alt Hacker News> "fee for service"
> "per capita"
I don't quite get the difference, patients pay a fixed amount for insurance, hospitals charge "fee for service" to the insurance. Both systems coexist, it's not one or the other.
To be clear, I'm not suggesting changing the whole system, I think that's infantile sorry to be blunt, I'm proposing a more down to earth (and commercially appealing approach) of increasing the price (and thus financial incentives) of medical goods that have low cost but high health values.
My economic theory clearly isn't as strong, because how much should a CT scan and a pill be priced at relative to a heart attack response with a 1 week hospitalization and a bunch of work. Because the cost of a CT scan and a pill is low (100$), the value of it is high (50K$ lower bound), and the cost of treating a heart attack is clearly around 50K$, but the value of it is clearly lower than the preventive treatment (perhaps stochastically adjusted).
So should we be pricing by cost or pricing by value? The naïve approach is pricing by cost, so that everything is cheap, the first issue with this approach is that it disincentivizes research, which is why legal systems widely recognize patents, copyright and intellectual property.
I looked into Shkreli's case a bit deeper, and he was a stupid kid of course, but it's what comes to mind when thinking of 'raising prices' of medicine, there's not many faces to that idea.
That said, I'm not saying that prices SHOULD be hiked, just that I'm not convinced that medicine pricing should be cost based, or that it should be value based, or that some supply-and-demand principle would magically find a value in the middle. I'm just saying that it can be either way, and I just don't know which way it ought to be.
And ultimately, it's a decision that every actor in the industry can make, what they price their products and time at. And to reiterate my thesis, pricing your product as cheaply as possible might counterintuitively reduce it's impact, since there is no incentive for intermediaries (or even yourself) to work on it. So I'm not saying that prices should be maximalized either, just that the relationship between price and value contributed to society is not linear, if you price your medicine at 0, you go bankrupt, that's not helpful obviously, and evidently pricing a CT scan and a heart attack pill at 100$ is not cutting it either, hike that up.
>I don't quite get the difference, patients pay a fixed amount for insurance, hospitals charge "fee for service" to the insurance. Both systems coexist, it's not one or the other.
I think their reference to "per capita" here is referring to a capitated payment structure where a provider organization is given a fixed amount per patient up front instead of billing for every service they provide. The software analog would be something like a flat subscription fee vs usage-based billing. While it's not the default in the US, it theoretically encourages providers to provide cost-effective care rather than just racking up bills on unhealthy patients.
The mechanism here is who bears the financial risk. The model you're familiar with is one where the payer (commercial insurance or medicare/medicaid) is the risk-bearing entity. They want more cost-effective care so they can protect their margins while the provider is incentivized to push a high volume of expensive care so they can boost their margins. Don't have it handy but the data on this shows providers are winning this battle with healthier, growing margins vs insurance companies whose margins generally aren't great.