>then why aren’t we replicating that mechanism across other essential goods like food and clothing?
maybe because the competition doesn't work as well in healthcare sector? or that there isn't a whole scheme of inflated prices that insurance companies negotiate down to, but uninsured people are forced to pay?
If that's the case, then why are we seeing Wal-Mart attempting to compete in the healthcare sector with what seem to be competitive prices?
Doesn't seem to be limited to just Wal-Mart either. An Oklahoma City Hospital began posting its prices online and started a bidding war[1]. The hospital lobby seems to be overwhelmingly opposed to price transparency out of fear that it will lower prices[2], and there are Yelp-like directories that are beginning to provide price transparency allowing for competitive rates like $79 MRI's[3].
Walmart actually made a big difference in the health market years ago when they introduced the $4 prescription program, something like 300 pharmaceuticals that are available for $4. Even for people with health insurance this is lower than many insurance providers' co-pay pricing.
>If that's the case, then why are we seeing Wal-Mart attempting to compete in the healthcare sector with what seem to be competitive prices?
And it only took decades of skyrocketing healthcare costs (and probably margins) for walmart to enter the space. How many more decades (if ever) until prices drop down to level in line with other developed nations?
> And it only took decades of skyrocketing healthcare costs (and probably margins) for walmart to enter the space. How many more decades (if ever) until prices drop down to level in line with other developed nations?
Was this a natural consequence of the market, or are there other explanations for why such a delay came to pass?
Why is this question relevant? Let's say the reason was that walmart thinks their core competency is supply chain management, healthcare isn't part of that, and they only entered because the healthcare industry gravy train has reached insanely high levels that they simply could not refuse, what then? Should our response to this crisis be to wait until a megacorp comes by and saves the day?
This question is extremely relevant, because it can help us evaluate all policy options.
The current status quo in the US Healthcare system was not some crazy accident of the market, rather it was the inevitable result of a series of policies passed at state, local, and federal levels over the past half century.
The fact that health insurance isn’t portable, and is rather tied to employment is a consequence of the WW2 era wage ceilings imposed on private corporations, followed by the tax benefits enjoyed by employers that provide group insurance, followed then by the mandate on employers to provide health insurance. This is in contrast with other countries that employ private insurance, like the Netherlands and Switzerland, where insurance is tied to the individual, not the employer.
The lack of price transparency logically follows from the fact that patients never really care how much their treatments cost, since employer sponsored insurance covers everything anyway. Large corporations are less price sensitive than individuals, which exacerbates the price inflation over decades.
Certificate of need laws, where local hospitals get to decide if a new, competing hospital can open, and the residency system requiring 10+ years of schooling to practice resulted in inevitable supply constraints.
Medicare, which provides healthcare for free for the elderly, removed the most engaged buyers from the market, suffocating the price discovery mechanism. Not only that, the elderly tend to be the richest people in the country - those above the age of 55 account for 73% of wealth in America. Boomers are disproportionately rich, and yet they also enjoy some of the most generous welfare on top of that.
There are number of ways to approach solving this problem. One way is to add yet another band-aid on top of the system, burn down the system entirely, or identify the root causes and disentangle them from the system. This is the political question.
>The fact that health insurance isn’t portable [...]
Agreed.
>This is in contrast with other countries that employ private insurance, like the Netherlands and Switzerland, where insurance is tied to the individual, not the employer.
It's worth mentioning that in both countries, there's heavy government regulation. According to wikipeida, in the Netherlands 50% of premiums goes to some sort of government agency that redistributes money to private insurance companies depending on their claims, which makes it a quasi-public payer scheme. In Switzerland the premium is capped at a percentage of a person's income with the government making up the shortfall, and insurance companies can't make a profit.
>The lack of price transparency logically follows from the fact that patients never really care how much their treatments cost, since employer sponsored insurance covers everything anyway.
Doesn't this argument apply to insurance schemes in general, both public and private?
>Large corporations are less price sensitive than individuals, which exacerbates the price inflation over decades.
I'm skeptical about this claim. Sure, they have more money sloshing about than individuals, but insurance premiums across the entire workforce adds up.
>Certificate of need laws, where local hospitals get to decide if a new, competing hospital can open, and the residency system requiring 10+ years of schooling to practice resulted in inevitable supply constraints.
Agree, although I'm weary of assigning significant blame due to this factor. Are doctors making record wages? Are hospitals making record profits?
>Medicare, which provides healthcare for free for the elderly, removed the most engaged buyers from the market. Not only that, the elderly tend to be the richest people in the country - those above the age of 55 account for 73% of wealth in America. Boomers are rich, and they also enjoy some of the most generous welfare on top of that.
I'm skeptical how big of an effect this can be. Wikipedia has a chart that shows medicare spending as percent of GDP[1]. If you combine that with total US healthcare spending by GDP[2], you see that it accounts for less than a fifth of total US healthcare spending.
> It's worth mentioning that in both countries, there's heavy government regulation
No disagreements that there exists regulation that can be helpful. Definitely an important part of the discussion. Even in Singapore, which is largely a market based system driven by price discovery relies on a healthy (heh) amount of regulation. In the US, the food system is largely market-based, but the FDA (as well as state and local health departments) impose important regulations.
> In Switzerland the premium is capped at a percentage of a person's income with the government making up the shortfall, and insurance companies can't make a profit.
Keep in mind that in the US, health insurance companies report an average profit of ~5%. Even if you eliminated that entirely, you wouldn't see any savings worth writing home about. I work at an insurance company, and the majority of claims I see are pretty asinine. $500 added to provide sign language service to a deaf patient, or $300 charged for a papoose used while giving a child a cleaning. Because of the third-party-payer model in which the care is priced and paid for AFTER the services are rendered, the patient has little skin in the game. In the best case (for the patient) the insurance company simply pays the asking price (resulting in a sort of moral hazard), and in the worst case, the insurance company doesn't cover it and the patient gets a surprise bill in the mail.
> Doesn't this argument apply to insurance schemes in general, both public and private?
Yes, it's another reason why using insurance to pay for all care can be a sub-optimal way to allocate resources. Not having skin in the game can result in patient overconsumption.
> Agree, although I'm weary of assigning significant blame due to this factor. Are doctors making record wages? Are hospitals making record profits?
Yes, and yes[1][2]
> I'm skeptical how big of an effect this can be. Wikipedia has a chart that shows medicare spending as percent of GDP[1]. If you combine that with total US healthcare spending by GDP[2], you see that it accounts for less than a fifth of total US healthcare spending.
The effect I'm talking about is removing the largest consumers of healthcare (rich old people) from the market, which impacts how the ultimate price of goods/services is determined by the market.
Clothing is a wildly different market. Imagine if the only way to get clothes were through a bespoke tailor, in person. No other way. And you often had—had—to get a very specific kind of jacket or whatever, no option to sub some other article, or else you or your kid dies or lives in pain or something. That’s healthcare. If clothes worked that way that market would suck, too.
Explain France and Switzerland then. Both use market mechanisms for delivering outpatient care. Or are these not European nations with universal healthcare?
maybe because the competition doesn't work as well in healthcare sector? or that there isn't a whole scheme of inflated prices that insurance companies negotiate down to, but uninsured people are forced to pay?