Medical Costs

People have complained that I haven't said why Medicine is costing so much in the U S of A. Give me a break -- I can't talk about everything at once. I've been intending to get to this all along. This is just the first installment, it's a long story.

So, thanks to all the mind boggling complexities of employer-provided insurance, Medicare, Medicaid, the Affordable Care Act, and a few other programs, something like 90% of Americans have some form of health insurance. Great news! That means we can all afford the medical services we need and nobody has to go broke because they get sick or are injured in a car crash or by somebody exercising their Second Amendment rights! Err, no. Sadly it does not mean that. In the first place, for the 50% of people who get their insurance through employment, it’s costing them more and more for the premiums – by three times the rate of inflation, since 1999, as shown below.

 

 

 

With that, plus deductibles, copays/coinsurance, denial of services, coverage limits, and uncovered services, overall, spending by middle income families on health care increased by 25% from 2007 to 2014, while spending on other necessities declined.

What is more, four out of ten insured adults surveyed in 2023 said they had skipped or delayed some type of care in the past year, and one in six said they had problems paying medical bills. According to an investigation by KFF, more than 100 million Americans – 41% of adults – have debts for medical services. A quarter of those owe more than $5,000 and 1/5 of them never expect to pay it off.

The KFF investigation uncovered many depressing stories. A couple who were sued for $10,000 by a hospital where the husband’s leg was amputated; another who were left with $80,000 in debt after the premature birth of twins; innumerable people who have been denied services altogether because of outstanding debt. The New York Times reported recently on a large, not-for-profit hospital chain that had an explicit policy of refusing services to people with more than $4,500 in debt. The corporation’s CEO, according to the Times story, was paid $3.5 million in 2021.

Medicaid generally has low to no deductibles or copays, but a given state may not cover specific services someone needs. We’ve already discussed the coverage gaps and limitations in Medicare. These are functions of what congress and the state legislatures have decided is best for us. But most people have private insurance – including people with Medicare Advantage plans – which requires more extensive consideration. 

The reason insurers impose deductibles and copays is to discourage utilization. They believe, no doubt correctly, that if people have to spend their own money they may choose not to get as many medical services or buy as many medications. The problem with this reasoning is that people aren’t wise shoppers for medicine. Now, I’ll be the first to shout it from the rooftops that as a nation, we spend far too much on medical services that are low value or worthless. In fact, I will do so (metaphorically) later in this book. But it’s not because consumers of medicine aren’t wise shoppers, and making them pay out of pocket isn’t going to change that. 

Next, I'll discuss more specifics of how insurance companies and other corporations screw us.