CBO: Obamacare costs revised downward, again. Finds lower than expected premiums.

[lobosrul]

They're really touting their doctors' and nurses' beside manner, which isn't a lie so much as subtly misleading. Many, if not most, patients care about that sort of thing.

Interestingly, there are cancer treatment hospitals which do a lot of advertising, and those that don't. Those that don't, like Massachusetts General Hospital, are the premier facilities and charge the highest prices (both list and negotiated). So much for the theory that advertising causes higher costs.

They specifically mention the word "treatment", not bedside manner.

You really don't think advertisement adds to cost?? Have you ever looked at a balance sheet before? If its a successful campaign it will add revenue, I don't deny that.

I read that a long time ago. Those are list prices, and they're all over the map, which is an indication that we don't have a free market. When I wrote that the cost was the same, I meant from the perspective of the insured consumer. Cost simply played no part in my brother's decisions.

That's what they bill people without insurance, before negotiations (someone willing to hand them a credit card up front can expect a discount). The insurance companies with their large bargaining power negotiate it down even further.

Why on earth would different list prices in different parts of the country be an indication that there is no free market? Mechanical work on cars differs greatly by which garage you go even in the same town for example.

 

[sunmaster14]

They specifically mention the word "treatment", not bedside manner.

You really don't think advertisement adds to cost?? Have you ever looked at a balance sheet before? If its a successful campaign it will add revenue, I don't deny that.

I meant costs to the consumer, not the producer. It would have been clearer to write "prices" instead of "costs."

That's what they bill people without insurance, before negotiations (someone willing to hand them a credit card up front can expect a discount). The insurance companies with their large bargaining power negotiate it down even further.

Why on earth would different list prices in different parts of the country be an indication that there is no free market? Mechanical work on cars differs greatly by which garage you go even in the same town for example.

The list prices vary by factors of 3 or 4. And it's not only between different parts of the country, but also within the same city sometimes. Also, it's difficult even to see the price before you get the service, let alone compare prices.

For auto repair work, I can get estimates, sometimes without even bringing my car in. Savvy consumers will bring prices into line, although it's possible for some garages to rip ignorant or non-price sensitive people off, and it's possible for others to justify premium prices for premium service.

If the consumer was paying out of pocket for most health care services, you'd see price comparison shopping, intense competition, and much lower prices. As I've said before, this isn't just theory. We have examples of it in laser eye surgery, cosmetic surgery, and dentistry - all areas where consumers foot most or all of the bill themselves. There really isn't any mystery about how free markets work or whether they would apply.

ETA: Oh, and the list prices for services are inflated by as much as an order of magnitude over what the providers are willing to accept. I don't know any other area of the economy where that's true. Maybe buying a rug from a rug dealer. I've heard that one of the reasons providers/hospitals do this is to avoid running afoul of Medicare's "most favored nation" status in the event that they need to provide a discount or a rebate for a service. It's a big no-no to perform a procedure and charge less than Medicare would be charged. Not sure if this "buffer" theory is correct.

 

[Emily's Cat]

Wow. You've gotten progressively less civil as your arguments have been rebutted. You don't even try to argue evidence or logic anymore. It's mostly just insults now.

If you had actually even come close to a rebuttal, or demonstrated any actual understanding, I'd continue putting in more effort. As it is, you just keep plugging your ears and insisting you're right because you've made an assumption that makes sense to you.

And for the record, being a health insurance bean counter does not make you an expert. You're far more likely to miss the forest for the trees than somebody who actually understands economics.

Maybe you might like to actually look in to what actuaries do, rather than once again making faulty assumptions?

 

[Emily's Cat]

If anybody who has read even a fraction of my posts believes that I don't understand economics, then I submit that such a person does not understand economics. Yes, I may be an arrogant bastard, but that's just how it is.

You've deomonstrated repeatedly that your understanding of what constitutes a commodity is completely and irrevocably wrong. So yeah, I've read your posts and it's clear that you don't understand economics, but have managed to convince yourself that you do because it makes sense to you... so of course it's right!

 

[Emily's Cat]

Interestingly, there are cancer treatment hospitals which do a lot of advertising, and those that don't. Those that don't, like Massachusetts General Hospital, are the premier facilities and charge the highest prices (both list and negotiated).

You do realize that's in direct contradiction to your claim that prices don't vary from one hospital to another, right?

 

[Emily's Cat]

You gave oil as an example of a commodity, or at least Emily did, and I showed that according to your definition it was not.

Which is funny, since the entire field of economics, the stock exchange - specifically the commodities exchange - views oil as a commodity, so... clearly you're right and it's the entire world that's wrong? All the textbooks and college courses are lying to us?

And what exactly do you do for a living that makes you such an expert on healthcare?

Not like it matters, since you persist in dismissing the opinions of actual experts... and indeed insist they're mere "bean counters".

 

[Emily's Cat]

I'll note that I have been working in finance for over 20 years, and I have four good friends who are full professors in economics at Harvard, MIT (2), and Yale.

Why don't you go ask your good friends if oil is a commodity, then get back to us, hmm?

 

[sunmaster14]

You do realize that's in direct contradiction to your claim that prices don't vary from one hospital to another, right?

No, it's not. I was referring to the prices the insured consumer sees (which is pretty much all consumers, especially in Massachusetts).

 

[Emily's Cat]

The list prices vary by factors of 3 or 4. And it's not only between different parts of the country, but also within the same city sometimes. Also, it's difficult even to see the price before you get the service, let alone compare prices.

Are you aware that the price of the same good at a different grocery store in the same area can differ by quite a bit? Does that indicate that there's no free market for milk?

 

[sunmaster14]

Are you aware that the price of the same good at a different grocery store in the same area can differ by quite a bit? Does that indicate that there's no free market for milk?

A dollar or two extra for a half gallon of milk can be a reasonable charge for convenience. Just like how a 0.5 liter bottle of water costs 16 cents in the supermarket, but can cost $1.50 in a machine and $4.00 at the ballpark. Point is, those price differences can be eminently justified in a free market. Not so, when one hospital charges $6,000 for an MRI and another charges $2,000.

ETA: By the way, what exactly are you trying to argue? That there's a free market in health care? I'm pretty sure that you've taken the opposite side before, and indeed understood it was because there is a 3rd party getting in the way of the price feedback mechanism. I thought you wanted to argue that a free market wasn't a good idea in health care, not that we have one and that it doesn't work.

 

[jimbob]

Really, what was my definition of a commodity? Perhaps you can point to it. I wonder if you would consider the definition of a durable good so broad as to be useless. Or a foodstuff. I think rather your definition is useless because literally nothing in the world would be considered a commodity. You gave oil as an example of a commodity, or at least Emily did, and I showed that according to your definition it was not.

You stated that cars were a commodity, so by implication your definition includes cars as a commodity - which is silly.

Commodities are products where the main differentiation is on cost. There can be different grades of commodities. This is well accepted.

Cars are not commodities as there is loads of distinction on factors other than cost. Brand image plays a huge part. Luxury marques are *mostly* brand image - there is a reason that Toyota created the Lexus marque, rather than just have those care badged as Toyotas.

Even when you move away from luxury cars, people go for test drives, and are influenced by how they feel in the car.

I believe in cartels. I just don't think they're sustainable, nor particularly effective. It is possible that our economy would work better if the government got out of the anti-trust business altogether, since those areas in which it does some good are likely swamped by those areas in which it does some bad. In any case, I don't have a strong opinion about anti-trust law, although there are some famous economists who take my side of the argument (including Milton Friedman and his son David). Furthermore, it was a digression and being used by you as something of a distraction from a losing argument. The focus of Emily on the definition of commodity is a similar derailing strategy. I didn't even use the word commodity first, but rather the term commoditization, but because she has no actual arguments, she tries to use semantics as a distraction and as a platform for launching insults. I've been disappointed, to say the least.

There are plenty of examples of monopolistic practices and cartels harming the consumer, I've just remembered another, but to be honest I am not trying hard to think up examples, because almost any single example is sufficient to disprove your position.

https://en.wikipedia.org/wiki/California_electricity_crisis

And what exactly do you do for a living that makes you such an expert on healthcare? Or the US in particular? Do you even have any experience with the US healthcare system? Because from your posting history, it sure seems like you don't.

I don't claim any expertise, and I am a semiconductor engineer. Some of the products I design and develop and release to the market are commodity products and some are not.

The industry I work in is capital-intensive, and so there is a huge focus on trying to understand the cost model, and whether a particular project will have a good business case. I am familiar enough with cost models to know some of the basic approaches that a large hospital organisation will have to take.

You seem unfamiliar with even this.

Meanwhile you disparage the expertise of Emily's Cat, describing her as a "bean counter", which is a gross misunderstanding of what actuarial work is. She does have direct experience in making assessments of probability distributions of costs for medical treatments.

To reiterate: I don't claim any expertise, but I do claim that my reasoning is transparent and backed up by examples. You claim expertise, but haven't demonstrated it; you have extremely eccentric ideas*, which you defend by appeals to non-verifiable authority, and base your reasoning on theory with no examples.

Anyway,


That is a digression from your assertion that a $500k bill for services for " an extremely rare form of pediatric leukemia," could be regarded as having any meaningful features in common with commodities. You also assert that such treatment is not bespoke, which implies that your definition of "bespoke" is uselessly narrow.

Changing tack to your proposed system

I believe you accept that 50% of medical costs in any year are due to 5% of patients, and that 20% make no claim.

Your proposed solution is to give people $5k and if they spend $1k on healthcare, they get the remaining $4k to spend as they see fit.

How is that $5k to spend on healthcare? It is $1k to spend on healthcare plus $4k.

You then have a catastrophic coverage for certain agreed treatments if the cost exceeds $5k.

A rational economic actor will ensure that the get billed for $1k of healthcare in the year even if they don't need it. If you let the market find the price, an end-of-financial-year doctor's appointment might end up having a market price of $1k. If not, why not, and how are you going to prevent that?

For the 5% of patients responsible for the biggest costs, why should they shop around for treatment? They know that they are going to spend far more than that, and they are going to get catastrophic coverage (according to your proposal). In fact, again, the rational approach would be for them to spend the $5k as quickly as possible, so that they get onto the catastrophic cover as soon as possible. Even if they did shop around, how would getting the best price on $5k worth of treatment bring down rest of the cost for $500k treatment?

Your suggested system would do nothing except increase the spending to $5k for the 20% that currently would not claim anything.

You also haven't stated why you think that $1k is a reasonable (indeed desirable) amount to spend on healthcare for a demographic that presumably ranges from 18-60.



*Not just the definition of a commodity, but also the assertion that information asymmetry is greater when deciding on a smartphone than expensive lifesaving treatment. This is, frankly, bizarre. You missed out the bit about captive markets, and time constraints (well you stated that these weren't problems, but didn't explain why). Also you asserted that monopolies generally require state facilitation.

 

[sunmaster14]

You stated that cars were a commodity, so by implication your definition includes cars as a commodity - which is silly.

My claim is that whether or not something is a commodity (or to what extent) is in the eye of the beholder/consumer. It is a continuum. Nothing is a pure commodity, and nothing is purely differentiated. Cars are commoditized in that to many consumers in a particular market segment, the products are insufficiently differentiated so that price dominates their buying decision. Most medical services could be similarly commoditized, and indeed things are moving that way, even with our deformed and stunted health care market.

I'll note also that you effectively claimed that LASIK surgery was a commodity in the same category as contact lenses. I didn't even disagree with you, although it's pretty silly to say that contact lenses and LASIK surgery are more interchangeable in the "eyes" of consumers as a Honda CR-V and a Mazda CX-5, or even a Honda Accord and an Aston Martin.

Commodities are products where the main differentiation is on cost. There can be different grades of commodities. This is well accepted.

Cars are not commodities as there is loads of distinction on factors other than cost. Brand image plays a huge part. Luxury marques are *mostly* brand image - there is a reason that Toyota created the Lexus marque, rather than just have those care badged as Toyotas.

This actually proves my point, as I noted before. The car companies are spending a lot of advertising dollars and jumping through a lot of hoops to try to differentiate what has essentially become a commodity product. Also, I pointed out that the car dealers (where you actually have to go to buy a car, by the way) are in many cases selling absolutely identical products.

And everything you claim about cars is true about oil as well (at the refinery level) or about gasoline/petrol at the retail consumer level. Some people like to put certain kinds of gasoline in their cars. Some, like me, don't give a crap.

<snip>

There are plenty of examples of monopolistic practices and cartels harming the consumer, I've just remembered another, but to be honest I am not trying hard to think up examples, because almost any single example is sufficient to disprove your position.

https://en.wikipedia.org/wiki/California_electricity_crisis

Only made possible really because of government enforced caps on retail prices. Without such caps, consumer demand would have dropped, and the transmission line manipulation probably wouldn't have worked. I doubt Enron would have even tried. Electricity is heavily regulated, especially in California. It's not a good example of a free market where a cartel was successful.

I don't claim any expertise, and I am a semiconductor engineer. Some of the products I design and develop and release to the market are commodity products and some are not.

The industry I work in is capital-intensive, and so there is a huge focus on trying to understand the cost model, and whether a particular project will have a good business case. I am familiar enough with cost models to know some of the basic approaches that a large hospital organisation will have to take.

You seem unfamiliar with even this.

Really? Give me an example of how I'm unfamiliar with cost models.

Meanwhile you disparage the expertise of Emily's Cat, describing her as a "bean counter", which is a gross misunderstanding of what actuarial work is. She does have direct experience in making assessments of probability distributions of costs for medical treatments.

It was a mild dig in response to a stream of personalized insults. I certainly know what actuaries do. I also know that in that line of work, it is very easy to miss the forest for the trees. Actuaries are mostly mathematicians and statisticians. It's not really necessary for them to understand microeconomics (apparently).

To reiterate: I don't claim any expertise, but I do claim that my reasoning is transparent and backed up by examples. You claim expertise, but haven't demonstrated it; you have extremely eccentric ideas*, which you defend by appeals to non-verifiable authority, and base your reasoning on theory with no examples.

Anyway,


That is a digression from your assertion that a $500k bill for services for " an extremely rare form of pediatric leukemia," could be regarded as having any meaningful features in common with commodities. You also assert that such treatment is not bespoke, which implies that your definition of "bespoke" is uselessly narrow.

It's not uselessly narrow. It's extremely practical. My nephew could have received the same treatment from dozens of high quality hospitals. I even recounted how the stem cell transplant places were wooing us. They just had dollar signs in their eyes because the marginal cost of treatment was so low relative to what they would be paid and what they had already sunk into their facilities. But we couldn't negotiate on price because, well, we weren't paying the bill. So the various clinics had to compete by (very subtly) bad-mouthing each other, showing off their gleaming facilities, and by having attractive female nurses (seriously!) show us around.

Changing tack to your proposed system

I believe you accept that 50% of medical costs in any year are due to 5% of patients, and that 20% make no claim.

Your proposed solution is to give people $5k and if they spend $1k on healthcare, they get the remaining $4k to spend as they see fit.

How is that $5k to spend on healthcare? It is $1k to spend on healthcare plus $4k.

They get $4,000 to spend as they see fit. Only $1,000 that must be spent on healthcare, or else refunded (make sure to keep your receipts).

You then have a catastrophic coverage for certain agreed treatments if the cost exceeds $5k.

A rational economic actor will ensure that the get billed for $1k of healthcare in the year even if they don't need it. If you let the market find the price, an end-of-financial-year doctor's appointment might end up having a market price of $1k. If not, why not, and how are you going to prevent that?

It's a small problem. We have that with flexible spending accounts already, where everybody rushes to spend their "use it or lose it" money at the end of the year on eligible items (usually eyeglasses). I'm not wedded to $1,000. Nor would I object to a slightly more sophisticated system. The point is to incentivize the consumer to be frugal without being miserly. He will be so incentivized even for the first $1,000, since he doesn't know when and if other health care costs will come during the year.

For the 5% of patients responsible for the biggest costs, why should they shop around for treatment? They know that they are going to spend far more than that, and they are going to get catastrophic coverage (according to your proposal). In fact, again, the rational approach would be for them to spend the $5k as quickly as possible, so that they get onto the catastrophic cover as soon as possible. Even if they did shop around, how would getting the best price on $5k worth of treatment bring down rest of the cost for $500k treatment?

The other consumers will force costs to come down on mundane items. That'll still a substantial fraction of all spending. It doesn't have to be even a majority of all spending to have a big effect. It probably would be a majority of all spending, however, especially because catastrophic coverage could still provide incentives for people to be frugal.

Your suggested system would do nothing except increase the spending to $5k for the 20% that currently would not claim anything.

No, maybe to $1K. Not to $5K. And those no-claimers are already not bothering with something that is free, since a lot of preventative procedures are free. No co-pay anymore even.

You also haven't stated why you think that $1k is a reasonable (indeed desirable) amount to spend on healthcare for a demographic that presumably ranges from 18-60.

It actually wasn't my plan. I just think it was a good idea. The $1,000 for preventative care per year seems to be ballpark right.

 

[jimbob]

Your suggested system would do nothing except increase the spending to $5k for the 20% that currently would not claim anything.

No, maybe to $1K. Not to $5K. And those no-claimers are already not bothering with something that is free, since a lot of preventative procedures are free. No co-pay anymore even.

Do they give back the remaining $4k? I thought the point was that they kept it.

 

[sunmaster14]

Do they give back the remaining $4k? I thought the point was that they kept it.

They keep it - either save it or spend it on other things. If it's not spent on health care, why do you consider it health care spending?

 

[jimbob]

because it comes out of the healthcare budget.

 

[sunmaster14]

because it comes out of the healthcare budget.

What healthcare budget? It's just numbers on a piece of paper. What matters is the utilization of real health care resources.

 

[Emily's Cat]

A dollar or two extra for a half gallon of milk can be a reasonable charge for convenience. Just like how a 0.5 liter bottle of water costs 16 cents in the supermarket, but can cost $1.50 in a machine and $4.00 at the ballpark. Point is, those price differences can be eminently justified in a free market. Not so, when one hospital charges $6,000 for an MRI and another charges $2,000.

ETA: By the way, what exactly are you trying to argue? That there's a free market in health care? I'm pretty sure that you've taken the opposite side before, and indeed understood it was because there is a 3rd party getting in the way of the price feedback mechanism. I thought you wanted to argue that a free market wasn't a good idea in health care, not that we have one and that it doesn't work.

Your entire premise is fraught with contradictions and inconsistencies.

 

[Emily's Cat]

My claim is that whether or not something is a commodity (or to what extent) is in the eye of the beholder/consumer.

No, it's not in the eye of the beholder. It's in the eye of the financial market.

 

[Emily's Cat]

This actually proves my point, as I noted before. The car companies are spending a lot of advertising dollars and jumping through a lot of hoops to try to differentiate what has essentially become a commodity product. Also, I pointed out that the car dealers (where you actually have to go to buy a car, by the way) are in many cases selling absolutely identical products.

And everything you claim about cars is true about oil as well (at the refinery level) or about gasoline/petrol at the retail consumer level. Some people like to put certain kinds of gasoline in their cars. Some, like me, don't give a crap.

Lets say you're making an omelet at home. You've got 3 eggs sitting on the counter. I sneak in when you're not looking, and I swap your 3 eggs with 3 eggs from my hens. Will you be able to tell the difference?

Let's say you're driving home and you stop for gas. While you're not looking, I take the spigot out of your car and fill it up with a different brand of the same grade. Will you be able to tell that I did so?

Let's say you're getting ready to go to work and you head to your garage. While you were sleeping, I sneaked in and swapped your Honda CRV with a Mazda CX-5. Will you be able to tell?

ETA: There's a difference between having comparable alternatives (as in the case of cars) and having fungible goods (as in the case of eggs, wheat, and oil)

 

[Emily's Cat]

It was a mild dig in response to a stream of personalized insults.

You know, my "insults" were explicitly attacks on your argumentation. I haven't personally attacked you.

I certainly know what actuaries do. I also know that in that line of work, it is very easy to miss the forest for the trees. Actuaries are mostly mathematicians and statisticians. It's not really necessary for them to understand microeconomics (apparently).

I think maybe you don't know. You certainly don't seem to understand that economics is a specific element of our studies, and constitutes a fair portion of the material on which we're tested.

They get $4,000 to spend as they see fit. Only $1,000 that must be spent on healthcare, or else refunded (make sure to keep your receipts).

You give them $5000, of which $1000 must be spent on medical care, but the remaining $4000 is theirs to do with as they please. If they have medical costs exceeding $5000, they are covered for that through other means. They effectively have no skin in the game at all. The observed cost to the consumer is $0 in your plan.

What exactly is going to create a competitive market?

It's a small problem. We have that with flexible spending accounts already, where everybody rushes to spend their "use it or lose it" money at the end of the year on eligible items (usually eyeglasses). I'm not wedded to $1,000. Nor would I object to a slightly more sophisticated system. The point is to incentivize the consumer to be frugal without being miserly. He will be so incentivized even for the first $1,000, since he doesn't know when and if other health care costs will come during the year.

But he can stick that $5000 in an account to use throughout the year. and have a nice xmas bonus with no risk. There's no incentive to be frugal at all - the observed cost to the consumer is ZERO!

The other consumers will force costs to come down on mundane items. That'll still a substantial fraction of all spending. It doesn't have to be even a majority of all spending to have a big effect. It probably would be a majority of all spending, however, especially because catastrophic coverage could still provide incentives for people to be frugal.

Not going to happen. There is no cost to the consumer under your plan. They have no skin in the game. Their given free money up front, and they're given free money if they exceed the amount of free money that you gave them to start. Why not just cut out the administrative costs altogether and make health care free?