Pharma Is a Small Component of Us Health Care Spending
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The article argues that pharmaceuticals are a relatively small component of US healthcare spending, but commenters dispute this, citing examples of price gouging and highlighting the complex, opaque nature of the healthcare system.
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The price in Canada is around $100. Yes, Big Pharma gouges Americans.
Which is what TFA points out as well:
"The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity. They have higher costs of capital than drugmakers, but they also clear our 10% hurdle much more comfortably (chart 3)"
50 years ago, there were many more pharma companies, many more insurance companies, and many more hospitals under individual ownership. First the pharma companies consolidated, which give them monopoly pricing power over insurers. So then the insurance companies consolidated to they could negotiate on equal footing, but then they had monopoly pricing power over the hospitals. So then hospitals consolidated so they could negotiate. And now after decades of this, we're right back we're started, except for consumers, who can't consolidate and hence get fucked.
The two solutions here are either breaking up all the monopolies at the same time-- pharma, insurance, and hospitals-- so that everyone has market competition again, or letting health care consumers consolidate so they have pricing leverage-- i.e., forming a single-payer health-care system where the government negotiates deals on behalf of a 330+-million payer pool.
It does not make sense to either blame or spare one single sector: the pharmas, insurers and hospitals are all guilty, though in a sense all of their hands were forced by their counterparties. It's a coordination problem of exactly the kind government is supposed to solve, hence why government-run health care eventually seems like the only option.
This is happening to a huge number of industries in the US, not just healthcare.
- Healthcare is almost 20% of the economy
- Demand for Healthcare is largely inelastic
Health insurers are limited by law as to profit margins. So how to make more money? Raise prices, or signal to providers that you'll pay higher. Because if your incoming premiums have to rise, then that percentage that can be captured as profit rises.
But wait... what if you (an insurer) build/buy a middle-man to route prescription money through? That isn't covered by those profit margin constraints. So you can just up the prices of prescriptions and siphon profits that way.
Even better, you can do entirely sketchy BS (looking at you, Aetna, but also others): "Sure, you can get your scripts filled at your local pharmacy... but only for <=30 day supplies. We'll reject any script authorization for a supply of 31+ days, like those extremely convenient 90 day refills... unless you use the mail-order pharmacy that is wholly owned by us", thus making people choose between convenience and pricing.
I suppose it is possible that the buyers of these plans agree to link the payments to the cost of the care provided, but I doubt it.
The flip side of what you say is this - employers are not actuaries in the world of healthcare. So, while an employer can say "hey, whatever else we're doing, we want to give every employee a massage a week, covered 100%, no copay" and the TPA will facilitate the pricing of that, for the general spectrum of care, they will say "We want basically this level of care" and really just choose a plan already provided by the insurer, because all the actuarial effort has been done and the employer has less risk of getting slammed with a multi-million bill because of unexpected incidences.
Consumer consolidation is called voting. Its too bad most consumers have voted in politicians who don't represent their best interests
On the Pharma and Devices side, there should be hard FDA requirements for dual sourcing (completely separate ownership structures) and 50% domestic production (for security) as a requirement to even offer medications/devices requiring a prescription in the US.
It could still allow for private competition for better servicing and support without federalizing everything.
Proof:
- I can get plenty of drugs cheaper if I don’t use my insurance - I can get hospital services cheaper if I don’t use my insurance. There have been times where my copay after meeting the deductible and the insurance coverage is higher than my entire out of pocket cost if I don’t use my insurance.
If you are getting cheap healthcare because these people are basically subsidizing it for you, and they’re not even getting anything, then you’re the leech.
These people laughing at Americans having to go bankrupt to afford $1000 medicine that they only have to pay $10 for in their country: fuck em. How I wish we could distribute the costs evenly…
How much profit is enough?
Let's hope they never discover that they could just not sell it in Canada at all and make even more money.
Sure, companies are gouging the US worse - but they still make a tidy profit in the Canadian market.
Most common drugs are out of patent anyway, so there should be no barrier to low cost production anywhere.
Moreover the EU and China give huge funding to basic and specific research, which forms the basis of many drugs. For instance the RNA research that gave us COVID vaccines was completely European from start to finish, only production then involved American companies due to scale benefits and market access.
On the contrary where the evidence is obvious is that the US pharma companies have amazing profits (such as the few Europeans that sell at scale in the US).
My personal, unscientific, take is that the entire narrative that the US prices fund global low prices is completely unfounded and just an attempt by big pharma to get the US government on their side to break fair pricing mechanisms in other countries.
The US admin negotiated them down to $20 a dose IIRC. Billions of dollars to just do scale manufacturing of a drug someone else slaved over, invented, stood behind for a decade while nobody else cared, and quickly utilized to deal with a novel virus that seemed to evade normal vaccine strategies.
$20 ain't nothing, but in our terrible system, it's almost a bargain.
And the shareholders of the Pharma company involved were fucking incensed that they didn't get more money.
They are ghouls.
But no, lets keep insisting that the US government couldn't negotiate prices for drugs to save Americans a significant chunk of change despite the fact we have a recent and obvious example of them doing a good job of it. Let's keep insisting that Democrats are in bed with Pharma and profit off our costs even though it was republicans who banned import of cheap drugs from Canada and republicans who refuse to allow Medicaid to negotiate meaningfully.
Pharma companies are public. You can see how much they spend on R&D. The claim is false.
You can choose to not repair your car. You cannot choose to not repair your body except in extreme cases.
Demand will always be infinite. We don't have the technology to saturate the healthcare market any time soon.
Meanwhile, plenty of Americans still insist that they "Don't want to pay for freeloaders" as the current system means hospitals overcharge them to subsidize people with no insurance who come into the emergency room (a much much much more expensive healthcare onramp) and require care.
But Americans will fix that shortly. Once hospitals are allowed to just let uninsured people die, you can rest assured that your money will not be used to subsidize poor people. Instead, every excess dime you spend will go right into the profit column of some executive's spreadsheet!
If you do have that view please show me some evidence that the US prices cross fund other countries rather than just pad shareholders' profits and CEO pay. No, not partisan papers (plenty of US right wing think-tank papers which confuse corporate income with actual R&D) but actual data on research subsidies per capita or a similar comparable unit.
Why do they care? Referral bonus?
Did you report them?
Is that really such a high bar?
They try, but they're not in a position to do anything about it.
You're telling me professionals who make $300k after 20 years of education have 0 clue about what their patients might pay, or have never had patients who expressed concern over costs? Or don't have friends or relatives who expressed dissatisfaction with a high-deductible plan? Or aren't complicit in getting kickbacks for prescribing opioids?
We gotta stop absolving people of accountability. And that includes EVERYONE in the chain who benefits. Yes, this includes doctors.
Btw, I have had doctors who do try, and many more now will accept reasonable cash prices for their services. That should be encouraged and commended.
Well, somebody's got to be, and the doctors seem like the ones with the most leverage to get those people to do something about it, right? Customer/patient pressure obviously isn't working.
More practically - HMG is a very difficult drug to assay for purity. It's too complex to interpret with qNMR, HPLC testing is also very hard to interpret. The testing that exists evidently either has a very high margin of error or involves lots of rats and dissections.
Even testing for hCG, while it can be done reliably with HPLC, results between different labs are not comparable because the primary assay is also to test bioactivity on rodents, so they're not normalized to the same standard.
The lack of any independent testing for HMG means that some of the more accessible international manufacturers don't actually test their own product. Combined with its high price, that all makes it a very common target for counterfeit.
Yes, the American pharmaceutical system absolutely has quality-control issues. 80% of our generic pharmaceuticals come from overseas production. The pentagon wanted to independently test the drugs it was purchasing for the VA, so it worked with a company named Valisure who determined that about 10% of the drugs had issues with contamination or a lack of the active ingredient[0]. The FDA responded by shutting down Valisure's third-party testing.
But even with the problems we have here in the USA, HMG is the one drug I would particularly not trust from gray-market supply chains. It's conjecture, but I wouldn't be surprised if the doctor said that because other patients had tried it and had poor results.
There is a lot of bureaucracy and audits. It is but as if a European laboratory is allowed to sell a generic drug without at huge costs for certifications ( and viceversa)
I am not saying that buying your medicines to questionable online web is a good idea. Just that other countries have their own controls depending on their policies
Also, compounding pharmacies in the USA sometimes get their raw active ingredients from even the shadiest suppliers in China and India. It's not always perfectly legal, things aren't always QA/QC'd at any point in the process the way they should be, but it happens. So again, "buying American" isn't exactly a golden ticket.
European HMG from reputable pharmacies is probably great quality - but it's still rather expensive compared to Chinese HMG and there's really no way to trust anyone selling it online, you'd basically have to fly to Europe yourself. And taking it back on the airplane would still be illegal, and you'd be rather more likely to be caught by customs than a mailed package.
The named drugs are injectable and require cold storage so it is not trivial to safely source them from overseas.
In the UK? Around £150-£300 total.
For whom? I can't imagine this in particular would not be free at the point of use like almost everything else. That said, the UK has famously been free of (classical) rabies since the 1920s, so it's unclear if it would be easily available if there aren't other uses.
https://en.wikipedia.org/wiki/External_reference_pricing
I only brought up YouTube because when a company is free to set their price, you will still end up with a pricing model where the pricing is different based on region.
The other parts of the healthcare system are hidden behind taxes and insurance.
Drugs like Oxy are both "legal" yet also consumed illegally. Made by a perfectly legit pharma company.
And that's before we discuss the river of fentanyl apparently flowing across the Canadian border...
The Economist's analysis creates a model that shows Pharma companies making "excess profits" (greater than 10% return on capital) second only to technology companies. In that sense, by the Economist's terms, they are in fact gouging.
But that's not really the point the Economist wants to make; rather, regardless of whatever profits Pharma is raking in, they're in fact a small component of overall health care spending. You could zero out Pharma profits (this is my point and not theirs) and not materially change US health spending.
In all these discussions about American health care, my first take is that everybody should go download the CMS National Health Expenditures, and make a beeline for "Expenditures by Type of Expenditure and Program" (it's just an Excel spreadsheet). It's an extremely intuitive breakdown of where all US health care spending goes, and who's paying for it, all on one sheet.
There are a lot of narratives about health care spending that do not survive first contact with that spreadsheet.
E.g. my son has a peanut allergy and so we need to buy EpiPens. They were hundreds of dollars, and the vendor played MBA-nonsense games like requiring two to be purchased at a time. Meanwhile I was able to drive to Canada and buy the exact same thing (and as many or as few as I needed) for tens of dollars.
"Medicine being expensive doesn't impact care being expensive"
Which is almost exactly the opposite. If people could get cheap general doctor visits and be able to afford their medicines then this would reduce the number of emergency visits allowing less beds/doctors/hospitals.
I am now ordering them from an Irish pharmacy. They are over the counter there, and cost $20.
They are literally exactly the same, you can tell by the lot numbers on the bottles.
There are others that apparently can ship to the US.
Washington State, the vendors lobbied on the back of a tragic incident to require a variety of people and places to have EpiPens physically present at all times...
... including in the back of ambulances, when we (I am, or was, a paramedic) we had epinephrine already available.
Which resulted in a huge amount of waste, throwing out expired EpiPens, etc. The number of hoops we had to jump through with the DOH to eventually allow us to have a specific "epi jump kit" (a small tackle box with syringes and a vial, alcohol, etc.) was enormous, but the net result was a replacement cost of $28 for the kit (actually less, because the $28 included the tackle box) versus the $600+ for EpiPens.
In the context of the cost of medication, the $449B on "prescription drugs" doesn't break out what goes to drug makers vs PBMs or anyone else. We can easily imagine a world without PBMs that still delivers drugs to patients, but someone has to actually make the drugs. We can also ask, are people on medications they don't actually need? Are we sometimes _causing_ later health issues when medicating (e.g. fueling a giant opioid crisis)? None of this is apparent in the top-line spending figures.
This is something that makes health care economics really difficult to discuss: everybody trusts their doctor and factors them out of the equation; the problem is every penny that doesn't go to their doctors and specialists. But that's not a valid analysis and your doctor and their support system is (after elder care) at the heart of US health spending.
> and if good data suggested that people aren't in hospital unnecessarily
> if ... some significant share of patients could be served just as well through less expensive clinical services, maybe that's too much
Do you have a source on that? I ant to understand how that works. The US is ludicrously inefficient per dollar spent, so how does that work?
It's weird to see people startled by this claim because it's a pretty basic and accepted one!
However, it seems now more like straight-up profiteering the past decade or two by doctors as a whole but it’s harder to point a finger at. In contrast with “Big Pharma” the profits are fairly centralized and easy to point a finger at.
Personally I’ve for a while believed the biggest issue with wealth inequality in the US isn’t primarily due to billionaire class, but rather the millionaire class and “managerial class”, though I’d include doctors in that list. Most CEOs would also be in that list.
Doctors via the AMA keep salaries artificially high, just the same as similar tactics used by land lords using software to jack up rent prices.
(I think we agree though).
More broadly though, I believe what's occurring with doctors is also happening across the board in other professions. Landlords as an aggregate are charging more than if fair, and the median landlord isn't a billionaire or Blackrock but probably part of the professional managerial class (PMC) [1]. No idea if landlords as a whole are charging 25% or 250% more for rent, but rent seems to have outpaced inflation by a fair bit.
Similarly others here mention doctors owning portions of diagnostic imaging companies who go on to request unnecessary imaging. That's the PMC enrich-yourself-first mindset. Historically it was the local landed nobles.
Repeat that across more fields and professions and you see that the middle and lower classes will be squeezed much more by PMCs than by billionaires, IMO. For example, it'll be some VP at Google who's pushing to raise the cost of YouTube premium rather than Sergey Brin or the Youtube CEO. Another VP who's figuring out how to move software to a never-ending subscription, etc. Though it'd be hard to split out the effect of say PMC's vs corporate profiteering. Perhaps they are part of the same effect.
1: https://en.wikipedia.org/wiki/Professional%E2%80%93manageria...
A lot of people think most of it is going to insurers and pharma companies, which is the literal opposite of what's happening.
It’s just easier to blame them companies because they’re more centralized. Easy to point and say “look at the billions in profit”. Doctors as a whole are likely make many billions more in profit but it’s harder to see and understand that.
Ideally the provider would bill the patient only without recourse to any insurer. The patient if satisfied could ask the insurance to pay. This way the bill "is out " in the sunlight, and providers have no way to get paid unless customers are happy. At bare bones it aligns provider with patient through a bill like anything else. Adversarial patients ... are another thing for later ... but i want people to start seeing US medicine up front rather that stuff that goes on behind the scenes.
I realize ppl get all kinds of paperwork now including sometimes bills ... but c'mon it's one thing if it's FYI after the fact" because it was all submitted to insurance yesterday anyway ... or ... this is it; the bill is due ... approve it ... or else ...
[1] https://www.statista.com/statistics/1094939/physician-earnin...?
[disclaimer] my wife works in pediatric cardiology and saving kids lives seems worth a hell of a lot more than a software jockey job. The dead baby days are the worst and make a rough merge or code deployment appear as trivial as they really are. The EU should be ashamed of paying their people so poorly. None of that is to say that our system isn't broken and wasteful. It certainly needs fixing. But paying critical care givers less is a really bad suggestion.
I had an endoscopy done, 15 minute procedure where they put you under. The bill came and the anesthesiologist charged $980 for those 15 minutes. And there was a gastroenterologist and two nurses in the room as well. While I understand that my life was literally in that professional's hands for those 15 minutes (i truly do get and respect that) I don't think "affordable healthcare" is compatible with billing almost a grand for 15 minutes of work. Whether my premiums pay it, or my taxes pay it, or I pay out of pocket, as long as people are charging $4k an hour, it's not going to be affordable. Simple as that.
Over paid? Yes. Worth their pay and 10x more when it goes bad. Yes.
Diagnostic imaging companies - each of the big ones (Siemens, GE, Philips) offer in-house financing for MRI, CT, etc., that they advertise to physicians. They also all offer specialist consulting help to facilitate you getting a CoN (Certificate of Need) for your facility. Hell, they also will help you find other physicians in your area who'd like to go in on setting up a DI facility (and will assist with spinning up the practice).
We then find that physicians who own a DI practice (or a share in one) refer their patients to diagnostic imaging at rates several standard deviations above other physicians and at rates that are "statistically improbable" when correlated to underlying ICD-10 diagnostic codes.
Upton Sinclair comes to mind ("It is difficult to get a man to understand something, when his salary depends on his not understanding it").
Another example, though with a less comical indicator than the MRI thing: at least up until recently, hernia repairs in Europe were all inpatient procedures. The US innovated on laparoscopic hernia repair that's done outpatient. This is by itself a very good thing! But the knock-on result is that the US now delivers way more hernia repairs; we do medically unnecessary hernia repair because we made it so easy to do.
None of these are my insights; they're just things you learn about if you read and listen to podcasts about the problems with our health care economics.
Like, for example, doctors are going to be paid more than foreign counter parts, but they also end up needing very expensive schooling. (Similar thing happens to dentists).
Go into the hospital, and you end up paying 10x the amount for any medication (Tylenol being a good example) because either the hospital has an agreement with a medical supplier for exclusive supplies or they are trying to make up for ER treatments.
Then there's simply the added layer of bloat on top of everything. Health insurance ends up hiring a large staff of people to try and reject all claims while hospitals hire patient advocates to appeal the denials for the patients. All that ends up being paid for somehow (usually a large chunk is from the patient's insurance principle).
And, much like funerals, slap on "medical" on any piece of equipment and you get to raise the price by 10x. A $10 stethoscope ends up costing $100 from a medical supplier. Or one I've personally seen, a "medical" pocket protector made from $1 in fabric costing $50.
The reason non-us healthcare ends up being cheaper is because the governments are running most everything rather than having 3 or 4 private businesses duking it out over cost. It eliminates a huge amount of redundancy in the system when a government builds the hospitals, pays the doctors directly, and is the only one negotiating with medical equipment providers.
But it remains important to get a picture of where the money is going, and the real picture disrupts a bunch of narratives.
Even in your comment: you're handwaving past physician comp and overdelivery!
† writ-large, I mean; I know some awesome doctors
I'm really not. I'm simply pointing out exactly why they have such an oversized salary. It costs a ton of money to become a physician. In order to survive, they initially need a pretty sizable salary.
After the loans are paid off, that salary can't go down, there would be a revolt if it did.
Over delivery is really just a general attitude of wanting to test everything to make sure nothing is missed. I have a hard time faulting them over that.
IMO, the way to address this problem is addressing the cost of education for physicians. There's no reason getting an MD should cost $500,000, and yet it does.
And, of course, the best way to do this is to make medical school publicly funded and tuition free. A lot of small hospitals close down because they can't afford regular doctors. It's also next to impossible for a doctor to setup a private clinic.
That won't fully solve the current salary bloat, the only way to really address that is expanding the number of doctors being trained.
But when institutions try to take these problems on, like when Blue Cross (IIRC) went after anaesthesiology upcoding abuses, industry lobbyists spin people up to think that insurers are demanding surgeons wake people up in the middle of operations. It's a real problem. People understand so little about how our system works that they will vociferously take the side of practitioners who are screwing them over.
(Everybody is screwing everybody over; I'm not taking a side, except to point out that Table 19 of the NHE makes a pretty stark statement about where the money is going.)
Again: I'm not out on a limb with these claims. I'm literally just remembering things Jonathan Gruber told Derek Thompson on a podcast, then looking up and bookmarking the numbers to confirm them. Many of the most popular message board narratives about healthcare disintegrate in the face of even these simple CMS numbers!
The second chart shows how many companies have return on capital greater than 10%, which basically covers the "very fat margins" you're looking for.
But _no_, the Economist category of "Healthcare Services" includes hospitals, insurers and PBMs and other "middlemen" (see the last paragraph of the article), and so based on their analysis we cannot separate out hospital margins.
The spreadsheet I'm "advocating" is less like that, and more like the tables in a 10K filing. It's simply an accounting of where US health dollars go, and where the money comes from.
I'm not saying that spreadsheet rebuts any claim this article makes (though it might). I'm saying it's a remarkably simple and comprehensive piece of data to fit onto a single screen, and when we discuss health care economics, it's extraordinarily helpful to have that data available.
For instance inhaled steroids for asthma can cost an eye-popping $300 a month but some people with asthma get hospitalized once a year at a cost upwards of $8000 so the inhaler is really a bargain.
My old boss described it this way: without price transparency medical care isn’t a market, it’s a racket. And all of the managers in health care are working to remove price transparency to increase their margins.
That is not evidence that "Big Pharma gouges America". It is evidence that Americans pay a lot more than other countries. Only that. The conclusion doesn't necessarily follow from the premises.
Want to understand why? Read the article's last paragraph:
> The bulk of the rents is captured instead by providers of health-care services such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity.
As always, no one reads anything.
In the whole or in relative terms? Source, even if personal or anecdotal?
I am willing to consider your point because, to be fair, the article doesn't show any data that indicts the insurers. They just blame them at the end without any evidence.
> all health care spending goes to companies that deliver health services directly.
Well, that wouldn't explain why medication alone is more expensive in America, right?
But accepting your argument: is it because of greed and oligopolies, incompetence or excess of regulation?
This means the only way for insurance companies to increase profits is to increase the price of healthcare, and they have zero incentive to try and lower the amount of money they pay out for healthcare which might otherwise have been split between profits and lower premiums.
Mostly I'm saying: you don't have to axiomatically derive why this is. Medicare collects and synthesizes this data.
The way insurance companies might gouge is by jacking up healthcare prices, since they act as a government-captured oligopoly block and thus don't have normal free market forces. That is how they could increase nominal profits without increasing % profits.
They could jack up health care prices massively while only being measured as a small % of the total. Whether this is actually the case or not, I'm not sure, but the incentives demand that they do it if they can. It should be impossible to pull off such a cartel in any unregulated market, but due to the way healthcare works it seems more likely it could be true.
And this is before you get to Medicare Advantage, which is where Medicare just pays for private insurance premiums for people who think vanilla Medicare sucks.
https://paragoninstitute.org/wp-content/uploads/2024/03/9DG_...
https://truthout.org/app/uploads/2024/12/insurers-profits-bi...
The debatable part is the rebate is back to the employer who is allowed to simply pocket the money, though one could argue its returning the amount the employer is covering, often more than the employee. :shrug:
Believe or not, I get yearly notices from UHC about rebates for the prior year.
These are plan-by-plan, not on the company overall, and notably this doesn't apply to:
1) Self-funded plans. Name-brand insurance companies manage these, but big companies fund them and take on the risk (with re-insurance and all that good stuff in the mix, of course). A large proportion of the US population is on these kinds of plans, and that limit does not apply to them.
2) New plans in their first (IIRC) two years. I've not looked into whether insurance companies are playing games with this such that a larger set of their plans are "new" ones than would be if this rule didn't exist, but if it's at all possible for them to do that, I guarantee they are.
> As always, no one reads anything.
The implication of the article was the "bulk of the rents" applies to healthcare costs in total, not just to drug costs. I.e. drug costs are not a huge part of the healthcare costs.
That by itself doesn't guarantee an understanding of why specific medication costs are sometimes 10x or whatever of other 1st world countries.
(but I didn't read the article; just the rest of the comments)
>America is a lucrative market for the world’s drug giants. Many pharma bosses admit that is where they make most of their profits. But are these profits really responsible for America’s ballooning health-care bill? The short answer is no.
I don't think the article is disputing that Americans pay more for drugs than other countries, only that the pharma industry isn't the top gouger (or even above average) in the healthcare industry.
Did a ctrl+F for "PBM," and when that failed, "pharmacy" :P And yeah, the thing about drug manufacturers is that they _are_ ripping us off, but at least they do actually provide a useful service. PBMs, by contrast, inflate costs without any real benefit to consumers.
The drug manufacturers are making massive profits, and nobody is stopping them.
Hilariously the whole TrumpRx card is kind of a step in the right direction, I've screamed for years that manufacturers blatantly rip everyone off and if just use a made up discount card system all of a sudden the drug is 30-90% off.
Ideally the government just says the global price is the US price, and eliminates discount cards entirely.
https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile...
>Total Market 8.67%
If everyone is paying then the burden is shared. Let's not even imagine the utopia of a progressive healthcare tax! The shame of a "self-made business man" losing 5% more of their income earned over 200k!
That something else could also be stuff like malpractice insurance, legal settlements, etc.
This claim is regularly brought forth as why US healthcare is expensive and it just doesn't work.
First of all, are you aware Texas has fairly rigorous limits to rewards for Medical Malpractice suits? You can only get half a million dollars above what the malpractice cost you. There's also a two year statute of limitations from when you found out about the malpractice, and if you find out that your surgeon willfully fucked up your treatment more than 10 years after it happened, too bad, no case for you period.
Does Texas have cheaper healthcare than the rest of the country?
Nope.
Second, the primary cost of a medical malpractice suit is fixing the medical problem which is only a large number because medical care in the US is stupid expensive. Blaming the cost of healthcare on malpractice suits and insurance is putting the cart before the horse.
Meanwhile, most medical lawsuits never even come close to large sums.
When my sister was being born, the doctor broke her shoulder to get her unstuck. There is a correct way to do this, but he did it wrong and permanently disabled her. Turns out, he was literally not allowed to practice medicine in some states for doing exactly that to several other babies, and ended up doing exactly the same thing to another baby a few years later in the same town.
We got $10k. Permanent, life altering disability with no treatment or fix for outright malicious incompetence. My sister isn't supposed to be left handed, but she is.
$10k
If you've ever gotten upset about the McDonalds "hot coffee" lawsuit for example, you should be aware that the plaintiff originally was only asking for $20k to treat her fused labia and permanent damage. The court awarded significant damages because it was discovered that McDonalds had done this to multiple people and was purposefully keeping their coffee hotter than they were supposed to despite how it had directly harmed multiple people. They also ran a literal propaganda campaign to libel this woman that it was somehow her fault for not knowing the coffee was hot or something. You can bet they spent more than $20k on that. Oh, and the $2.7 million she got in punitive damages for McDonalds willfully contravening safety and helping melt her lady parts? It was specifically equal to 2 days of coffee sales. And then the judge said "no" and only gave her $600k. Then McDonalds appealed the case and settled privately.
* hospitals,
* insurers,
* pharmacy-benefit managers, and
* other middlemen.
This is not easy to analyze with complements vs substitutes. Sometimes drugs can be substitutes for other treatments, and sometimes they are complements.
Also, people may be desperately needing one or the other or both. It's not like quitting coffee when the prices are high.
Say that for a certain drug and certain set of medical treatments, they are complementary. If the treatment is jacked up to be expensive, less of it will be performed, and that will create less demand for the drug. So you would think the drug would go cheaper. But the drug vendors can simply use their market power (say it is a patented drug with no generic version available) to stick to their guns and jack their prices too. Then they exert the reverse effect; the more expensive drug will put downward pressure on the complementary treatment.
In this manner, both the drug and the procedures can gradually become expensive together. Though each one is not as expensive as it would be if the other didn't move.
This category of "providers of health-care services" is rather over-broad, and I wish they had split it up more. Shouldn't hospitals (which actually _provide health care_ and are necessary parts of the healthcare system) be in a separate bucket from the "middlemen"?
And within the hospital category, don't we need to draw some distinctions? Currently in the US there's been press about how recent funding changes are causing a bunch of rural hospitals to shut down. It seems that some hospitals are major money losers, though we as a society may want them to continue to exist (or else a rural person in a medical emergency has no chance of getting care in time). But what's happening at the hospitals that _are_ collecting "rents", esp since in more urban contexts there are often multiple hospitals and one might expect more competition?
There should probably be trade (FTC) violation of some kind from this layer of man in the middle gouging, which is on top of the higher direct prices of the medications to begin with in the US.
https://en.m.wikipedia.org/wiki/Betteridge's_law_of_headline...
The second one I can hardly start on, "health care services" is a medium circle ( circle size = combined market capitalization ) with the second highest "Aggregate return on invested capital" and in the middle of "median weighted-average cost of capital".
I know its called "the economist" but they usually make their articles readable by people without a econ degree. If I had a suspicious mind ( I do ) I'd think this was deliberate obfuscation.
Also "health care services ... such as hospitals and the system’s true money-makers: insurers, pharmacy-benefit managers and other middlemen taking advantage of its opacity"
That is a lot of different interests bundled together. How can they say insurers are the true money makers when they are not even broken out?
https://www.ama-assn.org/sites/ama-assn.org/files/2025-04/20...
For drugmakers, we treat research and development as an asset that is depreciated over 15 years, which is more or less the lifetime of their patents.
I'm unsure how this revised assumption would alter the conclusions.
†one reference of many in support: https://pmc.ncbi.nlm.nih.gov/articles/PMC10242760/
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