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The Complicated Cost of Healthcare

Mainstream healthcare in the US is mainly controlled by policy and commercial interest. Health insurance companies set their prices and choose which drug formularies to offer, which services to cover, and whom they’ll accept into their network. However, the cost of healthcare is much more than our monthly insurance premiums.

Hidden Insurance Premiums

Most Americans get their health insurance through their employer, which means that as consumers of such an insurance product, we are insulated from the price, cost, and value.

In fact, most of us get very little coverage, and the employer ends up paying a lot of money — money that could go into our pockets as employees but is lost in the pockets of insurance companies.

The Relationship Between Hospitals and Insurance Companies

The hospital system, large medical groups, and health insurance companies are all in the same bed of trying to maximize profits, mainly by driving up the cost of healthcare. They aim to maximize the expensive procedures for which health insurance premiums can be ratcheted, and reimbursement can be justified relatively high.

Will you check your blood pressure and talk to your doctor about exercise? There is no value, no money in that for the treating physician. If anything, you might even prevent a particular disease or diagnosis for which the hospitals, insurance groups, and medical groups could make a lot of money in the future.

I’m not painting this as some behind-closed-doors intentional malfeasance. It’s just how our healthcare system has been designed around profits.

Supply and Demand Issues

We have a physician shortage in America.

This is an incorrect statement because anyone can do the math on the number of Americans and licensed physicians, and you’ll see that we have more than enough.

However, we have a terrible distribution problem. All the doctors are on the East or West Coast for obvious lifestyle reasons. Why go to the middle of nowhere when your risk of getting sued is higher, your overhead is the same, and your income is not much higher?

Not to mention, we are seeing a massive influx of NPs and PAs, which could be good as long as patient outcomes trend in the right direction.

If we have more NPs and PAs and telemedicine, then there should be no reason for supply to be this limited. The only other economic factor that can artificially keep supply down is if the reimbursement is too low, which, in this case, is mostly going towards administrative costs of healthcare, inflating healthcare costs without improving health outcomes.

Health Insurance Premiums

I’m 45 years old, and my monthly health insurance premiums will be in the $450 range as of 2024. I would spend $6,000 yearly just for health insurance, not health care.

Most of the money you pay to a health insurance company goes towards administrative costs – it’s quoted to be somewhere in the 80% range. 20% will go towards paying out for clinical care, aka coverage.

But to be able to use your health insurance, you must first find an in-network doctor. The health insurance company can manipulate this by limiting how many doctors they contract with. They can even kick out doctors who are too costly out of their network, even if they have better patient outcomes.

Since health insurance prioritizes treatment over prevention, it also fuels a healthcare economy in which few doctors focus on keeping patients healthy instead of billing for treating conditions. Driving up healthcare costs makes the pie bigger for everyone.

This isn’t because doctors are greedy; it’s because there is hardly any reimbursement for sitting down and telling a patient how to lose weight, how to quit smoking, how to change their diet, and how to prevent a specific medical condition they are at high risk for.

End-of-Life Costs

Most of our healthcare spending happens in the last few months of our lives. It’s often the ICU or hospital stay or money spent on chemo and radiation, which usually don’t add much time to our lives.

After all, many are okay with this, and that’s why they have paid into their health insurance plan for many years. Others prefer to have had the majority of their spending on prevention or more timely access during their working years.

Losing Health Insurance Coverage

Once a person is diagnosed with a chronic medical condition, they will depend on their health insurance. Without it, it would be hard to afford their visits to specialists, medication, testing, and treatments.

This forces the patient to stay stuck in a job they may not like so that they can keep their health insurance coverage. At any time, if their policy or job changes, they will lose their doctor and network and have to start all over again.

Lack of Price Transparency

Currently, different insurance companies reimburse for a knee replacement or appendectomy at different rates. The same insurance company might pay more to one surgeon or hospital system than another.

All the while, the patient really has no idea what goes into having their appendix removed, how much it costs, what the complication rates are, or all their treatment options.

The same lack of transparency exists in delivering a child in America, including all the prenatal and postnatal care. It’s common for an Obstetrician to earn only $1,800 for the entire pregnancy, which may include a C-section.

All the while, the woman has been paying thousands of dollars every year to ensure that she’ll have coverage in case she becomes pregnant. She did not know that she could have very well afforded this service out-of-pocket and been able to choose a doctor she really liked as opposed to a healthcare system that has optimized billing and reimbursement.

The Value of Health Insurance

Health insurance must first be an insurance product that helps protect members from financial catastrophe. Right now, health insurance is one of the main reasons for economic hardship.

Most Americans use their health insurance card like a credit card, paying for care and services through a hidden middleman, not knowing who pays how much for what services.

Health insurance should include optional riders, policy limits, and coverage options. I should be able to purchase a fully catastrophic plan with a $50K deductible and a Cadillac plan if I so choose.

Health vs. Healthcare

Health is something we do for ourselves. Healthcare is an integrated system where we use science to help someone deal with a medical condition over which they have little control.

Healthcare has many moving parts; we pay experts for their opinions and sometimes for their products and services. However, if we don’t have a definition of our health, then, unfortunately, it’s expected to be taken for a ride in the healthcare system.

Knowing your definition of health is the most important thing you can do before interacting with the healthcare system.

Health insurance isn’t bad, but its cost and the way we use it have made the average American patient lose sight of what health means to them.

Western medicine is advanced and can work quite well, but not when it’s dispensed in a system that is meant to be primarily profit-driven.

Individuals can improve their health by obtaining most of their care outside of the health insurance system and engaging in Direct Pay interactions with their physicians. Check out the resources section at DNH.

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