The US government requires that they receive the lowest public price for any medical care they pay for. Unfortunately, the US government is a very expensive customer to work with for many reasons. By sandbagging costs with very high public prices, it gives healthcare providers the latitude to, after various hidden discounts, charge the government more than private sector customers that actually cost them less to serve.
It is a perverse incentive created by the government insisting on the lowest price but having a very high overhead cost to deal with relative to everyone else that has to be paid for. Far from ideal but that is where we are. Quite a few fake prices in regulated markets can be explained by the government requiring that they receive the lowest price while incurring an unusually high cost overhead to the vendor.
Properly its neither a "principle agent problem" nor a "principal agent problem" but a "principal-agent problem" (that is, the problem is a conflict between the principal and the agent [both nouns] nominally acting on behalf of that principal, not a problem with the principal [adjective] agent [noun].)
That's still two words and only one was wrong. Hyphenation is not mandatory, there is no formal description of a "problem with the principal [adjective] agent [noun]" to be disambiguated from.
It's confusing, but each payer (insurance companies) negotiates a series of prices for things. Each one is a unique, bespoke, business deal -- and this is why prices are never clear: the cost of something is unique to the deal hammered out by an individual insurance company and individual health care provider networks.
Different payers will come up with their own unique take on health care coverage prices, favoring some things (lower costs) over others. Some may favor prenatal care and maternity, some may favor meat-and-potatoes basic health needs over specific categories of care. Larger payers may get a percentage point or two average-over-everything lower, smaller ones may favor a particular subcategory to create what they feel is a "good enough but still competitive in some key marketable categories" package. Each one is bespoke and quite varied.
From the outside, it can look insane: you walk into a hospital and ask how much a procedure costs, and the person at the desk is honestly confused and honestly has no answer. The reason? The cost is entirely relative to the cost structure package hammered out by a specific insurance company - there isn't really a fixed "cost" per se.
I take a fancy medication every week with an MSRP adding up to over $7,000 a month. Even with the cheapest insurance on my state's marketplace, I pay $0 for the drug because of a manufacturer copay savings program. This arrangement also happens to delete my yearly deductible and out-of-pocket max astonishingly quickly, making most of the rest of my healthcare free.
I have literally no skin in the game. Speaking as one of the winners in this charade, this whole thing is so stupid. It makes you wonder why they don't set drug MSRPs even higher.
The US healthcare system is a patchwork of policy, local incentives, and unchecked capitalism that barely works, some of the time. You can read intent into it, but it's really just a big mass of inscrutable complexity.
That said, a lot of the time, inentionally or not, the answer is "it facilitates the transfer of money to the shareholders of the big private health insurance companies"
Of all the industries in the US Health Care is the MOST regulated. How on earth is that "unchecked"? The problem is the checks are (and always will be) written by the companies.
you're right, I really should have said "poorly regulated capitalism." My comment on "unchecked capitalism" was more of a commentary on the lack of trustbusting for vertically integrated behemoths like UHG/OptumHealth/Optum PBM/OptumRX and for regional near-monopolies like UPMC.
Healthcare has a lot of regulations, for sure, but it adds a lot of complexity doesn't result in a good system for users -- so, bad regulation. OTOH, I think FSI regulations like Glass-Steagall and Dodd-Frank, as well as regulatory agencies like the SEC and CFPB (gasp!), have been huge successes for retail users of banks and financial markets -- so, better regulation.
I'm not an expert, but I've worked at a bank and had to go through all the regulatory trainings. I didn't hear about any good regulation other than things that should be covered by regular law. Like apparently there's special regulation about basically not commiting fraud?!
Everything else is some weird sneaky BS.
Again not an expert. Just a guy who had to listen to some awfull training courses.
What does this mean? You don't get to write off the difference between your "target price" and actual sale price.
And a reminder that companies always do better if they make more money, not point in purposeful losses (unless you are getting a side benefit like goodwill from charity).
I think, but am not sure, the point they're trying to make is that hospitals and insurance companies can "charge" really high prices and then they can forgve those high prices in exchange for a tax break?
That's not at all how it works so they don't have any idea what they're talking about. This is like when people say businesses can "write it off on their taxes". Only people who don't know what that really means say it.
I don't really understand what all that extra complexity achieves?