I'm interested in this intersection of technical problems where we already have the tech to solve it, but the bottlenecks are social/legal/financial incentive.
Recently there was an old lady in the family that had an appendicitis, an ambulance rejected her, and the next day it got worse, and at that point she was accepted, but it was a bit too late.
One hypothesis is that triaging is hard and there's a lot of demand so things only go in when it's bad enough (considering there was medical insurance, they aren't charging per patient, so there's no incentive to take on more patients). But if that were the case, then preventive measures would actually reduce the total burden on their system.
The more cynical hypothesis that I'm holidng is that that health system is maximizing for work, if there's 10 appendicitis per month, and they are all handled in time, that's maybe like 5 hours of billable hours per patient? But if the appendicitis becomes bad enough and there's a puncture, then you have infections, complications, the patients have to stay for weeks and often come back for checkups, we are looking at maybe 100 billable hours? So the financial incentive is there.
In that sense what I want to add is that the title would be completely wrong, the solution is not for the hospital to pay 100$ for prevention, but for prevention to be more accurately priced, we should be paying 50k, and maybe even 100k for prevention, because we value it more than emergency action.
In a broader economic sense, there's a lot of cases where there's a huge difference between the cost and the value, Shkreli got a lot of heat for surging up medicine prices, but I don't think it's immediately obvious that something should be valued in proportion to what it costs. Maybe if we price heart prevention at 100K, there would be more incentive for everyone involved to just get a fucking pill to those in need, imagine how many people would jump at that opportunity to make it happen, call centers, bureocrats, NOC support, legal teams, all dedicated to making sure a pill gets to the patient before a heart attack does.
Nobody likes to say this out loud, but because the US healthcare system is largely based on “fee for service” billing, it is true by definition that the sicker the patients are, the more profit the providers make. So incentives for actually making people healthier have to be imposed in indirect ways.
There are some pockets of “per capita” payment, where the provider gets a fixed amount per person and is thus encouraged to reduce treatment costs, which indirectly should encourage preventative care, but also encourages just refusing to treat people.
We could remove these weird constraints by making health care a government service rather than a highly contorted pseudo-market, but that would not be the American way. It has to at least look like a market, even if it’s an ineffective, inefficient, opaque, corrupt one.
> We could remove these weird constraints by making health care a government service rather than a highly contorted pseudo-market, but that would not be the American way. It has to at least look like a market, even if it’s an ineffective, inefficient, opaque, corrupt one.
It is still a market (and a single-payer one, ultimately) in these places, but it is not a government service. It is the best solution: the government funds the appropriate cost of care, the provider group is financially responsible for meeting it, and they are incentivized directly to get it right.
The left needs to stop shrieking about Medicare-for-all and the right needs to stop pretending like it can even spell healthcare. There are good solutions.
> but also encourages just refusing to treat people.
It categorically does not. It would be foolish to do so.
>It categorically does not. It would be foolish to do so.
Foolish hardly implies categorically false. It's a well-documented incentive for other risk-bearing entities (see insurance claim denials). Why are providers under capitated contracts categorically immune to refusing treatment to protect margins?
The Medicare “star system” attempts to compensate for this, but somewhat perversely by giving higher reimbursement rates to providers with higher quality. Logically, they should be getting lower rates because they’re more efficient at providing the service. But because the only real incentive is their profit margin, it has to be that way. And of course the star system definitions end up being a constant target of lobbying and stat-gaming.
IIRC this gets gamed by patterns like refusing to readmit patients following complications to hack low readmission rates and preserve higher reimbursement rates? Feels like so much in healthcare where you have a well-intentioned patch trying to solve deep incentive alignment issues and creating more problems.
Completely agree with your characterization of the current system but why does making healthcare a government service necessarily lead to better outcomes vs current state or a more sensibly constrained market?
Seems obviously right in terms of total cost to the median patient (less obvious for individuals in higher tax brackets), so I'm not disputing that. More curious about incentives to improve care delivery for better long-term outcomes.
Healthcare as a government service is one approach to the actual goal, which is healthcare that maximizes the quality of life and productivity of the citizens, rather than maximizing the profits of the providers.
When goods are discretionary and there are no externalities, it’s fine to have a purely autonomous market solution. Healthcare fits neither of those criteria. There’s a reason we don’t (or at least shouldn’t) have private subscription markets for baseline levels of law enforcement, fire prevention, public transit, food and drug quality enforcement, etc. etc. That same reasoning applies to healthcare.
Capitated reimbursement is a hybrid approach that helps a bit, but you can see from Medicare Advantage how the private sector relentlessly games the system because that’s how the incentive is inherently set up by the for-profit nature of the providers.
Yeah capitated reimbursement moves the risk but doesn't seem to effectively encourage innovation on care delivery when it's relatively easy to just cut costs at patients' expense because they have no agency and meaningful recourse.
Your criteria for when a market is (not) a good solution seem reasonable. My biggest concern is there's a fundamental problem with scaling labor-driven services that's exacerbated by entrenched interests constraining the labor supply to support wage growth. Care delivery needs to change if you want to fix both cost and quality, and I have a hard time imagining monumental changes to care delivery from a government service. Care will be expensive as long as it's constrained by scarce labor. That means either costs will balloon at the taxpayers' expense, service quality will decline to cut costs, or more likely both.
The way you fix that is either a) dramatically increasing the supply of qualified clinicians, or b) automation. Clinicians don't want more clinicians because it lowers their wages, so it will be fought at every level in the name of patient safety. But they also don't want automation to decouple care from their labor, so automation, too, will be fought at every level in the name of patient safety.
Most of this is opaque to voters who are largely under the impression that it's all health insurance executive greed, so there's not much of a political incentive to impose meaningful changes.
Where's the way out?
> "fee for service"
> "per capita"
I don't quite get the difference, patients pay a fixed amount for insurance, hospitals charge "fee for service" to the insurance. Both systems coexist, it's not one or the other.
To be clear, I'm not suggesting changing the whole system, I think that's infantile sorry to be blunt, I'm proposing a more down to earth (and commercially appealing approach) of increasing the price (and thus financial incentives) of medical goods that have low cost but high health values.
My economic theory clearly isn't as strong, because how much should a CT scan and a pill be priced at relative to a heart attack response with a 1 week hospitalization and a bunch of work. Because the cost of a CT scan and a pill is low (100$), the value of it is high (50K$ lower bound), and the cost of treating a heart attack is clearly around 50K$, but the value of it is clearly lower than the preventive treatment (perhaps stochastically adjusted).
So should we be pricing by cost or pricing by value? The naïve approach is pricing by cost, so that everything is cheap, the first issue with this approach is that it disincentivizes research, which is why legal systems widely recognize patents, copyright and intellectual property.
I looked into Shkreli's case a bit deeper, and he was a stupid kid of course, but it's what comes to mind when thinking of 'raising prices' of medicine, there's not many faces to that idea.
That said, I'm not saying that prices SHOULD be hiked, just that I'm not convinced that medicine pricing should be cost based, or that it should be value based, or that some supply-and-demand principle would magically find a value in the middle. I'm just saying that it can be either way, and I just don't know which way it ought to be.
And ultimately, it's a decision that every actor in the industry can make, what they price their products and time at. And to reiterate my thesis, pricing your product as cheaply as possible might counterintuitively reduce it's impact, since there is no incentive for intermediaries (or even yourself) to work on it. So I'm not saying that prices should be maximalized either, just that the relationship between price and value contributed to society is not linear, if you price your medicine at 0, you go bankrupt, that's not helpful obviously, and evidently pricing a CT scan and a heart attack pill at 100$ is not cutting it either, hike that up.
>I don't quite get the difference, patients pay a fixed amount for insurance, hospitals charge "fee for service" to the insurance. Both systems coexist, it's not one or the other.
I think their reference to "per capita" here is referring to a capitated payment structure where a provider organization is given a fixed amount per patient up front instead of billing for every service they provide. The software analog would be something like a flat subscription fee vs usage-based billing. While it's not the default in the US, it theoretically encourages providers to provide cost-effective care rather than just racking up bills on unhealthy patients.
The mechanism here is who bears the financial risk. The model you're familiar with is one where the payer (commercial insurance or medicare/medicaid) is the risk-bearing entity. They want more cost-effective care so they can protect their margins while the provider is incentivized to push a high volume of expensive care so they can boost their margins. Don't have it handy but the data on this shows providers are winning this battle with healthier, growing margins vs insurance companies whose margins generally aren't great.
Insurance companies generally have regulated profit margins. Healthcare providers don’t. However, note that this is all percentages — if the total cost of healthcare goes up, providers and insurance companies both win in absolute dollar terms.
Yeah absolutely re regulated profit margins (indirectly through MLRs - their actual margins are way below the cap due to expenses) but that only reinforces my point that providers are having more success growing their margins (on a relative basis, anyway).
Great point on bigger pie increasing both shares. I didn't mean to imply it's zero sum.
Oh the irony of MLRs encouraging insurers to provide terrible service (opex recovery boosts profits) and let providers push fees ever upward (bigger pie, bigger premiums, bigger net profit on constrained margin).