Middlemen In Healthcare Creating High Costs

I think it is misleading to say they are causing the high costs. Prices are determined by supply and demand. The middle man has simply inserted himself to get a piece of that. If you pushed him out, supply would not increase. Demand would not fall. The only result would be that the middleman’s cut would go to someone else.

If you pushed him out, supply would not increase. Demand would not fall. The only result would be that the middleman’s cut would go to someone else.

Except that cut for the middlemen is a huge part of the price. They eat up any rebates the manufacturers offer, and are putting a 30% overall markup (per the article). So yea, cutting back on these practices (which are illegal in almost every other industry) should save the end consumer about 30%.

That doesn’t change anything. It’s not a competitive industry so the price does not reflect the cost. Think of it this way. Suppose you had a business and because you were a monopoly you could charge a very high price. Your brother in law needed a job so you hired him and pay him more than he’s worth. That doesn’t increase the price you charge. It just reduces your take home. If you fired him then you could save that money but the price you charge would not change. Why should it? Supply and demand have not changed.

There is no supply and demand in U.S. healthcare, that’s why the price is so high. The “middlemen”, health insurance companies in other words, have taken over control of all aspects of health care so a doctor can’t prescribe an aspirin without getting their approval. Of course they take a cut of most of the money in the process. Just a casual look at how large the health insurance industry is should give you a clue how much they’re costing, the number of insurance workers and hospital clerks dealing with billing is huge compared to the actual numbers of physicians and nurses. The number of administrators and support staff that exist to move money around in healthcare is huge, someone has to pay for them and the industry grew that large because that’s where the money is, when you have a cash cow like health care it’ll inevitably grow itself out of control if allowed, everybody wants a piece of the action.

There’s a reason health insurance companies always have the fanciest high rise office buildings in any mid sized American city.

As Karl Denninger has pointed out, simply making the medical industry obey the existing anti-trust and pricing transparency laws on the books today would smash all of this looting and reduce costs by 80%.

It would also take an immediate 20% off of US GDP as hundreds of thousands of medical middlemen hit the unemployment line, even if it lasts only for a year or so while the economy adjusts.

Because of this, no politician - including Trump - will touch real health care reform with a with a ten foot pole - even though the final result would be hugely positive, especially for small business. We will continue to get abominations like Obamacare that keep all the major players' profits in place and redistribute a few crumbs to politically favored groups which screwing the middle class who has "nowhere else to go" anyway. They think we aren't smart enough to figure out what they are doing.

It is brutal. The money would be spent somewhere else.

One of the rich middlemen is the medical supply companies that milk insurance far and above the cost of the equipment they are supplying.

Years ago I had to start using a CPAP. This small device cost around $2500, $2000 of which was paid by my insurance company. I can buy the same device today on Amazon for $4-500 which is what I paid for the one I have - the medical supply house got the extra 2 grand from my insurance. Thus it’s actually worth $4-500.

Similarly I can buy filters, masks, headgear etc. on Amazon for what they’re worth - if I went through insurance I’d pay a lot more (due to a deductible plus the inflated prices).

That doesn’t change anything. It’s not a competitive industry so the price does not reflect the cost. Think of it this way. Suppose you had a business and because you were a monopoly you could charge a very high price. Your brother in law needed a job so you hired him and pay him more than he’s worth. That doesn’t increase the price you charge. It just reduces your take home. If you fired him then you could save that money but the price you charge would not change. Why should it? Supply and demand have not changed.

Except supply and demand aren't your only economic factors. They're not direct price setters, they're relative. Cost of production/to market is what sets the base price, then supply/demand simply move that number up or down.

But your analogy is slightly off, your take home wouldn't be affected by him hired or not, since you're setting the price (offering rebate). So getting rid of your brother doesn't help you, it helps the end customer. There's artificial price inflation that has nothing to do with supply and demand, so yes, you're right, SnD won't change. But it's not the variable affecting price changes in this scenario, so SnD doesn't matter.

Let's say you make windows, and you discover a plastic that's just as strong/clear as glass, but half the cost. So you can cut your price by 25%, and thereby take market share from the other guy. But if your installer doesn't pass some of the price cut to the consumer, why would consumers pick your windows instead? Nothing changed for them. But, if you sell your windows direct to consumers and let them hire their own installers, of course they'll pick your windows since they're 25% cheaper!

Nope. It is true that costs determine price in a competitive market. But this is not competitive in that sense. The whole industry is controlled by the government. In particular the number of doctors is controlled by the government.