Is there any particular reason to think that bills to deregulate healthcare would lower costs a lot? You cite Japan as an example; is Japanese healthcare actually less regulated than US healthcare? (My impression was the opposite but I am very much not an expert.)
Patents area form of regulation and mostly increase costs (licensing, litigation, inability to compete); sometimes they encourage innovation too. Patent law is used very effectively to limit competition.
Similarly with copyright. Terms are now over a century.
There are many government imposed monopolies in healthcare. The regulatory costs of putting a drug on the market are enormous. Sometimes this stops a bad drug getting onto the market; it always adds delays and costs and often prevents drugs reaching the market altogether.
Look at what happened with 23andme, who are prevented from giving the public the results of a scan of their gene (the genes linked in studies to illnesses). They have been told to apply for approval for each test of each gene on an individual basis.
In my country melatonin is a prescription drug. The cost from pharmacies is about 10X higher than the OTC cost in the USA.
In the USA there are severe restrictions on health insurance providers. Cross state competition is largely thwarted. The kinds of insurance that can be offered are severely limited.
Any relationship between the US health care system and a free market is entirely accidental.
You need to have a medical degree to oversee an MRI. If we would drop that requirement the labor cost would be cheaper.
Scott has articles about how Modafinil that’s sold via perspection is much more expensive then the one you get if you simply order it online. There’s again a chance to make it cheaper by loosening regulation.
These are all arguments that reducing regulation could reduce costs. That’s not in question. The question is how much scope there is to reduce costs by reducing regulation, which depends on how much of the cost is the result of regulation.
You cite an order-of-magnitude difference between Japanese and American MRI costs. Do you think it likely that 90% of the cost of an MRI in the US is the result of regulation?
I do think that the cost difference is largely a result of how the system of incentives and rules is setup. I don’t think it’s because the hardware is radically cheaper in Japan.
I don’t think that laws will get passed to reduce the price by 90% in the US during the next term.
Is there any particular reason to think that bills to deregulate healthcare would lower costs a lot?
By entirely standard garden-variety economics, deregulation reduces costs. You may find that there are trade-offs (e.g. the incidence of food poisonings or, say, tainted drugs increases), but if we are talking solely about costs, it would be hard to argue that reducing regulation (from the current high level) would not lower them.
Econ 101 says that deregulation reduces costs, yup. But ChristianKl said more specifically that deregulation “has the chance to lower costs a lot” (emphasis mine), and it’s not so obvious that realistic deregulation is likely to make a big difference to costs.
For instance, ChristianKl says MRIs are an order of magnitude more expensive in the US than in Japan. Is it really credible that 90% of the cost of an MRI in the US comes from regulatory inefficiencies that are absent in Japan? I don’t think so; I bet that cost difference comes from other sources, and if e.g. much of it goes to health insurers’ profits then it’s even possible that more regulation could reduce prices, if it restricts what insurers can charge.
Given the vastly higher costs in the US and the mediocre outcomes, it seems there is a lot of scope to reduce costs. I am not aware of any detailed quantification of this.
Maybe such a thing exists but all the material I can find seems to be motivated. E.g. the Obama material talks a lot about market failure but seems innocent of the idea that government regulation could be part of the problem.
I’m sure there’s scope to reduce costs (though e.g. if part of the problem is that Japanese medical professionals are paid much less than American ones, reducing those costs a lot would be really difficult). What I’m questioning is the assumption that what needs doing to get the costs down is to cut regulation. It might be—some regulation is very harmful—but the comparison with Japan points, if anything, exactly the other way. And I am as wary of the assumption that the solution to “X is really expensive” is “deregulate X” as I am of the opposite assumption that the solution is “put regulation in place demanding that X be cheap”.
Salaries are higher in the US, especially for highly skilled medical practitioners. Any sort of medical investigation or treatment is going to cost more in the US than in Japan.
Many costs are explicitly regulated down in Japan. Amusingly, this specifically includes ChristianKl’s example of MRIs: they are not allowed to cost more than a certain (rather low) amount.
Of course this may increase costs elsewhere; or it may, by lowering medical salaries or something, drive medical personnel out of Japan to places where they can earn more or have more comfortable working conditions. But such actual evidence as I’ve seen suggests that, Econ 101 notwithstanding, Japanese healthcare is way cheaper than American overall and of comparable quality.
Most healthcare in the US is paid for via for-profit insurance companies. Most healthcare in Japan is paid for via government-run insurance that is not required to be profitable. That removes one layer of extra profit-taking.
There may be differences in, say, administrative structure that greatly affect the amount of overhead cost; these might be there just for path-dependent historical reasons, or because of different levels of lawsuit-fear, or because of different government regulations, or for many other reasons.
I am not going to make any confident claims about what the actual sources of the difference are; I don’t have enough information to know. But nothing I’ve seen makes it at all plausible that Japanese healthcare is cheaper than American because there’s more regulation in the US and less in Japan.
Is there any particular reason to think that bills to deregulate healthcare would lower costs a lot? You cite Japan as an example; is Japanese healthcare actually less regulated than US healthcare? (My impression was the opposite but I am very much not an expert.)
Patents area form of regulation and mostly increase costs (licensing, litigation, inability to compete); sometimes they encourage innovation too. Patent law is used very effectively to limit competition.
Similarly with copyright. Terms are now over a century.
There are many government imposed monopolies in healthcare. The regulatory costs of putting a drug on the market are enormous. Sometimes this stops a bad drug getting onto the market; it always adds delays and costs and often prevents drugs reaching the market altogether.
Look at what happened with 23andme, who are prevented from giving the public the results of a scan of their gene (the genes linked in studies to illnesses). They have been told to apply for approval for each test of each gene on an individual basis.
In my country melatonin is a prescription drug. The cost from pharmacies is about 10X higher than the OTC cost in the USA.
In the USA there are severe restrictions on health insurance providers. Cross state competition is largely thwarted. The kinds of insurance that can be offered are severely limited.
Any relationship between the US health care system and a free market is entirely accidental.
You need to have a medical degree to oversee an MRI. If we would drop that requirement the labor cost would be cheaper.
Scott has articles about how Modafinil that’s sold via perspection is much more expensive then the one you get if you simply order it online. There’s again a chance to make it cheaper by loosening regulation.
Articles like http://slatestarcodex.com/2016/08/29/reverse-voxsplaining-drugs-vs-chairs/ describe how regulation leads to expensive EpiPens.
These are all arguments that reducing regulation could reduce costs. That’s not in question. The question is how much scope there is to reduce costs by reducing regulation, which depends on how much of the cost is the result of regulation.
You cite an order-of-magnitude difference between Japanese and American MRI costs. Do you think it likely that 90% of the cost of an MRI in the US is the result of regulation?
I do think that the cost difference is largely a result of how the system of incentives and rules is setup. I don’t think it’s because the hardware is radically cheaper in Japan.
I don’t think that laws will get passed to reduce the price by 90% in the US during the next term.
By entirely standard garden-variety economics, deregulation reduces costs. You may find that there are trade-offs (e.g. the incidence of food poisonings or, say, tainted drugs increases), but if we are talking solely about costs, it would be hard to argue that reducing regulation (from the current high level) would not lower them.
Econ 101 says that deregulation reduces costs, yup. But ChristianKl said more specifically that deregulation “has the chance to lower costs a lot” (emphasis mine), and it’s not so obvious that realistic deregulation is likely to make a big difference to costs.
For instance, ChristianKl says MRIs are an order of magnitude more expensive in the US than in Japan. Is it really credible that 90% of the cost of an MRI in the US comes from regulatory inefficiencies that are absent in Japan? I don’t think so; I bet that cost difference comes from other sources, and if e.g. much of it goes to health insurers’ profits then it’s even possible that more regulation could reduce prices, if it restricts what insurers can charge.
Given the vastly higher costs in the US and the mediocre outcomes, it seems there is a lot of scope to reduce costs. I am not aware of any detailed quantification of this.
Maybe such a thing exists but all the material I can find seems to be motivated. E.g. the Obama material talks a lot about market failure but seems innocent of the idea that government regulation could be part of the problem.
I’m sure there’s scope to reduce costs (though e.g. if part of the problem is that Japanese medical professionals are paid much less than American ones, reducing those costs a lot would be really difficult). What I’m questioning is the assumption that what needs doing to get the costs down is to cut regulation. It might be—some regulation is very harmful—but the comparison with Japan points, if anything, exactly the other way. And I am as wary of the assumption that the solution to “X is really expensive” is “deregulate X” as I am of the opposite assumption that the solution is “put regulation in place demanding that X be cheap”.
“Lower costs a lot” is an unfalsifiable statement—you need to nail it down before discussing whether it’s likely to be true.
Would you like to suggest what these other sources are?
Possible other sources include:
Salaries are higher in the US, especially for highly skilled medical practitioners. Any sort of medical investigation or treatment is going to cost more in the US than in Japan.
Many costs are explicitly regulated down in Japan. Amusingly, this specifically includes ChristianKl’s example of MRIs: they are not allowed to cost more than a certain (rather low) amount.
Of course this may increase costs elsewhere; or it may, by lowering medical salaries or something, drive medical personnel out of Japan to places where they can earn more or have more comfortable working conditions. But such actual evidence as I’ve seen suggests that, Econ 101 notwithstanding, Japanese healthcare is way cheaper than American overall and of comparable quality.
Most healthcare in the US is paid for via for-profit insurance companies. Most healthcare in Japan is paid for via government-run insurance that is not required to be profitable. That removes one layer of extra profit-taking.
There may be differences in, say, administrative structure that greatly affect the amount of overhead cost; these might be there just for path-dependent historical reasons, or because of different levels of lawsuit-fear, or because of different government regulations, or for many other reasons.
I am not going to make any confident claims about what the actual sources of the difference are; I don’t have enough information to know. But nothing I’ve seen makes it at all plausible that Japanese healthcare is cheaper than American because there’s more regulation in the US and less in Japan.