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UnitedHealth overcharged cancer patients for drugs by over 1,000%

fortune.com

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Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#291

Post by nradov »

franktankbank wrote: post #285
nradov wrote: post #260

Earlier quoted context omitted.

For better or worse, the incentives created by federal legislation since the 1940s make this healthcare industry consolidation and vertical integration inevitable. Payers (insurers) have been merging to gain more negotiating power over provider rates and hold down medical costs. So provider organizations have reacted by consolidating themselves to maintain their negotiating power and keep rates high. Increased costs…

Why does it need an act of congress? Isn't this clearly in need of trust bust?

From a strict legal perspective it's not at all clear that UHG or any of the other large payers meets the definition of a trust. Any attempt to apply antitrust law would likely be tied up in the courts for many years, and even if UHG were eventually forced to divest some parts of their Optum business it wouldn't solve any of the systemic problems. If we want to bring down costs and improve access to care it will require a major realignment of incentives that impact all the participants.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#292

Post by nradov »

franktankbank wrote: post #286
nradov wrote: post #267

Earlier quoted context omitted.

This is an example of what economists call path dependence. In principle there's no good reason for access to health care to be coupled to employment and we wouldn't design the system that way if we were starting from scratch. Originally it started during WW2 when the federal government imposed wage controls to hold down inflation, so employers took advantage of a legal loophole to offer free employee benefits such a…

Why mandate it at all?

It's essentially the free rider problem. If we want to make affordable healthcare available to everyone then we have to force everyone to pay into the system to spread the risk around and get the healthy to subsidize the sick. It kind of has to work that way regardless of whether we have a single public payer funded by taxes or multiple private payers funded by insurance premiums; in the end the money has to come from everyone.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#293

Post by johnnyanmac »

ruthmarx wrote: post #215
chis wrote: post #40

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 witho…

> 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.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#294

Post by johnnyanmac »

BugsJustFindMe wrote: post #4

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 peop…

> 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.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#295

Post by johnnyanmac »

theteapot wrote: post #201
landryraccoon wrote: post #28

Earlier quoted context omitted.

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.

"overcharge" is a qualitative source. If you're not working in the economics, I don't see much worth in finding the exact line between such a qualitative word. The market has some intuitiveness and know that charging 30$ for an item that costs $3 to make is highway robbery. Doesn't matter when or if we start to agree that $5, $6, or even $10 is reasonable (and yes, these are all pretty high markups to begin with compared to typical markups for stores).

We don't need to find the touchdown line when we're already outside of the stadium and the parking lot anyway.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#296

Post by johnnyanmac »

theteapot wrote: post #253
landryraccoon wrote: post #231

Earlier quoted context omitted.

To use a software development analogy, the average person is a user of health care, not a health care project manager or designer. Just as the user of an App doesn't need to provide an alternative design when they say "this App sucks", the average user of healthcare likewise has no obligation to redesign the healthcare system when they say "this healthcare system sucks."

Really apples and oranges comparison. But even so, if a certain App user is motivated to have the hostile App developer make a change that doesn't server their interest, they'll need to do better than cry "this app sucks".

yes. But the more likely action is that they download another app and delete yours. Most apps are "free", so the competition is fierce to keep that market happy. The dev is always beholden to the volatile audience.

It is apples and oranges, though. Because 1) apps are hardly a critical need for the populace and 2) software margins are even more difficult to find that "line" to than physical resources.

I'm sure that medicine needs some higher than average markup in order to make up for R&D, ingredients, and various regulations to get it approved for human patients. But very unlikely 1000%. And only 1000% because of questionable vertical integration that lets UHC charge UHC however much it wants to itself.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#297

Post by loeg »

gedpeck wrote: post #116
tptacek wrote: post #97

Earlier quoted context omitted.

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.

One should not profit from denying care. All health systems ration care. Doing so in a way that people profit from denying care is immoral.

It follows that providers should provide care for free. Anything else is profiting from denying care. I guess you're just a full communist? If that's the case, just come out and say it so we can agree to disagree and move on.

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#298

Post by nradov »

awongh wrote: post #219
sssilver wrote: post #157

Earlier quoted context omitted.

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?

Google says UHC made $370b gross revenue and $12b net revenue. Not sure what the total exec team costs but if the ceo was paid $10 million that’s 0.03% of revenue and 0.1% of profit. Not defending them but I do think that people hear $10 million but don’t quite realize how huge the pie is. I don’t think healthcare should be for-profit, but since we do have that system, what do people expect the ceo of a company (any…

You're looking at the wrong numbers. Annual revenue for all of UnitedHealth Group was $370B. Only part of that was UHC insurance premiums. UHG is a huge conglomerate with multiple lines of business, some of which are unrelated to medical insurance or PBM. If UHG spun off the pure software parts of Optum it would be one of the country's 20 largest tech companies.

https://www.unitedhealthgroup.com/investors/financial-report...

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#299

Post by johnnyanmac »

BugsJustFindMe wrote: post #143
landryraccoon wrote: post #28

Earlier quoted context omitted.

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 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 th…

So, important question: What problem are we trying to solve here? Is there any benefit to the overall populace for us in HN to debate what we feel is "overcharged"?

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But to go along with your exercise, I take a look at current market dynamics and compare it from there. Apparently, the typical wholesale markup is 20-40%, and stores will typically markup another 20-50% on top of that. So we're talking roughly a 125% markup on the higher ends from the factory into the consumer's hands as a very rough average (VERY rough, markups vary a lot per product and industry).

That's with two chains of markup, so clearly 1000% feels absurd from one part of such a chain. Outside of factors like drinks (which are easy to scale and can have markups well into the hundreds), it's pretty hard to find any part of the chain as not "overcharged" once we go past 100% markups in any given place.

on the most generous side, Costco famously has markups limited to 14% (albeit they rely on bulk purchases to mitigate that). and subsidized vehicles used to generally be a 10-15% markup price. So I'd say 15% is about the bare bottom of what to expect markups without some kind of twist. e.g. printers selling at a loss, making up for it with high markups for ink (another product that's easy to scale and marked up into the hundreds). or previously, a video game console in order to sell games (software, whose markup is hard to really determine since it's infinitely scalable and costs are more to make up for R&D).

Re: UnitedHealth overcharged cancer patients for drugs by over 1,000%

#300

Post by johnnyanmac »

mattgreenrocks wrote: post #147
throwway120385 wrote: post #51

Earlier quoted context omitted.

It ceased to be a free market when we enshrined employer-provided plans into the law. If it were more like auto insurance where I can fire my insurance company and receive a pro-rated refund or renegotiate coverage in the middle of the year then it would be more free. But my employer negotiates for me on my behalf, and their needs are often at odds with my needs. And the whole "open enrollment" period thing creates a…

I never understood why health care had to be so tightly coupled to employment. All it does is tie people down, obfuscate costs, and give insurance companies more leverage over everyone, companies and employees alike.

Very long history I suggest you look into, because it's very interesting, but the oversimplified explaination:

after WW2, there was very obviously inflation. It was crazy in the EU and Japan, but the US still experienced some too. To fight this, the government made a then-common tactic of wage controls: basically cap off the maximum amount an employer can compensate workers, in order to fight the inflation spiral.

But there was an imporant exemption. This was only on wages and not any benefits given to employees in order to try and quell the inevitably angry employees. So when companies couldn't attract talent with more money, they offered more benefits. including employer sponsored healthcare. Perfect since these contributions were free from income tax.

And the modeled spiraled from there. a tax code passed in 1954 to let these contributions be business expenses, Medicaid came in the 60's, etc. It was great back then, but it was getting more expensive to navigate and companies started compromising to manage it. up to our favorite healthcare starting its vertical integration 20 years ago to come into what we know them for today.

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