You cap healthcare prices for insurers because they are heavily influencing the provider prices.

Both institutions work in tandem[0] with one another to establish pricing guidelines. That's why your hospital-purchased ibuprofen is $10 per pill instead of $6 per bottle. The insurer and hospital "work out" a price that let's them achieve the profit needed to pay their administrative costs, plus margin.

In the USA(this is all from a US citizen's perspective), there are regulations that limit what percentage(15% in my state) of an insurer's income can be profit vs administrative cost. This means that a higher hospital price results in a higher profit for the insurance provider. This provides both parties an opportunity to set prices for an optimal profit. With government-mandated health insurance participation, the pool of people paying into this system has increased.

It is what is. Tell your elected official if you think it would help.

0: Anthem, Blue Cross, and UHC executives sit on the Baptist Health(hospital chain) board of directors, and vice versa.

Health insurers and providers negotiate payments for healthcare. They sit on the opposite side of the table - insurers want the lowest price and providers want the highest price.

The only benefit an insurer would have from a higher price is if they have a monopoly position - no other insurer. Otherwise the other insurers will pay less, charge a lower premium and grab all the customers.

That is what networks are for.

When choice is harder, they can play the price game better.

>You cap healthcare prices for insurers because they are heavily influencing the provider prices.

Insurers already have an incentive to limit prices, though, which is essentially what their contracts with providers are. As in, they list how much they'll shell out for CPT codes.

They have an incentive to get discounts, which is not the same as limiting prices.

It’s more complicated, the insurers essentially tell providers how to practice (ie prescribe this generic not the name brand, don’t prescribe 30 day Rx prescribe 90 day and don’t see/treat them in the meantime, etc...) and if the providers don’t listen the provider gets dropped from the network and either the patients are forced to new providers who the insurers control behind the scenes, or more and more the patients are forced to providers the insurers actually own.

Ok, but Americans overconsume health care and are prescribed more procedures than other countries --- that's a dominant factor in our health care costs, unlike prescription drugs and admin costs. How do insurers, which have a direct financial incentive not to fund care, own that problem?

As I said below:

The upward pressure on prices is also from the insurers. Insurers have an "80/20 rule" from Obamacare that only 20% of their revenue can be spent on non-medical expenses (ie. profit, insurance administrative overhead, etc.). They pretty quickly hit the caps, and now only by increasing medical expenditures (the other 80%) can the pie slice that contains their profit grow year after year.

This issue existed before Obamacare 80/20 rule. In a free market the way for a profitable insurer to grow is by growing marketshare -- whether 80/20 rule exists or not. And the way to grow marketshare is to offer cheaper insurance. To offer cheaper insurance insurers have to push service prices down. Somehow this is not happening.

Hey, wait a minute, that's true. The McKinsey study predates the ACA and establishes the overconsumption narrative. The 80/20 ACA thing can't be the problem.

I'm not staying it's the problem; for something as systemically wrong as the US healthcare system there isn't just one thing wrong.

I'm merely debunking your assertion that insurance companies don't have a financial incentive to keep costs high.

What's the financial incentive they had to keep costs high in 2010? You're making an extraordinary claim: health insurance companies are deliberately making themselves liable for provider costs in order to somehow benefit on the backend. You should have some kind of evidence?

What's the trend line since 2010? Since the 80/20 rule went into effect, has the rate of provider costs increased or decreased or stayed the same? If it hasn't increased, does your hypothesis actually explain any empirical observations?

If not, are you concerned this might be a just-so story?

Wow, sounds like one heck of an unintended consequence for that well-meaning 80/20 rule.

Only because of a non functioning market due to federal and state laws.

If there was one health insurance marketplace and set of rules, and everyone, young, old, poor, rich, healthy, infirm, we’re forced to buy from it, then it would actually be possible for insurance companies to compete.

Right now, it’s basically a game of hot potato to try and not get stuck with the million dollar hemophiliacs in each state. A lot of the healthy are separated out into employer based insurance plans, and there’s not sufficient possibility of business to have more than one or two insurance offerings on healthcare.gov.

Insurers control care to reduce costs. The upward pressure on prices is from providers.

In terms of these insurers who control providers, can you give an example?

The upward pressure on prices is also from the insurers. Insurers have an "80/20 rule" from Obamacare that only 20% of their revenue can be spent on non-medical expenses (ie. profit, insurance administrative overhead, etc.). They pretty quickly hit the caps, and now only by increasing medical expenditures (the other 80%) can the pie slice that contains their profit grow year after year.

Insurers are really controlling care to improve their “star rating”. Insurers are given a star rating by many things outside their control and in the domain of providers and pharmacists. That’s why they are dropping docs and pharmacies from their networks and otherwise buying them to consolidate the market and their control.

Next time you go to your primary doctor ask them how many faxes they get from the pharmacist instructing doctors to change prescriptions. Then ask the pharmacists where they get those instructions from to fax to the docs....the insurers.

I’ll admit the star ratings are related to costs, but short term costs. All this watered down care and cookie cutter treatment will lead to higher costs long term (ie hospitializations, waiting until health problems escalate instead of preventative care or proper management).

It’s also why the big groups have reinvented HMO, now called ACO, bc even they don’t want outcomes based payment, so with ACO they can get paid $x/patient per year and make the care fit. HMO failed from a cost and care perspective, again not in the short term but in the long term, and it’s literally being rebranded as ACO by the insurer/provider groups.

Star ratings are for Medicare plans only, not commercial. They are related to the quality of the insurers for the customers, not prices.

Yes but the Medicare plans are private insurance, the same insurers for the “commercial market” as you call it. You can’t separate the insurers dropping providers from networks and buying practices/hospitals from Medicare plans to non Medicare plans.

In other words if you aren’t a Medicare patient and are insured by UnitedHealth for example, you will be subject to the same networks of doctors/hospitals as their Medicare plans, so private is driven my the Medicare plans, because Medicare rules are driving the consolidation of the market.

And yes everyone will tell you star ratings are about “outcomes” not price, but if you knew/know anything about the star rating metrics it’s obvious “outcomes” is marketing/PR for cost cutting. Otherwise I’d ask to point out any metrics that increase star ratings that don’t lower costs, whereas it’s easy to point out the metrics that result in better “patient outcomes”/higher star ratings but lower quality of care.

Kaiser

Yes, and Kaiser has some of the lowest cost healthcare out of all insurers.

I did mean providers, I worded that poorly. US government does not set max prices for procedures, checkups, test, drugs etc as other counties have wisely chosen to do.

The reason we spend so much on Medicare and Medicare is because people are less hesitant to use the service. On a per capita basis, the public payers have reduced overhead and costs compared to the private markets. If you have sources proving me wrong, I’d be happy to look at them.

And while the US market my be drowong in various regulations, it is severely lacking in price control regulation - the whole reasons for this discussion.

The cost of procedures for Medicare and Medicaid is still much higher than for other countries.

Yes, they reduce costs by saying “this is what we’ll pay”, but it’s still much more costly than other countries’ systems.

And I agree with those two sentences - never was arguing that we pay less (compared to other models) in our public markets. But you are not strengthening a counter-point to the conclusion I presented from the book regarding zero price control in conjunction with for-profit insurances which jacks up overall costs through coverage disputes, excess admin work etc, lack of price transparency pre-treatment etc. What is your personal hypothesis for why US healthcare is such a poor value for the price?

If you look at the vision correction and plastic surgery markets, you'll see they function quite well! Providers compete on a combination of quality and cost. So I don't think there is anything intrinsic to the free market that suggestion it's to blame for ever increasing prices.

My personal hypothesis is that Americans get a lot more healthcare than most countries provide, combined with higher prices. Not all of it is all that beneficial.

If you want to read something really eye-opening, check out this McKinsey report, bottom of page 14[1] It basically compares US healthcare spending across categories, adjusting for GDP (expecting the US' higher GDP means we spend more).

For inpatient care (hospital care), the US actually spends inline with what other countries spend. For long term and home care, the US spends less than other countries. Same thing with durable medical equipment.

Almost all the "excess spend" is in the outpatient setting. American's get a shit ton of procedures done that other countries just wouldn't do. Have a hernia? Providers in the US fix that, where other countries might say "we'll do something if it becomes a problem" (for example).

[1]https://www.mckinsey.com/~/media/McKinsey/Industries/Healthc...

Medicare is dramatically more efficient than private insurance, both in terms of actual health costs paid out and administrative overhead.