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What's driving rising business costs?

libertystreeteconomics.newyorkfed.org

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Re: What's driving rising business costs?

#41

Post by yunwal »

rayiner wrote: post #33
shimman wrote: post #30

Earlier quoted context omitted.

Doctor salaries alone do not account for the hundreds of billions in profit that health insurance companies extract from us. You are right there is not a competitive market place because the US government cannot provide a universal plan for anyone. We all know the insurance companies would fold overnight as government welfare programs are extremely popular (just look at how much corporations love government welfare).…

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

The issue is not that health insurance companies make too much money (ok, it's not the only issue)They, along with the system they put in place introduce immense amounts of friction into every medical interaction and prevent doctors from practicing good medicine.

Re: What's driving rising business costs?

#42

Post by rileymat2 »

kxyvr wrote: post #39
nradov wrote: post #34

Earlier quoted context omitted.

The shortage of physicians has nothing to do with medical schools. The immediate bottleneck is a shortage of residency slots. Every year, students graduate from medical schools but are unable to practice medicine because they don't get matched to a residency program. (Some do get matched the following year.) This is primarily due to limited funding from Medicare, although some residency slots are funded from other so…

That's not true. You can look at the residency match for 2025 here: https://www.nrmp.org/match-data/2025/05/results-and-data-202... While many specialties are fully filled, we need pediatricians, family medicine, and internal medicine docs. They're generalists and where the largest shortage is. There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the…

But aren’t the specialities where the highest salaries are? So to reduce costs, shouldn’t those have more slots?

Re: What's driving rising business costs?

#43

Post by nradov »

kxyvr wrote: post #39
nradov wrote: post #34

Earlier quoted context omitted.

The shortage of physicians has nothing to do with medical schools. The immediate bottleneck is a shortage of residency slots. Every year, students graduate from medical schools but are unable to practice medicine because they don't get matched to a residency program. (Some do get matched the following year.) This is primarily due to limited funding from Medicare, although some residency slots are funded from other so…

That's not true. You can look at the residency match for 2025 here: https://www.nrmp.org/match-data/2025/05/results-and-data-202... While many specialties are fully filled, we need pediatricians, family medicine, and internal medicine docs. They're generalists and where the largest shortage is. There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the…

My statement above was correct. There are students who graduate from accredited medical schools with MD/DO degrees but don't get matched. Part of that is because some of them simply don't apply to programs that have extra openings. Medicare / Medicaid pay primary care physicians below market rates so students are naturally reluctant to pursue those specialties.

Re: What's driving rising business costs?

#44

Post by lotsofpulp »

yunwal wrote: post #41
rayiner wrote: post #33

Earlier quoted context omitted.

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

The issue is not that health insurance companies make too much money (ok, it's not the only issue)They, along with the system they put in place introduce immense amounts of friction into every medical interaction and prevent doctors from practicing good medicine.

The insurance companies are not stopping the government from paying for everyone's healthcare. It's the other way around, governments are using insurance companies (better referred to as managed care organizations since they don't really sell insurance) to add the friction so that some people get more healthcare and some people get less.

Who gets more and who gets less depends on who has political power (that's why the old and non working get subsidized by the young and working), and in a democracy, this question ultimately comes back to the voters.

Bottom line is due to demographics and restrictions in the credentialing process (including for medicine itself, one of the costliest components of healthcare), there is nowhere near enough supply of healthcare relative to demand, AND due to the enormous damages awarded in lawsuits in the US, the cost of liability protection is sky-high and increases prices for every step of the healthcare chain.

We need way more healthcare providers, and tort reform, and publicly funded medicinal trials, and without that we will continue to limp on with this bureaucratic maze to essentially reduce demand to manageable levels.

Re: What's driving rising business costs?

#45

Post by nradov »

yunwal wrote: post #41
rayiner wrote: post #33

Earlier quoted context omitted.

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

The issue is not that health insurance companies make too much money (ok, it's not the only issue)They, along with the system they put in place introduce immense amounts of friction into every medical interaction and prevent doctors from practicing good medicine.

You're giving doctors a little too much credit. While most of them have good intentions and try to act in the best interests of their patients, something like a third of the care they deliver is considered "low value" in that it's not evidence based and isn't likely to benefit patients. While some of the friction caused by health plans is just pointless waste, the utilization management processes can actually nudge doctors towards practicing better medicine.

https://www.bloomsbury.com/us/price-we-pay-9781635574128/

Re: What's driving rising business costs?

#46

Post by lotsofpulp »

blargthorwars wrote: post #18
kurthr wrote: post #11

Earlier quoted context omitted.

No accident. No move. No new vehicle. My car insurance went up 30%, in one year. Tried pricing around and it's not much better. Took an online "safety class" and got an 8% discount.

Here in the Pacific Northwest, the catch-and-release of car thieves drove up costs for everyone. If I change my address away from the craziness, my policy drops by half.

I have always only purchased maximum liability only insurance, and my premium went from $40 per vehicle per month to $50 per vehicle per month over the last decade. In Washington.

Re: What's driving rising business costs?

#47

Post by kxyvr »

nradov wrote: post #43
kxyvr wrote: post #39

Earlier quoted context omitted.

That's not true. You can look at the residency match for 2025 here: https://www.nrmp.org/match-data/2025/05/results-and-data-202... While many specialties are fully filled, we need pediatricians, family medicine, and internal medicine docs. They're generalists and where the largest shortage is. There were 147 unfilled slots for pediatricians, 805 for family medicine, and 357 for internal medicine. They don't have the…

My statement above was correct. There are students who graduate from accredited medical schools with MD/DO degrees but don't get matched. Part of that is because some of them simply don't apply to programs that have extra openings. Medicare / Medicaid pay primary care physicians below market rates so students are naturally reluctant to pursue those specialties.

If they don't match, they're allowed to scramble and move into one of those programs with open positions. If they don't choose to, that's on them, but it's still not a problem with number of residency slots.

I very much agree that pay is a barrier to entering specialties like family medicine. Though it depends on the market, I normally see family medicine at around $200k/year and that's not great if one needs to take something like $750k debt to get there along with eight years of training after a bachelors. If we want to fix that, then we need to make the value proposition better and reduce the medical school debt, improve working conditions, and/or increase pay.

So, yes, if one wants to maximize their earning potential, then they need to enter one of the specialty residencies and fellowships. Those are currently filled. However, that's not where the biggest need is and I contend that's not why there's a physician shortage.

Re: What's driving rising business costs?

#48

Post by nradov »

jgeada wrote: post #35
rayiner wrote: post #33

Earlier quoted context omitted.

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

If you have a fixed profit margin, the way to make more absolute money is to allow your costs to increase. Insurance companies have zero reason to negotiate prices down.

Well not quite. Health insurance is still a competitive business. Customers — both individuals and group buyers — are very price sensitive and while switching plans is a hassle they will change from Aetna to Humana or whatever if the difference is large enough. And many of the largest carriers are non-profit corporations so there's literally no "profit", although some of the employees are very well compensated.

Re: What's driving rising business costs?

#49

Post by lotsofpulp »

nradov wrote: post #48
jgeada wrote: post #35

Earlier quoted context omitted.

If you have a fixed profit margin, the way to make more absolute money is to allow your costs to increase. Insurance companies have zero reason to negotiate prices down.

Well not quite. Health insurance is still a competitive business. Customers — both individuals and group buyers — are very price sensitive and while switching plans is a hassle they will change from Aetna to Humana or whatever if the difference is large enough. And many of the largest carriers are non-profit corporations so there's literally no "profit", although some of the employees are very well compensated.

All the highest compensated non executive level employees I know are doctors, who would be highly compensated at every business. Same for all the executives, whose pay does not seem outsize compared to executives at other similar sized organizations. If anything, health insurance companies are known to be pretty stingy with pay unless you're in high demand, e.g. doctors.

Re: What's driving rising business costs?

#50

Post by Sevii »

rayiner wrote: post #33
shimman wrote: post #30

Earlier quoted context omitted.

Doctor salaries alone do not account for the hundreds of billions in profit that health insurance companies extract from us. You are right there is not a competitive market place because the US government cannot provide a universal plan for anyone. We all know the insurance companies would fold overnight as government welfare programs are extremely popular (just look at how much corporations love government welfare).…

It’s a red flag whenever someone talks about healthcare and they focus on health insurance companies and hospital administrators. It’s a sign that they’re working backwards from some ideological beef rather than looking at where the costs actually are. Health insurance companies have profit margins around 5% or less. Hospitals are half that. A Subway franchise has a higher profit margin. That’s just not where your he…

The problem is that health insurance companies squander immense amounts of money on adjudicating claims. Huge amounts of GDP are spent on fights between insurers and providers over what is covered.
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