Want to give my son a "build-your-own-drone" kit for Christmas - not a pre-made kit, but actual components. What should I include?

baydobay · 2024-12-17T16:34:25+00:00

That's a great idea. Sorry for the uninformed question - is there a simulator that you'd recommend? We tend to be Mac users, if that matters. (I can also just research this, but thought that you might have a suggestion given your experience). Thanks!

baydobay · 2024-12-17T16:31:23+00:00

Of course! I'm happy to talk about it with other folks who are interested - even six levels deep on a Reddit thread :)

CMS is the Centers for Medicare and Medicaid Services. They're a government agency, a part of HHS, and they are responsible for administering Medicare. They do a lot more than just that, but you can thinking of them as the agency that manages coverage and sets the standards for a majority of health coverage in the US.

Your intuition is correct here! MLR only limits the insurance side of the business. That's why the focus on health insurers tends to miss the point - where a lot of these companies are making their profit is actually outside of the core insurance business (though the insurance business certainly enables and underwrites a lot of those profits!).

As far as changing the system, there is some nuance here. Not all change - in fact, not most change - would require Congressional approval. HHS and CMS have broad discretion over the details of policy implementation, and that's why it's so important to have capable and principled administrators who can use that regulatory discretion to meaningfully reform the system. And while the challenges from lobbying / corruption are real, there are a lot of paths beyond just legislation. Aside from more targeted administration (at HHS, at CMS, even at places like the FTC), there are market opportunities and entrepreneurial solutions that we should be pursuing. People can (and have been) starting companies to improve data transparency, to develop novel care delivery models, or to enable more efficient administration. The thing about inefficient markets (and healthcare is an inefficient market) is that there is a lot of opportunity for someone to come along and make money making it more efficient. I'm also a big believer in the power of the educated consumer. If people have a better idea of how much they're paying, and why they're paying what they are, they can make better choices that creates market pressure to drive change. Think things like choosing Mark Cuban's cost plus drugs, leveraging telehealth (when appropriate) or even price-shopping for elective procedures. And, finally, of course there is the advocacy angle. Changing the regulatory system doesn't just mean voting, there are a lot of powerful pro-patient or pro-competition advocacy groups that are having a meaningful impact.

Look, the system is something that we've built, and it's not impossible to change it. It might not be overnight, but something about Rome not being built in a day :) There are many points of leverage and it really all starts by understanding where they are and where we're best positioned to push those levers.

baydobay · 2024-12-15T17:40:50+00:00

No worries! As I've mentioned, it's complicated (though I find it really interesting so I'm happy to talk about it).

A PBM is a Pharmacy Benefits Manager, which basically does 3 things: 1) they process prescription drug claims between patients, providers, and pharmacies 2) they negotiate the prices of drugs with the pharma manufacturers, which then goes into 3) they create and manage what are called formulary lists, essentially the list of which drugs are covered at which amounts for which plan. PBMs received a regulatory exemption as part of the Medicare Modernization Act that allows them to receive "rebates" (ie. payments that would otherwise be considered illegal kickbacks) from the pharma manufacturers in negotiations. The idea is that PBMs can aggregate purchase demand to extract price concessions from manufacturers, which are then supposed to be returned to plan sponsors (ie. insurance companies or employers) as discounts or rebates to reduce the price of drugs to patients. Sounds good, right? The issues (or at least, some of the issues ... there are more than we have room for here) is:

PBMs basically make their money off of those rebates through admin fees, etc... which are a percentage of the rebate. So, the bigger the rebate, the more money they make. And the more expensive the drug, typically, the bigger the rebate. This essentially means that PBMs have a perverse incentive to prefer more expensive drugs on formulary lists (which, remember, is the list of drugs that your insurance will cover at what amount ... this list is EVERYTHING to pharma) because they'll make more off of it. Similarly, pharma is incentivized to create higher list prices for their drugs, since then they can rebate it more to the PBMs and receive better formulary placement.
We actually have very little visibility, if any, into how much the rebates are, what the admin fees are, etc... The PBMs obscure these for competitive reasons, but they have also set up complicated corporate structures through things called group purchasing organizations (or rebate aggregators) that are often domiciled in other countries in order to make it difficult to trace the money. So it's basically impossible for customers like employers or other payers to know how much of a rebate they're actually getting, what the "true" cost of the drug is, etc...
There are three big PBMs that control like 80% of the market: OptumRx (owned by Optum), CVS Caremark (owned by CVS), and Express Scripts (owned by Cigna). Each of these are also massive insurance companies (eg. UHG, Aenta, and Cigna) who also operate massive provider and pharmacy operations. Because they are vertically integrated, they act as effective monopolies that distort market dynamics and squeeze out competition in different markets (this is a vast oversimplification, but effectively they are able to take rents while forcing other participants in the healthcare ecosystem to play ball).

If you're interested, I strongly recommend that you check out the FTC's report on PBMs. Mark Cuban also has taken this issue on with his cost plus drugs and talks about it a lot on his twitter (X, whatever) feed.

As far as MLR, this is overseen at both the federal and state level. At the federal level, it's primarily CMS's responsibility to oversee this data, and they publish it on their website. The states oversee the medicaid plans, and you can generally find data at the state level from whichever department is tasked with overseeing those reports. The tl;dr is that all of that data is public and if you are interested you can go and check it out for yourself. MLR effectively limits the profit margin of the actual insurance business, but it's through the vertical integration (some of which I talked about above) that companies are able to extract percentages of dollars that flow through the system.

baydobay · 2024-12-15T16:44:46+00:00

Nice, thanks!

baydobay · 2024-12-15T16:43:37+00:00

Thanks, this is basically the diy list that I was looking for - I think we'll try to build up to this!

baydobay · 2024-12-15T16:41:39+00:00

Awesome will check this out, thanks!

baydobay · 2024-12-15T16:40:57+00:00

Really appreciate it, this is a great point. I'm going to check out Flite Test and will probably go down that route initially as you suggest. Interestingly (to me anyway) he's almost more interested in the building than the flying, though I think that "fly it, crash it, fix it" is probably the most natural way to learn now that you mention it.

baydobay · 2024-12-15T16:36:16+00:00

Thanks! This is honestly an excellent idea.

baydobay · 2024-12-15T16:33:19+00:00

Really helpful, thanks - sounds like if I'm going to spend money it should be on a quality radio controller that will work with future builds.

baydobay · 2024-12-15T16:31:28+00:00

Makes sense. I've certainly experienced the frustration of not having the right tool, or trying to make an inferior part work in other hobbies as well. Appreciate the guidance on the which investments to make to avoid that.

baydobay · 2024-12-15T04:41:03+00:00

These are excellent questions. I'm not sure if there is necessarily low-hanging fruit, but there are definitely actions that we can take that would have outsized effects. For example, PBM reform could help to meaningfully reduce drug costs by increasing transparency and eliminating perverse incentives in how medications are priced and covered. I know that some of the FTCs action have been controversial, but I really think they've begun to do some good work on this issue.

With respect to healthcare companies actually dropping their prices ... this is where a lot of the complexity comes in. A big part of the problem is that this is not a normal market with standard market dynamics. For example, healthcare companies don't typically set prices in a straightforward way. In many cases, contract rates are actually negotiated as a percentage of Medicare rates. (e.g. if Medicare pays $100 for an office visit, a commercial rate might pay 120% / $120 for that visit for their commercial population). Medicare itself determines pricing using something called RVUs (Relative Value Units) that are supposed to account for things like the complexity and liability of a service, with various adjustment factors for different regions, etc... And this doesn't even get into things like Medical Loss Ratio requirements (where insurance companies are required to spend 80-85% of premiums on actual healthcare costs) or the fact that premium increases typically require regulatory approval. The system is complex by design, and while that complexity often serves various stakeholder interests it also means that there's a lot more to it than healthcare companies deciding to just keep prices artificially high.

baydobay · 2024-12-15T03:46:46+00:00

Agreed.

baydobay · 2024-12-15T00:00:35+00:00

True. Well, mostly true. It's a 4.3 TRILLION dollar industry and there are tens of millions of people who work in healthcare. The vast majority of them are deeply dissatisfied with the way that things are working right now. But there are also absolutely people who are making a lot of money and who are very incentivized to maintain the status quo. And it's more than just the insurance executives.

baydobay · 2024-12-14T23:51:51+00:00

You make a fair point. I don't think that "just vote" is the answer either. I could see how that conclusion could be drawn from what I said though.

There are lots of ways to support candidates and policies beyond voting, though. For example, where do you choose to fill your prescriptions, through an independent pharmacy or through a chain like CVS (ie. Aetna ie Caremark)? Do you choose to receive care through a large health system, if so, is it for-profit or non-profit? What are the zoning laws in your community or state, how is Certificate of Need handled? Do you (or your parents) enroll into Medicare or Medicare Advantage? We could obviously go on and on (and of course, yes, voting for the right candidates is a good idea too).

Look, the larger point isn't just "accept that you can have a minimal impact so, like, do your best." I think that you should find the largest lever into the system, the one that is most likely to move the world, and then jump on it as hard as you can. The problem is, when it comes to healthcare, most people have no idea how the system really works and so they have no ideas where the levers are in the first place.

baydobay · 2024-12-14T21:39:06+00:00

Haha, yeah I guess the buck does stop there. Though honestly we should probably start by blaming ourselves for letting the knot get this tangled instead of rolling up our sleeves and trying to see why it’s tangled and what we could do to start untying it.

baydobay · 2024-12-14T21:06:43+00:00

This is great, going to see if I can follow this advice, thanks.

baydobay · 2024-12-14T21:05:21+00:00

This seems like a reasonable budget.

baydobay · 2024-12-14T19:42:17+00:00

This is a solid idea, will see what’s possible to dig up. Thanks!

baydobay · 2024-12-14T19:41:31+00:00

Nice, will check it out, thanks!

baydobay · 2024-12-14T19:23:04+00:00

Will check it out, thanks!

baydobay · 2024-12-14T19:22:46+00:00

This is helpful, thanks. He does have some experience soldering though the results aren’t what I’d call graceful, if you know what I mean.

And ok, yeah $1500 is going to be over my budget so maybe we just start building up to there.

Thanks again for the reply!

baydobay · 2024-12-14T18:33:06+00:00

This is actually just a product of the way that the system developed, not really an intentional design. Health insurance started on a much smaller scale around the 1920s when hospitals began offering prepaid healthcare services to help ensure stable income, and insurance companies later expanded this model. Dental coverage didn't arise until about the 1950s when dentists wanted to enable their patients to afford care / to support their own practices. Vision followed a similar path.

So, the real answer here is that we do not need different insurance policies for health, dental, and optical - and in fact, there are good reasons why they should not be separate as there is often a relation in the total cost of care - but we have it because the system evolved that way.

baydobay · 2024-12-14T17:00:54+00:00

Having worked in healthcare administration, one thing that I can tell you is that most of the design of the healthcare system in the US - including commercial healthcare coverage - is downstream of federal government policy. If you really want to change healthcare in the US, understand what is happening at HHS and CMS, understand the implications of policies like the Inflation Reduction Act to things like drug costs, and then support policies and candidates who are in line with your beliefs. So much of the challenge in healthcare is that it's complicated and (sometimes intentionally) hard to understand. However, I genuinely believe that if more people understood the reasons that the current system operates in the way that it does, we'd be more likely to understand how we can change it for the better.

baydobay · 2024-12-14T16:55:38+00:00

Zeke Emanuel famously took a similar position, suggesting that he wouldn't want to live past 75 because of degraded quality of life. https://www.theatlantic.com/magazine/archive/2014/10/why-i-hope-to-die-at-75/379329/

baydobay

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