The huge prices charged by some hospitals shouldn’t be surprising if you understand the market issues at play. It takes a large population to support a hospital and people can only travel so far to get to one. The result is some hospitals are functionally de facto monopolies over an essential service.

i don’t think distance traveled or defacto monopolies has anything to do with difference you cite between Cambridge Health Alliance and Massachusetts General Hospital pricing.

my guess is that most people in MA would like, if given a choice, to have Mass General on their list of providers. that gives them pricing power that Cambridge Health Alliance doesn’t have.

……..

doesn’t take anything away from your larger point. and if the dems in MA were the slightest bit responsive to public opinion, we’d already have single payer. (we’d still have our clean elections law too, but that’s another story).

So many examples of what could be, so little use of them all in this country.

LeSigh but thanks for the read Mr. Walker, it’s a good one and informative as always.

As has been repeated many times by many others: health care is not subject to the same market forces as, say, a sausage. A few differences: captive markets, monopolies of coverage, imperfect knowledge of the product (unless you are a doctor). Expecting privatization of health insurance to lower health care costs is like believing in the profit elves.

1. Privatize health care
2. …
3. Lower costs!

You mean Obama making it more of a captive market than it already isn’t going to lower costs? I’m shocked! /s

Well – Jon correct me if I’m wrong here – but didn’t Obama propose an independent agency to set medicare reimbursement rates in his deficit reduction speech?

The “Free Marketeers” will defend the invisible hand even if its the hand that kills them.

Medicare has always had a set reimbursement rate, what you are thinking about has nothing to do with an all-payer system which is requiring all payers to pay the same rate.

Oh I see he proposed to strengthen the Independent Payment Advisory Board that’s a part of PPACA. Seems like a good idea?

Jon:

Ok, but why is national Medicare costs rising so much faster than healthcare costs in Maryland then? Shouldn’t they be about the same if they’re subject to similar price controls?

conceptually not bad but the board in ACA was crippled and highly distort to protect Obama secret deals with the Hospitals and drug companies so how it is actually going to work with these weird restrictions is a real problem.

Bigger issue is that it is just Medicare and Medicare is already cheaper and grows slower than private insurance. A board for Medicare is not going to do a lot of good because the poor regulated private insurance provider pricing system will be the drive force that makes the whole system more expensive.

Can it be shown that the private insurance pricing is driving medicare costs?

You might as well skip the part about Obama’s “deals” until you got them on the record; iow “non-secret”. You’re not preaching to your converts here and I won’t become one.

So Obama’s presently suggested changes to strengthen the Board – good?

Bigger issue is that it is just Medicare and Medicare is already cheaper and grows slower than private insurance. A board for Medicare is not going to do a lot of good because the poor regulated private insurance provider pricing system will be the drive force that makes the whole system more expensive.

Okay, so the basic problem here is that why should a health service provider deal with medicare that wants to pay 5$ when there are other actors willing to pay 10$?

It’s a good question but I bet it has something to do with more business. If medicare is the only game in town for a whole lot of people you have to deal with them or you lose profits. On the other hand if it becomes a voucher system I bet the individual insurance companies would pay a higher price unless there were a strong regulator. I wonder what exactly one can infer about the private market causing higher costs in the medicare market. That might be an argument in the defict reduction talks.

Well, the reason I’m asking is – being a believer in incrementalism in the face of political realities – it would be interesting to know what price controls Dems could propose apart from full blown national single payer. Beating down the premium support push will be easier if there’s a viable alternative…

I think we are at the same place. JON???

Dinner time perhaps :)

Well, I can’t wait. I’ll check back morrow morn.

have a good one

The reason is found in the difference between average cost and marginal cost. Average cost is total production divided into total cost. Marginal cost is the cost of one more unit (approximated by variable cost).

Once you have the hospital, operating room, doctors, nurses and so on on salary, the cost of one more C-section is about the value of the anesthesia and sponges and sterilization of instruments.
However, once the fixed assets are in place, the marginal revenue of one more C-section is almost pure profit. Other industries in the same situation include airlines and amusement parks. The cost of the first guest or flyer or patient is tremendous, the second one costs peanuts (or cotton candy).

Ok, but isn’t that an argument why medicare costs shouldnt rise very fast?

Jon – you tossed out the idea that Germany does not have single payer, which while technically true, is not quite the total picture – indeed it looks a lot like single payer but with gov just not collecting the premium/tax.

Currently 85% of the population is covered by a basic health insurance plan provided by statute, which provides a standard level of coverage, and 77% of all health care is government-funded. The government partially reimburses the costs for low-wage workers, whose premiums are capped at a predetermined value, while higher wage workers pay a premium based on their salary.

Not much different from single payer – indeed there is a national budget, a budget expense to recover via taxes, and the government sets the coverage – again, not much really different.

The Maryland Medicare waiver that allows the all-payer law should be extended to all the states. Indeed the state board setting the health care service cost for each service gets us a long way toward cost control. Mass’s proposed reform sucks in comparison – it just does blue smoke and mirrors as it chases a payment system change to rewarding for quality of care – again a market place incentive idea that we really do not need to waste time on – but then part of the blue smoke is the fact that it will not pass in Mass – it is just there to kill time to the next election.

Medicare cost rises because care givers threaten to not accept Medicare rates if they are too far below insurance company rates. And Ins co reimbursement rates are set as Medicare plus a few dollars – so every time Medicare raises there rate to catch up, the ins co’s raise the reimbursement rate so as to pay more (those lists of Doctors accepting patients with such and such ins are a marketing tool) – a spiral that never ends until the country is bankrupt.

Ok how about this for “fixing” medicare:

Offer medicare buy-in for employers and individuals as one option in the new exchanges. The rates are set to turn a (modest) profit, thereby extending the solvency of medicare. If the buy-in program is popular, the more effective cost controls of medicare will be applied to a larger share of the health care sector, thereby slowing overall cost increase.

And caek 4 all!!

?

that gives them pricing power that Cambridge Health Alliance doesn’t have.

Here is the problem with that argument – if I walk into nearly any healthcare facility with cash I’ll get the same service for much, much less than my co-pay & what the insurance company will pay. How can a ol’ T-Boy on his lonesome have more pricing-power than any of them?

Private, for-profit health insurance is a scam.

The point is all-payer is products results very similar to single payer. But yes, no one would say germany is single payer, it is an all payer with many non-profit insurers.

Well Jon, how about medicare buy in from the exchanges?

Is there potential for long term HC cost control?

Seems like the perfect oportunity to pitch it to the american people – now that the repubs has done half the work and threatened to put granny on the street “bcuz medicare is gonna go bust!!!”

My question is more mundane. Why are there so many caesarean sections in one hospital than in the other? Is this proportional to the number of births at each hospital.

Who can justify a caesarean section at these costs? Does anyone believe that it costs $5,000 to perform a caesarean section anywhere? Much less $10,000?

We aren’t talking leading edge technology, we are talking a knife, a surgeon and a couple of operating room personnel. This does not and cannot cost anywhere in the range of $5,000 to $10,000.

Delivering via caesarean section isn’t just like cutting meat from a turkey.

Private, for-profit health insurance is a scam.

yes. by pricing power, i mean pricing power with the insurance companies. (i don’t know about cash payments at either institution).

The point is all-payer is products results very similar to single payer.

only under excellent federal regulation.

however that’s not the country we current live in and that doesn’t change with the party in power (see bankster regulation. hell, see bankster fraud). and this is on of the BIG reasons why single payer, with everyone in the same boat, is the more pragmatic and practical approach.