|
|
 |
Some Thoughts on Healthcare |
 |
1
 |
failsafe United States. Aug 23 2009 19:56. Posts 1040 | | |
Just read a bit of ToTheEastSide's blog and thought I'd post some of my thoughts on the current health care debate in the US. This is a general complaint from my morose mind and hasn't got much to say about the politics of the situation. This is also too long to probably interest many readers, but I think it's simple and easy to argue for or against.
Not only is insurance causing pricing problems - medical insurance, at least as it exists today, doesn't even make sense. Insuring against buying monthly medication is pretty much the same as insuring against buying groceries. The whole point of insurance is to avoid variance, something poker players know a lot about. Example: if we summarize your yearly income from poker as being either 10BB/100 or -10BB/100, with an 80% chance of 10BB/100 and a 20% chance of -10BB/100 then your EXPECTED win rate for the year is 6BB/100. Remember, we're supposing that at the end of the year you will either come out at 10BB/100 or -10BB/100 and that (unlike the real life) no other option is a possibility. Would you, knowing that your EV was 6BB/100, be willing to pay a .5BB/100 premium to LP.net Insurance in order to ensure that your win rate was 5.5BB/100 for the year?
That's how insurance works: You insure against the possibility of a low-probability, high-impact event. You don't insure against relatively low-impact certainties. You don't insure against buying groceries. We shouldn't insure against monthly medication. Why are you paying a premium to medical companies on top of what you're already expecting to pay?
Insurance has other problems. It creates a lot of fucked up incentives. With a typical insurance company, we have copay (for simplicity's sake I'll ignore other types of insurance, but the principle is basically the same for coinsurance, etc.) Suppose my copay is $25 for any medication I buy. Medical corporations can now price their $35 product at $125 and yet no matter what they price it, demand from the insured is the same because copay is only $25. The whole concept of quantity demanded as a function of price goes right out the window. Profit-maximizing firms are incentivized to raise their prices.
Suppose then that not all of the population is insured. Insurance companies are gonna say "fuck the uninsured demand, I'm raising my prices. I can sell my shit at $125 where I used to sell it at $35, and people [the insured] will still buy it exactly the same as before." In other words, the insured have an extremely inelastic demand cure, meaning they will continue to purchase the medication is though it were $25 even as prices skyrocket. So, given that fact, medical corporations have an incentive to raise prices regardless of the uninsured demand because it benefits them to sell less product (also meaning less costs associated with production) at a substantially greater price. This whole phenomenon forces some of the uninsured to consider purchasing insurance just so they can afford the extreme prices of monthly medication.
Obviously this is a vicious cycle.
Another consideration with regard to insurance is the consumption of doctors' labor. The AMA already has a stranglehold on the number of doctors being licensed so in the USA we already have too few doctors to be called socially efficient. Couple the shortage of doctors with the copay example of how prices rise due to insurance. The price of a doctor's time, already artificially high because of the AMA's licensing procedures, is further increased by the fact that copay pays for all but $25 of a doctor's visit that can range into triple digit prices. Doctors prices are pushed higher, making them unaffordable to the uninsured while the quantity of doctor's labor demanded by the insured remains unchanged. We can imagine some unsavory, if not unlikely results: Suppose that before the introduction of insurance, a doctor's visit was relatively expensive, and suppose that once insurance is produced, a large fraction of the population purchases insurance. Then the quantity demanded for doctor's labor may actually increase due to the introduction of insurance meanwhile, because of the copay system, prices charged by doctors skyrocket. This means that not only will there be a shortage of doctors' labor, but that the condition will persist perhaps completely unchanged in spite of prices becoming incredibly expensive.
Do I think there should be medical insurance? Yeah, for stuff that doesn't happen often and is hugely expensive; not for routine check-ups or monthly/weekly prescriptions.
Sadly, insurance isn't the only problem with medical markets.
The very nature of medical markets disposes them to social inefficiency. As people are constantly pointing out, if you're dying and there's only one company with the cure, you're probably willing to pay a pretty high price to that company. In medical markets there are often no good substitutes for a given treatment; there are R&D/licensing barriers to entering the market; etc. Basically medical markets breed monopoly (or at the very least, they breed inefficiency).
Because medical companies are essentially monopolies reaming public welfare, government regulation of medical markets is absolutely necessary to achieving a socially optimal equilibrium. The breakdown of revenues and costs in medical markets is so far out of economic equilibrium that when I first read it I was hung up on the fact for days. What i'm referring to is neatly summed up in the fact that across the ENTIRE medical market, the mean after-tax accounting profit is over 20% of medical firms' revenues and costs balance. Without going into too much detail, there's a huge economic profit being realized in medical markets, and economic profit is a reliable red flag for social inefficiency. Socially efficient market structures do not yield positive economic profit, so positive economic profit is always suspicious to someone interested in socially optimal outcomes.
So you can see what I'm talking about, compare the following:
Graph
The graph is from 2005. Oil/gas is doing worse than you might expect. If this graph were current, banks and financial shit would be crashing, and I suspect that medical/biotech would stand well away from its competitors in terms of profits reaped. This is important for economic consideration: the fact that medical markets are way better than "the best alternative." Medical markets are raping all the other markets listed, and medical markets are also raping society at large.
A good read courtesy of Savio from TL.net: Overview of US Healthcare
|
|
| 1
 |
Critterer United Kingdom. Aug 23 2009 20:12. Posts 5337 | | |
problem is if pharmaceutical companies produce at what you call the "socially optimal" level. i.e no abnormal profits then there are little incentives to pump funds into R&D
their marginal cost is so low but the initial development costs of new drugs is astronomical |
|
| LudaHid: dam.ned dam.ned dam.ned. LudaHid: dam.ned northwooden as..hole | |
|
| 1
 |
curtinsea United States. Aug 23 2009 21:12. Posts 576 | | |
You used a lot of words to say very little. |
| |
|
| 1
|
curtinsea United States. Aug 23 2009 21:29. Posts 576 | | |
| | On August 23 2009 18:56 failsafe wrote:
Doctors prices are pushed higher, making them unaffordable to the uninsured while the quantity of doctor's labor demanded by the insured remains unchanged. |
Doctor's prices are not pushed higher because of expenses. Doctor's prices continue to rise because insurance companies continue to pay the bills. Expenses affect the profit margin, but prices are what the market will bear.
| | Because medical companies are essentially monopolies reaming public welfare |
This is a bunch of dung, but it gives you a demon to fight against, to blame for everything, to sum it up in a neat little package.
| | government regulation of medical markets is absolutely necessary to achieving a socially optimal equilibrium. The breakdown of revenues and costs in medical markets is so far out of economic equilibrium that when I first read it I was hung up on the fact for days. What i'm referring to is neatly summed up in the fact that across the ENTIRE medical market, the mean after-tax accounting profit is over 20% of medical firms' revenues and costs balance. |
so you propose a limit on the percentage of profit someone can make? Does that apply to you as a poker player? Should your profit be limited to what I judge to be a fair percentage? This is the kind of socialist crap the right gets so riled about. There is nothing wrong with making a buck if you can, this is America. Your defense against high prices is to not pay them. You can't expect to be provided services and then tell those providing them they can't make a profit at it.
|
| |
|
| 1
|
curtinsea United States. Aug 23 2009 21:50. Posts 576 | | |
| | On August 23 2009 18:56 failsafe wrote:
medical insurance, at least as it exists today, doesn't even make sense. Insuring against buying monthly medication is pretty much the same as insuring against buying groceries. You insure against the possibility of a low-probability, high-impact event. You don't insure against relatively low-impact certainties. You don't insure against buying groceries. We shouldn't insure against monthly medication.
|
This is your best point, and it is an argument against the insurance 'tweaks' that are being bantered around right now. The same with pre-existing conditions . . . if you already have cancer, it isn't insurance against the unforeseen, it is an ineffective way of someone else paying your bills for you. |
| |
|
| 1
 |
CrownRoyal United States. Aug 23 2009 22:05. Posts 11385 | | |
you have so much stamina
sick |
| |
|
| 1
|
curtinsea United States. Aug 23 2009 22:09. Posts 576 | | |
edit: accidental double post |
|
| tomorrow, for sure | Last edit: 23/08/2009 22:22 |
|
| |
|
|
 Poker Streams | |
|
Contact Users: 1194 Active, 1 Logged in - Time: 18:41
