alt Hacker NewsAlso, commercial insurers are essentially cross-subsidizing Medicare: the higher revenue from commercial insurers is partly why Medicare can be paid less. Similar dynamics exist with drug prices: the high US cost is a cross-subsidy to other countries. Maybe this is good (someone's got to fund R&D), maybe this is bad (it's a net wealth transfer to the elderly), but it's an important part of the dynamic either way.
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piva00 • yesterday at 11:07 PM
Would like sources about the pharmaceutical sector being "subsidised" by the American system, heard it many times but haven't seen it substantiated.
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The cross-subsidy argument is one hospitals use to justify high commercial rates: "Medicare underpays, so we have to make it up on commercial." The HCRIS data lets you test this. If cross-subsidization were the full story, you'd expect cost-to-charge ratios to be tight — hospitals would charge commercial just enough to cover the Medicare shortfall. Instead, the median markup is 2.6x across all hospitals, and 3.96x for nonprofits. That's not cross-subsidy. That's pricing power in a concentrated market.