It doesn't really have anything to do with the insurance companies. Their margins on paper aren't that great, and even if those margins are bigger than they look, it's probably not a big difference one way or the other.
Still, cost can be put under control. Here in the "outside world", we mostly have universal government funded care with country to country agreement for travelers and people living outside of their origin country boundary.
This is not "free", far from it, but, first, by taking no margins and then having tougher cost review for infrastructure/equipment purchase help reduce the cost. Then using generics drugs instead of branded ones by default also help. Remember, many hospital and doctors have official or under the table deal with private providers.
Then there are side benefits. People live longer and healthier. Their kids don't have to live in fear of having to spend 100k$ if their parent felt ill. My grand mother (91 years old) broke her arm and pelvic bone a few weeks ago. Of course, at her age, it wont heal, so it had to be replaced. How much would it cost in the US? 200 big ones (including a month or so of hospitalizations, the 2 surgery, the drugs and follow up). How much stress would it put on my family on top of the accident?
At some point, even for those who can pay, some level of social security, both health and monetary one reduce uncertainty and reduce crime rate. To some point, I understand US mentality on this. I tried to create startups a few times, it seem a lot harder here than everywhere else. It is not even socially acceptable to both succeed and fail. If you succeed, then you are a greedy asshole and if you fail you are a loser. But even giving that, I still think having universal health care and the other "big government" goodies is a good thing.
Other countries also have old people, and I don't have any reason to think that doctors and hospitals are more expensive in the USA than they are elsewhere.
> I don't have any reason to think that doctors and hospitals are more expensive in the USA than they are elsewhere
They definitely are. Doctors in the U.S. make more money. Drugs are more expensive, partially because the U.S. subsidizes R&D for everyone else. Hospital construction in the U.S. is insane in the major systems. They're "spare no expense" affairs, very different from the utilitarian facilities you used to find in the U.S. in say the 1970's and which you still find in the U.S. today.
No, not really. My american, pediatrician drove a beat up Subaru. Doctors is a pretty big field that covers GPs (PCPs in the US), surgeons, anaesthesiologist, etc. Surgeons make a lot of money in the US and everywhere, but your typical GP is not ballin'. I'd even say doctors in other western countries make more because no student loans and no malpractice insurance means their take home pay is higher.
Drugs are more expensive, partially because the U.S. subsidizes R&D for everyone else.
This list http://en.wikipedia.org/wiki/List_of_pharmaceutical_companie... has the top 2 drug companies being in the US and 3rd, 4th, and 5th are european. The US does subsidize the worlds R&D in erectile dysfunction research ;-). There are plenty of drugs that have been approved elsewhere that haven't been seen in the US.
tptacke's comment notwithstanding, I have a pediatrician friend who points out that among doctors, pediatricians are the lowest paid. This might be biasing your anecdote here.
It's the second and third vacation homes of the insurance/hospital administrators, equipment/drug suppliers, and doctors/surgeons you are paying for, not the hospital itself. The hospital itself is often getting massive tax breaks and other funding.
The problem is US health care is for-profit and the "American way" is that there is absolutely no limit on that profit, so they charge whatever they want.
"They charge whatever they want" is only the first half of the American way. The second half is that because its "whatever they want" someone else can cruise on up and "want" to charge $10 less and take all of the business.
The broken part is that they charge whatever they want and then stop anyone else from being able to charge less. If you do the first half, but not the second, its very much not the American way.
But the entry cost is prohibitive and create an oligopoly. So, no, they wont charge 10$ less. They can handle a limited number of patients and have an increasing potential market with median age increasing. It is basic offer, supply and demand. If it was only offer and demand, then yea, they could charge less, but they have an hard limit on the number of bed they can fit versus building+workers cost.
Where these exist (most states) you'll have a hard time opening a new facility whose purpose to charge less than the incumbents. (In theory they'd have to charge more to make up for the business you take away so you'll be raising prices.)
Thanks for pointing that out. CONs are a fascinating rabbit hole of government regulation. They try to lower prices by doing exactly the opposite of the actions that usually lower prices. Only a regulator could think that restricting competition would force prices down.
Also consider car dealerships where there is all sorts of special regulation, and even prevention of manufacturers selling direct to the public. (See litigation against Tesla for more details.)
Heck in California (I don't know about other states) the sales tax is paid based on the purchaser address, not the address where the sale takes place like for other goods.
Or how foreigners aren't allowed to own more than 50% of an airline.
For a land of free business, there is an awful lot of protectionism going on.
Much of the health care system isn't for-profit, but that doesn't stop money from getting spent. When I lived in Chicago, the local hospital was Northwestern Memorial, which is a non-profit hospital attached to a non-profit university. But the university owns literally 5-6 city blocks of prime Chicago real estate (tax free, of course). It's interesting to note that between 1972 and 1994, there was no new construction on the Northwestern Memorial campus. Then in 1999, two huge new buildings went up, then a women's hospital in 2007, a new children's hospital in 2012, and a new outpatient facility is slated to open in next year. These are each $350-500 million high-rise buildings. And these aren't utilitarian buildings of the kind that were pervasive in the 1970's. They're nicer than most F500 headquarters.
Comments
It doesn't really have anything to do with the insurance companies. Their margins on paper aren't that great, and even if those margins are bigger than they look, it's probably not a big difference one way or the other.
The major costs here are two-fold: 1) old people 2) doctors and hospitals (those huge, beautiful new buildings aren't free: http://www.feinberg.northwestern.edu/gfx/news/2012-year-revi...)
Still, cost can be put under control. Here in the "outside world", we mostly have universal government funded care with country to country agreement for travelers and people living outside of their origin country boundary.
This is not "free", far from it, but, first, by taking no margins and then having tougher cost review for infrastructure/equipment purchase help reduce the cost. Then using generics drugs instead of branded ones by default also help. Remember, many hospital and doctors have official or under the table deal with private providers.
Then there are side benefits. People live longer and healthier. Their kids don't have to live in fear of having to spend 100k$ if their parent felt ill. My grand mother (91 years old) broke her arm and pelvic bone a few weeks ago. Of course, at her age, it wont heal, so it had to be replaced. How much would it cost in the US? 200 big ones (including a month or so of hospitalizations, the 2 surgery, the drugs and follow up). How much stress would it put on my family on top of the accident?
At some point, even for those who can pay, some level of social security, both health and monetary one reduce uncertainty and reduce crime rate. To some point, I understand US mentality on this. I tried to create startups a few times, it seem a lot harder here than everywhere else. It is not even socially acceptable to both succeed and fail. If you succeed, then you are a greedy asshole and if you fail you are a loser. But even giving that, I still think having universal health care and the other "big government" goodies is a good thing.
Other countries also have old people, and I don't have any reason to think that doctors and hospitals are more expensive in the USA than they are elsewhere.
> I don't have any reason to think that doctors and hospitals are more expensive in the USA than they are elsewhere
They definitely are. Doctors in the U.S. make more money. Drugs are more expensive, partially because the U.S. subsidizes R&D for everyone else. Hospital construction in the U.S. is insane in the major systems. They're "spare no expense" affairs, very different from the utilitarian facilities you used to find in the U.S. in say the 1970's and which you still find in the U.S. today.
Doctors in the U.S. make more money.
No, not really. My american, pediatrician drove a beat up Subaru. Doctors is a pretty big field that covers GPs (PCPs in the US), surgeons, anaesthesiologist, etc. Surgeons make a lot of money in the US and everywhere, but your typical GP is not ballin'. I'd even say doctors in other western countries make more because no student loans and no malpractice insurance means their take home pay is higher.
Drugs are more expensive, partially because the U.S. subsidizes R&D for everyone else.
This list http://en.wikipedia.org/wiki/List_of_pharmaceutical_companie... has the top 2 drug companies being in the US and 3rd, 4th, and 5th are european. The US does subsidize the worlds R&D in erectile dysfunction research ;-). There are plenty of drugs that have been approved elsewhere that haven't been seen in the US.
Don't bring an anecdote to a gun fight, or something like that:
http://economix.blogs.nytimes.com/2009/07/15/how-much-do-doc...
(US GPs make sharply more than those in Europe).
And as pointed out in the last paragraph. The table excludes cost of education and malpractice insurance.
tptacke's comment notwithstanding, I have a pediatrician friend who points out that among doctors, pediatricians are the lowest paid. This might be biasing your anecdote here.
It's the second and third vacation homes of the insurance/hospital administrators, equipment/drug suppliers, and doctors/surgeons you are paying for, not the hospital itself. The hospital itself is often getting massive tax breaks and other funding.
The problem is US health care is for-profit and the "American way" is that there is absolutely no limit on that profit, so they charge whatever they want.
"They charge whatever they want" is only the first half of the American way. The second half is that because its "whatever they want" someone else can cruise on up and "want" to charge $10 less and take all of the business.
The broken part is that they charge whatever they want and then stop anyone else from being able to charge less. If you do the first half, but not the second, its very much not the American way.
But the entry cost is prohibitive and create an oligopoly. So, no, they wont charge 10$ less. They can handle a limited number of patients and have an increasing potential market with median age increasing. It is basic offer, supply and demand. If it was only offer and demand, then yea, they could charge less, but they have an hard limit on the number of bed they can fit versus building+workers cost.
Who is stopping anyone from charging less?
http://en.wikipedia.org/wiki/Certificate_of_need
http://www.ncsl.org/issues-research/health/con-certificate-o...
Where these exist (most states) you'll have a hard time opening a new facility whose purpose to charge less than the incumbents. (In theory they'd have to charge more to make up for the business you take away so you'll be raising prices.)
Thanks for pointing that out. CONs are a fascinating rabbit hole of government regulation. They try to lower prices by doing exactly the opposite of the actions that usually lower prices. Only a regulator could think that restricting competition would force prices down.
Also consider car dealerships where there is all sorts of special regulation, and even prevention of manufacturers selling direct to the public. (See litigation against Tesla for more details.)
Heck in California (I don't know about other states) the sales tax is paid based on the purchaser address, not the address where the sale takes place like for other goods.
Or how foreigners aren't allowed to own more than 50% of an airline.
For a land of free business, there is an awful lot of protectionism going on.
Much of the health care system isn't for-profit, but that doesn't stop money from getting spent. When I lived in Chicago, the local hospital was Northwestern Memorial, which is a non-profit hospital attached to a non-profit university. But the university owns literally 5-6 city blocks of prime Chicago real estate (tax free, of course). It's interesting to note that between 1972 and 1994, there was no new construction on the Northwestern Memorial campus. Then in 1999, two huge new buildings went up, then a women's hospital in 2007, a new children's hospital in 2012, and a new outpatient facility is slated to open in next year. These are each $350-500 million high-rise buildings. And these aren't utilitarian buildings of the kind that were pervasive in the 1970's. They're nicer than most F500 headquarters.