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[–] daskapitalist [S] ago 

You have a pretty good point there with investments focusing on the highest ROI. In the US at least, Medicare and insurance likely push these investment dollars into two categories: care not covered by insurance (because if you can e.g. halve the cost of lasik, you can drop the price to customers by 25%, make more profit per surgery, and sell more surgeries), and Newfangled Treatments (because it's a new billing code, providers can negotiate new payment rates with ins/medicare).

Non-free market treatments dont have those incentives, especially for medicare where it's largely reimbursed on a cost + % rate. Sure, that makes sense for variable costs, but it's insane once you realize that medical providers have fixed costs as well. So there's no good reason for a medical provider to e.g. design a better way to do dialysis because if they halve the variable cost from the made up number of $100 per treatment to $50, medicare will keep paying cost + %. E.g. if Medicare is paying cost + 10%, halving that dialysis cost would reduce the variable contribution margin per treatment from $10 to $5, which is a problem when their fixed costs doesn't go down.

You're also onto something with intrinsic costs. E.g. a physician's time is expensive no matter what. Now Medicare and Insurance will only reimburse for that time when delivered in a specific format. E.g. Insurance will reimburse for an office visit, but not for the doctor to send you an email response to a question. For care not covered by insurance, providers can work out whatever care delivery methods they want with customers (e.g. Insurance forces me to go in for a $75 office visit for my doctor to say "Daskapitalist, is your blood pressure OK? It is? Ok here's a prescription renewal", but if that was elective care not covered by insurance I can guarantee my physician would be only to happy go agree to e.g. a $25 "renewal by email" that she could complete in one minute instead of having to book a half hour office visit for the same thing (because 30x$25 > $75x1). Essentially Ins/Medicare skew how intrinsically expensive options are chosen over more efficient options by only paying for the expensive "oldschool" option.