Archived Of Course Healthcare is Expensive. Its a Monopoly. (thelibertarianrepublic.com)
submitted ago by daskapitalist
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Archived on: 9/7/2017 10:00:00 AM
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Archived Of Course Healthcare is Expensive. Its a Monopoly. (thelibertarianrepublic.com)
submitted ago by daskapitalist
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[–] daskapitalist [S] ago (edited ago)
Then why does medical care not covered by insurance become better, faster, and cheaper?
[–] bikergang_accountant 0 points 1 point 1 point (+1|-0) ago (edited ago)
This is something I've been struggling with, understanding which of these good are "sticky" and why. I think possibly the market invests money in reducing the costs in one particular segment at a time, like the sector that gives the best ROI for reducing costs in it. This is entirely emperical and not even studied on my part but I've noticed some costs are stable over time and some have been impacted by "the great cheapening" (made up term just now).
I think the day of awakening for each segment exists and will eventually have price reduced but everything seems to exist as part of a divide. Either prices have droped by half or more since the 90s or they have not dropped at all.
Non-free markets may have something to do with it because why invest in making something cheaper that is futile. So I think a few segments can satiate the total money spent on making things cheaper so it's a binary selection. Each segment could take upto I(s) for each segment and has R(s) rate of return for the activity of trying to make it cheaper, with Itot as total. The ones with greater R(s) recieve their full I(s) until Itot runs out. I also think that there isn't a downwardly monotonic marginal utility (deminishing return) for all levels of I(s)actual. Some money spent in an area leads to breakthoughs which makes it more opportune to do more. So I think until some sectors are exausted others are ignored for breakthroughs.
The other idea is intrinsic costs. Some things apparently have no intrisic cost and some maybe do. Processing is one without intrinsic cost. The price halves for what you get every 5-10 years. But power electronics you just can't bring their price down for some reason. It's gotten to the point where I can run a $0.20 micro controller powered by a $10 power supply. One of these is more complex than the other. Even the most powerful LEDs are much cheaper than you think. 90% of the cost in any LED lighting system is the power conversion. This is a problem that has existed for many years, is well understood, and has universal application. Yet reducing an LED's cost by 20% would produce a 2% reduction of cost in any system it's used in while a 20% reduction in cost of the power components would get you 18% savings. Dispite very little motivation to reduce the cost of LEDs it just keeps happening.
Edit: Dude. I totally misread your question. I'm still keeping what I typed.
[–] 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.