Price and Quality in medical setting
Posted by BCRinFremont 4 years, 5 months ago to Economics
I saw a news item today about requiring hospitals to disclose prices and I began preparing a long and drawn out economic analysis of price, quality, and results expected. Instead of posting what could be a doctoral thesis in economics, I would like to present a small template to the masters in Galt’s Gulch and see if anyone will end up where I ended up. Here goes!
Let it be given that healthcare is a Right. (Analysis without this “given” is also acceptable and maybe necessary.) Please address the following 4 scenarios:
1. High priced care with bad outcomes.
2. Low priced care with bad outcomes.
3. Low priced care with good outcomes.
4. High priced care with good outcomes.
The question posed is, “How will a healthcare system settle starting with equal amounts of these 4 types of care?”
This is kind of like determining the number of rabbits it takes to have a healthy fox population.
Let it be given that healthcare is a Right. (Analysis without this “given” is also acceptable and maybe necessary.) Please address the following 4 scenarios:
1. High priced care with bad outcomes.
2. Low priced care with bad outcomes.
3. Low priced care with good outcomes.
4. High priced care with good outcomes.
The question posed is, “How will a healthcare system settle starting with equal amounts of these 4 types of care?”
This is kind of like determining the number of rabbits it takes to have a healthy fox population.
1. High priced care with bad outcomes will become higher priced care with even worse outcomes.
2. Low priced care with bad outcomes will become higher priced care with even worse outcomes.
3. Low priced care with good outcomes will become higher priced care with even worse outcomes.
4. High priced care with good outcomes will became higher priced care with even worse outcomes.
:) See the pattern? If government forces prices down - outcomes will be even worse as the incentive will be removed to do better.
But, without know in what ways and how much the government would interfere hard to tell. As they have done thus far - I still think higher prices and worse service. But if they lift a heavier hand than they have to this point in forcing prices down - I think we will have our own 3rd world medicine - if not worse.
Forced lower prices will kill R&D and qualified medical staff. It will drive the qualified people out and cause shortages then long delays to get any quality of care.
Pretty much - read Atlas Shrugged.
Without knowing the real costs involved at every level from top to bottom - no one can make any rational decisions about what is too much at what point. Those running their businesses have to make those decisions and the free market has to let them compete - which is currently not the case. In other words. If a convenience store sells gas - even it they are not regulated themselves, but the fuel producers are - then the effect of government intervention cascades to the convenience store. The current health care system is so filled with regulatory interference that we really have no idea what the expenses of healthcare really are. The overhead I'm sure is insane. Depending on ROI on equipment, the many insurances that must be paid, wacko judges awarding insane payouts if frivolous cases, the R&D costs (including FDA regulation and related costs) can drive normal prices through the roof.
I always say - unless you are the business owner and know the details of the finances and the decisions behind them - it is not reasonable to assume any knowledge of why they have the prices they do. Someone glancing in from the outside has no bases for any opinion of the actual prices charged. You must know more.
My thoughts: In our universe, there is no steady state that lasts for very long. No matter how price and quality are distributed, people will be migrating from one category to another. Supply, demand, policy, rights, etc. all have effects on the way the categories are distributed.
The answer to the economic question is, “There is no steady state.”
The answer to “Is Healthcare a Right?” is only one input to this black box.
That fundamental is not "only one input" in a rationalistic "black box", which is not the proper way to think and analyze at all.
One can look at the economic consequences of government actions, including its mandatory entitlements. But it requires thinking in essentials, in terms of what one knows to be true. One cannot rationally discuss anything by starting with an assignment of "Let it be given" some fundamental premise one knows to be false and why, with restriction on thinking to arbitrary classifications as "scenarios". The problems with arbitrariness and rationalism are much deeper than "there is no steady state", which everyone already knows.
I am confused by the question. You describe a matrix of high/low healthcare price/quality. You ask how will a healthcare system settle.
This is hard to think about because I don't think of healthcare as a right or a system. I can set that aside for the purposes of the question. I can imagine a hypothetical where gov't taxes people more and buys a bunch of healthcare at various price/value points on your matrix. That's no stretch to imagine. But then what is the economic question about how that will settle out?
Of course you can't do that, because your concepts of rights are grounded in reality and treating it otherwise demands rationalistic thinking that is not.
The consequences of a government decree of forced entitlements can in principle be examined, but not in terms of ideas one knows to be false, isolated from the moral requirements for human life. The health care entitlement he implicitly assumed is shear immoral, socialized medicine where rights to private, voluntary production and trade of health care are legally prohibited. That's worse than government interference taxing people more and "buying" health care for redistribution. The "economic question" of where it "settles out" is pure destruction in a system in which there are no"prices", high or low, only imposed costs, because trade is prohibited.
It is worse than in your first post.
It may be assumed that your children are capable and hard working (let them deny it).
A lot will be expected from them, then it will be demanded.
Then they will look round and see those less capable,
and certainly less hard working living well, but consuming what others produce.
They will look round again and decide to shrug, it may be too late,
the power structure has been set, the swamp entrenched.
It won't last for ever but unlike in AS, history tells us it can take decades for collapse.
Thanks!
preamble....."unalienable right to life, liberty, and the pursuit of happiness".
The Declaration reaffirms a common principle of rights of man as freedom from government, broadly accepted at the time, but does not say in any detail what they are or why. It does not come "close" to endorsing anything like a "right" to health care or any other entitlement, but that doesn't stop the left and what they believe either.
Telling collectivists that they can't impose their entitlements because the Constitution doesn't let them is only a temporary legal-political answer that doesn't stop them. They are operating on a deeper level and seek to change the fundamental form of government in implementing their collectivism. They are already doing that and propose to do much more. Citing the form of government that was created in the 18th century is not an answer to that.
The Declaration and the Constitution based on it came from the Enlightenment, and the left represents the counter-Enlightenment seeking to overthrow all of it philosophically, not just politically. With no commonly understood philosophical defense of the rights of the individual they have been succeeding.
Appeals to the form of the original founding government in arguments from "tradition" are fundamentally not an answer to the left. Ayn Rand provided the philosophical defense required in her explanation of the source of morality in the nature of man as recognized as the rational being, and the principle of rights as a moral concept on which a proper government must be based.
You wrote that "No reference to health care can be found in the Constitution. The closest we can get is in the Declaration of Independence". The Declaration isn't "close" either, but it would make no difference if they could be strained to imply such a "right": the premise would still be false, and whatever they say is no obstacle to the false moral arguments from the collectivists.
Ayn Rand didn't count on political documents, no matter how good or mixed, as a basis for her political philosophy. In contrast, the conservatives' appeal to the Constitution and tradition as the starting point is hopeless in a moral argument.
And who is the hit and run cowardly jerk who is systematically 'downvoting' all of my posts? This is supposed to be an Ayn Rand forum, not a hangout for militant, anti-Ayn Rand conservatives filled with personal hostility.
Jan
Jan
Every one who sells something has the problem of needing to increase base prices in order to compensate for non-payers and problem-children. It can be done, and it would benefit the patients, but it requires Change...the dreaded Change!
Jan
Some pre-calculation is already done, such as in standardized inflated billing for standard items. But they have no way of knowing in advance what all the billable actions will be -- including inflated costs for doctors you never heard of briefly sticking their heads in the door and claiming to be assessing medical status.
Prices cannot be used for information because there isn't much left of a market, it's all controlled and arbitrary with unlimited rules and bureaucratic decisions. If hospitals couldn't 'work the system' to get what they can through their own per-patient 'flexible' pricing they would not survive in this system.
1) The Surgery Center in Oklahoma City posts all of its prices for surgical procedures online. The only kind of insurance it accepts is that of a self insured corporation, cutting the government and insurance companies out of the process
2) Direct Primary Care, where the patient is a subscriber, paying a monthly fee directly to the physician for basic care. The fee covers non-surgical outpatient treatment, vaccinations, physicals, and related tests. Often the physicians will offer prescriptions at their cost, which is often less than the copay under insurance programs. Fees run from $50-250 per month, depending on the location and services offered.
3) Reimbursable catastrophic insurance coverage, to cover hospital and surgical costs paid by the patient. Hospitals and surgeons will frequently offer special lower cost to the patient for saving them the burden of dealing with insurance companies.
Capitalist society:
1. Outcome is going to be largely based on resources (equipment, medicine, facilities) which are expensive. I think it is reasonable to assert that level of care is going to be largely analogous to resource allocation. As resource allocation is largely going to respond to typical market forces of supply/demand.
2. Costs will be analogous to resource usage but with a premium for physician expertise.
3. Resource availability will largely adhere to capitalist principles - primarily scarcity and cost of exploitation. Intellectual property laws (patents, etc.) may also factor in.
Socialist society:
1. Outcome is going to be based on artificially constrained and undervalued resources.
2. Costs will be and abstracted from those who utilize the service, resulting in higher overall costs and burden-shifting.
3. Resources - especially expertise - will divert elsewhere, further constraining a critical supply.
4. Demand will increase due to lack of market feedback regarding cost of service.
Of these two scenarios, only the first has a chance of being stable. The second must necessarily snowball out of control due to the inherent feedback mechanisms.
"Let it be given that healthcare is a Right." False given that skews and falsifies any discussion. Health care is not a right nor can it ever be. It is a privilege that has to be created by man. It isn't "endowed" by anything.
Insurance reduces the feedback to near zero. Must health insurance coverage be limited by law? When life vs death is part of the equation, can market forces be adequate to balance supply and demand?
1) Decades ago my employer, who was a major employer in my area, did not offer dental insurance and a standard clean and polish was about $22. Then my employer, rather than giving us all a raise that the IRS would cut into, gave us a "free" dental plan. The plan would pay up to $22 for a clean and polish. Sure enough, within a year a clean and polish cost $44, of which $22 was from the insurance company and $22 from a patient copay. Several years later, the insurance covered up to $44 and sure enough a clean and polish bumped up to $80. The same applied to other dental procedures.
2) Right down the street from the hospital where my father-in-law had to stay for a few days is a Dollar Tree where you can buy a small bottle of aspirin (or other NSAID) for a buck. The hospital had strict rules against anyone bringing their own medication so the Dollar Tree as an inexpensive NSAID source was out. However, the hospital administered an aspirin tablet each day and billed the insurance company $150 for the pill. No copay required.
3) The legal system maintains an enormous cash flow from suing the hell out of the health care system. Don't worry, insurance companies carry the load. Remember the famous $500 haircut for John Edwards? He made his fortune sucking the fat moo cow of the health insurance industry in the state of Georgia. The blue collar worker in Atlanta paid his/her $500 monthly insurance premium, but Johnny boy got his hair cut before the worker got an aspirin. Did you notice the big elephant missing in Obamacare was tort reform?
You are so correct, FFA! The entire feedback mechanism is broken. How to fix it seems to be above my pay grade, but I know "it ain't right" in a lot of ways.
At least I recalled the ambulance chaser part right, LOL!
Grass-root Socialists feel that government can fix any problem regardless of how irrational the solution. Socialists in power know better but they are sociopathically addicted to power.
But I asked the question in search of a workable solution.
I don't have one, but I know that forcing the young and able to pay a fortune for insurance that they do not need (and thereby increasing the costs of medical care) is the wrong answer. It only works to enrich those who provide medical services beyond their value, while taking funding away from other more immediate issues including research to solve the medical problem of aging itself. If everyone is given a blank check to keep their loved ones alive for a few more years the demand for that service will exceed supply and foolish waste of resources must occur.
Is this pro-bono healthcare? Not really, because that dirty poorly dressed person is hypothetically 'me'. Maybe I was replacing a fence on my property (hence poorly dressed and dirty) and I have to make a trip to Home Depot to get something I inevitably forgot or ran out of. I do not feel well, step out of my car (leaving my purse behind), stagger a couple of steps and then pass out. I have medical insurance, but I do not have it 'on' me at the time I am found.
So, in order for me to be safe in our society, I have to endorse that hospitals take care of homeless people...because they are indistinguishable from me-building-fences.
I actually think that there should be a minimal healthcare safety net, intended for people without insurance, and I would be willing to pay for that because it would also catch me under the abovementioned circumstance.
Jan
I would not want to run a hospital and try to keep it afloat.
When I go to my PCP who charges $206 for a visit, he actually gets less than $26 from medicare- regardless of what he bills.
Welcome to the age of socialism and its results !!
But burying hospitals and everyone else in impossible bureaucratic paper work with heavy fines for not complying with subjective rules interpreted on the fly by the bureaucracies is not impossible. In that they will succeed.
The worst part is that (in the industry we are discussing) costs exist and are high even if no actual medical health care is done, fixed costs. The major driver of fixed costs is activity required by government. When costs are fixed, and income is variable - that is if you do no medical health care, there is no income, it is a challenge for management, there are no accounting rules to give answers simply as the amount of work is not known, and it varies with price. What is certain is that the higher the ratio of fixed to variable costs, the more difficult it is for small businesses to compete and for newcomers to enter.
Government required compliance activities lead to costs to the business which are hard to relate to any particular service or customer. Only big players can survive. Prices creep up. The result is cosy arrangements between the corporation, the unions, the regulator, and government.
Fair, humanitarian, socialistic policies have attractions on some levels. Those who are attracted are the least able to follow the chain that inevitably leads to inefficiency, opaque pricing, high costs, and so to unfairness and exploitation by favored groups.
The "cozy arrangements between the corporation, the unions, the regulator, and government" you refer to was exemplified on a grand scale in the attempt to impose Hillary's Clinton care in the 1990s: The insurance companies were secretly collaborating with her to carve up the country into regions they would be granted to run under government control.
Fixing the health care mess requires getting rid of the controls, not blaming it on doctors and hospitals while adding more mandates to make them behave. But they are not blameless either -- they don't fight it as they go along, making themselves part of the problem fundamentally caused by the intellectuals they don't challenge. including the notion that there is any such thing as "fair, humanitarian, socialistic policies".
My understanding is this was a campaign promise from President Trump. Someone in the administration has a brain and kept the promise. Hospitals buried it in hard-to-read tables. The gov't, I think due to another initiative from the Trump administration, made them make it more clear. These are very good steps.
https://www.galtsgulchonline.com/post...
Here are my guesses about how a gov't plan would compared in the short run:
Compared to Medicare: similar prices and similar outcomes
Compared to a free market "non-system": way higher prices and worse outcomes, except for people who have treatable conditions they can't afford to pay for
Compared to HMOs: similar costs, similar outcomes
Compared to PPOs: lower costs, slightly worse outcomes
In the long-run, the gov't plan would have worse outcomes compared to all of these due to less incentive to develop expensive innovations for early adopters. I'm sure Senator Warren has got a plan for that, but no central plan can substitute for large numbers of suppliers and consumers making little decisions for themselves.
I say most of the plans have similar outcomes not b/c the gov't would do a good job managing people's healthcare, but because people are smart. People will wisely work the system to get the things that they can from it and go around the system for everything else. The system would save the lives of some who wouldn't have their act together under freer systems and might take the lives of people who can't find away around the system. But many people find their way around the gov't, as they do in buying recreational drugs, sex, and undocumented labor.
"Medicare for all" is comprehensively designed to eliminate the current possibility of avoiding the worst of the current government interference. Canadians escape the worst only by leaving the country for health care.
People trapped in the Soviet Union cynically "worked the system" the best they could but could not remotely achieve what is possible under freedom. They were trapped with limited choices in what they could do, legally or not. Getting away with something under dictatorship comes with its constant, oppressive built in punishment whether or not anyone "gets away" something. It becomes worse under totalitarianism.
People do not thrive in spite of controls, and mostly do not even fight back, motivated by the increased oppression. They become accustomed to the new level of deprivation as they sink into cynicism and despair.
The dismissive most would find a way to "get around" it, while "The system would save the lives of some who wouldn't have their act together under freer systems and might take the lives of people who can't find away around the system", is shear evil. It shows no concern for morality and the rights of the individual or the requirements of freedom of action for human life. If you are killed by government restrictions leaving you with no way to fight it doesn't matter how many others "got around it", and whatever is still possible for "getting around the system" does not excuse what it takes to do it.
To claim that people will find some way to "get around" the controls is "You'll do it somehow, Mr. Rearden", applied to everyone. The moral is the practical. Increasing collectivism is not "similar in outcome", not practical, and not moral; it is destructive and pure evil.
The original 1990s Clinton-care, Obama-care, and the latest escalating Democrat socialized medicine "medicare for all" schemes are morally and economically horrendous. People are not "smart enough" to get around totalitarian government brute force with a sweeping "you'll do it somehow Mr, Rearden", aimed at all of us.
Force and mind are opposites. The Democrat dictatorial, collectivist brute force is intended by design through government coercion and weaponry to overwhelm and prevent every individual, no matter how "smart", from thinking and acting on his own behalf, with massive penalties for trying to "get around" their evil intent.