Pharma costs are inflated by R&D costs and promotion. Insurance overhead is actually relatively lean, but base cost is primarily driven by cost of goods, and to a lesser extent admin. Provider costs are inflated by high legal and regulatory liability, shortage of qualified staff to offset liability, and high admin.
At a the highest level, cost is driven by an inability to discover and set prices at market clearing rates.
Manufacturer dont sell fixed price product into a market, but negotiate complex bulk deals with PBMs, pushing some prices up and others down. Similarly, hospitals/providers dont set prices at clearing rates, but negotiate 1:1 pricing, with some products above and below cost.
Last, and I suspect most significantly, health plans cant meaningfully vary in provided care, only cost sharing. That is to say, a bronze plan must include the same medications and procedures at a gold plan, differing only in copay. This breaks the price feedback on COGs. (e.g. a generic only insurance plan is illegal, so name brands face reduced competition).
If I were Medical Czar, I would look at banning preferential pricing/institutional rebates for goods and services.
I would allow more heterogeneity in policies (e.g. generics only, no implants, limited oncology, ect). This would crush innovation, but also greatly reduce pricing as it moves from cutting edge, to 10 year old technology.
Provider shortage is a tougher nut to crack, but I think it would require radically altering the residency program as it exists today and loosening requirements for other healthcare professionals.
