Olbermann on healthcare

[Master of Ossus]

Whaaaaaa.... how is it cheaper if we end up paying for them via hoodwink? the hospital "justifies" an unneccesary expenditure by fudging with medical knowledge and continues to make other unneccesary purchases which we then pay for.

That is not remotely what we're talking about, here. Moreover, there are strong mechanisms in the current system to prevent such things from happening.

The patient with insurance plays along because they have no idea the test is unneccesary and the insurance companies just quietly raise the premium.

Or fights the hospital.

How is ANYTHING cheaper or less expensive?

Let me ask you something: if someone had a magical machine that could cure any ailment, but there was only one of them, what do you think he would charge? Now, what if there were two people with two machines? A thousand people with a thousand machines?

Meanwhile medical expenses have been the leading cause of bankruptcy for years and we won't admit there's a problem?
http://www.consumeraffairs.com/news04/2 ... study.html

Geez do you buy a car when you can't afford it and take a road trip to prove you made a good call?

I don't resort to ridiculous parodies because I don't understand someone's argument to win a debate, either.

[Master of Ossus]

Do you honestly not understand the difference between the cost of the machine and the cost of the juice? That was the whole point I was making.

I don't understand your definition of "cost;" I was referring to the price of the juice that you make with the new machine in a competitive juice market.

Ah, of course. Thanks to the magic of the free market, the cost will just magically go away. It's not as if they'll either go out of business or find ways to make up those costs somewhere else. Oh no, it just disappears, right?

The cost doesn't disappear, but it's not passed onto consumers, in your example. That is the whole point. If health care providers were actually engaging in this behavior, it would result in lower MRI fees (and you, yourself, noted their discount coupons for such services--how the fuck do you explain this if they're so expensive?) and greater availability.

[Darth Wong]

That is not remotely what we're talking about, here. Moreover, there are strong mechanisms in the current system to prevent such things from happening.

Please elaborate on these "strong mechanisms".

Let me ask you something: if someone had a magical machine that could cure any ailment, but there was only one of them, what do you think he would charge? Now, what if there were two people with two machines? A thousand people with a thousand machines?

Yes, many machines prevent unusual price gouging on the part of one merchant, assuming no collusion. However, they do not make the entire system more efficient. If the customer base requires this procedure at a rate of X procedures per year per capita and market competition drives suppliers to actually purchase enough equipment to do 5X procedures per year per capita, then they collectively spent a lot of money which they did not really need to spend.

One of the reasons for the drive toward conglomeration of companies is to reduce redundancy and increase efficiency. Do you feel this mechanism doesn't work in the health care industry?

Geez do you buy a car when you can't afford it and take a road trip to prove you made a good call?

I don't resort to ridiculous parodies because I don't understand someone's argument to win a debate, either.

The analogy is apt. Perhaps you fail to understand what is being argued here.

[Darth Wong]

Do you honestly not understand the difference between the cost of the machine and the cost of the juice? That was the whole point I was making.

I don't understand your definition of "cost;" I was referring to the price of the juice that you make with the new machine in a competitive juice market.

And I was referring to the supplier's operating costs, which are increased and which he will have to find a way to recoup somehow. Your apparent inability to grasp the argument does not invalidate it. You did the same thing to Themightytom.

Ah, of course. Thanks to the magic of the free market, the cost will just magically go away. It's not as if they'll either go out of business or find ways to make up those costs somewhere else. Oh no, it just disappears, right?

The cost doesn't disappear, but it's not passed onto consumers, in your example.

Companies don't just eat costs out of the goodness of their hearts. They have to find a way to stay profitable, and the health industry is highly profitable.

That is the whole point. If health care providers were actually engaging in this behavior, it would result in lower MRI fees (and you, yourself, noted their discount coupons for such services--how the fuck do you explain this if they're so expensive?) and greater availability.

Tell me, if I could explain a logical mechanism through which this could happen, would you concede? Or would you continue to bluster and obfuscate?

[Master of Ossus]

And I was referring to the supplier's operating costs, which are increased and which he will have to find a way to recoup somehow. Your apparent inability to grasp the argument does not invalidate it. You did the same thing to Themightytom.

But your reasoning is absurd: companies work to maximize profits regardless of whether or not they have costs from other areas. It's not like some manager says, "I can raise profits by doing X, but why would I do when I saved all this money by not doing Y?"

Let me give a concrete example: suppose Hospital A purchased a snake oil machine that claimed it would be wonderful, but once they actually installed it they discovered that it was totally useless. Hospital B across town was offered the snake oil machine, but did not buy it. Consumers of healthcare perceive no differences between Hospitals A and B (obviously Hospital A thought the snake oil machine would give them a leg-up). How does Hospital A charge a higher price on its services in order to "recoup" their losses on the snake oil machine? They can't: consumers would go to Hospital B if Hospital A charged a higher price for its services than they did. Hospital A and Hospital B, therefore, will continue to charge the same price, but Hospital A will be less profitable as a result of its poor decision.

Companies don't just eat costs out of the goodness of their hearts. They have to find a way to stay profitable, and the health industry is highly profitable.

This is true irrespective of their purchase of MRI machines. Obviously companies don't like paying higher costs, but regardless of their paying such costs or not their pricing behaviour shouldn't change. But if the behavior of US healthcare providers were as absurdly unprofitable as you claim, then they would stop installing MRI's because that is the difference between Hospital A and Hospital B.

Tell me, if I could explain a logical mechanism through which this could happen, would you concede? Or would you continue to bluster and obfuscate?

What is your "logical mechanism?" By all means, show a method through which competitive hospitals with competitive MRI machines charge higher prices. Keep in mind, you yourself noted lower MRI prices among US hospitals.

[Darth Wong]

But your reasoning is absurd: companies work to maximize profits regardless of whether or not they have costs from other areas. It's not like some manager says, "I can raise profits by doing X, but why would I do when I saved all this money by not doing Y?"

My reasoning is not contradicted at all by that fact. You obviously do not understand my reasoning at all. In fact, if a company increases its operating costs by 20% and attempts to remain profitable, then it is painfully obvious that it must also increase its revenue by the same ratio, by hook or by crook.

Let me give a concrete example: suppose Hospital A purchased a snake oil machine that claimed it would be wonderful, but once they actually installed it they discovered that it was totally useless. Hospital B across town was offered the snake oil machine, but did not buy it. Consumers of healthcare perceive no differences between Hospitals A and B (obviously Hospital A thought the snake oil machine would give them a leg-up). How does Hospital A charge a higher price on its services in order to "recoup" their losses on the snake oil machine? They can't: consumers would go to Hospital B if Hospital A charged a higher price for its services than they did. Hospital A and Hospital B, therefore, will continue to charge the same price, but Hospital A will be less profitable as a result of its poor decision.

How is this bizarre analogy remotely applicable to a discussion of redundant over-supply of legitimately useful machinery which increases supplier operating costs?

Companies don't just eat costs out of the goodness of their hearts. They have to find a way to stay profitable, and the health industry is highly profitable.

This is true irrespective of their purchase of MRI machines. Obviously companies don't like paying higher costs, but regardless of their paying such costs or not their pricing behaviour shouldn't change. But if the behavior of US healthcare providers were as absurdly unprofitable as you claim, then they would stop installing MRI's because that is the difference between Hospital A and Hospital B.

Clearly, it never occurred to you that there is a gigantic hole in your argument: the fact that all suppliers would be equally compelled to do this, and thus the operating costs would increase across the board rather than granting a competitive advantage to one supplier.

Tell me, if I could explain a logical mechanism through which this could happen, would you concede? Or would you continue to bluster and obfuscate?

What is your "logical mechanism?" By all means, show a method through which competitive hospitals with competitive MRI machines charge higher prices. Keep in mind, you yourself noted lower MRI prices among US hospitals.

You aren't answering the question: do you agree that you should concede your argument if I can do this? I think you can't conceive of a mechanism because you're not trying at all. You obviously think you can't conceive of a mechanism because it is impossible. If I can come up with one, then you're obviously very wrong. Do you agree that if I can come up with something, then you're wrong and you should concede?

[Master of Ossus]

My reasoning is not contradicted at all by that fact. You obviously do not understand my reasoning at all. In fact, if a company increases its operating costs by 20% and attempts to remain profitable, then it is painfully obvious that it must also increase its revenue by the same ratio, by hook or by crook.

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I don't understand your reasoning at all. Once again: how is their behavior going to change because of this?

Suppose that a company can price-gouge its customers somehow. Why is their decision to gouge customers dependent on their costs? If they can gouge customers and make $100 million, or not gouge their customers and make $50 million in revenue, then why would it matter to them if their operating costs are $10 million, $50 million, $80 million, or $100 million? In any case, their profit-maximizing decision would be to gouge their customers.

How is this bizarre analogy remotely applicable to a discussion of redundant over-supply of legitimately useful machinery which increases supplier operating costs?

First of all, I don't understand your definition of "operating costs." Secondly, that is precisely the situation that you are ascribing to the MRI's: they have purchased so many that they have become useless.

Clearly, it never occurred to you that there is a gigantic hole in your argument: the fact that all suppliers would be equally compelled to do this, and thus the operating costs would increase across the board rather than granting a competitive advantage to one supplier.

It's true that if every clinic were compelled to have an MRI machine then there would be no competitive advantage, but that is not the scenario in the US, right now. In fact, MRI's are frequently not found in clinics in my area, and even hospitals have limited access to them because of the time it takes to run a scan.

You aren't answering the question: do you agree that you should concede your argument if I can do this? I think you can't conceive of a mechanism because you're not trying at all. You obviously think you can't conceive of a mechanism because it is impossible. If I can come up with one, then you're obviously very wrong. Do you agree that if I can come up with something, then you're wrong and you should concede?

Of course I will, and I ask again: what is the logical mechanism?

[Darth Wong]

I don't understand your reasoning at all. Once again: how is their behavior going to change because of this?

Your failure to understand the reasoning is painfully obvious. I'm not saying they're going to change their behaviour. I'm saying that if their costs go up, they will find a way to pass it onto the consumer. Jesus, what part of this do you find so objectionable? It's fucking obvious, and you would be the first one to say it if we were talking about (for example) passing tough new environmental regulations which increase their operating costs.

Suppose that a company can price-gouge its customers somehow. Why is their decision to gouge customers dependent on their costs? If they can gouge customers and make $100 million, or not gouge their customers and make $50 million in revenue, then why would it matter to them if their operating costs are $10 million, $50 million, $80 million, or $100 million? In any case, their profit-maximizing decision would be to gouge their customers.

See above.

First of all, I don't understand your definition of "operating costs." Secondly, that is precisely the situation that you are ascribing to the MRI's: they have purchased so many that they have become useless.

Since when did I say they magically become "useless" once they reach a point of oversupply? Are you deliberately trying to grossly misrepresent the argument, or are you really this dense? Have you honestly never heard of the concept of redundancy before? Redundancy does not mean "useless"; it just means there are more than you need. Do I have to start explaining basic definitions of things now?

It's true that if every clinic were compelled to have an MRI machine then there would be no competitive advantage, but that is not the scenario in the US, right now. In fact, MRI's are frequently not found in clinics in my area, and even hospitals have limited access to them because of the time it takes to run a scan.

You seem to believe that competition automatically brings everyones' prices down to the same level, but there is actually wide variation from place to place. Some places obviously do recoup much more of the machine cost per procedure than others. Like any other market, it depends on what they can get away with. Some of them are no doubt running their machines at cost, some might even run at a loss. Once again, I ask: what makes you think this market is so unique that these things won't happen here, even though they happen in other markets?

Link: http://www.comparemricost.com/ note the large variation in prices for the same procedure.

Of course I will, and I ask again: what is the logical mechanism?

The logical mechanism is redundancy. Let us take your own thought experiment of a magic health machine. It doesn't matter exactly how it works. Now let's suppose there is one supplier with one machine: he has a monopoly, and as you would no doubt hasten to point out, he would be able to charge exorbitant prices for his services, especially if the machine is not capable of satisfying demand even at full capacity.

Now let's suppose we increase to ten suppliers with ten machines. Now there's competition, and an increase in the supply vs the demand, so logically, the price should go down. We can both agree on this.

Now let's suppose we increase to a hundred suppliers with a hundred machines. Even more competition, right? But does this mean the costs should go down even further? What if the demand is pretty much sated at this point? The machine is not a pleasure item; people don't actually enjoy using it, so they just use it as much as they believe is necessary. So what if the demand was already sated back when there were only 50 suppliers with 50 machines? Each machine will be sitting idle half the time rather than running at full capacity. In order to recoup their costs, each supplier will have to charge enough money per procedure to make up the same purchase and operating costs despite fewer procedures. Otherwise, they will start going out of business.

An individual supplier might try reducing his prices to draw more customers and thus increase his machine utilization, thus making it easier to recoup his costs with lower costs, but people clearly do not move from one clinic to another as readily as they might walk across the street from a McDonald's to a Burger King. The large price disparities in the above-linked site prove that: the higher-cost operators are still in business. The increase in business might not be sufficient to justify the decrease in per-procedure revenue.

In short, and I don't see why this should not have been obvious from the start, an increase in competitors improves prices over a monopoly in general, but this is not a linear curve. At some point, too many competitors actually means a lot of redundancy and waste. Many of them would ordinarily go out of business, but the health industry is in a better position than many other industries to keep itself afloat: after all, its customers believe (with reason) that these particular services are necessary, not just luxury items, and they will drive themselves into bankruptcy in order to pay for them if necessary.

[BR7]

Companies don't just eat costs out of the goodness of their hearts. They have to find a way to stay profitable, and the health industry is highly profitable.

This is true irrespective of their purchase of MRI machines. Obviously companies don't like paying higher costs, but regardless of their paying such costs or not their pricing behaviour shouldn't change. But if the behavior of US healthcare providers were as absurdly unprofitable as you claim, then they would stop installing MRI's because that is the difference between Hospital A and Hospital B.

Clearly, it never occurred to you that there is a gigantic hole in your argument: the fact that all suppliers would be equally compelled to do this, and thus the operating costs would increase across the board rather than granting a competitive advantage to one supplier.

Also, MRI tests are themselves a source of income and can be advertised as a selling point to draw patients. They shouldn't be considered only negative.

I think I get where Master of Ossus is coming from with his arguments. His reasoning seems to rely on the assumptions that hospitals have perfectly optimized their pricing such that any increase will be more than made up by loss of patients, and all parties know what's going on, and that the costs of changing the status quo are negligible. Granting that, sure, health providers would just have to swallow any increase in operating cost, as profits are already as high as they can be. However, those assumptions don't apply to the actual situation with MRIs, for various reasons stated in previous posts.

[Darth Wong]

Also, MRI tests are themselves a source of income and can be advertised as a selling point to draw patients. They shouldn't be considered only negative.

Indeed. I don't see what he was trying to prove by equating MRI machines to some kind of completely useless snake-oil. But he seemed to think that my argument revolved around MRI machines being completely "useless" for some reason.

[Patrick Degan]

Which addresses the actual issue of U.S. healthcare's systemic problems... how, exactly?

Precisely my point: Darth Wong's been trying to claim that Obama's stupid example that he gave in his address to the nation was topical and addressed a legitimate problem with the country's current healthcare system, when in fact it did nothing of the sort.

Excuse me, but Obama's hypothetical addressed the problem of profit-mining via unnecessary medical procedures, which IS topical WRT this country's healthcare disaster. Your answer to Darth Wong's argument on this was essentially "MRI machines WHEEEE!"

[Master of Ossus]

Your failure to understand the reasoning is painfully obvious. I'm not saying they're going to change their behaviour. I'm saying that if their costs go up, they will find a way to pass it onto the consumer. Jesus, what part of this do you find so objectionable? It's fucking obvious, and you would be the first one to say it if we were talking about (for example) passing tough new environmental regulations which increase their operating costs.

Again, HOW? Provide a logical mechanism for why they wouldn't have maximized these profits in the past, in the absence of an "oversupply" of MRI machines or something else.

See above.

Sigh. Stop dodging this argument: why would they make use of other profit-maximizing behaviors if their other costs were lower than they would if they were higher?

Since when did I say they magically become "useless" once they reach a point of oversupply? Are you deliberately trying to grossly misrepresent the argument, or are you really this dense? Have you honestly never heard of the concept of redundancy before? Redundancy does not mean "useless"; it just means there are more than you need. Do I have to start explaining basic definitions of things now?

You need to define the things whose definitions I have asked for in this thread. How are defining "cost?" How are defining "operating cost?"

You seem to believe that competition automatically brings everyones' prices down to the same level, but there is actually wide variation from place to place. Some places obviously do recoup much more of the machine cost per procedure than others. Like any other market, it depends on what they can get away with. Some of them are no doubt running their machines at cost, some might even run at a loss. Once again, I ask: what makes you think this market is so unique that these things won't happen here, even though they happen in other markets?

Link: http://www.comparemricost.com/ note the large variation in prices for the same procedure.

So, in other words, different markets charge different prices. Devastating.

The logical mechanism is redundancy. Let us take your own thought experiment of a magic health machine. It doesn't matter exactly how it works. Now let's suppose there is one supplier with one machine: he has a monopoly, and as you would no doubt hasten to point out, he would be able to charge exorbitant prices for his services, especially if the machine is not capable of satisfying demand even at full capacity.

Now let's suppose we increase to ten suppliers with ten machines. Now there's competition, and an increase in the supply vs the demand, so logically, the price should go down. We can both agree on this.

Now let's suppose we increase to a hundred suppliers with a hundred machines. Even more competition, right? But does this mean the costs should go down even further? What if the demand is pretty much sated at this point? The machine is not a pleasure item; people don't actually enjoy using it, so they just use it as much as they believe is necessary. So what if the demand was already sated back when there were only 50 suppliers with 50 machines? Each machine will be sitting idle half the time rather than running at full capacity. In order to recoup their costs, each supplier will have to charge enough money per procedure to make up the same purchase and operating costs despite fewer procedures. Otherwise, they will start going out of business.

Precisely, but they can't raise prices.

An individual supplier might try reducing his prices to draw more customers and thus increase his machine utilization, thus making it easier to recoup his costs with lower costs, but people clearly do not move from one clinic to another as readily as they might walk across the street from a McDonald's to a Burger King. The large price disparities in the above-linked site prove that: the higher-cost operators are still in business. The increase in business might not be sufficient to justify the decrease in per-procedure revenue.

True, but neither will an increase in price necessarily result in more profit.

In short, and I don't see why this should not have been obvious from the start, an increase in competitors improves prices over a monopoly in general, but this is not a linear curve. At some point, too many competitors actually means a lot of redundancy and waste.

This is obviously true.

Many of them would ordinarily go out of business, but the health industry is in a better position than many other industries to keep itself afloat:

Just because some business is profitable does not mean that it will continue to purchase MRI machines at such a point, which tends to be a prerequisite for your entire scenario.

after all, its customers believe (with reason) that these particular services are necessary, not just luxury items, and they will drive themselves into bankruptcy in order to pay for them if necessary.

This doesn't in any way address the fundamental point that I'm making: this would be true whether there were 5 machines in the country or 5 million.

[Master of Ossus]

Excuse me, but Obama's hypothetical addressed the problem of profit-mining via unnecessary medical procedures, which IS topical WRT this country's healthcare disaster.

If that is what Obama was trying to claim, then Obama's point was effectively lost by the ineffective factual analogy both because a tonsilectomy may well be the most effective treatment for the patient in his case and because GP wouldn't be profiting from the tonsilectomy.

Edit: Incidentally, that article seems to point out problems with Medicaid to the extent that such anecdotes can even be used to decry an entire system. Indeed, they note that this sort of behavior does not occur among people who have private health insurance, and our entire discussion here presumably revolves primarily around the for-profit health insurers.

Your answer to Darth Wong's argument on this was essentially "MRI machines WHEEEE!"

I never even brought up MRI's until Darth Wong thought he could score points by trotting out the example.

Indeed. I don't see what he was trying to prove by equating MRI machines to some kind of completely useless snake-oil. But he seemed to think that my argument revolved around MRI machines being completely "useless" for some reason.

Nonsense: my argument in no way relied upon the uselessness of the MRI machine. It merely recognized the fact that in competitive markets (and you're decrying healthcare specifically for being profit-driven) the purchase of an additional MRI machine raises costs to the purchaser without allowing them to increase the price of MRI's (indeed, it would almost certainly lower the cost to a patient of getting an MRI)--something I made explicitly clear in my examples. Moreover, I ask again, if the cost of MRI's in the US is lower than in Canada, how is this some evil of corporate greed in the US healthcare system? You haven't answered this blindingly obvious point with anything resembling a logical mechanism.

[Darth Wong]

Again, HOW? Provide a logical mechanism for why they wouldn't have maximized these profits in the past, in the absence of an "oversupply" of MRI machines or something else.

I would love to know how you think "increased operating costs mean they will pass increased costs to the consumer" means "now they will maximize their profits, but they would not have done so in the past".

Sigh. Stop dodging this argument: why would they make use of other profit-maximizing behaviors if their other costs were lower than they would if they were higher?

They would not, and I never said they would. Learn to read.

You need to define the things whose definitions I have asked for in this thread. How are defining "cost?" How are defining "operating cost?"

What the fuck kind of demand is that? The cost is the money spent for the fucking 1 million dollar MRI machine, and for the maintenance and operation of aforementioned 1 million dollar machine. Why are you being so pedantic?

So, in other words, different markets charge different prices. Devastating.

I see you deliberately ignored the fact that prices fluctuated wildly even in the same city, probably hoping I wouldn't notice. Brilliant. The point is simply that you're wrong: competition does not guarantee all prices slide down to minimum. They will charge as much as they can get away with, which is quite a lot in the medical field because people are not always inclined to spend time shopping around before undergoing a procedure.

Precisely, but they can't raise prices.

Yes they can. Two suppliers, both in Dallas TX: one charges $3,624 and the other charges $2,172. Obviously, market competition does not drive prices to equality nearly as effectively as you think.

An individual supplier might try reducing his prices to draw more customers and thus increase his machine utilization, thus making it easier to recoup his costs with lower costs, but people clearly do not move from one clinic to another as readily as they might walk across the street from a McDonald's to a Burger King. The large price disparities in the above-linked site prove that: the higher-cost operators are still in business. The increase in business might not be sufficient to justify the decrease in per-procedure revenue.

True, but neither will an increase in price necessarily result in more profit.

You claimed there was no logical mechanism through which this can possibly occur. If you're backpedaling to "it is not guaranteed to occur", then you're conceding the point. Obviously, the exact circumstances may vary so that it happens more in one market than another, but there is a mechanism here.

In short, and I don't see why this should not have been obvious from the start, an increase in competitors improves prices over a monopoly in general, but this is not a linear curve. At some point, too many competitors actually means a lot of redundancy and waste.

This is obviously true.

Many of them would ordinarily go out of business, but the health industry is in a better position than many other industries to keep itself afloat:

Just because some business is profitable does not mean that it will continue to purchase MRI machines at such a point, which tends to be a prerequisite for your entire scenario.

That is correct: it does not necessarily mean it will happen. It is entirely possible that once the industry reaches an optimum number of MRI machines for the public, it will stop buying more, despite the fact that competition naturally leads to redundancy. But this dispute started because of your contemptuous declaration that the very possibility of it happening is utterly preposterous, remember? While I cannot guarantee that it will happen, there is considerable reason to believe it will (in fact, the more competition in any given market, the more redundancy there tends to be; this is the nature of competition), and there is certainly more than enough reason to dismiss your declaration that the very idea is utter nonsense and cannot possibly happen.

after all, its customers believe (with reason) that these particular services are necessary, not just luxury items, and they will drive themselves into bankruptcy in order to pay for them if necessary.

This doesn't in any way address the fundamental point that I'm making: this would be true whether there were 5 machines in the country or 5 million.

If there were 5 million machines in the country, at $1 million per machine, they would have cost $5 trillion to purchase, and this would be absolutely crippling to health care costs because the industry would have to recoup that money somehow. You can't keep declaring that the numbers of machines have no effect on efficiency or cost when it is manifestly untrue. The question is whether they're at an optimum level, and there is no reason to believe that "the free market" automatically guarantees optimum levels for overall cost. It only tends to mean that weaker competitors are killed off by stronger competitors; this is not the same thing as guaranteeing that costs are held to an optimal level for the entire system.

[Patrick Degan]

Excuse me, but Obama's hypothetical addressed the problem of profit-mining via unnecessary medical procedures, which IS topical WRT this country's healthcare disaster.

If that is what Obama was trying to claim, then Obama's point was effectively lost by the ineffective factual analogy both because a tonsilectomy may well be the most effective treatment for the patient in his case and because GP wouldn't be profiting from the tonsilectomy.

Bullshit. Obama's hypothetical doctor IS the doctor performing the very tonsillectomy which he himself recommends.

Edit: Incidentally, that article seems to point out problems with Medicaid to the extent that such anecdotes can even be used to decry an entire system. Indeed, they note that this sort of behavior does not occur among people who have private health insurance, and our entire discussion here presumably revolves primarily around the for-profit health insurers.

Which in no way actually refutes the substance of the article's central thrust: the use of unnecessary medical procedures for profit-mining.

Your answer to Darth Wong's argument on this was essentially "MRI machines WHEEEE!"

I never even brought up MRI's until Darth Wong thought he could score points by trotting out the example.

And then went on to handwave by flogging the positives of a country having an oversupply of the things while evading the central point of the argument.

[BR7]

Nonsense: my argument in no way relied upon the uselessness of the MRI machine. It merely recognized the fact that in competitive markets (and you're decrying healthcare specifically for being profit-driven) the purchase of an additional MRI machine raises costs to the purchaser without allowing them to increase the price of MRI's (indeed, it would almost certainly lower the cost to a patient of getting an MRI)--something I made explicitly clear in my examples. Moreover, I ask again, if the cost of MRI's in the US is lower than in Canada, how is this some evil of corporate greed in the US healthcare system? You haven't answered this blindingly obvious point with anything resembling a logical mechanism.

The issue is not so much the cost of an individual MRI but the systemic costs of such procedures.

Consider the following premises: 1 - An MRI machine represents a significant one-time cost to procure and some amount to maintain. 2 - MRI tests cost some amount in resources and command a fee, for a net profit. 3 - The amounts in 1 and 2 are such that a busy MRI machine will generate a profit after no more than a few years. 4 - Health care providers want to maximize profits. 5 - Patients generally agree to tests recommended by their doctors. 6 - Health care organizations can set standards that encourage doctors to recommend MRI tests, even if they are not strictly necessary.

From these, several things follow. In order to maximize profits, a health care provider would buy one or more MRI machines and keep them busy. Health care organizations ensure demand for MRI tests even in the absence of medical necessity if needed. Systemically, many providers buy MRI machines to do this. Systemic capacity surpasses the actual medical demand for MRI tests, meaning fewer necessary procedures per machine, meaning lower profits unless unnecessary tests increase. The end result is that unnecessary tests are performed, increasing average medical costs over what would be medically necessary in an efficient system, even if each test costs somewhat less. There remain economic incentives to buy more MRI machines and to perform more unnecessary tests, as the machines are still profitable so long as they are kept busy. This would only end if competition drives down the cost of an MRI test to the minimal acceptable cost to health care providers, probably marginal cost plus enough to pay back the purchase cost in a few years. In such a stable state, there would be many more MRI machines, MRI tests, and much more patient expense than in a system that only meets the medical need for MRI testing.

Do you disagree with any of this?

[Master of Ossus]

I would love to know how you think "increased operating costs mean they will pass increased costs to the consumer" means "now they will maximize their profits, but they would not have done so in the past".

What mechanism is there to allow them to pass these costs on to consumers?

Sigh. Stop dodging this argument: why would they make use of other profit-maximizing behaviors if their other costs were lower than they would if they were higher?

They would not, and I never said they would. Learn to read.

What mechanism is there that would allow them to pass these costs on to consumers?

You need to define the things whose definitions I have asked for in this thread. How are defining "cost?" How are defining "operating cost?"

What the fuck kind of demand is that? The cost is the money spent for the fucking 1 million dollar MRI machine, and for the maintenance and operation of aforementioned 1 million dollar machine. Why are you being so pedantic?

Because your entire argument relies on this, and I don't understand your argument in the slightest. Operating cost is usually not defined to mean the same thing as cost, which leads to confusion about your position.

I see you deliberately ignored the fact that prices fluctuated wildly even in the same city, probably hoping I wouldn't notice. Brilliant. The point is simply that you're wrong: competition does not guarantee all prices slide down to minimum. They will charge as much as they can get away with, which is quite a lot in the medical field because people are not always inclined to spend time shopping around before undergoing a procedure.

The cost of MRI's varied only slightly within cities; you have successfully shown that the market is not perfectly competitive. Congratulations! You have still not addressed the point that all of these MRI machines reduce prices, as shown by your own coupon example.

Yes they can. Two suppliers, both in Dallas TX: one charges $3,624 and the other charges $2,172. Obviously, market competition does not drive prices to equality nearly as effectively as you think.

In this simplistic example, disregarding all other variables and assuming that the MRI's are equal that is true. If the market is not perfectly competitive, what mechanism would Obama's healthcare plan use to eliminate this alleged inefficiency? Increase demand by giving more people access to these same machines?

You claimed there was no logical mechanism through which this can possibly occur. If you're backpedaling to "it is not guaranteed to occur", then you're conceding the point. Obviously, the exact circumstances may vary so that it happens more in one market than another, but there is a mechanism here.

But not one that works in any market in which the participants are attempting to maximize prices, which is the entire point, is it not? I concede that if you eliminate the profit-motive then your mechanism is valid, but we're discussing actors who are constrained by this, since that is the reason that Obama brought up the example in the first place.

That is correct: it does not necessarily mean it will happen. It is entirely possible that once the industry reaches an optimum number of MRI machines for the public, it will stop buying more, despite the fact that competition naturally leads to redundancy. But this dispute started because of your contemptuous declaration that the very possibility of it happening is utterly preposterous, remember? While I cannot guarantee that it will happen, there is considerable reason to believe it will (in fact, the more competition in any given market, the more redundancy there tends to be; this is the nature of competition), and there is certainly more than enough reason to dismiss your declaration that the very idea is utter nonsense and cannot possibly happen.

Again, how would Obama's healthcare plan achieve any of this? You are simultaneously decrying the "over supply" of MRI machines while also arguing that consumers are being overcharged for their use. This does not seem in any way realistic, and it still does not. Your "mechanism" is basically that the market for MRI's isn't perfectly competitive (which was a given), but how does Obama's current healthcare proposal change the number of MRI machines that are being purchased? Will it go up or down?

If there were 5 million machines in the country, at $1 million per machine, they would have cost $5 trillion to purchase, and this would be absolutely crippling to health care costs because the industry would have to recoup that money somehow. You can't keep declaring that the numbers of machines have no effect on efficiency or cost when it is manifestly untrue. The question is whether they're at an optimum level, and there is no reason to believe that "the free market" automatically guarantees optimum levels for overall cost. It only tends to mean that weaker competitors are killed off by stronger competitors; this is not the same thing as guaranteeing that costs are held to an optimal level for the entire system.

Again, this is self-evidently true, but shouldn't the goal of a health-care system be to maximize consumer surplus as opposed to accounting for the health-care provider's behavior?

[BR7]

What mechanism is there that would allow them to pass these costs on to consumers?

Health care providers with MRI machines could, if they choose, charge for MRI tests. Health care providers without MRI machines could not, depriving them of a mechanism that could increase profits at the expense of consumers.

If the market is not perfectly competitive, what mechanism would Obama's healthcare plan use to eliminate this alleged inefficiency? Increase demand by giving more people access to these same machines?

I haven't read the relevant parts in proposed bills (assuming they cover this, anyone know for sure?), but I think the idea is to check whether a given action is medically useful, and to proceed only if it is. If current practice is to perform unnecessary procedures of this type to increase profits, this plan (if it works) would reduce the demand for such procedures. Assuming some degree of competition between providers, this would probably result in higher costs per test performed (though maybe not if there is a large amount of surplus capacity), but lower systemic costs. As the demand would ideally be reduced to actual medical necessity, those health care providers that currently only give MRI tests as needed would not be affected, while those which bought more than needed in order to make profits with unnecessary tests would face loss of profit and financial incentive to downsize capacity to what is actually needed.

But not one that works in any market in which the participants are attempting to maximize prices, which is the entire point, is it not?

Please see my post above. Do you disagree with anything there?

[Master of Ossus]

Health care providers with MRI machines could, if they choose, charge for MRI tests. Health care providers without MRI machines could not, depriving them of a mechanism that could increase profits at the expense of consumers.

Except that they could easily charge for referring patients to nearby MRI facilities, and moreover the discount MRI observation suggests that MRI machines are not marked up to such a degree, but have been discounted in many areas to essentially the marginal cost. Clearly if there were only one guy with an MRI machine then he could capture all of the rents from having the device, but that doesn't seem to be true of the US medical care field anywhere outside of smaller markets.

I concede that this is a logical mechanism, which probably does fulfill the requirements I presented for a concession, but I think you'll agree that this is hardly the sort of thing that will win the debate given that it doesn't seem to fit with observations we've made of the US system.

I haven't read the relevant parts in proposed bills (assuming they cover this, anyone know for sure?), but I think the idea is to check whether a given action is medically useful, and to proceed only if it is. If current practice is to perform unnecessary procedures of this type to increase profits, this plan (if it works) would reduce the demand for such procedures. Assuming some degree of competition between providers, this would probably result in higher costs per test performed (though maybe not if there is a large amount of surplus capacity), but lower systemic costs. As the demand would ideally be reduced to actual medical necessity, those health care providers that currently only give MRI tests as needed would not be affected, while those which bought more than needed in order to make profits with unnecessary tests would face loss of profit and financial incentive to downsize capacity to what is actually needed.

Please see my post above. Do you disagree with anything there?

The problem with your reasoning is that having something be "medically useful" doesn't strike me as being the same standard as something that is "medically necessary." This is relevant because you are arguing for a systemic change to weed out "medically unnecessary" procedures, but ignoring the fact that the system that you are trying to change itself defines medical usefulness. Presumably, having a test be medically useful relies upon some form of cost-benefit analysis of running the test, taking into account the relative odds of the test revealing important diagnostic information against the costs of the test (and various other costs, like the possibility of the test coming back with a false positive). But that means that the definition of medical utility changes depending on the facilities in which people are being treated, among other things.

Returning to our long-standing example, if you have enough MRI machines such that there is excess capacity over people whose MRI's are a legitimate medical necessity, then you can start reducing the medical benefit an individual patient has to receive from an MRI in order to put them in a machine. If you have a situation like the one in the US, where there are plenty of essentially idle MRI's, then you can cut down the expected benefit from having an MRI, eventually to the marginal cost of running the machine. That is precisely the situation that Darth Wong observed when he saw advertisements for discounted MRI's. Given the number of MRI's machines available in the US, it seems totally reasonable to test people "just to be safe," because the marginal cost of running a machine are reasonably low, and so even when a doctor in a country with more constrained access to MRI's wouldn't ask for a scan it seems reasonable for an American doctor to recommend one. If the system were, in fact, to cut MRI's to the level where only "medically necessary" procedures could be run, that would strike me as significantly compromising patient care.

[BR7]

Except that they could easily charge for referring patients to nearby MRI facilities, and moreover the discount MRI observation suggests that MRI machines are not marked up to such a degree, but have been discounted in many areas to essentially the marginal cost. Clearly if there were only one guy with an MRI machine then he could capture all of the rents from having the device, but that doesn't seem to be true of the US medical care field anywhere outside of smaller markets.

The ability to refer patients elsewhere for tests is not related to the ability to perform those tests; it varies with the spare systemic capacity to perform those tests. The health care providers capable of performing the tests themselves would presumably optimize practices for maximum profit. This means busy MRI machines, excess capacity and unnecessary procedures, as I outlined earlier. Spare systemic capacity resulting from that means that, if referrals are profitable, health care providers would have a financial incentive to make unnecessary referrals, especially for the increase in demand that benefits everyone through allowing higher charges for tests.

Can you provide evidence that the "discount" prices represent near-marginal costs? Otherwise, it just means a reduction from the previous value, which might be far above the marginal cost. Even if the prices are near-marginal, is that not consistent with the competitive equilibrium I described earlier with excess capacity, testing, and patient expense?

I concede that this is a logical mechanism, which probably does fulfill the requirements I presented for a concession, but I think you'll agree that this is hardly the sort of thing that will win the debate given that it doesn't seem to fit with observations we've made of the US system.

What observations are inconsistent with it?

The problem with your reasoning is that having something be "medically useful" doesn't strike me as being the same standard as something that is "medically necessary."

I meant very similar things. If something is medically useful, it serves (or can serve) the end of patient health being normalized. If something is medically necessary, it is required for the end of patient health being normalized. There may be various medically useful options for treatment, but only one of them may be medically necessary (say, one pain medication among several that would work). If one procedure is decided upon, the others may no longer be useful, as the problem is being addressed. Note that cost does not factor into this. Do you accept these uses for the purpose of this discussion?

This is relevant because you are arguing for a systemic change to weed out "medically unnecessary" procedures, but ignoring the fact that the system that you are trying to change itself defines medical usefulness. Presumably, having a test be medically useful relies upon some form of cost-benefit analysis of running the test, taking into account the relative odds of the test revealing important diagnostic information against the costs of the test (and various other costs, like the possibility of the test coming back with a false positive).

Medical usefulness, as described above, depends on the particulars of the patient and the treatment considered, not on cost-benefit analysis (cost/benefit comes in when deciding among useful procedures). If a procedure is not useful, it is necessarily unnecessary. It is this kind of unnecessary procedure that my reasoning above suggests is most problematic with excess MRI testing. It is possible that a procedure may be unnecessary in the sense that, while useful, a cheaper procedure might work just as well, like standard X-rays vs. CAT scans for a simple broken bone. Health care providers would have an incentive to use the more profitable procedure, but regulating that to minimize systemic costs would involve oversight of cost-benefit analysis, not just checking if the procedure is useful, and so would be more problematic.

But that means that the definition of medical utility changes depending on the facilities in which people are being treated, among other things.

One procedure is just as useful in one place as another, provided patients with similar needs. That procedure might be necessary if no other options are available, but if others are, it might not be necessary, even if one of the options is. Does this cause problems for anything?

Returning to our long-standing example, if you have enough MRI machines such that there is excess capacity over people whose MRI's are a legitimate medical necessity, then you can start reducing the medical benefit an individual patient has to receive from an MRI in order to put them in a machine.

Yes, and health care providers would have financial incentive to perform MRI tests even if the medical benefit were zero.

Given the number of MRI's machines available in the US, it seems totally reasonable to test people "just to be safe," because the marginal cost of running a machine are reasonably low, and so even when a doctor in a country with more constrained access to MRI's wouldn't ask for a scan it seems reasonable for an American doctor to recommend one.

Only if the cost is negligible. Per the cited costs, it is not. At least for patients. Health care providers would find it very reasonable, as they make more money with unnecessary tests.

If the system were, in fact, to cut MRI's to the level where only "medically necessary" procedures could be run, that would strike me as significantly compromising patient care.

If the demand for medically necessary tests is filled, how would patient care be compromised? Anyway, I thought the idea was to reduce demand and let the market sort it out, not to shut down MRI machines by mandate.

[Darth Wong]

What mechanism is there to allow them to pass these costs on to consumers?

Is this a serious question? They charge the customer, the customer pays. Are you being deliberately obtuse?

Because your entire argument relies on this, and I don't understand your argument in the slightest. Operating cost is usually not defined to mean the same thing as cost, which leads to confusion about your position.

Personally, I think you are being deliberately obtuse. It is hardly a confusing statement to say that businesses which purchase expensive new equipment must find a way to recoup those costs, by either charging existing customers more or drumming up new business. It applies to all kinds of businesses, not just medical. If I buy a million dollar high-capacity milling machine because I need it to get certain kinds of contracts, I'm out a lot of money and I can recoup my investment much more easily if I can find ways to drum up more business for it. Every hour that it sits idle, I'm losing money. There's no way you haven't heard of this concept before. You're forcing me to baby-step you through every definition, every nit to pick, every line as if you're a child, and I think you know perfectly well what I'm talking about. You're just being pedantic in order to avoid conceding that Obama might have actually had a point.

The cost of MRI's varied only slightly within cities; you have successfully shown that the market is not perfectly competitive. Congratulations! You have still not addressed the point that all of these MRI machines reduce prices, as shown by your own coupon example.

From $2172 to $3624 in the same city is not "slightly" different; it is a huge difference. It seems you are now resorting to bald-faced lies in order to salvage your argument. And the coupon example does not mean that overall costs are being reduced; it means they are trying to drum up new business for their expensive million-dollar machine so it doesn't bleed red all over their balance sheet. We've been over this. Health providers are not like your local Office Depot; they do not go out of business easily, because despite what you think, they generally do find ways to recoup their costs.

When Office Depot holds a coupon sale to get rid of inventory they can't move, you may think "cost savings!" but the money they paid for that merchandise still has to come from somewhere, or they'll just lose money. If they keep losing money, they'll go out of business. That might happen (as it did to many Office Depot stores which are now gone), but health providers are better at finding ways to raise money. How often do they go out of business? And why do I have to explain things like this to a well-educated person such as yourself? Seriously, this is ridiculous.

In this simplistic example, disregarding all other variables and assuming that the MRI's are equal that is true. If the market is not perfectly competitive, what mechanism would Obama's healthcare plan use to eliminate this alleged inefficiency? Increase demand by giving more people access to these same machines?

Don't change the subject; do you or do you not concede that suppliers can find ways to pass increased costs onto consumers?

But not one that works in any market in which the participants are attempting to maximize prices, which is the entire point, is it not? I concede that if you eliminate the profit-motive then your mechanism is valid, but we're discussing actors who are constrained by this, since that is the reason that Obama brought up the example in the first place.

It works fine in any market where participants are attempting to maximize prices. Jesus, why are you being so dense about this? Have you never heard of a mechanic overcharging customers for unnecessary automotive repair work? It's the same concept, only with different machines and procedures, and a lot more money.

Again, how would Obama's healthcare plan achieve any of this?

I haven't read the plan so I don't know. I'm just pointing out that you're full of shit for saying it's impossible and preposterous and that such a thing could never happen. If you're willing to (finally) concede that you were wrong about that, then this particular discussion is concluded and we can move onto other things.

Again, this is self-evidently true, but shouldn't the goal of a health-care system be to maximize consumer surplus as opposed to accounting for the health-care provider's behavior?

No. The goal of a health-care system is to achieve a high level of service availability to all citizens at minimal cost. If the goal were to "maximize consumer surplus", one could easily achieve this by pouring huge amounts of money into it and then treating patients who can't pay as persona non grata, so that the surplus is increased for paying consumers while also maximizing profit for the businesses involved. Oops, that's precisely what the current system does, isn't it? No wonder you define the goal of a health-care system in such a bizarre manner.

[D.Turtle]

What mechanism is there to allow them to pass these costs on to consumers?

Is this a serious question? They charge the customer, the customer pays. Are you being deliberately obtuse?

He subscribes to neo-classical economics which says that the company does not set the price of services, the market does. In other words, even though the company might want to raise the price in order to recoup their expenses, they can't because as soon as they raise the price, they will lose business to someone who is offering it for less. Since this is the case for every firm, in the end the price is the absolute minimum possible, because only then nobody can sell it for less - as long as it is possible to sell it for less while still making a profit, they will do so because they will get the business from other firms who have the higher price.

So no, according to neo-classical economics, a company can not pass on the costs to the customer.

[TheKwas]

Don't slander neo-classical economics so effortlessly. He's assuming perfect competition, which is an assumption that is often used in neo-classical economics, but no where near always. Like Wong said, he's just being obtuse.

[whackadoodle]

What mechanism is there to allow them to pass these costs on to consumers?

Well, it really depends on who we mean by customer. You seem to be working on the assumption that the patient is the customer. For 47 million or so Americans, that is true. As for everybody else, they are not the consumer. The consumer is the one who pays. Medicare, Medicaid, insurance - they are the real consumers. For those people - by far the majority of Americans -, cost is not a concern for them at all. "Whatever it takes, doc." No, wait - the physician will not even seek the patients approval for whatever tests he/she deems "necessary". The doctor orders the tests done, the the patient waits, well, patiently, as they are done. Why not - in all likelihood their deductible is fairly low, and copay will not be more than $50.

True story. A couple of years back I switched our insurance to a very high deductible plan. Shaved off quite a bit of my premiums. The savings I use in part to fund the HSA account that I established for us at the same time. Long story short, I have insurance for the major, unexpected emergency shit, and pay for the planned stuff from the HSA.

Paying for things my broken wrist out-of-pocket made me do something I had never done before. I asked the doctor, who was about pull blood to send it off for testing, "Why is this necessary? How much will it cost?" Well, they charge you for the stick, and they charge you for the actual cost of the tests+a few bucks added onto each test. His rationale for me needing a blood test, for a busted wrist, with my bp, heart rate, weight all well within the healthy zone: I might have low vitamin D, and that, new research shows, might possibly potentially be a problem for some people,perhaps.

No tests, just set my wrist, please. Which he did.

You honestly believe that doctors, much like lawyers or IT contractors, don't do what my brother-in-law, who is a lawyer, terms 'work creation'?

The Atlantic has an excellent article this month on these very same issues entitled "How American Health Care Killed My Father".

[BR7]

As for everybody else, they are not the consumer. The consumer is the one who pays. Medicare, Medicaid, insurance - they are the real consumers. For those people - by far the majority of Americans -, cost is not a concern for them at all.

Where do you think insurance organizations get money? Also, unless one has a no-deductible, unlimited complete coverage plan, cost can indeed be a concern for the insured. Even then, unnecessary systemic costs would raise the premium for any given level of coverage, making it a financial concern for everyone covered, even without any personal medical procedures.