I think some critiques of American health insurance are simplistic, but this truly seems very bad. From the report:
> "Higher markups can also result in larger internal transfer payments from health plans to affiliated pharmacies, which may allow vertically integrated PBM-pharmacy-insurer entities to retain revenue and profits while formally satisfying the insurers' medical loss ratio ("MLR" ) requirements, but without providing the clinical care and quality improvements that the MLR rule seeks to promote. In
addition, higher markups can result in significant patient cost sharing requirements because
reimbursement rates are often correlated with point-of-sale prices, which can influence how
much patients are required to pay."
In other words. Health insurance firms have capped profits in the US. But in this case one conglomerate can own both an insurer and a PBM, so it can just overcharge consumers for insurance and then launder its profits through the PBM.
There is no complexity to the corruption and inefficiency of US healthcare. It has the highest costs and mediocre outcomes. It offers healthcare providers incentives to act even if they shouldn’t and allows insurers to profit directly from denying care.
It’s worse in practice than any system adopted by any peer nation regardless of the wide range of differing approaches to providing universal coverage.
Treating it as some uniquely complicated problem is deceptive. It’s broken because that keeps certain people wealthy and gives employers control over labor.
>In other words. Health insurance firms have capped profits in the US. But in this case one conglomerate can own both an insurer and a PBM, so it can just overcharge consumers for insurance and then launder its profits through the PBM.
Most insightful comment in this thread. THIS is the crux of the issue, and we've allowed the likes of UHC to buy PBMs and other pieces of the supply chain / customer lifecycle because UHC lobbyists claim it would reduce costs across the board and also improve efficiency. Load of absolute bullshit obviously but here we are.
Is it the case that UnitedHealth and Cigna each own (or control) one of the "big three" PBMs? If so, that is a just crazy - the control insurance premium pricing, benefit decisions, AND the pricing of covered medications?
yadaebo wrote below "Medical Loss Ratio (MLR) is capped at 85% in the US which means 85% of revenue must go to patients". Does controlling a big PBM allow an insurance company a loophole?
Yes. I have been trying to figure out for years why the PBM system is so convoluted and seemingly so much more central to healthcare than it was, and this seems like it must be the reason.
Medical is a very technical field, and the costs are obfruscated from most people. I'm not surprised laymen can't give a technical breakdown of what exactly is wrong with the health insurance field.
I do not like UnitedHealth, I do not like our existing crop of health insurance executives, and I might even be viscerally glad at some level that the UnitedHealth CEO was killed in a world where justice clearly takes a back seat to greed, but I wish the headline didn't say "overcharged", because there's no established amount of markup that is the correct amount of markup other than what people end up paying. Is that shitty? Yes. Does it violate a social contract? I think so. But tell me how much the right amount to charge is first. Is that cost? Cost+percentage? They've chosen their percentage. What's the correct one instead?
The article body presents the story in a more meaningful way, "UnitedHealth Group is charging patients a markup for key life-saving drugs that could easily exceed their cost by a factor of ten or more".
All I'm going to say is that Optum Specialty Pharmacy is the sole source that UHC will accept for a lot of special drugs. For example UHC offers insurance for IVF including a separate cap for medications, but if you use their insurance you have to order through their subsidiary Optum Specialty Pharmacy and the prices triple or quadruple over MSRP if you buy from OSP using insurance versus if you pay cash. They also won't tell you this until you're in the middle of a cycle and an order gets held up because you're out of insurance, but since they billed insurance you're on the hook for the remaining several-thousand dollars because if you stop the drugs you're just out the money and the medication and have to wait another month.
I don't know if I can give them the benefit of the doubt on the cancer drugs because of this.
I don't want you to give them the benefit of the doubt. I certainly don't think they deserve it. I do think, however, that a conversation about "overcharging" goes nowhere until people talk about exactly where charging ends and overcharging begins.
UHC double-dips because they own Optum even though Optum is "independent". It's fucking disgusting. How they were allowed to buy Optum and didn't have every regulator in the country on the case is beyond me.
I $truggle to think how $omething like thi$ wa$ allowed to happen.
I take issue with the claim that in order to say something is too expensive that you must be able to precisely propose an alternative price.
I have no idea what the correct margin for essential cancer drugs is. I don’t think it should be a 10x markup. Intuitively, it seems that there’s something wrong with price gouging dying cancer patients. If you have an argument why my intuition is wrong, please share it.
> I take issue with the claim that in order to say something is too expensive that you must be able to precisely propose an alternative price.
If you want to be quantitative of course you do. How hard is it? Margin of error is allowed. If you want to be qualitative, vague and wishy washy, that has its place too, but at some point someone is going to ask for a quantitative assertion, otherwise you get nowhere.
> I have no idea what the correct margin for essential cancer drugs is.
So let's talk about it and think about it and form an idea. There's no universally right or wrong answer, but you should at least be able to decide what answer is right to you.
> I don’t think it should be a 10x markup.
What about 1x markup?
> Intuitively, it seems that there’s something wrong with price gouging
There is, but you're relying on the word "gouging", and without identifying what price you think is gouging vs reasonable profit, stopping at the point where you express that "too much is too much" doesn't get us any closer to having actionable goals.
The article is about UnitedHealth's PBM, which negotiates rates and then earns revenue from drug manufacturers through rebates. Remember that insurance is part of Big Finance and involves a lot of clever instruments to shuffle around money, risk, and accountability. PBM's are one of those instruments. Our intuitive Econ 101 models of the industry don't always go far enough into the weeds when we're just reacting to headlines. This is one of those occasions.
For those who want to really understand the impact that PMBs play on the overall US healthcare system I highly recommend reading the "The Price We Pay: What Broke American Health Care--and How to Fix It" by Marty Makary, MD. The system of legalized kickbacks that they use isn't widely recognized but it will have to be reformed if we ever want to bring down prescription drug spending.
This is exactly it. They are charging that price because that price will be paid, and this maximizes their overall profit. In other similar situations this would spur competition, which would ultimately drive down prices to a reasonable level. But in the healthcare industry competition is often prohibited or made very difficult by law. You can cite the patent system as an example of this, but another horrible one is the "certificate of need" laws, which should infuriate you.
> there's no established amount of markup that is the correct amount of markup other than what people end up paying.
Of course it's all subjective, but I cannot think of a single other industry that can get away with a 1000% markup on anything and expect to get away with it. In proper capitalism, that just means any competitor worth a dime can massively cut you with a 300% markup that is insane but a steal in comparison. Then it just stabilizes to some point between where competitors need more saavy to compete and more than some minimum markup to function.
I'd say overcharge is correct given the monopolistic structure of healthcare. You don't have too many choices to begin with and it's very hard to switch.
I think one of the things that deserves discussion here is the whole concept of pharmacy benefit managers in the first place.
To start, can anyone give some good resources that really explain clearly what the role is that PBMs actually serve, and how the whole system even functions? I've tried to understand in the past but have always thought "Why do you exist???". Like the whole way companies like GoodRX can have a viable business: if I don't use you, my prescription medication is, say, $1000, but if I do use you, it's $60. One of the pharmacies I used to go to even had a keychain with random prescription discount codes on it that the cashier would scan. I.e. I'd go to check out, and the cashier would scan the price and it would come up as $X, then she'd say "Hold on a sec", and scan the discount code on her keychain and then would say "That's better, your price is now $0.1*X".
The PBM industry originally started with noble intentions, even if some of them have now morphed into something closer to parasites. They helped to hold down drug costs for consumers and employers by negotiating with pharmaceutical companies and retail pharmacies on behalf of multiple buyers. And they created formularies and clinical guidelines to encourage use of most cost effective drugs (generics and step therapy). A lot of doctors tend to write prescriptions for certain drugs out of habit without carefully considering what's best for and individual patient, both clinically and financially. And before federal laws were tightened up, it was common for drug companies to essentially bribe doctors to prescribe their expensive branded products through loopholes like paying them "speaking fees" to show up at company meetings held at 5-star resorts. So PBMs were a way to counteract that. But then some of the PBMs started taking kickbacks themselves and making money on pharmacy price spreads so it has all become a big mess.
Theoretically the role they serve is that they can negotiate with pharmacies and develop a formulary which insurers package into their various offerings. PBMs can negotiate with pharmacies by sending them lots of customers in exchange for negotiating for a discount (or, more likely, a rebate) on their "usual and customary" price. (Pharmacies know they do this, and thus they charge very prices to the uninsured, to ensure their U&C is high enough that they can still make a profit after applying the PBM discounts). Insurers are not experts in the local pharmacy markets of particular geographies, so in essence they outsource this negotiation and craft plans with formularies prepared by PBMs.
GoodRX and other discount providers generally work in one of two ways:
1) They have relationships with multiple PBMs, allowing you to choose the one who has negotiated the cheapest rate with the pharmacy for the drug in question. This is why it might be cheaper than your insurance: another PBM has negotiated a better deal.
2) The discounts come from patient assistance programs run by the manufacturers intended to reduce patient co-pays. Lately insurance companies have started to add clauses to their plans (called copay accumulators or copay maximizers) so that these discounts don't count as part of your copay or your deductible. So these types of discounts are going to be harder to get.
This all stems from a time when pharmacies were much less consolidated and vertically integrated than they are today.
One of the frustrations of the current system is that incentivizes sky-high drug prices. PBMs like high drug prices because they negotiate rebates (some of which they keep, but most they pay back to the insurer) and because the fees they charge to insurers are a percentage of the claims that go through. Pharmacies like high drug prices because they get more money paid them in reimbursements, and because the PBMs send them most of their customers. Manufacturers like high drug prices because they net more revenue, even if they later have to pay it back in the form of rebates, and in any case being on the formulary of major insurers is an existential issue for them. And insurers like high drug prices because they can max out patient co-pays, as the money returned to them in the form of rebates gets kicked into the general fund, thus allowing them to lower premiums, which is their primary axis of competition with other insurers.
The net effect is that you have sick people maxing out their deductibles in order to lower the premiums paid by healthy people--the exact opposite of how insurance is supposed to work. If I could wave a magic wand in Congress and make only a single surgical change to healthcare markets, the change I would make is banning rebates. They were anti-customer when John D Rockefeller used them to obtain a monopoly on oil, and they are anti-customer today.
A good place to read about these dynamics in American healthcare is drugchannels.net. The author is super well informed on how these plans are implemented.
Source: ran a startup targeting pharmacies (which failed) and currently work in a starup focused on discovering and developing new drugs.
Well, at least that one I understand. That is, other countries have much stricter pricing controls on medications, while the US does not. So pharmaceutical companies argue that it's essentially the US that makes drug discovery worth it - they basically say that if the US had strict price controls too, then it means that drugs research wouldn't be viable to invest in in the first place. Not at all arguing that's true (I don't know), and even if it is true it just means the American customer for those medications is carrying the load for everyone else, which besides just being unfair doesn't seem sustainable in the long term.
But again, at least that one I theoretically understand. PBMs make no sense to me whatsoever.
I don’t understand how an insurance company can overcharge consumers. Isn’t their job to pay what pharmacies and hospitals charge? Do insurance companies get money if they approve the overcharged prices? If so how? I thought their revenue was the premiums which are fixed. Is the extra money because people are forced to pay everything after the little the insurance company pays?
They're not just the insurance company - they are also the pharmacy manager who sells the drugs to the patient. So there wasn't really anyone to negotiate with - they pick the price they want to sell the drug for and then how much of it they'll cover.
UnitedHealth is not an insurance company. They own an insurance company as well as OptumRx, a pharmacy benefit manager, which is described at the very top of this article.
Correct - they aren't an insurance company, they are a racketeering organization committing fraud under the guise of being a "healthcare" company that is vertically integrated with every facet of the healthcare supply chain.
All this on top of being a for-profit corporation whose mission is quite literally to enrich shareholders, instead of helping patients navigate the healthcare system.
They also are the largest employer of doctors in the United States.
They've essentially constructed their own single-payer health care provider, but instead of being paid for by tax dollars it's a publicly traded company whose primary goal is to increase shareholder value.
Looks like we need regulation to prevent a company to own the whole stack like this. Leads to exploitation of consumers as we see here. Of course there is no will to do this in our politicians when they get bought for pittance
Nothing is shocking about the insurance industry anymore since they’ve been pulling this kind of thing for years. To me the most shocking thing is the people who defend them. I understand the drive to make money and build huge businesses: what confuses me is that we treat human health the same as things that don’t directly impact the health of people. It seems to me that there are endless opportunities to get insanely rich: I’ve never understood why we don’t set aside certain areas and just agree that they are not the place to do that. (I know, leaving potential profit on the table is sacrilegious to those who worship at the altar of the almighty dollar…)
What I believe has broken in the US, UK and is well on the way to breaking in Australia, is the confidence that principles will win over greed. If you believe there is a critical mass of good principled people who will stand against selfishness, then being principled is a smart choice. If you do not have that belief, being principled feels like a foolish extravagance. As many have said before, it's got to the point people have more faith in a zombie apocalypse than in citizens cooperating for their own common good.
In many ways, the problem is that we do treat health care different. What other industry will actively reject attempts to ask about prices? What other industry just sends out bills with no contractual basis and exaggerated fraudulent amounts made up after the fact? What other industry do you need to buy "insurance" to even be able to financially communicate with service providers? What other industry does the government provision social services by telling businesses that they must serve some of the most expensive customers for free, and then ensures monopolies so those large losses can be made back from every other customer? What other industry is it impossible to obtain services until a professional declares that you "need" them, at which point it's supposed to be close to free?
These massive profits are because of the so-called "regulation" that has continued to keep market dynamics away, new entrants out, and the industry supremely entitled (from doctors to billing departments). The political debate continues to be sidetracked by doubling down on this mistaken idea of thinking constructive outcomes can simply be declared in law. What needs to happen is to focus on making healthcare a competitive market where patients have agency, while also providing direct financial subsidies when people need them.
The problem is that it is different. What other industry sells a product that you might need in order to survive or to not be disabled which requires the dedicated efforts of multiple professionals with a decade of post-secondary education? What other industry sells a product that you might suddenly need at a moment’s notice that is the only way you’ll survive the day, that requires sophisticated equipment, dedicated facilities, and a team of the aforementioned highly educated professionals?
Most industries are either optional things you want to have but can live without, or necessities you need on an ongoing basis that need more than a few minutes of individual attention.
There’s a lot more to medicine than emergencies and lifesaving treatments. But I think those are the original sin from which the rest flows.
The basic question is this: should people be left to die if they have a sudden life-threatening event (heart attack, hit by a bus, shot) and they can’t demonstrate an ability to pay for treatment? (Note, not the same as not being able to pay for treatment. This would potentially apply to a rich person who got mugged and left for dead, for example.)
Few will answer “yes.” And everything else flows from the “no.” The US’s universal health care system is built around it. We pretend we don’t have universal health care, but we do. It’s just tremendously shoddy and weird. The one place with universal care is the hospital emergency room. Those have been required to treat everyone regardless of ability to pay since 1986. Once you start doing that, the rest flows from there. People start saying, what if it’s not critical to survival but they’ll be crippled without it? What if it’s life critical but there’s time to verify payment?
Can we do better without removing that? No doubt. But we’ll have a hard time getting to a proper competitive market.
Other industries with these characteristics (police, firefighting, rescue, ambulance if you count that separately from medicine) are usually handled by the government or at least contracted by them.
I’ve been on the selection side as an employer and several others will probably echo what I’m about to say.
Virtually every insurance provider is going up 15-20% / year to the point that it’s completely unsustainable. United was quoted to me as almost 20% lower than current rate for our provider (before they are about to go up 20%).
On premium alone they will save some people close to $500 / month for what is…”on paper” the same coverage.
I’ve read all of the same stuff about United that everybody else has but the finances put employers in a very difficult position.
I feel people defend them by opposing any other approach to solving this. Politicians in particular say things like "preserving customer choice", which I think just means having the ability to select among all the terrible insurance companies who will treat you poorly.
This is why we need to install National Health Care. Single payer systems get the best rate, and we can make a national decision over how much we can afford. The current system is insane and unsustainable.
Sure, I'll defend them, conceptually at least. I think most actors in this system are in some sense corrupt, and I don't think insurers are the most corrupt. Pull up the 2022 National Health Expenditure table, "National Health Expenditures by Type of Expenditure and Program: Calendar Year 2022" and look at combined hospital and physician expenses compared to insurer expenses; it's pretty black-and-white.
I haven't seen any defenses of insurance companies lately. In fact, it seems like insurance companies are the only safe target for criticism of US healthcare problems right now.
> Virtually every insurance provider is going up 15-20% / year to the point that it’s completely unsustainable.
The elephant in the room is that healthcare costs are going up. Even if we waved a magic wand and eliminated health insurance overhead, profits, and executive pay, your rates would still be going up that same 15-20% per year.
This is the part that seems to confuse everyone. There's a common misconception that insurance companies are raking in huge profits and that prices would plummet if we could just eliminate those profits. You see it throughout this thread with phrases like "dancing on the graves all the way to the bank" and blaming "capitalism" or "corporate greed" with the implication that insurance companies are the purveyors of this greed.
Yet we have non-profit insurance companies. They're not appreciably cheaper. If you look at insurance company profits, they're actually relatively low for companies that large. If you map healthcare spending on a big pie chart, the slice that goes to insurance company administrative overhead and profits is not that big. Single digit percentage. Even companies with socialized medicine have some overhead in this same slice.
The problem is multifactorial. The challenge is that it's not politically safe to touch on some of the drivers of US healthcare costs. Everyone loves to point at insurance companies and drug pricing because it's easy, but things get much quieter when you point out that our doctors, surgeons, and providers are paid substantially more than their peers in other countries. Americans also love to consume more healthcare and many would be very upset if they were forced to accept the level of allowed care and delays in other countries. It's not just insurance companies who have decision trees about when and what care is allowed. Americans also consume medications at an extremely high rate. Again, they don't take kindly to suggestions that we limit prescribing or drug prescriptions (see outrage over the DEA limits on amphetamine production or complaints about hesitancy to prescribe opioids, even though we already consume far more opioids than most countries).
Many Americans also live unhealthy lifestyles which contribute greatly to healthcare costs, but it's taboo to mention that. Everyone has seen the life expectancy charts showing US lagging international peers, but fewer people have seen the per-state version that shows that life expectancy depends heavily on where you live (and therefore what you eat, how active you are, and the local culture). Instead, the only acceptable target of blame is our food. While we have some room for improvement, we're not going to solve the obesity epidemic and lifespan problems by banning red dyes. Lifestyles and diets need to change, but that's a difficult topic. Much easier to point the finger at insurance companies, "CEOs", and the food industry and pretend that those cover all that is wrong with healthcare.
This is why it's politically difficult to accomplish anything in the United States. If anyone tried to copy and paste the health care system of a European country, from doctor pay to allowed procedures to more limited prescribing practices, there would be riots. People want all the healthcare, they want it now, they want it how they decide, and they want someone else to pay for it.
It's easy to just blame the insurance providers, but keep in mind:
Everybody expects a higher standard of care, because now we treat things that we didn't even know about in the past. For example, I have a CPAP and went through surgery for sleep apnea. 50 years ago, who knows what would have happened to me?
Medical providers are incentivized to "find" things to bill for. For example, I went to a podiatrist for foot pain, and she tried to figure out how to have me visit monthly.
Likewise, end-of-life issues can get very expensive, because it's hard to say "no" when loved ones' emotions are fragile.
How do you respond to people that say the profit motive is what drives innovation, and in the long term we’d rather have better, novel treatments sooner
Profit motives for medical / biotech research, yes. What innovations have insurance companies made in the last 100 years besides to squeeze out more profit?
We are talking about delivering care, not innovative medical technology. The biggest single target for innovation in care delivery is to get rid of private insurers.
By informing them that most of that is funded by taxes and students doing all the work, not corporations and not based on their revenue. If anything, they have an incentive not to make better treatments because better often means less profitable.
You can't possibly argue in good faith that being able to provide less than 0.1% of novel treatments is somehow more valuable than providing good, standard healthcare with already existing drugs and treatment protocols to the other 99.9% at a sane cost.
I'm going to go ahead and defend them because private insurance is actually far from the most broken thing about US healthcare, yet they seem to shoulder all the blame.
Average health insurance profit margin in US is ~3%. That's not a greedy profit margin. It's the health care that's expensive, not the insurance. Health care is much more expensive in the US than in similar countries. I'm not an expert on why, but there are all sorts of misaligned incentives on IP and drug pricing that need to be fixed. It's not the insurers.
The army of middlemen the doctors and hospitals need to hire to deal with the insurance companies adds a lot to healthcare costs in the US. Not to mention the armies of middlemen hired by the insurance companies themselves.
While every healthcare system has administrators, the US system with its thousands of different systems interacting with thousands of other individuals makes for a nightmarishly complex problem. Doctors in countries with socialized medicine complain about the government administrators too, but at least they only have one system to deal with.
The profit margin is just the shareholders' cut though.
What about the CEO salary? What about his secretary? The rent they pay for the buildings they occupy? Going down that path, how much of the operational expenses of private insurance meaningfully improve patients' health?
Even using more accurate financial indicators like Operating Cash Flow and Free Cash Flow still leave lots of room to obfuscate egregious behavior.
I don't know, people who talk about profit margins as if they mean anything in this context are either financially naive or are trying to muddy the water.
I'm not sure a low profit margin is indicative of a company providing a moral degree of service to their insured. Certainly naive profit margin percentages don't show the terptitude of overcharging cancer patients.
For someone who doesn't get this, if a company like UHC buys an entire hospital group they can use that expenditure to legally "hide" profits by reducing their "profit margin" short term while decreasing competition in the space.
If a company acquires enough debt in a given year they can "hide" nearly unlimited profit margins legally.
On a larger scale, a company (UHC) can dump money into "external" money losing ventures that just serve to hold wealth and take that money off their balance sheet, once that entity takes on enough debt the same company (UHC) can acquire it taking on that debt and reducing their profit margin yet again.
GE Capital and Amazon are poster children for having done this process in a legal fashion.
As a beginners guide, if you have access to a talented accounting firm you can ask about these approaches to get started:
1. Management & Consulting Fee Arrangements (Especially with Related Parties)
2. Transfer Pricing (in Multinational Contexts)
3. Debt Pushdown & Thin Capitalization
4. Special Purpose Entities (SPEs) or Variable Interest Entities (VIEs)
I would be inclined to agree with you, the issues is related to the healthcare vastly overcharging for basic acts such as giving simple drugs such as ibuprofen or paracetemol.
It shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security. The US’s primary concern is mark to market in pension funds.
A historical aside, the reason private health insurance was created in the US was World War 2.
I could be misremembering pieces, but the long and short of it was that salary compensation was capped/restricted during World War 2 and so companies began offering benefits outside of salary, private health insurance among them, to retain their employees.
> shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security
I forgot about the world-class healthcare the populations of Africa, the Middle East and the war-ravaged parts of Asia enjoy.
I agree there is probably a link between war and healthcare. But the link flows through civic pride and identity, and population-wide familiarity with the horrors of war, more than it does from any sense of military preparedness. (That said, I've never seen an American politician try to sell universal healthcare as a national security imperative. Hmm...)
For instance, Canada, which also arguably "never had a world war on the continent" has public healthcare. What gives? What about all the central/south american countries that don't have public healthcare?
Setting aside human health and agreeing that it should be outside capitalist endeavor would be incredibly damaging to human health. I can hardly imagine any policy that would reduce life years more than that.
I don't particularly care if health insurance is public or private.
DIRECT health care labor costs (doctor's, nurses, etc) are ~40-60% of TOTAL healthcare spending.
Smart people try to figure out ways to make our system better every day. If there was a silver bullet, we'd have already taken it.
Health insurance profits are ~1.2% of total health care spending, the cost of running it is approximately ~4% more.
It's always going to cost SOMETHING to run - whether you move it to the private or public sector is largely a rounding error.
If you take all those insurance jobs and pop them into the Federal Government - you're unlikely to see much efficiency gains (the most pro-medicare articles state it's 37% more efficient - that's an improvement of ~1.5% in total spending).
UHC had a net margin of 6.1% in 2024.
Sure, if all 6.1% of that went to spending instead of profits - health care would be slightly better.
But it's mostly a rounding error. Private health insurance profits are only ~1.2% of total spending.
Maybe you're focused on a ~6.1% margin, or ~$60B in total profits.
You're not going to get substantially better outcomes by simply having ~1.2%-2.7% more money to spend.
You'd need to bring down the actual cost of healthcare substantially - which isn't going to happen unless you pay doctor's and nurses way less money.
Pharmaceuticals are only about 9% of total US healthcare spending - even if you nationalize that (never going to happen) - you're still not getting substantially better / cheaper outcomes.
Profits on pharmaceuticals is <2% of total spending as well.
The only way you're getting significantly cheaper service is by reducing your biggest cost significantly - i.e. paying less for direct patient healthcare (doctor's, nurses, etc), and that's probably not a great strategy for getting better outcomes.
Who knows? NHS pays doctors dirt, and their system isn't obviously worse than ours. Some people think it's way better, others way worse.
Medicare administrative costs are around 2% of total program spending [1] compared to typically >10%. While what you're saying on the surface may be true from the numbers you are comparing, the fact of the matter is that healthcare costs are becoming more and more expensive during a time when many are experiencing a cost of living crisis.
The US gets a bum deal on costs and outcomes and while we can argue on which specific changes will move which specific needle I think it's clear that one of the major differences compared to the rest of the world is that running healthcare as a for profit enterprise has failed to deliver on the promise of good outcomes for as affordable a price as possible both on an individual and country wide level.
Honest question as someone who prefers single payer but acknowledged it's not a silver bullet: how much of the costs are nurses and doctors vs. admin? It seems to me there's a lot of overhead in passing the bills around to get paid. I just had my appendix out last year and got billed 8 times by 8 different firms, each with payment portals, call centers, billing providers, etc. I assume there's a lot of inefficiency internally too.
I have good news! If you move it to the public sector, you will effectively pay doctors less money for the same work. That's because the way it works currently is that the doctors have to deal with private insurance bureaucracy. By freeing them from this responsibility, they have more time to take care of patients, which should effectively gets you more medical bang for your buck.
6.1% profit margins is a lot when it should not be for-profit in the first place. Why is anyone making a profit off of administering necessary services?
What is the operating profit of your local firefighter brigade?
What is the operating profit of the interstate highway system?
What is the operating profit of your local water/sewer department?
Not a single person in this country doesn't need healthcare at some point. It's not an optional for-profit good.
Medical Loss Ratio (MLR) is capped at 85% in the US which means 85% of revenue must go to patients. This is roughly inline with other countries with universal healthcare (MLR ranges from 85-95%).
The fundamental problem is that we don’t have enough resources to take care of everyone. Insurance companies are faced with the impossible task of allocating resources and making care/nocare decisions.
I don’t get the “endless profiteering” angle against insurance companies. If anything it’s the providers who are screwing over patients by gaming insurance and taking more than is necessary from the shared insurance pool of money.
But when UnitedHealth requires medications to be purchased from Optum health (with whom they share a parent company), they can jack up the price of a drug and keep some of that 85% too.
> If anything it’s the providers who are screwing over patients by gaming insurance and taking more than is necessary from the shared insurance pool of money.
If the 85% gets larger, so does the 15%. Both sides gain when the cost increases.
I’m not an expert but I’m wary of anyone who has a simplistic view of what seems to be a complex system. This, plus looking at the profit margin of UHC paints a more nuanced picture (net profit margin is not that high. the dollar amount is high because the scale of the company is big). (Not that I want to make money from denying people healthcare, no matter how much internal logic there is to it…)
But it does seem like there’s a serious prisoners dilemma type situation going on in American health care. It’s easy to point fingers at someone else.
The situation is also coupled with a toxic political environment where a Trump voter can simultaneously be against “Obamacare” and think that Trump is going to improve access to healthcare, and a Harris voter can be pro Obamacare and ignore regulatory capture by pharmaceutical companies- e.g., both sides so convinced they’re right and the other side is wrong they won’t be seen to agree on anything common sense.
Insurance isn't a good industry to "get insanely rich". It doesn't have high profit margins. For one thing, the ACA mandates that insurance companies can't keep profits past a certain point.
My sense is that people expect too much from their health insurance. Subconsciously, we expect to experience no pain and live forever. When this inevitably doesn't happen, we blame insurance companies for not bankrolling infinite healthcare.
The miracle of US healthcare is how at every step, work is done to minimize every party's ability to either use market power to lower costs, or to make people cost-conscious about their own expenses.
Insurance, in a vacuum, detached from an industry is a perfectly sensible way to try to spread risk. And as you say, this fair, reasonable insurance isn't about getting extremely rich, but about being the best at identifying where the risks are, and using market power to lower costs. But with healthcare, and especially with the US peculiarities, we manage to get minimal value out of it.
People getting care don't know their options, and how different the pricing can be. Insurers are capped by a percentage of services paid, so they really are happy if everything is very expensive. Providers band together into conglomerates that make sure it's hard for insurers to lower reimbursement rates. Pharmacy benefit managers build complicated schemes that let them take a bigger piece of the pie. They even purchase pharmacies, and restrict the expensive purchases for themselves, while the local pharmacy is squeezed. All in all, it gets very expensive, with minimal control of spiraling prices, and nobody that can lower costs is incentivized to do so.
We blame insurers because that's the people that get paid first, but yes, it's not really a matter of just insurers. It's a kafkaesque system that is basically impervious to significant reform. And for good reason: Every dollar we overpay is someone else's salary. A decrease in costs per person for the same care to match, say, Spain would involve a whole lot of people making a lot less money, including many losing their jobs. Not exactly a political winner, even though the country would be better off with more efficiency
The article is about insurance company malfeasance, but this boils it down to mis-aligned consumer expectations about living forever in total bliss. That feels like a strange disconnect.
And for a while, for fun, they also varied pharmacy coverage by state. I live in WA, was traveling in CA for a holiday, and needed to visit urgent care in a town I didn't know well. All good, and then they asked what pharmacy. "Oh, CVS should work if there's one nearby", because that's what I used with my insurer in Washington.
Roll up to the CVS in the Target, and they tell me "Aetna doesn't cover CVS in California at this time"...
There are only three things that keep companies from doing bad things. criminal liability, civil liability and brand risk(PR). companies will do what our society has designed them to do, which is to generate profit while navigating those three risks. Negative PR is not enough to dissuade health insurance companies from doing bad things because it's generally not consumers who choose their insurance, it's their employers. Clearly we cannot rely on brand risk to keep these companies in check..we need more laws and regulation.
Some day our regulators at the fda, ftc, doj, etc should clean house and get some folks who can actually go after these greedy companies. Today they don’t because of the revolving door system.
Don’t you think it’s possible if drug advertising is banned then perhaps some of our media organizations may be at least slightly more inclined to investigate some of these hostile practices?
Companies who signup for these plans on behalf of their employees are finally getting on onboard that PBMs are hiding these markups and making backdoor deals with the drug companies. The best thing you can do is put pressure on your employer if you run into this.
>This past year saw a wave of mid-sized employers, unions, and health plans exploring alternatives to the Big Three, a trend that will only continue to gain momentum in 2025. In fact, a recent report found that 52% of employers are considering changing their PBM in the next 1-3 years. While 72% of employers still primarily contract with a Big Three PBM, 12% have already embraced a transparent PBM.
The only solution is to regulate. But if we had politicians with spine, they would enact retroactive fines and jail time, and pierce the veil to go after the executives and owners who profited to recoup these unjustifiable costs that can only come due to anti competitive practices.
And let’s not forget, United Healthcare’s subsidiary Change Healthcare held the breach notifications for MONTHS from affected people. They only got sent out recently, and the company not only refuses to compensate victims in any useful way, but won’t even tell them what information of theirs was compromised (hint: medical records). This affected 100 million patients, many of whom have NEVER been customers of Change or United:
https://techcrunch.com/2025/01/15/unitedhealth-hid-its-chang...
> CVS Caremark, by comparison, argued the FTC was guilty of “cherry picking” its analysis by focusing on generics, which represent a tiny fraction of client spending over branded specialty drugs in an attempt to mislead.
So it sounds like the report may be a bit misleading - what is being alleged here is that PBMs overpriced over the generics. So it's like if Coca-Cola set the price of their can at $50, and NoName at $0.50. So you be are being "overcharged" at the grocery store when you buy the Coke and not the NoName.
It's not actually clear from the report that the PBMs actually profited from overcharging. Furthermore, if the doctor prescribes a name brand drug, it's not always the prerogative of the PBM to switch the prescription on behalf of the customer.
No, it's saying that they bought the NoName for $0.20 and sold it for $20.
The PBMs are defending it, saying that coke costs $30.
The problem is that the insurer and thus the PBM are supposed to be working on behalf of the insured, but they pay their sibling pharmacy well above the reasonable market price.
This kind of profit margin (<6%) would get executives in many other businesses fired. All the other MCOs actually have a sub 3% profit margin. UNH has a higher profit margin because it sells healthcare, not just managed care.
On the other hand, here are the profit margins for the companies that make medicine (20%+):
Finally, search for the difference in rankings in market cap between pharmaceutical companies versus managed care organizations. There are at least 7 pharmaceutical companies in the top 100, and only 1 managed care organization. The next biggest MCO is #189.
Edit to respond to below: It does not matter if UNH or any other MCO moves money from their right pocket to their left pocket, the SEC filed 10-Q and 10-K will reflect all revenue and expenses. Their low profit margin is evidence that the money is flowing out of the organization and away from the shareholders. If this business was as profitable as people claim, then its stock returns would indicate it, but they don't.
There's such obviously fucked up incentives in this industry.
- When employers select insurance, providers will 100% of the time tend toward ignoring the interests of those who are insured: the incentives to do so are just too strong.
- When an insurance company also owns a pharmacy, it will 100% of the time tend toward overcharging: again all the incentives encourage this.
Unfortunately it seems most folks have little or no experience analyzing incentive structures when looking for levers to pull to improve outcomes. It'd be great to see popular discourse focus more on the environmental factors that incentivise these kinds of corporate abuse.
And, zooming out a little more, free market healthcare is just part of the problem.
We have a system where we’re only treating people once they have a disease, and not working to prevent the disease, so it would be helpful to look at the effects of for-profit companies on making healthy people sicker. Fast food, snacks, alcohol, there are so many industries that are incentivized to succeed by making people sick.
This is the system “working” according to the current rule set.
It’s time to look for a better algorithm than a purely profit maximizing one.
We have UnitedHealth, and my wife died of cancer. They denied a lot of things, but ultimately, they covered a lot when we rapidly soared past our deductible. We kept a running list of EVERY bill paid. It's a shame they put so much onus onto the family dealing with tragedy.
So while it was a pain to fight them on every bill, they did shell out for us.
Some of the biggest battles were with the hospital bill collectors.
So sorry for your loss. It is crazy that cancer treatments are so criminally expensive.
The analysis in the comments suggests that UHC pricing is high due to cartel like price fixing. So while they “shell out” it seems like they are playing a shell game to loophole the 85% rule.
Why is insurance charging anyone for drugs? Shouldn't the pharmacy/doctor/hospital charge the patient and the insurance company pay some percentage of the cost (maybe negotiating the price of the drugs downward)? It seems we've overcomplicated a system that should be much simpler.
What is being alleged here is that PBMs overpriced over the generics. So it's like if Coca-Cola set the price of their can at $50, and NoName at $0.50. So you be are being "overcharged" at the grocery store when you buy the Coke and not the NoName.
It's not actually clear from the report that the PBMs actually profited from overcharging. Furthermore, if the doctor prescribes a name brand drug, it's not always the prerogative of the PBM to switch the prescription on behalf of the customer.
Thank you. That makes sense. Why are you being downvoted? I'd love if someone could say why they're downvoting you, because it seems like you addressed my question -- unless you just fabricated an answer -- but it would be nice if they said that.
I find it amazing that people complain about paying more than some other countries, while they cannot even solve this sort of insanity. Just maybe first making this one sensible, next step could be to have some competition and free market...
I wonder a lot about this argument of private health care vs state funded health care. I have libertarian leanings and so would prefer a truly free market, because I would like to believe it would lead to affordable levels of health care for everyone.
But I don't know that it's true. My questions regarding the US system and health insurance: Is it a truly free market or does the state regulate in ways that make it difficult for competition?
In Australia we have heavily subsidized healthcare, but it's not great. If you've got something life threatening then you'll be OK. If it's not life threatening, but just really difficult to live with then you'll wait. Sometimes years. No choice of specialist or hospital either. So many of us get private health insurance of one level or another, in order to have more choice and better, more prompt care.
So, how free is the US system?
Also, here's an X post from a guy called Devon Eriksen on the topic of socialized healthcare and free markets.
PS: Devon wrote a great debut Sci Fi novel called "Theft Of Fire" (Orbital Space #1). It's a great read, with endorsements from John Carmack, "Uncle" Bob Martin and ESR, among others.
> I have libertarian leanings and so would prefer a truly free market, because I would like to believe it would lead to affordable levels of health care for everyone.
Just look at the per-capita spending on healthcare by OECD countries, basically all of which have universal healthcare except for the US [1]. So the US pays almost twice as much as #2 (Switzerland) for significantly worse outcomes and less coverage.
The US healthcare system is an unmitigated disaster that is a cautionary tale in how capitalism only promotes rent-seeking and regulatory capture. It's done with a service with inelastic demand, meaning the threat of violence since we are quite intentionally withholding lifesaving healthcare for the sake of the profits of completely unnecessary intermediaries.
This is what blows my mind about the universal health care opponents in the US. We would literally be spending less for better health care. People just cannot stomach their money going to the government instead of an unelected mega corp.
When Elizabeth Warren was promoting Medicare for All, she kept being asked the "how will you pay for it?" question over and over and over again. Debates, reporters, critics...
People hear "X increase in tax, 3*X decrease in costs" as "X increase in tax!"
"cautionary tale in how capitalism only promotes rent-seeking and regulatory capture" is a weird takeaway from this when the same applies to government-run healthcare. medicare, medicaid, veteran's affairs combined almost approaches OECD levels, but only covers a fraction of the population.
Medicare chooses the oldest (over 65), Medicaid chooses the poorest (who are more likely to have issues that went untreated and got worse) and most severely disabled, and Veterans' affairs chooses the ones who gave their bodies to Uncle Sam to be pushed out of planes, deafened in tanks, and have their backs wrecked with giant packs marched for several hours a day.
In other words, all patients that private insurers are likely delighted not to have on their books.
As another commenter put it, the government covers those with the highest cost of healthcare: veterans with varying degrees of disability, the elderly and the poor.
Another way to look at that is that insurance companies offload the highest cost people to the government so they can profit from the younger and healthier. How does that make sense?
You see this everywhere too, like with the push for privatization of education through charter schools and/or school vouchers. Some will point to the lower cost per student and completely ignore that the government education system doesn't get to be selective about students. State education caters to those with high-needs who are, just like with Medicare and the elderly, those that cost the most.
the only option to fix healthcare is to decommodify it and implement a public option where the risk pool includes everyone. There is 0 reason that the wealthiest country on the planet needs to operate at a worse level than so called "3rd world countries"
even from a purely neo-Liberal capitalist sense, this completely violates the shared fantasy of the "free market" and yet we still have people going on Joe Rogan saying stuff like "we need to deregulate the market further because this is all due to innovation being stifled through regulation" which is an absurd notion.
Every other country is eating our lunch when it comes to medical discovery and novel chemical compound discovery while the US spends all of its time and money evergreening medical patents to extend them indefinitely so they can maintain monopolistic control. I honestly just don't see a way out of this.
People have wanted health care reform in the US for over a century and it is farther away from ever. This carrot you are waving does not exist, which is why CEO Brian Thompson has filed his last claim denial.
https://archive.ph/7vHah
I think some critiques of American health insurance are simplistic, but this truly seems very bad. From the report:
> "Higher markups can also result in larger internal transfer payments from health plans to affiliated pharmacies, which may allow vertically integrated PBM-pharmacy-insurer entities to retain revenue and profits while formally satisfying the insurers' medical loss ratio ("MLR" ) requirements, but without providing the clinical care and quality improvements that the MLR rule seeks to promote. In addition, higher markups can result in significant patient cost sharing requirements because reimbursement rates are often correlated with point-of-sale prices, which can influence how much patients are required to pay."
In other words. Health insurance firms have capped profits in the US. But in this case one conglomerate can own both an insurer and a PBM, so it can just overcharge consumers for insurance and then launder its profits through the PBM.
There is no complexity to the corruption and inefficiency of US healthcare. It has the highest costs and mediocre outcomes. It offers healthcare providers incentives to act even if they shouldn’t and allows insurers to profit directly from denying care.
It’s worse in practice than any system adopted by any peer nation regardless of the wide range of differing approaches to providing universal coverage.
Treating it as some uniquely complicated problem is deceptive. It’s broken because that keeps certain people wealthy and gives employers control over labor.
>In other words. Health insurance firms have capped profits in the US. But in this case one conglomerate can own both an insurer and a PBM, so it can just overcharge consumers for insurance and then launder its profits through the PBM.
Most insightful comment in this thread. THIS is the crux of the issue, and we've allowed the likes of UHC to buy PBMs and other pieces of the supply chain / customer lifecycle because UHC lobbyists claim it would reduce costs across the board and also improve efficiency. Load of absolute bullshit obviously but here we are.
You just answered my question:
Is it the case that UnitedHealth and Cigna each own (or control) one of the "big three" PBMs? If so, that is a just crazy - the control insurance premium pricing, benefit decisions, AND the pricing of covered medications?
yadaebo wrote below "Medical Loss Ratio (MLR) is capped at 85% in the US which means 85% of revenue must go to patients". Does controlling a big PBM allow an insurance company a loophole?
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Yes. I have been trying to figure out for years why the PBM system is so convoluted and seemingly so much more central to healthcare than it was, and this seems like it must be the reason.
> I think some critiques of American health insurance are simplistic,
At it's core, details are not really needed to show how atrociously inequitable the system is.
Medical is a very technical field, and the costs are obfruscated from most people. I'm not surprised laymen can't give a technical breakdown of what exactly is wrong with the health insurance field.
https://archive.ph/cg4we
I do not like UnitedHealth, I do not like our existing crop of health insurance executives, and I might even be viscerally glad at some level that the UnitedHealth CEO was killed in a world where justice clearly takes a back seat to greed, but I wish the headline didn't say "overcharged", because there's no established amount of markup that is the correct amount of markup other than what people end up paying. Is that shitty? Yes. Does it violate a social contract? I think so. But tell me how much the right amount to charge is first. Is that cost? Cost+percentage? They've chosen their percentage. What's the correct one instead?
The article body presents the story in a more meaningful way, "UnitedHealth Group is charging patients a markup for key life-saving drugs that could easily exceed their cost by a factor of ten or more".
All I'm going to say is that Optum Specialty Pharmacy is the sole source that UHC will accept for a lot of special drugs. For example UHC offers insurance for IVF including a separate cap for medications, but if you use their insurance you have to order through their subsidiary Optum Specialty Pharmacy and the prices triple or quadruple over MSRP if you buy from OSP using insurance versus if you pay cash. They also won't tell you this until you're in the middle of a cycle and an order gets held up because you're out of insurance, but since they billed insurance you're on the hook for the remaining several-thousand dollars because if you stop the drugs you're just out the money and the medication and have to wait another month.
I don't know if I can give them the benefit of the doubt on the cancer drugs because of this.
> subsidiary Optum Specialty Pharmacy and the prices triple or quadruple over MSRP if you buy from OSP using insurance versus if you pay cash.
As an European, this is mind boggling.
I don't want you to give them the benefit of the doubt. I certainly don't think they deserve it. I do think, however, that a conversation about "overcharging" goes nowhere until people talk about exactly where charging ends and overcharging begins.
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UHC double-dips because they own Optum even though Optum is "independent". It's fucking disgusting. How they were allowed to buy Optum and didn't have every regulator in the country on the case is beyond me.
I $truggle to think how $omething like thi$ wa$ allowed to happen.
Bastards.
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I take issue with the claim that in order to say something is too expensive that you must be able to precisely propose an alternative price.
I have no idea what the correct margin for essential cancer drugs is. I don’t think it should be a 10x markup. Intuitively, it seems that there’s something wrong with price gouging dying cancer patients. If you have an argument why my intuition is wrong, please share it.
> I take issue with the claim that in order to say something is too expensive that you must be able to precisely propose an alternative price.
If you want to be quantitative of course you do. How hard is it? Margin of error is allowed. If you want to be qualitative, vague and wishy washy, that has its place too, but at some point someone is going to ask for a quantitative assertion, otherwise you get nowhere.
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> I have no idea what the correct margin for essential cancer drugs is.
So let's talk about it and think about it and form an idea. There's no universally right or wrong answer, but you should at least be able to decide what answer is right to you.
> I don’t think it should be a 10x markup.
What about 1x markup?
> Intuitively, it seems that there’s something wrong with price gouging
There is, but you're relying on the word "gouging", and without identifying what price you think is gouging vs reasonable profit, stopping at the point where you express that "too much is too much" doesn't get us any closer to having actionable goals.
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They've chosen 90% margin (cost + 1000%).
Semicon tool builders (my industry) have margins around 50% (cost + 100%). This is considered high margin manufacturing work.
To match United Health's margins we'd need to raise prices by 5x.
I agree, but we can't talk about "over" without talking about where the line is.
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The article is about UnitedHealth's PBM, which negotiates rates and then earns revenue from drug manufacturers through rebates. Remember that insurance is part of Big Finance and involves a lot of clever instruments to shuffle around money, risk, and accountability. PBM's are one of those instruments. Our intuitive Econ 101 models of the industry don't always go far enough into the weeds when we're just reacting to headlines. This is one of those occasions.
https://content.naic.org/insurance-topics/pharmacy-benefit-m...
For those who want to really understand the impact that PMBs play on the overall US healthcare system I highly recommend reading the "The Price We Pay: What Broke American Health Care--and How to Fix It" by Marty Makary, MD. The system of legalized kickbacks that they use isn't widely recognized but it will have to be reformed if we ever want to bring down prescription drug spending.
https://www.bloomsbury.com/us/price-we-pay-9781635575910/
https://en.wikipedia.org/wiki/Price_gouging
This is exactly it. They are charging that price because that price will be paid, and this maximizes their overall profit. In other similar situations this would spur competition, which would ultimately drive down prices to a reasonable level. But in the healthcare industry competition is often prohibited or made very difficult by law. You can cite the patent system as an example of this, but another horrible one is the "certificate of need" laws, which should infuriate you.
> which should infuriate you
Oh it does!
> there's no established amount of markup that is the correct amount of markup other than what people end up paying.
Of course it's all subjective, but I cannot think of a single other industry that can get away with a 1000% markup on anything and expect to get away with it. In proper capitalism, that just means any competitor worth a dime can massively cut you with a 300% markup that is insane but a steal in comparison. Then it just stabilizes to some point between where competitors need more saavy to compete and more than some minimum markup to function.
I'd say overcharge is correct given the monopolistic structure of healthcare. You don't have too many choices to begin with and it's very hard to switch.
There are many models used in different jurisdictions. Typically it's a government body for negotiation, assessment and sometimes price caps.
Health insurance profit margins are regulated, so UHC earning higher margins does seem like overcharging.
Perhaps we need antitrust action in healthcare.
I think one of the things that deserves discussion here is the whole concept of pharmacy benefit managers in the first place.
To start, can anyone give some good resources that really explain clearly what the role is that PBMs actually serve, and how the whole system even functions? I've tried to understand in the past but have always thought "Why do you exist???". Like the whole way companies like GoodRX can have a viable business: if I don't use you, my prescription medication is, say, $1000, but if I do use you, it's $60. One of the pharmacies I used to go to even had a keychain with random prescription discount codes on it that the cashier would scan. I.e. I'd go to check out, and the cashier would scan the price and it would come up as $X, then she'd say "Hold on a sec", and scan the discount code on her keychain and then would say "That's better, your price is now $0.1*X".
Like how can any of that possibly make any sense?
The PBM industry originally started with noble intentions, even if some of them have now morphed into something closer to parasites. They helped to hold down drug costs for consumers and employers by negotiating with pharmaceutical companies and retail pharmacies on behalf of multiple buyers. And they created formularies and clinical guidelines to encourage use of most cost effective drugs (generics and step therapy). A lot of doctors tend to write prescriptions for certain drugs out of habit without carefully considering what's best for and individual patient, both clinically and financially. And before federal laws were tightened up, it was common for drug companies to essentially bribe doctors to prescribe their expensive branded products through loopholes like paying them "speaking fees" to show up at company meetings held at 5-star resorts. So PBMs were a way to counteract that. But then some of the PBMs started taking kickbacks themselves and making money on pharmacy price spreads so it has all become a big mess.
Theoretically the role they serve is that they can negotiate with pharmacies and develop a formulary which insurers package into their various offerings. PBMs can negotiate with pharmacies by sending them lots of customers in exchange for negotiating for a discount (or, more likely, a rebate) on their "usual and customary" price. (Pharmacies know they do this, and thus they charge very prices to the uninsured, to ensure their U&C is high enough that they can still make a profit after applying the PBM discounts). Insurers are not experts in the local pharmacy markets of particular geographies, so in essence they outsource this negotiation and craft plans with formularies prepared by PBMs.
GoodRX and other discount providers generally work in one of two ways:
1) They have relationships with multiple PBMs, allowing you to choose the one who has negotiated the cheapest rate with the pharmacy for the drug in question. This is why it might be cheaper than your insurance: another PBM has negotiated a better deal.
2) The discounts come from patient assistance programs run by the manufacturers intended to reduce patient co-pays. Lately insurance companies have started to add clauses to their plans (called copay accumulators or copay maximizers) so that these discounts don't count as part of your copay or your deductible. So these types of discounts are going to be harder to get.
This all stems from a time when pharmacies were much less consolidated and vertically integrated than they are today.
One of the frustrations of the current system is that incentivizes sky-high drug prices. PBMs like high drug prices because they negotiate rebates (some of which they keep, but most they pay back to the insurer) and because the fees they charge to insurers are a percentage of the claims that go through. Pharmacies like high drug prices because they get more money paid them in reimbursements, and because the PBMs send them most of their customers. Manufacturers like high drug prices because they net more revenue, even if they later have to pay it back in the form of rebates, and in any case being on the formulary of major insurers is an existential issue for them. And insurers like high drug prices because they can max out patient co-pays, as the money returned to them in the form of rebates gets kicked into the general fund, thus allowing them to lower premiums, which is their primary axis of competition with other insurers.
The net effect is that you have sick people maxing out their deductibles in order to lower the premiums paid by healthy people--the exact opposite of how insurance is supposed to work. If I could wave a magic wand in Congress and make only a single surgical change to healthcare markets, the change I would make is banning rebates. They were anti-customer when John D Rockefeller used them to obtain a monopoly on oil, and they are anti-customer today.
A good place to read about these dynamics in American healthcare is drugchannels.net. The author is super well informed on how these plans are implemented.
Source: ran a startup targeting pharmacies (which failed) and currently work in a starup focused on discovering and developing new drugs.
Or the fact that you can mail order some name brand prescription drugs from Canada for a fraction of what you'd pay here.
Grift all the way down.
Well, at least that one I understand. That is, other countries have much stricter pricing controls on medications, while the US does not. So pharmaceutical companies argue that it's essentially the US that makes drug discovery worth it - they basically say that if the US had strict price controls too, then it means that drugs research wouldn't be viable to invest in in the first place. Not at all arguing that's true (I don't know), and even if it is true it just means the American customer for those medications is carrying the load for everyone else, which besides just being unfair doesn't seem sustainable in the long term.
But again, at least that one I theoretically understand. PBMs make no sense to me whatsoever.
I don’t understand how an insurance company can overcharge consumers. Isn’t their job to pay what pharmacies and hospitals charge? Do insurance companies get money if they approve the overcharged prices? If so how? I thought their revenue was the premiums which are fixed. Is the extra money because people are forced to pay everything after the little the insurance company pays?
They're not just the insurance company - they are also the pharmacy manager who sells the drugs to the patient. So there wasn't really anyone to negotiate with - they pick the price they want to sell the drug for and then how much of it they'll cover.
UnitedHealth is not an insurance company. They own an insurance company as well as OptumRx, a pharmacy benefit manager, which is described at the very top of this article.
Correct - they aren't an insurance company, they are a racketeering organization committing fraud under the guise of being a "healthcare" company that is vertically integrated with every facet of the healthcare supply chain.
All this on top of being a for-profit corporation whose mission is quite literally to enrich shareholders, instead of helping patients navigate the healthcare system.
RICO them.
They also are the largest employer of doctors in the United States.
They've essentially constructed their own single-payer health care provider, but instead of being paid for by tax dollars it's a publicly traded company whose primary goal is to increase shareholder value.
Looks like we need regulation to prevent a company to own the whole stack like this. Leads to exploitation of consumers as we see here. Of course there is no will to do this in our politicians when they get bought for pittance
Can you explain how discount cards (like GoodRx) work?
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That's the magic of vertical integration!
https://youtu.be/5rw4kNHNZyk
Nothing is shocking about the insurance industry anymore since they’ve been pulling this kind of thing for years. To me the most shocking thing is the people who defend them. I understand the drive to make money and build huge businesses: what confuses me is that we treat human health the same as things that don’t directly impact the health of people. It seems to me that there are endless opportunities to get insanely rich: I’ve never understood why we don’t set aside certain areas and just agree that they are not the place to do that. (I know, leaving potential profit on the table is sacrilegious to those who worship at the altar of the almighty dollar…)
The problem with greed is it has no limits. These people are happily dancing on graves all the way to the bank, and we allow it.
What I believe has broken in the US, UK and is well on the way to breaking in Australia, is the confidence that principles will win over greed. If you believe there is a critical mass of good principled people who will stand against selfishness, then being principled is a smart choice. If you do not have that belief, being principled feels like a foolish extravagance. As many have said before, it's got to the point people have more faith in a zombie apocalypse than in citizens cooperating for their own common good.
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"chart goes up and to the right!" seems to excuse just about anything in some peoples' political philosophy.
much shareholder value was increased, I'm sure.
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In many ways, the problem is that we do treat health care different. What other industry will actively reject attempts to ask about prices? What other industry just sends out bills with no contractual basis and exaggerated fraudulent amounts made up after the fact? What other industry do you need to buy "insurance" to even be able to financially communicate with service providers? What other industry does the government provision social services by telling businesses that they must serve some of the most expensive customers for free, and then ensures monopolies so those large losses can be made back from every other customer? What other industry is it impossible to obtain services until a professional declares that you "need" them, at which point it's supposed to be close to free?
These massive profits are because of the so-called "regulation" that has continued to keep market dynamics away, new entrants out, and the industry supremely entitled (from doctors to billing departments). The political debate continues to be sidetracked by doubling down on this mistaken idea of thinking constructive outcomes can simply be declared in law. What needs to happen is to focus on making healthcare a competitive market where patients have agency, while also providing direct financial subsidies when people need them.
The problem is that it is different. What other industry sells a product that you might need in order to survive or to not be disabled which requires the dedicated efforts of multiple professionals with a decade of post-secondary education? What other industry sells a product that you might suddenly need at a moment’s notice that is the only way you’ll survive the day, that requires sophisticated equipment, dedicated facilities, and a team of the aforementioned highly educated professionals?
Most industries are either optional things you want to have but can live without, or necessities you need on an ongoing basis that need more than a few minutes of individual attention.
There’s a lot more to medicine than emergencies and lifesaving treatments. But I think those are the original sin from which the rest flows.
The basic question is this: should people be left to die if they have a sudden life-threatening event (heart attack, hit by a bus, shot) and they can’t demonstrate an ability to pay for treatment? (Note, not the same as not being able to pay for treatment. This would potentially apply to a rich person who got mugged and left for dead, for example.)
Few will answer “yes.” And everything else flows from the “no.” The US’s universal health care system is built around it. We pretend we don’t have universal health care, but we do. It’s just tremendously shoddy and weird. The one place with universal care is the hospital emergency room. Those have been required to treat everyone regardless of ability to pay since 1986. Once you start doing that, the rest flows from there. People start saying, what if it’s not critical to survival but they’ll be crippled without it? What if it’s life critical but there’s time to verify payment?
Can we do better without removing that? No doubt. But we’ll have a hard time getting to a proper competitive market.
Other industries with these characteristics (police, firefighting, rescue, ambulance if you count that separately from medicine) are usually handled by the government or at least contracted by them.
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Does anybody defend them?
I’ve been on the selection side as an employer and several others will probably echo what I’m about to say.
Virtually every insurance provider is going up 15-20% / year to the point that it’s completely unsustainable. United was quoted to me as almost 20% lower than current rate for our provider (before they are about to go up 20%).
On premium alone they will save some people close to $500 / month for what is…”on paper” the same coverage.
I’ve read all of the same stuff about United that everybody else has but the finances put employers in a very difficult position.
I feel people defend them by opposing any other approach to solving this. Politicians in particular say things like "preserving customer choice", which I think just means having the ability to select among all the terrible insurance companies who will treat you poorly.
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This is why we need to install National Health Care. Single payer systems get the best rate, and we can make a national decision over how much we can afford. The current system is insane and unsustainable.
Sure, I'll defend them, conceptually at least. I think most actors in this system are in some sense corrupt, and I don't think insurers are the most corrupt. Pull up the 2022 National Health Expenditure table, "National Health Expenditures by Type of Expenditure and Program: Calendar Year 2022" and look at combined hospital and physician expenses compared to insurer expenses; it's pretty black-and-white.
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> $500 / month
What the actual f!?
That saving is double the total cost of my private health insurance in Australia!
This includes the “Medicare levy” tax I pay at the highest rate because I get an above average income.
Health insurance cost is something I just don’t think about.
My missus reminds me every few years to combine our plans because it might save us AUD 250 per… year. Maybe.
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I haven't seen any defenses of insurance companies lately. In fact, it seems like insurance companies are the only safe target for criticism of US healthcare problems right now.
> Virtually every insurance provider is going up 15-20% / year to the point that it’s completely unsustainable.
The elephant in the room is that healthcare costs are going up. Even if we waved a magic wand and eliminated health insurance overhead, profits, and executive pay, your rates would still be going up that same 15-20% per year.
This is the part that seems to confuse everyone. There's a common misconception that insurance companies are raking in huge profits and that prices would plummet if we could just eliminate those profits. You see it throughout this thread with phrases like "dancing on the graves all the way to the bank" and blaming "capitalism" or "corporate greed" with the implication that insurance companies are the purveyors of this greed.
Yet we have non-profit insurance companies. They're not appreciably cheaper. If you look at insurance company profits, they're actually relatively low for companies that large. If you map healthcare spending on a big pie chart, the slice that goes to insurance company administrative overhead and profits is not that big. Single digit percentage. Even companies with socialized medicine have some overhead in this same slice.
The problem is multifactorial. The challenge is that it's not politically safe to touch on some of the drivers of US healthcare costs. Everyone loves to point at insurance companies and drug pricing because it's easy, but things get much quieter when you point out that our doctors, surgeons, and providers are paid substantially more than their peers in other countries. Americans also love to consume more healthcare and many would be very upset if they were forced to accept the level of allowed care and delays in other countries. It's not just insurance companies who have decision trees about when and what care is allowed. Americans also consume medications at an extremely high rate. Again, they don't take kindly to suggestions that we limit prescribing or drug prescriptions (see outrage over the DEA limits on amphetamine production or complaints about hesitancy to prescribe opioids, even though we already consume far more opioids than most countries).
Many Americans also live unhealthy lifestyles which contribute greatly to healthcare costs, but it's taboo to mention that. Everyone has seen the life expectancy charts showing US lagging international peers, but fewer people have seen the per-state version that shows that life expectancy depends heavily on where you live (and therefore what you eat, how active you are, and the local culture). Instead, the only acceptable target of blame is our food. While we have some room for improvement, we're not going to solve the obesity epidemic and lifespan problems by banning red dyes. Lifestyles and diets need to change, but that's a difficult topic. Much easier to point the finger at insurance companies, "CEOs", and the food industry and pretend that those cover all that is wrong with healthcare.
This is why it's politically difficult to accomplish anything in the United States. If anyone tried to copy and paste the health care system of a European country, from doctor pay to allowed procedures to more limited prescribing practices, there would be riots. People want all the healthcare, they want it now, they want it how they decide, and they want someone else to pay for it.
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It's easy to just blame the insurance providers, but keep in mind:
Everybody expects a higher standard of care, because now we treat things that we didn't even know about in the past. For example, I have a CPAP and went through surgery for sleep apnea. 50 years ago, who knows what would have happened to me?
Medical providers are incentivized to "find" things to bill for. For example, I went to a podiatrist for foot pain, and she tried to figure out how to have me visit monthly.
Likewise, end-of-life issues can get very expensive, because it's hard to say "no" when loved ones' emotions are fragile.
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How do you respond to people that say the profit motive is what drives innovation, and in the long term we’d rather have better, novel treatments sooner
Profit motives for medical / biotech research, yes. What innovations have insurance companies made in the last 100 years besides to squeeze out more profit?
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Even if that's true for the actual pharmas, how are insurance companies like UHC innovating? They're just middlemen.
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We are talking about delivering care, not innovative medical technology. The biggest single target for innovation in care delivery is to get rid of private insurers.
I think the graph at the top of this article really says it all: https://www.economist.com/graphic-detail/2019/05/22/republic...
They're totally wrong. War is what funds innovations.
Imagine all the innovation we're missing on every day a country isn't being invaded!
By informing them that most of that is funded by taxes and students doing all the work, not corporations and not based on their revenue. If anything, they have an incentive not to make better treatments because better often means less profitable.
You don't, because they are trolls.
You can't possibly argue in good faith that being able to provide less than 0.1% of novel treatments is somehow more valuable than providing good, standard healthcare with already existing drugs and treatment protocols to the other 99.9% at a sane cost.
Competition is what drives innovation. There are many ways to chase profits without innovating.
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I'd say we have an unsustainable system, and innovation that makes it less sustainable is not particularly helpful.
Profit motive can also drive profiteering.
What "innovation" is UnitedHealth doing, pray tell me?
I'm going to go ahead and defend them because private insurance is actually far from the most broken thing about US healthcare, yet they seem to shoulder all the blame.
Average health insurance profit margin in US is ~3%. That's not a greedy profit margin. It's the health care that's expensive, not the insurance. Health care is much more expensive in the US than in similar countries. I'm not an expert on why, but there are all sorts of misaligned incentives on IP and drug pricing that need to be fixed. It's not the insurers.
The army of middlemen the doctors and hospitals need to hire to deal with the insurance companies adds a lot to healthcare costs in the US. Not to mention the armies of middlemen hired by the insurance companies themselves.
While every healthcare system has administrators, the US system with its thousands of different systems interacting with thousands of other individuals makes for a nightmarishly complex problem. Doctors in countries with socialized medicine complain about the government administrators too, but at least they only have one system to deal with.
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The profit margin is just the shareholders' cut though.
What about the CEO salary? What about his secretary? The rent they pay for the buildings they occupy? Going down that path, how much of the operational expenses of private insurance meaningfully improve patients' health?
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Even using more accurate financial indicators like Operating Cash Flow and Free Cash Flow still leave lots of room to obfuscate egregious behavior.
I don't know, people who talk about profit margins as if they mean anything in this context are either financially naive or are trying to muddy the water.
I'm not sure a low profit margin is indicative of a company providing a moral degree of service to their insured. Certainly naive profit margin percentages don't show the terptitude of overcharging cancer patients.
For someone who doesn't get this, if a company like UHC buys an entire hospital group they can use that expenditure to legally "hide" profits by reducing their "profit margin" short term while decreasing competition in the space.
If a company acquires enough debt in a given year they can "hide" nearly unlimited profit margins legally.
On a larger scale, a company (UHC) can dump money into "external" money losing ventures that just serve to hold wealth and take that money off their balance sheet, once that entity takes on enough debt the same company (UHC) can acquire it taking on that debt and reducing their profit margin yet again.
GE Capital and Amazon are poster children for having done this process in a legal fashion.
As a beginners guide, if you have access to a talented accounting firm you can ask about these approaches to get started:
1. Management & Consulting Fee Arrangements (Especially with Related Parties)
2. Transfer Pricing (in Multinational Contexts)
3. Debt Pushdown & Thin Capitalization
4. Special Purpose Entities (SPEs) or Variable Interest Entities (VIEs)
5. Intellectual Property (IP) Holding Companies
I would be inclined to agree with you, the issues is related to the healthcare vastly overcharging for basic acts such as giving simple drugs such as ibuprofen or paracetemol.
The only reason healthcare is so expensive is because a dysfunctional insurance industry exists.
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>"Average health insurance profit margin in US is ~3%. That's not a greedy profit margin."
Could it be that good chunk of the profits is eaten by overinflated salaries of major execs?
It shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security. The US’s primary concern is mark to market in pension funds.
> It shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security.
You seem to be making a weird connection here, but maybe I misunderstand you.
Are you truly suggesting that countries who have socialized health care do so because they've been affected by war on their territory at some point?
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A historical aside, the reason private health insurance was created in the US was World War 2.
I could be misremembering pieces, but the long and short of it was that salary compensation was capped/restricted during World War 2 and so companies began offering benefits outside of salary, private health insurance among them, to retain their employees.
> shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security
I forgot about the world-class healthcare the populations of Africa, the Middle East and the war-ravaged parts of Asia enjoy.
I agree there is probably a link between war and healthcare. But the link flows through civic pride and identity, and population-wide familiarity with the horrors of war, more than it does from any sense of military preparedness. (That said, I've never seen an American politician try to sell universal healthcare as a national security imperative. Hmm...)
There are plenty of countries with 'socialized' healthcare that had no wars in their territories.
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I'm not sure I follow that argument - Canada shares a continent.
>It shows that the US never had a world war on the continent. All the other countries treat health care as a matter of national security.
Sounds like https://xkcd.com/1122/
For instance, Canada, which also arguably "never had a world war on the continent" has public healthcare. What gives? What about all the central/south american countries that don't have public healthcare?
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The incentive drives them to do sht like that.
Businesses are immortal unkillable people, per the Supreme Court.
If they kill people, they pay (small to them) fines.
Oh wait, the have special tax laws, depreciation, and deductions that real people can't use.
It's almost like he only recourse is to print out a gun and (censored)
Happy capitalism everybody.
Setting aside human health and agreeing that it should be outside capitalist endeavor would be incredibly damaging to human health. I can hardly imagine any policy that would reduce life years more than that.
Why then do countries with socialized healthcare have linger life expectancy than countries with capitalist-only healthcare system?
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I don't particularly care if health insurance is public or private.
DIRECT health care labor costs (doctor's, nurses, etc) are ~40-60% of TOTAL healthcare spending.
Smart people try to figure out ways to make our system better every day. If there was a silver bullet, we'd have already taken it.
Health insurance profits are ~1.2% of total health care spending, the cost of running it is approximately ~4% more.
It's always going to cost SOMETHING to run - whether you move it to the private or public sector is largely a rounding error.
If you take all those insurance jobs and pop them into the Federal Government - you're unlikely to see much efficiency gains (the most pro-medicare articles state it's 37% more efficient - that's an improvement of ~1.5% in total spending).
UHC had a net margin of 6.1% in 2024.
Sure, if all 6.1% of that went to spending instead of profits - health care would be slightly better.
But it's mostly a rounding error. Private health insurance profits are only ~1.2% of total spending.
Maybe you're focused on a ~6.1% margin, or ~$60B in total profits.
You're not going to get substantially better outcomes by simply having ~1.2%-2.7% more money to spend.
You'd need to bring down the actual cost of healthcare substantially - which isn't going to happen unless you pay doctor's and nurses way less money.
Pharmaceuticals are only about 9% of total US healthcare spending - even if you nationalize that (never going to happen) - you're still not getting substantially better / cheaper outcomes.
Profits on pharmaceuticals is <2% of total spending as well.
The only way you're getting significantly cheaper service is by reducing your biggest cost significantly - i.e. paying less for direct patient healthcare (doctor's, nurses, etc), and that's probably not a great strategy for getting better outcomes.
Who knows? NHS pays doctors dirt, and their system isn't obviously worse than ours. Some people think it's way better, others way worse.
Medicare administrative costs are around 2% of total program spending [1] compared to typically >10%. While what you're saying on the surface may be true from the numbers you are comparing, the fact of the matter is that healthcare costs are becoming more and more expensive during a time when many are experiencing a cost of living crisis.
The US gets a bum deal on costs and outcomes and while we can argue on which specific changes will move which specific needle I think it's clear that one of the major differences compared to the rest of the world is that running healthcare as a for profit enterprise has failed to deliver on the promise of good outcomes for as affordable a price as possible both on an individual and country wide level.
[1] https://www.politifact.com/factchecks/2017/sep/20/bernie-san...
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Honest question as someone who prefers single payer but acknowledged it's not a silver bullet: how much of the costs are nurses and doctors vs. admin? It seems to me there's a lot of overhead in passing the bills around to get paid. I just had my appendix out last year and got billed 8 times by 8 different firms, each with payment portals, call centers, billing providers, etc. I assume there's a lot of inefficiency internally too.
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I have good news! If you move it to the public sector, you will effectively pay doctors less money for the same work. That's because the way it works currently is that the doctors have to deal with private insurance bureaucracy. By freeing them from this responsibility, they have more time to take care of patients, which should effectively gets you more medical bang for your buck.
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It is already established fact that Medicare is more efficient than private insurance: https://www.healthaffairs.org/do/10.1377/forefront.20110920....
6.1% profit margins is a lot when it should not be for-profit in the first place. Why is anyone making a profit off of administering necessary services?
What is the operating profit of your local firefighter brigade?
What is the operating profit of the interstate highway system?
What is the operating profit of your local water/sewer department?
Not a single person in this country doesn't need healthcare at some point. It's not an optional for-profit good.
Medical Loss Ratio (MLR) is capped at 85% in the US which means 85% of revenue must go to patients. This is roughly inline with other countries with universal healthcare (MLR ranges from 85-95%).
The fundamental problem is that we don’t have enough resources to take care of everyone. Insurance companies are faced with the impossible task of allocating resources and making care/nocare decisions.
I don’t get the “endless profiteering” angle against insurance companies. If anything it’s the providers who are screwing over patients by gaming insurance and taking more than is necessary from the shared insurance pool of money.
But when UnitedHealth requires medications to be purchased from Optum health (with whom they share a parent company), they can jack up the price of a drug and keep some of that 85% too.
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The more revenue an insurer brings in, the larger that 15% slice of the pie. The fact that they have a capped MLR is beside the point.
> If anything it’s the providers who are screwing over patients by gaming insurance and taking more than is necessary from the shared insurance pool of money.
If the 85% gets larger, so does the 15%. Both sides gain when the cost increases.
I’m not an expert but I’m wary of anyone who has a simplistic view of what seems to be a complex system. This, plus looking at the profit margin of UHC paints a more nuanced picture (net profit margin is not that high. the dollar amount is high because the scale of the company is big). (Not that I want to make money from denying people healthcare, no matter how much internal logic there is to it…)
But it does seem like there’s a serious prisoners dilemma type situation going on in American health care. It’s easy to point fingers at someone else.
The situation is also coupled with a toxic political environment where a Trump voter can simultaneously be against “Obamacare” and think that Trump is going to improve access to healthcare, and a Harris voter can be pro Obamacare and ignore regulatory capture by pharmaceutical companies- e.g., both sides so convinced they’re right and the other side is wrong they won’t be seen to agree on anything common sense.
so by increasing the cost of patient care, they can take out more profits.
Insurance isn't a good industry to "get insanely rich". It doesn't have high profit margins. For one thing, the ACA mandates that insurance companies can't keep profits past a certain point.
My sense is that people expect too much from their health insurance. Subconsciously, we expect to experience no pain and live forever. When this inevitably doesn't happen, we blame insurance companies for not bankrolling infinite healthcare.
There is a max % take insurance companies can have.
The easy as hell solution to this is insurance companies collude with hospitals to charge patients more. 5% of 5000 is more than 5% of 2000.
In some cases insurance companies just buy up hospital chains and then bill themselves whatever the hell they want to.
The miracle of US healthcare is how at every step, work is done to minimize every party's ability to either use market power to lower costs, or to make people cost-conscious about their own expenses.
Insurance, in a vacuum, detached from an industry is a perfectly sensible way to try to spread risk. And as you say, this fair, reasonable insurance isn't about getting extremely rich, but about being the best at identifying where the risks are, and using market power to lower costs. But with healthcare, and especially with the US peculiarities, we manage to get minimal value out of it.
People getting care don't know their options, and how different the pricing can be. Insurers are capped by a percentage of services paid, so they really are happy if everything is very expensive. Providers band together into conglomerates that make sure it's hard for insurers to lower reimbursement rates. Pharmacy benefit managers build complicated schemes that let them take a bigger piece of the pie. They even purchase pharmacies, and restrict the expensive purchases for themselves, while the local pharmacy is squeezed. All in all, it gets very expensive, with minimal control of spiraling prices, and nobody that can lower costs is incentivized to do so.
We blame insurers because that's the people that get paid first, but yes, it's not really a matter of just insurers. It's a kafkaesque system that is basically impervious to significant reform. And for good reason: Every dollar we overpay is someone else's salary. A decrease in costs per person for the same care to match, say, Spain would involve a whole lot of people making a lot less money, including many losing their jobs. Not exactly a political winner, even though the country would be better off with more efficiency
Clearly with Private Equity entering healthcare this is patently false.
The article is about insurance company malfeasance, but this boils it down to mis-aligned consumer expectations about living forever in total bliss. That feels like a strange disconnect.
Why is my insurer (Aetna) allowed to own the only pharmacy (CVS) it covers? That seems like it should be some kind of violation of antitrust law, no?
And for a while, for fun, they also varied pharmacy coverage by state. I live in WA, was traveling in CA for a holiday, and needed to visit urgent care in a town I didn't know well. All good, and then they asked what pharmacy. "Oh, CVS should work if there's one nearby", because that's what I used with my insurer in Washington.
Roll up to the CVS in the Target, and they tell me "Aetna doesn't cover CVS in California at this time"...
There are only three things that keep companies from doing bad things. criminal liability, civil liability and brand risk(PR). companies will do what our society has designed them to do, which is to generate profit while navigating those three risks. Negative PR is not enough to dissuade health insurance companies from doing bad things because it's generally not consumers who choose their insurance, it's their employers. Clearly we cannot rely on brand risk to keep these companies in check..we need more laws and regulation.
Some day our regulators at the fda, ftc, doj, etc should clean house and get some folks who can actually go after these greedy companies. Today they don’t because of the revolving door system.
They're not going to for at least the next four years.
"What is good for the shareholders is good for society" will be the order of the day.
Don’t you think it’s possible if drug advertising is banned then perhaps some of our media organizations may be at least slightly more inclined to investigate some of these hostile practices?
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Companies who signup for these plans on behalf of their employees are finally getting on onboard that PBMs are hiding these markups and making backdoor deals with the drug companies. The best thing you can do is put pressure on your employer if you run into this.
https://www.fiercehealthcare.com/payers/industry-voices-why-...
>This past year saw a wave of mid-sized employers, unions, and health plans exploring alternatives to the Big Three, a trend that will only continue to gain momentum in 2025. In fact, a recent report found that 52% of employers are considering changing their PBM in the next 1-3 years. While 72% of employers still primarily contract with a Big Three PBM, 12% have already embraced a transparent PBM.
The only solution is to regulate. But if we had politicians with spine, they would enact retroactive fines and jail time, and pierce the veil to go after the executives and owners who profited to recoup these unjustifiable costs that can only come due to anti competitive practices.
And let’s not forget, United Healthcare’s subsidiary Change Healthcare held the breach notifications for MONTHS from affected people. They only got sent out recently, and the company not only refuses to compensate victims in any useful way, but won’t even tell them what information of theirs was compromised (hint: medical records). This affected 100 million patients, many of whom have NEVER been customers of Change or United: https://techcrunch.com/2025/01/15/unitedhealth-hid-its-chang...
> CVS Caremark, by comparison, argued the FTC was guilty of “cherry picking” its analysis by focusing on generics, which represent a tiny fraction of client spending over branded specialty drugs in an attempt to mislead.
So it sounds like the report may be a bit misleading - what is being alleged here is that PBMs overpriced over the generics. So it's like if Coca-Cola set the price of their can at $50, and NoName at $0.50. So you be are being "overcharged" at the grocery store when you buy the Coke and not the NoName.
It's not actually clear from the report that the PBMs actually profited from overcharging. Furthermore, if the doctor prescribes a name brand drug, it's not always the prerogative of the PBM to switch the prescription on behalf of the customer.
No, it's saying that they bought the NoName for $0.20 and sold it for $20.
The PBMs are defending it, saying that coke costs $30.
The problem is that the insurer and thus the PBM are supposed to be working on behalf of the insured, but they pay their sibling pharmacy well above the reasonable market price.
>It's not actually clear from the report that the PBMs actually profited from overcharging.
Even if they did profit, it is clear from their 10-Q and 10-K that the managed care organizations (MCO) did not tremendously profit.
https://www.macrotrends.net/stocks/charts/UNH/unitedhealth-g...
This kind of profit margin (<6%) would get executives in many other businesses fired. All the other MCOs actually have a sub 3% profit margin. UNH has a higher profit margin because it sells healthcare, not just managed care.
On the other hand, here are the profit margins for the companies that make medicine (20%+):
https://www.macrotrends.net/stocks/charts/LLY/eli-lilly/prof...
https://www.macrotrends.net/stocks/charts/NVO/novo-nordisk/p...
https://www.macrotrends.net/stocks/charts/NVS/novartis-ag/pr...
https://www.macrotrends.net/stocks/charts/PFE/pfizer/profit-...
https://www.macrotrends.net/stocks/charts/MRK/merck/profit-m...
Finally, search for the difference in rankings in market cap between pharmaceutical companies versus managed care organizations. There are at least 7 pharmaceutical companies in the top 100, and only 1 managed care organization. The next biggest MCO is #189.
https://companiesmarketcap.com
Edit to respond to below: It does not matter if UNH or any other MCO moves money from their right pocket to their left pocket, the SEC filed 10-Q and 10-K will reflect all revenue and expenses. Their low profit margin is evidence that the money is flowing out of the organization and away from the shareholders. If this business was as profitable as people claim, then its stock returns would indicate it, but they don't.
Yes, the profit flows into the pharmacy, which happens to have substantially the same owner.
There's such obviously fucked up incentives in this industry.
- When employers select insurance, providers will 100% of the time tend toward ignoring the interests of those who are insured: the incentives to do so are just too strong.
- When an insurance company also owns a pharmacy, it will 100% of the time tend toward overcharging: again all the incentives encourage this.
Unfortunately it seems most folks have little or no experience analyzing incentive structures when looking for levers to pull to improve outcomes. It'd be great to see popular discourse focus more on the environmental factors that incentivise these kinds of corporate abuse.
Yes, this is an issue!
And, zooming out a little more, free market healthcare is just part of the problem.
We have a system where we’re only treating people once they have a disease, and not working to prevent the disease, so it would be helpful to look at the effects of for-profit companies on making healthy people sicker. Fast food, snacks, alcohol, there are so many industries that are incentivized to succeed by making people sick.
This is the system “working” according to the current rule set.
It’s time to look for a better algorithm than a purely profit maximizing one.
This goes without saying but I hope they free Luigi.
We have UnitedHealth, and my wife died of cancer. They denied a lot of things, but ultimately, they covered a lot when we rapidly soared past our deductible. We kept a running list of EVERY bill paid. It's a shame they put so much onus onto the family dealing with tragedy.
So while it was a pain to fight them on every bill, they did shell out for us.
Some of the biggest battles were with the hospital bill collectors.
So sorry for your loss. It is crazy that cancer treatments are so criminally expensive.
The analysis in the comments suggests that UHC pricing is high due to cartel like price fixing. So while they “shell out” it seems like they are playing a shell game to loophole the 85% rule.
Why is insurance charging anyone for drugs? Shouldn't the pharmacy/doctor/hospital charge the patient and the insurance company pay some percentage of the cost (maybe negotiating the price of the drugs downward)? It seems we've overcomplicated a system that should be much simpler.
The report is misleading.
What is being alleged here is that PBMs overpriced over the generics. So it's like if Coca-Cola set the price of their can at $50, and NoName at $0.50. So you be are being "overcharged" at the grocery store when you buy the Coke and not the NoName.
It's not actually clear from the report that the PBMs actually profited from overcharging. Furthermore, if the doctor prescribes a name brand drug, it's not always the prerogative of the PBM to switch the prescription on behalf of the customer.
Thank you. That makes sense. Why are you being downvoted? I'd love if someone could say why they're downvoting you, because it seems like you addressed my question -- unless you just fabricated an answer -- but it would be nice if they said that.
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I find it amazing that people complain about paying more than some other countries, while they cannot even solve this sort of insanity. Just maybe first making this one sensible, next step could be to have some competition and free market...
I wonder a lot about this argument of private health care vs state funded health care. I have libertarian leanings and so would prefer a truly free market, because I would like to believe it would lead to affordable levels of health care for everyone.
But I don't know that it's true. My questions regarding the US system and health insurance: Is it a truly free market or does the state regulate in ways that make it difficult for competition?
In Australia we have heavily subsidized healthcare, but it's not great. If you've got something life threatening then you'll be OK. If it's not life threatening, but just really difficult to live with then you'll wait. Sometimes years. No choice of specialist or hospital either. So many of us get private health insurance of one level or another, in order to have more choice and better, more prompt care.
So, how free is the US system?
Also, here's an X post from a guy called Devon Eriksen on the topic of socialized healthcare and free markets.
[https://x.com/Devon_Eriksen_/status/1865932424376377833]
PS: Devon wrote a great debut Sci Fi novel called "Theft Of Fire" (Orbital Space #1). It's a great read, with endorsements from John Carmack, "Uncle" Bob Martin and ESR, among others.
> I have libertarian leanings and so would prefer a truly free market, because I would like to believe it would lead to affordable levels of health care for everyone.
Without regulation it just leads to predation.
A storm is brewing and its heading right at the insurance industry.
Is the storm going to be just as impotent and worthless as the ACA was?
Ultimately ACA resulted in high-deductible plans and the current situation, despite temporarily insuring a higher percentage of the population.
The next solution needs to account for these factors. Will it?
.. and think of how much of that money went right into their lobbying/bribing on the hill to make sure they don't get regulated.
Just look at the per-capita spending on healthcare by OECD countries, basically all of which have universal healthcare except for the US [1]. So the US pays almost twice as much as #2 (Switzerland) for significantly worse outcomes and less coverage.
The US healthcare system is an unmitigated disaster that is a cautionary tale in how capitalism only promotes rent-seeking and regulatory capture. It's done with a service with inelastic demand, meaning the threat of violence since we are quite intentionally withholding lifesaving healthcare for the sake of the profits of completely unnecessary intermediaries.
[1]: https://www.oecd.org/en/data/indicators/health-spending.html
This is what blows my mind about the universal health care opponents in the US. We would literally be spending less for better health care. People just cannot stomach their money going to the government instead of an unelected mega corp.
When Elizabeth Warren was promoting Medicare for All, she kept being asked the "how will you pay for it?" question over and over and over again. Debates, reporters, critics...
People hear "X increase in tax, 3*X decrease in costs" as "X increase in tax!"
"cautionary tale in how capitalism only promotes rent-seeking and regulatory capture" is a weird takeaway from this when the same applies to government-run healthcare. medicare, medicaid, veteran's affairs combined almost approaches OECD levels, but only covers a fraction of the population.
Medicare chooses the oldest (over 65), Medicaid chooses the poorest (who are more likely to have issues that went untreated and got worse) and most severely disabled, and Veterans' affairs chooses the ones who gave their bodies to Uncle Sam to be pushed out of planes, deafened in tanks, and have their backs wrecked with giant packs marched for several hours a day.
In other words, all patients that private insurers are likely delighted not to have on their books.
Welcome to the concept of "selection bias".
As another commenter put it, the government covers those with the highest cost of healthcare: veterans with varying degrees of disability, the elderly and the poor.
Another way to look at that is that insurance companies offload the highest cost people to the government so they can profit from the younger and healthier. How does that make sense?
You see this everywhere too, like with the push for privatization of education through charter schools and/or school vouchers. Some will point to the lower cost per student and completely ignore that the government education system doesn't get to be selective about students. State education caters to those with high-needs who are, just like with Medicare and the elderly, those that cost the most.
the only option to fix healthcare is to decommodify it and implement a public option where the risk pool includes everyone. There is 0 reason that the wealthiest country on the planet needs to operate at a worse level than so called "3rd world countries"
even from a purely neo-Liberal capitalist sense, this completely violates the shared fantasy of the "free market" and yet we still have people going on Joe Rogan saying stuff like "we need to deregulate the market further because this is all due to innovation being stifled through regulation" which is an absurd notion.
Every other country is eating our lunch when it comes to medical discovery and novel chemical compound discovery while the US spends all of its time and money evergreening medical patents to extend them indefinitely so they can maintain monopolistic control. I honestly just don't see a way out of this.
shocked, shocked I tell you
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It's hard to imagine anything more toxic to the cause of healthcare reform than tying it to support for vigilante murder.
People have wanted health care reform in the US for over a century and it is farther away from ever. This carrot you are waving does not exist, which is why CEO Brian Thompson has filed his last claim denial.
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