Who in healthcare has an incentive to reduce costs?

TL;DR: no one. Or so it seems.

My search for information about which of the many healthcare stakeholders have an incentive to reduce costs in the system led me to an NPR story from last year. That story is about a patient, Michael Frank, who was asked to pay $7,088 coinsurance on a total charge of more than $70,000 for a partial knee replacement he had received from NYU Langone. His insurance company, Aetna, had paid NYU Langone the rest, but Frank thought he had been overcharged - and so had his insurance company.

As NPR’s Marshall Allen put it:

Frank could have paid the bill and gotten on with his life. But he was outraged by what his insurance company agreed to pay. "As bad as NYU is," Frank said, "Aetna is equally culpable because Aetna's job was to be the checks and balances and to be my advocate."

And he also knew that Aetna and NYU Langone hadn't double-teamed an ordinary patient. In fact, if you imagined the perfect person to take on insurance companies and hospitals, it might be Frank.

For three decades, Frank has worked for insurance companies like Aetna, helping to assess how much people should pay in monthly premiums. He is a former president of the Actuarial Society of Greater New York and has taught actuarial science at Columbia University. He teaches courses for insurance regulators and has even served as an expert witness for insurance companies.

Why are insurance companies always the bad guys?

As Olga Khazan wrote recently in The Atlantic, the current batch of Democratic candidates for president have made a bad habit of blaming insurance companies for much of what is wrong in healthcare.