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The air ambulance industry, in which providers charge private insurers 4x-10x the prices that they get from Medicare, demonstrates the market failures that permeate through healthcare and why the government often can’t rely on the private sector to determine fair prices. 1/5
Healthcare markets function poorly when (1) providers have market power (2) a third party heavily subsidizes the transaction and (3) the third-party payer has no real ability to say no or steer the patient to close substitutes. 2/5
Private insurers alone cannot create adequate tension to prevent pricing abuses when these market failures exist. I understand the argument that government shouldn’t set prices if possible but in some markets defaulting to the private sector is a much worse alternative. 3/5
Medicare doesn’t rely on the private sector to negotiate prices of air ambulances, just like it doesn’t take the private sector’s prices for hospital services. But it does for drugs. The result is we pay the highest drug prices in the world while also having poor access. 4/5
The drug pricing reforms propose a much reduced gov’t role than CMS currently has in setting prices for hospitals and doctors, which isn’t controversial. Makes me think the opposition is less about the policy & ideology but rather status quo bias & power of special interests. 5/5
