if they have different side effect profiles for enough patients or if a nontrivial number of patients respond better to the me-too than to the original.
For point 1, I'd make an exception for me-too drugs that have no generic alternative.
For point 3, If the objection is that me-too drugs might have substantial value due to different side effect profiles or slightly better efficacy via the same mechanism, they should have to prove that on the patent application.
"People talk about how the US system is 'privatized' and the Canadian system 'socialized', but a lot of this comes down to whether your payments for the same basic package are marked 'paycheck deductions' vs. 'taxes'."
On average, these are the same. But if you make much less money than average, paying for health care via taxes is a much better deal than paying via paycheck deductions, and vice-versa if you make much more than average.
Also, you said that China and Taiwan are much poorer and less developed than the other countries on the list; this is definitely true of China, but in terms of PPP GDP per capita, Taiwan is on par with Germany and considerably wealthier than France or the UK. For some reason it looks much poorer in exchange-rate terms. Certainly it's much closer to Europe than to China.
I haven't been to Taiwan for several years, but last time I was there it didn't strike me as obviously less developed than Europe. It's getting hard to tell these days, though, with even poor countries having modern cities, and even rich countries having less-developed rural areas.
Honestly, I take someone saying the US as a "mostly private" system as agenda setting in the first place. As far as I can tell, slight majority of spending is private. But the most intensive care tends to be for older people and under single payer.
Having lived in both Germany and Switzerland, it is a red herring to put them into different categories, just because of the formal status of their insurance companies.
The main point is: In both systems, all insurance companies must offer exactly the same product, called basic insurance. It is not up to the company to decide which cases they cover or when they pay. This is regulated, and border case are resolved otherwise. (Some very minor variations are allowed in Germany, almost none in Switzerland). And they can't reject any costumer. In such a situation, the price will not depend on the type of company.
What actually makes a difference are very different things. In Germany, if I have disease X, then the doctor/hospital will be paid a fixed amount to treat X. But they have to treat it ("Behandlungspflicht"), they can't reject a difficult case, even though they lose money with it. In Switzerland, the doctor is paid proportional to the amount of time/effort treating X. In both cases, there are long and detailed price tables, all of which are independent of the insurance. I think this is the main reason why the Swiss system is more expensive than the German one. (It doesn't show in the table, but I suspect that it would show if you only consider basic insurance. Also, drugs are probably cheaper in Switzerland, relative to income.) For better or worse, Swiss doctors are not optimizing so hard for efficiency. I like the Swiss system better. Swiss doctors don't keep cutting me short. But it's expensive.
Of course, companies can offer things that go beyond basic insurance, but this is a completely different market, and probably much closer to US system. But those are luxuries, not necessities. For details on the two countries (I was referring to public insurances in Germany, which is only part of the system), there are excellent description of those systems by Lars (on Germany) and Er Matto (comparison between Germany and Switzerland) in the comments.
As I understand the Swiss system, basic healthcare is mandatory, rates are more or less fixed by the government, and providers must accept any citizen who applies. This avoids any bias in who does or does not get insured. Insurers can offer extra products at their discretion on top of that, from rebates if you use a fitness app to private rooms in hospital if you pay more.
In Switzerland, you receive your income before both income tax and healthcare technically-not-a-tax, but you still have to pay both of them.
1. Cultural differences. Comparing health systems across cultures is like comparing education systems; it's often not the system that differs but what the participants bring from home as it were. For education, if all the kids show up with an strong expectation that their job is to learn, and that they will learn, it hardly matters what the teachers do as long as it is non-violent. In the US, we expect that we can live how we want, eat all we want, and if something goes wrong we'll get a pill to fix our discomfort. I have lived in a variety of cultures, poor and rich, and in comparison am still astonished by how little care so many Americans take of themselves. We also expect physicians to be superhuman and are willing to pay them accordingly, whereas most of their job - at least in primary care - could be done by a nurse or a pharmacist. I have lived in places where in fact the first place you went for care was the pharmacy, and the pharmacist asked you a few questions, sold you some pills, and you were set. We expect the latest to be the best, and are eager to pay 10x more for a pill that works .1% better. We have a whole range of cultural assumptions about medicine that will not change simply by changing the system, and as long as we have those assumptions, most systems will not work well.
2. Related to this, but tangential, is what problems we expect the health system to manage. Just as in the US we somehow expect police to solve domestic disputes between spouses, we expect our health system to manage all the problems incurred by our lack of a safety net. I did a very simple study once (https://qualitysafety.bmj.com/content/20/10/826) which found that government expenditures on the social safety net explained differences in health outcomes (things like infant and maternal mortality, etc) better than government expenditures on health care; basically, spending more on social services can prevent a lot of health problems down the road. Subsequent studies have found similar patterns globally and across US states & counties.
For both these reasons, I don't think it makes much sense to compare 'health systems' across countries in isolation.
I like the joke at the end about negotiating a price of the book at the end. It actually highlights the difference between how pricing works in different markets.
Many people think that prices for goods and services are defined by the market, hence they are “legitimate”, for the lack of better word. There is also an intuitive belief that price of something is connected to the value it provides. So when price of something is exposed as arbitrary it naturally begs the question why does market forces would not influence it.
The issue is quite simple, the market equilibrium (and “fair price”) is achieved _only_ when there is competition on both ends - the buyers and the sellers. If there’s one seller and many buyers — seller defines the price.
If there’s one buyer and many sellers - buyer defines the price. So when government negotiates with many insurance providers, government can influence the price.
But when you sell books, there are many readers and many publishers, so price is less arbitrary.
I must say that I do not have any firsthand experience with healthcare in US, in my country everything is completely different and insurance companies do no play a major role.
So, if I correctly understood your question “If there are many insurance companies and patients in the US, why the price is not defined by the market?”
There are two points.
1. There is more than 1 medical insurance company in the US, so it’s not an absolute monopoly. Yet, top 7 companies control ~50% of 1 trillion market and serve, I don’t know, more than a hundred million customers, probably. This is still a seller’s market, especially if we consider the probability of collusion (price fixing) between insurance companies.
So the price is still higher than “market” price.
For example, in my country you either pay directly to the private clinic or you use free government-provided healthcare in state facilities. That drives the prices down, there are hundreds of smaller clinics and plenty of state hospitals in my city, which drives the costs down.
2. Markets are not always the “base reality”. Often the way the market is structured is defined through political means, for example to achieve the political goal — affordable drugs, the market for medicine is artificially constrained by regulation, which introduces the price negotiation process you wrote about, when describing European healthcare systems.
So the price is below the “market” one, yet the system still functions.
Now this is interesting from an ethical POV. Is it ethical to take more risks with a brain-dead patient? I think so.
I'm thinking the "pig" kidneys are more likely to help than hurt the patient, and considering the brain-dead state, extreme measures are warrented (despite the obvious inability to give consent).
I'm pretty sure drug prices outside the US are only low because Americans are effectively subsidizing drugs for the rest of the world. Regardless of how much a drug sells for, it still costs pharma companies $1-4 billion to create a new drug from ideation to market. But manufacturing costs, especially for most small molecules, is basically negligible in comparison. So as long as a pharma company can recoup its R&D investment, say by selling the drug for lots of money in the US, then it still makes economic sense to sell it for basically any price in other markets.
If the US set drug prices like other countries, probably Americans would pay less and everyone else would make up the difference. Or even worse, prices would stay low and pharma companies would stop all expensive drug R&D. But there's no healthcare policy that can change the fact that drug discovery is damn expensive. (Probably changing FDA rules could do this by making approval cheaper/more efficient, but that's a separate issue)
Frankly, the rest of the world is free-riding off of US pharma spending. If I ran the zoo, I would say that drug companies must set prices in other countries as a ration of their per-capita GDP to America's.
So Switzerland would spend more per pill, but Peru quite a bit less. Only seems fair, right?
I feel like using life expectancy at birth is a very poor metric for judging healthcare systems. I lived in Japan for 15yrs and I'm pretty confident it's not the healthcare that gives them long lifespans. Genentics, diet, lifestyle would seem to me to have way more effect than healthcare.
My personal experience there is there are good doctor's but also many bad ones. By bad I mean they'd never have passed whatever tests are needed in the USA to practice medicine. Not going to laborate my bad experiences here but I did eventually fine doctors I liked..
On the other hand the government sets prices and you can basically visit any doctor you want anytime you want. Just show up and hand over your insurance card. I loved that part. That includes seeing many specialists. . Prices are very inexpensive compared to the USA.
This has probably already been said, but the requirement (in the US) for employers to provide health insurance for full time workers leads to hiring more part time workers. I know a few people working multiple customer service type jobs. It stinks, is how I view our healthcare.
Former Soviet Estonia pays about 2.5k per capita, life expectancy 78.5, infant mortality 1.9. I've heard we're one of the most 'effective' countries in underpaying our doctors : ) This creates the problem of some of them opting to work in neighbouring 2x richer Finland. Medics seem to be exceptionally duty-bound people though, are willing to do a lot of overtime, and mostly won't really leave for greener pastures.
We often have to do charity campaigns to raise money for rare cancers that aren't covered by our system. I gather oftentimes the pharma companies just aren't that interested in dealing with a folk of 1.3 million, among whom some rare cancer happens 10 times in 10 years. And we're also kind of too poor to pay 100k for a shot in the dark.
I see the common strategy of 'just try to be cheap more' emerging.
Dutchman here. It might be good to know that the *only* thing for which there is a meaningful market is additional insurance. The basic insurance is completely regulated, with premiums set annually by the government (and discussed in parliament) and regulated deductibles (basically around €350,- per year but you can get a slight discount on your premium if you max out at around 800).
Moreover, it is forbidden by law for healthcare insurers to make any profit. Any profit made has to be returned to the policy holders. It can also not be used to grant bonuses, buy back shares or any such shenanigans. The idea of the Liberal-Conservative (which is right-wing for Europe) government which abolished the Patient Fund (a government health insurance) was, originally, for profits to be introduced at a later point. But since the current system went into effect in 2006, this introduction has been postponed, and probably will be indefinitely, even though we've had several right-wing governments for the last decade. It's just kind of taken as a given by everyone that introducing profits for insurance companies would drive up cost and it's kind of gross to profit off of a basic human right.
Having said that, the only real bargaining power that insurance companies have, as far as I can see, is contracting hospitals to take their policy holders. There has been some push by both government and insurance companies to use this as a tool to force hospitals to specialize, but I'm not knowledgeable enough to know if this has helped any more than the regular tools of government funding and decision-making to achieve this goal.
The biggest problem Dutch people and doctors have with this system is that there is sometimes a bunch of unnecessary bureaucracy involved. For instance, some medications that are quite permanent (like type 1 diabetes medication) need to be re-approved every year by that patients insurance company, for which the doctor or their assistant needs to send a form. (As an aside: there is a campaign among medical staff to stamp these documents with a picture of a purple crocodile. Why a purple crocodile? Because a famous Dutch advertisement (ironically by an insurance company) features a purple crocodile lost by a little girl in the swimming pool, which an obstinate pool employee refuses to hand over even though it's right behind him, until the mother of the girl has filled out several forms in capitals. Eventually he tells her they can pick it up in the morning between 9 and 10. https://www.youtube.com/watch?v=mJipJwDPJ-g you can watch it here, it works quite well even if you don't understand Dutch.)
My take on the US and its drug care costs are two fold:
For drugs out of patent: ABSOLUTE INSANITY partially driven by FDA regulation making it quite difficult and expensive for generics to exist and it should be quite straightforward to improve the system.
For new drugs: US patients massively subsidize pharma research for the rest of the world, the system can probably be improved by lower/faster FDA regulatory costs but probably not by a whole lot.
The suggestion for reducing the costs of new drugs by lower/faster FDA regulatory costs completely ignores where most of the money actually goes in a pharma company, as the video I linked outlines in more detail. The expected savings in a more streamlined FDA approval process not only wouldn't impact the prices much, most of it would just be funneled into higher dividends and more stock buybacks. Real solutions have to fix the skewed financial incentives.
> completely ignores where most of the money actually goes in a pharma company
Say a company spends $100 million creating a drug, amortized over all the failed drugs.
Then it's approved. They have 10 years to make money. They crunch the numbers and determine if they spend $0 on marketing, they will bring in $90 million. If they spend $110 million on marketing, they will bring in $280 million.
I made up those numbers, but it's a direct example where "lol just get rid of marketing" means we lose the drug as well. As much as armchair economists think we should all switch to word-of-mouth advertising, the patent system doesn't allow companies to wait around.
(It also ignores a company that spends $40 million on R&D, completely fails, and disappears with its investors' money. That won't show up in 10-K reports because the company is gone[1], but still affects the market because investors will demand more and don't care about survivorship bias.)
Drugs exist in a somewhat competitive market. It would be better if consumers were better at cost-benefit analysis[2], but even in absence of that, companies still face price pressures that will affect the rates of drug discovery. They aren't in the business of lighting money on fire; if they are spending money on marketing it's because they've decided it's in their interest.
> more stock buybacks
I know this is popular meme among the late-stage-capitalists these days, but no one cares about them.
[1] Did you know most mutual funds historically outperform the market? Just look at their prospectuses and you'll see it's true!
[2] instead of it often being literally impossible to compare costs
> I made up those numbers, but it's a direct example where "lol just get rid of marketing" means we lose the drug as well. As much as armchair economists think we should all switch to word-of-mouth advertising, the patent system doesn't allow companies to wait around.
The US is a healthcare bizarro world. In no other country on Earth do pharma companies advertise directly to citizens. In other countries, people's doctors actually decide what medications would suit them best in concert with patients, based on a review of the evidence.
There are certainly costs for marketing to doctors as well, which I know all too well being close friends with numerous drug and medical device reps, but that number does not need to be as high as it is.
> They aren't in the business of lighting money on fire; if they are spending money on marketing it's because they've decided it's in their interest
Yes, it would be in their interest in a fucked up market where *health is not the primary concern*. How about we fix that and redirect those marketing dollars that aren't improving health to something that actually improves health, like lowering drug prices to make treatments more accessible. That's part of what I'm suggesting, and would certainly impact drug costs far more than a streamlined FDA process.
> I know this is popular meme among the late-stage-capitalists these days, but no one cares about them.
Healthcare doesn't work like normal economics because people NEED it, it's not a good with a varying demand that can be terribly influenced by advertising. With or without healthcare or choices, if you break your arm, you almost certainly need to get seen by a doctor. So much of "traditional" and colloquial economics is built on a system that sidesteps necessity for consumerism. Markets can be used as a tool to make healthcare better, but that logic doesn't really apply to the thing itself.
Glad to see from the comments that not only can we not decide what sort of medical system works best, but we can't agree on whether the healthcare systems of individual countries are brilliant or terrible.
But I'm glad that options other than the status quo and the NHS are being moved towards the US overton window.
The business about health care being a bizarro world where normal economics rules don't apply is true, but it's true in that it's inherently broken. To have efficient markets you need good consumer information, the ability to easily comparison shop and change vendors, easy entry and exit of vendors from the market. If you wind up in a coma and are brought to an emergency room you can't open your eyes, discuss what the treatment will be and how much it's going to cost, do appropriate research and decide for yourself whether the doctors's recommendations for treatment are appropriate, decide that the amount being asked for is outrageous, find a potential competitor, have them open up a competing ER next door, and check in there. Every step of that can't happen. The seemingly weird and artificial things like government negotiated prices are compensating for the normal mechanisms of efficient markets not functioning. In the US I've had the experience of getting quoted a price for a drug at a pharmacy, commenting that it was completely outrageous, getting argued with that the insurance company was paying most of it, asking what it would be out of pocket, getting quoted a price lower than the copay, then glaring at the pharmacist who suggested swiping a magical card she had through the machine which got a price even lower. Under such circumstance the government putting their foot down and declaring that there can only be one price and they're negotiating it on behalf of consumers is completely reasonable.
One of the other major differences between the US healthcare system and the EU systems is that the European Commission does drug approvals for all of the EU (and there are other EU-wide paths to getting drugs approved, with approval by any regulatory body being sufficient for the drug to be approved); whereas, the FDA does approvals for just the US (and it doesn't compete with any other US regulators to do the approvals). This gives individual European countries much more leverage than the US would have for negotiating with drug manufacturers. Since most of the cost of drug manufacturing is the research, trials, and approval process, Norway (technically a non-EU member of the EEA, but they still accept approvals given by the European Commission) can offer drugmakers relatively low prices and still have them sell their drugs there because they're already going through the European Commission approval process to sell their drugs in the rest of Europe. If the USA starts setting drug prices particularly low, it will have a much bigger impact on the incentive to fund drug trials through the FDA approval process. This also changes the optics dramatically. There's not going to be a scandal over a drugmaker failing to push their drugs through the approval process the same way there would be over it refusing to sell drugs to a particular country where those drugs are approved. (And I think it's generally accepted that the FDA's process is slower, more stringent, and more expensive than Europe's.)
Relatedly, another thing that is always missing from discussions of healthcare spending is the extent to which Europe and Canada freeload on the rest of the world for medical research. Below are the total medical R&D expenses by country for years for which I could easily find data. The key takeaway is that even though US GDP is only 13x Canada's in 2018, US medical research spending was approximately 45x theirs. US GDP is only about 20% bigger than Europe's, but the US spent significantly more than 2x on medical research than they do; (and as far as I can tell from less complete data sources the disparity is growing).
United States (GDP $21T): 2007: $131B 2012: $119B 2013:$143B, 2014: $154B, 2015: $163B, 2016: $173B,2017: $182B, 2018: $194B
Japan (GDP $5T): 2007: $21B, 2012: $28B
All of Europe (GDP $17T): 2007: $56B, 2012: $54B
Canada (GDP $1.6T): $3B in 2009 and 2010, and $4B every other years since 2007 (rounded to the nearest billion) -- all of the other values are in USD; whereas the Canada numbers are in CAD.
I think the overall picture looks something like this:
The incremental cost of manufacturing a pill tends to be pretty cheap. A drug company has to make back its investment in R&D with returns to justify the investment somewhere (which is necessarily a high risk investment with a long time window between the investment and when it starts giving returns which standard economic theory says makes the required returns higher). But once it makes back its research investment anywhere, it has a pretty big incentive to just sell its drugs everywhere even if it is selling them heavily discounted in some markets relative to others. (The regulations around drugs are a particularly effective form of geofencing that eliminate the incentives that might otherwise exist to charge similar prices in different markets.) So we have a drug industry that basically works by researching drugs to sell them in the United States; but then also pushing the drugs through the relatively easier regulatory regimes in the rest of the world to also sell the drugs everywhere else possible where the only investment that those additional sells need to justify recouping is the cost of getting the approvals since all of the research is already done. And we end up with a system where drug development is worthwhile if and only if those drugs end up being sold in the United States, and where the FDA has the most stringent approval process, and nobody really has an incentive to change this. American regulators and politicians get disproportionately more power out of this arrangement. Drug companies make their profits. American insurers are able to pass along and distribute the costs across the population so they make their profits too. European countries get their drugs relatively inexpensively, and are existing in a legal context where that is their only real incentives since they really can't increase their ability to regulate drugs because the power that exists there is distributed throughout the EU rather than possessed by the governments of the member states. And the members of the EC probably are a bit unhappy and trying to increase their own ability to regulate things, but they're sufficiently disconnected from the powers of the member states that what they want doesn't really matter. (So Europe has somehow found a way to make the people who have the most incentive to increase the price of drug R&D there from having their voices heard.) And the American voters are the only people who really have an incentive to try to reduce those prices, but many of them are shareholders of the drug companies anyways, many of them aren't but see themselves as "temporarily embarrassed millionaires" who plan to own lots of stock someday, and all of them are participating in a political system where there is almost no ability to express your opinion on any given issue because that's how the American two party system works.
I'm very far from being an expert in health care systems, but I'd like to offer a bit of insight into the Brazilian system since Scott demanded to know what developing countries do and Brazil is my home country. Brazil is in a very curious position regarding health care, since the current Constitution established in 1988 provides that we will have universal health care provided by the State (Sistema Único de Saúde, or SUS to keep with the three letters) but at the same there is an abundant proliferation of private medicine practice - hospitals, clinics, insurance companies, doctors can work outside the universal public system in for profit systems and not get paid by the state. This basically means we have at the same time a system with a lot of state-run hospitals and clinics, as well as state-employed doctors, other facilities run by private operators but funded by the State (considered part of the universal system) and also 100% private enterprises. This creates a situation in which a very large portion of the middle, upper-middle and upper class all have private insurance - provided by their employers or paid by the user - and the poor have universal coverage under the public system. However, the universal public system ranges enormously in quality: for example, we have simultaneously one of the best vaccination systems in the world for free but months of waiting time to get a simple doctor's appointment or years of waiting to get a surgery. Some types of surgical procedures provided by the state are good and others are not, same with exams, and the state-run hospitals also vary enormously on quality. The users of most private insurance companies also have a lot of low quality services, albeit with shorter waiting times and more options. A few of the really expensive ones provide quality services for the richer individuals. Also it's worth noting that a lot of the best doctors don't accept insurance payment at all and charge a fee for each appointment.
So basically poor people get screwed regarding surgeries, appointments, laboratorial exams and so due to poor quality and waiting times but at least can count on some basic quality services for free such as vaccination, ambulances, and urgent first care. Middle class people fare slightly better with considerably shorter waiting times, marginally better services and can also use the public system in which it does well. And rich people get very good health care for a reasonably pricey amount.
Brazil also has a very commended drug price system involving patent breaking but I don't really know much about it, only that it really makes most drug prices really low.
The political side of things is also very complicated especially because the left-wing blocks any productive discussion on reform since it considers the public system untouchable and refuses to acknowledge its shortcomings most of the time - or blame them on underfunding and "neoliberal policies". A lot of upper class left-wing people haven't used the public system once in their life but still consider it perfect. Brazilian things.
The US is the only country that pays "full price" for drugs. Others pay as little as they can get away with.
This means US consumers alone finance most medical drug development, and the rest of the world gets a free ride.
Many Americans want to pay the lower prices the rest of the world enjoys. That would be great in the short run, but in the not very long run, most drug development would disappear, since there isn't a sustainable way to finance most of it.
This is also why the FDA has such an oversized influence on the whole world. Other regulatory agencies don't really matter much in comparison.
This is a rather bleak way to look at things, so I'd love if someone could convince me this is wrong?
Part of the reason that drug negotiation prices work is that researching the efficacy of a drug is a fixed cost, and so if you find that your drug works in America, then it probably works in Europe too (As someone who works in pharma I can tell you that different countries/regions have different regulatory requirements and some countries want evidence that the drug works for the people who live in their country specifically, but these requirements are usually rolled into existing clincal trials, usually at a fairly low cost).
The argument is often made that if the US negotiated to lower their drug prices then drug companies would fund less research and there would be less drug innovation. I have no idea how true this is in practice.
> How does the US model (which doesn’t work) differ from the superficially-similar Swiss, German, and Dutch models (which do)?
Well... what is it about the US model that we're saying doesn't work? The table you feature shows that the US is an outlier in customer satisfaction. It does not appear to be exceptional in life expectancy (where it's on the low end of the table, which is bad), or in frequency of unreasonable waits for specialists (where it's on the low end, which is good), or in amount of money spent on health care (where it's the highest value, which has no particular moral valence, and where it's quite similar to Switzerland [and, to be fair, the two of them are substantially higher than most of the rest of the table, with an honorable mention going to Norway]).
It is an outlier again in terms of health spending as a share of GDP. This tells us that Switzerland is, per capita, much richer than the United States. (Which is true: IMF estimates for 2021, according to wikipedia, are US$93,500 per capita for Switzerland and US$69,400 per capita for the US.) Is the problem that our health care system doesn't work, or that we're poor?
Demography has a significant influence on GDP. And the US is, by that metric, seriously handicapped compared to Switzerland; we have a bunch of low-earning Hispanics dragging our GDP per capita down and our life expectancy... up. What lesson do we draw from that?
Do we have a problem with our health care system other than that people are unhappy with it? By the standard aphorism of "reality is that which, when you stop believing in it, doesn't go away"... is there a real problem here?
The US does a really poor job of keeping (advertised) drug prices low because we a) have like 1M different purchasers of drugs, and b) those purchasers use a variety of different middlemen to actually purchase the drugs. We pay the middlemen a percentage of the drug costs.
For clarity, the dollar value chain is like this: Purchaser -> Insurer -> PBM -> Pharmacy -> Wholesaler -> Manufacturer.
All of the steps other than Purchaser (and small pharmacies now) make more money the higher drug prices go. Insurers can keep 15-20% of total premiums for their internal administrative costs and their profit margin under the Affordable Care Act's "Medical Loss Ratio" rule. That means that the only way for Aetna's profits to increase from 2021 to 2022 is for total "medical losses" to increase. They can keep 20% of $70B in 2021, and 20% of $80B in 2022, implying that drug+hospital+doctor costs HAVE to increase by $8B during the year, or else premiums can't go up and Aetna can't make more money.
The PBM step generally keeps an administrative cost per prescription plus a % of the cost of branded drugs. These companies are: CVS/Caremark, Express Scripts, OptumRx, Prime Therapeutics and a lot of minors. They negotiate "rebates" with manufacturers. This basically works like this: Humalog and Novolog are effectively equivalent drugs. They cost ~$300/month without insurance. The PBM will say to Lilly "That's a nice humalog you've got there. I'm going to need $150/month as a check back to me or else every patient on my plan gets Novolog unless the doctor fills out 500 pages of paperwork to get Humalog AND the patients pay $200 of the cost." Lilly says "ok fine." According to the PBM lobbying organization, PCMA, most of the rebate money goes back to purchasers, but IMO that just makes the problem worse because it makes purchasers complicit in the game by sending them checks that they use to reduce their premiums instead of reducing the cost of drugs to their plan members.
Consider for a moment that CVS/Caremark by themselves is the PBM for ~112M people in the USA. That's more than the entire population of Germany. If you think that Germany pays less for drugs that CVS/Caremark.........
Pharmacies generally get paid ~1-2% of the cost of branded drugs as their total compensation. On generic drugs, a typical pharmacy will get ~$10 per prescription on average as their compensation (to pay staff and rent etc).
Wholesalers like Cardinal, McKesson and AmeriSource Bergen (together controlling 95% of drug distribution) generally make their money by marking up generic drugs to pharmacies, and by taking a ~2% cut of the price of branded drugs.
Manufacturers make money by selling drugs for more than it costs to make them, including paying off all of the folks in the middle out of their revenues.
The actual prices realized in the US for branded drugs ARE likely higher than in other countries, but the differential is almost certainly not as large as it appears. grosstonetbubble.com is a site that talks about the size of the wedge between prices paid to manufacturers by wholesalers for drugs, and prices actually realized by manufacturers after accounting for rebates and other discounts paid to the PBMs and insurers.
Also... consider for a moment that NET drug prices (after rebates and other discounts) have DECLINED in the US for the past 3 years. Anyone that talks about "skyrocketing drug prices" and doesn't pay attention to the middlemen is just lying.
I've actually had that idea before: why don't governments act as a sole source purchaser for foreign copyright media, especially since distribution is nearly costless. E.g. Sports broadcast rights only having one govt sponsored rights buyer who then has to resell at marginal cost to distributors.
Or just ban exclusivity deals. That might work too.
One huge difference between healthcare in the US and elsewhere is advertising. The US has a whole industry dedicated to marketing drugs and medical services directly to patients, which just doesn't exist in most other countries.
I think this explains a big part of the cost disease. Ads for drugs are particularly common on daytime TV or cable news, I guess because they're watched by elderly people who tend to be sick and have Medicare. Most pharmaceutical companies actually spend more on marketing than on r&d, so high drug prices aren't really subsidizing new meds. They're subsidizing Fox and CNN waging the culture war.
And it's not just drugs. The are law firms, insurance companies, even hospitals promoting their emergency rooms. The whole purpose of these ads is to increase demand for healthcare, so as well as pushing up costs directly they probably lead to a lot of unnecessary doctors' visits and prescriptions.
As somebody who has seen both ends of the spectrum (lived in both the UK and US), my opinion is that this kind of analysis is overly complicated and virtually irrelevant. The problem in both countries is really the same: patients are disempowered from acting in their own interest.
In the US, there is no way for patients to choose cheaper healthcare.
In the UK, there is no way for patients to choose higher quality healthcare.
The inevitable result is that US healthcare is unaffordably expensive and UK healthcare is unacceptably low quality. This is only indirectly related to how it is paid for.
Why would other countries get better results than the US, even though the systems share many features? Probably because patients generally have a louder voice. Whether this is legal or cultural matters little.
They do, yes. Generally the overwhelming reason to "go private" is shorter wait times- this swamps all other quality considerations. Which is odd, really. Waiting a kind of "hassle penalty" applied to see if you really need free healthcare.
Healthcare in the UK in general is not especially bad, in my experience. It's deteriorated slightly in the last decade, but it's still fairly on par with other rich nations.
I think consumer choice is an overrated idea in healthcare generally. Healthcare is particularly badly suited to a consumer market, because it is extremely difficult for an individual patient to assess how good their healthcare actually is. They can judge some, not terribly centrally relevant, aspects of it, but that just leads to optimisation for these, not actually that important, aspects.
The two first priorities for a rich country's healthcare system are to ensure that basic healthcare is available to everyone, and to regulate provision of healthcare well enough that it isn't swamped by snake-oil-sellers and actually does do some good. There are various ways to achieve both of these.
As an aside, the part about each country averaging the costs of a basket of countries is the known network problem of consensus dynamics [1].
In practice, countries will always converge to a price, they will not fluctuate indefinitely. If they form communities (e.g. if all Western countries look at each other, all Eastern look at each other, and so on) they will first converge to the average of their community.
If the communities are connected (e.g. at least one country in a community looks at a country in he other communities) then eventually the whole system will converge to the average.
I describe it in more details in the network science book that I wrote [2], Section 8.5.
[1] Morris H DeGroot. Reaching a consensus. Journal of the American Statistical Association, 69(345):118–121, 1974
As to the reason why Germany and Netherlands work relatively well:
1: Evolution. German health care system has been around since Bismark. Lots and lots of evolutionary tinkering, mostly by people who at least party knew what they were doing.
I don't think this is not a simple question of who is paying and whether private not-for-profit, private for-profit, or public institutions do the work?
Drucker already stated that healthcare organizations were double-headed monsters! The fact is it there are way more than two heads. Many stakeholders are present in a healthcare system: general citizens and the politicians that represent them, healthcare managers (top level, intermediate level and local supervisors), physicians, nurses, nutritionists, healthcare technicians, psychologists, social care workers, drug and medical device makers, suppliers, professional schools and colleges selling healthcare degrees, etc.
In many countries, healthcare professions have bars that somehow may be protecting themselves more keenly than the patients they are supposed to serve. Inside those associations there are subgroups that are interested in keeping a low level deficit of resources in their specialty to keep a higher pay per service. Some of those groups may have considerable political and social power and have their interests be respected by politicians when healthcare decision making is made by ministries.
Regarding physicians:
- How are the labour relations between physicians and hospitals (public and private)? Is the work contract-based, physician groups-based, or physicians are working as independent contractors?
- Did physicians pay $200.000 for their college educations, or was it virtually free (as in some countries)? Will that cause escalating healthcare prices to pay college loans? Will physicians try their best to specialize in Urology or Plastic Surgery, instead of practicing General Medicine, just to have a higher pay and pay their debt?
- Is there uncertainty in continuity of practice (ie does the physician believe he may be prevented to practice in the near future because of failure to achieve a passing grade in the recertification exam, or he may be disbared because he commited a mistake while seeing his 56th patient that day)? What is the likelyhood of being sued (I am pretty sure there are way more healthcare related lawsuits in the USA comparing to Europe)? How much does he have to pay for professional insurance?
There are so many variables at stake I don't think anyone can fully explain why are some healthcare systems working better than others. Or, at least, there is no single reason for it. The USA may be a perfect storm of many bad decisions. And Denmark may have a great healthcare system because labour relations are more transparent and respectful than other countries. And that characteristic of the country is not specifically related to healthcare. Healthcare professionals burnout statistics may be very informative in this matter.
Just one more thing. Why is it that, in healthcare, we tend to consider that the lower the GDP spending the better? We don't do that in any other sector, like education, leisure or investment in tech. Regarding the «bang for the buck» issue, life expectancy isn't a perfect indicator. Quality adjusted life years may be better.
And again, instead of arguing that the quality of a healthcare system is proportional to the ratio of life expectancy/GDP spending in healthcare, we have to consider whether professionals are doing ok and happy with their work lives instead of burning them out and importing healthcare professionals from poorer countries (eg. in the UK 12% of healthcare professionals are foreign-born), draining the healthcare system of those same countries.
It is probably the most regulated sector in most western societies and quite frankly the human costs are way higher than «life expectancy».
In a more forward-thinking system a nation would loosen restrictions/import health care professionals from foreign countries before those in the country are burnt out. To answer your question regarding GDP% its more of an observation that the US is way higher than other nations in spending and equal or lower in a host of outcomes, life expectancy just being one of them and easy to understand. Ofc when you look into it its a terrible metric to compare its just an example that seems less subjective (but isn't really: see above comment on prematurely born babies).
I'd be interested to see a cost comparison with US military healthcare. It doesn't have a lot of these features that probably drive up cost in other US medical systems. The military pays you to go to medical school. The physicians are paid a fixed salary, not reimbursed per-procedure. That salary is set by legislation and can't be individually negotiated. I don't believe there is any personal liability beyond loss of license for mistakes, as rather than being able to sue the military if you get maimed by bad treatment, you just get permanent disability reimbursement from the VA instead. While the licensing requirements are the same, you can get an awful lot of first line treatment from a medic that does not need to be licensed.
Some of the reasons I believe led some healthcare systems to transition to a mixed compensation scheme for physicians:
- if you pay fixed salary, many physicians will refuse to see a reasonable number of patients (they will say that medicine is very complex and you can only see 6 patients a day) and increase the pay for each health unit. Some may even get to their private practice during hospital/health center working hours
- if you pay on a capitation base, physicians will try to have higher numbers of patients with complex labels on their list, but will refuse patients with complex disease or whose diseases are not covered by the capitation monitoring system (p.eg. get lots of simple diabetic patients [type 2 diabetic patients diagnosed after 70 years], but avoid complex diabetes patients [type 1 diabetic patients or severely insulin resistant diabetes] and asthma patients). Even if the physician has some complex patients in their list, it is easy to register a lot of clinical acts that he/she is a actually not doing. This happened in the UK some years ago, and is happening in other countries still using this kind of pay
- if you go fee-for-service, physicians will say that every exam or treatment or appointment is very necessary, and you will get a lot of unnecessary spending in low value care. We can't forget that the manager is not a doctor and he probably can't tell what is necessary or not. The patient doesn't know either.
So, I believe mixed compensation and a lot of monitoring may be the answer.
In 2010, Washington Post reporter T.R. Reid wrote "The Healing of America" on this topic (a comparative survey of developed countries' health care systems). While a dozen years out of date, it might still be more informative than Dr. Emmanuel's work.
I suspect monopolies (or in this case, monopsonies) can be good when an additional unit of power for the monopolising group has large social benefits. Think of unions.
I find I do not care about the best or worst national healthcare system.
I care about the best outcomes *for me in my current context* - I want the national system that provides that. If that system is more or less expensive for the nation, requires certain social setups or population types, involved oppression or celebrates specific kinds of humans or animals, melts the polar caps more or less... don't care. Best outcome for me, thanks.
I expect many people are this way once you remove the need to perform social caring or tribe affiliation or whatever.
This is why many arguments for or against system A or B tend to fail. Lots of arguments about what is good for the world, the nation, or the group.... and nobody cares. The 'best' national healthcare systems probably screw a lor of individuals in some way they would call screwed, and the worst probably take great care of some people.
The fundamental reason why the United States is so bad is because health care breaks the iron law of capitalism, which is that the person who uses a good or service should be the person who chooses it, and who pays the bill. Doctors & patients together choose a medical treatment, but insurance pays the bill. Individuals use insurance, but don't actually choose or pay for it; that's done by their employers, and the plans are so complicated that individual consumers can't make heads or tails of it anyway. Hospitals offer treatments, but just try asking a hospital how much it costs or shopping around; they flat out won't tell you. It truly is upside-down bizzarro world. Plus, the bureaucracy is impenetrable. Have you ever noticed how long it takes a pharmacist to fill a prescription? Taking the pills off the shelf takes 30 seconds. Calling the insurance company and waiting on hold -- that takes 15 minutes or more.
Wrt. to other countries, there's not a lot of difference between regulation and socialism. Sure, in Germany and the Netherlands insurance is provided by private companies (my wife is Dutch). But if all companies are required by law to charge the same rates, and offer the same coverage, then it doesn't really matter whether a private company or the government pays for it. A really easy way to lower costs in the U.S. would be to require all insurance companies to offer the same coverage and costs as Medicare. All hospitals would be forced to accept that, because otherwise they'd have no customers.
I lived in the UK for many years, and used the NHS. It was great. No paperwork, no insurance cards, and no weird bills for ludicrously high amounts when you leave. As a patient, I loved the simplicity of it. But there is a catch.
The NHS hospitals get a fixed amount of money per year, and they have to treat every patient that walks through their doors. Hospitals are non-profit, and success is measured by how many people they can treat given a limited budget, not by how much profit they can make by doing lots of expensive treatments. That's the main difference between "capitalism" and "socialism" in this case -- it's the metric you use to measure success. NHS hospitals do a cost/benefit analysis on every treatment, and focus their efforts on the low-cost, high-benefit treatments. If you want the hospital to do an MRI, or something fancy, then they will not agree unless your condition is life-threatening. But if you just want basic every-day care, they're pretty good at that. I think the life-expectancy numbers bear that out; high-cost low-efficacy treatments do not improve outcomes all that much at the aggregate level.
And the NHS is really good at pinching pennies in smart ways. When my wife needed to go to the hospital, I called the NHS hotline, and they asked if she was able to walk. Not far, but yes, she could. So they sent a taxi-cab to my door, who dropped us off at the hospital front entrance. It was totally free -- his fare was paid for by the NHS. In the United States, they'd send an ambulance, for 10X or 100X the price, then bill it to insurance, who would then send a co-pay to me for some hundreds of dollars. That doesn't help anybody.
In a way, the NHS actually satisfies the iron law of capitalism better than the US system does. It works because the hospitals/doctors both make the medical decisions, and they foot the bill.
In Portugal, until ~10 years ago, taxi drivers could pick up patients with difficulty walking to take them to healthcare institutions, and the SNS (ie NHS) would pay. Until a law was published that forbade workers outside of professional ambulance (private, fire department-associated, or public) services to do that job. Transportation costs in the healthcare sector sky-rocketed from one year to the other.
For me, that's one example of toxic lobbying doing its way. Of course, there was a minister back then that was a partner in an ambulance service. So, there you go...
Interesting article -- thanks! However, I doubt that giving everyone a personal HSA will make much difference. I currently have an HSA with a very high deductible plan, which my employer funds generously. It's basically the exact same system as proposed in the article. My insurance only covers catastrophic emergencies, because routine care will never exceed my deductible.
And... I treat it exactly like insurance. I never make any health care decisions on the basis of cost, because cost is never a factor. The HSA can only be used for health care, so it doesn't compete with my household budget. If I'm sick, I see the doctor, and if I'm not sick, or not badly sick, then I stay as far away from the hospital as possible. I have enough money in the HSA to fund my deductible, I can't use the money for anything else, and anything over the deductible is covered by insurance anyway.
There's this myth that if you could just devise a system where health care is produced and consumed like a normal good in a capitalist economy, then the magic of capitalism will take over and yield lower prices and better service. But health care is not a normal good. We don't go to the doctor because we *want* to, we go because we *have* to. We may choose to buy a smaller house, or an older car, or buy cheap dinners in order to save money. But almost nobody ever weighs the pros and cons of either getting that hip replacement, or buying a new big-screen TV. Health care is not discretionary in the same sense as other goods. "Consumer choice" in health care generally means being able to choose *which* doctor does the hip replacement, not whether we get the treatment.
P.S. One big exception is end-of-life care. If I'm terminally ill, I might very much wish to avoid major interventions, if it meant that I could then leave the money to my children. And since end-of-life care is super expensive, that could very well move the needle on overall costs at a national level.
Thanks for reading the article @delesley. To be clear, this is based on Singapore's model (see my comment somewhere below) which gets the very best value for money (4% of GDP for world-ranked outcomes). So the idea is not just theoretical.
Your insurance does sound pretty sound - could you identify the insurer for me?
I would take issue, by the way, in your assertion that there is *no* consumer choice in healthcare but in other systems, that choice is more marked. Your hip replacement example is, IMHO, exactly the sort of 'consumer choice' that you might make when you get older. Replacing a worn-out joint is not a binary decision - you weigh the pros-and-cons as a patient about when and whether to do it for some time before you actually take the plunge. Perhaps you don't compare it to a TV - but you will think carefully and, if you have an HSA, you may weigh up how much you need that vs other healthcare needs.
Worn-out hip = type B healthcare. Fractured hip = type A healthcare. Repairing the latter is clearly *not( a choice!
In that kind of system, what would happen with people that already have chronic disease?
Also, there is a fair amount of personal decision in the management of some chronic diseases. In type 1 diabetes, you could prefer a continuous glucose monitor of one brand instead of the other, because it may have integration with a smartwatch p.ex. And you can use an insulin pump but many people prefer not to, even in countries that have insulin pumps fully covered by the NHS (see Sweden, Slovenia, among others). The only thing that is mandatory in type 1 diabetes is access to insulin. But the very basic in this health problem costs 1/10th compared to a state of the art treatment regimen. How is this manageable in an insurance based system? Does it all depend on physician decision making (ie who gets what)? Is there the risk that some individuals get easier access to advanced technology because of that (Weiss D, et al. The diffusion of innovative diabetes technologies as a fundamental cause of social inequalities in health., The Nord-Trondelag Health Study, Norway. Sociology of Health & Illness 2020; doi.org/10.1111/1467-9566.13147)? Will the sons and daughters of physicians and nurses have early access to state of the art?
an interesting question @cesar. I did mention it deep in the article I posted. My suggestion (untested) would be to give bigger annual savings to those with demonstrably higher needs. Type 1 diabetic patients would get an extra top-up.
Not too sure about assuring equality of access to new tech - but the inequality that currently exists is so pernicious, I wonder if it would be any worse.
Oh hey, I was just thinking about you because I'm watching Nausicaa for the first time while thinking about programming language design. I hope you're doing well.
Insurance companies negotiate lower prices collectively through Pharmacy Benefit Managers. If by market price for a drug you mean list price, almost no one actually pays the list price in the US system. I personally find that Zeke tends to handwave concerns about drug price controls and innovation a bit too much so he downplays the benefits of paying higher prices for medications.
Taiwan is a *very* measurable, and measured, health care environment. And yet many of the “key facts” published about the features of health care in TW don’t align with the ground truth.
This is a data point that raises doubts in my mind about the methodology and mindset of economists, public health researchers, and the other folks who try to collect good science on health care systems and economics.
Forgive me for not listing more than two examples, I’m writing with little time to spare.
- not correct: few or no private insurance providers in TW, few or no people in TW have private insurance
- also not correct: most patients in TW pay very little out of pocket for expensive tests or procedures
The patient experience in Taiwan for most health conditions is, on average, as quick and easy as anyone could hope for. And the citizens, government, and hospitals are proud of the NHI and the health care system. The VP is an epidemiologist, the mayor of the capital is a surgeon. Access is granted freely to researchers who want to study public health in Taiwan (I’ve done lung cancer treatment clinical trials in TW hospitals, measuring among other things the performance of oncologists). There is plenty of high-quality hard science done in Taiwan in clinical research, pharma, bioscience, and a solid pharma and medical device industry.
And yet despite all this happy openness…the conventional wisdom on the “health care system in Taiwan” is not aligned with the key and complex reality of the features of health care in TW.
Aside: yep, the doctors in TW see way more patients each day than in the States. The base pay is barely more than resident pay in the US. But there are plenty of career physicians who are wealthy enough to afford an above-average home in the large cities in Taiwan ($1m-$3m is the average price for an apartment) and a Tesla.
I'll also add that doctors in Taiwan see way more patients each day in the States, and the clinics are usually open beyond normal working hours (which is way more convenient for patients).
Thanks for this very interesting review. I suspect I'll get more from this than reading the book.
As an NHS (UK) doctor, it's always interesting to find people who can cut though our blinkered propaganda about having the "best" medical system in the world. Clearly the UK has one of the best compromises - and there is other data to suggest that we do well on value-for-money, but that our main problem is access. The pandemic has undermined what was already quite precarious and the UK is very likely to fall down the rankings. We shall see.
The single biggest omission from this book would appear to be the exclusion of Singapore (or did I miss that). They have consistently the best outcomes for the smallest %age of GDP (about 5% compared to nearly 20% in the US)
Taiwan also only gives out the exact amount of drugs, you're supposed to have for a treatment course. The patient is not left with a bunch of surplus drugs, because there's only two package sizes available. And you get your drugs from the doctor, instead of being sent on an errand to present a written paper to a specialized shop called "pharmacy".
At least, that was my experience when I got treated there.
I have no idea if handing out fewer pills/tablets/capsules actually saves costs meaningfully, though. For all I know the actual production cost per unit of the drug is not a relevant factor, if the actual cost is dominated by R&D and negotiation is done via bureaucracy magic, anyway.
Was nice to see, anyway. There's something very pleasant to that alien Taiwanese aesthetic of "don't get handed crap, you won't need".
Having spent more than a year in Taiwan, I do hear that often people go to the doctor when they're only slightly ill just to collect medicine, which leads to system overuse.
The drug pricing, from what I know of, is through negotiation between big drug corps and US government and insurance company(not exactly sure but through negotiation).
And there are different types of drugs. For example, drugs including over-the-counter(generic) drugs. Usually even with the same chemical formula, the same drugs from different manufacturers will be priced very differently. For example, Vitamin12 from China is around 0.001cent/tablet but manufactured in US probably cost around $0.01/tablet(numbers are forged here just to give one example).
I think some other types of drugs are usually patented in US, which lacks of direct competitor in the market and also the R&D costs are high (1 billion dollar for one small molecule anti-cancer drug). This contributes the drug price as well. US indeed has very large pharmaceutical industry (EU has second largest I assume) and many drugs are only available in US. The drug prices in other countries are more affordable and people complain less about the price may also partly because --- they don't even have that option. These novel drugs are not allowed in imported/circulated in the country. Both India and China are famous for sham drugs as they usually have to wait for 20 years after the US patents are over and they can start manufacturing that drugs. China/India may be the driving force to pull down the manufacturing cost for any chemical drugs.
Third, from what I have known of -- US has many more patented, advanced medical devices. They all contribute to the cost of the healthcare. US healthcare is expensive but the quality, once you get to see the specialist, is usually good. US is probably good at high end medicare and difficult diseases but China/India is better at general medicare (home treatment) as they are fast and more economical.
Drug pricing has many models behind and indeed is a very intriguing question.
Afaik a properly functioning Obamacare would look basically the same as the German system. The American version is just too complex and the courts + Republicans have made it much worse, but the basic thrust is the same.
I’m very ignorant, though, so feel free to correct me, but I’m still surprised Scott (or the book) did not mention the implications of Obamacare.
Going by the descriptions of the categories, Germany is actually a mix of 3 and 4:
"Single payer channeled through private insurance with substantial (different kind of) private insurance".
Lars elsewhere in the comments explains characteristics of the German healthcare system far better than I could and in far more detail than I would have, but let me just say that this bit from the description of Australia in category 3 applies to Germany almosy exactly if you just read "government" as "regular insurers" and "private" as "different kind of private insurers" (and some minor changes in parentheses):
"For example, in [Germany] sometimes the private insurance has shorter waiting times, or can get you nicer rooms in more luxurious hospitals. Often (mostly) the same doctors and hospitals treat the government and private patients, but give the private patients more time and resources, which leads to resentment and scandals (don't remember any scandals, but plenty of resentment). On the other hand, the private patients sometimes (very often) subsidize the public ones - ie a hospital charges extra for private patients and uses that to make up a funding shortfall if the government doesn’t pay them enough."
I've had the enormous privilege of having good private health insurance in Germany my entire life so far, and I have virtually no (personal) complaints about the healthcare (and pricing) available to me, it's really really good (for my own personal experience).
>This part confused me, because it seems to be both a government decision and a negotiation. The government sets a price based on some method. Then the drug companies - well, as far as I can tell, they accept. This article makes me think that in theory drug companies have the right to refuse an unfairly low price, but that in practice neither side wants the PR hit of a country going without a drug, both sides try pretty hard for an agreement, and it’s very rare for the process to fail.
>But this made it hard for me to understand this section of the book, which praised countries who managed to keep drug prices low. “Keeping drug prices low” mostly seems to involve having a process that reliably generates low numbers for the government’s offers.
The power in that negotiation rests almost entirely with the government, not the pharmaceutical company. This is what happens if the pharma company plays hardball:
Government: Sell your drug at price X.
Pharma company: No, we want price Y (Y > X).
Government: Fine, your patent's revoked. Now you have to compete with generics and will get Z (X > Z ~= cost of production).
The only real thing the pharma company can say then is "then we'll bribe the US government to be nastier to you in trade talks", which may or may not work.
The real question here is, what is the kabbalistic significance of being named "Ezekiel Emanuel"? That definitely seems like a name with a lot of... something.
> Taiwan works its doctors incredibly hard - they see about 2-3x as many patients per day as in other countries, for less money, and I’m not sure why they stay in medicine or how they stay sane.
The joke-but-also-true answer is that working over-long hours for unclear reasons is part of Taiwanese culture.
>Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price, and your health care system will be great and affordable.
My guess for this is that basically, there is a gap between 'A: The amount it would cost for it to be worth our time and effort to provide good health care' and 'B: The amount we're able to charge for healthcare in a supply/demand economy given that people don't have much choice not to buy, generally only have one or a few providers in their area to choose between, don't really understand what they're buying or have the knowledge or time to comparison shop, have principle/agent problems with their insurance discouraging them from saving money, we're ea prestigious profession that people expect to be expensive and they tend to trust when we tell them what things cost, and also we have IP laws giving us monopolies on most of what we do anyway'.
My guess is that B is larger than A, and that in fact B is SO MUCH larger than A that any sane-sounding effort to cut B - like B-10, or .8B, or whatever - still ends up being far larger than A, and so it's still worth everyone's time and effort to keep providing the same good healthcare at that cost.
idk if anyone will see this but re: the drug-pricing section: is it possible that the US is basically subsidizing everyone else by paying so much for drugs?
The book leaves out Japan. Having lived here for over 20 years and in the uSA for 45 years, I would say the system in Japan is better in many ways. The doctors are very good, the hospitals better in terms of after care and nursing, the after insurance costs are unbelievably low compared to the US. Universal coverage from day 1 with private insurance available for upgraded rooms and special treatments. As an older person, no way would I endure the system in the US.
Zooming in on pharmaceutical costs (which are a fraction of the total dollar spent on healthcare) while ignoring very high physician incomes, a broken medical educational system, the huge amount of wasted money spent on salaries and bonuses for healthcare, insurance and middlemen (PBM) executives...High pharmaceutical costs spur innovation and actually help frive down ancillary hospitalization costs. But Ezekiel is an MD, so bringing up physician renumeration (4x times that in the rest of the world) will never be a problem for him.
I have an idea for reforming our health insurance system in the United States, which I have never seen advocated for elsewhere. You all are way smarter than me, so thought I would throw it out to see whether this has any merit. Maybe nobody is pushing this idea because it is too dumb to work, or maybe it just hasn't occurred to anyone else yet, so here goes.
First off, we institute a nationwide, federal government provided, catastrophic health plan that covers every American person regardless of age, employment status, pre-existing condition, or any other disqualifiers. The annual deductible is $30,000 for single and $40,000 for a family. Funding could be through a surcharge on all citizens payable with their annual income tax filing, payroll deduction, or some other similar mechanism. Monthly cost for a $13,700 deductible plan in my area is $1,184/mo so increasing the deductible by more than 100% has to cut the cost appreciably. Also, this catastrophic plan covers absolutely nothing until you have spent through the deductible. Current plans have a rabbit warren of services that are not paid out of pocket, like annual physicals and bloodwork, which increase the cost of all these plans. Shifting responsibility for those services to the end user should result in more incentive for price discovery. On average 20% of people spend enough to satisfy their deductible each year. That would be much lower at this higher deductible and focus the care on the truly extreme cases where there is often little choice in the matter.
By implementing a catastrophic health plan for all, no more families need to file bankruptcy due to a child's cancer diagnosis, being involved in a car crash, or contracting a rare debilitating disease. Those major medical events get paid for now in an extremely inefficient and often soul crushing way. If you have good coverage, the insurance company pays for it and raises premiums on everyone else to compensate. If you don’t have insurance, the hospital charges you, you file bankruptcy, costing ridiculous amounts of time and legal expense, not to mention ruining your financial life for a decade. The hospital doesn't get paid, so raises its rates for those who do pay to compensate. In between those options are numerous iterations of varying soul-crushiness and taxpayer subsidy. Spreading the catastrophic situations more broadly and paying for it in a consistent way will reduce waste and inefficiency.
What about the $0-$30,000? That is where the free market would be let loose to do it's thing. Private insurance policies covering that amount should be cheap and easy to obtain. With an upper limit on annual cost, companies wouldn't have to worry about insuring someone taking a drug that costs $350,000 a month. For the young and healthy, risk tolerant, or those unable to afford private insurance, they would take the risk of needing health care that costs up to $30,000. Not an insubstantial sum, but certainly more manageable than $1 million or more for a brain tumor resection and several rounds of chemo.
With a large chunk of annual health spending required to be out of pocket, price discovery would actually take place. Attempts have been made to lift the veil on this, but until the end user has real incentive to find out whether that hip replacement is $4,800 or $9,200, true change won't happen.
All of the above has been tried in some form or another, and is not revolutionary. The unique part of my idea might solve the last part of this problem.
For all the $0-$30,000 spending that is not covered by a private insurance plan, or if those private insurance plans do not come into being, hospitals could be stuck with large outstanding bills to people unable to pay, much like they are now with uninsured patients. We solve this problem by requiring hospitals to offer payment plans at a reasonable rate of interest, say 1% over the Fed Funds target rate. Payment amounts are capped at 5% of Adjusted Gross Income, so the repayment term could be as short as 1 year or as long as 15 years, but be manageable for the vast majority of people. For example, $30,000 AGI would result in $125/mo available to pay toward healthcare costs, so a $5,000 bill takes 3.5 years to pay off at the minimum. Discounts for early payoff would incentivize full payment whenever possible.
That stream of income would be an attractive investment for the bond market. Hospitals could sell that pool of medical debt, much like banks sell secondary market mortgage loans, significantly improving their cash flow. The debt can then be packaged together in the same way Mortgage Backed Securities are today. We could set up an agency similar to Fannie Mae, I would call it the Healthcare Underwriting and Repayment Trust (HURT).
An industry with the technical expertise to service this medical debt already exists for servicing home mortgages. A 25bp packaging fee for HURT would provide the income necessary to maintain infrastructure and guaranty repayment on the bonds. Another 25bp servicing fee would be paid to the servicers for collecting and distributing payments to investors. Yield hungry institutional investors are clamoring for options, and a safe asset offering a variable yield of 50bp over the Fed Funds rate would be vastly oversubscribed in a world with 30 day T-bills yielding 5bp.
In the interest of relative brevity, I’ll leave it at that, and see what others think of the idea.
2. The companies that make the drugs are mostly in the US, and can lobby the US directly. Those companies also pay taxes to the US. This creates a different situation when it comes to the US negotiating prices then other countries are in, for the most part.
A simple change the US ought to make is "single price". No provider should be allowed to charge different prices to different payers (although different providers could charge different prices from each other). We could write into the next Medicare contract with providers- you are not allowed to charge any customer more than you charge Medicare. This would immediately eliminate the out of network problem, the uninsured retail cost problem, and the cross-subsidy problem. It would eliminate the expensive process of providers negotiating a price with each insurer. It would achieve the supposed monopsony power of single payer without the bureaucracy of single payer.
I get why you want to do these things, but there are problems.
> No provider should be allowed to charge different prices to different payer
Sometimes a lab test is a lab test. But what if you need it to happen in the middle of the night as an emergency? What if a hospital makes a contract to buy 10,000 tests in bulk for the next year, taking a financial risk off of you, and thus worth a discount?
Maybe we have to give all that up and it's worth it because of how broken pricing information is, but we'd need to think harder about it.
> you are not allowed to charge any customer more than you charge Medicare
Well, this breaks the whole system. People take Medicare and Medicaid to be nice but they often need private payers to break even.
I am coming to this really late. While the talk here is of how the cost of treatment in the US is higher than in other parts of the world, my colleague Akshay and I did an analysis of cost of treatment compared to income last year, when there was irrational use of tests and medicines in India.
While individual drugs may be cheaper in India compared to higher income countries, when many of them are used irrationally, the cost becomes significant. Add the cost of a CT scan and blood tests and a person with asymptomatic to mildly symptomatic Covid spends something like 120 USD for no reason at all, which is close to the average monthly income of an Indian, but in reality, far more than what 90% of Indians earn.
There is no safety net in India. 80% of patients from all strata of society pay upfront for their tests and treatment and even though there are Govt schemes and insurance, there is significant copay involved.
Point being that even in a poor country with apparently low costs, the costs are not really low when compared to what people earn.
Finally getting around to reading this (really enjoyed it).
As a strong proponent of my own UK system, without getting too post-structuralist, the definition of ‘better’ does a lot of heavy lifting here. Patient choice and waiting times are interesting metrics, but in my ‘socialist’ heart of hearts, I can’t weight them as heavily or even in the same category as health outcomes such as mortality statistics and life expectancy (particularly via measures such as QALYs). Do I want a health system that makes me happy, or that saves the maximum lives per dollar?
Subjective micro-oriented measurements, like patient satisfaction, risk missing the point that we’re all a bunch of self-important, entitled, demanding a**holes whenever we experience even the slightest bit of pain. The lawyer’s knee replacement on a six month waiting list begins to look much less pressing when compared to the office cleaner with life-threatening pneumonia, but the lawyer doesn’t have that context and only one of them is going to answer a phone survey or fill out a grumpy patient satisfaction questionnaire on discharge. The Rawlsian and the utilitarian ethicist in me are pretty united however in terms of which patient should be prioritised.
On this basis, the UK or ‘socialist’ model has several major advantages:
1.) It gives excellent value in terms of £/$/€ per extra year of satisfactory life expectancy
2.) It generates monopsony power for health buyers that effectively balances monopoly pharmaceutical power, helping to mitigate a system that relies partly on high R&D spending / IP rights
3.) While still only partially realised, the improved ability of a more integrated system to drive effective medical practice / epidemiology / pharmacology through data analysis has been very significant in UK health policy and academia during the COVID-19 epidemic; this also has spillover benefits for other health systems
I’m not saying that our current health system is optimal - like the author I’m intrigued to learn from the German / Canadian / Scandinavian models and would be very prepared to accept that other systems are ‘better’. However, I’d like to be very sure of my definition of ‘better’ before undertaking any radical steps towards reform…
If you look at the number of insurance policies offered in The Netherlands, you might think there are dozens. However, many insurances are brands or daughter companies of bigger groups. In effect, four big companies rule the market with around 85% market share in 2021. They are Zilveren Kruis (Achmea), VGZ, CZ and Menzis. https://www.zorgwijzer.nl/faq/welke-zorgverzekeraars-zijn-er
Since the minimum standard for the 'basic insurance' is set by law and the insurance companies are obliged to accept everyone, they mostly compete on price, brand and additional insurances (e.g. dental, physiotherapy when it's not medically urgent).
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs? I thought I understood the reasons why US health care doesn’t work, but Germany and the Netherlands seem to replicate its apparent disadvantages without running into the same problems. Why?
It does happen that health care providers are unable to reach an agreement with an insurance company. If you are a small practice (GP, physiotherapy, independent psychologist) it's basically impossible to NOT enter into contract with one of the 'big four', since 20% of your patients will get upset that they have to pay premiums.
Hospitals face a similar issue, but since they are much larger they have more bargaining power. An insurer would definitely lose face and it would make them seem like money grubbers if they are not able to reach agreement with a mayor hospital. It does happen from time to time.
In short - though I'm not knowledgeable on the topic - it seems that insurance companies in NL DO have market power over health providers.
Health costs have risen enormously over the last years and spending as % of GDP is up. However, most experts seem to agree it could have been much worse. Due to the increasing average age, there is an issue for the future when it comes to the ability to pay for health care as a community and find enough employees willing to work in health care.
so I take it he aint offed himself yet.
He's got until he hits 75. Then we can hold him to it.
kool-ade.
He <I>opposes</i> euthanasia, so why would he support suicide, particularly?
(He seems to be against expensive or elaborate care for old people, not for killing them like an elderly Logan's run.
And one should note that this is not entirely nonsensical as a <I>personal</i> position; doctors themselves are famous for refusing "heroic" measures on their own care plans.
A lof of very expensive and painful stuff in old people still leads to their near-term death.)
driving, too.
I think you're conflating "heroic" with good here. In medicine heroic measures tend to mean the last ditch effort to save a life e.g. amputating a leg to stop gangrene. Heroic measures means this will probably do more good than harm but it will do significant harm.
I think it's tempting to leapfrog the semi-private ones because people don't like the idea of a "two-tiered" system, that you get something better if you have more money. Me, I'm happy to let the people with more money have their better things if there's a reasonable chance for me to get it just by paying some money, instead of having to scheme or get in endless lines or go abroad or just wait.
Also, the "publicly funded but privately run" is how Medicare Advantage and, increasingly, Medicaid is run in the US, where the state/federal gov't contracts with an insurance company and pays them some kind of risk-adjusted "per capita" rate per enrollee, and the company assumes all the risks as it tries to enroll the public plan beneficiaries.
Also, one thing that makes the US system worse is its being tied to employment; I wonder how many issues with the private market might be at least partially resolved with a new equilibrium where the employer-sponsored plan is no longer required nor tax-privileged.
EDIT: Medicare ADvantage is an alternative style of Medicare plan (for old people) where all your care is covered and handled by a company, instead of the government directly. The companies offering these plans are "at risk" for all the costs, which they're expected to manage through "value-based incentives" and things like that; and they have a limited menu of incentives they can offer to get you to sign up, like free transportation and gym memberships. But it's totally voluntary for seniors to sign up. The hope is that this can optimize and streamline costs in a way "Traditional fee-for-service" Medicare can't.
> Me, I'm happy to let the people with more money have their better things
The issue with this is it means the people with money (i.e. the people who have the most say in society) have no stake in the public system, and a big incentive to actually want as cheap and terrible a public system as possible because it will mean cheaper taxes for them.
I mean, according to the above, Netherlands and Germany manage to have a private option which, anecdotally from a German friend, affords better treatment if you have the nice private coverage than the public option.
You can still tax high and have a decent public option, but if you outlaw all or most private payment or operation of healthcare, you make it possible only for the very rich to access anything other than your public option, which seems to be an issue in UK and Canada.
A nice thing about a private option with a genuinely good public option is that it at least in theory lets moderately well-off people go a lot more a la carte and spend in the areas that mean a lot to them (or not spend for things they don’t care about).
One of the obnoxious things about post-Obamacare private insurance is that there are no options available between “literally nothing” and “expensive because they wanted everything notionally covered”.
Permanent short-term health plans have been a thing since... 2017 or so? They might go away again, considering they haven't been Thanosed out of existence yet they might just quietly continue along.
These are the plans that are in between that you were looking for.
Right, but because I have employer provided health insurance, because my employer is legally required to offer it, I don’t really have that option (or I do, but I’m leaving a pile of compensation on the table if I take it).
They just choose to offer it. They could pay a small fee (2.5k per head after a certain number I believe) and opt out. You could seek out an employer that doesn't tie compensation to a non optimal system.
and from experience, somehow those things arent actually covered.
In The Netherlands we don't have a private system. We have the government literally set the price for 'basic insurance that the government deems is necessary', you can adjust kind of a slider between monthly cost/deductable, and that's it. Insurance companies mostly compete on like 'ten free yoga lessons!', 'we are known for better service', '$100 off your first year'.
The big exception is dental, which does not fall under basic healthcare, so companies offer extra packages, which they also do with things like a shrink or fysiotherapy, which are normally only covered when your GP says you should go.
Yep, sounds familiar to our German way. The "secret" seems to be to have the insurances compete on low administration cost. (Some smaller insurers who run into troubles here are regulary "integrated"/"bought" by bigger ones - and some "new" ones try their luck growing on streamlined procedures). - Those funny extras they throw at us to lure us into swaping are very secondary. - The docs have much less hassle cuz it is all one price (or two: "insured" vs. "privately insured"). Imagine a doc had to deal with dozens of prices, some insurances not covering certain stuff others do! Nightmare! And hell of extra-costs). - The docs love private (insured) patients, as they can charge them around 75% more plus for some less cost-efficient stuff. (Dermatolgists loved looking all over my skin when I was young and private. Nowadays ... - well thanks for letting me know I enjoy the best health care in the world. ) - Fun fact: many Germans with private insurance (self-employed or high salary) stay unmarried. As their partner+kids would be forced into theit contract and make it much more expensive.
In the Germany system don’t you get stuck in the private system if you stay there too long?
Kinda. And the premiums go up with age, of course. I got out by no longer being a Beamter (civil servant) - a fate I could not bear for more than a year. But it is complicated - wikipedia (and the book) should have more info.
(And the government subsidises the basic premium for those on low incomes). However, for me this fits the category definition "Individuals use their own money to buy insurance from private companies" a la Switzerland. It certainly doesn't fit "the government pays 100% of your costs". You're going to pay 80-200/month for insurance - to a private company - plus probably some out of pocket expenses/deductible for usage. What is the distinction being drawn between these two systems? Is it saying that the government acts as a middle man - they pay the hospital/doctor, insurance reimburses government?
It seems like it would only work if your politicians aren't already captured/corrupted. If they are, then the public system would suffer as Angus said. Arguably this wouldn't work in the US for this reason.
I second that anecdote. I'm privately insured in Germany and it's GREAT (for me, that is. although I do subsidise the publicly insured people to a small extent, so not exclusively for me).
And I had that issue you describe in the UK - I didn't want to wait as long as I would've had to for a specialist whIle living in the UK, so I looked for private options (which my German insurance, under certain circumstances, like those I was in, would cover).
It was possible, but there was little choice, and it was a lot more expensive than in Germany.
As it stands I'd say the only people with an actual stake in the healthcare system have that stake going in the direction of: "Make things more expensive" -- as much as the populace at large would like things to be cheaper their interest is diffuse.
If your moral or intellectual model of healthcare is that healthcare is perfectly inelastic then private options are unethical since it's more money chasing the same supply of goods, and the only ethical choice is to ration it at the lowest price point possible. Plenty of voters probably think this way subconsciously and plenty of economists will probably argue it explicitly.
If the supply is sufficiently elastic, and you combine private healthcare with a sort of sales tax that finances the public option, then the existence of
Everyone in the US with a concrete stake in the healthcare system would want something like a (legally instituted or not) perfectly inelastic supply of medical services plus a government that pays "The market price"
Except healthcare isn't perfectly inelastic. I do software development for a living and volunteer in EMS. If pay in EMS was to outdo my software engineering job I'd do that for a living. And if doctors were paid more I'd go to medical school. (Opportunity cost is a bitch)
I don't think HC is perfectly inelastic, but rationing it makes sense if it was.
I think that's a real theoretical worry, but we can see how it has actually worked and it doesn't actually seem to work that way where it's been implemented. And you also have to say 'Compared to what?' In the Private US system, basically young(-ish) people with money just don't care at all that there even is a system available for people who may fall through the cracks.
It has worked that way in plenty of places. Chile and India come to mind. Also Russia iirc. From my conversations with people from those countries, the public option is horrible and you essentially have to go to the private to get anything like reasonable care.
So maybe not in first world countries, or maybe just not yet, but saying "it doesn't happen" is not accurate.
Looking at incentives is so important because it shows you how the system is going to trend over time.
Do the "people with money" ever have a stake in the public system? I mean, it sort of depends on how you define "people with money", but I suspect that in all of the surveyed countries the 1% are basically going to go to whatever doctor they like best and get whatever medical treatment they want (or that their doctor tells them to), and if the public system wants to pay for it, great, otherwise they'll just pay themselves because is there any better use for their money than (perceived) better health care?
So, they'll *prefer* the public system to be generous in paying for high-quality health care. But being in the 1%, they are almost by definition net taxpayers, particularly in health care. So they'll know that any plan that ends with "and the public system can now afford to provide €1,000 per capita additional high-quality health care", is going to start with >>€1,000 per year additional taxes from their 1%-er selves.
There's an important difference between the top 51% being able to buy their way out, and the top 51%.
?
“Also, one thing that makes the US system worse is its being tied to employment;”
This seems so obviously true that I was shocked that Obamacare went all in on entrenching it even further by MANDATING that most employers provide a particular level of insurance.
Portability from job to job, and state to state seems like a thing to definitely try.
For many employers, paying the penalty is cheaper (and provides cheaper insurance) than paying for the employee's insurance. Too bad it's phrased as a penalty. When Biden increased the Obamacare benefits I kept wondering if the strategy was to just keep turning up the value of Obamacare over traditional employer health care until enough Accounting/HR wonks just decided to flip the switch and suddenly you have a bloodless healthcare revolution.
Too bad there aren't enough wonks out there and public image is still a cost consideration.
My theory is that the nature of law being written in the US is - gather all the stakeholders [with lobbyists/organizations] - American Hospital Association, American Medical Association, Disabled Veterans' Groups, AARP, large health insurers or their representatives, and big pharma - and split the difference between all those interests, with tons of special carve-outs and special interests to go around. Hence you get gigantic unreadable bills that benefit specifically health insurance companies and heavily favor health system consolidation/monopoly formation, and increased bureaucracy. There aren't actually all the actual stakeholders - just the ones with institutional knowledge, but also resources to communicate that knowledge, connections, and political pull.
(This is also why I assume that US version of "Medicare for All" will be government-paid private plans and you pick one, run by insurance companies who are "at risk" for your costs and therefore with incentives to deny your claims and pay as little as possible - meaning it won't really improve quality or accessibility as much as proponents claim.
Medicaid is government paid private plans where you pick one and they are run by an insurance company. The only information I see out there (5 minutes googling) about denied medicaid claims in Texas is on the provider's end, not the patient.
No, I'm not quite sure why there are several different private insurers to choose from under medicaid. Especially considering you can change them at any time and BACKDATE your change. It's weird.
Perhaps the more accurate claim would be, that the incentives stack up and point towards denial, or reduction of care (or selection of patients). If the plan is at risk for all the costs, they will of course try to manage the costs (subject to regulations - they can't just deny every claim, because they get reviewed regularly by the relevant regulatory body on tons of metrics). They have whole "utilization management" and clinical review departments - "managed care" in a way that other countries definitely weren't doing, at least not recently.
I worked for a large managed care provider, they were all about "disease management" programs and value-based incentives, including capitation-based reimbursement to primary care where possible, diverting care to "high-value" practices, using various sorts of approaches to reduce expensive care, emergency department admissions, directing to more cost-effective post-acute facilities.... Some of these might significantly reduce costs without compromising quality of care, but it's hard for me to believe that something doesn't get cut somewhere - e.g., access to more expensive drugs, novel or additional treatments, out-of-network specialists, and so forth. I didn't delve into it too deeply, because that wasn't my direct job; but it seemed like the positive programs - data-based disease management programs, care coordination initiatives for high-claims individuals, community outreach, etc. appear high-touch and therefore expensive: great outcomes, but I don't know if cheap, necessarily (if they're to be done well). This is very different from "traditional Medicare", which basically covers most things that fall in its purview. Maybe someone who is an expert in managed care specifically can weigh in, but again my strong bias to believe that a company that's on the hook for certain costs - facing a fixed reimbursement rate per person (perhaps adjusted based on how sick the person is) - will seek to minimize those costs any way they legally can, balancing it against regulation and reputation, of course.
Hey, would you be open to talking to me about your experience working for a managed care provider? I am researching the incentive landscape around psychiatric crisis care and am really lacking an understanding from the insurer/payer side. (if so, DM me on Twitter--I'm @utotranslucence)
When I use "Medicare for All," it means just what I choose it to mean—neither more nor less."
Most people have no idea what they're actually proposing, besides "fuck the current system."
That's not a bug, it's a feature. Keeps people desperate for jobs, and unlikely to stand up to their employer/leave.
It's a political feature: "If you like your insurance, you can keep it". A very large number of voters already have insurance that they want to keep.
Yes, exactly -- mandatory employer-provided health insurance is the one clear and obvious way we are different from the other countries being studied. Almost no decision-maker has to bear the full cost -- not for care, not for premiums. And Medicare, which could be a disciplining influence, instead bases its formula on what insurance is paying. We have market power among hospitals, market power among insurers, and pharmacy benefit managers who do...what, exactly?
Come to think of it, considering how arbitrary and made-up the prices are for hospital services here, when we are able to find out what they even are, it's not surprising that alternative arbitrary budgeting methods actually work just fine.
Well, that was the point of the public option, which was originally part of Obamacare but got killed by Joe Lieberman. Without a public option there wasn't much choice but to freeze the current system in place, or else you would risk there being no options at all for large swathes of the employed public if private insurers chose not to enter the market in a given state. I think had the public option passed, there's a good chance the employer mandate would not have been included (and I definitely would have taken that trade; I wonder whether Joe Lieberman would have).
At the time there was definitely political pressure to "save" employer health insurance too because many people didn't want disruption to their existing health plans even though they almost certainly would have had better options waiting for them if the employer-insurance link was broken. One of the biggest complaints about Obamacare right after it went into effect was people upset that their employer plans were being modified/replaced.
There are two-tiered private systems where richer people get nicer things (eg Australia), but I don't think that's what's happening in Germany and the Netherlands.
My impression is that Germany and the Netherlands are like charter schools in the US, where the government pays for everybody but you can still choose which of several competing institutions you want to use.
https://www.commonwealthfund.org/international-health-policy-center/countries/germany
This description describes the private option as follows, towards the end of the blurb:
"Germans earning more than $68,000 can opt out of SHI and choose private health insurance instead. There are no government subsidies for private insurance."
The set of criteria is more complicated:
https://www.expatrio.com/living-germany/health-insurance-germany/private-health-insurance-germany
From what I've heard, it includes quite a lot of people because there are quite a lot of civil servants because Germany likes to class people as civil servants.
So there *is* a two-tier option, but there are choices within each tier. About 10% of people (see link) choose the more expensive tier, it comes with lower waiting times etc.
Edit: I should add that a friend of mine is a doctor in Germany, and told me that apparently they lose money on the non-private patients, and make money on the private patients because private patients pay a lot more. Nobody is really happy with this situation, but it has been this way for a while.
Why do the doctors see non-private patients, then?
Some don't.
They often claim that, but it’s not true. Doctors can easily chose to accept only private patients, however, it is pretty rare to do so, because the number of patients with private insurance is too low to provide enough volume.
May not be true for all (or even most) doctors? Could have also been exaggeration.
I used to work in billing software for doctors in Germany. This claim is definitely not true.
Maybe its true for some doctors with higher costs but not others.
Edit: comment below claims " Also, doctors are only paid for a certain number of mandatorily insured patients per quarter – they can treat more, but they won't get paid for it " so in terms of marginal cost once they've filled their quota, they make zero money on the non-private insured people.
I'd guess that if this is true at all (which I'm skeptical of) they 'lose' money in the same way that McDonald's 'loses' money when someone buys something from the dollar menu, rather than one of the more expensive options: ie, if everyone used the lower cost option, the fixed costs wouldn't be covered, but it still brings in more money than the variable costs (obviously, since if they were losing money on the variable costs they wouldn't be doing it in the first place).
I think that thinking of the German system as "ACA, but the mandate is enforced so nobody is ever uninsured" is a good approximation (the "single payer part" being the subsidies for lower income individuals that also exist with ACA). At least for white collar and unionized jobs, you get private health insurance from your employer that is significantly better than the basic public one much like in the US.
That is a better approximation, but an important thing is missing: There are only two (mostly overlapping) „networks“. Doctors, hospitals and pharmacies all charge according to the rules of either public or private health insurance. Most accept both types of insurance. So „out-of-network“ issues are almost nonexistent. Pricing for one type of treatment is the same at every hospital for everyone with the same insurance type. Because of that Hospitals and doctors don’t compete on price, but on the quality of service.
> Most accept both types of insurance
Yes. Though there are a number of specialists that only accept private insurance, this is communicated and checked very clearly and in advance so I've never heard of anyone ending up in the wrong category by mistake.
Germany has two parallel systems. One is the single-payer-through-private-companies that you described. In that system (called something like "mandatory insurance" in Germany) you pay a certain percentage of your salary and get health care. The other is a "private" system but there are still lots of rules, I think. Doctors get more money when they treat these private patients but this is also capped at, I think, 2.5x the money they would get from a mandatorily insured patient. Also, doctors are only paid for a certain number of mandatorily insured patients per quarter – they can treat more, but they won't get paid for it – whereas they always get money for the privately insured patients. The result is obviously that doctors give preferential treatment to those with private insurance. But also that privately insured patients are subsidizing those with mandatory insurance in a way.
You are allowed to get private insurance if you earn more than a certain amount or if you are self-employed. The system is either-or: either you have the mandatory (single payer) insurance or you have the private one. Though, if you have the mandatory insurance, nothing stops you from telling your doctor you are privately insured so that they send you an invoice which you then have to pay for by yourself. It's just that most people can't afford that (or rather that it's risky).
(As a side note, if you look at this from the Hansonian perspective on healthcare, then it doesn't necessarily result in better outcomes for those with private insurance. It's true that those patients get _more treatment_ but a lot of it is useless and only happens so that the doctor can earn more money. As someone with only mandatory insurance, you will likely get less treatment but you should always be able to get the really life-saving care, so you might come out basically the same. My mother has private insurance because she is a teacher – who always have private insurance for historical reasons – and every time she goes to the doctor they find some treatment they could do, whereas my father who has mandatory insurance gets told to drink water and rest.)
Just adding my two cents: The insurers in the German mandatory system aren't really private companies, but public (as in "delegated by the administration with public tasks") corporations. They are entities under public law and can't fall into insolvency for example. Comparing them with private insurers really underestimates the grade of socialization in the German economical system. This also explains their bargaining power, because all the public insurers negotiate as bloc with the manufacturers, representing >85% of the market.
You are right about their legal status and that they got huge bargaining power, but not everything is negotiate as a bloc and there are many different public insurance companies. This is not the kind of „one-size-fits-everyone“ socialism.
They can also go into insolvency since 2010.
I would argue that the segmentation in many different public insurers has mainly historical reasons and isn't a fundamental weakness or strength of the system, because by and large the indivual differences between the insureres are marginal.
The price of pharmaceuticals is bargained on the insurers' side by the collective umbrella corporation, the GKV-SV.
You are technically correct (the best kind of correct) on insolvencies, but the insolvency proceedings of public insurers differs so fundamentally from private companies that they aren't comparable, mainly because claims against public insureres are backed by a collective fond.
The insolvency rules are different, but they still get an important job done: Inefficient players are removed from the market, which is also one of the reasons why the differences between the insurances are so small. While the large number (97, used by more than 1000) of insurances has historical reasons, and a much smaller number could work just as well, or even better, I argue that it is an important feature of the German system to not just have one large insurance. With multiple insurances, they will compete on the efficiency of the administration. Inefficient players have to improve or will be forced to leave the market. However, if all or most of the insurance providers struggle you know that the system needs more money. While if you had a single big insurance and it is struggling, you don’t know if this is due to inefficiency or because not enough money is available for the task.
Another thing: the rate of the mandatory system is ca. 15% of your gross income (employers pay half the amount).
Lowest income the assurances assume is about 1200€/month and if you earn more than 63000€/year the rate is capped, so you pay a maximal rate of 756€/month yourself and your employer pays the same amount.
So both companies and workers are interested in low rates.
Your insurance may ask for 1-2% or/and offer some additional treatments (some pay for homoeopathic "medication" e.g. LOL) People are allowed to change once per year, so this is not a monopoly but earnings are capped.
The good thing about the mandatory system: your family might be insured as well (kids until 25 resp. end of study/apprenticeship, your partner in a marriage if they have no income of their own) and they do not care about your health status.
Private insurances start often cheaper if you are young but get more expensive every year. Of course if you are disabled or have a condition, you smoke, are obese etc. the insurance is expensive immediately.
So the mandatory system has more people who are sick and the private ones the more healthy and rich.
Just to be clear, the UK has a private medical system including hospitals totally separate from the NHS where you can buy top up medical insurance to the NHS, which allows you to see specialists and get treatment quickly. Emergency cases though are usually treated on NHS. About 10% of the population pay into this or get it through work. It doesn’t seem to cause much resentment. There is little regulation on the cost and content of these plans, though of course the medical care can’t deviate from UK standards. For a family of 4 annual costs are around £2,000. To me the UK system is a good compromise between looking after the less fortunate with some pretty good health care at a low cost for the country but allowing those who want a higher standard of care without too much regulation.
Yes, I know that you can get private insurance in the UK, but you can't opt out of the NHS, right? I'm not completely sure whether that is a meaningful difference, but when you get private insurance in Germany, none of your money flows into the "single payer" system. Also, people with both kind of insurance go to the same doctor in Germany – I have never heard of a doctor or hospital that only takes one or the other kind of insurance. But in the UK there are private hospitals that only take private insurance (or rather, they send you an invoice and you have to pay the money somehow), right? And you couldn't just go to an NHS doctor and say you want to pay for yourself, right?
Note that I'm not making any sort of claim about which system is better, but they do seem clearly different to me.
You can't not pay for the NHS.
sample size of 1 but my experience of the system is:
My work offered private (probably quite a cheap plan) - I turned it down as the main benefit was access to GPs quickly. I didn't have to pay for it but i did have to pay tax on the 'value' of the benefit and even that was too much. They would let you go to in network private hospitals and you might have shorter wait times but they were only covering stuff that you'd get on the NHS anyway and my experience with the NHS has been good.
My wife has given birth in NHS, I've had 2 ops and an ongoing blood condition. All times I've been pretty impressed at the level of service. A friend of ours got cancer at 30 and I was also impressed with his care.
Another friend has ongoing problems with something vaguely IBS shaped. He has been to his GP a bunch of times but they aren't showing much initiative. Another friend with mental health issues had a similar story.
I think my blood condition got a lot more traction because there was a binary test and if the test was positive there was a protocol to follow. Refer to this specialist, give this medication until this number is in this range. For more subjective stuff people tend to have worse experiences. Maybe going private in these cases would mean they would but more effort into finding what is actually going on.
If I wanted to see a GP I could:
* go through the NHS process and get a 10 min appointment. If it isn't 'urgent' (which has quite a low bar) it will take weeks to be seen. If I just give vague sysmtoms I feel its likely I'd be 'fobbed off' with something like 'drink more water, do some more exercise and come back in 3 months if its still an issue'
* go privately and see a GP immediately (who almost certainly does NHS work too). I could pay for just that visit or if i was part of a private scheme this would be covered by that. I've never done this but I would expect them to be a lot more proactive.
I've mentioned ages in all the previous examples because I'm aware of the level of service not being as good for retirement age people. My grandfather was in a hospital for about 3 month until he died recently and I can't say the quality of care was very good. From a completely dispassionate perspective I'm not sure spending money on better care for him would be cost effective.
I think one of the benefits of the NHS is that it has to prioritise so minimising the number of unnecessary treatments, this is overall good for society but of course if your treatment is the one being deprioritised it sucks.
I think it's worth noting that in Australia the private system only offers some services, with the most specialised procedures (transplants, major trauma, most paediatric specialties etc) only offered through the public system.
The private system we have, imo having worked as a doctor on both sides, is great for bulk surgical procedures like knee replacements but not very good at looking after people who are acutely unwell or have multisystem long term illnesses. Private medicine has very little oversight (you are treated by one attending/consultant who can basically do whatever they want) compared to the public system where departments and the presence of trainees act as a kind of peer review which I think leads to better medical care. If I was seriously sick I would rather be looked after in the public system.
I think there's a fair argument to be made that the private system skims off the healthiest and most straightforward cases and dumps the rest on the public system. I don't know whether this is cost effective or not - obviously there are efficiencies which come with higher throughput, but there is definitely overservicing and waste in the private system. It's a source of resentment.
Much of what you say is true of the UK as well. I would come down on the place that there is a political limit on the amount of funding for a national health service so people who go private are releasing resources for those who do not. Like school systems. So it is a good thing. But I can see why communitarian leaning people don’t like people who have a limited stake in the success of the state system.
That was my thought too - I spent a year working as a junior doctor in the UK and IMO the public systems are almost identical, we just spend a bit more in Australia.
My view is that on average private patients don't get significantly better medical care (just a nicer room and marginally better food), so while I think the communitarian argument has its merits I'm not sure how relevant it is here.
I think it would be fairer if the government ended subsidies for private insurance and let the companies/hospitals really fend for themselves. As it is they have negotiated a cosy niche where they are paid to provide the highest yield procedures but shift costs back to the state when it suits them.
I don’t know about Australia but I don’t think there are any subsidies in UK for private medical. But of course overall the NHS is a regressive system, I am always amazed every time I get free medicines even though I could well afford it. A system that charged high earners more would be more fair, although I guess since most of the top decile has private maybe it works out.
The system does charge high earners more. At least, assuming they pay tax.
In the Netherlands individuals pay (order of 100euro per month) for insurance. If you have low income the government will subsidise this. The price for insurance is basically fixed by the government, and insurers can’t refuse people. And you are legally required to be insured.
I don’t know how true this is, but among people here I know the Dutch healthcare system has a bit of a reputation for just ignoring problems that would be treated in other countries. I’m slightly skeptics of satisfaction ratings, as they are relative to expectation (Dutch food being an example where this may play a significant role…).
Actually, in the Netherlands, the government decides what will be covered in the basic plan, and every insurer then sets their price. Every 1th of January, consumers can switch healthcare insurers, and price is an important consideration (and prices are widely advertised in November/December). Some plans are cheaper because not all providers are covered, meaning that, for example, you might not be able to go to your hospital of choice. Still, I have a limited plan, and always could go to the providers I wanted.
GP's in Holland seem to be more reluctant than their colleagues abroad in prescribing drugs and treatment ("Let's see how it goes before we do something"). I think this is more a question of medical culture than to limit costs, and I like it, because in general, it is a good thing to be reticent in prescribing stuff.
Insurers bargain with providers over prices. The government bargains with pharma over drug prices.
Waiting lists for many procedures can be long, but I can't compare them with other countries.
Dental is included in the basic plan for children under 18.
Insurers and health providers are private entities, but government sets many rules limiting their behavior. Still, they can go broke (and sometimes hospitals do).
My understanding is that the Dutch system also has the unique property (though it gets muddled in practice) of separating out short-term and long-term care. Where long-term is more fully socialized and short-term is more market oriented. I could imagine something similar in the US where you have the government provide something like catastrophic coverage on a universal basis, which would free-up insurance companies to have more competitive plans for the remaining (capped) coverage.
The other big factor is that "Single Payer" is a massive stealth transfer of wealth, and so this appeals to the sort of people who want to do massive transfers of wealth.
Thats technically true but for me at least isn't a useful lens.
I don't feel the same about:
* giving everyone access to a minimum standard of healthcare
* giving poor people the same amount of money it would cost to given them a minimum standard of healthcare.
Maybe its because I'm in the UK and we've already done the 'wealth transfer'. To transfer it back, and have less fortunate people be vulnerable to crippling medical bills for minor problems so I can save on national insurance, seems incredibly selfish
In countries with private and public systems the private system can sometimes get you into surgery quicker for elective surgeries, or you get a nicer room, or sometimes more options - like cosmetic surgery. If you are hospitalised in those systems in an emergency then there’s no difference in care.
Depends. There are absolutely countries where there's a two tier system and the public option is fucking atrocious.
At least in Germany, comparing it to economy vs. business class might be a good comparison. Both tiers will get you from A to B, you won‘t be more likely to get into fatal accident if you travel coach rather than business, but the process can be much nicer in the more expensive tier.
That's not what people mean by a two-tier system, though. What you're describing is fine - so long as everyone uses the same hospital and same doctors, and the only thing you can pay for is frills (private room, better food, whatever), then you're ok.
A two-tier system is you can take the government DC-3 that's held together with bailing wire and twine and one of the wheels is just a skid, or the the private 777 with proper maintenance and flight crew.
And in healthcare that looks like a public hospital where you have to bring your own bandages and medical supplies because it's so poorly supplied vs the private hospital that is, you know, a hospital.
Hey! I wrote a longer comment below, but there's some good evidence that you can't just get better healthcare in the US by paying more money; in other words, the care that the richest Americans get is about equivalent to what average folks in other rich countries get: https://bit.ly/3nGRHL8. In other words, there is no reasonable change for you to have better things just by paying some money; in the US even if you have access to top tier healthcare what you're getting is something like average French or German healthcare.
Even the "socialist" UK has a private option, often based on cash payment rather than insurance (thought that exists too.) Because it has to compete with free, it tends to be quite a lot cheaper than in the US, sometimes even less than the co-pay for insured patients in the US.
I am in favor of universal free healthcare, but I don't see a problem with people also paying privately if they want to. The alternative would be banning all health care outside the government system, which seems draconian. I think that paying for private healthcare when there's a free government alternative is a lot more justifiable than paying for private education, which seems much closer to zero-sum competition.
More money incentivizes more supply, and this is true even if the constraint is a fixed number of staff. For example, there are doctors who work full-time in the NHS and then see cash-pay patients on the side for a few hours a week. I guess in an ideal world, the NHS would have so much money that no-one would need to go private, but I'm not aware of any system that works this way.
Canada works this way. Most Canadians would tell you they wouldn't want it any other way.
Since I had no idea who Dr. Ezekiel Emanuel was, my immediate reaction was "He's either Jewish or African, I'm not sure which" 😀 So I had to look him up and went "Oh, *he's* your brother?"
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
That's... certainly one way to look at it. I think the view in the UK would be (a) various governments have and are trying their best to privatise chunks of the NHS - there is some concern that large American healthcare businesses are competing for contracts and buying up lots of healthcare provision which they run for-profit, funnelling British taxpayer money back to the shareholders:
https://www.ft.com/content/4f428fc8-fefe-11e9-b7bc-f3fa4e77dd47
https://www.theguardian.com/society/2021/feb/26/nhs-gp-practice-operator-with-500000-patients-passes-into-hands-of-us-health-insurer
(b) there is constant meddling with the structure of the health care system in Britain which ends up with layers of bureaucracy and lack of efficiency (c) health is one of the huge drains on the budget, along with social welfare and education; no matter how much money you put into it, it always requires more (d) various Health Secretaries have been very unpopular, see Jeremy Hunt (and the, um, rhyming slang version of his name)
https://en.wikipedia.org/wiki/Jeremy_Hunt%27s_tenure_as_Health_Secretary
https://www.thecanary.co/trending/2018/06/25/the-bbc-accidentally-referred-to-jeremy-hunt-in-rhyming-slang-again/
The NHS is doing its best but there are a lot of problems. Then again, compared with the Irish HSE, it's much better.
Does this review and book not refute that the NHS is expensive and inefficient, at least compared to peers? The table shows it’s pretty much the cheapest option. To me that suggests:
A) bureaucracy exists In all systems - the NHS probably avoids a lot of bureaucracy by removing the insurer/claim dynamic, but instead gets the public sector bureaucracy cost add on
B) People hate taxes and perhaps paying for healthcare through a general tax (paying for everyone) makes people feel more negative about it than paying for your own insurance only (paying for me only). Bit the lesson from the review here is seems to be you can eat your dinner hot or cold, but you have to eat it.
The theory I heard for why the NHS is cheap is that it was founded many decades ago when healthcare generally was cheap, and bureaucratic inflexibility meant it resisted changing its tightfisted ways for a long time (though it has more recently become less of an outlier as it got more expensive).
I think that's a common argument Megan McArdle makes: it's much easier to *keep* costs low than to *lower* costs.
Note that the NHS budget is a big political thing. Underfunding the NHS is one of the main accusations that Labour make against the Tories.
Is there an argument for preventative care. Most developed countries don't want to just let people die so hospitals are obliged to get them stabilised before letting them go. Given their problem wasn't actually fixed how long will it be before they are back in the ER?
These visits are expensive and have to be subsidised by higher fees for paying customers. Maybe its just cheaper to give anyone treatment that needs treatment (from a menu of pre approved cost effective options)
It's an idea people throw out, but I haven't seen evidence for that.
I tried to find some numbers. The best I could do was that us spends roughly ~35B a year on 'uncompensated health care services' which is pretty small change compared to the $4.1T it spends on total health care.
So thats definitely not the main reason UK care is cheaper than US care
I feel that proactive care should do more than save us $100/capita. Maybe it isn't captured in these figures but does lead to a healthier more productive workforce...another nice idea I have no evidence for
Lots of people have tried it before, since it seems like a free lunch. It rarely works out.
It depends. Getting diabetics to be compliant with their medication could save tens of thousands of dollars per year. Most, in practice, will save little. The problem is that the people who are non-compliant are usually that way because they choose to be, rather than due to cost or anything else.
Sort of - healthcare was cheap as the number of conditions that could be effectively treated, was really quite low - the NHS was created in '48 after the discovery of antibiotics and their initial use during the war.
The relative cheapness is the capital cost - the British Government anticipated really quite high, bordering upon truly massive, civilian casualties during the war, partially down to the expected use of poison gas, and over-estimating the effectiveness of aerial bombing. So, an awful lot of capacity got built out quickly, of varying, ah, quality.
Neither of those scenarios actually occurred as expected. So, a great wodge of stuff was there to be used after the war. F'rinstance, the hospital where I was born in '69, and had some broken bones sorted out (at age 7 and 16), was a building dating from around 1920 or something, and a whole load of Nissen huts. For all I know, those huts had been there, in use, since 1940.
The other part is that some number of hospitals had effectively been built/created much earlier, essentially in acts of Victorian (or possibly Edwardian) philanthropy. And they were operated as charities.
For those, there were no identifiable owners - so no compensation paid upon nationalisation.
This gave rise to a number of voters, in my grandparents generation, who utterly despised the Labour Party on the grounds that "they stole our 'ospitals".
Zeke and Rahm have another brother, Ari, who's a Hollywood agent that I believe even had a TV show about him, called "Entourage": https://en.wikipedia.org/wiki/Ari_Emanuel
I found out that Singapore has one of the more reasonable healthcare systems out there, with only 4% of GDP spent on world-class service. Basically, it requires the citizens to pay a small part of the healthcare costs out of pocket, and the rest is financed by taxes. There's a lot of interesting intricacies that make it work well, all detailed in this 16-minute video by a good economics youtube channel: https://youtu.be/sKjHvpiHk3s
Singapore is not good for non Singaporeans ... Who are a fourth of the people.
Even granting that, it would remain true that 3/4 of the population gets very good healthcare for 1/4th the cost. Maybe there's an access issue but the core design is very good imo.
The core design is decent except it still relies on private insurers, which is odd on an island of 5 million, and you can get denied for pre existing conditions. Additionally, the fact that foreigners are not part of it is a problem.
in what way does it *rely* on private insurers? yes, people may choose to get supplemental insurance or to participate in private providers, but this is true in every country with nationalized healthcare. it would be insane to outright ban private insurance (as Bernie Sanders has suggested).
Problem according to who?
This is not a valid criticism of the efficacy of the Singaporean healthcare system. This is a criticism of their value system with respect to public spending.
(and imo, a meritless one; what's the issue with the Singaporean government restricting access to social programs to Singaporeans?)
I think I agree with you, but it's interesting to consider that Singapore has such a large number of expats. Something about the place requires a lot of non-singaporeans to be there doing stuff. Not because the citizens don't work, but just becauese the culture has evolved to live off a supply flow of outside blood.
So Singapore is refusing to offer health care to a population that is a vital and organic part of it's fabric. I think that's morally fine, but it's still interesting.
Any foreigners here, like me, are here of our own accord.
You're there of your own accord, but the large majority of non-citizens in Singapore are lower-income, some even there for generations, and have much more limited options. Upper income non-citizens are clearly a different group and not really who is being discussed. This is a somewhat less extreme version of being the British banker in Dubai who says foreigners have it great there; true for British bankers, perhaps, but absolutely not true for Indian manual laborers, who far outnumber the British bankers. It's hard to take any policy advice too seriously from places like Singapore or Dubai that rely so heavily on low-wage foreign workers who are always excluded from public benefits to make their economies run.
Well, the construction labourers from Bangladesh and India are here because their other options are less enticing. Even low wage in Singapore is good by their local standards.
Similarly, I am in Singapore because my other options are worse.
You seem to imply that it is bad of Singapore to let poorer people work here? Countries like the UK which don't let poor people from India work there are even worse for poor people from India.. Alas, out of sight is out of mind.
I do agree that it would be better for humanity if Singapore, and other countries, opened themselves more to (economic) migration.
If the UK could let more people in to work, and somehow use that to make the NHS cheaper and better for locals, that would be great! Even if they don't open the NHS to the foreign workers.
That is the standard argument for extending national coverage to non-nationals (ie, that they contribute to society so they should be included). But as alluded to by Matthias, I think freedom of exit satisfactorily addresses this point.
I'm a non-Singaporean living in Singapore. It's great here, not sure what you have to complain about?
How do non-Singaporeans access medical care? Do they pay doctors out of pocket every time they go for a visit? Or are there insurance options available for them?
Different people do different things.
I often pay out of pocket, but there are also insurance options available.
Many expat white collar professionals get medical care through their employer as a benefit. But that's not mandatory to offer.
If you employ a foreign domestic worker in your household, the government mandates some insurance; and there are multiple competing private insurance providers for that.
I don't know about foreign blue collar workers. Though in general, the government is more paternalistic for poorer people, than for richer people or richer expats.
I've also heard that singapore has good+efficient healthcare. althrough I have not look into it. More info on Healthcare triage:
https://www.youtube.com/watch?v=WtuXrrEZsAg
Lived in Singapore for 5 years, doctors were good, if expensive, but the biggest issue was that as a foreign resident, you don't get to take part in all of the parts of it that keep costs down. Foreigners don't get the HSAs and they don't get the basic government Medishield coverage. So, as a foreigner, you are in the same boat as the US system where you pay for expensive private insurance on your own, or you are reliant on your employer to do it.
Paying out of pocket as a foreigner here isn't all that bad.
For example at least you get a good estimate of costs upfront.
yes! everyone benefits from having a system that centers price-sensitive consumers and provider competition. even those not covered by the system.
A big part of it seems to be the compulsory savings accounts that can only be withdrawn from for healthcare expenditures. I'm not American, but I do not think most Americans would agree that this is a "reasonable healthcare system".
They might see the light of reason, if you passed the savings of the system on to them?
Maybe. But enough Americans seem to place a high enough premium on freedom that I think this would be a hard sell.
Not sure. A mandatory savings account sounds like more freedom than eg taxes.
They can probably come up with a better name, too.
HSAs are very popular for higher income americans due to the invective of tax savings. There probably is a way to scale them down, but it gets problematic once you have people living paycheck-to-paychecks with savings available (even if you pay a penalty to remove it).
In Singapore you can't remove money from your health savings account for non health expenses, as far as I know. Not even with a penalty.
we literally have compulsory retirement/health "savings" in the form of payroll taxes, although we do not get to keep the premiums (nor earn a guaranteed return). I would much prefer my 6% of income to go to a 401k and an HSA than to the pyramid schemes known as Social Security and Medicare.
it's actually 12% of income... (employer and employee each pay 6%)
Singapore is a strange omission here, given that it a) is unusually cheap, b) works well enough, in that it hasn't kept Singapore from consistently being near the top of the life expectancy rankings, and c) actually is very different from the others; among other qualities it has a very high proportion of out-of-pocket spending.
That said, the cheapness of Singapore's health care system is probably overstated due to its GDP being inflated by Singapore's finance industry.
High GDP might be a part of the explanation. In absolute numbers, healthcare spending in Singapore is $4,439 per capita. Quite expensive with #20 spot globally, but still below most of the countries analysed here, save for China and Taiwan.
> People talk about how the US system is “privatized” and the Canadian system “socialized”, but a lot of this comes down to whether your payments for the same basic package are marked “paycheck deductions” vs. “taxes”.
Having compared what is for sale in America to what is provided under OHIP, this is very much not the case. OHIP provides far more comprehensive insurance and greater peace of mind than any insurance I was able to find for sale in the US. You quite literally cannot buy the kind of insurance I have in Ontario in America.
Could you clarify? I'm very interested to know about it. In the US I can buy a plan with no (apparent) limits where I pay $6,000 at minimum and $14,000 at maximum ($0 at minimum and $8,000 at maximum after subsidies). Or I could spend a few hundred more and get a different selection of doctors.
What actual content for the insurance ("more comprehensive") is different in Canada?
Maybe things are different now? When I looked I couldn't find anything this good.
OHIP offers:
- no deductible
- no limits of any kind
- any specialist, any diagnostic covered
- hospital stay, surgeries, etc. fully covered
- no gotchas
- no having to sift through options (honestly this is huge for me, ymmv, but I don't think you can underestimate the importance of knowing that your coverage is good with no effort)
- no "out of network" BS, I can go to any doctor or clinic or hospital without any restriction
- no signups (e.g. I'm trying to find American insurance plans to compare, and I'm seeing "Open Enrollment for 2022 health insurance has passed", what the fuck is that lol)
I just spent some time trying to find a provider, and holy shit that was a nightmare. Best I could fine before getting too aggravated was $6000 US/year with all kinds of caveats, deductibles, copays, in-network-out-of-network bullshit... Copays on every kind of diagnostic into the hundreds of dollars. Like, what exactly am I even paying for at that point?
I would call that $6000 for a very much worse plan.
So basically what US employer-based insurance used to be like 25 years ago.
Except I don't need to be employed to get it.
Deductible: it's a pro, not a con to me. In years I don't have medical bills I pay less, in years I have medical bills I pay more. If you consider the top number in the plan the "price" for the plan and then end up spending less, then you have the peace of mind that the most you can spend is X and if you get a little back into your retirement account then that's nice.
No limits: there's no dollar limit in the US. I suppose there might be some weird loophole where they decide spending one billion dollars on you to extend your life 30 minutes isn't kosher, but I imagine Canada has the same setup.
Any specialist, any diagnostic: Yeah, under the maximum price anything and everything that's legally medicine is covered.
Hospital stay, surgeries: yup, same
No gotchas: Ugh, we had a weird loophole gotcha a couple of years ago here where these hospitals would be "in network" but the people that worked at them wouldn't be, and they'd bill you beyond your cap. We closed that loophole one way or another in all the states (AFAIK, maybe one or two is lagging), but honestly that was something we should have raked the hospitals over the coals on. This whole "we just rent out the stage to the performers" setup is terrible.
No having to sift through options: I like choices. I like being able to find the setup that's right for me. I understand that others don't and just want someone to take care of it for them, but that's not exactly impossible to find at any price. Just pick the most expensive or cheapest plan (as your heuristic demands) and go for it.
No out of network: Yeah, that's still there in order to give teeth to negotiation. I don't think it's that big of a burden. I go to brand X doctors. If I really wanted brand Y I change insurers. If I wanted X+Y I would just pay more and get a more expensive insurance company. In Canada how much choice do you have over what doctor to go to? In the US I just pick any one that's on my plan (or change insurers and pick any one on theirs).
No signups: Once a year you pick your insurer/plan. Or you just ride with whatever you had last year.
If the argument is "It's impossible to pay for the same thing" the answer is no, you can pay for the same thing. You can also choose to pay less and get less (my preference). The cost is that you do have to actually make that choice instead of just being told you're getting what you are getting.
Deductible: you're paying money, I'm not. Keep in mind that you pay the same in taxes on healthcare as I do, AND you get to pay for private insurance. That's how bad the US system is.
No limits: I think that's new with the ACA, pretty sure there used to be limits. But sure.
No gotchas: yeah until the next one...
No out of network: I can literally go to any doctor in the country. You say you like choice, but apparently not that much lol.
I was not able to find a plan that offers no deductible, no out of network BS, no copay. Maybe it exists, but I picked a nearby state (Pennsylvania), and nothing like that was offered on the State clearinghouse. Not for any price. Happy to change my tune if you can find that plan, but the fact that it's not a) easy to find and b) the default that's included in your taxes, is a complete and abject failure of the system.
Shifting goalposts. You said for any price. What is the difference between a plan that costs 14k and a plan that costs 6k with an 8k deductible/out of pocket max.
Where do you get that we pay the same on healthcare taxes? I honestly have no clue what Canadians pay. Toronto Sun says about 9k if you make around 90k. Don't know how accurate that is but I make about thay much and would only pay that much if I maxxed out the plan that year.
I wasn't able to find such a plan. Doesn't mean it doesn't exist, but it does mean it's not readily available.
You can look it up, but Americans pay the same in tax for your shockingly efficiency Medicare system which covers a few people as we pay for our system which covers everything for everyone with no deductible...
Show me a link to a plan that has no deductibles and no copays for anything, no out of network nonsense, and so on. And is also included in your taxes lol.
No out of network is a huge downside.
People have to change doctors because of it. This causes tangible harm to plenty of people.
You're misundering. They're saying there's *no such thing* as an out of network doctor, no that there's no access to out of network doctors. Out of network simply isn't a thing up there.
I meant to reply (thought I did) to etheric42, who was saying that it's not that much of a difference between the two systems. I agree with Angus.
Specifically I understand and agree that not having to deal with out of network is a great plus of the Canadian system.
I've been thinking about this response for awhile. I assume that there are some cases where this would be a problem but... for the circumstance I'm talking about (US insurance not attached to your job, bought through the marketplace), this seems very minor.
1) When you choose your plan you choose the plan with the doctor in network you have been seeing.
2) If your doctor drops the plan because of failed negotiations, that's generally limited to the end-of-year period, which is when you are free to change plans to follow them.
3) There is a chance that maybe you want to see both doctor A and doctor B and no plan has both A and B in their network. That would be a problem, although I suppose the "at any cost" at the root of my comment comes up, in which case you sign up for both plans.
4) There is a chance that mid-year you discover you need to start seeing a doctor, and you only want to see a doctor that isn't on your plan. That would be a problem, but only until the end of the year. If it's a chronic problem then I can understand wanting to make sure you are with a doctor you can form a connection with, but for one-offs it seems like you should be able to find someone on your plan that does a good enough job.
I have personally known people who have had their lives negatively impacted in large meaningful ways because of having to change providers. It's not really a hypothetical so much as a real thing that happens.
> Deductible: it's a pro, not a con to me. In years I don't have medical bills I pay less, in years I have medical bills I pay more.
You mean, in years when you might have trouble maintaining employment to pay those medical bills, you pay more. Sounds like a nightmare.
Don't know what you're talking about. My insurance isn't attached to my employer. If you have a choice between spending 8k and having everything covered and spending 0k and having everything but the first 8k covered, the latter is strictly a better deal.
And again: the original comment was about not being able to buy the same thing for any price.
> If you have a choice between spending 8k and having everything covered and spending 0k and having everything but the first 8k covered, the latter is strictly a better deal.
Sure, if you have to pay for health coverage regardless of your employment status. However, you were replying to a post that listed OHIP's coverage where there is no deductible, and you replied saying that a deductible is a feature, but it's not in that context.
Under OHIP you end up paying into the healthcare system while employed and don't have to pay a deductible, but if you become *unemployed*, say because of a serious medical problem, then you *don't* pay for health coverage *and* you don't have to pay a deductible. In principle, it's absurd on its face to expect people who can't be employed due to medical issues to pay deductibles to get the help they need.
So like I said, a deductible is not strictly a pro, and definitely not a pro for a system like OHIP.
I have an option everything except for the signup problem. Open season is necessary, otherwise you wouldn't have health insurance until you're diagnosed with cancer or something. The option that has all that is more $6,000. It was $7,500 with my employer paying 70% on top of that. But they are available, just expensive.
There is SOME level of out-of-network issue. Move between provinces and you can end up in a very nasty game of pass-the-parcel where each province tries to claim they don't have to cover you. And medical care on vacation is often a similar situation.
Those are exceptions, though.
As someone who grew up in Ontario and now lives in the US: thank goodness!
The experience in Ontario was terrible. Long, long lines. Multi-month waits to see your doctor. Unless you want to see the doctor on-call at which point you are still waiting hours. A continual lack of specialists. And unconscionable waiting times for things like hip replacements.
So you are saying "You quite literally cannot buy the kind of insurance I have in" <America> "in" <Ontario>?
Our experiences are completely different.
It might help to put healthcare within the context what the "public health" system is for each of these counties. Listen to Zeynep Tufekci's recent interview with Ezra Klein. She has an ability to put healthcare for individuals (whether public or private) within the context of the public health infrastructure of different counties. This begins to show why the US has done so poorly with Covid. Even countries like Vietnam have dealt with Covid better than the US. She doesn't say this but I do, if the concept/mindset that the government can't do anything right and we shouldn't invest in public institutions, then we won't be prepared for health emergencies. This seems obscene for the richest country in the world.
Disagree, US had fewer COVID deaths per capita than UK (most socialized health system in the developed world) up until the vaccines came out. US COVID problems relative to most other countries are mostly vaccine refusal problems.
That sounds a little bit like special pleading. The point about *public health* is that it has a heavy political and cultural element. If America is less healthy because of X, then X is part of the public health equation.
The discussion seems to be about "Which Country Has The World's Best Health Care?". Even the parent post specified "within the context of the public health INFRASTRUCTURE of different countries" [my emphasis]. I do not see how it's at all special pleading to point out that "cultural elements" (ie, personal decision to not get vaccinated), ie NOT healthcare design, was primarily responsible for the different outcomes.
This honestly seems like it might be a partial answer to Scott's entire question of why US healthcare sucks so much when it's similar to systems that don't. Maybe Americans are just less healthy and it's harder and more expensive to provide care to people with worse health habits and lifestyles. The only developed nation I can think of with similar lifestyle/obesity habits is Kuwait. What lifespan outcomes do they get for dollars per capita?
It's analogous to why do we have so much more gun violence than Canada even though our laws are similar? We seem to just be culturally more violent.
Along similar lines, what about credential systems? Is it easier to become a doctor in other countries? What about other levels of providers, such as nurse-practitioners or PAs. What about pharmacies that can diagnose and proscribe to address a limited range of ailments? What about the prevalence of parallel traditional-medicine systems?
According to this graph
https://ourworldindata.org/covid-deaths
there is not much in it. The UK and US trade places a few time before vaccines.
UK is also older and more densely populated on average.
I think vaccine accessibility was a big part of the problem in the US, due to the piecemeal healthcare system. People were building third-party tools to share vaccine availability data, since the official ones were so lacking or awful: https://www.technologyreview.com/2021/02/01/1016725/people-are-building-their-own-vaccine-appointment-tools/ By contrast, the NHS really shone here: we all waited until our age-prioritised blue envelopes arrived through the post with our vaccine appointment details, then went along to GP surgeries or newly-created mass vaccination clinics in village halls and conference centres and got jabbed. It worked great until they got to the under-30s, who are much less likely to have stable addresses or to be registered with a GP (and thus harder for the NHS to get in contact with).
You got a blue envelope? I got text messages.
Not just vaccine refusal issues, but also issues that many people can’t afford to stay at home and isolate.
I don't think you can put COVID deaths down to the NHS vs Medicare though. COVID deaths are mostly down how fast/far COVID, which is not something hospitals have much control over.
If the UK had stayed locked down during the winter of 2020 rather than the start/stop thing they did deaths would be a lot lower. That's entirely unrelated to how doctors are funded.
I think that two things: the US style and culture of government, specifically, means that I inherently don't trust its government programs to be implemented as effectively other countries, even if the initial design is similar.
Two, I wonder if the ethnic makeup of the US vs. other countries had an impact on the Covid outcomes? COVID was very bad for Hispanics and African Americans, at least based on acquaintances on the ground e.g. in NYC hospitals. Did other developed countries have worse outcomes among their minority/indigenous populations? Is that just a factor of people being sicker (e.g. overweight, diabetic), more exposed (e.g., more crowded living conditions), or inherent predispositions? I've heard it argued that these factors are contributory to how Asian vs. non-Asian countries did with COVID, and how US vs. other European countries did with COVID, but I haven't really checked the numbers myself.
My impression is that in Sweden covid incidence and bad outcomes were *much* higher among immigrant populations.
Is there any official data to reflect that?
This seems a similar argument to that made in this long read https://www.newyorker.com/magazine/2021/08/30/costa-ricans-live-longer-than-we-do-whats-the-secret that the kind of healthcare we normally think if that happens in hospitals is less important than widely available preventative steps, public health campaigns and easily accessible primary care
COVID vaccine distribution seems like something the US actually did better than most other countries (with a few exceptions like Israel). Both initial shots and boosters were widely available sooner than elsewhere. The vaccines are also given away free without any need for health insurance, and the problem quickly became limited demand rather than supply.
This doesn't excuse the slowness of the CDC and FDA in approving vaccines and boosters, of course. It just means that other countries were even worse, or perhaps that the US was able to outbid them.
Whatever may be ailing the US government, it sure ain't lack of money.
I read the comment "No country except the US pays anything like a market price for drugs[,]" and had to ask myself, "What does 'market price for drugs even mean?"
As I understand this section, in some countries, the price is set by government fiat. In other countries, the government or an entity indistinguishable from government negotiates the price. Neither of those seem like they could define “market price.”
The United States is different. But it seems suspect to say that the price paid in the US is the “market price,” since the combination of all of the other countries is (I suspect) a larger population and therefore a larger “market.”
And in the United States, the vast majority of consumers are not negotiating the price, their insurance is. I differ from Scott in as much as he says “Consumer’s don’t for drugs directly.” A small subset do, and they are paying a higher amount than those with access to insurance. So is the market price the price paid by the smallest, weakest part of the market?
I’m an economics near-illiterate, to say that almost everyone is paying below market price seems backwards.
ETA: I should say, can some explain this to me as if I am five, because my inability to figure this out indicates to me that I missing something. What would the proper measure of the "market price" of a drug be?
It's hard to say what the market price would be, since many drugs are monopolies. Out-of-patent generics tend to be quite cheap, monopoly-produced new drugs tend to be quite expensive. That suggests that the actual "reserve price" of most drugs is quite low (i.e. the price below which it makes no sense to sell it as you're not making money), and it's only monopoly power that makes the drug expensive.
That further suggests that in a competitive environment where anyone could produce the monopolized drug, its market price would probably be fairly low. And that for monopolized drugs, the idea of a "market price" is kind of nonsensical.
Indeed. As far as I understand, after a drug has been deemed useful and safe the actual cost of producing, distributing, and marketing is usually not particularly high. The problem is that getting from the idea for a new drug to the point where it can be prescribed or used is incredibly hard, expensive, and annoying, at least in the USA. And furthermore it fails for some non-negligible percentage of drugs. So the saying goes that pharma companies won't even try to do that work unless they get free reign to set the price for 20 years or so. But then what is happening in these countries where drug prices are low? Is it that getting drugs approved is easier or cheaper? Is it that they import all of their drugs and don't need to incentivize any pharma company? Something else?
It varies from country to country usually some combination of
a) They don't get the drug
b) They don't get the drug for a long time (maybe 20 years)
c) They don't get the drug for a short time (maybe 6 months after first to market)
d) They only get a limited supply of the drug and then have to decide who in their country gets to use it (similar to how COVID vaccines were for the first 6 months or so)
e) They get as much of the drug as they want at a lower price than what is paid in the wealthier countries
Option e is great when it happens but it doesn't always happen...
Option e often happens, as long as it is a sufficiently big market and the offered price is still way above cost. If you can manufacture and distribute a drug for $10 and you want $100, but you get offered $20, it would be stupid to not accept that offer, because that still offers you a $10 profit. Withholding the drug to get a better offer, only works, if your drug is really much better than everything else on the market, which is usually not true.
Wouldn't that tend to imply that the amount of money a country spends on a drug isn't really the cost of the drug, but instead effectively the amount the country is willing to invest in the development of drugs?
Yes, precisely. You can save money on drug prices by free riding on everyone else paying development costs.
And by everyone else, you mean the USA. Per Cato, "the United States accounts for approximately 78% of worldwide drug industry profits". Since most profits are re-invested in research, America is basically saving the world.
It seems that this claim is disputed. See e.g. 'Debunking The Pharmaceutical Research ‘Free Rider’ Myth' (https://www.healthaffairs.org/do/10.1377/forefront.20170602.060376/full/).
This debunks nothing. It merely asserts without any backing data at all.
For an article with actual facts, please see https://www.cato.org/regulation/winter-2021/2022/why-are-some-us-drug-prices-so-high#
You need to distinguish the price at which it pays to produce and sell a drug that is already discovered and approved from the much higher price at which it pays to bear the cost of developing a drug and getting it through the FDA approval process. Hold the price down to the former and you get no new drugs.
Did you get your "n" back?! Did Scott find it on his honeymoon?
Scott also fixed his blog title anagram when he moved to Substack. Together, this is what psychologists refer to as 'dual-n-back'.
AFAIK whatever price anyone is willing to pay for a drug, is the market price 𝐢𝐧 𝐭𝐡𝐚𝐭 𝐦𝐚𝐫𝐤𝐞𝐭. Since it is illegal* for me to import a cheaper drug from another country, whatever the price for the identical drug is in Canada is irrelevant here in the U.S.
* https://www.fda.gov/about-fda/fda-basics/it-legal-me-personally-import-drugs
That article is a bit weird - it starts from an assumption that those drugs "often have not been approved by FDA" and discusses the consequences, limitations and exceptions of that scenario while absolutely ignoring the very reasonable case where the drug is actually identical and *has* been approved by FDA, choosing (IMHO intentionally) to not give any answer whether that is legal or not.
Perhaps Americans pay enough for drugs for the companies to recover the research and FDA-approval expense, plus the profit their shareholders require. Prices in other countries can be as low as the marginal cost of production.
Other countries do drugs research too though.
Sure, but where the research happens isn't a factor in what Steve said. If the drugs developed in other countries are priced similarly to the drugs developed in America, it's plausible that the higher American price is subsidizing development of new drugs in those other countries as well.
Researchers in countries around the world develop new drugs in the expectation that US insurance companies will pay them enough to make it retroactively worth their while, yes. US insurance companies have deep pockets and don't care where the drug is developed.
Typically the market-price is the level that people are willing to pay for the benefit.
If we had a government-run health-care system except that it issued prizes to people who could provide cures [1] for diseases, the government would rationally offer $1 less than NPV of all their future expenses on that disease. Tee company spends some fraction, gets a profit on the rest, the government saves a buck, and the citizens are cured of the disease.
[1] just to keep the model simple, assume that complete cures are on the table and we can recognize them as complete cures
Exactly. The markets are just different. The seller is typically a single monopolist drug company. The buyer can either be A) a collection of smallish independent actors (insurances), or B) a single committee acting for the whole country.
In both cases, the buyer is pretty desperate to buy (access to) the drug. But in the second case, the buyer has still much more negotiation power, because the seller is much more desperate to sell the drug. For two reasons: it is a higher chunk of the market that the drug company would lose. But also because denying a drug to a country is a PR desaster, but denying the drug to one out of 50 insurances is not so bad. (In that case, it would obviously the fault of the insurance, right? Because the others do get the drug. Stupid insurance!)
So the market price in B is lower than the market price in A.
It seems like the size of the administrative body might play a role here. I don’t know how to make the connection or if I’m just restating a prior, but it’s easier to imagine 50 US states, some being well managed, some not so much, as opposed to the single US regulatory agency outperforming.
Maybe the summary is “picking a spot on the Pareto frontier involved value tradeoffs and the more people you have knocked, the more likely you’ll end up further from the frontier , since this lowers the number of pissed off stakeholders.”
This is a good point. And the size of the country's population too!
Reading between the lines here, there are (presumably fascinating, enraging, etc) reasons for the differences in pricing, but the author didn’t have access to the driving forces behind the negotiations.
Ex post, the different systems have a story about why good X is costing them price Y. But that’s a justification, not an explanation.
It’s a bit like saying the border between these two European countries follows the river; the fact that it follows the river is the outcome of the forces one really wants to understand.
A river is a good Schelling point.
But why the Rhine and not the Moselle?
The Schelling point mechanism already does a lot of work:
It suggests why the lines aren't totally arbitrary. Or why, unless something big and important happened, the border will stick to the river, instead of deviating with little bumps and detours.
You are right that it doesn't tell you which river or which watershed gets picked. You need more contingent information for that.
But the Schelling point mechanism (or simplicity in general) does account for the vast majority of bytes in the border specification.
Life expectancy is a poor metric for healthcare outcomes, and varies a lot based on how countries calculated it. In particular, the US tries to save babies born very very prematurely, many of whom die, and this really brings down the average life expectancy by putting in a bunch of extra zeros that most of the world calls “miscarriages”.
Secondly, satisfaction with healthcare is a function of the PR and patriotism ala NHS as the UK’s National religion, not actual quality of care delivered. I remember seeing this “study” that purported to find the NHS as the best healthcare across a dozen western countries which seemed odd until you realized most of their survey was fuzzy metrics like “do you feel it’s affordable” or “how much do you like it” and not “what are your chances of not dying from cancer and can you even get a surgery for it scheduled”. Health outcomes were only 1/11 of the survey metrics and NHS did quite poorly on that.
There’s a reason the rich of the world come to US hospitals to get their serious procedures done.
https://www.fragiledeal.com/t/coping-with-medicare-for-all/3107/33
I don't think the life expectancy infant mortality thing holds up. The US ranks about the same place in "life expectancy at age 65" as "life expectancy at birth", see eg https://www.oecd-ilibrary.org/sites/037c3a2d-en/index.html .
I think you're right that life expectancy is a poor health care measure as it includes things like diet, exercise, and maybe even genetics, but it seemed fairer than using any more specific statistic when there's so much noise in all of them.
I agree the top levels of US healthcare are able to offer excellent service to the rich.
“I agree the top levels of US healthcare are able to offer excellent service to the rich.”
Is it really just “the rich”, or is it like 90% of the professional class? How many people are dissatisfied with US healthcare because of objective reasons that are actually better, vs checking the “no”box because that’s the Blue Tribe thing to do?
How confident are you that you aren’t suffering from a grass-is-greener problem where you live the worst parts of US healthcare every day and only hear about the German system from advocates?
I'm mostly going off of the statistics I find at https://www.commonwealthfund.org/international-health-policy-center/system-stats, the Emanuel book, the patient satisfaction ratings, and my own experience as a healthcare provider and patient in US and Ireland. I agree it's possible all of those are deceiving me, but at some point I've just got to go with my best estimate.
That’s fair. I think the “personal experience as a provider” (without corresponding experience in a different system) and “public satisfaction” are highly likely to bias you in a negative direction. The first because you see how the sausage gets made (but only in the US), the second because griping about how terrible the backward US healthcare system is compared to our enlightened Euro betters is what all the cool kids do.
In light of that, and statistics which are very real but require some interpretation, might you be susceptible to confirmation bias? I certainly trust you more than most to have considered this though, so this is maybe unjustified quibbling on my part.
You misunderstand: Scott has worked as a healthcare provider in both the US and Ireland.
Commonwealth fund is quite biased tho, full of anti racist healthcare for All and similar rhetoric. Here’s the article pointing out how they ranked the UK the best (since they scored high on equity and affordability) while scoring poorly on 5 year survival rates conditional on stroke, cancer, etc.
https://mises.org/wire/does-britain-have-worlds-best-health-system-only-if-you-ignore-outcomes
As I said elsewhere, you can die for free without a fancy system. What you should be paying for is one that actually keeps you alive when bad things happen. The US system is really good at that, which is why when the global elite get old and need procedures, the top US hospitals are often their choice.
Small differences in lethal condition survival rates are not really totality of the healthcare system. It is really small part of it.
"As I said elsewhere, you can die for free without a fancy system." - yes, because NHS does absolutely nothing for your survival rates, you could have just stayed home ? That is a pretty bad argument.
I have a lot of problems with Commonwealth's methodology (basically they're similar to my critiques of Emmanuel's comparisons as well, I just don't think most of the things that differentiate systems in quality are easily quantifiable KPIs or macro level things like private vs public), but this Mises critique is substantially more biased than anything Commonwealth has ever put out.
FWIW, the 2021 Commonwealth report had the NHS drop by 4 places, with Norway, Australia, and the Netherlands now as their top picks. I don't think that's because their methodology suddenly got better, but I do think that's closer to accurate even if accidentally.
The five year survival rates are misleading.
See https://youtu.be/yNzQ_sLGIuA for the argument.
I think the broken link in your post might want to be this one
https://www.oecd-ilibrary.org/sites/037c3a2d-en/index.html?itemId=/content/component/037c3a2d-en
Which shows the US is the middle of OECD by age 65 conditional life expectancy. But the US has way more obesity and diabetes than a lot of the rest of the OECD, so in some sense our life expectancy is a testament to our healthcare system, and we achieve it in spite of our poor diet, exercise, etc. how many Big Macs per day did those Japanese get to eat if they want to make it 22 years from 65 instead of just 19? :)
"I agree the top levels of US healthcare are able to offer excellent service to the rich." <---This might not be true! I'm posting this link all over the comments: https://bit.ly/3nGRHL8. It's a paper (by Zeke himself, published after the book you reviewed was published) that shows white residents of the wealthiest top 1% of counties achieve outcomes that are about average for our peer wealthy nations. I wrote a longer comment below going through some of the findings.
Before I read this paper, the probability of truth I assigned to the statement, "Rich people in the US get just about the best healthcare in the world" was 99%. Now it's something like...40%?
Unfortunately, it seems like in order to deliver good health outcomes, you need effective healthcare systems. I am a critical care doctor and I feel like the quality of care I deliver generously is responsible for 20% of patient's experience? The other 80% being made up by interactions with nurses, their follow up outside the hospital, how easy it is to coordinate their care with their other physicians, how much hassle it is for them to get things that they need, etc. So unless you're so rich you can buy a wing of a hospital, you really are stuck with many of the elements of healthcare that everyone in America has to deal with.
This topic is always a tough one and the details matter *a lot* to policy changes. People are constantly writing about how the US health care system performs the way it does because of one big thing, but in reality, it is a million little things.
Start with the US being an outlier in a lot of ways: it is much, much richer than the other countries on the list: US GDP per capita is 40% higher than Germany, and doctors aren't any more productive, so health care would be more expensive under any system. See Baumol. People in the US on average are fatter, etc., which kills the utility of most of your statistics.
Add to that what gets measured and what doesn't. I can only speak from my experience in Belgium, where I could see a specialist relatively quickly, but getting something like an MRI took five months. Sure, I didn't *die*, but I was in a lot of pain and had limited function for an unnecessarily long time. And satisfaction numbers wouldn't tell you much, because all the Belgians I knew didn't realize it could be any different (hedonic treadmill!).
Pile on top of that that what a realistic US implementation of these other systems would be... Most of these countries subsidize medical education while the US... Puts a cap on residencies? Medicare is a giant insurance plan but it just pays some weird list-price-based formula for drugs? And have you seen the insane paperwork for Medicare that makes private insurance claims look like nothing -- backed up with criminal penalties! Certificate of need laws... Medical boards that until the pandemic made telemedicine nearly impossible, have stopped nurse practitioners from expanding care access... Medical malpractice tort liability!
It would be great if passing Medicare for All immediately made all these things go away. I'm not going to hold my breath.
I live in America. I hurt my back when i was ~4. I don’t remember how. I just remember a flash of white and never having a second of not-agony since.
It took over thirty years to get an MRI.
We need universal healthcare. We need healthcare that is so easy to navigate that children in agony can get medical even when their parents don’t believe them. If that’s not realistic, then it needs to be navigable by thirteen year-olds who can’t jump through hoops, but did manage to get to an ER.
I agree that satisfaction is probably a poor metric to objectively compare healthcare systems, it says more about feelings than facts, but at the end of the day it's probably the only metric that matters from a political perspective?
I'd say it's the only things that matters from a patient perspective...
You can fix satisfaction with a good ad campaign.
This doesn't seem completely true. It's extremely common to the point of being a trope that US pro athletes go to Europe for all the latest greatest orthopedic treatments keeping them playing into their 40s now that are still considered experimental and not approved in the US.
This is an interesting point, I do hear that a lot. Do we think 'European doctor' could just be a code for 'steroids & HGH treatment for a month outside the practical range of American drug testing'?
Life expectancy can actually be a decent metric for healthcare outcomes, if you compare similar populations.
So, for example, you can compare the life expectancy of first-generation Japanese immigrants in various countries.
US: the largest per capita cost (by far) with the smallest percentage satisfaction.
That's quite damning.
If two countries provide the same standard of care and one charges more, I would not be surprised if people were more satisfied in the cheaper country, even if satisfaction is not meant to measure the price trade-off. Which is to say, satisfaction is a function of expectation, and expectation is a funcion of cost, and so you can't look at the cost and the satisfaction as independent variables.
But also, it's become kind of a meme that healthcare in the US is terrible, which I imagine brings satisfaction scores down.
A sizeable percentage of Americans have excellent insurance paid as a company benefit. They don't see the cost.
For those who do see the cost, I do agree: they will tend to be less satisfied.
While they work for that company. Not having portability is a big deal for a lot of people.
That's not as big of a deal as it used to be. Few people leave a job with health insurance benefits for one that doesn't. The reason this used to be such a big deal was that health insurance companies would frequently refuse to cover expenses associated with a pre-existing condition, so if you, say, developed diabetes at 40 and then tried to switch jobs at 42, that meant you were going to have to pay out of pocket for all your insulin and test strips and whatever else. The Affordable Care Act put a stop to that, though. I think the only time it's really a problem now is if you switch jobs and your current doctor is out of network with your new insurance. I don't know how important this really is, though, because I'm relatively healthy and I don't have the highest opinion of the medical profession in the first place. Swap one mediocrity for another and quitchyerbitchin'.
Yes, you're totally right about protection against being punished for pre-existing conditions helping things quite a bit.
I'm a psychotherapist and so I think we see more of the difficulty of employer-contingent health insurance than other healthcare providers, so my view is biased that way. People tend to have somewhat stronger and more personal preferences about the therapist they work with than other healthcare providers they see, generally speaking. At the same time, many (most?) psychotherapists are solo providers who are not able to accept all forms of insurance (because of the paperwork load, among other things). That means that when people change jobs, it sometimes means they have to end their work with a therapist right at the moment that they're going through an often stressful life change. Every year I have to see several clients through this unnecessary disruption in their care and it's a kind of harm that is completely avoided in other healthcare systems.
The other thing I notice not specific to mental healthcare is that a person's deductible re-sets when they start a new job as well as at the start of every calendar year. Particularly in working with people more in their 20s and 30s, I see people chronically unable to meet their deductibles and therefore to have any costs covered between job changes and calendar year changes that keep re-setting their deductibles. People in their 20s and 30s tend to have lower incomes than people in their 40s and 50s and so are less well-situated to encounter these repeating out-of-pocket costs.
I work with quite a few people who when taking a new job have gone to check the marketplace to see if they could pay for and choose their own health insurance, or opt to not have their health insurance change, but the incentives right now are so strongly in favor of employer-provided health insurance, that effectively a person has no choice in their insurance company. That seems really bad for competition.
If a person doesn't like their psychotherapist or doctor, it's so easy to change to another one. If a person doesn't like their home insurance or car insurance company, it's so easy to change to another one. If a person doesn't like their health insurance company, they're s*it out of luck. It seems to me if one is going to have no choice of carrier, then they ought to in exchange at least have stability of benefits, but currently many people have neither.
I've also seen many patients who experience dramatic and unanticipated shifts in their health insurance coverage because their employer found a better deal with a different insurance company. Employees are not consulted in that process. It seems unfair to me that all the choice of product is in employers' hands when the costs are shared and the impact is entirely on the employee's body and mind.
If we're going to have private insurance, it seems to me it ought to be aimed at competing for the people who consume it and not intermediaries (employers) who have entirely other incentives.
> Few people leave a job with health insurance benefits for one that doesn't.
Isn't that the point? Lack of portability means that you're stuck in your job. I guess you have the option of switching to a different job that has similarly good health insurance, but it makes it hard to quit work and start a business.
No, my point is that above a certain threshold of education requirements, compensation, or status/prestige, almost every employer offers healthcare benefits because of the tax advantage. Once you've crossed that threshold, why would you accept a job below it? A senior attorney is not going to quit his job to go be a paralegal somewhere, for example. I'm sure you could think of situations where something like that actually does occur, but my contention is that these are relatively rare and thus not terribly important. Starting a business is not one of them, because then you can buy whatever kind of plan you want; you're the employer.
Satisfaction seems to largely be about "is this currently a political football?" rather than actual outcomes. Most people have never dealt with another country's health care system and have no idea what they're comparing to. But if they're forever being told "Health care sucks and it's [other party's] fault" then they're going to think that their system is particularly bad.
Right now in the US everything is a political football, so US people seem to be under the impression that their country is particularly bad at everything.
It's impressive to me the mental gymnastics people will undertake to defend the American health care system which is so obviously worse to me than the one I came from in Germany where we take care of everyone no matter their employment status or bank balance. Many people in the US live without insurance and do not go to the doctors simply because they can't afford it. Unthinkable in Europe.
Only 8.5% of Americans didn't have health insurance in 2020. Of those, a significant fraction probably would have been able to get free or reduced price coverage if they had only bothered to sign up. Massachusetts, for example, has a state level universal healthcare program, and yet it still has a 3% uninsured rate, because not everybody who was eligible signed up. So extrapolate that to the rest of the nation, and you're left with roughly 5.5% of people who wanted health insurance but couldn't get it. Maybe that seems like a grave injustice to someone from Europe, but I think a lot of Americans look at the situation as "hey, 94% of the population has coverage or could get it easily if they wanted; that's pretty good."
Especially true since the Commonwealth Fund's survey question was "Which of the following statements comes closest to expressing your overall view of the health care system in your country?"-- not "How satisfied are you with the health care you get?"
That's quite damning of the Commonwealth Fund.
It all comes down to what question you're trying to answer, really. If you want to know how much political heat your system is likely to come under, the Fund's question is fine. But if you want to know how your system is actually treating people, better to ask them about their own experience rather than their guesses about other people's experiences.
That much charity is unwarranted given that their what they say they want to do, which is to explore "performance indicators". You'd have to stretch it pretty far to include questions that get at how much political heat the system is likely to come under. From what I can tell, they're one of the many respectable propagandists of the day.
https://www.commonwealthfund.org/about-us
>Today, the mission of The Commonwealth Fund is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, particularly for society’s most vulnerable, including low-income people, the uninsured, and people of color.
>The Fund carries out this mandate by supporting independent research on health care issues and making grants to improve health care practice and policy. An international program in health policy is designed to stimulate innovative policies and practices in the United States and other industrialized countries.
[DEI blurb omitted from my copy-paste]
https://www.commonwealthfund.org/international-health-policy-center/system-stats
>Explore comparative data on key health system characteristics and performance indicators such as overall health care spending, hospital spending and utilization, health care access, and more.
Us health spending indirectly funds drug development, and the US is by far the world leader in drug development. So in essence, many other countries with good healthcare and benefitting from America's healthcare system while also getting to act like their system is superior.
This.
A comforting tale of self-aggrandizing martyrdom for Americans, but drugs being only 10% of healthcare spending, also an insufficient explanation for the discrepancy
He didn't say it was the cause of the US's high spending.
But it kind of smarts when I keep on subsidizing someone else and they openly call me a sucker, even if I can afford it.
How was efficacy measured? Did it take into account the baseline health of the population? Americans are much less healthy by lifestyle.
I'll add another comment on why I think health care doesn't work like "normal economics". I think it does, but if something's completely regulated in a very complex way, you can't really predict specific effects or estimate any "market prices". (Relatedly, I remember wondering what actuaries working for health insurance companies even did, because they are very regulated on what they can rate on and what they have to cover anyway.)
My personal hypothesis, not one I have the resources to check, but that the source of "cost disease" is - when the majority of players in a market have a ton of money, like large corp/gov't level money and not individual/small business levels of money, then everything costs that much - and anyone smaller who tries to play in that market gets shafted. To me, the cost of e.g. college is directly driven by unlimited student loans and (ironically) things like the GI bill; and healthcare in the US driven by the fact that the payers are very large insurance companies, paid primarily by very large corporations/unions/governments, and large government payers themselves (CMS being the biggest one). If every reimbursement schedule is pegged to Medicare ("120% of Medicare, 90% of Medicare") it's not really market-based. If every hospital has 20 agreements with 20 different payers for how much they get paid, and these agreements all demand the "lowest price" or some kind of deep discount off "ticket price", of course price transparency will be lost.
On the subject of drugs, it seems like the US is basically where Pharma makes their profits. If everyone is trying to peg their price to "at cost" or "the average of everyone else", the money has to be made somewhere, and if you cut off the source of profit entirely, you lose the development pipeline -- which is primarily in the US (as far as I can tell), but can always migrate to less developed and more adventurous countries, like China or India. Further, the costs of getting drugs developed and approved in the US is driven up at least in part by the prohibitive hurdles to get anything approved, which you have documented often on your blog -- the whole system creating this government-pharma cabal, if you will, which eats up a lot of money and gets more and more entrenched with every new incremental policy change, regulation, etc. Again - too complex for simple modeling of specific prices or effects, but you can see the general direction of incentives and how it will affect costs.
I say this having worked in a health insurance company for a couple of years, but not at a high level or anything.
> On the subject of drugs, it seems like the US is basically where Pharma makes their profits.
This is an old trope, but for it to be true, you would have to accept that they're selling at a loss everywhere else. Makes no sense why they would do this.
You can also see from generic drugs that, in general, pharma products are actually very cheap, and that the high prices charged by monopoly holders are just that - monopoly prices.
Are you familiar with the difference between average cost and marginal cost?
Drug companies often will make the majority of their revenue from selling their drugs in the U.S., then they might sell as large a volume, or more, in other high income countries, which will wind up being the other 40% of their worldwide revenue.
Both are profitable, the U.S. is much more profitable. It's not really that complicated?
This is correct, from what I can tell. Also, the high prices of non-generic drugs are the reason why those drugs exist. Financial incentives from US prices motivate the industry to innovate and create drugs that benefit the rest of the world. Of course, those incentives aren’t perfectly aligned with general human welfare, but it has been working pretty well overall.
They might sell a little above cost in the other places, but the majority of the profits can come from the US. If those profits were lost, it would probably have significant effects on drug production.
The difference is, as BronxZooCobra suggests, the difference between average cost and marginal cost.
70+% of the cost of a drug is usually in development, not manufacturing, which makes it not affect the marginal cost of producing an additional dose. Even most of the cost of manufacturing is in fixed upfront infrastructure costs, which again impact average cost but not marginal cost.
Someone has to pay for the 80+% of a drug's cost that doesn't scale with # of doses produced for the drug to be economically viable. The average cost does need covered. But selling to a market that's more price sensitive at a lower-than-average-but-above-marginal cost isn't selling at a loss.
This is also one of the big drivers for generic drugs being cheaper. Noone has to pay the fixed cost for drug development, so prices are naturally 25% or less of the non-generic cost. There are also some issues with monopoly pricing which can absolutely come in to play sometimes, but even without that we would expect generics to be massively cheaper.
Yes, I'm aware of all that. Given the obscene profitability of big Pharma, though, I'd say monopoly pricing has a lot more to do with it than development costs.
What would be interesting would be a patent system that expires when the development cost is paid off, not after a certain number of years. Since that's the justification for the monopoly, there's no need to extend it further.
If you're aware of it, you really shouldn't be saying things that are wrong in light of it (like that if American's higher prices are subsidizing drug development costs, pharma companies must be selling at a loss in countries that force a lower price.)
I didn't say that. The implication by op was that without the noble Americans paying obscene prices for drugs, there wouldn't be any. That's crap.
My point was that Pharma companies don't "make their profit" in America (which implies they're selling at cost of a loss elsewhere), they make their profit everywhere they sell their drug.
The United States accounts for approximately 78% of worldwide drug industry profits.
>they make their profit everywhere they sell their drug.
I think either you didn’t understand their point or you have in mind a different definition of marginal cost.
If I’m following the discussion correctly, their point is that the revenue from the drugs sold in countries outside the US only exceeds the cost of those very same drugs that are sold. It doesn’t include the cost of making the blueprints of those drugs, getting it approved by the FDA, and the physical factories that produce those drugs. Eg, the amount of dollars exchanged for, say, 1000 pills of X drug in Norway only exceeds the cost of making those specific 1000 pills.
> What would be interesting would be a patent system that expires when the development cost is paid off, not after a certain number of years.
How people keep on re-inventing cost-plus pricing
Now all we have to do is figure out who reimburses the development costs for all the drugs which don't pan out, and we're good to go.
Most innovations are government or university financed already. Privatize the profits, publicize the risk is the mantra of any industry that can figure out a way to do so.
Most pharma companies could almost entirely fund their R&D departments by cutting their marketing and sales departments, which honestly I think are a little unconscionable.
I somehow doubt that the marketing and sales departments are loss centers. But even supposing that there's money to be made by getting rid of them, the questions arise: (1) Why haven't they done this already, and (2) Why wouldn't they distribute the money to the shareholders, instead of financing the development of new drugs on which they will only be allowed to break even if they succeed, but will still be out the entire cost of trying to get them approved if they fail?
> Most innovations are government or university financed already.
This is not true. Not remotely true. The most expensive parts of drug development are the human testing and refinement for pharmokinetics and manufacturing which are almost entirely borne by the pharma industry.
It's worth noting here that roughly 90% of drug candidates that pharma companies take to the clinic for testing in humans *faiI*. The exact percentage varies based on the field, but it's never even a 50-50. The vast majority of drug development costs are spent on drugs that eventually fail. It's an absolutely critical part of the drug development funding problem, especially in legitimately difficult diseases like Alzheimer's (where billions have been spent by dozens of companies with NO real hits.)
Who should pay to keep pouring money down the Alzheimer's drain? Or do we just give up on treating it?
Also on the subject of drugs! The US does indeed pay about a 60% premium on medicine compared to our peer countries, per capita. That 60% premium is equivalent to about $500 per capita (~1300/per person in US vs. 800 overseas; here's my source: https://bit.ly/3nHv7Cj, seems legit but please someone tell me if there's a better source somewhere!). So even if I could wave a magic wand, and for some reason used that magic wand to make drug prices line up with what is paid in peer countries, it wouldn't really move the needle much in terms of per capita health expenditures, and certainly wouldn't change our rank on these lists of who spends the most on healthcare. For what it's worth, the biggest absolute difference is in bills for inpatient and outpatient care, which are ~$4k higher in the US relative to our peer countries.
That's not to say that drug pricing isn't interesting (it is!) or that it's fair (it most certainly is not, especially if you are uninsured and need a life-saving or life-changing medicine). But it does mean that if you're interested in making huge differences in healthcare costs overall, drug prices are probably not the first place to look. BIG PHARMA is only responsible for about 10% (in dollar terms) of the reason we pay more than other countries for healthcare.
Also relevant disclosure, I am a practicing physician but I am taking a job at a pharmaceutical company soon, so this might be motivated reasoning because I'd rather not think of myself as evil! Very eager to hear good arguments as to why I'm not thinking of the above correctly.
Lets say it costs $1 million to do the research to develop a new drug. And $1 to create, package, and sell one pill.
If you sell a million pills to the UK at $1.50 you make half a million after manufacturing costs, not enough to recoup your RND investment.
If you sell a million pills to the USA at $10 you make nine million after manufacturing costs, enough to recoup your RND investment and make a tidy profit.
And if you sell a million pills to the UK at $1.50 AND a million to the USA at $10. You're making nine and a half million after manufacturing, why say no to the extra half million of profit?
I don't know if this is how it works in reality, but it's not an unrealistic theory.
Our healthcare regulations are sometimes justified on the basis of "adverse selection and moral hazard", but don't actually do anything to help with those.
https://www.econlib.org/archives/2009/07/adverse_hazard.html
The mandate was supposed to prevent people from avoiding paying for insurance when healthy and then buying it when they need it, but Congress zeroed it out (which was popular because voters prefer getting stuff for free vs paying).
On the topic of determining market prices...
Many energy generators have very high market power, and it's hard to think of a universal way to get around this. If you think the energy coming from your coal plant is too expensive, too bad, it's the only one connected to your network.
Regulators get around the problem by *literally declaring that generators must offer the market price(EDIT: maginal cost)*. For example, the Western Australian market rules say:
"6.6.3. A Market Generator must not, for any Trading interval, offer prices within its Portfolio Supply Curve that do not reflect the Market Generator's reasonable expectation of the short run marginal cost of generating the relevant electricity when such behaviour relates to market power."
Problem solved, I guess?
Bulket 1 isn’t really correct. Many years ago the UK spun many of its hospitals off into Trusts which operate pretty much like the 80% of US hospitals that are non-profit. They have a local board, they hire a CEO, they make a lot of their own decisions.
Yes - and some of those Trust areas offer some of those services to other, neighbouring areas. Obviously, they can also withdraw those offers, or the service entirely.
Also, the NHS isn't as monolithic as it once was; there is now NHS England, NHS Scotland and NHS Wales. They get managed differently according (partially) to decisions taken within the devolved areas. NI is different again.
Although Scott probably wrote it that way for simplicity, let alone brevity (healthcare within the UK was never entirely single-payer/single-provider from the off).
This aside:
> "One of my favorite books is David Friedman’s Legal Systems Very Different From Ours,"
made me wonder, is there a list of your favorite/recommended works anywhere, Scott?
I can explain a bit about the Australian drug bargaining system. The outcome isn't always "we get the drug at a low price".
In terms of how the price gets set, we have algorithms we use to decide what we'll pay for drugs, based on the benefits to patients (compared to other options), how many patients in Australia would need them and what the budget hit for the government would be, etc. This is based on quality adjusted life years and the company has to provide evidence to the government about the benefits of the drug to justify the price they want, and we have a (slightly rubbery) limit on how much we'll pay for a given level of benefit.
Often this means that drugs will only be subisidised for a subset of patients, e.g. those with more severe disease or certain conditions. So for example bupropion is subisidised for tobacco cessation, because there aren't a lot of other options for that, but it isn't subisidised for depression, because there are. Some drugs are only subisidised if other (cheaper/more effective) treatments have been tried and failed, or if you have severe disease and will therefore get a large benefit that justifies the cost from the government's perspective.
If they can't come an agreement, there are a few possible outcomes.
Firstly, drugs that aren't covered through the government subsidy system are often still available, the patient just has to pay full price for them. This is often lower than the price in the US, because my understanding is that some elements of the US system hugely inflate the price of many drugs, so for example an anti-inflammatory that cost me $8 in Australia was like, $80 in California*. This happens a lot with stuff like anti-depressants and the pill, where the government won't pay more for something with equivalent outcomes if there are a bunch of cheap options that are already subsidised that do basically the same thing (on paper, if not for an individual patient).
Secondly, sometimes drugs do get covered, but there's a delay while the government negotiates with the company. This happened with the new hep C treatments when they came out - ultimately we got them at a great price and they're covered for everybody in Australia with like, a $20 co-pay from patients (the standard for our subsidised drugs), but we got them a couple of years later than they first became available in the US.
Finally, sometimes a drug isn't covered and that means it just isn't available here. This happens with expensive drugs for rare conditions, like some third-line chemo agents for rarer cancers, weird treatments for rare genetic conditions etc. If it costs $80,000 per course and the government won't pay for it, you just can't get it. I guess maybe sometimes rich people make special arrangements to access things at that cost, if they can find a private doctor who will help them sort that out, or maybe private insurance covers it in some cases, but most really expensive things like cancer treatment are done entirely through the public system anyway.
Because we're a small market, companies can walk away from us if they're not going to get a good deal on a drug for a rare condition - they don't really care if they miss out on sales for like, 500 patients. But for common conditions it works well.
*I think the reason for this is that in the US you have all these private insurers who will pay insane prices like $80 for an anti-inflammatory, because you don't have a single payer with huge bargaining power to keep prices down. So the companies can just try it on, some insurers will pay it, and patients without insurance will miss out. Whereas here, because private health insurance doesn't cover non-prescription medicines, if they charged $80 in Australia they just wouldn't get any sales at all. And for prescription medicines, insurance companies won't cover anything that's covered by the government, so again, there's no parallel private market to sustain high prices. The only medicines private insurance covers here are the ones that the government doesn't cover at all. But I suspect Australian patients' and insurance companies' low tolerance for high prices in general probably means they're still cheaper here than it is in the US.
I am an American and live in the Dominican Republic now. I don't have insurance. When I need drugs (for myself or others) I walk into a pharmacy and pay whatever they say.
THE PRICE IS ALWAYS LESS THAN THE US!
Sometimes remarkably so.
I doubt that the inept and corrupt Dominican government is doing any fancy negotiating either.
Perhaps the prices are lower here because the public is too poor to pay more.
The drug companies know they can't get any more money out of the DR so they don't bother, and 'refusing to sell to poor countries because they don't have money" is bad PR
Also, as long as the marginal profit they make there is non-zero, it's worth it to sell at that price, unless it's so easy to buy it across borders that they would lose out on some full-price paying American customers.
As much as I've tried to approach the discussion of healthcare systems with an open mind, i.e., not applying my very libertarian defaults, I've never, ever heard a very convincing case as to why health care should be any more managed than grocery store products/prices. Lots of hand-waving about market failures without any convincing empirical data.
People love yelling "asymmetric information!" while ignoring that there is similar asymmetric information everywhere and also ignoring that the quintessential case of an asymmetric info market failure, the used-car lemon, seems to literally be the worst case you could pick, as I've never seen any analysis conclude something other than buying a car that has been used 2-3 years is your best value for the money.
People also love to talk about how you can't negotiate in an emergency, while ignoring that emergency care is but a sliver of overall costs, and 99% of the time you go see a doctor you have plenty of time to pick and choose, review, get second opinions, etc.
>People also love to talk about how you can't negotiate in an emergency, while ignoring that emergency care is but a sliver of overall costs, and 99% of the time you go see a doctor you have plenty of time to pick and choose, review, get second opinions, etc.
What happens if people don't do that, though? The mental image of people jumping around between doctors and hospitals searching for the best price/treatment is certainly a mental image, but I believe it happens very rarely on the whole. I think people just assume their doctor is on their side and doing their best and don't look further unless they get actively bad care.
Certainly, when I've been in a doctor's office, I've never felt an impulse to flit away and find a cheaper price. Particularly given I have to pay for an appointment in the first place.
When it comes to pregnancy and birth care people do shop around. There are many options for providers of different types (OBGYN, mid wife, etc). The services are offered in different locations too (hospital, birth center, home) and the type of care offered is highly variable. I don't have data on what this does to prices.
I think most people don't shop around because it is a huge pain in the ass mainly due to the existing system. I don't think we can reason about what people would do under a different system.
Finally, people do shop around when purchasing other expensive and complex goods and services. Cars, houses, mortgages, education, etc. I don't have any data on it, but I would be surprised if this behavior is substantially different based on income. In fact I bet when it comes to cars, lower income people have to shop around more to find not just the right vehicle but the right seller who is willing to work with someone with lower income and possibly bad credit.
I think the main reason is the insurance system, something like:
- Most people really want good treatment if they get cancer. Good cancer treatment costs $1 million (or whatever). Most people don't have $1 million. But there's only a small chance you'll get cancer. So it's natural to buy insurance instead of paying health costs out of pocket.
- Some stupid or lazy people would just not buy insurance, and then they'd get treatable diseases and die of them. You can argue this is justice in some kind of cosmic sense, but it would be hard sell to the population. And also, I say "stupid or lazy" people, but I myself screwed up getting renters insurance on an apartment when I was younger and almost went bankrupt when it flooded, so the bar for being "stupid or lazy" is pretty low.
- But also, some people will get pre-existing conditions genetically, or as a kid, and then not be able to afford insurance. For example, a kid might get diabetes, their parents hadn't gotten them insurance yet, and then when they turn 18, they can't afford insurance because insurance companies know that it would be too expensive to treat their diabetes.
- If the government said that insurance companies had to offer everyone the same price without discriminating based on pre-existing conditions, this would be unfair to the insurance companies, because sick people would disproportionately want insurance more than healthy people (the "adverse selection" problem). Also, the price would be very high, because it would be the average of you and a bunch of very sick people, meaning it might not be worth it for you, meaning only very sick people would buy insurance, making the price even higher in a vicious cycle.
- The main solution anyone's had to this problem is for the government to require that everyone get insurance, so sick people can't preferentially select into it. The only alternative solution anyone's been able to come up with is to have employers have all their employees get insurance together, which works badly for the unemployed, the self-employed, and everyone I talked about at https://slatestarcodex.com/2020/04/24/employer-provided-health-insurance-delenda-est/
I'm not sure government-sponsored insurance is the only possible way to solve this problem, but I think the problem is real and a good explanation of why health care is less amenable to free market solutions than other industries (without some additional clever hack).
Maybe. But the "clever hacks" in most of these cases seem much less like clever hacks and more like just eliminating the laws that prevent companies from doing obvious things.
I'm open to being proven wrong, but without even looking into it, I'm guessing there's a law or set of laws that prevent people from being able to purchase portable insurance at 18 that lasts for life and isn't inherently bound by state lines. For that matter, what stops companies from offering lifetime insurance for people who aren't born yet?
I'm guessing it's not their failure to think of it.
To follow up a bit, you mention some lazy/stupid or even not so lazy/stupid might fail to buy health insurance. OK. Well, lazy/stupid people might fail to buy food and starve to death, so...
You can reasonably counter than failing to buy food to the point of starvation would require unrealistically extreme and repeated neglect. But why doesn't that apply to health insurance? One has to typically fail to buy health insurance for a loooong time to get hit with this, right?
Not really. Since health insurance isn't portable in a lot of ways, the way most people end up not insured isn't because the *never* bought insurance, but because they haven't yet bought *new* insurance since their last move/job change/divorce/graduation/etc.
The feedback cycle for realizing that one needs food is a lot shorter than the feedback cycle for realizing that one needs medical care.
If it's lazy/stupid as opposed to utterly indigent, then as Nancy says at the time you start getting really hungry, you go out and buy some cheap food. We've got plenty of that, some of it even nutritious. But by the time lazy/stupid can't help but notice the big lump, it's too late for them to go out and buy some cheap health care or health insurance(*). But the rest of us are mostly either kind or squeamish, and either way aren't going to tolerate some poor SOB dying of a treatable disease, so we're going to pay for their care one way or another. We don't want to do that, so we try to find ways to get them to pay for the insurance up front even if they are lazy/stupid.
The utterly indigent, we're going to pay for their food *and* health care, but that's a separate issue.
* Barring extreme regulatory redefinition of what constitutes "insurance".
1. Systemic Risk: If life expectancy in the US at the moment is 77 in 2015, but in 2040 it will be 75, then all your calculations for how much to charge get fucked up. If you estimate 2.5%/annum return over inflation on your investments but you get 2%/annum instead, same deal. There are many such possibilities and you have no ability to correct for them. If you offer such a plan broadly, you're going to get screwed eventually, and it will tank your company when you have people born in X year actually cost 20% more than you expected. That can't really happen if people are paying month-to-month and you can hike up their rates regularly.
2. Nobody Actually Has A Big Pile Of Money Sitting Around. I pay ~$400/mo for insurance. If we transformed this into a perpetuity at 4%/annum interest, I would have to have $120,000. I have never had $120k at any one time in my entire life.
1. Insurance companies have a natural way to adjust, though. Old clients die, and new clients are coming on constantly. They can adjust rates of the new clients to account for old miscalculations. Insurance companies that do a better job forecasting will have to adjust prices for new clients less, giving them a competitive advantage.
2. If a company is setting premiums across an entire lifetime, they will naturally be cheaper on average. Also, I don't see why there's a need to pay up front. You agree to pay $x/month until you die for insurance until you die.
1. Example scenario: Company A underestimated how much it would cost to pay for the "people born in 2002" cohort, and is now losing money. They raise prices. Company B did not underestimate it, or did so less significantly, or isn't doing some insane lifetime plan, so they do not raise prices, or don't raise them as much. People buy from Company B, since they're cheaper, and Company A goes out of business.
2. I don't see how this proposed insurance plan could possibly be significantly much cheaper. My insurance was ~$300/mo when I was 26 and first had to start buying insurance. It seems completely absurd to imagine that it would be much cheaper for a lifetime plan that's going to have to have the money to cover me when I'm 77 and on chemo. People would realistically not buy, say, a $800/mo plan in preference to an equivalent $400/mo one, even if they're told it's a ~lifetime set rate plan~, particularly given the strong suspicion it is not (what if the company goes out of business? What if I don't have the money for a couple months?).
1. Sure, it's possible a company could go out of business. I would expect some to. That happens and sucks. If we feel back about it, we could give stipends to people whose long-term insurance goes out of business to help them buy new insurance in the same way that we hand out food stamps. But food stamps are a looooong way away from the deep entanglement that exists between government and healthcare.
2. It's going to be much cheaper because in a system that hasn't been so thoroughly stupid-ified, health insurance would actually be insurance: low premiums to handle rare but catastrophic outcomes. Instead, insurance now is just a useless third party intermediary for all health costs, which hospitals and doctors also use as a source for indirect redistribution (overcharging insurance companies to subsidizes the uninsured).
I think this still fails everyone with genetic diseases and everyone who got diseases before age 18. It less obviously fails, but I think still presents a moral hazard around, people who can't afford insurance at exactly age 18, or are too absent-minded to get it.
Why not offer insurance to parents for their 10 week old fetus and let the child take over payments at 18 or whenever?
Why not just insure everyone through the government? You literally can't get better risk-pooling than 100% of people.
Because you can't get that superior risk pooling without the humongous list of massive inefficiencies and absurdities that drive every discussion of healthcare systems?
And if your parents didn't buy it for you, then what? Your fault for having dumb parents?
This might work, but only if you are irrevocably locked into that one company (and paying its premiums) for the rest of your life. Though then it's a bit like government insurance except (a) you have a once in-a-lifetime chance to choice your poison, but (b) you have to worry about your insurer's possible bankruptcy at some later date.
Otherwise, you have the classic death spiral danger. (In short, what follows once another (or "another") company advertises cheaper rates for 28 year olds, say, who switch to them - but only accepted if they are in good health (which is why they can be cheaper)?)
Why are you locked into one company? I have a life insurance policy through my employer, which ends if I change jobs, but I also have a separate policy I bought myself. There's no reason a person couldn't buy redundant insurance for the same reason you buy insurance at all..."just in case".
There's no reason why we wouldn't expect insurance insurance to spring up, that is a policy that pays out a lot of money to you if your primary health insurance company blows up.
Your point about adverse selection for healthy 28 year olds makes sense, but there again seems like an obvious solution, very much akin to pre-payment penalties for real estate or penalties for breaking a lease: charge people a lump sum to cancel their policy.
I'm technically wrong about both the 'locked' in and 'one company' part, but I think I'm practically as correct than not.
You can maintain as many health insurance policies as you want, yes, but the average premium for an individual is $500/mo. Unlike life insurance the benefits aren't additive, so this is nearly wasted money (but is protection against bankruptcy or something?)
A cancellation fee certainly addresses my other issue, so you don't need to be locked in. My back of the envelope calculation would put it as somewhere north of $50K at its peak (it would vary by age, rising then declining.) But is it socially or legally viable? An insurance company presumably can't predict its premiums decades into the future (medical advances, if nothing else). So when I get my premium notice at 40-years old, do I just have to accept it whatever the number is (unless I pay $50K or whatever exit fee). It's not as if I signed up for that particular premium back when I was 18 - will the courts even enforce this?
Insurance-insurance sounds viable, if purchased while healthy, and would be a better alternative to buying two policies. Maybe it's another insurance company who charges a smaller premium to be backup-until-the-primary-goes-bankrupt. I wonder how many people would buy it? It faces double adverse selection, so would probably only be offered to very healthy people in very sound (-seeming) insurance plans, but if you buy it at 18 with your main policy it seems like it could work.
Pre-birth, lifelong insurance seems like the sort of service that could only be reliably provided by a government, though, right? Especially in an unregulated marketplace, the switching cost would be enormous--insurers would not be motivated to take on high utilizing patients in mid-life, and those would be the people most likely to be dissatisfied with their insurance. Furthermore, what company would you trust to deliver a complex service 40-50 years into the future, especially in an industry as rapidly evolving as healthcare?
Are you familiar with what happened to the long term care insurance industry? The same applies to your lifetime health insurance idea.
Seems to me a government catastrophic insurance system that had a deductible set at say 10% of household income over the poverty level each year and then covered 90% of expenses over the deductible up to say an additional 10% of income annual cap would cover most of those issues while allowing market forces to do a lot of work.
For chronic diseases (like type I diabetes) you could also add some kind of lifetime or 5/10 year cap.
I find it very strange that our solution is to make everyone get insurance instead of directly attacking the problem by making everyone go to the doctor?
Also, at least when it comes to children there are many charities that provide free medical care even for extremely expensive procedures like cancer. I am thinking primarily of St Judes.
To clarify, the market failure case for healthcare is not traditionally the goods or services, as one would find in used car markets or grocery stores. It is regarding insurance markets in healthcare. In that sense, the Canadian system would agree with you in some sense.
Its specifically adverse selection that 'public' health insurance systems (single payer) solve because it uses the power of the state to force everyone to be part of a plan. Which admittedly is not a great case for a libertarian to hear!
The other, less (un?) explored option is to not de-facto require people to go through insurance to secure these goods and services. We don't make car insurance cover gas and oil changes - not sure why we have medical insurance cover basic routine care.
Keep in mind that a lot of non-emergencies still involve being very sick. And if you’re very sick you often don’t have the bandwidth to deal with searching out prices and comparing doctors.
>>I've never, ever heard a very convincing case as to why health care should be any more managed than grocery store products/prices. <<
Have you ever needed to buy a gallon of milk, because you will be dead or in great pain if you don't?
I need to buy food constantly to keep from being in great pain or dying.
The difference is that you can substitute all kinds of different food products just fine. For the health care scenario, if you happen to need strawberry flavored yogurt, then you need just that, milk or cheese won't do, and if raspberry flavored yogurt is ten times cheaper then maaaaybe it will work, but have a bit greater chance of dying.
I.e. even for non-emergency medicine, if you'd treat it as a grocery store, there would be a big difference because you don't have a connected market for food where any outrageous pricing gets corrected by substitutes, but you have a collection of many small oligopolies or even monopolies.
Less than 5% (a *lot* less than 5%) of US healthcare costs are incurred in an emergent/emergency situation. And a great deal of the emergency costs overlap with non-emergency care - buildings, lab tests, basic supplies, standard nurse training and salaries, etc.
Also - people manage to get car repair, animal repair, and a great deal of other 'just in time' services at market rates, apparently just fine.
"Emergency situations" is only a small subset of "situations where if you fail to pay you will be at risk of severe injury or death."
Cancer isn't an emergency; you don't need to get rushed to the ER the moment it's detected, but it will still kill you if left untreated for too long.
Right, but the difference is that with cancer you'd have time to call around to a few different hospitals to find out pricing (in an alternative world where prices weren't retrospectively determined through voodoo, that is).
"Situations where if you fail to pay you will be at risk of severe injury or death" still doesn’t separate healthcare from many other goods and services. To use the comparison by OP, you are constantly at risk of death by starvation unless you buy food. There are other aspects that make healthcare different from food, but “is your life on the line?” isn’t one of them.
Catastrophe insurance can cover these situations.
The key market failure are not in the health care market, it is in the *insurance* market.
Adverse health events can require ongoing streams of payment for decades after they occur. These streams of payments are incredibly uncertain and especially so far into the future. Not only is there a lot of individual uncertainty (which would not be that hard to insure), there is a lot of highly correlated collective uncertainty because of the invention of new treatments in the future.
For example: let's say I would like to insure myself against the risk of developing a particular medical condition X. X requires some degree of immediate and ongoing treatment (eg insulin for diabetics). But X also increases my risk of certain cancers, and of heart disease, and of obesity, which ultimately increases my risk (in old age) of falling and injuring myself, and so on.
The moment I learn that I have medical condition X, *today*, all of the incremental risk due to X is known and in a fully unregulated market would be "priced in" by insurance companies. If I develop condition X and then *after that* try to go buy insurance from an insurance company, they'll charge me a lot more because they are aware of all those increased costs.
That means that if I want to buy insurance against medical condition X, that insurance needs to provide a lifetime guarantee of coverage for all of the costs downstream of X. This is not something that insurance companies can practically offer.
And the on top of this is the problem of buying insurance before you are born for conditions that you have at birth.
I think if people step back and look at the back and forth below, it looks like the kind of conversation we'd be having about *any* product the very first time anyone ever suggested the benefits of a free market. The implicit idea behind these "gotchas", I think, is that a person has to plan out in advance the detail of how every kind of product or service would be provided or implemented before people will say "OK, let the market sort it out".
But we know that's impossible! The whole idea behind letting the market work is that central planners without a profit motive *cannot* do this.
Suppose that by historical accident all food production and sales were handled by the government in the way health care is in all modern economies. If I came along and said "Guys, this seems silly. Let's just let the market handle all of this like we do with personal computers", I can't help but feel we'd be having these same sorts of conversations.
"Food is different because we need it to live, and we need it constantly."
"When you're hungry you don't have time to negotiate prices."
"There's no good way for people to know if the food they're buying is good."
it is almost impossible to find information on how exactly it is decided how much money hospitals get in Germany but I think I found it: the combined insurance companies bargain with the hospital organization on a price. The compensation was based on the cost of providing these services. I think practices often get a flat amount per visit (limited to 1 per month per customer) and private insurers pay per service provided (much more money). The amount of practices per city is set by the doctors association.
Im not quite sure everything I've said is correct but I am reasonably convinced that the gist of it is. And yes - everything is a 3 letter acrynom. It's horrible.
Yes, basically hospitals get a flat rate from the insurances based on the amount and type of treatments they were giving in the past
I can imagine some of the issues with drug pricing being related to countries and companies having a lot of experience of what an “acceptable” price for drugs is. No drug company is going to sell atezolizumab or lisdexamphetamine for $5 a pop when they have patents on it and spent lots of money on trials etc. The NHS and NICE knows this, so their offers are likely to be somewhat reasonable so that drug companies are at least making a nice profit. Drug companies on the other hand know that the NHS will not let it’s eyes be gouged out by new cystic fibrosis drugs that cost too much (Or Alzheimer’s drugs that don’t even work), so there is a mutual understanding of what prices are likely to be, and then negotiation ends up in a much more narrow range. Related to this fact, it’s not unheard of for the nhs to not publicise what it’s paying for drugs as part of the agreement with the drug company (presumably for political reasons and also maybe to mess with other countries average algorithms). It’s not quite as random a process as it sounds.
One thing I don't understand and perhaps someone can help me here
What on earth is the justification for private insurance? You have 50 different electrical car companies, 10 years later you have the world's best set of electrical cars.
What do 50 different health insurance companies get you???
The best set of health insurance companies?
Clearly not.
"Best" In profit seeking terms given extensive regulation perhaps
I'll bite
What the () do they do for patients or for medical innovation? Its got to be one or the other to justify it. Otherwise why even allow it?
The value-add of an insurance company is supposed to be risk estimation (not "negotiation" - if anything this is a waste). A company that does a better job of risk estimation will be able to charge cheaper premiums, and maintain the same margins.
However, in the US, I get the impression that health insurers are basically forbidden from doing this core function, due to laws saying what premiums you can charge to whom.
So, the industry could provide value, but right now it's all just wasteful paper pushing.
Insurers are the negotiator that acts between hospitals and employers. Otherwise employers would have to negotiate directly with providers if they didn’t want to pay whatever price a provider thought up.
So insurance is basically paying someone to negotiate on your behalf?
Like paying a lawyer? To force the other person to cheapen their price?
Best lawyers get the best prices in this paradigm
Theoretically, you cut out the insurance and just have the government subsidize and negotiate, you may have the same (crap or better) outcomes at a far cheaper cost. There doesn't seem to me any reason insurance agents should act like lawyers as if there is some ambiguity in whether the patient is guilty or not. One man's cancer is another man's cancer, not that one is innocent and the other is lying and just has a fetish for cancer drugs. There should be a single, strong but reasonable negotiatior not 50.
In theory you can also get a risk/benefit profile that matches your lifestyle. One company might say having no legs is 90% QALY discount, another a 30% discount, but they swap for arms. I don't know the right answer for everyone, but people could choose on those.
Okay so the SINGLE UNIQUE BENEFIT of private insurance is a risk/benefit profile to match your lifestyle?
To the blazes it go then
Blast private insurance
Oh I didn't realize this was a death quiz sorry
Another is that private companies are better able to keep down waste; they do not need a government regulation that says exactly what level of employee stealing pens is worth it to demand a TPS report for each pen, which corporations can make those decisions on their own.
If the government denies you something, you're SOL, only able to sue it if the government agrees to be sued. You can take corporations to court, or tell other people not to deal with them if they aren't meeting your needs.
"Oh I didn't realize this was a death quiz sorry"
It is...our very conversation will decide the future. Millions of lives hinge on our very words.
"Another is that private companies are better able to keep down waste; "
It seems this is mostly true for companies that provide goods, kind of true for companies that provide services but I don't see what efficiency is occurring with insurance, health insurance to be precise. It seems jts only adding to the systems innefficiency
Well, I think the theory is that the competition for customers among insurance companies provides ample incentive for them negotiate the most advantageous rates with healthcare providers, keep overhead costs low, and root out waste, fraud, and abuse. I don't think this actually works well in practice, given how much healthcare costs have grown over the past 40 years or so, but I don't know that the federal government could actually do the negotiating part much better. Consider that when the Affordable Care Act was passed, one of its most important provisions was the creation of the Independent Payment Advisory Board, which had the power to cut payment rates for various types of services in order to reign in Medicare spending, and whose decisions could only be overruled by a super majority in Congress, in order to insulate it from political pressure.
This wasn't foolish. The American Hospital Association is one of the most powerful lobbying groups in the US, as its well funded, and every member of congress has at least one hospital in his/her district, and which is almost always one of the five largest employers in that district, also, so it represents a chunk of potential votes, too. Here's from the wikipedia page on the IPAB:
"Henry Aaron, a health care expert at the Brookings Institution, said that many observers saw that some in Congress are "in thrall to campaign contributors and producers and suppliers of medical services" and most are not well enough informed to wisely use Medicare's buying power to reform health care.[9] The idea behind the IPAB was to take power away from Congress (and special interests[10]) in order to give it to those knowledgeable in health care policy."
https://en.wikipedia.org/wiki/Independent_Payment_Advisory_Board
Needless to say, Congress killed the IPAB in 2018. "Just have the government negotiate lower prices" is not a policy prescription that works in practice. Oh, the joys of democracy.
The term "insurance" with regard to healthcare and specifically the US, is somewhat buggered, ie. wrong.
There is insurance, paying away a premium in order to regain the cost associated with an event which is relatively rare, and the cost is relatively high.
Then there is assurance, where the premium is paid to cover the cost of an event which is relatively common, or actually nailed on given enough time, and the cost is relatively low.
The terms get badly muddled, but an insurer and an assurer have to consider the risk of the event happening, and the likely cost of the pay out and how the payout is ultimately affordable, and are those are different.
At a certain point, depending upon, at the very least, how many customers an insurer or assurer has, and what the events are, then one begins to look very much like the other. An insurer has a portfolio of events, at least some of which are absolutely guaranteed to require a payout in any given time period, say 14-23 year olds breaking legs playing football, or broken noses or gouged eye sockets playing rugby, which doesn't occur at the same frequency for 24-45 year olds. Premiums paid across the two segments effectively balance out, but they are events that are always going to occur with different frequencies between groups.
At scale, single-payer will work. Yet single-provider may or may not.
This is one of the issues that the current US solution has - no single insurer/assurer can achieve the scale necessary to make this work across the entire country - which isn't a unitary state. So each insurer ends up having to determine a sequence of exceptions for events that they will not payout, and also for things that they will (but quibbling the amount).
Essentially, you end up with people who are good at negotiation, and not that much else.
> they said everyone in Switzerland is rich
Living in Switzerland for many years: this is most certainly not true. Salaries are higher than neighboring countries, but so is cost of life. I have known people living in the fringes, and there's definitely plenty of misery. (It is less bad than what I know from Mediterranean countries, and government help does its job for those who know to seek it, but still.)
This overall higher cost of living / income helps with some stuff, like buying drugs that have the same price everywhere. But everything that involves a human is proportionally expensive. If at the end of the day it remains affordable, it's because insurance franchises are low (which doesn't happen without a fair amount of regulation), and because the government does subsidize those who can't pay it.
I may be misremembering - the exact quote might have been "no one in Switzerland is poor" - although it sounds like even that isn't quite true.
Can you explain what you mean by "insurance franchises are low"?
Not quite true, no, but in fairness it's far from the worst. Any chance that came up during last summer Zurich's meetup? I recall some conversations about healthcare there, and opinions were very different between people who'd been born Swiss and were mostly exposed to Swiss social circles than to those that came from abroad.
To give concrete numbers about the franchise, the top tier it's about 2000-2500CHF yearly with a monthly premium of 350-450CHF. As people get older they choose lower franchises with higher premiums, since they'll use them up anyways, but all young people I know have the highest possible of 2500CHF.
Compare with people paying 1000CHF-2000CHF for rent in a place like Geneva. With respect to income, from net monthly salaries I know, a social worker gets around 3000CHF post taxes, a postdoc around 4500, a school teacher 5000, a junior developer 6500, and a mid-level programmer can go up to 10k net. Then e.g. that social worker would be eligible for government subsidies on the premium.
This means that even in the worst-case scenario of having to be hospitalized for several days, the bills for the whole year will be less than one month's salary.
There are a couple of surprises in the system, e.g. ambulance transport is not covered by default. They're covered by just a dozen francs more per month on the premium, but if no one tells you (such as the shadier and cheaper insurance companies do) then it can be a really nasty surprise if you ever end up having an emergency.
On the plus side, they offer international coverage by pretty much nothing, I guess assuming that paying doctors elsewhere is nearly always going to be cheaper than paying them in Switzerland.
Pardon my ignorance, but what is a 'franchise' exactly in this context?
Ah, I may be mistranslating something. The insurance company does not cover the first X costs per year (the "franchise", in this case 2500CHF), above that it covers everything. So if I'm normally healthy and I need to go to the doctor for the first time in a year because I have a headache, the 200CHF bill will be on me (and it'll get deducted from that year's franchise). If they send me to a specialist that charges 1000CHF in tests and whatnot, it's still on me. But if after that I need to be hospitalized, whatever the hospital bill is, I'll only pay 1700CHF (the franchise minus the 1200 I've already spent), and everything above from that is taken care of by the insurance.
Ah! The equivalent term in US insurance is 'deductable' (because they deduct that much from their payments.)
Thanks for clarifying!
Oops, then definitely, I was under the latin influence there. Thanks for raising it!
I am Swiss, and have many family members and friends who also lived for a while in the US (including many US-born kids).
Putting the US and Switzerland in the same bag MAY make sense at the macroeconomic level; but for the persons who lived in both countries, how they experienced it is completely different. For healthcare, we are a practically a socialist country when compared to the USA; some people have difficulties paying their health insurance premiums, but hospitals will take care of everyone. Except a few edge cases (e.g. experimental cancer treatments not yet reimbursed by insurances), nobody will die because they don't have the money.
I personally don't think it makes that much sense at the macroeconomic level either. Sure there are a couple similar metrics. But it looks like inequality levels are much more reduced in Switzerland, it has a very particular economic relationship with its neighbour economies, it has to deal with different inmigration issues... Then internally there's things like the really good public education system, good public transport, etc that tell you it really cannot work in the same way.
To be clear
> nobody will die because they don't have the money.
I absolutely agree with this. I was just raising the point that "everyone is rich in Switzerland" is not quite correct, and it sends the message that problems here are solved because people can just throw money at them. This diminishes the merit the country has for solving problems because it has functional institutions and decent civic organization.
It's more socialist than outlined in the article, even, as on the order of 55% of in-patient costs are directly born by tax payers.
Isn;t this the same in the US? I don't think hospitals can deny service to anyone. Maybe I am wrong (I am not American)
I think what's implied is "with them being able to pay for it" / "not get crippled with debt", cf "nobody will die because they don't have the money"
Switzerland may be rich compared to most of Europe, but it's not that much richer than the US. By some measures, the US is richer. So we shouldn't use this is explain why Switzerland's health care system works better than America's.
From Wikipedia:
Switzerland's GDP per capita is $76k, the US's is $68k, Germany's is $57k, France's is $49k, and the UK's is $47k.
The US's median disposable income is $43k, Switzerland's is $39k, Germany's is $31k, France's is $29k, the UK's is $26k.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
https://en.wikipedia.org/wiki/Disposable_household_and_per_capita_income
But the claim is "nobody is poor in Switzerland". If you look at income inequality, the gini coefficient of Switzerland is 29.3 (18th), while the US is 37.8 (59th, according to worldpopulationreview.com). If Switzerland's health care works because nobody is so poor that they can't afford it, that would be a good explanation.
As a cashier at an ALDI supermarket in Switzerland, you earn more than 4000 CHF per month, which is roughly 4000$ per month. There are a few jobs that earn you less than 4000 CHF per month, but very few that earn you less than, say 3500.
In the US, there are a lot of jobs that earn you less than 3500$ per month. It is not trivial to find a job of >3500$ if you have no qualification. In Switzerland it is.
The data you give is correct, but it misses this point. As Scott emphasized, nobody in Switzerland is poor, other than in the US.
The valid pushback on this statement is what others have made: prices for services are extremely high, and rents are Too Damn High. I don't want to downplay that "poor" people in Switzerland really struggle with that. But being poor in Switzerland is a completely different level than being poor in the US.
If that’s 4000 a month after taxes that’s a bonkers wage
No, before taxes. But it's still bonkers.
In the bay area, starting salaries for in-n-out employees are around $3500 per month (full time)
As per the Norway-gets-cheap-drugs issue, beware any modeling that lacks accounting of (1) scale and (2) iterations of equilibrium. Where one inquisits: "Emanuel praises this as a good decision. But Norway does even better: they take the average of the cheapest three countries in their basket. Obviously this works, but then why not the cheapest two? Why not just say your drug price will be Norway’s price minus one dollar? Half Norway’s price? I didn’t get a good sense of why some countries had cheaper algorithms and baskets than others. Maybe they had tougher negotiators?", I hope this is another one of those tongue-in-cheek digressions intended as irony to the insiders. Let's add scale and iterative considerations.
Norway is ~5 million people, or something like 0.5% of the wealthy population, and a rather smaller percentage including the not-quite-wealthy-but-not-exactly-poor, e.g., including China. Thus, to consider scale: an international drug manufacturing concern is unlikely to spend much sweat over a fractional loss of profit in an already tiny fraction of the market, especially where a failed negotiation has a large cost in goodwill (we can presume that the lowest-price drug markets are still profitable ones; this is unlikely to invoke a loss-leading strategy). Then, consider whether this equilibrium iterates: if the biggest, wealthiest markets (USA, Germany, &c.) banded together and demanded the Norway price, the manufacturer could easily be incentivized to swap its chemical engineering to some other, now-more-profitable task; that is, the negotiating power of the small+wealthy markets is floated along by the insouciance/indifference/sheer wealth of the large+wealthy markets.
Norway only having 5 million people does make it a lot less strange that they can get away with charging lower prices.
A key factor for the US is that we have a large number of middle-men organizations, such as PBMs, which drive up costs. Other countries systems are complex and also have middle men organizations, but a key difference is that theirs are and have been non-profit for some time, while ours are for profit. One of the reasons the Left desires the seemingly large shift from our current system to Medicare for All is it would eliminate/minimize the role of for profit middle men, sidestepping the incredibly difficult seeming process of reforming them. To be reductionist, expanding an efficient government program to all is seemingly easier than reforming our current gnarled system, political considerations notwithstanding.
Are “profit margins” really high enough to account for the difference in cost? I don’t get the impression that health care systems are particularly profitable overall.
Healthcare administrators/executives take up some of the excess, which from a balance sheet standpoint is not profit but salary. A larger factor is the fact that doctors, especially certain specialists, are paid handsomely in the US, more than in other countries. This incentivizes the best doctors to come here and gives us the best top end service, but also inflates costs.
https://www.healthcaredive.com/news/covid-19-spurred-growing-profitability-in-insurance-markets-last-year-kff/599436/
"Major U.S. payers reported historically high profits in 2020 as medical utilization flatlined during the early months of the coronavirus pandemic."
Margins are pretty good, but you're right they don't account for most of the cost difference alone.
>This incentivizes the best doctors to come here and gives us the best top end service, but also inflates costs.
I would think more doctors going to the US would reduce costs. Why does it inflate costs?
Good question. The absolute increase in supply is very small, but those that do come do so because with their skills they can command a premium for their services in our healthcare system, raising cost ceilings and average cost. It’s not a con but a trade off. Think of it this way: an inordinate amount of supply is added on the top end, which shifts the average cost of specialized medicine upwards, and since as Scott mentioned pricing is often circular in healthcare, this inflates costs.
It reduces costs per doctor relative to a US healthcare system with no immigration, but not relative to other healthcare systems that don't gate medical licensing as stringently as the US and have more overall providers per capita even if they lose some small number of them to the US.
Medicare fraud, waste, and abuse costs run over $50 billion per year:
https://pubmed.ncbi.nlm.nih.gov/25068880/
Is it really fair to call such a program efficient?
The problem is that Medicare is barely sustainable for providers. Medicare also freeloads off of a bunch of legal regulation which isn't available to regular insurance companies.
So the US basically has 3 systems working in parallel: VA (socialized medicine) Medicare (single payer) and (heavily regulated) private. Maybe 4, if you split out whatever Obamacare is (community pooling, notionally private but heavily subsidized and even more heavily regulated).
Which of these systems works the best in the US? Does the US “single payer” flavor compete with other countries that do single payer? If not, is there just something uniquely challenging about delivering healthcare to USians?
I kind of think it might be the last one? We spend a crap ton on health care because we have a fraction of really rich people who demand the best and have more disposable income to throw at it (some of this flows down and makes everyone’s care more expensive since you generally don’t have a rich person ER and a poor person ER - the docs and facilities and procedures are the same). But you also have a really poor population with generally shitty health outcomes.
So it looks like the US pays a lot for shitty outcomes. But what if the people paying a lot, and the people getting shitty outcomes, are just different people?
There's also Tricare for the active duty military, which is single payer, publicly funded, and free to the consumer, but routed through private insurance companies that in turn pay a hybrid system of on-installation military healthcare providers, some uniformed and some civilian, directly employed by the government, but also allows you to seek out private care from providers off installation who accept Tricare, understanding they'll get lower reimbursement compared to other insurance providers.
The US is also 50 different states each with their own set of regulations which further complicate things. This doesn't even get to regulations which actually impact care such as rules allowing existing hospitals to essentially veto new hospitals entering the market or rules over who can perform what procedures which drive up costs.
How different are the US states in practice? I've lived in a number of a different states, and while there are differences, they seemed marginal ... such as required coverage areas. That certainly matters if you happen to have a relevant condition ... but are there are actually structural differences or just slightly different details between states?
I am not an expert, so this is only based on what I have read or experienced living a different states.
A big one is that different states have different licensing requirements for doctors and insurance companies. So you don't always have as many options as you could in every state. Or the rules inhibit innovation, especially with modern technology. For example my child's doctor offers telemedicine appointments - but only if we are in the state that we live in (where they are located as well). So when our son was sick over Christmas and we were visiting family we couldn't do a telemedicine appointment because we were in a different state.
The insurance company are also not always licensed in every state so that can make it hard to find in-network care if you are in a different state. Or, like in my case, work for a company located in a state where you don't live - the insurance provided by the company is only licensed for that state. Luckily we have Blue Cross which is big enough that I can find in-network providers where I live. An interesting note on Blue Cross/Blue shield is that they are actually a membership organization, not a singled company, made up of many different companies operating in different regions.
Each state also has different laws when it comes to care. Some require hospitals to publish prices. Some explicitly prevent hospitals from publishing prices. Some states allow existing hospitals to effectively veto new hospitals opening in the area.
Some of these rules are good, others maybe not. But it does create a lot of complexity which is rarely good for consumers. It may not impact consumers directly but I think it does reduce innovation or at least concentrate it to major cities or specific states that have regulation schemes that are easier to navigate.
The US had similar sets ups in banking and telecom in the past where each states basically was its own country. This forced up prices in these industries before the markets were opened up (telecom of course has its issues but mostly related to the network effects of spectrum and other structural characteristics).
I don't know much about how to compare systems but I do know for years Canada's system has always lagged others according to studies from the Fraser Institute, CD Howe (two think tanks here) and the OECD. It's especially very pedestrian relative to the bragging. Oof, the boastful antics of Canadians regarding 'free' public health. It's so great we lost our civil liberties and wrecked the civil order to avoid 'overwhelming' the 'fragile' system - particularly in Quebec. Years of sheer corruption, mismanagement and ineptitude meant 15 days was never going to be enough and that the unvaccinated were to be blamed for its sorry state. Just my two pennies.
Life expectancy seems like a pretty rough and imprecise measure of healthcare quality. Like I would guess that part of the reason the US has lower life expectancy than other developed countries is due to non-healthcare factors, like violent crime, suicide, car accidents, etc.
If you look at more direct measures of healthcare quality, like 5-year cancer survival and heart attack survival, the US doesn't seem so bad:
https://en.wikipedia.org/wiki/List_of_countries_by_quality_of_healthcare
Obesity and drug use would be huge factors pulling down the life expectancy in the US as well.
Cancer survival is a very flawed metric. If you do a giant amount of mammograms and remove lots of benign tumours, you will tremendously increase your survival rate without adding a day to anyone's life. Same issue with other cancers.
A while back I tried to get a good answer to "how much is the US death rate reduced by murder/accident" to win an argument on an earlier comments section. The most recent I found was this paper, which estimated a combined 1.2 years lost due to violence, which they define as murder, suicide, and accidents, in the year 2000 in the US (see Table 4):
https://www.demographic-research.org/volumes/vol19/35/19-35.pdf
The National Health Service doesn’t own and run all the hospitals in Britain - there’s a large and thriving private sector offering both insurance and treatment. Who blundered in claiming it does - Scott or Dr Emanuel?
As far as the quality of the NHS is concerned, complaining about it is a national pastime but it’s political suicide to even hint at wanting to scrap it. Of course, the system can perform only to the level of funding it receives and it has been underfunded since the Cameron administration’s austerity era. BJ has the political savvy to see the danger and has begun to address it.
I hear this claim a lot, and I'm always curious as to when it *became* underfunded. Because its funding has been increased, in real terms, per person in Britain, every year since 1996. The above-inflation increases were not as far above inflation under Cameron as they had been under Labour, but I remain unconvinced that the second derivative of healthcare spending predicts healthcare outcomes.
I can’t find data for inflation adjusted per-capita spending on the NHS. Perhaps you can cite your source. Can you confirm that inflation-adjusted means adjusted for inflation in medical costs and not for a general basket of goods for which inflation has, for decades now, been lower.
Reliable data on the percentage of GDP Britain spends on the NHS shows strong annual increases 2000 to 2009, and sustained decreases under Austerity 2009 to 2018.
BJ’s administration substantially increased the percentage of GDP spent on the NHS in 2020 in response to widespread dissatisfaction with wait times and care. I doubt he’d have done that if the perception wasn’t that not enough was being spent to keep standards in line with medical advances and to pay for the increasing costs of such services.
In two systems of equal scope and efficiency but with marginal constraints, it stands to reason that spending more on one will achieve better outcomes. I think you’d need to present evidence to contradict that
I'll dig out the sources later. Real terms means adjusting NHS income for headline retail price index though. To adjust it for NHS expenditure seems a strange thing to do. Cost disease is a fundamentally different problem from underfunding. If bandits are determined to charge the NHS the maximum they think the NHS can pay, increasing the amount the NHS can pay doesn't help.
The NHS underfunding is relative to what governments in other comparable countries spend on healthcare. Even the US government spends more per capita, despite a large fraction of Americans needing to rely on private insurance.
The UK government isn't "the sole employer for doctors and other health professionals" - we do have private hospitals, private health insurance, and doctors who do NHS work and private work in the same hospital. Most people use the NHS, but private healthcare is a minority option, a bit like private schooling. It sounds like how you describe the Australian system.
(I'm not sure whether Emanuel missed that, or you misunderstood him, or I misunderstood your categorisations.)
I came here to say this too. What we have in Britain is pretty much exactly what's described in "Single Payer With Substantial Private Insurance." The only difference is that it's not really substantial. Only 10% of the population in the UK have private health insurance, compared to 44% in Australia.
+1. Just this month I had a private doctor in a private hospital stick a camera up my nose and charge me £130. I assume if I didn't pay he was going to leave it there.
No country as far as I know forbids consenting adults from buying healthcare out of their own pocket from basically whoever, nor from insuring themselves against that expense before they foresee it.
The qualitative difference between 1 and 2/3, if it existed, would be the option to get a tax rebate by opting out of the universal scheme. I'm pretty sure that doesn't happen anywhere, as it would create all manner of perverse incentives.
The confusion over the NHS being the sole employer may come from the fact that, if the NHS pays for your training, then they own your soul. You may purchase your soul back from them, but for a price that exceeds the salary junior doctors start on.
Certain provinces in Canada don't allow private healthcare. (Part of the complexity of having 'Canada' as a healthcare system is that it's a provincial responsibility, and rules and coverage differ, albeit I acknowledge that they're generally more similar to each other than to other countries' systems)
I'd love to see Scott review of RFK Jr's The Real Anthony Fauci. If even 10% of it is true then Fauci should be locked up for crimes against humanity. It goes a long way toward explaining why science is so politicized (hint: it's the money). And why the American healthcare system spends so much for such mediocre outcomes and .
Scott's week : 12/01 : announced his wedding. Warn that posts will be sparce during honeymoon.
18/01 : quasi book review.
19/01 : book review.
21/01 : much more than you wanted to know.
22/01 : announces his divorce ?
Please take your time off, we can survive without you for a couple days !
I went on a one-week honeymoon to Ecuador. It was very nice. Now I'm back home, seeing patients, and don't see any reason not to write blog posts too.
Translation piece like you did for the Europe trip?
Now that's it not 1a.m. and I've had a night sleep, I fear my joke was in poor taste. I'm sorry if it was the case.
Don't worry, not a problem!
Health Care Budget Setting is like two wolves and a sheep sitting down to decide the price of a kidney.
The thing that sprung out to me on why this doesn't make any sense may be that the information in the book is either wrong or only technically correct but not how it actually works in practice. Maybe you need to have been a citizen of a specific country or at least experienced the intricacies of its specific system for a couple months to be able to begin and understand it. I can only speak for Germany here, where even the most high-level view seems to be wrong: going by the descriptions, it fits much better into bucket 3 than 4 (the appropriate three-letter acronyms in this case are GKV and PKV). If Emanuel managed to get even that part wrong, I don't have high hopes whether any of his other opinions or facts on this matter can theoretically be correct.
As for one of your other questions: "Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Hospitals that allow any of the government insurance companies have to allow all of them by law. There are basically two ways of being a health care provider: you serve everybody and are allowed to receive money from the government insurance companies (what exactly each procedure is allowed to cost is defined by law as well) OR you work in private practice and take only upfront cash (although with citizens, invoicing is usually preferred; the upfront cash part is only really used for foreign nationals) for procedures, where you (sometimes) have to use the same cost tables as with government insured people but are allowed to have a higher multiplier on the base rate. Those with private insurance can then get a reimbursement from their insurance if they so choose.
These systems feel so vast in the end that whatever emergent properties they developed could just be pure chance and the US just happened to get the worst deal? Or maybe that other popular theory by proponents of the US system may even be correct, i.e. that it's the US that's basically subsidizing the world in health care and multinational drug companies just accept different government prices around the world because they can always sell their pill for $10k a pop in the US? That's only the drug cost part of the problem obviously ... but honestly, I have no idea.
(EDIT: I've since seen some other comments claiming this is true of the UK as well. This makes my estimate of the trustworthiness of the purported facts from this book go down even more.)
I'm far from an expert on Germany's system but I agree the description above feels off. Germany has 3 systems -- KV, private, and HAVG.
Private insurance is basically a scam on young people. You pay a reduced rate when you're young but are forever locked out of the KV system and end up paying massive amounts when you're older and have no options. Everyone I've met using private insurance loves it when they are in their 20s and hates it when they are in their 40s.
HAVG is a weird one. It is basically the result of intense lobbying by primary care physicians who were mad that specialists were making more money. But it does have some good points, in theory, by trying to lower costs by driving more stuff through a primary care physician instead of a bevy of specialists.
The KV system technically has private insurance companies but they always felt like they didn't do anything except coordinate paperwork between the care giver and the KV fund. From what I could tell they have zero discretion on anything. The whole KV system felt a lot closer to the NHS than anything in the US.
"Private" sounds like a German version of a US we're-in-it-to-skim-off-the-low-risks insurer - targeting young people is a cost-effective way to screen out most high risks. So this would be how I would assume the market to function, i.e. that some entrepreneur should sooner or later come along to break with the posible German "gentleman" agreement between insurers of not trying to lure low risks away from each other.
HAVG seems like it is structured like the Great Britain & Scandinavian public health care systems, which demands that you have to see a (not that expensive to train) General Practitioner first, and he/she acts as a doorkeeper to more advanced treatment in hospitals (where there are more-costly-to-train specialists). Using often self-employed GPs as doorkeepers is a way to keep costs down, by relegating most consultants to the European equivalent to barefoot doctors (I mean GPs).
...unlike in "traditional" health insurance systems, public as well as private, where you can often start by going to a hospital right away (i.e. you are covered by the insurance if you do that), you do not have to go to a GP first in order to get access. Which in Great Britain and Scandinavia is regarded as a non-efficient way to use specialized (hospital) labour.
...If I assume right that in the KV system, you can access a hospital (with specialists) right away?
I've never even heard of the HAVG (german here). The Gatekeeping happens anyways - i.e. you need to see a GP to get a receipt for a specialist. Of course if you need to be rushed to hospital you will be but other than that - GP first.
That's useful, thanks.
My implicit reference here was to how (I believe) health insurance works in some middle-and low income countries, e.g. Mexico. Although also here I admit my knowledge is a bit sketchy, since I usually rely on translations plus feedback from my students from middle- and low income countries.
If GPs serve as gatekeepers to more specialised services also in Germany, one wonders what exactly is the "selling point" of HAVG then. (..otherwise a "selling point" could be that HAVG might be cheaper for the customer, By channeling more of health care services to be done by GPs compared to realtively speaking more expensive hospital doctors & staff.)
...but since you have never heard of HAVG that might be the point; this insurance product has not really taken off: Not enough demand...However, Tran Hung Dao might have more knowledge here?
I have been trying to understand the German system for some time now, so thanks for these insights.
A follow-up question: Related to Scott’s point about the adverse selection problem, do you have any good explanation why German insurance companies to not compete by trying to offload high/bad risks elsewhere, and chase after the low/good risks that are presently members of other insurance companies?
…since this in my opinion is a main underlying problem in all countries (such as the US) that allow several competing insurance providers “all the way down”, rather than to have a public insurance system (single-payer system) “beneath” the competing, private insurance companies offering insurance top-ups.
Framed differently: My puzzle is why Germany and the Netherlands who like the US (and unlike most other European countries) have competing insurance companies all the way down to the basic level, have not experienced the similar market-type logic than in the US: i.e. that insurance companies (including the not-for-profit-ones) are forced to differentiate premiums by luring low risks away from others & discourage, or charge the white out of the eyes, of high-risk members – in order to survive in the market.
(..since if you instead try to be “noble” and think it beneath you to chase after low risk-customers elsewhere, and/or for private ethical reasons do not want to give your low-risk customers a better deal than your high-risk customers, you are bound to lose in the long run to a less-noble competitor coming after your low-risk customers. )
…I have speculated if it is a “gentleman’s agreement” in Germany that insurance companies do not try to lure low risks away from each other. However, Germany has approx. 80 million people and it is hard to see how an informal agreement should stick in a country that large?
…Or if the explanation is “tradition”, i.e. that lack of dog-eats-dog competition among insurance companies is due to the social insurance tradition from Otto von Bismarck onwards, that white-collar workers do not mingle, insurance-wise, with blue-collar workers, or artisans, or farmers, or (more generally) “those other people”?
(But then again, a modern-minded capitalist German insurance-entrepreneur should be able to spot the possibility of making a killing by breaking this tradition, and launch an insurance company for low-risk (mainly young) people. So if “tradition” is the explanation, why has not German capitalism destroyed this “tradition”?)
….Finally: It the reason legislation? My hunch is that it must be. But if so, how does the German legislation achieve killing off this type of competition between their many insurance providers?
I am asking because if it is legislation, then other countries (including the US) who similarly do not have a bottom-floor, universal single payer system, might have something to learn from how the Germans do it. (While if it is a gentleman’s agreement or “German tradition/culture”, the solution is far less exportable.)
While at it: If I understand the Dutch system correctly, they have created a “functional equivalent” for a bottom-floor, universal/mandatory public system, by compelling everyone to buy a basic insurance package. Dutch people can choose their insurance provider for this basic insurance package, but what it offers, and how much it costs, are both so heavily regulated that you cannot “steal” low-risks customers by offering them a better deal for this basic part.
(You can for the supplementary part, but then the Dutch system becomes de facto similar to “single payer” European countries, who all also have voluntary top-up insurance systems. The difference in Europe is then reduced to the difference between countries where the basic insurance package is generous, so that top-up insurance is mainly “luxury health care consumption” (as in Great Britain and Norway); or if the basic insurance package system is not so generous, implying that it matters a lot which supplementary plan you buy (which I believe is increasingly the case in the Netherlands – rumour has it that the Dutch government is scaling down the basic insurance package you have to buy for the fixed price).)
…I give this Reader’s Digest view of the Dutch system (which I admittedly am not 100 per cent sure I have got right), since I wonder if the German solution is perhaps rather like the Dutch?
Grateful for any reflections or comments!
For the record I work on the comparative research - side of welfare systems (broadly defined), and my main take-home lesson from comparing health care systems in particular is “it’s complicated”.
The semi-private insurance companies do not off-load risky people, because they are not allowed to. They have to take everyone who comes. (Except for some edge cases like self-employed, Beamte (most civil servants), and soldiers, who are out for historical reasons)
But can they get rid of them by charging prohibitively large contributions (premiums)?
...if I remember correctly, the US also prohibits insurance companies from denying insurance to high risks (such as the born disabled or people with pre-existing conditions). But they can - eventually after a while - charge them very high premiums, and get rid of them that way.
...perhaps Germany does not allow the "semi-private" insurance companies to use this strategy either, i.e. that premiums are fixed regardless of risk?
Premiums are tightly regulated: https://www.gesetze-im-internet.de/sgb_5/__242.html The legalese makes my eyes glaze over, but the gist of it is that insurance companies are allowed to adjust their premiums based on income and a government agency may approve, deny or demand an increase in the premiums. (The law appears to be written from the perspective that insurance companies might prefer running a deficit instead of raising premiums and the government might have to force them to.) Directly targeting high-risk individuals with higher premiums isn't possible that way.
They're allowed to give bonuses to low-risk individuals, but that is contingent on making them participate in preventative programs and the bonuses have to be less than the savings caused by the preventative programs. https://www.gesetze-im-internet.de/sgb_5/__65a.html I guess an insurance company could try to target healthy people for a check-up that doesn't make them healthier, but allows them to claim that participants were healthier than average and then pay them a bonus for their participation. Even if that works, this possible loophole seems quite a lot harder to exploit than direct price discrimination.
Interesting, thanks for this piece of information Yorwba.
Despite your reading that this regulation (officially?) is “sold in” as a way to encourage insurance providers to raise premiums (rather than them running a deficit), I would guess the real purpose is the opposite, to prevent insurance companies from freely raising premiums in order to get rid of high risk-customers (since that regulation ambition makes more sense).
I would not be surprised in some of the hundreds (thousands?) of regulations concerning US insurance-company behaviour have similar rules. (Perhaps people more knowledgeable about US regulations than me would comment on that.) Here is the thing, however:
…such regulations set the stage for a regulators-and-insurance-providers “arms race”, since there is a benefit to be had for insurance providers who manage to circumvent such regulations (finding more subtle ways to ditch or discourage high risks), which sets the stage for a new round of regulations to block the subtler ways to avoid high risks, and so on and so on. “Come play the regulation game with us, for ever and ever”.
…the debris of this regulatory arms race is an ever-thicker manual of regulations, plus increased administrative costs on behalf both of both government administrators and the hired hands in insurance companies.
Allow me some loose speculations here, on German insurance competition versus US insurance competition (and I would really welcome comments if I am totally wrong or on to something):
I have the feeling (and it is only a feeling) that this “regulatory arms race” is less extreme in Germany than in the US (at least so far).
Competition between German insurance providers seems in a sense more “civilized”.
Related: I have a gut feeling that the Friedmanesque ethos “the ethical obligation of a company is only to make profits for its owners” is accepted among (at least some) US insurance providers - and it only takes a few for the rest to have to behave similarly, in order not to lose business.
...While German private insurance culture is still more “gentlemanly”, perhaps due to social democratic as well as Christian democratic “capitalism with a human face” way of thinking. (Which I link further to the importance in Germany of the long ideological shadows of Catholic social doctrines.)
Anyway. It’s a theory. Went off on a tangent there, admittedly.
…One final reflection on insurance competition the US-versus-German way: If my sources are right, this issue – i.e. to secure “reasonable” insurance premiums for the born disabled & people with previous conditions – is driving a wedge within the Republican party. The “Christian faction” within the Republican party is deeply unsettled by a market that places intolerable financial burdens on the born disabled and people like them.
If so, there might in the distant future still be room for a stable & less peculiar US health care system - through a coalition between these factions within the Republicans and the Democrats.
Just an outsider’s view.
In addition to what Yorwba said: The premium the inssurances can demand, is a fixed portion of a customers income, plus a small adjustment (I think +-0,5%). But this adjustment has to be the same for all customers.
So my insurance takes 14.6% of my income (+the same amount again from my employer) and an extra adjustment of 0.3% "because of extra costs during the pandemic" (it was 0,15% before the pademic). My father was with the same inssurances, and his premium was calculated the same way, until he retired last year.
For people in social security programs the state pays an fixed amount. Children pay a percentage of their parents premium.
I think that the term "semi-private insurance companies" is confusing with regard to the German system.
Private Krankenversicherungen (PKV, Private Health insurances) are offered by private companies (often publicly traded companies) which are regulated (as other private insurances) by the Versicherungsvertragsgesetz to some degree. Calling them semi-private is wrong because they *are* private companies (aiming to increase shareholder value) choosing to operate in a somewhat regulated sector of the economy -- just as SpaceX is choosing to operate in the somewhat regulated aerospace industry. They are very much competing with each other (and the GKV) based on premiums (e.g. 177,75 € - 572,65 € for a hypothetical (healthy) employee born 1990 [0]), coverage and extras (like single bed hospital rooms, and being treated by the Chefarzt (head physician)).
The PKV are allowed to screen prospective members for health problems (and increase the premiums, exclude certain health issues or reject the applicant altogether), but after you become a member, premiums are fixed (unless costs increase or something), I think.
Gesetzliche Krankenversicherungen (GKV, law-based health ensurances, also "Krankenkassen"), on the other hand are Körperschaft des öffentlichen Rechts (juridical person appointed by the state, who (mostly) are tax-exempt, public universities might be another example). While there is some competition between them (based on the insurance rates, which ranges from 15.25% of income to 17.1% [1] (half of which is payed by the employer), and eligible coverages e.g. dental health plans) they share a health fund. They are governed by Fünftes Buch Sozialgesetzbuch (SGB V, linked by Yorwba below). They are not private in any sense of the word. For employees who earn less than 62.550 Euro a year, the GKV is obligatory (Pflichtversicherung). Other groups can be elective members of the GKV (freiwillig versichert).
The transition from the PKV to the GKV is generally limited to avoid people moving there when they get old. These only depend on age (55 years seems to be an important number) and on formal conditions (are you self-employed, how long where you in the PKV, etc), however.
[0] https://www.check24.de/private-krankenversicherung/
[1] https://www.check24.de/gesetzliche-krankenversicherung/
Many thanks for these claraifications quiet_NaN. I have a follow-up question, if you have time. You write:
For employees who earn less than 62.550 Euro a year, the GKV is obligatory (Pflichtversicherung).
Question: What is the sanction from the government if someone fails, or is unwilling, or unable, to comply?
...this is relevant in a US context, since a major issue with the Affordable Care Act was what to do if people failed to comply with the duty to buy health insurance. (There was initially an economic sanction, but that was removed by Trump, leading to a major weakening of the Act.)
...so how do the Germans do it? Could be interesting to know for many of us!
Or is this something that "simply never happens"? (Which would also be interesting to know!)
...Incidentally, having to buy basic insurance whether you want to or not, seems to be very similar to the Dutch approach - the Dutch and the Germans being the two "odd countries out" in a Europe otherwise dominated by public first-tier health care systems. I am not Dutch muself, but I have a bright master student from the Netherlands who wrote a paper on her system, describing this as a core feature. I will not wouch 100 percent for her description to be correct (comparative health care research "is complicated" as we all know), but if correct this sounds rather similar to the German approach, as you describe it. Quote from her paper:
"Everyone who lives or works in the Netherlands must take out basic health insurance (basic package). The government determines what is included in the basic package. This is medically necessary care to which everyone is entitled. Health insurers determine themselves what is included in supplementary insurance.
The basic insurance covers standard care provided by, for example, a general practitioner, hospital or pharmacy. A deductible applies for most care in the basic package.
....
- The basic package is the same for everyone. The premium of a policy is the same for everyone. Everyone with the same policy pays the same, regardless of age or health.
- The basic package is determined by the government. The content may change annually. The government also determines the amount of the deductible and the amount of the health care allowance. There is no deductible for certain care, such as GP care or obstetric care. The government also determines for which care you have to pay a personal contribution. This is completely independent of the deductible.
- A health insurer must accept you for the basic package .
...
Health insurers must accept everyone as insured for the basic package. Age or health should not play a role in this. Everyone contributes to health insurance. Healthy young people, for example, help pay for specialist medical care that the elderly often need. And the elderly contributes to the maternity care that is important for young mothers.
....
. Insurers negotiate with healthcare providers about the price of care provided..... Insurers must reimburse care if an insured person is entitled to it. This is stated in the Health Insurance Act.
.....
You cannot (even if you are very rich) not take [basic] health insurance. This way people are not taken by surprise with the enormously high costs of health care. And with that, people cannot get into debt to pay their health bill. To help people with paying for the cost of the health insurance the government will give an X amount of money to people that have less income. This way the poorer people (that are usually more likely to live life less healthy and need higher insurance coverage) can still pay their health insurance.
...
[If you cannot pay the price of the basic package you may be entitled to a health care allowance.]To be entitled to health care allowance, you must in any case have Dutch health insurance. You should also not earn too much. For 2021, if your yearly income is less than €22.000 you receive €111 healthcare allowance (Belastingdienst, 2021).
...
[In addition to the basic package, you can buy supplementary health insurance. this is voluntary, and here the adverse selection problem kicks in.]
...does this seem rather similar to Germany?
...And it is not that different from how the US Affordable Care Act was initially supposed to work, I might add.
> Question: What is the sanction from the government if someone fails, or is unwilling, or unable, to comply?
I had a look in the penal section of SGB V, but did not find anything on that. I think if you are employed and fall under the mandatory GKV, it is the responsibility of your employer to sure you have health insurance. Otherwise, you are basically employed illegally.
I guess if you fall under compulsory GKV membership and are not employed, and do not actively chose a GKV, you will simply be enrolled to the GKV which is deemed responsible for you. Probably your last GKV or the local AOK. They will just bill you, and if you fail to pay them, things will not go too differently from what generally happens if you fail to pay bills.
> ...does this seem rather similar to Germany?
This is the case for people which fall under mandatory insurance, but other people (mostly with high incomes) may opt out of this altogether and go to a PKV instead, not contributing to the public health insurance at all (except for their taxes, which are used to generally keep the GKV premiums stable).
Thanks. the German system becomes clearer by the minute...
Off-loading risks does exist to a small extent in Germany. While I was in my 20s in Germany, I was covered by a public insurance (IKK, three letters) which had more young people than average, and had mildy lower prices.
But it only goes so far. As Dark_Tigger pointed out, insurances in Germany have to take everyone, so getting younger people works basically because the difference is not too large. Young people like me (back then) looking for the first own insurance of their life will go for small differences. Older people mostly stick to the current insurance. But if the difference would become really large, then old people would start switching as well, and the advantage get smaller again.
But the basis of all this is regulation. All public insurances must offer the same product. They don't decide themselves what to cover, that is given by regulation. (Very minor deviations in strictly specified areas are allowed.)
Insurances can offer *more* than this basic insurance, but those are mostly luxury items, like avoiding multi-person rooms in hospital. And this is simply a different contract than your basic insurance, and is pretty independent. (And the market for those items is very different, and much more like you describe.)
Small note...the UK is not 100% socialised. Bupa and Mayo have surgeries/clinics here. Also, many employers offer supplemental private health insurance. Knowing this, it makes me question the analysis on the other types of health care systems. (and if politics was injected into the analysis)
Think about prices from the perspective of the pharma and med device companies. Unit costs are almost nothing. Research and dev costs are very high. When they succeed in bringing a drug to market, they make the large majority of their profits in the US, where they can set basically any prices they like. They take a relaxed approach to pricing with non-US countries because the US is the golden goose. Change that dynamic and the prices will either increase elsewhere or the investment in new drugs will sharply fall. If you try to make the US like the other countries, the whole system will have to adapt, likely to the detriment of other countries.
Good, they can start to suffer now as we have suffered for so long, slaving away for their benefit while we pay the price.
Germany is listed under #4 but it has a private sector similar to #3.
https://en.wikipedia.org/wiki/Healthcare_in_Germany#Private_insurance
I elided this, but most countries regardless of system have some supplemental private insurance for things like vision and dental. I think Dr. Emanuel was saying that the key feature of Germany's system is that the government insurance is channeled through sickness funds.
Yes, government insurance (GKV) has ~8.4 times the number of members than the private insurance (PKV), this means full coverage, not private supplementary contracts. Numbers 2014..2020 (page in German):
https://de.statista.com/statistik/daten/studie/155823/umfrage/gkv-pkv-mitglieder-und-versichertenzahl-im-vergleich/
I think there's 3 different kinds of private insurance (that sit on top of a more socialised system) worth distinguishing between:
Pure supplement, doing what the public system does but a bit better, you still have to pay for public healthcare the same as anybody else. (e.g. Bupa in the UK).
Vision, dental etc.
Private insurance that exempts you from having to pay for public healthcare. (e.g. German private health insurance).
There are two different versions of private health insurance in Germany: the supplemental ones to the GKV (extra health care etc), which can be brushed under the carpet.
But the full coverage private health insurance (PKV) is very much a thing in Germany, (even if only a small fraction of the people are in it, as pointed out by Obiter Dictum below).
I get that you are summing up lots of different countries, but "Single Payer Channeled Through Private Insurance" is a very confusing because in Germany, there is on the one side the GKV (emphatically not private in any sense of the word), and then on the other, smaller side, there is the PKV (private, for-profit, but regulated).
"Single Payer With Substantial Private Insurance", while omitting the fact that there are several options for government insurance (GKV), and overemphasizing the impact of private (PKV) would be a much better description of the German system, I think.
While the PKV in smallish in terms of insured percentage, I would also argue that it is larger in the headspace of health care providers. PKV members are generally seen as cash cows. Some practices will have separate, nicer waiting rooms for PKV members (which also means that the GKV members will not notice as much that the PKV people will have shorter waiting times). So I would argue that there is a strong two-class medicine vibe in Germany.
The reason the drug prices are lower in non-US countries is that each country is functionally its own market, in which either the government or some central cartel representing the whole health industry is a de facto monopsony (the only person buying the drugs) from the manufacturer’s perspective. The perfectly orthodox economic result is that a monopsony can buy at marginally above cost prices - few of the raw materials involved in drug manufacture are scarce, and the manufacturer’s choice is “sell at this price or don’t sell.”
The reason Germany and Germanesque countries’ systems don’t have inter-provider friction will be (I say confidently while knowing nothing about German healthcare) that the government lets them operate as huge cartel-like trade associations that do all the negotiating centrally and pressure everyone to join the associations. This probably wouldn’t work in the US for cultural reasons (e.g. the idea that the sole purpose of a business is to make money; businesses should be free to conduct their own separate negotiations). This system where everyone has to come together to semi-plan their own economy with government endorsement/instruction but not as a branch of the state is basically ordoliberalism, and is impossible for Anglo-Saxons to comprehend.
(More accurately, ordoliberalism is the result of their attempt to understand what we’re doing, then copy it but rounded off and fiddled with so it makes sense in their context)
Wouldn't money-making insurance businesses *want* to be able to all negotiate together as a monopsonist and end up paying much lower prices for drugs?
Having worked in an insurance company (albeit not a US one), organizational inertia predicts that it's pretty profitable being an insurance company and trying to squeeze out a few percentage points more, but also having to deal with the "barbarian chieftain" of the competing insurance company is just too much work for too little gain. (Especially if your bonus doesn't depend on that. Maybe the next CEO will be in the mood for building up a monopsony.)
In Texas there is a percentage limit to the profit an insurer can make. And if they exceed that they have to reimburse their customers (typically the employers who may or may not choose to pass it along to their employees).
So no, in order to make a larger profit the insurance company needs to spend more money. So that it can charge more money. But not so much more that it's out of line with its competitors such that customers jump ship.
When I had employer based insurance I used to get so angry at all the high-quality wellness program advertising/webpages/apps/bonus trinkets they developed and sent out (ALL THE TIME) as both a marketing tool and a way to spend more money on a notionally health-related product. I doubt anyone was interested in seeing how much QALY this money being spent was generating.
I suspect the main answer is they’d fall afoul of the Sherman Act, but the other problems are probably (in order of likelihood):
1) The noninterference clause for Medicare Part D means a massive chunk of the healthcare market would be bound to pay more
2) If a doctor says a patient needs a drug, a US insurance company will probably have to cover it - in some systems (e.g. the UK) the same body that sets care standards sets drug prices, or calculates what the acceptable/worthwhile price of the drug would be (e.g. Zoloft is only worth it for under $10 a pill, any more than that and it’s not worth the cost of treating people with it)
3) Whichever company/plan defects and buys the drug at a price the cartel won’t pay would have a competitive advantage over other companies/plans - this would probably bite even in a broken market, as “they have that drug I need to not die” must push people to comparison shop for plans, even in the real world where no-one comparison shops, and even with an employer-based system
4) No-one could corral a whole American industry efficiently enough without the kind of governmental soft power over industry that the US doesn’t really have
5) No American concept of a price-setting industry association being distinct from a shady cartel; a shady cartel would presumably have better things to do
I would like to see someone like Emanuel analyze a libertarian/free market system of the type proposed by various economists -- basically, government financed "catastrophic coverage" for big and unforeseeable expenses (cancer, heart attacks, major accidents, etc.), but with individuals responsible for paying cash and making consumer cost-benefit decisions for everything else (with the help of self-directed "medical savings accounts" that could be subsidized for lower income people).
The main idea is to bring market forces to bear in order to make the system more cost conscious and efficient, and to eliminate the massive transaction costs of insurance.
>What about the former Soviet states
Russia uses the 1st model, where the state insures everyone, taxes everyone and pays for everyone's healthcare. Except that there are 1) sort of co-pay for some procedures, which can go really high for things like complicated surgeries 2) fully private hospitals where you pay completely out of pocket. As far as I know other post-soviet states have something similar.
The government-funded part is pretty bad, definitely way worse than the US system in terms of quality, but of course cheaper. Hard to compare wait times, I don't have much experience on either side. Doctors are horribly overworked, payed relatively low - better in the last decade or so I hear, but still the salary is similar to other non-glamorous intellectual jobs and probably a few times lower than programmers. There is a decent amount of corruption, and a huge amount of nepotism, where to get good (or in extreme cases any) medications, or better room in a hospital, or get to the head of the line for some complicated procedure you need to know the right people (and then perhaps you may need to pay them some anyway, but it depends). Wait times can be long, depending on the procedure, and don't expect anybody throughout the system to be polite to you - they might, but that's more of an exception.
Private hospitals work reasonably well, and there's some variety of options for different budgets, so some fields like dentistry and gynaecology/urology are probably dominated by private clinics, at least in larger cities. You definitely *can* get more serious procedures in a private clinic as well, but I'm not sure how common is it or how does it work or how much it costs except it's a lot. Their doctors are paid notably better and don't work crazy hours. Wait times are usually short to nonexistent, thanks to higher prices.
There is also private insurance system, called "Voluntary Medical Insurance" (as opposed to government-run "Mandatory Medical Insurance"). You can buy VMI policies from a number of providers and get access to better service at state-run clinics or at private ones (my employer offers this).
In general, the system is greatly geared toward pensioners with their constant, but usually minor problems (and lots of time, but no money at all to spend). You will find a long queue of babushkas at most every doctor's door in state clinic. Some lonely souls even use it as a kind of social club and go weekly or at least monthly.
As for doctors' pay, it depends a lot on experience and specialization. Top surgeons and oncologists earn comfortable living even in state-run hospitals, but lowest-rung personnel barely survive. Currently, Russian public healthcare system is in process of being re-staffed mostly by immigrants, because only they are willing to work for the low salary offered (which is still better than they would get in various *stans where they come from). Though maybe pandemic will reverse this trend, as immigration channels aren't as wide open as before, and the whole country experiences labour shortages.
I feel like this post is going to cause a lot of people to start commenting on the situation on their country instead of going to sleep like they should.
As to why normal economics doesn't seem to work for health care in general, and as to why other countries have such low prices for drugs in particular, I have a very strong intuition that the USA subsidizes all of the world's healthcare.
To be very clear, I know nothing about any of this, and I am almost certainly wrong about virtually all the micro details and the vast majority of the macro ones. Which is why I would greatly appreciate the opinion of someone more knowledgeable on the subject.
But as to how this world-wide subsidy would work in general, I can't really say, but as to drug prices it seems much more straightforward: there are only a few big pharma companies, all of which develop and manufacture the drugs everyone needs. They upsell in the USA because they can, and they accept the low prices in other countries because the USA's overpayment makes the numbers add up.
As an American currently making the transition to living in the Netherlands but who otherwise knows essentially nothing about healthcare, I don't think it's quite accurate that the government pays 100% of your healthcare costs.
The Dutch healthcare system seems more like Obamacare, if the Obamacare mandate actually had teeth. There's a government-mandated health insurance package that's basically the same whoever you buy it from, though you can buy fancier insurance if you want. Whichever option you go with, you have to pay—a little bit more than €100 a month for the basic package. There's also an annual deductible, which varies inversely with your premium. Employers also have to chip in part of the cost. If you don't buy an insurance policy, you get a letter from the government that says you have to; if you still don't do it, you automatically get enrolled in an insurance policy (I'm not sure which one) at a higher cost than if you had just listened and bought insurance in the first place.
Also, it's free for kids.
The main reason the US private insurance is different from the Netherlands or Germany is because most Americans get insurance through their employers, which significantly screws up the incentives insurance companies face. Unlike every other aspect of US healthcare (e.g., Medicare, VA), no other country in the world does anything like that. It's not for nothing that it's called "the original sin of the American healthcare system".
As I understand it, the drug price thing is heavily influenced by the fact that the US doesn't negotiate lower drug prices. The general argument is drug companies make enough off of America to cover R&D, so they can sell to the rest of the world at marginal cost. I haven't investigated to confirm that, but it sounds plausible.
Qualifications: I have a PhD in Econ, health econ was one of my fields in grad school, and I've taught undergrad health economics.
Yes to this, well said. Also my understanding, as a healthcare provider and someone who previously did economic research on US healthcare sector.
Why would they sell to the rest of the world at marginal cost rather than for a small profit?
"At marginal cost" is econ-speak for "at a small profit"
I’ve never seen MC used like in that sense. But grand my question is answered.
As I mentioned elsewhere, drug prices are both higher and lower than other countries due to the Hatch–Waxman Act. Please read this overview: https://www.cato.org/regulation/winter-2021/2022/why-are-some-us-drug-prices-so-high
I received better and cheaper care out of pocket in Mexico (n = 2) than I ever did in Germany (n = 30-50) - and I've been both in the public and the private system in Germany.
Also curious: what's exactly how the question is worded for the public opinion data? I wasn't able to find that looking at the source.
If they asked "How satisfied are you with your health care system?" I suspect national pride has an influence on how respondents answer the question.
The "contrarian take" Scott linked above from Random Critical Analysis claims that wealthier countries spend an increasing fraction of GDP on healthcare, but that the results are no better once you reach the level of roughly Spain (consistent with Robin Hanson's argument about healthcare not having a marginal benefit on actual health). So Mexico being poorer means their system is cheaper, although I think since it's poorer than Spain he wouldn't expect it to be better either. Baumol's cost disease should mean that the labor supply of healthcare workers should be available and not bid away by other industries.
"Results are no better" is worth digging into a little.
I suspect that beyond a certain point, spending more money doesn't significantly improve measurable outcomes (death rates etc), it just improves patient comfort. Things like private rooms, shorter waiting times (outside critical situations), decent food et cetera add a lot to costs but don't have much effect on prognoses. In my limited experience, US hospitals (due to incentives) do invest more heavily in a pleasant experience for patients.
Patient comfort is expensive; on the other hand, the patient experience in a bare bones hospital is pretty hellish. I don't know if there's a right answer to how much money should be spent on making patients' stays better; I know that I'm happy to spend my own money on increased comfort, but I'm not that keen on spending my money on other people's increased comfort.
I wouldn't expect Mexico to be better overall.
I wonder though: is the idea of "out of pocket" naive? What I had in Mexico was pure out of pocket, no third-party involved.
And it was amazing. Probably more expensive on a PPP basis for an average Mexican, but still I paid only $20 for almost 1h of a high-quality consultation on my backpain with the most high-tech equipment for testing I've ever seen (like real-time data on which areas of my back are how functional).
Paying out of pocket is more popular with economists than voters. Right in this thread we have people complaining about deductibles.
People pay out of pocket for basically everything else in their lives. Seems like their opinions have been set based on something other than experience.
> [in the US] "Consumers don’t pay for drugs directly; only insurance companies pay for drugs."
This is not true in the general case. Insurance companies decide to cover, cover with copay, or not cover drugs, just like any other healthcare, and a quick googling suggests it's roughly a quarter to a third of Americans that have prescription medications that insurance doesn't cover.
Yes, thanks for adding this, was going to say as well. The inconsistent coverage of drugs in the US leaves a lot of people in a terrible spot relative to a thing they can't live without.
"Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply."
Kind of true! The critical thing to understand is that "normal economics" usually means "economics with competition". Most of the principles of economics you probably imagine are really just stuff that happens under the particular (but overwhelmingly common) case of perfect or near-perfect competition. "Less money, less stuff" is one those things! In a competitive situations, goods tend to be produced for close to the cost of producing them; if you demand people give you the goods for less money, it isn't possible, and less stuff. But this isn't true of all goods! Monopolies and Oligopolies are the usual counterexample: they tend to already be charging prices substantially higher than the cost of production, so regulators can often force those prices lower without doing any harm. You can't generally do this sort of thing for ever -- eventually you lower the price down to close to the cost of production, at which point "less money less stuff" starts to bind. Think about, say, paperback print copies of Harry Potter. Setting a price cap that slightly reduced the price probably wouldn't affect sales, because it's still profitable to sell them; just the publisher or JK Rowling gets less money. But if you reduced the price enough, you'd start to cut into fundamental costs -- paper, bookbinding, shipping, shelf space -- and you'd get a reduction. (There might also be some long-term effects on future authors depending on how exactly this is done but those interactions are often weird and tricky to predict.)
Generally the amount you can influence the price of something through policy is a function of how close the price of the item is to its efficient production cost, which is often the same question as "how close is this to perfect competition". Healthcare is pretty far from perfect competition! On-patent drugs are fundamental monopolies. Providers, doctors and hospitals are often wildly imperfect substitutes due to variations in their quality. The common disconnect between the person who chooses the service (the patient) and the people that pay for it (the insurance, the employer) also has weird effects on the competitive process. There are often very high startup costs (especially for hospitals) both in terms of money and in terms of navigating a very complicated regulatory environment. All of these things push healthcare away from perfect competition and make a lot of the patterns you reasonably imagine should apply not apply. So a LOT of stuff can be possible that would never, ever work if you were instead trying to regulate, say, energy or food.
This distinction between what is essentially efficient and inefficient markets is often a point that gets overlooked in economic discussions and curriculums. One of my professors liked to say that any economics department will teach you about markets that work; only a good department will also teach you about the ones that don't.
I would think there are lots of markets for things that aren't perfect substitutes. People inspect houses before buying them because they vary a lot, and of course one of the most important factors behind their prices is a location that you can't substitute for elsewhere.
I'm also skeptical that you need to be all that close to "perfect competition" for results to be close. In one example, the difference between having one firm in a market vs two was greater than the difference between two and twenty:
https://www.econlib.org/eric-posner-on-monopsony/
To clarify a point, I'm not saying that there aren't markets for things which are imperfect substitutes. I'm saying that in those markets, it's more possible for policy interventions to move prices without imposing tradeoffs, or at least with less severe tradeoffs.
Which, now that I think about it, is probably wrong. I think I actually confused two points in my original comment, which your response has helped me to see (thank you!). It's actually whether the goods are being priced at close to their cost (total cost, including overhead, R&D etc) that determines whether a policy intervention would be good. But I conflated the not-priced-near-cost case with the not-perfect-competition case, which is not quite correct. I've edited the original post.
>>Consider telling Dr. Emanuel that you will only pay however much the Norwegians pay for their books.<<
LOL!
I was going to write the exact same thing!
The book is 288 NOK on one of the biggest Norwegian online bookshops.
FWIW: I'm 79 and the last few years have been some of the happiest of my life.
I have an American friend who has been an NHS doctor in London for 20 years (MD from Penn). He is a big, big fan of the NHS, especially compared with the US system. FWIW from a provider perspective.
For how long was he a doctor in the US?
I’m not honestly sure. A couple years, I think. But he has been in London much longer.
I have always assumed that all the other countries are able to pay such low prices *because* the US pays such high prices. That is, the drug companies develop their drugs with only the US market in mind, and everyone else is gravy. I think it's very likely that if the US started negotiating harder, either prices for everyone else would have to rise substantially, or we would get far less drug development. The US market (note: not necessarily US researchers/companies) is responsible for the overwhelming majority of innovation in healthcare, and every other country has essentially been leeching off of that largesse.
In the UK, at any rate, the National Institute for Clinical Health (NICE) determines its willingness to pay by the benefit to patients. If the US had a similar system, you would expect fewer drugs like Aducanumab, but not necessarily any less of the sort of innovation that benefits patients.
Re. Aducanumab, On 16 December 2021, the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) adopted a negative opinion, recommending the refusal of the marketing authorisation for aducanumab (Aduhelm), a medicine intended for the treatment of Alzheimer’s disease. Consequently the first appraisal committee discussion of this topic has been cancelled and NICE has suspended the appraisal.
I'm not sure I agree with that. Drugs are not funded in the hopes that they won't help anybody. Drugs are funded because the company believes that they will help people, and that was the case for Aducanumab just as for most other drugs.
If you squeeze drug companies ability to recoup their investments, they have to either just lose money, or stop researching. There is no third option. Look at their margins - Drug company margins are good, but they're not *that* good. Pfizer's net margin is currently 33%. Reduce their revenue by more than that, and they're no longer profitable.
Anyways, which *kinds* of drugs you might get wasn't my point. My point was about cost reductions. If the US starts paying less for its drugs, other countries will have to pay more, if we want to achieve the same level of pharmaceutical output. The financial math for this is pretty straightforward.
I am not sure how much the world should pay for drugs in total. My point is that you want to incentivise drugs that benefit patients. Curing cancer or Alzheimer would make pharma companies money, but so would any number of useless or nearly useless drugs that get through the US regulatory systems, and that Medicare and most private insurers end up having to pay for. State buyers like NICE that pay for benefit to patients nudge drug companies away from useless drugs towards more useful ones. If the US were to do the same, you would end up with more useful drugs for whatever money you are willing to pay in total.
Ya I agree that breaking the "reward hacking" dark patterns of the US system, to put it in terms of Scott's post yesterday, would be great. My point was only that the US is subsidizing pharmaceutical innovation for the rest of the world. However, you're right, it is also incentivizing misallocation of resources, to a degree at least.
I mean, you say 'any number', but I can only think of one example right off (escitalopram, which is a derivative of the now-generic citalopram with minimal if any difference in effectiveness.) I don't think this is especially common. Plus, effectively copycat drugs like escitalopram presumably take very little development effort compared to brand new useful drugs, so I'm not sure they would be a major component of drug company expenditures even if they're more common than I think.
(Not counting Aduhelm because it had about as good a shot of being useful when it was being developed as any other current Alzheimer drugs. That entire field is a graveyard of hopes and dreams, and Biogen's shame is that they didn't just let it die when it was clearly DoA, and instead have dressed it up in fancy clothes and declared the rotting corpse to be alive.)
Fun fact: Another Emanuel brother is Ari Emanuel. Ari Gold, the asshole talent agent from _Entourage_, is inspired by him.
Lack of price caps for US healthcare, including drugs, goes hand in hand with the US being an invaluable leader in healthcare innovations.
The US is generally good at innovation, but is no more an innovator in healthcare than it is in other technologies. Probably less so. One example: of the three leading Western COVID vaccines, only one (Moderna) was developed in the US, and two (Pfizer BioNTech and Astra Zeneca) were developed in Europe. By contrast, virtually all major hi tech companies are American.
Why would you expect the effect of higher US drug prices to only affe t innovation by US companies? This estimates that US consumers account for 65 to 78 percent of all pharmaceutical spending: https://www.brookings.edu/research/the-global-burden-of-medical-innovation/ Maybe the marginal impact of additional money at this stage is low, though I'm not sure how you would show that. (Pointing to individual dud drugs like Aduhelm obviously doesn't cut it.)
The foreign drug companies still make a majority of their money selling to America. No matter where the firms are located, American consumer are funding their drug development.
Health systems also in the extent to which everyone has a GP who is familiar with their health, is a trusted source of advice, and can coordinate the care they need. And related to this, do chronic patients have nurses visiting, checking that they take their medicines, keep their blood sugar under control etc? Such community level services not only improve care, but also reduce costs, since the alternative is for these patients to regularly shuttle in and out of hospital.
"In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America? Is the problem just that this would be a monopoly (technically a monopsony, I guess?) Is only antitrust law preventing them from trying this?"
This does happen in the US. Pharmacy benefit managers (PBMs) do this as one of their core services. They essentially negotiate volume pricing with the drug manufacturers on behalf of their plan sponsor clients (i.e. the insurance companies). If they don't reach an agreement then the drug will not be included in the plan formulary (i.e. the list of drugs covered). There used to be independent PBMs but they're mostly gone now. Express Scripts was the last big independent one but they got bought by Cigna. United and CVS also have very big ones in-house. PBMs occasionally catch heat politically because the drug companies like to blame them for being "middlemen driving up prices." In my opinion that's not true. Really it's the opposite. But PBMs are often the reason why there's some very high "list price" for a drug that nobody actually pays.
And note it's not just private plans. PBMs negotiate on behalf of Medicare Part D plans and managed Medicaid.
My impression (see my comment above) was that PBM's drive up costs by being for-profit and adding friction to the process, but your comment if accurate makes that less true. I know their has been enormous amount of vertical integration in healthcare and I suppose in house PBM would be incentivized to be efficient. I now have two questions:
1. Do PBM's not talk to each other? If one PBM is paying more for a drug than another, they can simply say to drug companies "I have it on good authority you offer this drug to other companies for such and such price" and demand a lower price. If refused, they could combine orders or something to that effect.
2. Why would CMS not just do this in house? To what degree are PBM's not lawyers+scientists+actuaries?
IMO PBMs DO drive up costs, because they make more money the more expensive drugs are. The general revenue model for a PBM is that they take a % of the cost of any branded drug. That means that they make more if a drug is $10000 (and they keep 5%) than if a drug is $1000 (and they still keep 5%).
In response to your questions: 1) they sorta do! CVS/Caremark formed a "GPO" called "Zinc" which is used by Anthem's IngenioRx. Express Scripts formed a swiss GPO called Ascent (iirc) which Prime Therapeutics uses. I'm 99.999% sure that the express scripts/prime agreement is illegal under the Sherman act, but... I'm not a lawyer and until a year ago, no one cared about the Sherman act.
2) When Congress created Medicare Part D in 2003, they specifically forbade CMS from "interfering" in the negotiations between PBMs and manufacturers. CMS doesn't have the authority to do drug price negotiations (in Part D - they do have authority in Part B which are drugs that you get administered at a hospital outpatient department or at a doctor's office).
Obviously opinions differ on this topic. I think they were never the bogeyman they were made out to be. That objection about the PBM clipping a fixed % of the drug price was common when PBMs were in the spotlight a few years back. But I think you have to keep in mind, the PBM has to drive good pricing to actually add value to their plan sponsor clients. Notice how if the PBM is acquired by an insurer and moves in-house, the optics of negotiating volume discounts get much better, even though the economics of the situation are largely unchanged. It's true that the rebate model created weird gross price vs. net price situations that played badly in the press (like Gilead's Sovaldi).
Also, as I understand it, PBMs have been moving away from a model that involves fixed % rebates, precisely because it was putting them in the crosshairs unnecessarily, and they can accomplish the same thing without an arrangement that could be construed as perverse.
1. I think technically information is secret and proprietary but information is decently porous in these negotiations. Keep in mind there are only a handful of big PBMs left at this point.
2. As Benjamin pointed out, Part D is set up so that everything is negotiated by PBMs, and CMS can't jump in and negotiate directly. Part B uses a formula based on an average price in the market, plus a margin.
Nit: It makes sense to set China aside since that's still a relatively poor country, but it's very strange to exclude Taiwan for that reason in 2022 (though a PPP adjustment may be in order).
On the point towards the end of Part I in the post - why do the systems in Germany in the Netherlands work when they seem to only fix part of the problem.
I'd say it must be because of the broader context of their nations. Many seemingly impossible things happen there due to some social factor which 'works' in ways that are totally non-intuitive.
If you look at German housing and property, you'll find many cooperatives and groups of tenants owning and managing theri units in unusual ways. Groups of renters have some inexplicable legal structure in which to operate and the people take advantage of that structure to do things like get solar panels on apartment buildings which they own through their coop.
In Germany the workers and unions are incredibly strong and if you compare economic inequality and the legal structure of the boards of companies where the unions are given formal seats and votes as any other executive with some government relations person sitting in as a sort of tie breaker.....that's may vague understanding of it at least....then you can see the negotiation and strategy and emphasis in terms of how they deal with insruance companies is very different.
The very idea of the union having a government mandate to sit on and comprise half of the corporate board would send western neo-liberal autocrats into fits of panic frothing at the mouth. When a US company negotiates with an insurance company for health coverge for their workers....the people doing it don't give a shit. It is jsut some salary package perk and anyone taking the job will just take it anyway. The US has a fully broken model in terms of incentives and who is pulling the levers of power. Random HR folks who couldn't care less and get better paid special plans for themselves.
It is the same with the apartments....why do apartment buildings get run by slumlords with nothing fixed and shitty builds with no closets or extra spaces for the people who live there? Because the types of property developers with enough funding to build apartment buildings...they don't live in the places they build. But when a German apartment cooperative spends a few years with members who get a custom small apartment complex made to their own needs and specifications....they don't skimp on themselves!
I truly have no idea other than saying 'something something, culture, culture' to describe how and why many things work so much better in Germany. People have power, they have tools, they have a very high self-organisation cost....and they somehow meet it without everyone arguing and everything falling apart.
In this way they are able to make a private healthcare and insurance model full of many negotiations work...because nearly all of the people engaging in those negotiations are direct 'stakeholders' and they actually care about what they are doing because it affects them personally. It is always inexplicable to me and overcomes many of the 'too hard' and 'people wouldn't cooperate' problems so often described in the anglosphere.
I suspect similar factors take place in the Netherlands where most of the people I've met from there and the brief descriptions of their legal and living environment seem more alien to me than I would have thought.
> I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, ... your care gets worse every year, but in real life this doesn’t seem to happen
I've talked a bunch to a (US) radiologist about this... they read a *lot* more images than they used to, and are reimbursed *much* less per image. Some of it is computers making it cheaper / faster to develop / read images than film, and some of it is just pressure to just read things faster (which probably has a quality trade-off).
> Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price
I wonder in what % of health care spending the price is tied to the cost of production? On-patent drugs have a monopoly and are sold much higher than the unit production cost (low prices might affect what new drugs are invented, but that won't show up in a comparison of health systems).
The supply of doctors is usually bottlenecked by medical school / medicare-funded residency slots, etc. Salaries could hypothetically be cut while maintaining supply until there are no excess applicants to medical school (if you made medical school free and/or shortened+combined it with undergrad like some European countries, you probably could cut salaries even further).
Scott, you read the wrong book. My 2006 book, Crisis of Abundance, has real health care economics. On the 23rd on my substack, I'll try to summarize the main points.
I haven’t read Emmanuel’s book, but it does seem thin. Per my other comment to this post, my recollection from grad school is that the Commonwealth Fund data/analysis is rather week. But, I could very much be wrong on that front.
Thanks! I will check it out!
A couple of things:
-In grad school, I seem to recall my health policy professor giving the Commonwealth Fund’s data and analysis little credence. Things could have changed since then
-Two of the Commonwealth Fund’s data points seem suspect. Life Expectancy at birth of course captures all types of factors outside just the health care system. The US is way more violent than all other countries on the list. We’re also fatter.
-The % Satisfied figure seems way too low for the US. I’m guessing it’s pulled from a generic question of “Are you satisfied with your country’s healthcare system?” Seems like a reasonable question but this is a politicized topic in the US where the left thinks we have a hyper capitalistic system and the right thinks it’s governed by death panels. A better (but still flawed) approach would be to aggregate patient data about patient’s interactions with their providers. I’ve seen hospital survey data, and I don’t think I’ve ever seen 19% overall satisfaction. Probably never below 50%. Now, the downside to this approach is that it misses people that forego care which is real. Also, you would want to have survey data on members’ opinions of their health insurers. I still don’t think 81% are unsatisfied with their health insurers (but maybe, as I haven’t seen that data).
I've been following the Commonwealth Fund reports as they come out for about a decade now. They're definitely better than they used to be, but at the end of the day still pretty thin. I wouldn't go so far as to say they're /completely/ useless, and the 2021 report I do think the produced a ranking that looks similar to whatever a "correct" ranking would be. But this is just a question that I don't think lends itself well to this type of high level analysis.
The actual statistics you can gather about health system performance are all hopelessly confounded, and in some cases might not even be meaningful if they weren't. Really meaningful information that can't be easily quantified gets ignored- recall some of Scott's early posts about working conditions for residents in Ireland vs the US. And there's probably something that looks like state capacity at play that's much more important than macro system design- on paper Germany and the Netherlands look very similar, but having talked to a few people who've practiced in both systems, they think things just work better in the Dutch system, with no consistent reason as to why.
I don't know what the right way to approach these types of questions are, but I definitely don't think it looks like the types of analysis we usually see. And I think the principle here probably applies to a bunch of other stuff- trying to compare responses to Covid-19, as an example.
"A better (but still flawed) approach would be to aggregate patient data about patient’s interactions with their providers."
In any country where patients are expected to wrangle their own medical bills (even if, ultimately, someone else usually ends up paying the bulk) and where patients' health may depend more on keeping prescriptions and medical devices up-to-date than on interacting with providers per se, I don't see how you can limit patient satisfaction to provider interactions, excluding medical billing and pharmacy/device provision.
I'm an asthmatic with a rarely-diagnosed connective-tissue disorder, EDS. Once I factor in that EDS is a "heartsink" diagnosis, one doctors can't do much for and might understandably pass the buck on, I'm fairly well-treated by the providers in my hospital system. Its geneticists were the ones who finally diagnosed me correctly, and I'll forever owe them. But the billing?
Crikey, the billing! Then the claims adjuster who calls me to check *I'm* not committing shenanigans is not the claims adjuster who can check whether the *hospital* is committing shenanigans — and can't connect me to that adjuster, either: different subcontracts. My husband and I both have math degrees, and despite the hours I sunk into it, I never did figure out who at my health plan I alert if I suspect systematic upcoding.
We've paid huge hospital bills that seemed incommensurate with what the hospital actually did, apparently not just to us but our benefits plan (judging by what the plan paid). This is after our trying to use urgent rather than ER care whenever possible so as to reduce costs and avoid clogging the ER. (Doesn't work if urgent care sends you on to ER anyhow.) We've made an effort to keep current on the cost-conscious consumer advice our benefit plan publishes for its members, and we're *still* continually wrong-footed on billing. Why bother trying to be cost-conscious, then?
And then there's the merry-go-round asthmatics on steroid/LABA devices and their doctors are put through when pharmacy benefits updates its purchasing. I grew up thinking "go generic" was the way to save, and was excited by the announcement of generic steroid/LABA devices. So far, though, generic has never been preferred through our benefits policy, the financial penalties for not selecting the preferred brand are punishing, and doctors can't just write a prescription for "whatever dose-equivalent steroid/LABA device is preferred by patient's plan". Once a year — sometimes more often, for reasons opaque to me — asthmatics and their doctors risk a turn on the, "No, really, which is the preferred device on this plan?" merry-go-round. I hate it. My doctor hates it. Who loves it?
So yeah, I'm dissatisfied. For reasons unrelated to usually OK-ish (often unusually good for EDS) interactions with my providers. For reasons mostly unrelated to our total healthcare expenditure, too, which we could budget for if it were "really what it cost". Only there seems no rhyme or reason to what it supposedly "really costs".
Or any sense to non-cost gatekeeping, either: EDS patients have been advised that the doctors in this hospital system who diagnose EDS don't treat it, and if patients expect to see the rheumatologist who *does* treat in EDS in this system, patients must be referred for something *other* than EDS. I'd say this was merely an isolated case of a niche condition coming with niche absurd hoops, but if so, half of America is niche, judging by neighbors' stories. Most American families, it seems, have stories like mine.
I was still misdiagnosed, but more satisfied, when I saw a private practice that billed me the estimated cost up-front, managed my medications, and managed to palliate some EDS symptoms despite lacking a correct diagnosis. Between that and a local urgent care with transparent pricing, I lived a half-decade not fearing the mailbox over medical debt. Then the practice closed. We moved. Hello, new hospital system, in theory easier to navigate because all services are "under one roof"! I've clawed my way out of medical debt once before and I still fear it.
I don't fear the reaper. I fear medical billing.
Medicare and Medicaid cost over a trillion dollars per year which comes to about the same per capita as what the NHS costs, except they only cover about half of the population, so it actually costs twice as much. I can't stand how people in the US just ignore these garbage programs.
Medicare and Medicaid, by definition, cover most of the sickest and oldest people, that is the people who use the most healthcare. So on priors we should expect them to cost more than the private insurance companies do per capita.
Greg's "per capita" denominator was the total population, not people covered. The American private system spends about the same as the US government to cover the healthier half of the population. It doesn't have a lower per capita cost.
it's also noteworthy that Germany has about twice as many doctors per capita as the US... much easier to become one and to emigrate there as a doctor from a poorer country.
From my experience here in Czech Republic the private insurance companies that were created after the "privatization" seem mostly pointless and possibly a negative thing compared to having one state-run insurance company. How it works here is that the state distributes the public insurance money between them and they are supposed to compete on the administrative cost and thus provide value. What actually happens is that they just pick the healthy people to insure and the chronically sick and risky ones are left for the state-run insurer.
I would say that for the mandatory insurance they are completely useless overhead providing no benefit. I can see their value for people buying additional benefits and that should be their role.
Basically it seems to me that this solves (to some degree) the issue of bad political incentives of rich people having completely separate insurance. This way they pay for the basic insurance in the public system (with only one public insurer), and they can buy additional benefits with private insurers.
This would obviously limit what they could offer as additional benefits. They could not offer you to skip the line and get preferential treatment medically, but things like better rooms and treatment of things that state does not cover.
Interesting. Some countries in the book worked like this, but the government had complicated rules adjusting how much insurers got paid based on demographic factors so that insurers couldn't make more money off of healthy people than sick ones. I was surprised these worked but Emanuel said they did.
Yes, the government has such rules. The companies are not making ridiculous amounts of money on it. They do ok, probably by being somewhat better at the statistical wizardry and the state wants to keep them existing so it probably does not push too hard. But they definitely are picking patients, so I assume it brings them more money, otherwise they would not do it ( or they are bad at making money ;) ).
Obviously to actually determine if the situation would be better with just one state insurer, we would need to test it. And between-country comparisons probably lead nowhere, too many confounding variables.
Just to illustrate and to describe some post-communist healthcare systems :
Czech Republic has probably one of the most "socialized" systems. Doctor visits are free, there is some co-pay for some prescription drugs and there is no private insurance (as in providing different/better services, like Germany) really. System provides really good results for how much we pay for it. Even in communist times we had some really good indicators, like top 4 (I think) infant mortality and such. As #1 Covid case country in the world at some point we never really had any situation like Italy or Spain or NY. The system is I think unsustainable in the long run, because it basically runs on doctors being badly paid and the young doctors are just leaving for EU/Britain and old doctors will at some point retire. Stopgap is using doctors from Slovakia/Poland/Ukraine which creates interesting movement of doctors on the European continent :) Though I am not sure where Ukraine will get its doctors from. Maybe UK to create closed cycle :) I think the issue is solvable with some more money put into the system, but we will see.
In contrast Poland has one state insurer, but it basically runs parallel private system, since the public system is just terrible. Public system is basically used for things that you cannot pay out-of-pocket (cancer, surgeries,...). People often pick as their private specialist someone who also works in state hospital, because they know that it might come in handy if they ever need to use the public system. And some doctors work part-time in state hospitals because they know it will help their private practice due to the above. The results in the private sector are I would guess on par with the Czech counterpart (which is public), but the Polish public system is really bad compared to Czech one. The difference was already present in communist times. It is interesting because the countries are now much closer in wealth, the basic principles of both systems are similar, but the differences are still quite large. Poland spends less money, but I am not sure whether the statistics actually capture the parallel private system very well.
The cream-skimming is not happening though. Health insurance companies in the Czech Republic function on the principle of so-called 100% redistribution since 2008 [1]. That means all of the insurance payments to all insurance companies are pooled and then redistributed among all insurance companies depending on the age and health status of their clients, independent of the amount of money each insurance company actually collected. I think that completely negates the point of having multiple insurance companies.
[1] Check Act 145/2017 and the yearly redistribution governmental orders, such as 176/2021 for year 2022
Thanks, the info I based my opinion on was from quite some time ago (from some doctors), though I thought it was newer than 2008. It can still be happening since the redistribution calculations are probably not perfect. I will have to investigate it though.
But I agree that it negates the point of multiple insurance companies. Though I do not see much use for them in any completely public (insurance-wise) system. Theoretically there can be some administrative savings through competition, but I am doubtful that it will offset the administrative overhead of multiple companies. Probably depends on how well the country works, with high level of corruption the state insurer might become too wasteful.
"Is this some kind of weird horseshoe theory situation where the maximally socialist response overlaps with the maximally libertarian one?"
health care in many respects acts like a 'non-competitive market' in that the consumers have (relative to other markets) weaker ability to make competitive choices. Usually, there is one or very few 'best drugs' to deal with a given problem, making the patents/ip behind drugs the actual 'valuable thing' rather than the manufacturing processes. To the extent that the value of the static information is greater than the value of a given manufacturer's competitive competencies, 'socialization' (governments bidding the price down) will not cause any deadweight loss. Similar logic to the weird socialist-libertarianism that we see in georgism, which also deals with 'scarce resources that we need to continue existing'. what is 'efficient' gets loopy and strange when supply gets more and more fixed.
I'm surprised that the 80/20 rule isn't mentioned.
In the US, this rule means that most insurance companies must spend at least 85% of the money they take in from premiums on health care costs. So the ONLY way insurance companies can increase their profits is by increasing their spending. This means that they have only 2 ways to increase profits: either get more customers or spend more money per customer.
It seems to me that this creates a weird alignment problem with insurance companies. They want medical care costs to increase. If medical costs go up, they can raise premiums, and also increase their profit.
Insurance companies are disincentivized to negotiate prices for medical care and drugs.
See: https://www.healthcare.gov/health-care-law-protections/rate-review/
That rule went into effect in 2013 but I'm pretty sure the US had perplexingly high per capita costs relative to comparable countries even before that.
Isn't there a really simple explanation for all the weird things: medical spending really quickly reaches a point of *severely* diminishing marginal returns. In other words, after you've got the basics most medical spending only has a minor effect on outcomes that's swamped by differences in eating, exercise and genetics between the countries? Well, probably there is some effect of a few new drugs but the drugs with the biggest health impacts are pretty much never not available in any of these countries.
In other words, from an EA point of view, most medical spending is probably wasteful. From a selfish POV those 'minor' differences might be quite significant even if it's only a year or two. But, I wouldn't be surprised if there aren't substantial differences between these countries about the experience of treatment (both the anxiety of having to pay as well as the issue of how quickly pain/depression gets alleviated).
By the way, have you read "Catastrophic Care", that began as a series in The Atlantic Monthly, written by a guy (David Goldhill) trying to figure out why his father was killed (like hundreds of thousands of others are, apparantly) unnecessarily, in a healthcare system where the individual components of the system all worked very well individually.
Fantastic book.
Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong https://www.amazon.com/dp/034580273X/ref=cm_sw_r_apan_glt_i_06QNMGTWQR0S3JKTHZXR
Seconded!
I think a big part of the bad US performance is the trouble we have with our primary care workforce: access is poor, continuity is poor, care coordination is poor and comprehensiveness is poor. See the late Barbara Starfield MD for characteristics of high quality primary care.
I'd add that I am very concerned that if the US goes single payer we lose a very very important market signal for drug prices. I'm sure we will still somehow manage to incentivize funding cancer drugs (to some extent) but I worry that without the US providing a market signal drugs that 'merely' improve someone's lifestyle (e.g. viagra) won't be sufficiently compensated. Sure, competition between insurance providers isn't great in the US but it does exist and lots of people do buy drugs without insurance providing insurers with a price signal. Maybe I'm being crazy but I worry that without at least one country providing such a signal we'll instead see drug prices being determined by what 'serious' people think they are worth ... meaning mere 'lifestyle' drugs will be undervalued even though I suspect they have huge well-being effects.
Unless your single payer system would ban buying Viagra over the counter, the price of lifestyle drugs won't drop below what people are willing to pay out of pocket. This seems like exactly the correct value.
If the US stopped subsidizing pharma research it would be a disaster for world health. Unless other countries stepped up new drug development would grind to a halt.
You might also like In Search of the Perfect Health System by Mark Britnell. It's a similar comparison of the healthcare in different countries, but has a wider range (25, about a third each of high income, middle income, and developing), and goes into more detail on the tradeoffs involved in design.
"Third, China also underpays its doctors, and they compensate by being corrupt and demanding bribes before treating patients."
There's been a major change in this, at least in the nice city where I live (Xiamen, southeast coast). 15 years ago, when my son was born, we gave the doctor an envelope stuffed with cash; today, that doesn't happen. I don't have a lot of contact with the healthcare system because we're all very healthy, but on the couple of occasions we've tried to "expedite" procedures (by offering money over and above the hospital bill) in the last few years, we've been cheerfully rebuffed.
It's still true that China underpays its doctors (though there are some poorly-understood perks); but a lot of the blatant bribery associated with day-to-day transactions that were common 20 and even 10 years ago have now vanished from (middle-class urban) life in China.
The most obvious reforms in the US health system are probably things like training more doctors, making it easier for foreign doctors to practice, and letting nurses do more things that needlessly require a doctor to be involved. These are things that 99% of health economists would support, whereas there'd be a lot less consensus about structural reforms.
Also: get rid of the undergraduate requirement to be able to go to medical school. It's a huge opportunity cost and the courses which need to be taken could be done in a single year.
> corresponds to a health care budget of $1 billion or whatever. Then doctors submit reports on how much health care they’ve done, ie “we have done 500,000 units of health care”, according to some list where a blood test counts as X units, a heart surgery as Y units, etc. Then the government says “Well, we said the budget was going to be $1 billion, doctors did 500,000 units of health care, so we’ll reimburse doctors $2,000 for each unit of health care they did”.
Scott has problems with this, but it seems straightforward to me. The budget is not going to plummet from year-to-year, and doctors and not going to double the number of health care units they do a year.
I see problems with it, but they're the normal problems you have in any market.
"He opposes euthanasia, which I interpret as demanding state-sponsored coercive violence to prevent torture victims from escaping, but I know other people interpret it differently."
You may know better than me about this, but my understanding of his opinion is that he believes (and I don't know if this is research or personal experience or what) that it is a complete myth that patients that use or want euthanasia do so because they're in pain. So your interpretation of his view seems misleading. He claims that people who seek euthanasia are generally depressed people -- and it seems weird to enable depressed people to kill themselves when we generally try to stop depressed people from killing themselves. I don't know if he's correct in his "euthanasia is mainly sought by depressed people rather than people in physical pain" thing -- but I live reasonably close to the Netherlands and the few people I knew of who wanted to use go on a one way trip there were depressed and not in physical pain.
This made me remember a previous post of yours where you said ( https://slatestarcodex.com/2015/10/12/against-against-autism-cures/ )
"Autistic people suffer. They suffer because of their sensory sensitivities. They suffer because of self-injury. They suffer because they’re in institutions that restrain them or abuse them or just don’t let them have mp3 players. Even if none of those things happened at all, they would still suffer because of epilepsy and cerebral palsy and tuberous sclerosis. A worryingly high percent of the autistic people I encounter tend to be screaming, beating their heads against things, attacking nurses, or chewing off their own body parts. Once you’re trying to chew off your own body parts, I feel like the question “But is it really a disease or not?” sort of loses its oomph."
The vast majority of people getting euthanasia in The Netherlands have cancer (2020: 64.6%). Only a very tiny fraction have psychiatric issues (2020: 1.3%)
Even when you have terminal cancer and request euthanasia, they will still make sure you aren't depressed and refuse your request if they think it is because of depression. Personally I think this is ridiculous.
Source: I live in The Netherlands and have metastatic cancer and spent several months of last year studying on euthanasia. My conclusion was that it isn't nearly liberal enough. As a consequence I bought two helium tanks for a DIY euthanasia when the time comes.
Gosh, I'm really sorry to hear that.
If you're comfortable talking about it, could you say more? I'm completely ignorant about this.
So why are so many people with cancer wanting euthanasia? Is it because of quality-of-life is low? Is it pain? Is it the fact it's terminal? How will you personally know when the time has come? Is it how you feel or is it when you lose a certain level of functionality?
As a purely practical consideration -- how do people distinguish between suicidal depression and suicidal non-depression? Is the distinction that we find their desire to commit suicide more sympathetic somehow? Or is it that if they're close to death either way then there isn't much in it? Is there a difference in the sort of people who commit suicide outside of euthanasia and those within?
"Personally I think this is ridiculous"
So you think anyone should have access to euthanasia? Or more people like yourself? Why were you turned down? In my head I guess I figured anyone with terminal cancer could get it -- so I'm way off here.
Sorry if my prying is offensive in any way -- totally unintentional; and sad to hear about your metastatic cancer.
The percentage of people that get euthanasia because of cancer is high, but that doesn't necessarily mean the percentage of people with cancer that get euthanasia is high. I don't know the numbers, but I'm sure the vast majority of people with terminal cancer die without euthanasia.
Of those with cancer that do choose euthanasia, pain is almost never the primary reason. I don't know the exact reasons and the reasons specified are colored by what is required to get euthanasia. There is a strong selection effect. If you know the right things to say you have a much higher chance to get euthanasia if you really want it.
Personally, I dread the idea of becoming dependent on others, so I definitely want to die before I need any level of help with my daily activities, but probably even sooner because I also don't want to run the risk of getting into a position where I wouldn't want to live anymore but don't have the physical capability of ending my own life. I'd much rather die too soon than too late.
I don't know how they diagnose depression in terminal patients and I don't really believe it is meaningful anyway (that's why I said it's ridiculous). I don't consider being depressed in response to a terminal illness to be a malfunction.
I do think everybody should have access to euthanasia. I think that the current situation where doctors have a monopoly on euthanasia and assisted suicide is insane. Suicide is legal (and rightly so), so assisting someone should also be legal (obviously with the caveat that it should be clearly proven that the assistance was requested.)
I was not turned down. Just doing my homework. Besides the obvious (and not so obvious) side effects being castrated (to slow down prostate cancer) I don't have any symptoms currently. I think I know the correct things to say to get euthanasia, but the problem is you can never be sure because it is such an arbitrary system. So that's why I'm prepared to do it myself. I do prefer euthanasia because it is beter for the family. With euthanasia they can be present without risk, when I take my own life I don't want them to be present because they run the risk of being suspected of assisting me. When you are grieving a loss, you don't need a criminal investigation hanging over you. This is not just theoretical, it happens extremely rarely, but I definitely don't want them to run that risk.
It sounds like the laws on assisting suicide are similar in the Netherlands to the UK. I was with my mother when she ended her life and as a result I was arrested and spent five hours in a police cell on suspicion of 'aiding the suicide of another'. As it happens it wasn't a particularly bad experience, and one I'd happily have signed up for so that my mother wasn't alone during her last days, but it seemed quite ridiculous.
However, the chances of any serious consequences were tiny and I would guess that some written statements by yourself in advance would reduce those even further for your family - if you and they wish them to be present.
Have you talked it over with them?
It will put them under great stress to discuss this, so I don't want to do it unless necessary. However, there was a case here where the family members where under investigation for four months (and then the case was dropped), combined with things our lead public prosecutor has said about euthanasia I'm not comfortable that they can be trusted.
Thanks -- I don't have any useful or interesting responses but I found what you were saying profound and interesting so thankyou.
Cultural factors may be at play here also. For example, in the Netherlands, doctors are famously stubborn at taking complaints seriously. Stereotypically, a Dutch doctor will send you home with an aspirin when your leg is falling off, and they laugh off many symptoms as "ahh that's just a sign of getting older".
I imagine that might 'reduce costs' significantly, which could be being masked by the general good health of the population due to frequent daily exercise (e.g. cycling).
I found a lot of good stuff in John Goodman's New Way To Care.
As I have gotten older and engaged with the US healthcare system from different perspectives I have only come to view it with a less and less favorable lens over time.
I have been uninsured, insured at a tech company with good insurance, paid out of pocket for a high quality insurance plan (very expensive), and now been the owner of a small business having to deal with insurance for my employees.
The strong coupling of business with insurance is definitely a huge negative for the system as a whole, and for small business. I think any system that moved us more in a direction of decoupling medical insurance from your place of employment would be a large positive.
Part of what may be going on with drug prices is that the U.S., as the largest market, ends up as the "privileged minority" producing the public good of making it worth the cost of developing new drugs. If the U.S. insists on paying low prices the companies produce fewer new drugs. If Austria pays low prices, the effect is much smaller. Think of it as a bargaining game among countries where everyone else ends up free riding on the US expenditure.
Perhaps stating the obvious, but the "efficient market" assumption where price = marginal cost is an idealized case with lots of buyers and lots of sellers and various other assumptions.
In real life, you often have a transaction where there's space between the maximum price the buyer would pay and the minimum price the seller would accept, which is why haggling was invented. Saying in a stern voice that you refuse to pay more than X is just haggling.
Also the thing where you create a pool of money and then divide it among workers proportionally to work done without adjusting the total money for the total work sounds a lot like how Amazon pays authors for Kindle Unlimited, AIUI.
Part of what may be going on with drug prices is a bargaining game among countries. If nobody pays high prices you don't get new drugs. The smaller a country is in the drug market, the less the effect of the prices it pays, so the biggest player ends up paying the most — it, and everyone else, knowing that if it refuses there will be fewer drugs. That makes the US a "privileged minority" in the production of the public good of getting new drugs produced.
I’ve heard great things (from people who use it) about Hong Kong’s system, which doesn’t seem to be covered in the breakdown of systems. It’s something like China or Australia except the private insurance is optional and opt-out, between the customer and the insurer, and paid as a reimbursement. It functions like private school vs public school in the US — if you could somehow buy insurance to reimburse you for attending private school (and attending school was an occasional thing). That is, you can go to your locally zoned government hospital for “free” care (featuring student doctors, waiting lists and multiple patients per room) or choose from multiple levels of private care (featuring top docs, no waiting and private suites) and pay out of pocket, getting reimbursed later in whatever way the insurance you bought covers you. Because capitalism, the cost of private care and insurance is relatively cheap/affordable. Because socialism, no one dies in the street. It appears to be the best version of all systems, one where you can spend time or money to get care.
Looking up data from Gapminder, and comparing spending PPP$ per person vs. life expectancy, the pareto frontier includes South Korea, Israel, Singapore, and Japan; with Malta, Spain, Italy, and New Zealand also doing well. So if I was looking for the best system, I'd look to see what those countries are doing.
"Emanuel thinks the UK is probably close to the cost-quality Pareto frontier and not making any stupid mistakes, but has made the political decision to not fund its health system very much."
So in UK politics rightists and centrists are very conscious of healthcare eating up a larger and larger part of GDP -- so there's an effort to make it sustainable to avoid an apocalypse where either everyone is dying on the streets, or the country goes bankrupt.
For this reason there's a mindset to avoid costs. GPs are gatekeepers. They don't quite turn you away three times to ensure you really in your heart know you need treatment -- but it's not so far off. A while ago my young son accidentally got acrylic paint in his eye. I cleaned out everything I could see but was worried. So I took him to the hospital. We were in the waiting room for four and a half hours. I'm told by doctor friends that sometimes they allow you to wait for a few hours to deter time wasters.
Friends of mine from the US or Germany get very angry about this and feel mistreated.
Anyways, that's some context.
I dispute that the NHS doesn't do anything silly though. I've probably told this story before, but I will repeat it here: a friend had certain health problem; and was told by our local hospital that they had ceased to offer treatment X (which he preferred), only treatment Y. My friend was annoyed because a recent meta-study done in the UK had shown that treatment X was at least as safe, and about two orders of magnitude cheaper (in medical costs, for the taxpayer) than treatment Y. He wrote a letter to his MP. Who had a meeting with the Health Minister, who called the head of the hospital. They then looped back and he was told by the MP that the head of the hospital confirmed that the procedure was safer and orders of magnitude cheaper, but they were now refusing to offer it because only doing treatment Y would improve the hospital's finances because the government paid them fixed rates per procedure -- and to the hospital's finances only the margin matters.
I would also say that there is a difference in culture I perceive between the US and UK medical establishments. (Can't comment for Europe.)
The UK has a steady stream of medical scandals where either the NHS did something awful intentionally (such as experimenting on children in a boarding school, most of whom died from being given blood that was known to be infected -- the doctors recorded the progression of their illnesses and gave this information to research institutions) or the NHS realised something it was doing was bad and its instinct was to cover it up (for example, the NHS realised a few years ago that its vaginal mesh operations were doing much more harm than good -- and decided the best thing to do would be to cover it up, and keep doing the operations that were known to be harmful). I have never heard of any criminal prosecutions, lawsuits, and so on, over this. In both these cases the current Minister of Health gives an apology -- when he had nothing to do with it in the first place. I get the impression that in the US they'd be quite hard nosed about it and people would just be sent to prison for this sort of gross malpractice?
I do like the NHS, but long wait times are just expected, especially for non-scheduled appointments, probably for the reasons you mention. Actually visiting the GP didn't involve too much of a wait last time I went, although I was fortunate in that my working hours were flexible enough to allow me to go in the middle of the day.
I remember the time when I was unsure of whether or not I'd broken my arm (turns out it was just sprained, but I still needed a sling for a week) and I made sure to get lunch first, the doctors wouldn't be in a rush so there's no reason I should be.
Neither of those claims of NHS malpractice are in any way unique to the UK!
I believe you, but I don't know whether that's reassuring or the opposite. I was thinking that in the US it would be harder for hospitals to cover stuff up for decades, and if they did, then heads would roll. But maybe this is a grass-is-greener thing?
I tried to find statistics. But failed. I tried to find medical malpractice insurance rates. But failed.
Speaking as a British person, I do think it's particularly egregious when it's the NHS, a public institution. I expect corporations to try to cover up their misdeeds, they serve only the bottom line, but the NHS is meant to serve us, not protect itself from embarrassment at the expense of the country's health.
Blame the Iron Law of Institutions, I suppose.
Wonder if the middleman-heaviness of the US system gets any consideration, see this classic: https://siderea.dreamwidth.org/1182366.html
I dunno about that post about bioethicists... I wouldn't say I was reflexively *hostile* to the idea before hand, but it left me feeling with more confidence what I already felt before I read it, which is "what's the point?". I guess the message for you was, don't consider them as your outgroup because they're not that different from you. That's fine. But I still don't have any particular respect for the field. Although I'm a person who already doesn't see the point of academic philosophy in general.
Having lived in Germany and Switzerland (and now going back-and-forth between the US and Canada), I think I can give some answers as to what's happening:
1) Standardisation: in Switzerland your health card is a smartcard that is fully standardised. All doctors can read it and it contains all basic information about you.
Reimbursement forms are also standardised: when I went to the doctor, the secretary gave me the choice of sending the payment directly to the insurance (in which case I pay nothing on the spot, and the insurance will bill me monthly, somewhat similar to a credit card company), or I can pay myself and keep a copy of the itemised invoice, which I would send as-is to the insurance, without having to fill any form whatsoever. The insurance either OCRs it, or they have data-entry people. I didn't have to care because the invoice already contains everything the insurance requires.
2) Doctors' autonomy: doctors are fully in charge of the treatment plan, meaning that in most cases they don't have to ask authorization to the insurance to order a certain test or treatment. Exceptions are made for very expensive surgeries. This means that the admin personnel of insurance companies is much smaller than in the US, which lowers costs.
3) Non-profit: in Germany most insurers are non-profit foundations, or are part of a larger insurance company which voluntarily runs the healthcare department at cost. In Switzerland, by law, healthcare insurers are mandated to be non-profit: most are departments of larger insurance companies, but they have entirely separate budget and all surplus must be reinvested or distributed as bonuses. The insurers compete on low admin costs and posh benefits for the supplementary care, and use the efficiency and good reputation of their healthcare unit to lure customers into life/house/car insurance which are quit profitable. Most Swiss stay with the same insurance company their whole life or maybe only change when they get married, and only the poorest shop around annually.
4) Price control: not just medicines, but the prices for medical services are set by the government. For example, the kantons set the maximum price for a 30-minute dermatologist visit and the doctors must give the same price to everyone, which means that insurance companies don't negotiate the prices of mandatory services with doctors or hospitals directly (as far as I know).
They might negotiate for some non-essential surgery.
5) Concierge service: wealthy people pay more for posh service, like a semi-private or fully private room in case of hospitalization, or being treated by the head of department instead of a lesser experienced doctor. Insurance companies lose money on regular patients and balance their budget (remember, no profits) with the "business/first class" patients.
6) Lower salaries: medical schools are essentially free in Switzerland, so doctors don't have huge debts to repay. Switzerland doesn't graduate enough doctors for their needs, but it attracts many foreign-educated doctors and the barriers for degree recognition are reasonably low (contrary to what I read about US and Canada where the doctors' associations have been very successful in blocking degree recognition). I don't have hard numbers, but my impression is that Swiss doctors make 60-80% of their US counterparts.
7) Focus on generic drugs: doctors are strongly encouraged to prescribe generics, which keeps the prices down. The kickbacks that US doctors get for prescribing very expensive drugs are non-existent for the most part.
I was happy to pay 480 CHF a month for a semi-private plan (and rarely using it), when other colleagues my age went for cheaper options around 220-240 CHF. My total annual deductible was 7000 CHF, which amounts to a maximum annual expense of 7000 + 480*12 = 12760 CHF (13900 USD).
If I were sicker I could opt for a 1500 CHF deductible and less fancy service, which would cap my expenses in the range of 5-7000.
It's still cheaper and higher quality than the US, especially considering Swiss salaries.
Very good summary. The system is not entirely straightforward and rarely ever characterized properly.
One nitpick: not sure how you get to a deductible of 7K, the mandatory basic plans have at most 2.5K and for the first 7K above that you have 10% copay.
As for accessibility: I have a hard to treat chronic disease and ever since they finally managed to diagnose it (don't get me started) access to expensive biologics, frequent lab tests, radiology and specialist appointments has been exemplary. And while I happen to have top notch supplementary insurance, 99% of that was covered by the basic, mandatory plan.
Oops, I believe you're right. I didn't remember the copay calculations correctly.
For the accessibility, my experience matches yours (with SWICA in Zurich). I could get an MRI for the next day. Here in Quebec I'm lucky if I can get an appointment in 3 months unless I'm willing to pay 700 CAD entirely out of pocket (compared to the 120 CHF in Zurich).
Scott how much did the book account for the fact that it is easier to have low wait times when people just don't bother to go because they can't afford it?
Or because the threshold for going is not the same. Within a country, this threshold already is incredibly variable, due to a combination of general heath, eagerness (or reluctance) to visit doctors or hospitals, and price /revenue. This means that the default theory is that the per country average also strongly differ...which mechanism would make that roughly constant, when countries demography and cultures are not the same?
The combination of a system that's fee-for-service, looking for things they can charge you for at the highest possible price, and a public that's unwilling to bargain or accept limits on consumption. There are some moves to improve this with 'capitation' where you go in for some surgery and instead of charging you for every test and consultation and procedure and meal and other thing that gets done during that visit the insurer has a tariff: For this kind of surgery, they pay the hospital this much per patient. You win some you lose some. Hospitals that are efficient and avoid complications do well in the long run.
I also suspect, but have no data, that expenses balloon at the bottom and the top of the utility curve. At one end, pharma companies selling drugs that aren't needed to people who aren't ill. At the other end, extremely costly treatments and repeated surgeries in an undignified attempt to prolong life and extract the maximum 'consumer surplus'. Other systems would ration care based on too low QALY for the cost, and individuals in other cultures like the Amish that you mention would say you know what, I don't want to die in a hospital.
I live in The Netherlands and have some experience with our healthcare system (I have metastatic cancer) and if what I'm getting is top-tier, you all have my sympathies.
How do you know it is "top-tier"?
No one else is commenting on this particular thing, so I guess only my brain is failing to work here, but:
>"I think if the government will pay you $2,000 per unit in 2020 and only $1,000 per unit in 2021, then you stop doing all the health care with a value of between $1,000 and $2,000 per unit[...]"
Why? WHY? Why is this not making sense to me?
Wouldn't this rather make you stop doing health care with a value of > $2000/unit in 2020, and > $1000/unit in 2021?
Maybe I'm confused by what "value" means here. We're looking at what providers would do when the government assigns a value to their per-unit healthcare, right? So "value" can't mean "government-assigned value for this year" — it must be referring to the amount the unit costs to the provider. But if that's the case, I don't get the reasoning above.
I had an aha moment when I thought "wait... maybe it refers to the *value to the provider!*" — i.e., profit. But no, providers are compensated by the government in this model, right? They aren't profiting otherwise. And if it were profit, anyway, you'd want the highest regardless.
I'm clearly missing something. Boy, I feel dumb as hell.
I know everyone just wants their own country talked about, but I'm disappointed that Israel doesn't get a mention mainly because I'm curious how they measure up. The system seems to work remarkably well (compared to other countries and compared to other Israeli government services). Its super cheap. And since Covid I've realized how impressive it is that everything is universally synced in a robust online system.
Anyway maybe it's mentioned in the book.
Second that.
One of the amazing things about our system in Israel is that we have these semi-public HMOs ("Kupat Holim") and their incetives are somehow well aligned with the patients'.
For example, most people don't switch HMOs their whole lives because they are nearly identical, so the HMOs have an incetive to care about the long term health of their patients, and they invest in preventive measures such as check ups, anti-smoking courses, etc.
Short description of the system in Israel:
The Health law in Israel is from 1994. It mandates a "health-Tax" on all incomes, of about 3-5%., depending on salary.
The State adds to this budget and determines a total health budget, usually by some formula depending on the population size, age brackets - and available budget.
This budget is then divided to what is called the "health bucket". The health bucket defines all the services that would be provided by the state, and the patient cost for each. Usually the patient cost is trivial, a few dollars for a service like a doctor meeting.
Treatments get into the bucket according to cost effectiveness, so expensive treatments would just stay out of it. This puts pressure on Pharma companies to reduce prices.
The state doesn't provide the services directly, those are mediated through some kind of HMOs, called "Boxes". There are 4 of those, and each resident can choose which one to go to, and they can't refuse. They compete between themselves, and the budget the States provides depends on the amount of patients each manages.
In addition, there is a private health system, that is much smaller. Most Doctors would work part time at the public system and the private system, but used mostly for Dental service for adults, to shorten lines and to choose your doctor. The same Hospital and the same doctor could work in Public in the morning and private in the afternoon. There is constant worry about resources going over from the public system to the private system.
Doctors and nurses and most other health professionals in the public system are unionized, with a fixed salary - that means there is no economic incentives for doctors in the public system, only in the private one, where they do get paid per procedure.
There are various incentives built-in into the system - for example for a lot of procedures the HMOs ("Boxes") have incentives to reduce sickness and treatment because they get a fixed budget according to number of patients.
Going to ER is free with a reference with a doctor, or if it was deemed an emergency, but frivolous visits can be pretty expensive (~700$).
Megan McArdle has written some good stuff on the topic over the years. Here is a random pick from Google to give a flavor: https://www.theatlantic.com/business/archive/2009/04/ask-the-editors-why-does-health-care-cost-so-much/12998/
The main thing I take away from her is path dependency effects. Almost impossible for US to cut costs because Healthcare professionals make too much already (and it's almost impossible to cut wages), hospitals have already been overbuilt with excessively swanky facilities (a problem that I see also with US colleges - these hotel grade dorms / top end gyms built in recent decades will make it almost impossible in future to cut cost of college) etc.
Separately, there is the argument that other countries can negotiate lower prices w/ drug makers largely because high prices in US subsidise whole system - basically Norway, UK etc. are just low marginal cost markets for drug makers who have already recouped all their costs and then some in US alone. If US also started to negotiate hardball the system wouldnt work, lots of new drug development would become uneconomical and get canned etc. Hard to prove how much this argument is true as opposed to drug industry crying poverty, but having invested in drug development in my previous life I could see that some of the argument is definitely true.
Btw. just wanted to mention that I've lived under the US, UK, Swiss and Taiwanese health systems now (as well as Germany but that was when I was a kid so don't remember much) so have direct experience of quite a few of the systems studied in the book. Personal experience is that for a regular guy with relatively high income and few serious health problems all these feel about the same. I get feeling it's around the edge cases that specific systems fail to deliver.
I remember liking this analysis:
https://www.theregister.com/2015/01/04/healthcare_provision_look_anywhere_you_like_for_answers_just_not_the_us/
Which makes a distinction between insurance (pooling risk for unlikely but severe healthcare needs) and assurance (paying for things we will all need eventually, doctors appointments and old age care), and which rates the system used in Singapore highly.
I have some broad anecdotal experience having lived in or received medical care in many different countries:
- USA (20 years)
- Singapore (2 years)
- Kuwait (5 years)
- France (1 year)
- Switzerland (4 years, son was born here)
- UAE (4 years)
- South Korea (ad-hoc)
- China (ad-hoc)
I can't say I even know 1% of the regulations involved in these systems, but I have an overall impression from participating in them.
South Korea was by far my best experience - as a combination of quality of care and low price. They have a public system with private add-ons, but if you don't get regular check-ups then you can be denied care. They also have this incredible system for annual check-ups where you rapidly go from station to station with a mob of people and see more than 10 doctors in a couple of hours running all kinds of tests.
China was the worst experience. An overflowing hospital and waiting in line for six hours to get 3 minutes standing in front of a doctor who just prescribed a bunch of antibiotics without checking on my infant son.
Switzerland has high quality care but is very expensive - minimum $~400 per month for the basic insurance. But they also make the rules transparent and they encourage you to do preventative steps, like subsidizing gym memberships.
UAE is also great if you get coverage at a good hospital. This is done through my employer and we have 10-15% co-pays.
Singapore was a long time ago, so I can't remember if I had to pay anything, but I remember feeling that doctors unnecessarily prescribed antibiotics for everything.
Taiwan has a GDP of close to $33K per capita (and a lot higher using PPP). Not sure if excluding it for being poorer/less developed than other countries makes sense here. I've lived under the Swiss, American and now Taiwanese health care system, and Taiwan certainly holds its own.
Do doctors here seem any more tired to you than in the US? In my experience they mostly seem about the same.
Same here. They definitely work hard, but they don't seem overly tired. This is all purely anecdotal, but I've had an operation and several check-ups here, and my wife gave birth here as well.
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?
I am not an expert, but I do live in Germany. The reason this doesn't happen is that there is a law that if you accept patients from one "public insurance company" you must accept patients from all of them.
There are a few luxury clinics in wealthy areas that only accept privately-insured patients but as far as I know there are no actual hospitals that do that since there are very few people who are insured privately. The reason the privately insurance population is low is that you are only allowed to have private insurance if you make above a certain income threshold (I believe it is 150% of median income). Ironically private insurance is usually much cheaper than public insurance (~€150 vs ~€300 per month at the max cost-to-income scale), but there are some downsides which make most people reject it even if they are eligible. Namely, it is very difficult to return to the public insurance system, you need to pre-select a "menu" of coverage you think you'll need instead of just being covered for everything, it does not cover your partner and children for free, and the price scales with age. So a wealthy middle-aged person opting for private insurance is basically betting that they will still be wealthy as they age. If they have some misfortune and end up poorer when they are elderly they can have crushing medical insurance costs and be unable to switch back to the subsidized public insurance scheme. Germans, being frugal and cautious by nature, view this as a terrible bargain so most privately insured people are either Actually Rich or foreigners who do not intend to grow old in Germany.
The public insurance companies which cover ~90% of the population bargain collectively for acceptance with all doctors/clinics/hospitals/whatever and have extreme coercive power. However, this is balanced by the government basically setting prices for medical procedures in advance. This is done similar to the way they set prices for drugs.
I think the main reason that this works is the _style_ of negotiation. In US healthcare you have a multi-party _adversarial_ negotiation where if a bargain can't be struck then one party walks away and all their associated patients suffer. In Germany the parties are pretty much permanently legally bound to each other (or at least the law creates such a disincentive to walking away that it is effectively impossible) so instead it is a _cooperative_ nationwide negotiation between three roughly equally powerful parties: the German Health Ministry, the Health Insurance Association, and the Healthcare Provider Association. All of them need each other to exist and all agreements are "one for all and all for one" so there is no room for defection.
The result is a fairly functional, if a bit ponderous, healthcare system that most Germans are relatively satisfied with (insofar that a German can be satisfied with anything).
> The reason this doesn't happen is that there is a law that if you accept patients from one "public insurance company" you must accept patients from all of them.
Right. But then why doesn't an insurance company turn around and say they are only going to pay $1/visit or something? After all, they *must* be accepted.
Then the government steps in and says "you don't cover the cost the doctor is charging? You are not really a health insurance company and can no longer operate."
Correspondingly if the doctor charges to much the government would also say "you charge more than the set price window for this procedure, you can no longer see publicly insured patients."
The shaky leg of this tripod is the government price controls. Which need to be set high enough that the doctors can have a sustainable business. But low enough that the health insurance companies don't go bankrupt. This is where most of the "cooperative negotiation" occurs. But since all parties have an interest is figuring out the "proper" price it works pretty well.
I know a guy who's lived in Portugal, Brazil, US, France, and UK. He confidently ranks US healthcare as the worst of these (unless you're rich) and France as the best, followed by Portugal and then I don't remember.
As a long-suffering user of the NHS, I wanted to add that the system in the UK isn’t quite how Scott / Emanuel characterises it.
Yes, most hospitals and doctors surgeries etc are run (awfully) by the government, but there are a substantial number of fully private hospitals / facilities, and, in addition, most of the best NHS hospitals have their own private wings, which help to subsidise the public sector care. Most doctors will also get some private work in as soon as they have enough experience, because the pay for highly trained medical professionals is *LOL*, when compared with equivalently smart / educated people doing things like Law / Finance / etc. In dentistry (also under the remit of the NHS, but in an inconceivably more stupid way), _everyone_ does private work; if you try to do only NHS work, you will either (a) commit fraud or (b) go bankrupt. There is no way for dental professionals to make any money on the NHS, so they use NHS patients as a funnel for private work (“Would you like a white filling? That’ll be £xx extra”). So, although it is different from Option 3 as listed above, I think the system also does broadly fall into that category, rather than standing alone as a purely socialised system, which it both is and isn’t.
Anyone who can afford to have insurance and go private, does; it took me personally one morning to complete some private appointments and tests, which would have taken me ~6 months to have completed and reviewed on the NHS (pre-COVID). Other than for emergencies (even then, call out times can often be multiple hours), no one would ever choose NHS care over private options
I think there is an orthogonal question of morality here that cannot be resolved merely by looking at how well each system performs. I maintain that it's unethical for government to be involved in healthcare of its citizens, and I see that I saw no country even close to following that model of non-involvement (despite what people think about the US, the US doesn't do that).
Even if in all the countries examined above, government had no role in healthcare beyond enforcing contracts, we may see different levels of performance and it is wrong to think that the relationship between government involvement and performance is independent of many other variables.
> 4: Single Payer Channeled Through Private Insurance is typical of Germany and the Netherlands. I think this is kind of like how charter schools work in the US: the government pays 100% of your costs,
This doesn't sound like the Germany I remember.
In Germany you have to pay for what they call "public" health insurance, but actually you are paying a private company of your choice. On the other hand they are so tightly regulated that the choice doesn't matter much. IIUC, it might seem like the government pays, because most people have the payment taken straight out of their paycheck, but if you are a self employed, you have to pay them yourself.
It strikes me as very similar to the post-Obama system in America, except presumably more orderly and, because it's German and not American.
You wondered how Germany avoids patients going to out-of-network doctors.
There's an official price list for (basically) every procedure a doctor might perform. Doctors are allowed to apply a factor to every price., but this factor has to be negotiated before the treatment.
In practice, the patient hands over their insurance card before the appointment, and the doctor sets the factor to whatever the insurance allows. This incentivizes doctors to give better treatment to high-factor patients, so that they don't go looking for a different clinic.
Some doctors state outright they will only work for a minimum factor*, then the patient has to cover the difference if its above their insurance's max factor, or negotiate, or go somewhere else.
* it's usually phrased as "we only accept these insurances: ..."
To the question of "why doesn't Germany suffer from higher costs", the answer is price controls. Costs for any particular intervention are set by a process of sectoral bargaining between the health insurance companies, hospital industry groups, and doctor's associations, with a healthy helping of government regulation and cracking the whip to make sure everyone comes to a reasonable compromise. It nestles nicely into Germany's cultural corporatism, where everything is subject to tedious consensus-building in highly centralized representative bodies that reach decisions that individual agents are required by law to adhere to (unless they fall into a narrow band of exceptions, in which case there are basically no rules but they tend to follow them anyway because Germans love following rules).
This is similar to how German wages are set: if you hire a metalworker, you have to pay them the union rate even if they're not in the union, but unions and employers' associations are generally very cozy with each other and work stoppages, when they happen at all, are symbolic; everyone knows eventually they'll meet in the middle and go back to work.
Basically, the German love of order and consensus prevents a lot of rent-seeking defection. The American culture of chaos, defection, and adversarial relationships is unlikely to be able to adopt much from the system without incurring severe psychological pain.
I'm telling a very culturally reductive story here but after a decade in Germany it's a little bit hard to come to any other conclusion. Germans are just wired differently than Americans, and that has upsides and downside. They're great at manufacturing but terrible at UX design. Go figure.
Regarding the german system: The adversarial vs cooperative point by @Atticus is excellent and can not be understated. To add some points on the german system (I'm also unsure about its correct catgorization in the book, but don't know enough about the used system to be sure enough):
- Doctors are free to reject patients with the statutory health insurances (which pay the predetermined rate) and only take privately paying patients, but the vast majority just take everyone and offer benefits to the (economically more viable) privately paying.
- Most doctors are not motivated primarily by money. One of the "people dying in germany while on the waiting list for a specialist" is a myth - every doctor I know triages referals to specialists (some specialist professions have notoriously long waiting lists), so that patients with a need for a speedier specialists opinion of treatment are referred faster by calling the specialist in advance and ask for an urgent appointment for the patient. An example would be dermatologists, who usually are booked full 3-4 months in advance (because they do often prioritize privately paying patients that want beauty treatments) - but if your general practitioner finds a suspicious skin change that might indicate a fast spreading skin cancer type, they just call the patients dermatologist and usually get an appointment on the next day. Note that this is all without looking at emergencies, which are treated non-discriminately immediately by everyone, *and* that this kind of triaging is neither charged extra or bonused in any way nor is it regulated by law. My only explanation here is just that doctors in general are simply philanthrophs in germany and make enough money to stay motivated - as well as people here not feeling the need to show off to everyone else how rich you are as it seems custom in the US.
- The rate for one insured "unit of work" is not as fixed as I've read between the lines here, but there's a negotiated, fixed base rate, that the doctors are able to multiply by a "difficulty factor" to adapt their work to the time needed. If a doctor is known from an insurer to have a statistically higher cost due to always using a high difficulty factor, they will get more and more trouble with the insurances, because these can challenge the factors to prevent fraud.
- The base rate and even which medication and treatments are payed for by the statutory health insurances based on their effectiveness for certain medical issues is regularly negotiated in a common nationwide commitee you already mentioned (Gemeinsamer Bundesausschuss). They *have* to base this on the effectiveness by law, which *has* to be based on scientific studys.
- If you are an edge-case where no treatment is being payed according to this committee, you have an independent escalation committee (Medizinischer Dienst der Krankenkassen), where you can appeal your specific case and get the treatment payed by anyway. This committee can also be called upon by your employer or your statutory health insurance, if they believe that you are fraudulently sick or otherwise trying to cheat the system - countering one of the often used arguments against a "quasi-socialized health system", where everyone "would just stay sick at home". You still have the right to sue for payment of your treatment afterwards.
- statutory health insurances' members are paying their insurance rate as fixed percentage of their income (14.6%), up to a maximum of 4.200€ of income. So the wealthier upper class is incentivized to still be insured in a statutory health insurances (because their effective rate is reduced with higher income due to the maximum).
- The statutory health insurances *are* able to pay for medical treatments and medication, that is *not* sanctioned by this committee, *but* they have to pay this out of their own pockets. For this, they are allowed to charge their members a monthly premium (which is around 0-2% of the income of the insured member). Each year, the insurances are rated against each other in their effectiveness (cost per insured member) and their premium is redistributed. This self-regulates each insurance to keep their effectiveness high.
- There were an absurd number of statutory health insurances in the past, but they have been reduced through mergers a lot in the past five decades to promote more efficiency (from ~1.800 in 1970 to 103 in 2021).
TLDR: The system in germany works so well, because it is capitalist based, heavily regulated by the state, with self-regulating feedback-loops to get the best outcome for the patient, while still balancing it with the necessary cost effectiveness.
"This committee can also be called upon by your employer or your statutory health insurance, if they believe that you are fraudulently sick or otherwise trying to cheat the system - countering one of the often used arguments against a "quasi-socialized health system", where everyone "would just stay sick at home"."
In theory this may be true but malingering absenteeism is still endemic in Germany. Only in extreme cases does this get used, ie someone submits a sick note and then posts pictures on Facebook from Malle.
It's actually quite easy to be send to the MDK as a sick person and it doesn't need much effort from the employer or the insurance. All that is needed is probable cause, which can be as little as a written statement containing a hard-to-disprove lie like "I've seen the employee that has been sick for the past weeks due to backproblems carrying groceries". Straight-out lie, no further pictures or even a written lieu of an oath necessary.
In general, these edge-cases that the MDK is covering work both ways, the committee is truly independent (only consists of doctors that are forbidden by law to disclose any medical information they gain, cost covered by the insurance) and while there obviously will be the occasional wrong decision they make, it's the best system I can think of when regarding the cost-benefit-ratio.
I would add an additional point, which is that Americans, as a rule, live stupendously unhealthy lifestyles compared to these reference countries and that is going to be reflected in health outcomes and costs connected to things like care for chronic conditions. Terrible diet and sedentary lifestyles are the norm, notwithstanding the narrow sliver of society that is fitness-obsessed. It's not even a choice, really; unhealthy food is cheap, healthy food is unsubsidized, and most areas are hostile to non-automotive locomotion. I lost fifteen pounds without even trying when I moved to Germany.
> I spent a long time staring at this system trying to figure out how it could possibly work.
Someone else probably said it better already, but the answer is "Not very well." At least here in Germany there are dozens of small and less small problems that come from this system.
American expat in London here. I moved from an Anthem PPO plan in San Francisco to just plain NHS with no private insurance, and quite frankly the UK NHS is far better (the French system that I also have experience with is better yet, the Dutch is worse). I get access to physicians or hospital services much faster, including expensive tests like MRIs, my prescriptions for a chronic condition are completely free, and more topically so are Covid lateral flow tests. Not having to waste half an hour at the beginning of each appointment filling out insurance and HIPPA paperwork is also a boon and helps with the blood pressure :-)
They take preventive medicine seriously, and even the facilities are in better shape than the expensive SF CPMC or UCSF hospitals, despite the NHS being a cost-optimized cheap-and-cheerful basic service.
I do use private dentistry, but even the idea of free basic dental care would blow most Americans' mind.
I find this difficult to believe, given that literally every other post by a British person on this article is 'the NHS is terrible & you have to wait forever for everything, if you can afford it you get private insurance immediately'. I think I read 10-15 comments saying this exact thing before reaching your comment saying the opposite
Maybe different people have different experiences.
If 1 person says X and 15 people say !X, okay, we can believe !X, but we don't need to tell the 1 person with X that they're wrong or lying.
Some notes on drug pricing regulation in the EU. The situation is interesting that even though it looks like monopoly/psony in a single country on the EU level it is much more competitive. Most drugs sold in the EU have EU universal (or almost universal) registration. If you are a pharmacy you can buy a drug in one country and repackage and sell it in another. In case of significantly different prices among the countries (south and east prices tend to be lower) that can lead to a deficit of the drug in low price countries and a huge second market that in reality is tiny (I have a client who runs a second market platform for pharmacies).
I haven't seen a comment yet on France (we are of course half a day ahead of you) so here are a few thoughts. I'm not sure I recognise the system from the brief description in the essay.
The basis of the French System is Social Security (the "Sécu") which covers everybody for most things and gives you a green card with a SS number and microchip which can be read by any pharmacy or any health provider in the system. This has all your medical details and all of your prescriptions. Because not all costs are covered (eg about 70% of the cost of the average prescription) almost everybody has a top-up system, known as a "Mutuelle", sometimes run as a wing of an insurance company, but also as friendly societies linked to professions (there's one for education, for example). This tops you up to 100%. In my case I pay the equivalent of about $100 a month for this insurance, though this figure reflects my age( I am 70). After that, I pay essentially nothing for medical treatment. At the pharmacy I give them my card and the prescription. They give me the medicines. That's it. The kinestherapist gives me a bill every six weeks or so, and by the time the cheque is cleared I have already been refunded. There are certain procedures that are not covered by the Sécu, and non-routine dental care can be quite expensive. Some drugs are not reimbursed, though you can pay for them if your doctor is really convinced and so are you. There are subtle nudges also: generics are provided free at the point of collection, whereas non-generics have to be paid for and then reimbursed. Some Mutuelles pay for special treatment (eg osteopathy), others don't. The French complain about their health services a lot: some of the bureaucracy that goes on behind the scenes is incredible, but it all seems to work. It's also true that successive governments have starved the system of resources and we are seeing the consequences.
However. And it's a big however. What the French and the UK system have in common is that they exist to look after you, not to make money. Whoever you are, and no matter how much or how little money you have, you will be taken in and looked after. The reality is that people don't think of their health, or of health care in general, like an economist, but like a citizen and a possible patient. To that extent, I really wonder to what extent health care economics, for all that it may be a nerdish subject of interest to specialists, should be allowed to inform policy-making. Thirty or forty years ago, when the NHS just concentrated on care, the system worked much better. With every attempt to introduce budgets and management, it's got worse. There's a lesson in that.
While I can't say anything on the UK's NHS, the french system sounds completely similar to the german system. Do you know of any major differences without nitpicking? Is the prescription still paper-based or does France already use an electronic system based on the your green smartcard? I remember that France started a decade a go with a nationwide electronic patient file, but that it was never accepted by the general population (same as the current efforts in germany - even in that regard we seem to be similar).
Belgium is also very similar. I wonder if large part of the observed differences is more linked to population and doctors "health culture" rather than the health systems. Like : how often and quickly do you go to the hospital? To a doctor? To your family doctor? How much do you demand / reject different types of interventions (antibiotics, psychotrops, vaccines, other, chirurgy, imagery,blodd analysis, ...). In the end, what will happen is an interaction of patient expectations, doctors practices and health system incentives. Assuming the first 2 to be the same if they are not will make comparisons of the third extremely difficult, if not impossible. Maybe that's another reason why health systems do not seems to make a lot of sense economically speaking...
And then you also have demographic and general health difference. A country with a population 10y older can not expect that replicating the health system from a country with a younger population will gives similar results. Not sure how this was taken into account, but if you don't (or do it wrong), comparing health systems is doomed...
There's very little paper. My own "patient file" is on my green card, and that's the master document, to which only medical professionals have access. I don't think there's any master paper file anywhere, not least because (another complexity) the SS system, whilst national, is administered by the Department you live in. I have a paper prescription, and printed results from laboratories (though I actually get them by mail in PDF format). For dentists and opticians (and I should have said that if you want a decent pair of glasses you have to pay most of the price yourself) you'll probably be given a paper copy of the diagnosis and the bill, but everything is also held electronically. On the whole the system works well - it can be laborious going to a new health provider, but in principle all the systems talk to each other very well. But I actually think the similarities of European systems are greater than the surface difficulties: all of them are systems designed to help the patient, rather than to make money.
A few data points on the Sécu and mutuelles: with only the Sécu, I get reimbursed something like 15€ for glasses that cost ~350€, the vast majority of the cost coming from the lenses (~310/320€) and a small part from the frame. With my mutuelle, I pay 0€ for my glasses.
For 28 x 10mg pills of escitalopram, with my mutuelle, I pay 1€. Note that since I have my green card ("carte vitale") and the mutuelle paper with me, I don't have to pay and then get reimbursed, I only pay the part I have to pay.
I pay ~215€ a month to the Sécurité sociale, my employer pays ~300€ (on a net salary of 2210€), I pay ~120€ for my mutuelle, my employer pays ~180€.
For people not familiar with the French system, my employer pays ~4300€ a month for me, my take home pay (after taxes) is ~2000€. Part of it goes to the sécu, part of it to the "assurance chômage" (some pay if you're unemployed, socialized), some of it goes to a retirement fund (also socialized, I'm paying for people retired right now, and I pray that the next generations will pay for me. The fun part is that the rules are not the same for everyone: before retirement was at 60, now it's between 62 and 65).
I'm ~25 and working in software, not in Paris, and probably slightly under market rates. I pay ~700€ a month in rent for a 2 bedroom appartment of 55m², have a garage, I can walk to the city center in ~15 minutes, have a few shops around me. The neighborhood is relatively safe. Food can vary quite a lot, I'd say it can go as low as 100€ a month, to as high as a a few hundreds, average is ~200€ a month. A restaurant is ~10€ to 20€. A quick meal on a weekday can go from ~3€ (sandwich) to ~8€ (nice salads with salmon and stuff like that) if you buy it "outside".
Not a lot of hard facts here, but for people that don't have any idea on "what money means" in France, it can help get a better feeling of things.
The discussion of the arbitrariness of health care budget setting reminded me of my experience negotiating with hotels to hold conferences. The complete arbitrariness and flexibility of the prices charged for the use of meeting rooms was a bit disconcerting; it bore no relationship to anything driven by costs, the way food service prices did. You might get some idea of this from the variability of cost of sleeping rooms, though that's driven much by supply and demand, which wasn't so much a factor in meeting rooms, as they weren't in such regular demand at least with these hotels.
For food service at your conference the majority of the cost is for the food itself, its preparation, and serving it. If you don't have food the hotel is stuck only with the cost of the additional kitchen space that wasn't necessary that day.
For the conference room, on the other hand, the marginal cost in setting it up is relatively low as compared to what the hotel pays for the the space itself (lease or capital costs for the land area and that part of the building, taxes, etc.), and those latter costs are paid whether anybody uses the space or not.
Situations with high fixed and low marginal costs generally have funny pricing structures as the sellers attempt to balance making a bit of extra money to put against the fixed costs with not selling _everything_ at so little above their marginal cost that the fixed costs aren't covered. Seats on scheduled airline flights are a classic example of this.
Yes, I know that high fixed and low marginal costs is an explanation. But it still doesn't dictate the weird flexibility of this. Airline seats, like hotel sleeping rooms, still isn't quite the same thing because of the supply-and-demand factor, and because there's no negotiation involved. You can shop around for different prices, try at different times, etc. But the price is still whatever it is when you find it. That's not like sitting down with the hotel's conference manager and having her suddenly cut what had seemed like a fixed price in half, just because of something else you were getting, or just to tempt you and keep your business.
I don't understand your point there. The price was what it was when you found it at the start of when you sat down with the hotel's conference manager, and it was what it was when you found it after she made the sudden cut; this seems no different from checking the price of an airline ticket on a web site and then checking it again five minutes later to find that it had changed.
In both cases, the seller seems to have encountered some information that made them decide to change the price. Perhaps the flight filled up, or a group on that flight cancelled. Perhaps the manager realized that they make a lot of money on something else you just decided to buy so they can offer a more attractive price on the conference room, or perhaps they know they're not likely to book it with someone else and have the feeling you won't take it at the price they offered.
Remember, the seller doesn't have perfect information (in fact, in your case, the seller probably has terrible information), so the price change does not necessarily reflect the actual market conditions. You may know that in that meeting you paused to think about what fun things you were going to do with the money you saved on the cheaper-than-expected conference room, but if the seller thinks you paused to think about where else you might be able to go to get the room cheaper, they may (incorrectly, from your point of view) lower the price to mitigate this perceived problem.
(If the airlines seem to be doing a better job, part of that is likely due to the fact that they have a staff of economists dedicated to pricing the seats they sell.)
No, there's a huge difference, which is that when you sit down with a hotel manager you're part of the process of negotiating the prices. When you look them up on a website you're just a passive receptor.
Another big difference is this: the rates were originally presented to me printed on an informational sheet, and one that looked like it was pretty standardized (not like a "today's offerings" menu would). They didn't look like they were subject to massive change. If you're new at this, which I was, it takes you by surprise when abrupt changes are made. Later, as I became more savvy, I learned to expect this sort of thing, but it's not like airline prices which change the next day or are already varied depending on when you fly, or hotel sleeping rooms which are similar.
You're writing mostly about -why- these changes are made, but I'm not asking why. Once I know it happens, I can figure out why. I'm just remarking on the unexpected arbitrariness which is what Scott's discussion of health care budget setting reminded me of.
Technical deficiencies in some descriptions:
1. UK GPs are independent contractors, and self-employed. Hospital doctors are employees. All can do private practice as well as NHS work, but if they do both they must not spend more than a small portion of their time on private work (they can do 100% private if they have the desire and the reputation for it). Consumers often have private insurance either for add-on services, or in gold-plated versions, that pay for private health care.
2. Canada confusingly refers to some of its separate provincial health care arrangements as insurance. It isn't: it's just taxation and government spending. Traditionally, doctors have been self-employed independent contractors (again with only one client). Negotiations take place at a provincial level between a medical society/union to set fees for all paid via fee for service. This is being gradually replaced by alternative funding plans where a group of physicians (say all the surgeons in a teaching hospital) get together and negotiate a pot of funds for their services in return for certain promises of work. They then split it up how they like. In effect, they become salaried employees but with no benefits as they are still, technically, self-employed. Government knows what the costs will be, rather than the open-ended fee-for-service system, and pays the docs less than under FFS, and the docs get to work much less for their income.
3. I'm not sure any Canadian hospitals are privately owned any more. Some may still technically belong to, say, a Catholic charity, but those just become a free building for the government to use as it sees fit. Attempts have been made to set up private surgical clinics, but the provinces always get them shut down. Privatised medicine is illegal in Canada, though tolerated in Québec. Consumers do have private insurance, for services not covered by government (drugs, dentistry, eyeglasses etc).
Re: Canadian hospitals, there are a few that are actually really private still. They tend to be very specialized like Shouldice in Toronto. I agree its confusing when analyses like these refer to our hospitals as private since they're functionally an arms-length Crown corp. However I think that type of mistake is always going to come with the territory of this type of analysis- this one feels obvious, but I'm sure there are lots of less obvious ones too. I guess the hospital one can also be complicated by things like the P3 shift that Ontario especially has embraced, where the healthcare providers are de facto public, but the operations and ownership of the physical building are privatized.
Also the NHS sometimes outsources treatment to the same private hospitals that do add-on stuff. Anecdotally, I've heard they don't have the same ability to deal with complications as NHS hospitals do.
Explanation to why there is no "out of network" in Germany:
Doctors need a license to treat publicly insured patients (~90%) which limits their ability to reject patients or treatments.
Otherwise they they limit their clientele to a small more lucrative group of privately insured patients.
Since the doctor has to bill treatments based on a catalogue not specific to the insurer he has no incentive to exclude patients for that reason. The catalogue is the same for private patients, doctors are allowed to apply specific factors between 2.3 and 3.5 tho. Because of that there are reduced wait times for private patients and it's easier to be taken on as new patient.
There are specific treatments the doctor can offer which the patient has to pay out of pocket. Those can't be compulsory and are usually pointless.
Explanation why hospitals or doctors don't go bankrupt when costs rise:
One direct reason is that treatments can be made made more profitable with modification, e.g. the first night in the hospital is very lucrative and can be added to treatments which don't necessarily require it.
Some speculation on the topic:
I don't know the situation in the US, but I feel generic drugs are also widely accepted and handled sensibly in Germany and the EU which puts price pressure on the pharmaceutical companies.
A lot of hospitals are be ran by the state (university clinics) or charitable organizations so commercial hospitals can offload unprofitable treatments to those when they start running a deficit.
I've just spent four years in the Netherlands, after 3.5 years in Singapore, and much of my life in the UK before that.
The Dutch system is very good in many ways. The insurance costs can be high, but the facilities are often very good - modern, well-equipped hospitals etc. But Covid has shone a light on some structural problems: 1. Insurance funding starts to fail when a pandemic hits. Big time; 2. The Dutch system has little central control (parts are run on religious lines) and this was a problem in coordinating a pandemic response; 3. Worse, the Dutch government is good at sensible technocratic problems (water, normal health care) but bad at difficult and unpredictable crises (Covid), and this feeds through to the health system; 4. The Dutch aren't very good at being told what to do - Over the last two years I was in hospital for various reasons at various points (check-ups, a minor operation) and over all these points I'd guess at maybe <50% of people wearing masks (including staff!!!!); 5. The Dutch don't seem to rely heavily on pain relief - so you'll be given maybe 75% of the dose that you might receive elsewhere (a big deal for some procedures!). So it's a good system for normal times.
Singapore was terrific, and the insurance system works on very different tiers so the system isn't monolithic. They picked up a couple of big health problems that even required a full-scale exploratory operation - something that would never have happened in eg Britain. I suspect the nurses aren't as highly skilled as they can be (ie developing a nurse-practitioner career path) but that is certainly true of China and elsewhere in East Asia.
Britain has a terrific system of a sort, but its major flaw is political - it's so wedded to the NHS system that it's found it difficult to reform and to introduce mild market-led reforms (for instance involving insurance). This is a massive handicap! Even going through the GP doctor system to get the referral to a private doctor is difficult, as you're often faced with a degree of scorn from the medical staff (for jumping the queue, for undermining the secular religion of the NHS). They also let me and my family down badly on several occasions (this can happen, but these were preventable).
I think Random Critical Analysis' detailed and excellent work deserves much better than a 'see here for a contrarian take'. I spent a lot of time engaging with it a couple of months ago, and the strength of their arguments and analysis helped change my mind on a topic that I knew quite well, which is rare and wonderful. In fact, their collected posts should get a book review of their own!
Thesis: The governing factor in US healthcare is geography. No country with the geographic distribution of people similar to US have solved healthcare adequately.
To unpack: fundamentally, the screwed-upness is about insurance (which is about ~$1T revenue industry); which in turn, is about population density (or more precisely, the lack thereof), and the geographical distribution of population in the US, which makes a single-payer-system uneconomical. To unpack: you look at population density in the EU, you drop a hospital in any city >10K population, and it can also provide timely support to the neighbouring 5 villages, meaning you have reach of ~50-100K people. Quantitatively: US pop density ~36 per km^2 vs EU pop density 117 per km^2. You look at eg Utah on https://lh3.googleusercontent.com/fjk6tl9Zz-6PnzxKh-TmRj8McEd5nV_jidjuPvLTEMaiObBNKWuiXyHFu_aMG7QOzg earth at night, and it is infeasible to give coverage on an economical basis; which makes single-payer system impossible, or at least dependent on private sector, which in turn, asks for profit-maximization; which, in turn, pulls in insurance for revenue generation, which in turn gives rise to the misalignments we can all perceive.
To address objections: Canada doesn't count, being essentially a few hundred km^2 of population, and rest populated by polar bears. Russia's healthcare system is administered down the pub in the form of vodka (and months and months of queues); and China is practicing "traditional chineese medicine" in all non-Tier-1 areas. Probably the biggest anomaly is the US's insistence and enforcement of scientific-based healthcare practices -with all the full costs it entails.
I do think Canada (and Australia) are relevant counter examples. Both countries have high concentrations of their populations living in a small share of their geography, but that actually makes things more challenging for provision of care for everyone else. If you live in a remote village accessible only by plane; the government still has to provide you healthcare- it just comes with the additional cost of flying providers out there for temporary rotations at much higher pay, and flying patients to a more populated area for hospital based care.
Where I think there's a stronger case isn't from America's geography or density but its large population size. If you list the highest population countries in the world, the first one that has a "good" healthcare system is Japan at 11. I don't have a theoretical reason of why a high population might make it more difficult to administer healthcare (in a sense it should be easier because of better risk pooling), but it does seem notable. Maybe there are diminishing returns to risk pooling above a certain population size, and after that a high population just becomes too administratively tricky?
It does make it more challenging for provision of care for everyone else, but if "everyone else" is a tiny fraction of the population then they can die five years younger and still not significantly impact the statistics.
> If you list the highest population countries in the world, the first one that has a "good" healthcare system is Japan at 11
If you list the highest population countries in the world then they're all poor, except for the US and Japan (and Germany in 19th place).
Not many Canadians live in the hyper remote areas, but about 20% of our population lives outside of urban areas- Saskatchewan isn't that different from Utah. For the US its about 18%, for Australia about 23%. I just don't think geography has much explanatory power for the US's poor outcomes.
The fact that many of the largest countries are poor is a big confounder. The US is unique in both having a large population and being rich. But healthcare wouldn't be the only area where it shares more characteristics with other high population countries than with other rich ones.
I want to push back on the assertion you made, Scott that "Certainly rich people in America get good health care." After he published this book in June 2020, Ezekiel Emmanuel published an article in JAMA IM (link: https://bit.ly/3nGRHL8) called "Comparing Health Outcomes of Privileged US Citizens With Those of Average Residents of Other Developed Countries." He wanted to test the commonly stated trope that a feature of the US healthcare system is that the rich here get the very best care in the world. To do that, he looked at outcomes across six benchmark diseases (heart attack, colon cancer, breast cancer, infant mortality, maternal mortality, and pediatric acute lymphocytic leukemia). He compared outcomes for white people in the 1% of richest counties in the US, 5% richest counties in the US, and average outcomes in 12 rich countries (i'm not going to type them all out but they're places like Australia, Canada, and Germany). The results were...not so great for rich Americans!
While rich people in the US do better than average people in other rich countries with breast cancer, RICH children in the US have outcomes worse than AVERAGE citizens in 11/12 of this group of rich countries. Rich people in America have about the same outcomes after heart attack that average people in other rich countries have. In other words, in most cases, you're about as well off having a heart attack being the average bozo in France (for example) as you are having one in one of the wealthiest counties in the US. I was pretty shocked when I read this paper.
The reason I think this is important is because I think it's extremely politically useful sometimes to be able to claim that rich people in the US get great healthcare! People like to imagine themselves as more privileged than they are, and think that, if and when they get sick, they'll have access to this incredible care. So we should reframe from "average care in the US is shitty but care for the upper echelons is the envy of the world" to "average care in the US is shitty, and also in the upper echelons we are about the same as the average person in America's peer countries."
The whole article is worth a read (link again! https://bit.ly/3nGRHL8) as it's very relevant to the discussion here. It also touches upon the "satisfaction paradox" that many folks have commented on--satisfying healthcare isn't necessarily good healthcare:
"Choosing a concierge cardiologist or a hospital ranked highly by U.S. News & World Report may ensure prompt service and personalized attention, which have value, but it does not ensure the world’s best clinicians at each stage of care, at whatever facility is providing care, and does not ensure the best outcomes. A well-off US citizen cannot “buy out” of the uneven quality of care provided by the US health care system."
This is interesting, but I’m a bit concerned that he chose only 6 outcomes to measure https://xkcd.com/882/. This, with the results being absurd, makes me skeptical of the results.
Related to this, I don’t think he ran any statistical tests. This may not matter because of the large number of people, but it may also matter because he only used n=152 counties.
Also, why use counties? This should bias you downwards of the true number in your estimate, since counties do not hold all the same income-level people.
Hey! Good points. Let me try to address them best I can. Obviously you should be more skeptical about surprising results, especially if you don't have subject matter expertise! But I don't think the study is poorly done. I am a doctor and a researcher (not that this makes me any more qualified to judge a good argument form a bad one!) but let me make the best possible case that I can that the results presented in this study are interesting and compelling.
First, the 6 illnesses seem, a priori, pretty relevant. Will the exception of pediatric ALL (which is useful because it is a non-adult condition that relies on specialists for delivery), these are all extremely common conditions. While the xkcd comic is very funny (they always are), I don't know that it's relevant here? They're not cherry picking a small feature of a bigger phenomena and then claiming that that cherry picked thing is driving the whole phenomenon; rather they're using some representative conditions to try to understand ways in which healthcare in the US may be surprising.
Second, I think any of the results individually are surprising! Remember, this isn't an association; it's a comparison. If I asked you, based on priors, who has better outcomes after a heart attack, white people in the richest counties in America (average income ~$100k), to people in Denmark (average income ~$51k) (see the supplement for some of this data: https://bit.ly/3KsUP71), I think most people would say America? But Americans die about 12% of the time when admitted for a heart attack compared to 10% in Denmark. In other words, the design of the study is HEAVILY biased in the direction opposite of the results we see.
Why use counties? I think it's because that's the data that was available, which is a limit to a lot of epidemiological research. You draw conclusions as best you can from the evidence you have. That said, any bias within counties should also apply as much to entire countries. Furthermore only considering whites (demographically wealthier), also again biases in the opposite direction of the study findings.
Finally re: statistics, I'm not sure what you mean? Maybe you mean he didn't publish P values? There are 95% confidence intervals for many of the measurements. Furthermore, because of the design of the analysis, a lack of difference IS a surprising finding; if there are statistical tests that are relevant that you think should have been included but weren't, I'm eager to hear your thoughts!
So I agree, the results are absurd! It is absurd that, despite spending much more than any other country in the world on healthcare, the richest Americans don't even have access to what would be average outcomes in any of a number of our peer counties. But I don't think there is anything misleading here.
You’ve addressed my points. Thanks. I’m tentatively convinced. Though the study still seems oddly specific, my gripes are no longer with the study, and my skepticism is now just the blanket “but will this generalize” type which comes from most social science research.
Sure thing! But even if these results don't generalize, they should still prompt some re-evaluation of the idea (which most people accept uncritically) that wealthy folks in the US get better healthcare than anyone in the world, which it seems might not be true!
I don't really think this is a question that could even be answered usefully in a statistically rigorous way, but I'll add that Peter Attia- a Canadian physician who currently runs a highly specialized clinic for the ultrawealthy in the US- has said something somewhat similar based on his experience (it was in a podcast episode, I don't remember which one, so you're going to have to take my word on it).
His take was basically that if you're wealthy enough to get care parallel to the formal healthcare system rather than within it, you can get the best care in the world in the US. But if you're "merely" a millionaire with a Cadillac insurance plan, you'll get worse care than what the average person in Canada gets.
The take might be incorrect, and it might also be out of date- even pre-pandemic, the last few years have not been kind to Canada's healthcare system. He specifically gave the example of having a heart attack and showing up to an emergency room as a case where its better to be Canadian, which DEFINITELY feels out of date. But it broadly fits with what I've heard a lot of providers who have practiced in both the US and another developed country say.
This doesn't look very rigorous: in particular, I don't see a clear distinction between payment systems for health care vs. health care provision.
And note that single payer blaberty blah is irrelevant.
Japan has a national single payer setup. However, they also have a medical pricing board which apparently pretty much all Japanese doctors/hospitals follow in their pricing. Kind of like Medicare but without the gigantic opposing negotiator component.
Thus any real measurement of health care should be looking at:
1) How bills are paid
2) How health providers price
To these I would add:
3) Relative supply of health care provision capability - which the book does indirectly reference via wait times
4) Private vs. Public choice - which can be public only, public or private, private only
2) matters because I 100% believe that private health care practitioners will base their pricing relative to public health care costs, if such costs are transparently available - if for no other reason than their customers also will be aware of their options.
I've lived in the US, China, Australia, Singapore and Spain. I'm really surprised that the book didn't even consider Spain, which has a pretty cheap system, the world's highest life expectancy at birth and, by far, the best health system of all those I've had a first-hand experience with. No need to tell you much about the US, and Australa's system is, in my limited experience, marginally better. Singapore is hyper-expensive and hyper-effective and anyone who includes China in such a comparison must be doing it for the laughs. Very expensive and second-rate at best in big cities, third-worldist for hundreds of millions in the countryside.
I’m an American and lived in the Netherlands for several years (2012-2018). The Dutch and also the expats loved to complain about it, but I thought the Dutch system was pretty great. By far the best part of it was the transparency. My health insurance actually covered my needs- I never saw a bill. No copays, no surprise mystery bills of the kind I’ve always received in the US, even with “Cadillac” level insurance.
It’s hard to measure expenses and satisfaction across systems because you’re dealing with such different expectations. One common complaint by my fellow American expats was that doctors didn’t “do anything”. This is what the non-interventionist default of Dutch doctors feels like to an American.
But “go home, take some Tylenol and come back if you don’t feel better” is actually quite an effective strategy in this GP-as-gatekeeper model. Most of your patients feel better and don’t come back, as you couldn’t have done anything for them anyway. This keeps costs down and keeps the emergency room just for actual emergencies.
Dutch people’s complaints seemed largely rooted in the perception that Germany and France had better healthcare. I’ve never lived in either place, so I can’t say. But the handful of people I met in the Netherlands who had been seriously sick, e.g. childhood cancer or a major injury, had much nicer things to say.
See also: the guy I know in the Netherlands who was able to get his severely autistic son into a residential program for children where he could receive 24-hour care. Almost nothing like that exists anywhere else, and I believe it was covered at least partially by insurance. I wonder how many of the satisfaction survey participants even considered the existence of such programs as part of their healthcare system.
> In Germany, all the insurance companies get together and form a Drug Price Bargaining Group, which bargains with drug companies the same way a government would. Why don’t insurance companies do that in America?
Since the ACA, health insurers in America are limited to making 20% profit on insurance premiums. If they want to make more profits, the only way they can do this is by spending more on healthcare. Not sure why anyone thought this was a good idea. See the 80/20 rule here: https://www.healthcare.gov/health-care-law-protections/rate-review/
PBS did a great special called "Sick Around the World," that illustrated all of the same issues. Great mini-doc during the discussion of Obamacare.
https://www.pbs.org/wgbh/frontline/film/sickaroundtheworld/
No one has mentioned the regressive nature of US healthcare financing. Scott is right that what we call "premiums" are effectively just payroll taxes. For the typical American worker, healthcare-related premiums/taxes aren’t just “big.” They’re bigger than all non-healthcare-related income/payroll taxes combined. Healthcare is THE thing impacting take-home pay.
-- If we call employer-sponsored health insurance what it is - a tax - then about 70% of taxes taken from the paychecks of a typical American worker with family coverage go to healthcare. If the worker has individual coverage, that number is about 51%.
-- In hard dollars, the healthcare industry takes about $26,000 from the total compensation of a worker with family coverage whose salary is $50,000 (whose total compensation is actually about $70,000).
-- The structure and branding of healthcare financing (having the employer pay the bulk of it, and calling it a "premium" instead of a "tax”) leads the typical American to grossly underestimate 1) their healthcare costs and 2) their total taxes.
-- Because the US healthcare system is structured to overpay by 2x, this typical worker is overtaxed by about $13,000.
More details here: https://thebottomlineinhealthcare.substack.com/p/health-premiums-vs-incomepayroll
This is a really good comment and I hope other people read it. American's perceptions of their healthcare costs are way out of whack and it deeply affects the politics of how we discuss reform.
"Medicare For All asks that we go from one of the most privatized health systems in the world to one of the most socialized, leapfrogging over successful semiprivate ones like Germany and the Netherlands. This is especially odd since those systems seem to be some of the best performers. Why would this be tempting? Absent a theory of why Germany and the Netherlands work so much better than the US, I’m not sure."
Absent a theory of what's so great about the German and Dutch systems, you can't ask that the government to implement that theory. Probably the people calling for medicare for all don't actually know anything about the diversity of European systems. But what good would it do them to know which systems are best?
IMO, the most interesting model I've heard of is Israel's – consumers choose one of 4 non-profit HMO's to belong to, who are paid by the government per person who subscribes. HMO's offer much better incentive models for overall quality of care, and the competition keeps services consumer-oriented (compared to fully-socialized systems like the NHS).
Would love to see a look from you!
Great point on the pricing of this book Scott :)
So, I am curious about the percentage of uninsured people in each country and how this relates to overall health care costs and life expectancy? Also, what about Japan?
While reading the Amish healthcare link on SSC, I had an idea on how to keep costs down:
A members-only prepaid hospital. No obligation to treat any non-members. Accepts no insurance. Membership fees would cover the fixed costs of running the hospital plus help cover catastrophic things way below marginal cost. Everything else would be a fee-for-service near the marginal cost, prepaid by the patient with their payment-methods-on-file. Make all the members sign an arbitration clause forfeiting their right to lawsuits to the maximum extent allowable by law.
Then there is no need to ever pay:
* lawyers
* insurance overhead on either the hospital side or the insurance company side
* debt collectors
* people who process paperwork of newcomers. It'd all be done on a website before they ever visit the hospital.
* paying extra to compensate for those who who scam the hospital or can't afford to pay.
I'm not sure this would be entirely legal in the US, but it should be.
"fee-for-service near the marginal cost" - this means the system still fails to act as a true replacement for insurance, since you have a low chance of incurring astronomical costs due to expensive-to-treat conditions.
But then you could cover this by buying private insurance that's "just insurance"--no principal-agent issues, no collective bargaining, just pure risk-pooling.
The catastrophic hospital-related stuff is subsidized by membership fees. The other thing that can get really expensive is prescriptions. In the worst case you can import it from Canada or India to circumvent US prices. Many expensive prescriptions are unnecessary, non-superior-to-generics, me-too drugs, which no informed person would ever buy with their own money. Pharma reps wouldn't bother mindfucking doctors at a hospital where everyone pays out of pocket.
I like most/ all of that. It misses on a few edge cases.. but details. I will say it's a small step from that to having everyone in some larger community (even state sized) pay some fee (tax) for hospitals and catastrophic care, and then fee-for-service. Which is how I get my dental care, and I like my dental care here.
I like that approach as well, and would probably be willing be pay a chunk for membership.
The ability to drop your membership in year n+1 in this private prepaid hospital, and decide what you want as an alternative (without needing to move your residence) is quite a bit more than a small step away from a local health care tax.
Re: legality, freedom of contract permits such a hospital and pricing/membership model. There are obstructions to exercising your freedom of contract, but those can be eliminated or sidestepped with enough effort.
As a data point, here's my experience in Germany. I've been living in Berlin for 1.5 years.
As an employee, I pay 8% of my gross salary on health insurance. This is just 50% of the total cost, with my employer paying the other half. As long as you make less than 64.350 euros gross a year (and the threshold grows every year) you are compulsorily insured with public insurance. If you make more, you can switch to private. If you're young and fit, it will cost you much less than public insurance. But if you get in trouble and want to switch back to public, it can be very difficult. However, if your income falls back under the ever-growing threshold, you are forcibly switched back to public.
Even with public insurance, you must choose a provider, but like Scott said, they are all very similar, so the choice is easy. I chose my provider because they speak English. I can call them or write them at any time and they are very helpful.
I don't have health problems, but I've been doing a lot of medical exams. The system is smooth and efficient. I always come out very impressed. Like most people, I book my appointments on a popular online platform. I am not tied to a specific family doctor: I can go to anyone who has a free spot, so there's always a way to get an appointment within a few days. I can also directly book visits with specialists without going through a family doctor.
The clinics ooze a sense of wealth and high quality healthcare. Wait times are short and the doctors all speak English. Processes are streamlined as needed: in one case, a doctor wanted to send me to a specialist, so he just gave me a piece of paper and told me to see his friend downstairs. Ten minutes later I was done. In another case, a family doctor spared me a visit to a specialist and accelerated the waiting time for some physicals so I could get a vaccine sooner.
I am very prudent and careful about my health. I find that doctors here are understanding and willing to conduct exams. They have time to listen and engage and don't seem overworked.
There are almost no added costs. This includes dental work: I've had two or three cavities removed. Oh, and mental health: you can get at least 80 hours of therapy on the public scheme, with a therapist of your choice.
The drawbacks: the health scheme is extremely expensive, both for the individual and for the state. And the system was mostly designed with employees in mind, so it can be extremely burdensome for freelancers and the self-employed. As self-employed, you need to pay 14.6% of your gross income! And this on top of all the other taxes, which are very high in Germany!
As for Scott's questions:
"Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs?"
I don't know, but I assume it's because these industries are heavily regulated and don't have room for maneuver.
"Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs?"
Again I don't know, but from the user's viewpoint, public insurance is a monolith. It doesn't matter which provider you have. When looking for doctors, you only have to check whether they accept public insurance (most do). I assume that providers are forbidden from not reaching agreements and imposing out-of-network costs.
>As self-employed, you need to pay 14.6% of your gross income
Yikes. 14.6% of freelancing income assessed in health taxes just sucks.
APAC Comparisons
The health tax rates in Singapore for freelancers are 4%-10% in theory, but capped at (US)$5k-$6k per person. Works out fine for freelancers.
The 15-22% income taxes on income in SG look reasonable. If your freelancing income isn't assessed by the CPF board, well then you get to not pay 17% into the Central Provident Fund, and you win. If you're an employee and SG citizen or PR, your relatively low income tax is more than doubled by a 20% CPF tax.
The health tax rate in Taiwan for freelancers is 5.2%. And paying that tax provides NHI eligibility for a single taxpayer, or a married taxpayer with 10 kids. Employees pay a fractional amount of 5.2%. Works out really well for freelancers or employees.
The income taxes for freelancers and employees in TW are steep, though, from an American perspective - 12% for low paid work and 40% over $150k. Compensated for by zero tax on capital gains in equity. My German friends here are happy with the TW and SG systems as compared to the German taxation and health care quality.
Another idea: abolish the patentability of obvious me-too drugs. The patent application would have to prove the drug has a different mechanism of action than the prior drugs.
This might be counterproductive to the extent it succeeds in reducing incentives to develop me-too drugs: I'd expect me-too drugs to lower drug prices, not raise them, since the me-too drug is by definition a close substitute for the drug it's a clone of, and the differences between the me-too and the original allow the former to escape the latter's patent protection. That is, the me-too serves to weaken the original drug's monopoly before generics become available.
On the other hand, second order effects from discouraging me-toos might have improved patent protection increasing the incentives for development of truly novel drugs.
On the third hand, close substitutes are not perfect substitutes. Me-toos can still have substantial therapeutic value if they have different side effect profiles for enough patients or if a nontrivial number of patients respond better to the me-too than to the original.
For point 1, I'd make an exception for me-too drugs that have no generic alternative.
For point 3, If the objection is that me-too drugs might have substantial value due to different side effect profiles or slightly better efficacy via the same mechanism, they should have to prove that on the patent application.
"People talk about how the US system is 'privatized' and the Canadian system 'socialized', but a lot of this comes down to whether your payments for the same basic package are marked 'paycheck deductions' vs. 'taxes'."
On average, these are the same. But if you make much less money than average, paying for health care via taxes is a much better deal than paying via paycheck deductions, and vice-versa if you make much more than average.
Also, you said that China and Taiwan are much poorer and less developed than the other countries on the list; this is definitely true of China, but in terms of PPP GDP per capita, Taiwan is on par with Germany and considerably wealthier than France or the UK. For some reason it looks much poorer in exchange-rate terms. Certainly it's much closer to Europe than to China.
I haven't been to Taiwan for several years, but last time I was there it didn't strike me as obviously less developed than Europe. It's getting hard to tell these days, though, with even poor countries having modern cities, and even rich countries having less-developed rural areas.
Honestly, I take someone saying the US as a "mostly private" system as agenda setting in the first place. As far as I can tell, slight majority of spending is private. But the most intensive care tends to be for older people and under single payer.
Having lived in both Germany and Switzerland, it is a red herring to put them into different categories, just because of the formal status of their insurance companies.
The main point is: In both systems, all insurance companies must offer exactly the same product, called basic insurance. It is not up to the company to decide which cases they cover or when they pay. This is regulated, and border case are resolved otherwise. (Some very minor variations are allowed in Germany, almost none in Switzerland). And they can't reject any costumer. In such a situation, the price will not depend on the type of company.
What actually makes a difference are very different things. In Germany, if I have disease X, then the doctor/hospital will be paid a fixed amount to treat X. But they have to treat it ("Behandlungspflicht"), they can't reject a difficult case, even though they lose money with it. In Switzerland, the doctor is paid proportional to the amount of time/effort treating X. In both cases, there are long and detailed price tables, all of which are independent of the insurance. I think this is the main reason why the Swiss system is more expensive than the German one. (It doesn't show in the table, but I suspect that it would show if you only consider basic insurance. Also, drugs are probably cheaper in Switzerland, relative to income.) For better or worse, Swiss doctors are not optimizing so hard for efficiency. I like the Swiss system better. Swiss doctors don't keep cutting me short. But it's expensive.
Of course, companies can offer things that go beyond basic insurance, but this is a completely different market, and probably much closer to US system. But those are luxuries, not necessities. For details on the two countries (I was referring to public insurances in Germany, which is only part of the system), there are excellent description of those systems by Lars (on Germany) and Er Matto (comparison between Germany and Switzerland) in the comments.
Well the author has found his balls and his sense of humour again. Glad to see it
As I understand the Swiss system, basic healthcare is mandatory, rates are more or less fixed by the government, and providers must accept any citizen who applies. This avoids any bias in who does or does not get insured. Insurers can offer extra products at their discretion on top of that, from rebates if you use a fitness app to private rooms in hospital if you pay more.
In Switzerland, you receive your income before both income tax and healthcare technically-not-a-tax, but you still have to pay both of them.
Two thoughts.
1. Cultural differences. Comparing health systems across cultures is like comparing education systems; it's often not the system that differs but what the participants bring from home as it were. For education, if all the kids show up with an strong expectation that their job is to learn, and that they will learn, it hardly matters what the teachers do as long as it is non-violent. In the US, we expect that we can live how we want, eat all we want, and if something goes wrong we'll get a pill to fix our discomfort. I have lived in a variety of cultures, poor and rich, and in comparison am still astonished by how little care so many Americans take of themselves. We also expect physicians to be superhuman and are willing to pay them accordingly, whereas most of their job - at least in primary care - could be done by a nurse or a pharmacist. I have lived in places where in fact the first place you went for care was the pharmacy, and the pharmacist asked you a few questions, sold you some pills, and you were set. We expect the latest to be the best, and are eager to pay 10x more for a pill that works .1% better. We have a whole range of cultural assumptions about medicine that will not change simply by changing the system, and as long as we have those assumptions, most systems will not work well.
2. Related to this, but tangential, is what problems we expect the health system to manage. Just as in the US we somehow expect police to solve domestic disputes between spouses, we expect our health system to manage all the problems incurred by our lack of a safety net. I did a very simple study once (https://qualitysafety.bmj.com/content/20/10/826) which found that government expenditures on the social safety net explained differences in health outcomes (things like infant and maternal mortality, etc) better than government expenditures on health care; basically, spending more on social services can prevent a lot of health problems down the road. Subsequent studies have found similar patterns globally and across US states & counties.
For both these reasons, I don't think it makes much sense to compare 'health systems' across countries in isolation.
I like the joke at the end about negotiating a price of the book at the end. It actually highlights the difference between how pricing works in different markets.
Many people think that prices for goods and services are defined by the market, hence they are “legitimate”, for the lack of better word. There is also an intuitive belief that price of something is connected to the value it provides. So when price of something is exposed as arbitrary it naturally begs the question why does market forces would not influence it.
The issue is quite simple, the market equilibrium (and “fair price”) is achieved _only_ when there is competition on both ends - the buyers and the sellers. If there’s one seller and many buyers — seller defines the price.
If there’s one buyer and many sellers - buyer defines the price. So when government negotiates with many insurance providers, government can influence the price.
But when you sell books, there are many readers and many publishers, so price is less arbitrary.
I'm still confused about the difference. There are many patients and many insurance companies, so in theory this ought to work, but it doesn't.
I must say that I do not have any firsthand experience with healthcare in US, in my country everything is completely different and insurance companies do no play a major role.
So, if I correctly understood your question “If there are many insurance companies and patients in the US, why the price is not defined by the market?”
There are two points.
1. There is more than 1 medical insurance company in the US, so it’s not an absolute monopoly. Yet, top 7 companies control ~50% of 1 trillion market and serve, I don’t know, more than a hundred million customers, probably. This is still a seller’s market, especially if we consider the probability of collusion (price fixing) between insurance companies.
So the price is still higher than “market” price.
For example, in my country you either pay directly to the private clinic or you use free government-provided healthcare in state facilities. That drives the prices down, there are hundreds of smaller clinics and plenty of state hospitals in my city, which drives the costs down.
2. Markets are not always the “base reality”. Often the way the market is structured is defined through political means, for example to achieve the political goal — affordable drugs, the market for medicine is artificially constrained by regulation, which introduces the price negotiation process you wrote about, when describing European healthcare systems.
So the price is below the “market” one, yet the system still functions.
OT:
Kidneys From a Genetically Altered Pig Are Implanted in a Brain-Dead Patient
https://nyti.ms/3Ahk2wK
Now this is interesting from an ethical POV. Is it ethical to take more risks with a brain-dead patient? I think so.
I'm thinking the "pig" kidneys are more likely to help than hurt the patient, and considering the brain-dead state, extreme measures are warrented (despite the obvious inability to give consent).
I'm pretty sure drug prices outside the US are only low because Americans are effectively subsidizing drugs for the rest of the world. Regardless of how much a drug sells for, it still costs pharma companies $1-4 billion to create a new drug from ideation to market. But manufacturing costs, especially for most small molecules, is basically negligible in comparison. So as long as a pharma company can recoup its R&D investment, say by selling the drug for lots of money in the US, then it still makes economic sense to sell it for basically any price in other markets.
If the US set drug prices like other countries, probably Americans would pay less and everyone else would make up the difference. Or even worse, prices would stay low and pharma companies would stop all expensive drug R&D. But there's no healthcare policy that can change the fact that drug discovery is damn expensive. (Probably changing FDA rules could do this by making approval cheaper/more efficient, but that's a separate issue)
Our drug prices are both high and not-high due to the very successful Hatch–Waxman Act. This article does a good job of explaining it: https://www.cato.org/regulation/winter-2021/2022/why-are-some-us-drug-prices-so-high
Frankly, the rest of the world is free-riding off of US pharma spending. If I ran the zoo, I would say that drug companies must set prices in other countries as a ration of their per-capita GDP to America's.
So Switzerland would spend more per pill, but Peru quite a bit less. Only seems fair, right?
I feel like using life expectancy at birth is a very poor metric for judging healthcare systems. I lived in Japan for 15yrs and I'm pretty confident it's not the healthcare that gives them long lifespans. Genentics, diet, lifestyle would seem to me to have way more effect than healthcare.
My personal experience there is there are good doctor's but also many bad ones. By bad I mean they'd never have passed whatever tests are needed in the USA to practice medicine. Not going to laborate my bad experiences here but I did eventually fine doctors I liked..
On the other hand the government sets prices and you can basically visit any doctor you want anytime you want. Just show up and hand over your insurance card. I loved that part. That includes seeing many specialists. . Prices are very inexpensive compared to the USA.
This has probably already been said, but the requirement (in the US) for employers to provide health insurance for full time workers leads to hiring more part time workers. I know a few people working multiple customer service type jobs. It stinks, is how I view our healthcare.
Former Soviet Estonia pays about 2.5k per capita, life expectancy 78.5, infant mortality 1.9. I've heard we're one of the most 'effective' countries in underpaying our doctors : ) This creates the problem of some of them opting to work in neighbouring 2x richer Finland. Medics seem to be exceptionally duty-bound people though, are willing to do a lot of overtime, and mostly won't really leave for greener pastures.
We often have to do charity campaigns to raise money for rare cancers that aren't covered by our system. I gather oftentimes the pharma companies just aren't that interested in dealing with a folk of 1.3 million, among whom some rare cancer happens 10 times in 10 years. And we're also kind of too poor to pay 100k for a shot in the dark.
I see the common strategy of 'just try to be cheap more' emerging.
Dutchman here. It might be good to know that the *only* thing for which there is a meaningful market is additional insurance. The basic insurance is completely regulated, with premiums set annually by the government (and discussed in parliament) and regulated deductibles (basically around €350,- per year but you can get a slight discount on your premium if you max out at around 800).
Moreover, it is forbidden by law for healthcare insurers to make any profit. Any profit made has to be returned to the policy holders. It can also not be used to grant bonuses, buy back shares or any such shenanigans. The idea of the Liberal-Conservative (which is right-wing for Europe) government which abolished the Patient Fund (a government health insurance) was, originally, for profits to be introduced at a later point. But since the current system went into effect in 2006, this introduction has been postponed, and probably will be indefinitely, even though we've had several right-wing governments for the last decade. It's just kind of taken as a given by everyone that introducing profits for insurance companies would drive up cost and it's kind of gross to profit off of a basic human right.
Having said that, the only real bargaining power that insurance companies have, as far as I can see, is contracting hospitals to take their policy holders. There has been some push by both government and insurance companies to use this as a tool to force hospitals to specialize, but I'm not knowledgeable enough to know if this has helped any more than the regular tools of government funding and decision-making to achieve this goal.
The biggest problem Dutch people and doctors have with this system is that there is sometimes a bunch of unnecessary bureaucracy involved. For instance, some medications that are quite permanent (like type 1 diabetes medication) need to be re-approved every year by that patients insurance company, for which the doctor or their assistant needs to send a form. (As an aside: there is a campaign among medical staff to stamp these documents with a picture of a purple crocodile. Why a purple crocodile? Because a famous Dutch advertisement (ironically by an insurance company) features a purple crocodile lost by a little girl in the swimming pool, which an obstinate pool employee refuses to hand over even though it's right behind him, until the mother of the girl has filled out several forms in capitals. Eventually he tells her they can pick it up in the morning between 9 and 10. https://www.youtube.com/watch?v=mJipJwDPJ-g you can watch it here, it works quite well even if you don't understand Dutch.)
My take on the US and its drug care costs are two fold:
For drugs out of patent: ABSOLUTE INSANITY partially driven by FDA regulation making it quite difficult and expensive for generics to exist and it should be quite straightforward to improve the system.
For new drugs: US patients massively subsidize pharma research for the rest of the world, the system can probably be improved by lower/faster FDA regulatory costs but probably not by a whole lot.
Marketing and stock buyback costs are much higher than R&D costs.
https://youtu.be/vOftaNdqIUk
I'm not sure how that's a response.
The suggestion for reducing the costs of new drugs by lower/faster FDA regulatory costs completely ignores where most of the money actually goes in a pharma company, as the video I linked outlines in more detail. The expected savings in a more streamlined FDA approval process not only wouldn't impact the prices much, most of it would just be funneled into higher dividends and more stock buybacks. Real solutions have to fix the skewed financial incentives.
> completely ignores where most of the money actually goes in a pharma company
Say a company spends $100 million creating a drug, amortized over all the failed drugs.
Then it's approved. They have 10 years to make money. They crunch the numbers and determine if they spend $0 on marketing, they will bring in $90 million. If they spend $110 million on marketing, they will bring in $280 million.
I made up those numbers, but it's a direct example where "lol just get rid of marketing" means we lose the drug as well. As much as armchair economists think we should all switch to word-of-mouth advertising, the patent system doesn't allow companies to wait around.
(It also ignores a company that spends $40 million on R&D, completely fails, and disappears with its investors' money. That won't show up in 10-K reports because the company is gone[1], but still affects the market because investors will demand more and don't care about survivorship bias.)
Drugs exist in a somewhat competitive market. It would be better if consumers were better at cost-benefit analysis[2], but even in absence of that, companies still face price pressures that will affect the rates of drug discovery. They aren't in the business of lighting money on fire; if they are spending money on marketing it's because they've decided it's in their interest.
> more stock buybacks
I know this is popular meme among the late-stage-capitalists these days, but no one cares about them.
[1] Did you know most mutual funds historically outperform the market? Just look at their prospectuses and you'll see it's true!
[2] instead of it often being literally impossible to compare costs
> I made up those numbers, but it's a direct example where "lol just get rid of marketing" means we lose the drug as well. As much as armchair economists think we should all switch to word-of-mouth advertising, the patent system doesn't allow companies to wait around.
The US is a healthcare bizarro world. In no other country on Earth do pharma companies advertise directly to citizens. In other countries, people's doctors actually decide what medications would suit them best in concert with patients, based on a review of the evidence.
There are certainly costs for marketing to doctors as well, which I know all too well being close friends with numerous drug and medical device reps, but that number does not need to be as high as it is.
> They aren't in the business of lighting money on fire; if they are spending money on marketing it's because they've decided it's in their interest
Yes, it would be in their interest in a fucked up market where *health is not the primary concern*. How about we fix that and redirect those marketing dollars that aren't improving health to something that actually improves health, like lowering drug prices to make treatments more accessible. That's part of what I'm suggesting, and would certainly impact drug costs far more than a streamlined FDA process.
> I know this is popular meme among the late-stage-capitalists these days, but no one cares about them.
They should IMO, but that's another discussion.
> How about we fix that and redirect those marketing dollars
And there we fucking go.
Healthcare doesn't work like normal economics because people NEED it, it's not a good with a varying demand that can be terribly influenced by advertising. With or without healthcare or choices, if you break your arm, you almost certainly need to get seen by a doctor. So much of "traditional" and colloquial economics is built on a system that sidesteps necessity for consumerism. Markets can be used as a tool to make healthcare better, but that logic doesn't really apply to the thing itself.
Glad to see from the comments that not only can we not decide what sort of medical system works best, but we can't agree on whether the healthcare systems of individual countries are brilliant or terrible.
But I'm glad that options other than the status quo and the NHS are being moved towards the US overton window.
The business about health care being a bizarro world where normal economics rules don't apply is true, but it's true in that it's inherently broken. To have efficient markets you need good consumer information, the ability to easily comparison shop and change vendors, easy entry and exit of vendors from the market. If you wind up in a coma and are brought to an emergency room you can't open your eyes, discuss what the treatment will be and how much it's going to cost, do appropriate research and decide for yourself whether the doctors's recommendations for treatment are appropriate, decide that the amount being asked for is outrageous, find a potential competitor, have them open up a competing ER next door, and check in there. Every step of that can't happen. The seemingly weird and artificial things like government negotiated prices are compensating for the normal mechanisms of efficient markets not functioning. In the US I've had the experience of getting quoted a price for a drug at a pharmacy, commenting that it was completely outrageous, getting argued with that the insurance company was paying most of it, asking what it would be out of pocket, getting quoted a price lower than the copay, then glaring at the pharmacist who suggested swiping a magical card she had through the machine which got a price even lower. Under such circumstance the government putting their foot down and declaring that there can only be one price and they're negotiating it on behalf of consumers is completely reasonable.
One of the other major differences between the US healthcare system and the EU systems is that the European Commission does drug approvals for all of the EU (and there are other EU-wide paths to getting drugs approved, with approval by any regulatory body being sufficient for the drug to be approved); whereas, the FDA does approvals for just the US (and it doesn't compete with any other US regulators to do the approvals). This gives individual European countries much more leverage than the US would have for negotiating with drug manufacturers. Since most of the cost of drug manufacturing is the research, trials, and approval process, Norway (technically a non-EU member of the EEA, but they still accept approvals given by the European Commission) can offer drugmakers relatively low prices and still have them sell their drugs there because they're already going through the European Commission approval process to sell their drugs in the rest of Europe. If the USA starts setting drug prices particularly low, it will have a much bigger impact on the incentive to fund drug trials through the FDA approval process. This also changes the optics dramatically. There's not going to be a scandal over a drugmaker failing to push their drugs through the approval process the same way there would be over it refusing to sell drugs to a particular country where those drugs are approved. (And I think it's generally accepted that the FDA's process is slower, more stringent, and more expensive than Europe's.)
Relatedly, another thing that is always missing from discussions of healthcare spending is the extent to which Europe and Canada freeload on the rest of the world for medical research. Below are the total medical R&D expenses by country for years for which I could easily find data. The key takeaway is that even though US GDP is only 13x Canada's in 2018, US medical research spending was approximately 45x theirs. US GDP is only about 20% bigger than Europe's, but the US spent significantly more than 2x on medical research than they do; (and as far as I can tell from less complete data sources the disparity is growing).
United States (GDP $21T): 2007: $131B 2012: $119B 2013:$143B, 2014: $154B, 2015: $163B, 2016: $173B,2017: $182B, 2018: $194B
Japan (GDP $5T): 2007: $21B, 2012: $28B
All of Europe (GDP $17T): 2007: $56B, 2012: $54B
Canada (GDP $1.6T): $3B in 2009 and 2010, and $4B every other years since 2007 (rounded to the nearest billion) -- all of the other values are in USD; whereas the Canada numbers are in CAD.
I think the overall picture looks something like this:
The incremental cost of manufacturing a pill tends to be pretty cheap. A drug company has to make back its investment in R&D with returns to justify the investment somewhere (which is necessarily a high risk investment with a long time window between the investment and when it starts giving returns which standard economic theory says makes the required returns higher). But once it makes back its research investment anywhere, it has a pretty big incentive to just sell its drugs everywhere even if it is selling them heavily discounted in some markets relative to others. (The regulations around drugs are a particularly effective form of geofencing that eliminate the incentives that might otherwise exist to charge similar prices in different markets.) So we have a drug industry that basically works by researching drugs to sell them in the United States; but then also pushing the drugs through the relatively easier regulatory regimes in the rest of the world to also sell the drugs everywhere else possible where the only investment that those additional sells need to justify recouping is the cost of getting the approvals since all of the research is already done. And we end up with a system where drug development is worthwhile if and only if those drugs end up being sold in the United States, and where the FDA has the most stringent approval process, and nobody really has an incentive to change this. American regulators and politicians get disproportionately more power out of this arrangement. Drug companies make their profits. American insurers are able to pass along and distribute the costs across the population so they make their profits too. European countries get their drugs relatively inexpensively, and are existing in a legal context where that is their only real incentives since they really can't increase their ability to regulate drugs because the power that exists there is distributed throughout the EU rather than possessed by the governments of the member states. And the members of the EC probably are a bit unhappy and trying to increase their own ability to regulate things, but they're sufficiently disconnected from the powers of the member states that what they want doesn't really matter. (So Europe has somehow found a way to make the people who have the most incentive to increase the price of drug R&D there from having their voices heard.) And the American voters are the only people who really have an incentive to try to reduce those prices, but many of them are shareholders of the drug companies anyways, many of them aren't but see themselves as "temporarily embarrassed millionaires" who plan to own lots of stock someday, and all of them are participating in a political system where there is almost no ability to express your opinion on any given issue because that's how the American two party system works.
I'm very far from being an expert in health care systems, but I'd like to offer a bit of insight into the Brazilian system since Scott demanded to know what developing countries do and Brazil is my home country. Brazil is in a very curious position regarding health care, since the current Constitution established in 1988 provides that we will have universal health care provided by the State (Sistema Único de Saúde, or SUS to keep with the three letters) but at the same there is an abundant proliferation of private medicine practice - hospitals, clinics, insurance companies, doctors can work outside the universal public system in for profit systems and not get paid by the state. This basically means we have at the same time a system with a lot of state-run hospitals and clinics, as well as state-employed doctors, other facilities run by private operators but funded by the State (considered part of the universal system) and also 100% private enterprises. This creates a situation in which a very large portion of the middle, upper-middle and upper class all have private insurance - provided by their employers or paid by the user - and the poor have universal coverage under the public system. However, the universal public system ranges enormously in quality: for example, we have simultaneously one of the best vaccination systems in the world for free but months of waiting time to get a simple doctor's appointment or years of waiting to get a surgery. Some types of surgical procedures provided by the state are good and others are not, same with exams, and the state-run hospitals also vary enormously on quality. The users of most private insurance companies also have a lot of low quality services, albeit with shorter waiting times and more options. A few of the really expensive ones provide quality services for the richer individuals. Also it's worth noting that a lot of the best doctors don't accept insurance payment at all and charge a fee for each appointment.
So basically poor people get screwed regarding surgeries, appointments, laboratorial exams and so due to poor quality and waiting times but at least can count on some basic quality services for free such as vaccination, ambulances, and urgent first care. Middle class people fare slightly better with considerably shorter waiting times, marginally better services and can also use the public system in which it does well. And rich people get very good health care for a reasonably pricey amount.
Brazil also has a very commended drug price system involving patent breaking but I don't really know much about it, only that it really makes most drug prices really low.
The political side of things is also very complicated especially because the left-wing blocks any productive discussion on reform since it considers the public system untouchable and refuses to acknowledge its shortcomings most of the time - or blame them on underfunding and "neoliberal policies". A lot of upper class left-wing people haven't used the public system once in their life but still consider it perfect. Brazilian things.
You may like this. It has been a while since I read it but I remember it being enlightening.
https://amp.theatlantic.com/amp/article/307617/
My understanding of drug prices:
The US is the only country that pays "full price" for drugs. Others pay as little as they can get away with.
This means US consumers alone finance most medical drug development, and the rest of the world gets a free ride.
Many Americans want to pay the lower prices the rest of the world enjoys. That would be great in the short run, but in the not very long run, most drug development would disappear, since there isn't a sustainable way to finance most of it.
This is also why the FDA has such an oversized influence on the whole world. Other regulatory agencies don't really matter much in comparison.
This is a rather bleak way to look at things, so I'd love if someone could convince me this is wrong?
Part of the reason that drug negotiation prices work is that researching the efficacy of a drug is a fixed cost, and so if you find that your drug works in America, then it probably works in Europe too (As someone who works in pharma I can tell you that different countries/regions have different regulatory requirements and some countries want evidence that the drug works for the people who live in their country specifically, but these requirements are usually rolled into existing clincal trials, usually at a fairly low cost).
The argument is often made that if the US negotiated to lower their drug prices then drug companies would fund less research and there would be less drug innovation. I have no idea how true this is in practice.
I also have nothing to say about infinite loops.
> How does the US model (which doesn’t work) differ from the superficially-similar Swiss, German, and Dutch models (which do)?
Well... what is it about the US model that we're saying doesn't work? The table you feature shows that the US is an outlier in customer satisfaction. It does not appear to be exceptional in life expectancy (where it's on the low end of the table, which is bad), or in frequency of unreasonable waits for specialists (where it's on the low end, which is good), or in amount of money spent on health care (where it's the highest value, which has no particular moral valence, and where it's quite similar to Switzerland [and, to be fair, the two of them are substantially higher than most of the rest of the table, with an honorable mention going to Norway]).
It is an outlier again in terms of health spending as a share of GDP. This tells us that Switzerland is, per capita, much richer than the United States. (Which is true: IMF estimates for 2021, according to wikipedia, are US$93,500 per capita for Switzerland and US$69,400 per capita for the US.) Is the problem that our health care system doesn't work, or that we're poor?
Demography has a significant influence on GDP. And the US is, by that metric, seriously handicapped compared to Switzerland; we have a bunch of low-earning Hispanics dragging our GDP per capita down and our life expectancy... up. What lesson do we draw from that?
Do we have a problem with our health care system other than that people are unhappy with it? By the standard aphorism of "reality is that which, when you stop believing in it, doesn't go away"... is there a real problem here?
The US does a really poor job of keeping (advertised) drug prices low because we a) have like 1M different purchasers of drugs, and b) those purchasers use a variety of different middlemen to actually purchase the drugs. We pay the middlemen a percentage of the drug costs.
For clarity, the dollar value chain is like this: Purchaser -> Insurer -> PBM -> Pharmacy -> Wholesaler -> Manufacturer.
All of the steps other than Purchaser (and small pharmacies now) make more money the higher drug prices go. Insurers can keep 15-20% of total premiums for their internal administrative costs and their profit margin under the Affordable Care Act's "Medical Loss Ratio" rule. That means that the only way for Aetna's profits to increase from 2021 to 2022 is for total "medical losses" to increase. They can keep 20% of $70B in 2021, and 20% of $80B in 2022, implying that drug+hospital+doctor costs HAVE to increase by $8B during the year, or else premiums can't go up and Aetna can't make more money.
The PBM step generally keeps an administrative cost per prescription plus a % of the cost of branded drugs. These companies are: CVS/Caremark, Express Scripts, OptumRx, Prime Therapeutics and a lot of minors. They negotiate "rebates" with manufacturers. This basically works like this: Humalog and Novolog are effectively equivalent drugs. They cost ~$300/month without insurance. The PBM will say to Lilly "That's a nice humalog you've got there. I'm going to need $150/month as a check back to me or else every patient on my plan gets Novolog unless the doctor fills out 500 pages of paperwork to get Humalog AND the patients pay $200 of the cost." Lilly says "ok fine." According to the PBM lobbying organization, PCMA, most of the rebate money goes back to purchasers, but IMO that just makes the problem worse because it makes purchasers complicit in the game by sending them checks that they use to reduce their premiums instead of reducing the cost of drugs to their plan members.
Consider for a moment that CVS/Caremark by themselves is the PBM for ~112M people in the USA. That's more than the entire population of Germany. If you think that Germany pays less for drugs that CVS/Caremark.........
Pharmacies generally get paid ~1-2% of the cost of branded drugs as their total compensation. On generic drugs, a typical pharmacy will get ~$10 per prescription on average as their compensation (to pay staff and rent etc).
Wholesalers like Cardinal, McKesson and AmeriSource Bergen (together controlling 95% of drug distribution) generally make their money by marking up generic drugs to pharmacies, and by taking a ~2% cut of the price of branded drugs.
Manufacturers make money by selling drugs for more than it costs to make them, including paying off all of the folks in the middle out of their revenues.
The actual prices realized in the US for branded drugs ARE likely higher than in other countries, but the differential is almost certainly not as large as it appears. grosstonetbubble.com is a site that talks about the size of the wedge between prices paid to manufacturers by wholesalers for drugs, and prices actually realized by manufacturers after accounting for rebates and other discounts paid to the PBMs and insurers.
Also... consider for a moment that NET drug prices (after rebates and other discounts) have DECLINED in the US for the past 3 years. Anyone that talks about "skyrocketing drug prices" and doesn't pay attention to the middlemen is just lying.
I've actually had that idea before: why don't governments act as a sole source purchaser for foreign copyright media, especially since distribution is nearly costless. E.g. Sports broadcast rights only having one govt sponsored rights buyer who then has to resell at marginal cost to distributors.
Or just ban exclusivity deals. That might work too.
One huge difference between healthcare in the US and elsewhere is advertising. The US has a whole industry dedicated to marketing drugs and medical services directly to patients, which just doesn't exist in most other countries.
I think this explains a big part of the cost disease. Ads for drugs are particularly common on daytime TV or cable news, I guess because they're watched by elderly people who tend to be sick and have Medicare. Most pharmaceutical companies actually spend more on marketing than on r&d, so high drug prices aren't really subsidizing new meds. They're subsidizing Fox and CNN waging the culture war.
And it's not just drugs. The are law firms, insurance companies, even hospitals promoting their emergency rooms. The whole purpose of these ads is to increase demand for healthcare, so as well as pushing up costs directly they probably lead to a lot of unnecessary doctors' visits and prescriptions.
As somebody who has seen both ends of the spectrum (lived in both the UK and US), my opinion is that this kind of analysis is overly complicated and virtually irrelevant. The problem in both countries is really the same: patients are disempowered from acting in their own interest.
In the US, there is no way for patients to choose cheaper healthcare.
In the UK, there is no way for patients to choose higher quality healthcare.
The inevitable result is that US healthcare is unaffordably expensive and UK healthcare is unacceptably low quality. This is only indirectly related to how it is paid for.
Why would other countries get better results than the US, even though the systems share many features? Probably because patients generally have a louder voice. Whether this is legal or cultural matters little.
Many middle class and higher britons do buy private healthcare or get get it as a benefit from their employer.
They do, yes. Generally the overwhelming reason to "go private" is shorter wait times- this swamps all other quality considerations. Which is odd, really. Waiting a kind of "hassle penalty" applied to see if you really need free healthcare.
Healthcare in the UK in general is not especially bad, in my experience. It's deteriorated slightly in the last decade, but it's still fairly on par with other rich nations.
I think consumer choice is an overrated idea in healthcare generally. Healthcare is particularly badly suited to a consumer market, because it is extremely difficult for an individual patient to assess how good their healthcare actually is. They can judge some, not terribly centrally relevant, aspects of it, but that just leads to optimisation for these, not actually that important, aspects.
The two first priorities for a rich country's healthcare system are to ensure that basic healthcare is available to everyone, and to regulate provision of healthcare well enough that it isn't swamped by snake-oil-sellers and actually does do some good. There are various ways to achieve both of these.
As an aside, the part about each country averaging the costs of a basket of countries is the known network problem of consensus dynamics [1].
In practice, countries will always converge to a price, they will not fluctuate indefinitely. If they form communities (e.g. if all Western countries look at each other, all Eastern look at each other, and so on) they will first converge to the average of their community.
If the communities are connected (e.g. at least one country in a community looks at a country in he other communities) then eventually the whole system will converge to the average.
I describe it in more details in the network science book that I wrote [2], Section 8.5.
[1] Morris H DeGroot. Reaching a consensus. Journal of the American Statistical Association, 69(345):118–121, 1974
[2] Michele Coscia, The Atlas for the Aspiring Network Scientist, ArXiv, https://www.networkatlas.eu/, 2021
As to the reason why Germany and Netherlands work relatively well:
1: Evolution. German health care system has been around since Bismark. Lots and lots of evolutionary tinkering, mostly by people who at least party knew what they were doing.
This essay makes an interesting argument that it's about cost effectiveness of spending (eg public health and preventative care vs expensive drugs and surgeries) https://www.newyorker.com/magazine/2021/08/30/costa-ricans-live-longer-than-we-do-whats-the-secret
I don't think this is not a simple question of who is paying and whether private not-for-profit, private for-profit, or public institutions do the work?
Drucker already stated that healthcare organizations were double-headed monsters! The fact is it there are way more than two heads. Many stakeholders are present in a healthcare system: general citizens and the politicians that represent them, healthcare managers (top level, intermediate level and local supervisors), physicians, nurses, nutritionists, healthcare technicians, psychologists, social care workers, drug and medical device makers, suppliers, professional schools and colleges selling healthcare degrees, etc.
In many countries, healthcare professions have bars that somehow may be protecting themselves more keenly than the patients they are supposed to serve. Inside those associations there are subgroups that are interested in keeping a low level deficit of resources in their specialty to keep a higher pay per service. Some of those groups may have considerable political and social power and have their interests be respected by politicians when healthcare decision making is made by ministries.
Regarding physicians:
- How are the labour relations between physicians and hospitals (public and private)? Is the work contract-based, physician groups-based, or physicians are working as independent contractors?
- Did physicians pay $200.000 for their college educations, or was it virtually free (as in some countries)? Will that cause escalating healthcare prices to pay college loans? Will physicians try their best to specialize in Urology or Plastic Surgery, instead of practicing General Medicine, just to have a higher pay and pay their debt?
- Is there uncertainty in continuity of practice (ie does the physician believe he may be prevented to practice in the near future because of failure to achieve a passing grade in the recertification exam, or he may be disbared because he commited a mistake while seeing his 56th patient that day)? What is the likelyhood of being sued (I am pretty sure there are way more healthcare related lawsuits in the USA comparing to Europe)? How much does he have to pay for professional insurance?
There are so many variables at stake I don't think anyone can fully explain why are some healthcare systems working better than others. Or, at least, there is no single reason for it. The USA may be a perfect storm of many bad decisions. And Denmark may have a great healthcare system because labour relations are more transparent and respectful than other countries. And that characteristic of the country is not specifically related to healthcare. Healthcare professionals burnout statistics may be very informative in this matter.
Just one more thing. Why is it that, in healthcare, we tend to consider that the lower the GDP spending the better? We don't do that in any other sector, like education, leisure or investment in tech. Regarding the «bang for the buck» issue, life expectancy isn't a perfect indicator. Quality adjusted life years may be better.
And again, instead of arguing that the quality of a healthcare system is proportional to the ratio of life expectancy/GDP spending in healthcare, we have to consider whether professionals are doing ok and happy with their work lives instead of burning them out and importing healthcare professionals from poorer countries (eg. in the UK 12% of healthcare professionals are foreign-born), draining the healthcare system of those same countries.
It is probably the most regulated sector in most western societies and quite frankly the human costs are way higher than «life expectancy».
In a more forward-thinking system a nation would loosen restrictions/import health care professionals from foreign countries before those in the country are burnt out. To answer your question regarding GDP% its more of an observation that the US is way higher than other nations in spending and equal or lower in a host of outcomes, life expectancy just being one of them and easy to understand. Ofc when you look into it its a terrible metric to compare its just an example that seems less subjective (but isn't really: see above comment on prematurely born babies).
I'd be interested to see a cost comparison with US military healthcare. It doesn't have a lot of these features that probably drive up cost in other US medical systems. The military pays you to go to medical school. The physicians are paid a fixed salary, not reimbursed per-procedure. That salary is set by legislation and can't be individually negotiated. I don't believe there is any personal liability beyond loss of license for mistakes, as rather than being able to sue the military if you get maimed by bad treatment, you just get permanent disability reimbursement from the VA instead. While the licensing requirements are the same, you can get an awful lot of first line treatment from a medic that does not need to be licensed.
Some of the reasons I believe led some healthcare systems to transition to a mixed compensation scheme for physicians:
- if you pay fixed salary, many physicians will refuse to see a reasonable number of patients (they will say that medicine is very complex and you can only see 6 patients a day) and increase the pay for each health unit. Some may even get to their private practice during hospital/health center working hours
- if you pay on a capitation base, physicians will try to have higher numbers of patients with complex labels on their list, but will refuse patients with complex disease or whose diseases are not covered by the capitation monitoring system (p.eg. get lots of simple diabetic patients [type 2 diabetic patients diagnosed after 70 years], but avoid complex diabetes patients [type 1 diabetic patients or severely insulin resistant diabetes] and asthma patients). Even if the physician has some complex patients in their list, it is easy to register a lot of clinical acts that he/she is a actually not doing. This happened in the UK some years ago, and is happening in other countries still using this kind of pay
- if you go fee-for-service, physicians will say that every exam or treatment or appointment is very necessary, and you will get a lot of unnecessary spending in low value care. We can't forget that the manager is not a doctor and he probably can't tell what is necessary or not. The patient doesn't know either.
So, I believe mixed compensation and a lot of monitoring may be the answer.
In 2010, Washington Post reporter T.R. Reid wrote "The Healing of America" on this topic (a comparative survey of developed countries' health care systems). While a dozen years out of date, it might still be more informative than Dr. Emmanuel's work.
Amazon link to $5 e-book: https://amazon.com/Healing-America-Global-Better-Cheaper-ebook/dp/B003XQEVMQ/
Why are monopolies bad in most markets but not bad in health care?
Also, health insurance =/= health care. Why do we/the media/politicians continually conflate the two.
I suspect monopolies (or in this case, monopsonies) can be good when an additional unit of power for the monopolising group has large social benefits. Think of unions.
I find I do not care about the best or worst national healthcare system.
I care about the best outcomes *for me in my current context* - I want the national system that provides that. If that system is more or less expensive for the nation, requires certain social setups or population types, involved oppression or celebrates specific kinds of humans or animals, melts the polar caps more or less... don't care. Best outcome for me, thanks.
I expect many people are this way once you remove the need to perform social caring or tribe affiliation or whatever.
This is why many arguments for or against system A or B tend to fail. Lots of arguments about what is good for the world, the nation, or the group.... and nobody cares. The 'best' national healthcare systems probably screw a lor of individuals in some way they would call screwed, and the worst probably take great care of some people.
The fundamental reason why the United States is so bad is because health care breaks the iron law of capitalism, which is that the person who uses a good or service should be the person who chooses it, and who pays the bill. Doctors & patients together choose a medical treatment, but insurance pays the bill. Individuals use insurance, but don't actually choose or pay for it; that's done by their employers, and the plans are so complicated that individual consumers can't make heads or tails of it anyway. Hospitals offer treatments, but just try asking a hospital how much it costs or shopping around; they flat out won't tell you. It truly is upside-down bizzarro world. Plus, the bureaucracy is impenetrable. Have you ever noticed how long it takes a pharmacist to fill a prescription? Taking the pills off the shelf takes 30 seconds. Calling the insurance company and waiting on hold -- that takes 15 minutes or more.
Wrt. to other countries, there's not a lot of difference between regulation and socialism. Sure, in Germany and the Netherlands insurance is provided by private companies (my wife is Dutch). But if all companies are required by law to charge the same rates, and offer the same coverage, then it doesn't really matter whether a private company or the government pays for it. A really easy way to lower costs in the U.S. would be to require all insurance companies to offer the same coverage and costs as Medicare. All hospitals would be forced to accept that, because otherwise they'd have no customers.
I lived in the UK for many years, and used the NHS. It was great. No paperwork, no insurance cards, and no weird bills for ludicrously high amounts when you leave. As a patient, I loved the simplicity of it. But there is a catch.
The NHS hospitals get a fixed amount of money per year, and they have to treat every patient that walks through their doors. Hospitals are non-profit, and success is measured by how many people they can treat given a limited budget, not by how much profit they can make by doing lots of expensive treatments. That's the main difference between "capitalism" and "socialism" in this case -- it's the metric you use to measure success. NHS hospitals do a cost/benefit analysis on every treatment, and focus their efforts on the low-cost, high-benefit treatments. If you want the hospital to do an MRI, or something fancy, then they will not agree unless your condition is life-threatening. But if you just want basic every-day care, they're pretty good at that. I think the life-expectancy numbers bear that out; high-cost low-efficacy treatments do not improve outcomes all that much at the aggregate level.
And the NHS is really good at pinching pennies in smart ways. When my wife needed to go to the hospital, I called the NHS hotline, and they asked if she was able to walk. Not far, but yes, she could. So they sent a taxi-cab to my door, who dropped us off at the hospital front entrance. It was totally free -- his fare was paid for by the NHS. In the United States, they'd send an ambulance, for 10X or 100X the price, then bill it to insurance, who would then send a co-pay to me for some hundreds of dollars. That doesn't help anybody.
In a way, the NHS actually satisfies the iron law of capitalism better than the US system does. It works because the hospitals/doctors both make the medical decisions, and they foot the bill.
In Portugal, until ~10 years ago, taxi drivers could pick up patients with difficulty walking to take them to healthcare institutions, and the SNS (ie NHS) would pay. Until a law was published that forbade workers outside of professional ambulance (private, fire department-associated, or public) services to do that job. Transportation costs in the healthcare sector sky-rocketed from one year to the other.
For me, that's one example of toxic lobbying doing its way. Of course, there was a minister back then that was a partner in an ambulance service. So, there you go...
@delesley - you might like this: https://www.southampton.ac.uk/assets/centresresearch/documents/wphs/DJBGive%20the%20patients%20the%20money.pdf
Interesting article -- thanks! However, I doubt that giving everyone a personal HSA will make much difference. I currently have an HSA with a very high deductible plan, which my employer funds generously. It's basically the exact same system as proposed in the article. My insurance only covers catastrophic emergencies, because routine care will never exceed my deductible.
And... I treat it exactly like insurance. I never make any health care decisions on the basis of cost, because cost is never a factor. The HSA can only be used for health care, so it doesn't compete with my household budget. If I'm sick, I see the doctor, and if I'm not sick, or not badly sick, then I stay as far away from the hospital as possible. I have enough money in the HSA to fund my deductible, I can't use the money for anything else, and anything over the deductible is covered by insurance anyway.
There's this myth that if you could just devise a system where health care is produced and consumed like a normal good in a capitalist economy, then the magic of capitalism will take over and yield lower prices and better service. But health care is not a normal good. We don't go to the doctor because we *want* to, we go because we *have* to. We may choose to buy a smaller house, or an older car, or buy cheap dinners in order to save money. But almost nobody ever weighs the pros and cons of either getting that hip replacement, or buying a new big-screen TV. Health care is not discretionary in the same sense as other goods. "Consumer choice" in health care generally means being able to choose *which* doctor does the hip replacement, not whether we get the treatment.
P.S. One big exception is end-of-life care. If I'm terminally ill, I might very much wish to avoid major interventions, if it meant that I could then leave the money to my children. And since end-of-life care is super expensive, that could very well move the needle on overall costs at a national level.
Thanks for reading the article @delesley. To be clear, this is based on Singapore's model (see my comment somewhere below) which gets the very best value for money (4% of GDP for world-ranked outcomes). So the idea is not just theoretical.
Your insurance does sound pretty sound - could you identify the insurer for me?
I would take issue, by the way, in your assertion that there is *no* consumer choice in healthcare but in other systems, that choice is more marked. Your hip replacement example is, IMHO, exactly the sort of 'consumer choice' that you might make when you get older. Replacing a worn-out joint is not a binary decision - you weigh the pros-and-cons as a patient about when and whether to do it for some time before you actually take the plunge. Perhaps you don't compare it to a TV - but you will think carefully and, if you have an HSA, you may weigh up how much you need that vs other healthcare needs.
Worn-out hip = type B healthcare. Fractured hip = type A healthcare. Repairing the latter is clearly *not( a choice!
Thanks for the comment.
In that kind of system, what would happen with people that already have chronic disease?
Also, there is a fair amount of personal decision in the management of some chronic diseases. In type 1 diabetes, you could prefer a continuous glucose monitor of one brand instead of the other, because it may have integration with a smartwatch p.ex. And you can use an insulin pump but many people prefer not to, even in countries that have insulin pumps fully covered by the NHS (see Sweden, Slovenia, among others). The only thing that is mandatory in type 1 diabetes is access to insulin. But the very basic in this health problem costs 1/10th compared to a state of the art treatment regimen. How is this manageable in an insurance based system? Does it all depend on physician decision making (ie who gets what)? Is there the risk that some individuals get easier access to advanced technology because of that (Weiss D, et al. The diffusion of innovative diabetes technologies as a fundamental cause of social inequalities in health., The Nord-Trondelag Health Study, Norway. Sociology of Health & Illness 2020; doi.org/10.1111/1467-9566.13147)? Will the sons and daughters of physicians and nurses have early access to state of the art?
an interesting question @cesar. I did mention it deep in the article I posted. My suggestion (untested) would be to give bigger annual savings to those with demonstrably higher needs. Type 1 diabetic patients would get an extra top-up.
Not too sure about assuring equality of access to new tech - but the inequality that currently exists is so pernicious, I wonder if it would be any worse.
Oh hey, I was just thinking about you because I'm watching Nausicaa for the first time while thinking about programming language design. I hope you're doing well.
Insurance companies negotiate lower prices collectively through Pharmacy Benefit Managers. If by market price for a drug you mean list price, almost no one actually pays the list price in the US system. I personally find that Zeke tends to handwave concerns about drug price controls and innovation a bit too much so he downplays the benefits of paying higher prices for medications.
Taiwan is a *very* measurable, and measured, health care environment. And yet many of the “key facts” published about the features of health care in TW don’t align with the ground truth.
This is a data point that raises doubts in my mind about the methodology and mindset of economists, public health researchers, and the other folks who try to collect good science on health care systems and economics.
Forgive me for not listing more than two examples, I’m writing with little time to spare.
- not correct: few or no private insurance providers in TW, few or no people in TW have private insurance
- also not correct: most patients in TW pay very little out of pocket for expensive tests or procedures
The patient experience in Taiwan for most health conditions is, on average, as quick and easy as anyone could hope for. And the citizens, government, and hospitals are proud of the NHI and the health care system. The VP is an epidemiologist, the mayor of the capital is a surgeon. Access is granted freely to researchers who want to study public health in Taiwan (I’ve done lung cancer treatment clinical trials in TW hospitals, measuring among other things the performance of oncologists). There is plenty of high-quality hard science done in Taiwan in clinical research, pharma, bioscience, and a solid pharma and medical device industry.
And yet despite all this happy openness…the conventional wisdom on the “health care system in Taiwan” is not aligned with the key and complex reality of the features of health care in TW.
Aside: yep, the doctors in TW see way more patients each day than in the States. The base pay is barely more than resident pay in the US. But there are plenty of career physicians who are wealthy enough to afford an above-average home in the large cities in Taiwan ($1m-$3m is the average price for an apartment) and a Tesla.
I'll also add that doctors in Taiwan see way more patients each day in the States, and the clinics are usually open beyond normal working hours (which is way more convenient for patients).
Thanks for this very interesting review. I suspect I'll get more from this than reading the book.
As an NHS (UK) doctor, it's always interesting to find people who can cut though our blinkered propaganda about having the "best" medical system in the world. Clearly the UK has one of the best compromises - and there is other data to suggest that we do well on value-for-money, but that our main problem is access. The pandemic has undermined what was already quite precarious and the UK is very likely to fall down the rankings. We shall see.
The single biggest omission from this book would appear to be the exclusion of Singapore (or did I miss that). They have consistently the best outcomes for the smallest %age of GDP (about 5% compared to nearly 20% in the US)
https://www.commonwealthfund.org/international-health-policy-center/countries/singapore
see also:
https://www.commonwealthfund.org/international-health-policy-center/countries/singapore
And - at the risk of shameless self-promotion - there's a paper here about how we might use the Singaporean system as a model for the UK.
https://www.southampton.ac.uk/assets/centresresearch/documents/wphs/DJBGive%20the%20patients%20the%20money.pdf
Thanks again for the review.
DJ
Taiwan also only gives out the exact amount of drugs, you're supposed to have for a treatment course. The patient is not left with a bunch of surplus drugs, because there's only two package sizes available. And you get your drugs from the doctor, instead of being sent on an errand to present a written paper to a specialized shop called "pharmacy".
At least, that was my experience when I got treated there.
I have no idea if handing out fewer pills/tablets/capsules actually saves costs meaningfully, though. For all I know the actual production cost per unit of the drug is not a relevant factor, if the actual cost is dominated by R&D and negotiation is done via bureaucracy magic, anyway.
Was nice to see, anyway. There's something very pleasant to that alien Taiwanese aesthetic of "don't get handed crap, you won't need".
Having spent more than a year in Taiwan, I do hear that often people go to the doctor when they're only slightly ill just to collect medicine, which leads to system overuse.
Hi Dr. Scott,
The drug pricing, from what I know of, is through negotiation between big drug corps and US government and insurance company(not exactly sure but through negotiation).
And there are different types of drugs. For example, drugs including over-the-counter(generic) drugs. Usually even with the same chemical formula, the same drugs from different manufacturers will be priced very differently. For example, Vitamin12 from China is around 0.001cent/tablet but manufactured in US probably cost around $0.01/tablet(numbers are forged here just to give one example).
I think some other types of drugs are usually patented in US, which lacks of direct competitor in the market and also the R&D costs are high (1 billion dollar for one small molecule anti-cancer drug). This contributes the drug price as well. US indeed has very large pharmaceutical industry (EU has second largest I assume) and many drugs are only available in US. The drug prices in other countries are more affordable and people complain less about the price may also partly because --- they don't even have that option. These novel drugs are not allowed in imported/circulated in the country. Both India and China are famous for sham drugs as they usually have to wait for 20 years after the US patents are over and they can start manufacturing that drugs. China/India may be the driving force to pull down the manufacturing cost for any chemical drugs.
Third, from what I have known of -- US has many more patented, advanced medical devices. They all contribute to the cost of the healthcare. US healthcare is expensive but the quality, once you get to see the specialist, is usually good. US is probably good at high end medicare and difficult diseases but China/India is better at general medicare (home treatment) as they are fast and more economical.
Drug pricing has many models behind and indeed is a very intriguing question.
Afaik a properly functioning Obamacare would look basically the same as the German system. The American version is just too complex and the courts + Republicans have made it much worse, but the basic thrust is the same.
I’m very ignorant, though, so feel free to correct me, but I’m still surprised Scott (or the book) did not mention the implications of Obamacare.
Going by the descriptions of the categories, Germany is actually a mix of 3 and 4:
"Single payer channeled through private insurance with substantial (different kind of) private insurance".
Lars elsewhere in the comments explains characteristics of the German healthcare system far better than I could and in far more detail than I would have, but let me just say that this bit from the description of Australia in category 3 applies to Germany almosy exactly if you just read "government" as "regular insurers" and "private" as "different kind of private insurers" (and some minor changes in parentheses):
"For example, in [Germany] sometimes the private insurance has shorter waiting times, or can get you nicer rooms in more luxurious hospitals. Often (mostly) the same doctors and hospitals treat the government and private patients, but give the private patients more time and resources, which leads to resentment and scandals (don't remember any scandals, but plenty of resentment). On the other hand, the private patients sometimes (very often) subsidize the public ones - ie a hospital charges extra for private patients and uses that to make up a funding shortfall if the government doesn’t pay them enough."
I've had the enormous privilege of having good private health insurance in Germany my entire life so far, and I have virtually no (personal) complaints about the healthcare (and pricing) available to me, it's really really good (for my own personal experience).
>This part confused me, because it seems to be both a government decision and a negotiation. The government sets a price based on some method. Then the drug companies - well, as far as I can tell, they accept. This article makes me think that in theory drug companies have the right to refuse an unfairly low price, but that in practice neither side wants the PR hit of a country going without a drug, both sides try pretty hard for an agreement, and it’s very rare for the process to fail.
>But this made it hard for me to understand this section of the book, which praised countries who managed to keep drug prices low. “Keeping drug prices low” mostly seems to involve having a process that reliably generates low numbers for the government’s offers.
The power in that negotiation rests almost entirely with the government, not the pharmaceutical company. This is what happens if the pharma company plays hardball:
Government: Sell your drug at price X.
Pharma company: No, we want price Y (Y > X).
Government: Fine, your patent's revoked. Now you have to compete with generics and will get Z (X > Z ~= cost of production).
The only real thing the pharma company can say then is "then we'll bribe the US government to be nastier to you in trade talks", which may or may not work.
I haven't read the original book but curious how it compares to this paper https://www.manhattan-institute.org/using-lessons-from-international-health-care-medicare-for-all
The real question here is, what is the kabbalistic significance of being named "Ezekiel Emanuel"? That definitely seems like a name with a lot of... something.
> Taiwan works its doctors incredibly hard - they see about 2-3x as many patients per day as in other countries, for less money, and I’m not sure why they stay in medicine or how they stay sane.
The joke-but-also-true answer is that working over-long hours for unclear reasons is part of Taiwanese culture.
>Overall I got the impression that health care was a bizarro-world where normal economics doesn’t apply. If you have the courage to say loudly and firmly “we refuse to pay a high price for this”, then providers have to give you a low price, and your health care system will be great and affordable.
My guess for this is that basically, there is a gap between 'A: The amount it would cost for it to be worth our time and effort to provide good health care' and 'B: The amount we're able to charge for healthcare in a supply/demand economy given that people don't have much choice not to buy, generally only have one or a few providers in their area to choose between, don't really understand what they're buying or have the knowledge or time to comparison shop, have principle/agent problems with their insurance discouraging them from saving money, we're ea prestigious profession that people expect to be expensive and they tend to trust when we tell them what things cost, and also we have IP laws giving us monopolies on most of what we do anyway'.
My guess is that B is larger than A, and that in fact B is SO MUCH larger than A that any sane-sounding effort to cut B - like B-10, or .8B, or whatever - still ends up being far larger than A, and so it's still worth everyone's time and effort to keep providing the same good healthcare at that cost.
idk if anyone will see this but re: the drug-pricing section: is it possible that the US is basically subsidizing everyone else by paying so much for drugs?
The book leaves out Japan. Having lived here for over 20 years and in the uSA for 45 years, I would say the system in Japan is better in many ways. The doctors are very good, the hospitals better in terms of after care and nursing, the after insurance costs are unbelievably low compared to the US. Universal coverage from day 1 with private insurance available for upgraded rooms and special treatments. As an older person, no way would I endure the system in the US.
Zooming in on pharmaceutical costs (which are a fraction of the total dollar spent on healthcare) while ignoring very high physician incomes, a broken medical educational system, the huge amount of wasted money spent on salaries and bonuses for healthcare, insurance and middlemen (PBM) executives...High pharmaceutical costs spur innovation and actually help frive down ancillary hospitalization costs. But Ezekiel is an MD, so bringing up physician renumeration (4x times that in the rest of the world) will never be a problem for him.
I have an idea for reforming our health insurance system in the United States, which I have never seen advocated for elsewhere. You all are way smarter than me, so thought I would throw it out to see whether this has any merit. Maybe nobody is pushing this idea because it is too dumb to work, or maybe it just hasn't occurred to anyone else yet, so here goes.
First off, we institute a nationwide, federal government provided, catastrophic health plan that covers every American person regardless of age, employment status, pre-existing condition, or any other disqualifiers. The annual deductible is $30,000 for single and $40,000 for a family. Funding could be through a surcharge on all citizens payable with their annual income tax filing, payroll deduction, or some other similar mechanism. Monthly cost for a $13,700 deductible plan in my area is $1,184/mo so increasing the deductible by more than 100% has to cut the cost appreciably. Also, this catastrophic plan covers absolutely nothing until you have spent through the deductible. Current plans have a rabbit warren of services that are not paid out of pocket, like annual physicals and bloodwork, which increase the cost of all these plans. Shifting responsibility for those services to the end user should result in more incentive for price discovery. On average 20% of people spend enough to satisfy their deductible each year. That would be much lower at this higher deductible and focus the care on the truly extreme cases where there is often little choice in the matter.
By implementing a catastrophic health plan for all, no more families need to file bankruptcy due to a child's cancer diagnosis, being involved in a car crash, or contracting a rare debilitating disease. Those major medical events get paid for now in an extremely inefficient and often soul crushing way. If you have good coverage, the insurance company pays for it and raises premiums on everyone else to compensate. If you don’t have insurance, the hospital charges you, you file bankruptcy, costing ridiculous amounts of time and legal expense, not to mention ruining your financial life for a decade. The hospital doesn't get paid, so raises its rates for those who do pay to compensate. In between those options are numerous iterations of varying soul-crushiness and taxpayer subsidy. Spreading the catastrophic situations more broadly and paying for it in a consistent way will reduce waste and inefficiency.
What about the $0-$30,000? That is where the free market would be let loose to do it's thing. Private insurance policies covering that amount should be cheap and easy to obtain. With an upper limit on annual cost, companies wouldn't have to worry about insuring someone taking a drug that costs $350,000 a month. For the young and healthy, risk tolerant, or those unable to afford private insurance, they would take the risk of needing health care that costs up to $30,000. Not an insubstantial sum, but certainly more manageable than $1 million or more for a brain tumor resection and several rounds of chemo.
With a large chunk of annual health spending required to be out of pocket, price discovery would actually take place. Attempts have been made to lift the veil on this, but until the end user has real incentive to find out whether that hip replacement is $4,800 or $9,200, true change won't happen.
All of the above has been tried in some form or another, and is not revolutionary. The unique part of my idea might solve the last part of this problem.
For all the $0-$30,000 spending that is not covered by a private insurance plan, or if those private insurance plans do not come into being, hospitals could be stuck with large outstanding bills to people unable to pay, much like they are now with uninsured patients. We solve this problem by requiring hospitals to offer payment plans at a reasonable rate of interest, say 1% over the Fed Funds target rate. Payment amounts are capped at 5% of Adjusted Gross Income, so the repayment term could be as short as 1 year or as long as 15 years, but be manageable for the vast majority of people. For example, $30,000 AGI would result in $125/mo available to pay toward healthcare costs, so a $5,000 bill takes 3.5 years to pay off at the minimum. Discounts for early payoff would incentivize full payment whenever possible.
That stream of income would be an attractive investment for the bond market. Hospitals could sell that pool of medical debt, much like banks sell secondary market mortgage loans, significantly improving their cash flow. The debt can then be packaged together in the same way Mortgage Backed Securities are today. We could set up an agency similar to Fannie Mae, I would call it the Healthcare Underwriting and Repayment Trust (HURT).
An industry with the technical expertise to service this medical debt already exists for servicing home mortgages. A 25bp packaging fee for HURT would provide the income necessary to maintain infrastructure and guaranty repayment on the bonds. Another 25bp servicing fee would be paid to the servicers for collecting and distributing payments to investors. Yield hungry institutional investors are clamoring for options, and a safe asset offering a variable yield of 50bp over the Fed Funds rate would be vastly oversubscribed in a world with 30 day T-bills yielding 5bp.
In the interest of relative brevity, I’ll leave it at that, and see what others think of the idea.
2 things-
1. Worse lifestyle.
2. The companies that make the drugs are mostly in the US, and can lobby the US directly. Those companies also pay taxes to the US. This creates a different situation when it comes to the US negotiating prices then other countries are in, for the most part.
European drug countries get more revenue from the US than Europe, even though the economies are about the same size and right next door.
A simple change the US ought to make is "single price". No provider should be allowed to charge different prices to different payers (although different providers could charge different prices from each other). We could write into the next Medicare contract with providers- you are not allowed to charge any customer more than you charge Medicare. This would immediately eliminate the out of network problem, the uninsured retail cost problem, and the cross-subsidy problem. It would eliminate the expensive process of providers negotiating a price with each insurer. It would achieve the supposed monopsony power of single payer without the bureaucracy of single payer.
I get why you want to do these things, but there are problems.
> No provider should be allowed to charge different prices to different payer
Sometimes a lab test is a lab test. But what if you need it to happen in the middle of the night as an emergency? What if a hospital makes a contract to buy 10,000 tests in bulk for the next year, taking a financial risk off of you, and thus worth a discount?
Maybe we have to give all that up and it's worth it because of how broken pricing information is, but we'd need to think harder about it.
> you are not allowed to charge any customer more than you charge Medicare
Well, this breaks the whole system. People take Medicare and Medicaid to be nice but they often need private payers to break even.
I am coming to this really late. While the talk here is of how the cost of treatment in the US is higher than in other parts of the world, my colleague Akshay and I did an analysis of cost of treatment compared to income last year, when there was irrational use of tests and medicines in India.
While individual drugs may be cheaper in India compared to higher income countries, when many of them are used irrationally, the cost becomes significant. Add the cost of a CT scan and blood tests and a person with asymptomatic to mildly symptomatic Covid spends something like 120 USD for no reason at all, which is close to the average monthly income of an Indian, but in reality, far more than what 90% of Indians earn.
There is no safety net in India. 80% of patients from all strata of society pay upfront for their tests and treatment and even though there are Govt schemes and insurance, there is significant copay involved.
Point being that even in a poor country with apparently low costs, the costs are not really low when compared to what people earn.
Here is the link to that article. https://www.atmasvasth.com/covid03/
Finally getting around to reading this (really enjoyed it).
As a strong proponent of my own UK system, without getting too post-structuralist, the definition of ‘better’ does a lot of heavy lifting here. Patient choice and waiting times are interesting metrics, but in my ‘socialist’ heart of hearts, I can’t weight them as heavily or even in the same category as health outcomes such as mortality statistics and life expectancy (particularly via measures such as QALYs). Do I want a health system that makes me happy, or that saves the maximum lives per dollar?
Subjective micro-oriented measurements, like patient satisfaction, risk missing the point that we’re all a bunch of self-important, entitled, demanding a**holes whenever we experience even the slightest bit of pain. The lawyer’s knee replacement on a six month waiting list begins to look much less pressing when compared to the office cleaner with life-threatening pneumonia, but the lawyer doesn’t have that context and only one of them is going to answer a phone survey or fill out a grumpy patient satisfaction questionnaire on discharge. The Rawlsian and the utilitarian ethicist in me are pretty united however in terms of which patient should be prioritised.
On this basis, the UK or ‘socialist’ model has several major advantages:
1.) It gives excellent value in terms of £/$/€ per extra year of satisfactory life expectancy
2.) It generates monopsony power for health buyers that effectively balances monopoly pharmaceutical power, helping to mitigate a system that relies partly on high R&D spending / IP rights
3.) While still only partially realised, the improved ability of a more integrated system to drive effective medical practice / epidemiology / pharmacology through data analysis has been very significant in UK health policy and academia during the COVID-19 epidemic; this also has spillover benefits for other health systems
I’m not saying that our current health system is optimal - like the author I’m intrigued to learn from the German / Canadian / Scandinavian models and would be very prepared to accept that other systems are ‘better’. However, I’d like to be very sure of my definition of ‘better’ before undertaking any radical steps towards reform…
If you look at the number of insurance policies offered in The Netherlands, you might think there are dozens. However, many insurances are brands or daughter companies of bigger groups. In effect, four big companies rule the market with around 85% market share in 2021. They are Zilveren Kruis (Achmea), VGZ, CZ and Menzis. https://www.zorgwijzer.nl/faq/welke-zorgverzekeraars-zijn-er
Since the minimum standard for the 'basic insurance' is set by law and the insurance companies are obliged to accept everyone, they mostly compete on price, brand and additional insurances (e.g. dental, physiotherapy when it's not medically urgent).
> Germany and the Netherlands have dozens of different insurance providers - why doesn’t that decrease bargaining power and raise costs? Why doesn’t it mean that sometimes they fail to reach an agreement with a hospital, and their patients can’t go there without facing “out-of-network” costs? I thought I understood the reasons why US health care doesn’t work, but Germany and the Netherlands seem to replicate its apparent disadvantages without running into the same problems. Why?
It does happen that health care providers are unable to reach an agreement with an insurance company. If you are a small practice (GP, physiotherapy, independent psychologist) it's basically impossible to NOT enter into contract with one of the 'big four', since 20% of your patients will get upset that they have to pay premiums.
Hospitals face a similar issue, but since they are much larger they have more bargaining power. An insurer would definitely lose face and it would make them seem like money grubbers if they are not able to reach agreement with a mayor hospital. It does happen from time to time.
In short - though I'm not knowledgeable on the topic - it seems that insurance companies in NL DO have market power over health providers.
Health costs have risen enormously over the last years and spending as % of GDP is up. However, most experts seem to agree it could have been much worse. Due to the increasing average age, there is an issue for the future when it comes to the ability to pay for health care as a community and find enough employees willing to work in health care.