- I think the health insurance industry as a whole can be thought of as a tax. Granted it is distributive in nature; but private insurance means high pressure for profit. There is a downside to this distributive model in that the provider (X Doctor) is motivated to sell you the most services possible because the patient wants the most for their premium. Because costs are distributed the patient is more likely to want to receive more value from their insurance payments.
- However, a socialized system (distributive model) is still best for the aggregate. But there is the selling of unnecessary services on one end and the insurers’ profits on the other. Each side seeks to maximize profit. The provider will take advantage of the insurer’s obligation to pay, and the insurer will simply raise rates. If this a loop of sorts there would seem to be necessarily a limit, but there may not be in fact. It may be that the system simply accommodates greed.
- There are also legal obstacles to lowering prices. For example, Medicare Part D — which outlaws (!) the government from using its scale to bargain down pharmaceutical prices (a Republican piece of legislation from 2004). This was an obvious gift to the pharmaceutical industry. And Trump’s campaign promises to lower prescription drugs have encountered the formidable force of the pharma lobbyists: http://www.vox.com/policy-and-politics/2017/1/31/14453740/trump-medicare-prescription-drugs
4. another factor is the inefficiency of market saturation. So many insurers competing for the same dollars at first seems like a free market bargain in the form of competitive pricing but a) price fixing is a reality and b) reduplication of administrative functions spread over hundreds of companies each with at least a dozen plans increases administrative costs per capita.
Solution (which won’t happen) US gov. should broker health insurance. this is a good public service (like policing and education); it should be in government hands. The work is centralized and there is no profit incentive so premiums will stay lower.
We must not forget that insurance cos. don’t provide health care. They simply broker it. Gov. can do same and at less cost to the public.
A sad day for Aetna, but a good day for the American people.