Medical Insurance creates higher Medical Costs for a lot of reasons; but the main reason is that it removes the price negotiation and decision from the buyer (the insurance owner) and instead gives it to a third-party system.
In addition, this creates loads more paperwork and hassle for health service providers making it cost even more yet. This has the added effect of raising the cost of your health insurance as well.
While insurance companies and health care service providers are rolling in the cash, you, the consumer, who gave up your control and decision in the matter, is getting royally shafted.
Medical costs are so high that it’s almost a requirement to have it and not just for emergency situations, but for regular maintenance and routine appointments. In most circumstances, people can’t even afford the insurance either.
It’s time to stop blaming high medical costs on illegal immigrants and people without insurance who don’t get care. Unpaid healthcare services amounted to $49 billion in 2011 but in 2010 total healthcare spending in the United States was $2.6 trillion, that’s about 1.9% of the total amount.
Do you really think health care and insurance is soooooo expensive because there’s an unpaid 1.9% in medical services that they claim are passed on to private insurances and consumers?
Let’s disregard the fact that these hospitals and businesses get a tax deduction at the end of year for any losses such as this, and let’s pretend that you pay $1,000 a month for health insurance.
Let’s just go ahead and take 1.9% out of your monthly obligation for health insurance and we are left with $981.
Does that $29 a month help you out? Sure it does, even though these businesses use losses as tax write-offs.
Is this 1.9% responsible for the high cost of health care and health insurance? Absolutely not!
So How Does Medical Insurance Raise Medical Costs?
By the simple fact that health insurance removes competition. Competition is a free market principle that drives prices lower and increases the quality of service. Look at laser surgery for eyes; that market was unhindered by insurance as most didn’t accept it and the cost of laser surgery to correct vision has came down consistently over the years while the quality has improved.
When you use insurance for every single doctor visit or appointment, your insurance company is in charge of negotiating the price with the service provider. What simple concept does this remove?
Try one you use in every other aspect of your life, “How much is this going to cost?”
If you knew how much something would cost or cared, you would probably try to find someone to do it cheaper right?
You don’t buy your Plasma TV from the most expensive place, you search around and find the cheaper price.
Insurance companies remove this vital principle for health care, therefore, the hospital charges what they want and the insurance company charges you what they must. It’s that simple.
From Experience
Recently, I went to a hospital because my wife was going to have a baby. We don’t have insurance nor do we want it, this isn’t a complaint about not having money for things, I pay my bills in full every time, thank you very much. But I want to point out what is going on that you and even your doctors aren’t even aware of.
To get into the hospital you get to do a pre-screen to register to give birth. At this prescreen appointment, we told them we were cash payers, the lady at the counter informed us that to talk to the doctor and go through the review was charged at $900 an hour.
What?!? Did you say $900 an hour?
Yes you heard me correctly, $900/hr. No tools, no equipment, no tests, just to simple go in and talk to the doctor. She looked over medical records and told us our options, that’s it.
We reported this finding back to the place that referred us. They were shocked. Those people called the hospital and talked to the doctors there, and guess what?
They were shocked as well. The doctors performing these services had NO IDEA how much the hospital was charging for their services.
On top of that, it was “hospital policy” that an ultrasound be done by their ultrasound department, even though one had already been conducted and could be transferred easily (we eventually got this waved); want to guess the cost of that?
We were quoted at $1200, but the lady said they could discount it up to 51%? Wait what? Why is it $1200 but I can get a 51% discount?
And having said that, let me explain to you how a free market would work at this point.
First off, I would kindly say “thank you” and I would leave the hospital and go price hunting at other hospitals or service providers.
The simple fact is, once enough people cannot afford to pay $1200 for an ultrasound or $900 an hour to see a doctor because they are paying out of their wallet and they refuse.
The “mandatory ultrasound hospital policy” would simply no longer exist as they would lose all their customers.
That doctor would see a pay cut down to what other professionals charge. Maybe $100/hr if they are lucky?
Those prices get to stay so high and those tests, which most of the time are extra tests that aren’t necessarily needed, are able to cost that much simply because you lost the ability to say no and take your business elsewhere.
Instead you have put an insurance company in place to pay for you of which they really honestly don’t care how much they save you because they’ll just raise your rates and in return you’ll make sacrifices to pay because you “need” it.
The hospitals make lots of money, the insurance companies make lots of money, and you’re broke. There’s a reason why the medical care industry is so huge and growing, look how much money is in it.
$2.6 trillion is a lot of money, perhaps one of the larger industries in the world. Is it because we have the most people here? Nope, it’s not. Is it because we have the highest quality of health care? Sorry, not that either, in fact in this article the United States is ranked among last in the 7 industrialized nations.
If the high cost does not come from having the most people or having the best quality health care, then where does it come from? Yep, you’ve guessed it. It comes from third party payee interference in our current system.
There are lots of issues with this. One of them is that insurance should never be used as a primary form of payment and only as a last resort. No one has car insurance that pays for maintenance (that I know of, at least not everybody does), why would you want to use insurance to visit a doctor because you have a cold?
It doesn’t make sense, and there’s so much more to discuss, but I hope after reading this you get the general idea now and can research it more.
You’ve heard of opening up competition over state-lines between insurance companies. This is a step in thinking the right way.
Most of those insurances companies own a monopoly in their area and people have no choice but to use them. By opening up interstate competition, these insurance companies would have to compete with each other.
The end result is that in some fashion insurance companies would have to compete; competition would reduce premiums by refusing to pay the high costs of medical in order to make their premiums cheaper.
The worst thing we can do is provide government insurance for the uninsured, this is not a solution to address only 1.9% of the unpaid medical expenses total.
In fact, once you provide government insurance, the tax payer gets stuck with the bill and health care spending will go up as these people who couldn’t afford health care costs or insurance before, now go in as much as everyone else, further increasing the tax bill.
We need free markets and competition, enough said.
Resources:
$49 Billion in Unpaid Care 2011 –http://www.usatoday.com/news/washington/2011-05-09-uninsured-unpaid-hospital-bills_n.htm
$2.6 trillion spent on health care in 2010 http://money.cnn.com/2011/07/28/news/economy/healthcare_spending_forecast/index.htm
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