EP366: An In-Depth Dissection of Our Dysfunctional Healthcare Benefits Market, With Kevin Schulman, MD

Why Insurer Profit Caps Reward Rising Healthcare Costs, With Kevin Schulman, MD. Why 15% of a Bigger Number Is a Bigger Number: How Insurer Profit Caps Backfire. Episode 366. Stacey Richter talks with Kevin Schulman, MD, professor at Stanford's School of Medicine and Graduate School of Business, about a JAMA paper he coauthored on the dysfunctional health benefits market—and why capping insurer profits at a percentage of costs quietly rewards insurers for letting costs rise rather than negotiating them down. WHAT YOU'LL LEARN ✅ Why commercial insurance costs have risen roughly 4x the rate of other benchmark goods and services, per the paper discussed in the episode ✅ How capping insurer profits at 15% means higher healthcare costs translate directly into higher absolute profit for carriers ✅ Why Wall Street rewards predictable, rising-cost performance more than it rewards insurers who successfully restructure care to lower costs ✅ Why nonprofit hospitals and carriers aren't exempt from this dynamic—"margin" and "profit" function the same way regardless of tax status ✅ Schulman's framing of cost as "a dynamic fiction": how health systems' own capital decisions become the justification for cost shifting onto commercial payers ✅ Why competitive markets, or regulated ones like Maryland's, show hospitals can do fine on Medicare rates without needing to cost shift WHY THIS MATTERS When the rules of the game reward insurers for bigger dollar amounts rather than genuinely lower costs, "negotiating" with providers becomes theater, and patients and employers are left absorbing wage stagnation, bankruptcies, and financial toxicity that is really clinical toxicity. Schulman's research reframes the debate: the dysfunction isn't a market failure so much as a market working exactly as its incentives are built to work. === LINKS === 🔗 Show Notes with all mentioned links: Episode Page ✉️ Enjoy this podcast? Subscribe to the free weekly newsletter 🫙 Support the podcast with a small donation to the Tip Jar 📺 Subscribe to our YouTube channel 🎤 Listen on Apple Podcasts 🎤 Listen on Spotify === CONNECT WITH THE RHV TEAM === ✭ LinkedIn ✭ Threads ✭ Bluesky ✭ X 00:00 Introduction. 07:13 Why have commercial insurers become price-takers? 10:04 How does a health plan get bigger profits? 10:40 "At the core at this, Wall Street rewards predictable performance; and the predictable performance … is great if healthcare costs go up." 11:00 What does it mean to have a "dysfunctional equilibrium" in healthcare? 12:05 What's really changed in healthcare in the last 20 years that's caused this increase in healthcare pricing? 12:47 Commercial price versus Medicare: Do hospitals really need to cost shift? 15:51 How is value-based care really going to work? 17:43 "It's not A or B; it's a dysfunctional market." 17:57 "Little changes in volume or incentives is not going to change the underlying dynamics." 24:32 "I think it's an open question whether this model is really serving the American public." 29:25 "It's a really important time for us to think about, how do we create a different trajectory?"