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A Window Into How Health Insurance Companies Harm Consumers by Threatening to Deny Coverage
From the New York Times, we learn about how health insurance companies hire PBMs (Pharmacy Benefit Managers) to help them restrict access to doctor-prescribed drugs. For all the talk of insurance companies directly denying coverage, when it comes to pharmaceutical drugs, specifically, they're able to offload a significant amount of Delay, Deny, Defend onto third parties, in this case PBMs. By restricting coverage, insurance companies are able to reduce costs and increase profits. A bonus is that they don't even have to be The Bad Guy; they can pawn that off on a third party, who is ostensibly making the choices for them. They don't have to personally defend the decisions to deny; they can just obfuscate, wave in the direction of the third party, and let the complexity of The American Healthcare System stymie consumers.
The Times does a deep dive into a Good Guy Pharmaceutical Company and the lengths they have to go through to navigate this minefield to get their high-quality, purity-assured drugs into the hands of the market. Primarily, they've gotta give the PBMs a cut of the money, who in turn share it with the insurance companies and employers they represent. For a while, they were rebating 23% on average, allowing patients to access the drugs their doctors prescribed at prices that were reasonable to them, their employer, and their insurance company. One PBM reportedly wanted (and got) more - 60% rebate to keep prices low and avoid inflaming popular anger with denials. Of course, that still doesn't quite reach how good some Medicare plans were at 'negotiating'; they got about 70%!
The Good Guy Pharmaceutical Company knew how much people wanted its product; they knew that doctors were prescribing it; they knew how dangerous the alternatives could be for many in the market. They were offering a well-known, well-tested product, clean from any adulteration, and outrage would surely rule the populous if folks had to turn to alternative products or sketchier outlets, possibly with less-stringent quality control. So, they selflessly paid the toll to do the right thing, to get their product into the market, to save lives. NYT rightly applauds their admirable efforts to do what they could, at cost to their own bottom line, to protect consumers from the restrictive, denial-focused tactics of health insurance companies and their lackeys.
Oh wait. NVM. It's Purdue. It's Oxy. Flip everything 180 degrees. Apparently, nobody (other than Purdue and their supporters) thinks it's good to flood the market with high-quality, pharmaceutical grade opioids with well-known potency properties. They somehow don't think that this is preferable to folks getting funneled toward lower-quality, potentially dangerous alternatives. They're back to liking the gatekeeping of insurance companies and their lackeys, ya know, so long as they're doing so in keeping with their own political proclivities. Gatekeeping is Good and Right, so long as the folks who buy digital ink by the barrel can browbeat the gatekeepers into doing things the way they want it to be done. ...and they sure ain't even thinking about including libertarian politics on drugs in the list of their demands. Woke politics, tho? Sure, why not?
I think the bottom line, is this is just what a low trust society looks like. Everyone smashes the defect button as often and as quickly as possible, in every situation. There is literally no solving this problem, only clearing the way for a different species of defector who will ruin things, do material damage, and end lives with their greedy, corruption and indifference.
I was sitting in the car one day, pondering how low trust our society has become. I was at a gas station while my wife was using the bathroom. And I couldn't help but notice that the emergency gas shutoff switch is just out there, in the open, totally exposed. It got me thinking about the damage that will be caused when our low trust society devours that. I mean, it's there, unguarded, for a reason. Gasoline is dangerous, you can't just have it spilling all over the place. In case of emergency, you might not have time to grab the manager, have them get their keys, etc, etc. So it's just out there, for anybody to hit, whether there is an emergency or not. Which makes me wonder how long until some asshole tiktok prank becomes smashing that button as many times a day as possible until gas stations across the country have to start locking them up. Which then leads to more avoidable accidents at gas stations.
It's just going to be this way with everything. Nothing is going to be too trivial, or too important for some asshole to pillage, either metaphorically or literally.
What it looks like to me is that it's far from "everyone" that smashes the defect button - more like 10% of dysfunctional criminals and elite sociopaths. The rest try to cooperate, it's just that your tribe's definition of "cooperate" is not the other tribe's.
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I often feel like people get the system they deserve. That the system is a product of the people, and trying to change a system’s rules on its own can only have marginal effect. We have a low trust, somewhat dysfunctional society and so any form of healthcare is going to be similarly dysfunctional.
Nerdy discussions of voting systems like ranked choice vs FPTP always trigger this feeling in me, like the voting system doesn’t matter at all. Maine implemented ranked choice and it’s not really going to improve Maine, Maine was only able to do it because it’s the whitest state in the country and as a result extremely non-polarized.
I got thinking about this when Richard Hanania pointed out that the political systems practised by Vietnam, Japan, Korea and China could hardly be more different from each other: China is nominally-communist-but-really-state-capitalist-and-authoritarian, Vietnam is actual no bullshit communist, Japan and Korea are modern capitalist societies. And yet, the day-to-day experiences of living in any of those countries are remarkably similar: low crime, low rates of children born out of wedlock (coupled with low fertility in general), high rates of educational attainment, high life expectancy. It suggests that, to the extent that your country following a particular political system makes a difference to the lived experience of its citizens at all, the difference is mainly felt on the margin. A particular political system can help to safeguard and maintain stability and economic productivity in a country, but you'll never establish a stable, functional and economically productive country without a critical mass of human capital, regardless of which political system it nominally follows. A corollary of this is that debating what political system your country should follow when it doesn't have the prerequisite human capital is like debating what colour to paint your car when it doesn't have an engine.
I agree you need human capital. But compare say Hong Kong with Beijing over the last hundred years.
Or compare the Ming Treasure Voyages cancellation with the European Age of Exploration. China was on top of the world, but their institutional infighting manifested as stasis while Europe's often-more-literal infighting manifested as a mad scramble for power, and the difference in incentives set China back centuries.
Compare East Germany with West Germany, or South Korea with North Korea. The economic effects of better vs worse governance on nearly-the-same-genes can literally be big enough to see from space.
I think a more interesting wrench in the gears is the question of better vs worse culture, though. South Korea has a lot more lights than North Korea in all the satellite photos, but at 0.72 and still falling TFR they might as well start turning lights off now before the last person "leaves". Their genes haven't significantly changed, and their government changes over the past 60 years (since the TFR started falling from 6) seem unrelated, but the cultural changes have been massive and baffling. Nerds started getting a mathematical handle on voting system foibles and game theory back around the time of Condorcet (though we've now got much better alternatives to FPTP than IRV-misnamed-as-Ranked-Voting, so the lesser-nerds' focus on the latter at this point in history is weird...), and likewise for economics and at least the most obvious Communism-level economic mistakes. But does anybody have any sort of mathematical analysis of WTF happened in South Korean culture, to cause the gender war to get so bad and the fertility rate to plummet eight-fold in 2 or 3 generations? It's like the stereotype of the pushed-into-overachievement kid burning out and becoming suicidal, but on a 50-million-person scale!
Two crazy statistics to think about:
So there is social pressure to not have kids out of wedlock, and more than half the population is deferring marriage until after the fertility cliff. I blame the marriage deficit on high financial expectations on young couples and a culture which teaches that marriage at 35 or later is okay. The birthrate crisis is downstream of the marriage crisis.
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South Korea made childhood hellacious so nobody wants to subject people to it. It’s not a mystery.
That pushes the mystery back one step, anyway. Why did they do that, and other countries didn't?
Other countries have totally done that, South Korea just went unusually far.
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It’s not because of the gender war, it’s because they have a broken culture that is ultra-hyper-competitive for no good reason and encourages all parents to pour all their resources into a single child who lives a miserable life in the hope of being 98th percentile in a hundred exams in a row and getting a job at Samsung (that pays as well as an average white collar job in the US). Many people increasingly check out of that system.
Less, I expect. I knew programmers at Samsung in Korea back when programming was an ordinary white-collar job, and they made a lot less than American programmers did.
Korean pay scales reward seniority, not technical skills. All engineer starting pay is 1/3 to 1/5 the equivalent US starting salary, except Samsung which is 1/2.
But the US is an outlier in programmer salaries and in minimum cost of living. So someone can live comfortably on 40k USD in Seoul. Compare the US where cheap 100 to 200 sqft rentals don't exist anywhere.
Someday I need to post my student budget. I was able to save up 10k USD over three years while making less than 10k USD annually, paying tuition and living in central Seoul.
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The interesting question is: how do you change the people, or at least stop them from changing for the worse?
I spend a lot of time in Switzerland, and on paper it should be pretty similar to many US states. Population size and density, GDP per capita, Gini index, cost of living, ect. are all pretty comparable to one of the "nice" US states. Even healthcare is kind of similar (certainly closer to the US than to the EU). Also, they have insane immigration, and have had for decades: 40% of permanent residents over 15 have an immigration background, 35% don't hold citizenship. Walk through a major city, and you'll hear a dozen different languages spoken within minutes. Walk onto a construction site, and none of them will be one of the national languages (OK, you'll probably hear Italian).
And yet, Swiss society is insanely high trust. Bikes unlocked, phones left on empty cafe tables, unaccompanied children move all over town on bikes or public transit. Farm stands have cash sitting in an open box, stores don't have locks on any product, self checkout is 100% unsupervised (and isn't using a digital scale to check what you bought).
The question is: why? How do they run a 1%-2% immigration rate, and instill the honor principle/high trust into everybody that arrives? How do they keep their citizens from defecting, practically ever? Of course, rate of incarceration is extremely low, too.
Or maybe we have to turn the question around: why are Americans choosing to defect so frequently now? Is the gini index not covering real differences in inequality?
You don't change the people. Switzerland has very few immigrants from Africa or the Middle East so they don't have too many problems yet.
https://en.wikipedia.org/wiki/Demographics_of_Switzerland
Of course, immigrants from those countries commit crimes at a rate of several times the native population.
Switzerland isn't doing anything "right" except for restricting immigration from unsavory countries. Neverthless, numbers are increasing, so unless they start deporting people soon, they can say goodbye to that high trust society within a few decades. None of this should be surprising to anyone.
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Where are the immigrants from? A Bavarian/Piedmontese family moving to Switzerland counts as an immigration background but is not likely to lower trust significantly (they're crossing a border but originate in a different part of the same mountain range) while a family coming from another continent that speaks a different language is going to be far more challenging to assimilate quickly.
That's relatively diverse, at least from language, income and a "native trust level" perspective. The largest groups are, in descending order: Italy, Germany, Portugal, France, former Yugoslavia, Albania and Turkey. None of those groups is more than 10%, an together they're below 60% of immigration origin.
Maybe that diversity helps with not forming ghettos. Maybe all these origin countries have higher-trust societies than the most common countries the US gets immigrants from. But my intuition says this isn't the case.
Number one origin for immigrants in the US by far is Mexico, number two is India, followed by the Dominican Republic, Vietnam, Philippines, El Salvador, Brazil, Cuba, and South Korea.
I believe your intuition is bad. Mexico, India, the DR, El Salvador, and Brazil are notoriously low trust.
At least on this metric, all of the countries listed are rather lower trust than Switzerland itself, which has been gaining in trust over the past 30 years despite immigration from lower trust societies.
Italy, France, and the DR are similar trust societies. Same for Portugal and India, and El Salvador and Turkey. Albania is lower trust than any other country mentioned.
Italy and Germany (#1 and #2 for Switzerland) are significantly higher than Mexico and India (#1 and #2 for the US) by that metric. Though that metric may be suspect; it has China higher than Switzerland, and there's at least plenty of anecdote pointing towards China being low-trust. Perhaps they don't trust the surveyors.
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They're mostly Germans and Italians with some Iberians thrown in.
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I think honestly this isn’t a system we created and thus don’t “deserve”. The thing is that we’ve been taught to be cynical hyper-individualistic, hedonistic, lazy jerks. It comes from everywhere. You’ve been taught that your traditions are old and stodgy and nobody cares about them anymore. You’ve been taught that your ancestors were rotten, terrible people who genocide their way around the globe. You’ve been taught that striving is pointless and that the rich will keep you down. You’ve been taught to deconstruct everything, but never to construct.
There are lots of reasons for it. Some are hyper-consumption: if you lose access to a community in which someone can solve your problem for free, then you have to buy that service somewhere. You don’t know someone who can cook and you don’t know how to? Door Dash. Daycares are essentially replacements for extended family. It used to be that if both parents needed to work, grandparents were close by and retired and the kid could stay in a place where he’d be safe and with a loved one. Now you hire a company who pays strangers less than $20 an hour to do the same. Go down the list of home repairs, car repairs, lawn maintenance, and a lot of services replace community.
The other part is that traditional systems are terrible for governments who want to control their populations. A strong community doesn’t need or want much government interference. The Amish have their communities in pretty good order without too much need for the state to come in and control them. They don’t need welfare because they have their church to help those in need.
The final thing is the issue of legitimacy. Legitimacy comes from the people. But in order to get people to vote for whatever it is that you want, job one is to convince them to want it, or convince them that they’ve always wanted it, or that “good people” are like this. So people vote as they’ve been taught to do. You have to be taught to believe in an atomized society with no deep connections so that you’re more willing to accept the breakdowns, less willing to trust community.
Thank you. I... Guess I should say something else but actually I'm just thanking you because you voiced one of my frustrations eloquently. People making worse versions of things because the good version is patented, people creating deadweight loss to get rid of to reap the benefits... or inducing unnecessary paradigm shifts so that they can be at the top of the transition team...
I guess I really do believe that theres no actual way to create more value for people. The modern amish have everything they need really. What was the point of all this junk we made? The medicine is nice yes. The food. The energy. I don't mind the AIs, though people trying to sell them to us is just another example. Take away friends, replace with 20$/month subscription. The cars... seemed nice but slowly grow to disgust me as I see how the travel distances expand to match their speed, keeping me only farther from other people. The trinkets and stopwatches and beer umbrellas add spice... but it turns to ash in my mouth without someone to share them with.
I don’t think it’s the technology. It’s the mindset that comes through the media that’s teaching everyone to defect, that everything is rotten, and that you should focus on yourself and getting yours. And when 300 million of us get that from the firehouse of media, we act on it. And the results are pretty clear. When no one is trustworthy, and nothing is worth protecting, you get defections.
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I think you’re assuming the conclusion. The economic forces which make babysitters and dishwashers ubiquitous wouldn’t disappear if we’d never started critiquing imperialism.
I also think your view of the past is rose-tinted as hell. 1700s America wasn’t an endless quilt of Amish communities, waiting to be tempted out of Eden. It was a hungry, dirty, disease-ridden frontier just starting to climb the curve of industrialization. Communities weren’t solving each others’ problems “for free.” They were paying their dues on their own social contract.
I’m not necessarily suggesting the Amish are perfect. I’m suggesting that we’ve kinda thrown out the baby with the bath water when we went full bore on the car and convenience society. And when we decided to destroy the myths of America and at least nominal Christianity as the default belief system. When tradition and community are uprooted in favor of door-dashing, you lose the personal connection to other people around you. When your neighbor fixes your car you end up bonding over it. You know him better, and it can lead to connections that don’t happen in transactional relationships. When you attend the local church with all of your neighbors and friends, you form connections and bonds and the kids play together and so on. When everyone around you believes in the same sort of things and wants to preserve the community, then you have more trust, especially if everyone knows each other and has a relationship that’s more than passing in the streets in individual cars on the way from one building to another. Walk down the streets of your own neighborhood, odds are that you couldn’t give the names of more than 10 people in your own neighborhood, and it’s highly likely that outside of that neighborhood, you see them often.
I think the social contract is exactly the problem. It’s the reason that high trust is actually possible, because people believe in that contract, try to live up to it, and know each other well enough to broadly enforce it. That’s how most high trust societies work. Asia, in general has Confucius and the ideals of social contract and familial relationships and reciprocal relationships as the core of their beliefs. Read the stuff. Confucius was all about the social contract, how you should relate to other people, how you obey your elders and serve your various roles in society. I’m convinced that while most other systems weren’t that explicit, they all had those kinds of ideas — you are not merely some atomized individual seeking autonomy and the best life and hedonistic pleasures. You are part of a community greater than yourself and have some duties to people and the broader institutions around you.
As I said above I don’t think any of this is down to technology. Asia has a lot of this and has more high tech than we do. Orthodox Jews form these kinds of high trust enclaves in New York City. It’s simply making the decision to follow traditional practices and to build community with people around you and sharing things and skills with those around you. To some extent, I think it might be helpful to get out of the mass and social media spheres or at least limit the kinds of media and social media you allow into a community like that. It’s not Amish, just being intentional about what is and isn’t allowed to be seen in your own home.
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1700’s America was the wealthiest society on earth at the time; death by starvation was more or less unknown and nutrition standards were high by the standards of the day.
The colonies had a way higher standard of living than the old country.
Maddison gives US gdp/cap in 1700 as below world average (which seems a little low, I admit), only catching up to the UK around 200 years later. French peasants, who according to those numbers were richer than americans, were always one bad harvest away from starving during the 18th century.
This is yet another condemnation of GDP as a metric for prosperity, then. Whatever the numbers say, starvation was dramatically less common in the New World colonies than the old world. If an economist wants to quote numbers to me, that tells you what an economist is worth.
Because I'm a retarded autist with only one special interest I have to weigh in with relevant evidence. When daguerrreotypes became popular in the 1840s they were vastly more accessible in the USA than in any other country on Earth including their home of France. In the USA you routinely see occupational portraits of people of every social class and profession, carpenters, lamplighters, sailors, farriers, mill-girls, coopers, teamsters etc. In France and the UK (with every other country being negligible) you only see the upper classes, military officers and the like, you never see occupationals of random working class people. It is clear to me that already by 1840 the USA was VASTLY wealthier than every other country on Earth, at least when it came to the wealth of average people and even the lowest like night watchmen or lamplighters in the USA had more real purchasing power than most lawyers or doctors in France or Germany. Note, this only applies to the North in the USA, the South basically had daguerreotype production patterns that were closer to Continental Europe.
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What are you basing this on?
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We've seen a remarkable, unprecedented increase in GDP per capita in the last 200 years. However, the GDP gains may overstate the actual gain in wealth. In 1800, someone would take part in fulfilling but unpaid labor such as child rearing or food preparation. This is not measured in GDP because no goods or services were exchanged. Nowadays, the equivalent person might use daycare and Door Dash while they pursue their higher paying job as a laptop worker for a big nonprofit. More GDP is being created by the commoditization of previously unpaid work even if no more value to society is being created.
So maybe GDP per capita has increased 5,000% but real wealth has only increased like 2,000% or something. We're vastly better off now than before, but imagine how much better things could be with stronger communities.
It's not about GDP. Individuals don't choose their career to please the Federal Reserve. So why are women--because men, naturally, aren't expected to do anything so fulfilling--choosing instead to sell their labor on the market?
As far as revealed preferences go, this one isn't particularly shocking. Since the dawn of civilization, the rich and powerful have been paying other people to deal with their kids. Technology has made that dubious ambition much more attainable.
Bad equilibrium.
A lot of labor is people competing for zero sum positional goods. There are 10 houses with a view of the lake. If I have one, you CAN'T have one. So I work extra hours to get ahead in the rat race. So do you. We're all running as fast as we can to stay in the same place.
The career woman personally benefits from her big non-profit job, gaining high prestige and access to positional goods such as housing. But this is all zero sum.
Look to East Asia to see how negative this can be when taken to an extreme.
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I think this is a large part of it. Scott even has an essay on this topic where he discusses reasons the Amish pay between a fifth and a tenth of what the rest of us pay for healthcare. A few of those reasons (the second, fourth, sixth and arguably the seventh too) basically come down to the Amish being honest and everyone else knowing they're honest.
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By law, they can't lock them up. In a blue state we'll just get op-eds and politicos opining about how this is why we need to ban gasoline cars and go to all electric. There IS a solution to this particular class of problems, but it's banned. Basically the "railroad bull" solution -- swift and painful punishment for the assholes that do it.
I have lately wondered if what we're missing is a bunch of, I suppose, nuns with rulers or the equivalent to punish modest anti-social behavior (defecting, in this conversation) promptly with a transient painful stimulus that neither leaves lasting marks nor a permanent legal record.
But I don't think it would work in all cases, or maybe even at all. And it's almost certainly disallowed by the Constitution. And suffers from a lot of ambiguity as to where to draw the lines.
Yeah, the problem is "promptly". Nothing about the justice system is prompt, nor really can be; it can be faster, but not prompt enough for simple conditioning like I'm suggesting. That is, some fools start doing obviously stupid shit. Some of them are caught immediately by guards, who give them a thorough beating and are not punished. Word gets around. Trying to do this in a world where the guards can't be trusted either obviously has problems, and formalizing ways of verifying the guard's behavior will tend to make the system too slow.
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A good chunk of our current society has made every effort to metaphorically disarm and discourage the previous set of 'nuns with rulers'. I don't see how trying to artificially implement them from the top down is going to do anything but make things worse.
Put bluntly, if you want a high-trust society, get more Daniel Perry's and stop punishing them when they actually step up and do things.
I have heard tourists (here n Japan) remark on how surprised they are that the iPhones in the shops are just sitting there for you to look at and aren't locked up. The reason is that if you steal one you'll be summarily caught and sent to jail. This seems like a blindingly obvious policy.
Having written that I admit sometimes the catching takes time. Last Saturday in Kyushu some asshole stabbed two teenagers in a McDonald's, killing the girl, and is still at large.
While there may be rule of law here, when it does go south there are very few Daniel Pennys.
Edit: Found him
Comparing two different nations with very different setups, society, and ethnic spread is always a bad comparison.
What works for one doesn't always work for another. I envy Japan on a level you cannot imagine for their train network, that doesn't mean I expect the same to be implemented in the US.
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More Daniel Pennys or Kyle Rittenhouses can't magic up a high trust society. They're mainly useful in showing the insane behavior of agovernment that abdicated responsibility and then punished anyone that refused to be preyed on.
The government just has to do its job and enforce order. But apparently that's too much to ask for a variety of reasons.
I disagree, the thing that makes a society "high trust" is the understanding that bad actors will not be tolerated.
The people of New York City have collectively chosen to tolerate bad actors and punish those who do not tolerate them. Thus the people of New York City have chosen to be a low trust society and the only way that will ever change is for people to choose differently.
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There's nothing in the Constitution that bars corporal punishment. There's a prohibition on "cruel and unusual" punishment, but we know this doesn't mean all corporal punishment, because it was widely practiced at the time and not ended until long after the ratification of the Bill of Rights.
Certainly it's plausible that a Supreme Court containing at least five left-leaning Justices who take a somewhat cavalier attitude towards their oath to uphold the Constitution might rule that the Eighth Amendment bans corporal punishment, but that would be them, not the Constitution.
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