The healthcare and health insurance system in the United States is fundamentally flawed!
Why? Because it's optimized for those who work for relatively large companies. For everybody else (under the age of 65), most folks are forced to get "high deductable" packages that really don't pay for much at all, since they don't have the advantage of the "Large Insurance Pool".
If you're healthy, you're paying 3 or 4 times as much per year as your actual medical expenses.
If you are not healthy, you're faced with annual expenditures of $5000, $6000, or more before insurance actually begins to help.
The pricing and payment system is also broken. For any given procedure or drug, your cost if paying out of your own pocket is many times higher than the cost presented to the insurance company. Furthermore, If you go to the hospital, you don't really know what it will cost until you get the final bill. There is no other financial transaction like this. Would you buy a car if the dealer told you "We can't give you a price until you've signed all the papers"?
And is there a real reason to account for the absurd price of pharmaceutical drugs?
Allow me to elaborate:
Number 1: Health Insurance is too expensive. (OR: "The new uninsured".)
When I was employed at a fairly large high-tech firm, insurance for my wife and I cost an almost negligible deduction from my paycheck. At that time our average annual expenses were about $1000 to $1500 per year, (being both blessed with excellent health, having long since made the lifestyle changes that result in that health.)
When I retired in 2014 at the age of 65, I was eligible for Medicare and Medicare Advantage, for a cost of about $190 per month. But private insurance for my wife was $600 per month, and rose to $900 per month by 2015. So our medical "expenses" (insurance) rose to $9600 per year - and that's not counting my $190/month Medicare/Medicare Advantage!
Let me write that out: Nine thousand six hundred dollars for medical expenses.
It might be noted that there was a huge increase in insurance costs around 2013. In 2012, our insurance plan - or at least the plan with the same name - cost $275 per month and paid for 2 office visits and an eye exam per year, in addition to prescription drugs after a relatively small deductible. The $9600 plan paid for nothing, since it had a $6,000 deductible. No office visits. No pharmaceuticals. No eye exams. It DID pay for a flu shot, however. So at $900/month, that was a $9600 flu shot!
Currently my wife is over 65 (you didn't hear that from me!) So we both now pay $200 per month for Medicare and Medicare Advantage, which pays for most medical care visits and even for many dental expenses.
So in essense, health insurance has become too expensive for those who do not work for larger companies and who are under 65. Thus, for those under the age of 65, the "New Uninsured" has been transferred from the poverty level to the middle class!
Number 2: Health Insurance is tied to employment.
Why is that? It goes back to World War II. President Roosevelt instituted Wage and Price Controls to hold down the cost of war equipment. But this quickly had the same effect as any other government control of business. Companies needed some way to attract better workers and they couldn't offer higher wages, so the easiest way was to provide "perks". Health insurance was the biggest perk they could offer. Further, in 1943, the IRS officially sanctioned it by declaring that employees did not have to pay tax on health insurance premiums.
Although employer-based health insurance was almost non-existent before the war, by the 1950s 45% of the population had this form of insurance and by the 1970s, 75% had it.
All this worked in the 1940s, when health care and drugs were relatively cheap. It worked when the principal insurance underwriter was the (then) non-profit Blue Cross/Blue Shield. And it also worked when U.S. industry was mainly large corporations like Alcoa, Dupont, U.S. Steel, Standard Oil, and the like (because this provided large "insurance pools"). But, it just doesn't work now.
Two other issues with employer-based health insurance:
It's third-party payership. The employer pays the health care bills, not the individual. Since the money has already been deducted before you get the final paycheck, it is almost as if all your health care is absolutely free. It's not connected with an actual pull-out-your-wallet-and-pay scenario. For example, during my 40-odd year career, at any given time I would have been hard-pressed to tell you what my medical deduction was! Thus there is very little financial incentive to care for our health. Those who do take care of themselves pay the same amount as those who fill their grocery baskets with white bread, soft drinks, salty prepared foods, and sugar-covered pastries.
Employee's health insurance deduction is made with pre-taxed money. This makes employer-based insurance a tax subsidy, amounting to over $273 billion in 2019. According to taxpolicycenter.org, this amount is the largest single expenditure from Federal taxes.
To get an overall idea of what is wrong with the American health care system, consider the original Insurance Model. Insurance was originally based on the concept that everybody pays in a small, managable amount, and that pool of money (the "Insurance Pool") pays for the (somewhat unlikely) catastrophic ocurrence that some of them have (the "Insurable Event"). Under our current health system, only those who work for large corporations participate in this Insurance Model.
It might be tempting to look at other countries to see how they handle health insurance, and that's a great idea. But we have a fine example of that right here in our own country. What is that example?
It's auto insurance.
The auto insurance system works. It's cheap, yet it pays for any "catastrophic" event, such as accidents of various sorts, even up to the total loss of the car. So why does it work?
Auto insurance has a big Insurance Pool. Why? Because the states require it.
It is completely divorced from employment. So everybody's in whether they are employed or not.
And that's why health insurance is so much cheaper for those who are employed in medium to large corporations! The insurance companies get what they need - a large Insurance Pool of people paying in - whether they are low-risk or high-risk. That’s why the insurance issuers want to sign up medium to large companies!!!
In the auto insurance model, drivers pay more if they are careless. But, as mentioned above, people who don't take care of themselves are not financially penalized.
Auto insurance pays only for Insurable Events. Auto insurance doesn’t pay tune ups, brake jobs,
auto detailing, or other maintainence. That may sound expensive, but if you take care of your car, maintainence is cheap.
Health insurance, on the other hand, is expected to pay for everything.
Indeed, it might be instructive to ask, "what if auto insurance did pay for maintainence?" For example,
What if it paid for brake jobs, A/C work, tune ups, and the like? Then you'd get the same problems you have with health
There would be the big increase in administrative overhead in handling all the bills.
There would be increased expenses/hassles because you would have to prove that you needed a brake job.
But most of all, those who take care of their cars would end up paying more to cover the additional services needed by those who don't. For example, someone who doesn't change their oil regularly will soon be needing an expensive engine overhaul. That cost would have to be bourne by everybody. (And this analogy, my friends, is one of the biggest problems with our health care system!)
As an aside:
The SYMPTOM of the health insurance disease is the high price. The CAUSES of the health insurance diseases are:
People don't take care of themselves. A large percentage of congestive heart issues and diabetes is lifestyle-generated. Don't believe me? Just look at grocery carts the next time you are in a grocery store.
Medical Science is geared to treating disease rather than supporting health. It is geared to using expensive compounds as medicine rather than food as medicine.
The food industry, the agricultural industry, and the livestock industry all promote unhealthful foods that are quick to manufacture and are optimized for maximum shelf life. These are the highly-processed oils, from which the nourishment has been removed. These are the cows, pigs, and chickens raised in crowded conditions and fed antibiotics just to keep them alive. These are all the foods full of preservatives. Further, higher quality and organic foods are priced out of the reach of lower income folks.
The restaurant industry promotes high fat, high salt, and high sugar foods and excessive portions sizes.
The big hospitals are bottom-line oriented, and put profits before care. Exorbitant profits at that, some of which are described at the end of this essay.
The drug industry is bottom-line oriented, seeking to benefit its investors before the end-users of their medicines.
If all the above were addressed, health care would likely be affordable
even if we did nothing to improve it.
But. . . this is just an aside.
And as a further aside, in regard to the last four items. . . whatever happened to compassion??
So everybody has a plan to fix all this, I'm sure. Most presidential and congressional candidates have a plan for it. So, what the hey; Here's mine: Make it like Auto Insurance!
1 Everybody is required to buy health insurance. It's not clear
what the penalty for not purchasing would be. One possibility might be a penalty equal to at least half of what the premium
would have been. There will be those folks who can't afford even the reduced premiums that would result from this plan.
See #4 below for the provision on handling this.
They buy it directly from private insurance companies. (No government-operated inefficient bureaucratic procedure). They buy it with the understanding that they will paying for coverage until they are 65. At 65, everybody reverts to Medicare - if they want to. The premium is established on a state-by-state basis, just like car insurance. After all, states like Oregon and North Dakota are likely to have a lot more laid-back attitude and cleaner air than, say, New York or Texas. Our auto insurance in Oregon, for example, is half of what it was in Texas.
So, what does all this do?
Well, now we have the biggest "Insurance Pool" of all - the whole country.
Also,employers, relieved of all that administrative overhead, can now go back to doing what they do best - creating goods and services. And the money formerly used to provide half the premium for the "health insurance perk" can now be used to offer higher salaries.
2 Since we already have Medicare, we keep it as is - at least for the start. People will sign up for "Medicare Advantage" plans as they do now. From my experience at least, Medicare Advantage seems to work fine. By keeping Medicare, this removes the burden of insurance companies needing more in the pre-65 years to cover anticipated extra expenses after 65. Those who don't want Medicare can obtain insurance from private insurers.
3 Insurance goes back to paying only for Insurable Events. It does not pay for office visits or "common" meds. We pay for these things out of pocket. This actually could be accomplished by the simple expedient of a universal deductible, say $750 - $1,000. Think about it: If the insurance premium is, say, $200 per month, that's $2,400 per year. It makes no sense to pay $2400 for a couple of $150 - $200 visits. Further, doctors and insurance companies both are now relieved of administrative costs for all these minor events. This results in a significant cost reduction in itself.
Also, Insurance also does not cover certain "elective" procedures (liposuction, gastric bypass, plastic surgery, botox). But it would pay for things like rotator cuff surgery, knee surgery, bone spur removal, and the like. For preventative purposes, the plan does pay for one physical every two years (including lab work) and one eye exam every two years, and pays for immunizations. Dental cleaning and exams should be covered too, since dental problems impact overall health.
4 Further, the "universal pool" is not asked to support those who can't afford health insurance!. That is a separate pool. And what pays for this separate pool? The taxes that are now back in the system because we have eliminated the employer-based insurance tax subsidy. That's the 273 billion dollars.
5 The system should provide the incentive for good health by reducing the premium for those with good stats on health exams (E.G.: blood pressure, cholesterol). If this would result in premiums being too high, we provide the incentive for good health by possibly giving a tax credit, supported in part by eliminating the employer-based insurance tax subsidy..
6 Insurance companies will, on a state-by-state basis, negotiate prices for procedures, like they do now for employer-based insurance. The price may be 10% - 20% higher than Medicare's price if necessary, since a common - and likely legitimate - complaint of health care providers is that Medicare reimbursement is not enough. Further, the negotiated price should be sufficient so that hospitals are no longer tempted to charge much higher prices for those without insurance - but the main idea behind this plan is there shouldn't be people without insurance.
Indeed, one of the problems with the current system is the (huge) discrepancy in charges for people paying out of pocket vs with insurance. Recent examples include Coronavirus tests that typically are around $100 when paid by insurance but anywhere from $1400 to $6400 when paid for by individuals! Also, according to FAIR Health, the median charge for a Coronavirus hospitalization for patients over 60 is $31,500 for insured vs $62,000 for uninsured.
My first thought when writing this essay was the price for any given procedure or drug should be the SAME for individuals with or without insurance. And yet it could be argued that out of pocket prices perhaps should be bigger. Why? Because, if you want the better prices, you have to pay into the Insurance Pool. But, there needs to be reasonable limits!
Some Final Notes:
Regarding the excessive charges by hospitals and other healthcare entities, it might be noted that the Health Care sector contributed $152.3 million to political candidates and commitees in 2012! Big Oil spent less than half of that, at $70 million and even Defense was far less, at $27 million.
Something needs to be done about the price we are all paying for lawsuits. In addition to some reduction in premiums, malpractice-tort reforms would likely reduce the incidence of unnecessary tests. In one example of excessive charges given in the site referenced below, a patient who presented with possible coronary issues received a very expensive nuclear imaging test with a radioactive dye, while a simpler EKG-based stress test would have sufficed.
Two sources for pricing information. Also a link for further reading:
There is actually a tool which will allow you to get an estimate on most tests and procedures. The tool
shows what is considered a "Fair" price, along with a range of prices. Also you enter your Zip code, and it displays local
facilities that provide the services. In some cases, the tool suggests facilities that offer cash discounts for those without
|Health Care "Blue Book"|
||Reducing Prescription Drug Costs|
Here's a link to some examples of exorbitant hospital charges. It is actually a reprint of a very interesting Time Magazine article, "Bitter Pill: Why Medical Bills Are Killing Us", by Stephen Brill, Feb 20, 2013. NOTE: It's a "PDF" Newer versions of Firefox will simply download it without a confirmation banner.
|Medical Bills are Killing Us|
Copyright © 2020 J.A.