We pay the most for healthcare out of all industrialized countries. The high cost is not associated with higher quality, either. The reason? Private insurance companies stand as a middleman between you and your doctor. Private insurance runs significantly higher overhead costs compared to Medicare, due in part to their CEOs making millions a year while denying care to their clients. This must change.
The United States spends more as a percent of GDP on healthcare than 10 other OECD countries, according to a Commonwealth Fund study. Cost does not equal quality in this case, as the US ranks last place out of all of the countries. Countries were ranked on five categories: Access to Care, Care Process, Administrative Efficiency, Equity, and Health Care Outcomes. The US ranked last in every category with the exception of Care Process, in which it ranked 2nd. How can all of these countries spend less than us and have better outcomes? They all have something in common that the United States does not.
The System in the United States
The United States has both private and public health insurance programs. Private insurance is the most prevalent, covering 66.5 percent of insured individuals. 34.8 percent of individuals are covered by public programs like Medicare and Medicaid. The most common type of coverage is employer-based health insurance, covering 54.4 percent of individuals. In 2020, 28 million people had no health insurance coverage at all.
Medicare and Medicaid are not available to the general public- Medicare is age-based for those 65 years of age or older, and Medicaid is for low-income Americans. If you do not fall into those categories, and you are not a military veteran, you have to purchase private health insurance.
As described above, most Americans with private health insurance have employer-based insurance. This is because the employer shares the cost of the insurance plan with the employee. Employers pay around 80 percent of the total cost of the health insurance. Most Americans cannot afford to pay insurance premiums at the full price. Tying health insurance to employment reduces the employee's freedom to pursue other careers or to become entrepreneurs and start their own business, because doing so would cause them to lose their health insurance coverage.
Private Insurance: How Does It Work?
Private health insurance companies like Blue Cross Blue Shield and United Healthcare take in premiums from employers and employees. The money collected from these premiums are then used to pay out insurance claims. Anyone who claims that "I don't want my money paying for other people's healthcare," - they already do. That's how insurance works.
Not all services or procedures are covered by health insurance. Many services, like doctor visits and prescription medication, require co-pays, or additional costs on top of the premium that the customer already pays. Most plans also have "deductibles." Deductibles mean that the customer has to pay a certain percentage of their medical bill before the insurance will cover it. For example, a plan may have a 20% deductible, where the customer has to pay 20% of the medical bill, then the insurance company will pay the remaining 80%. This happens with every medical bill until the customer reaches their "maximum out-of-pocket." For example, once a customer pays $10,000 out of pocket (not including premiums) for that year, then and only then will the insurance company pay the entire bill. Healthcare plans vary widely. Some have lower premiums and higher deductibles, some have high premiums and low deductibles, as well as other factors.
Private insurance also has the ability to deny claims- approximately 200 million claims are denied every year- regardless of your doctor's recommendation. They are encouraged to do this, because they want to pay out as little as possible to increase revenues. Many of the largest health insurance providers are publicly traded on the stock market, and their CEOs make millions of dollars a year. United Health CEO David Wichmann for example, makes over $18 million a year. Compare this to the highest paid Medicare employee, Elizabeth Richter, who makes $252,000 a year. Private insurance also runs higher overhead costs- around 12%, compared to Medicare's 1.4%.
The Myth of Choice
Supporters of private health insurance insist that it is the best system because it gives people choice of providers and services. But that can't be further from the truth. Since majority of people have employer-sponsored healthcare, you have no say in which health insurance provider that you get- it is whatever your employer says it is. When it comes to choosing a doctor or hospital, the insurance provider gives you a list of what is "in network". Is your favorite doctor not in your network? Guess you won't be going to them anymore. That is not freedom. That is not choice.
We can reduce healthcare costs in four ways: 1) Getting rid of profit motives in healthcare 2) Reducing overhead costs 3) increasing the risk pool and 4) Lowering drug prices. I'll explain what that means below.
Profit Motive: If an insurance company makes a profit- that is, their revenue exceeds their expenses- that means they are literally overcharging their customers. A profit motivation incentivizes companies to cut corners and deny claims.
Reducing Overhead Costs: As I have already explained, programs like Medicare have significantly lower overhead costs. Reducing these costs will make coverage more affordable.
Increasing the Risk Pool: What is a risk pool? When I say risk pool, I am referring to the ratio of healthy to unhealthy people in an insurance group. The higher percentage of "unhealthy" people (people who receive more in benefits than they pay in), the more expensive the plan will cost. Remember: all types of insurance works by people pooling together their money, and using that money to pay out claims. Some groups are going to have a higher number of unhealthy or chronically ill people than others, and they will have to pay higher premiums. How do we get that ratio down to the lowest number? Include the entire population.
Lowering Drug Prices: The United States pays up to ten times as much for prescription drugs than other countries. Negotiating drug prices will dramatically lower prices.
The way to have the lowest cost for health insurance is a single-payer health insurance system. Every one of those countries that out-preform the US in the study above all have one form or another of single-payer systems.
There are many versions of single-payer, but in my proposed version, the actual providing of healthcare- so your doctors, hospitals, clinics, etc.- will all remain the same: privately owned. The only difference is when you go to the doctor, instead of handing them your Blue Cross or United Healthcare card, you hand them a Medicare card. The provider stays the same, the insurance changes.
Under this system, you do not pay any premiums, co-pays, or deductibles. The program is paid for via tax- one version uses a 4% income tax and a 7.5% tax that the employer pays. What results is a net savings for both the employee and employer. Study after study shows that single-payer saves money compared to our current private and for-profit system.
Why? Again, the cost savings comes from reduced administrative (overhead) costs, ending the profit-motive, increasing the insurance pool, and the largest saving comes from lowering the cost of prescription drugs.
Currently, the United States pays some of the highest prices for prescription drugs, many of which were created in part with publicly-funded research. This is largely due to the fact that Medicare is prohibited from negotiating drug prices, which is what other countries do.
That's right: we pay well over twice the price for the exact same drugs. The fact that Congress has allowed this for decades is completely unacceptable.
The answer is clear. We can provide quality healthcare to every American, and save money in the process. If it is so obvious, why haven't we done it yet (like all other industrial countries)? Corporate greed. The healthcare sector spent almost $600 million in lobbying in 2019 alone. That's the equivalent of spending over $1 million per member of the House and Senate. Once again, it is money in government that stands between the American people and the life that they deserve. It is time for that to change.