When Uber entered the market, USA already had taxis and delivery services. They knew that to win in the race, they need to… offer a better service for lower price, right? That’s how the market works?
Well, yeah, kinda. They offered both drivers and passengers incredibly low prices, well below the equilibrium market point, operating at loss. They were losing money, but their seed capital and investments from people who knew where the wind was blowing were enough to stay. Taxis, who had to actually make money and operate at a profit, were driven out of the market. They couldn’t compete with what was basically free shit.
In 2023 Uber saw its first profits, after the taxis basically disappeared. Of course, at this point Uber could freely raise prices, lower quality, drain the drivers dry, whatever, they have captured the market. Both the drivers and the clients would have preferred the previous system, but, unfortunately, Uber and other ‘gig economy’ services were the only thing left. The market did what it does best - ensured that people have no choice but to get worse good at larger prices.
Wait, where was I?
Private medical insurance in USA first appeared somewhere around the Great Depression - I’m assuming it was because fewer and fewer people could afford healthcare straight. The idea was noble, the Blue Cross - each person/employer paid 50 cents a month (about 10$ in modern dollars), and if they ever fell sick, they got 21 days of guaranteed medical care. This system was later improved into Blue Shield and got more and more popular over time, becoming the standard part of employee benefits package.
It was a good system. It helped people afford medical care. It optimized the costs and benefits. So, what went wrong?
I don’t know what provoked the things that came next. Perhaps people in general got richer and healthier, it made more and more sense to skip insurance and just pay hospitals directly. In other words, healthcare was becoming better and more affordable. This kind of thing cannot survive under market conditions.
So, how do we solve this problem, how do we drive uninsured healthcare out of the market? Insurance companies started working with hospitals to set their pricing strategy. The idea was that insurance companies pay hospitals a little more, and in exchange for that, hospitals must charge significantly more money to the uninsured.
Fewer and fewer people could afford to pay for their care directly and had to purchase insurance. Which drove the prices of insurance up, which drove the prices of direct payments up… And not for any material reason, mind you. Care was just as easy, medications just as available, people just as healthy. It was just a bubble. Patients can’t get care without signing up for insurance - because the prices are absurdly high. Hospitals can’t stay profitable without entering the agreement - because all the money are in the insurance companies. The demand for healthcare is incredibly inelastic, so they can just raise prices however high they want. This agreement between insurance companies and hospitals was voluntary and mutually beneficial. The only ones who got the short end of the deal are doctors and patients. But the healthcare market isn’t for them, right?
I am pained by the fact that a lot of Americans consider it normal. That an ambulance ride is supposed to cost a thousand dollars, that that’s what it costs, that’s the price of the labor and the materials. The insurance companies are there to help them afford this incredibly scarce good.
After all, it cannot possibly be that the biggest players on the market simply absorb gigantic amounts money without offering anything in return, just because they maneuvered themselves into having the legal right to make the decisions about who gets to treat whom. We can’t have doctors and patients decide that!
Doctors, thankfully, seem to be somewhat more aware about it. They mostly hate that they spend more time on removing sticks from their wheels that on working. Although this might be selection bias - I only read doctors who are smart enough to write.
Ah, and, of course, I can’t not mention government regulations. If for no other reason that whenever I speak on this topic someone brings this up for some reason. Sure, those are bad, too.
Yes, capitalism breeds innovation. The insurance companies innovated hard on coming up with all those ways to take people’s money and then deny them care. All those premiums, copays, pre-existing conditions, this is, of course, all very innovative. I heard that someone even uses AI for this purpose. To prevent people from getting healthcare. The market did what it does best.
What was I about? Right, I’m a game designer, I should talk about games. Luigi’s Mansion 3 is great.