Well, of course they (often) come out ahead (the ones that don’t end up going out of business). The way they do that is by charging enough for their services to cover the expense of whatever health insurance they provide. But that means that the people who contract with them are paying for that much health insurance. It’s not broken out as a separate item: *HEALTH INSURANCE. But it’s still there in the total.
My personal preference in health insurance would be to have substantially less than what is now supposed to be the legal minimum. I want insurance for catastrophic expenses like surgery or a major illness. But for routine health care, or occasional larger procedures that aren’t catastrophic, I’d rather pay out of pocket. That way I’m not paying the administrative overhead of having my money go to an insurance company that then sends it to a care provider. And back when I did pay out of pocket, I regularly had providers say, “Oh, no insurance? We’ll give you a discount!”—presumably because dealing with insurance companies imposes costs on them as well.
Unfortunately, insurance often works exactly the reverse of that way. I had optional dental insurance for a year or so, as part of my Medigap policy (a private policy that supplements Medicare). But then I had dental expenses, and I discovered that my dental insurance paid the first thousand (which I could have paid on my own) but paid nothing toward anything past that (which was where I might have actually wanted insurance and benefitted from it). That is, it did nothing that was any use to me. So I cancelled the dental and optometric parts of the policy and will never use that option again.
There is a common tactic in pricing to have a discrepancy between list price and discounted price. As a product manager, I have to account for discounting in my pricing models and margin calculations. Procurement departments demand discounting (it’s now they get measured), so we bump up the list price so that we can give a discount. You see the same effect with retail stores who are always having sales. When JC Penny’s got rid of the sales and just lowered their “everyday pricing” to match, they lost customers. Even though the customer was paying the same amount, they weren’t getting a discount, so they went elsewhere.
I’m sure healthcare and insurance companies have similar considerations. The healthcare provider lists a procedure as $100. The insurance companies have negotiated an 80% discount, so it only costs them $20 (and costs the patient nothing (I’m ignoring co-pays)). For the uninsured, they give a 25% discount because the actual market value for the procedure is $75.
I don’t think I follow the reasoning. Let’s say the actual market value is $75. Then if an uninsured person pays $75 and insured people pay $20, the average is going to be less than $75, probably much less; if 80% of patients have insurance, it will be $31, for example. It appears not only that no one ever pays the list price, but that the average is a lot lower than what you are calling the “market price.” So what does market price mean? It seems strange to say that insurance companies aren’t part of the market when they’re the majority of purchasers.
And also, it seems as if you’re saying that health care providers have an incentive to tell out of pocket purchasers they’re getting a discount, because people will say, “Oh, that test is discounted to $75 from $100? I’ll have it!” when they would say “Oh, that test is $75? No, I can’t afford it.” Most people who discuss medical expenses seem to think that they are far less optional then that—that what health care people purchase has very sensitivity to price (in economic language, I think it would be called inelastic). I’m not saying that they’re right, but I’m saying that you seem to be viewing health care more as a commodity than most people do.
Here, I’m assuming the “market price” is what an uninsured consumer with the option to shop around for the price is. Insurance companies operate on their own model, where they purchase in bulk, at much lower margin to the health care provider, but profit is made by the health care provider through volume. This is a greatly simplified model from someone not in the healthcare industry.
Mod voice: OK, let’s see if this works; people can at least ignore it more easily if it’s its own topic. And the whole thing can be killed quickly if needed.
I don’t think I ever worked for an agency that provided health care (for an affordable price, at any rate). And since they did not need to pay for insurance, I’m sure the agency was making bank on its workers.
You remind me of my favorite economics joke: “We lose two dollars per unit sold, but we’re making up for it in volume!”
Okay, I’ll stipulate that terminology, though it’s not how I would divide things up.
I can see two theoretical models here. In one, the insurance companies have total monopoly power, and can just dictate the price, subject to the providers saying, “No, sorry, we can’t even offer bilateral orchidectomies at that price.” In the other, the insurance companies are influenced by the providers, so the providers have some incentive to set a list price that will make the insurance companies think they need to offer the highest extractible payment. Since most health care is covered by insurance, the list price will be determined by that.
Then the size of the discount would possibly be influenced by how much is saved by not having to deal with insurance companies (and wait for them to pay up!).
I’m saying all this speculatively, by the way; I haven’t actually worked in this area, or studied health economics academically.
On a different topic, I would note that in dealing with cell phone providers and the like, my habit is to ask, “How much will I be paying after the initial discount stops applying?” And then I base my decisions on that, not on the startup price. If they won’t tell me the regular price, I’m less likely to deal with them, because I don’t trust them to be honest.
I am waiting for a response to my inquiry about whether ethics is an allowable topic for discussion here. But until then, let me simply say that not everyone agrees about ethics. By the ethics I believe in and live by, what you are saying is not only wrong but an active plea for evil. You should not assume that “ethics” is a subject on which everyone shares your views.
This is one area where US healthcare providers (I’m talking hospitals here, not clinics for elective procedures) are notoriously opaque or labyrinthian. People end up getting charged $30 for single aspirin during an ER visit or hospital stay.
You’re right, it is a personal view on ethics, and I should not assume that everyone want to have that debates, or that it is a common and shared view by all.
With my mod voice explicitly not in use, my personal feeling is that there are many, many other places for political talk and I don’t want this to become like the cesspits that they are. But hey, surprise me.
Let me say, first, that I am willing to state my own views on ethics, if that topic is allowed. But, second, that I have a high degree of confidence that what I think about ethics will be controversial, based on past experience; I don’t anticipate that it will lead to our finding common ground.
Well, okay, I’ll try to give a coherent brief summary of my ethical and meta-ethical outlook. But I’m going to wait a while and think about it, rather than jumping in in haste.
I actually really agree with the fact that there are other place to discuss this kind of topics.
Here is what I’m suggesting, as an idea to try and see if we can make this discussion both civil and respectful of other. Could we try to make a private thread, via message, and when we feel we both finished talking, we can see if it would be valuable to make it public? And we could invite other people on the private thread who are willing to have a discourse ?
For the moment, let me say, “Maybe; let me think about it.” My concern is more with time required than anything else; if you don’t mind a slow pace it’s less of an issue.
Let’s think about it. But for the record, I really don’t mind the slow pace. I also think if we should start the thread on the basis that we are in disagreement, and that we both want to share why we care about our belief more than we want change the other one mind. Also, we should feel free to let the conversation die if one of us just stop responding, without feeling we “won” the conversation.