Why is most health insurance so expensive?

[Xavier434]

As the topic asks, I want to know people's opinions on why most descent health insurance is so expensive? My theory places most of the blame on lawyers. However, I really don't know for sure.

Here is the whole theory:

It starts with your average middle class joe in America who works a full time job and has insurance for himself and his family. This person, like all of us, are constantly bombarded by billboard advertisements, television commercials, junk mail, news stories, etc etc. Included in all of these categories are stories and advertising from or about lawyers and law firms explaining that you should contact them if you believe you have ever been a victim of malpractice. This happens so much and you hear so many stories about how people have gotten hundreds of thousands or even millions of dollars due to a malpractice suit. Eventually, the general public begins to believe that any form of malpractice could result in getting your hands on a lot of money. The lawyers, as a result of their greed and desire to bring in more business, are the source of this idea existing in people's minds. The people then feed the idea themselves by picturing lots of dollar signs in their head. What ends up happening is that you have many people filing for suits regardless of how they were truly effected by whatever form of malpractice they claim to have experienced. Many do it simply because they want money and it has nothing to do with the "damages" it has caused them in their lives. I am not saying all suits are like that. Many are very necessary in my opinion, but I would like to know how many of these suits would never have existed if there wasn't so much money involved. Granted, I feel the public should be compensated for their losses and "damages" to an extent, and I really like how it keeps doctors on their toes to ensure quality but I have to ask how much am I paying for it?

Now let's look at the doctors and insurance companies. I have been told by a doctor who is the father of a good friend of mine that he has to pay one million for malpractice insurance every year. I don't know if that is above or below average, but it seems like a lot. The reason for it being so expensive is because the malpractice insurance companies need to payout an incredible amount of cash every year due to all of the malpractice suits. As a result, the doctors end up charging the patient more because of how expensive their annual malpractice insurance is. Since many people have medical insurance, it is often the medical insurance companies that need to float most of the bill. Those companies end up charging the public much more as a result.

So, when viewing this problem from the top to the bottom, would it be accurate to say that the general public is paying a ton of money for insurance because they have fallen to the greedy idea that they can sue for anything that they believe is malpractice? The same idea that lawyers have trained them to believe through advertisements and news stories.


Prove me wrong. Prove me right. I don't care. I would just like to learn more about this subject.

 

[Uppsala9496]

This is a very complicated answer. There are a lot of factors that go into it and I only know a little from experience.
Litigious America is part of it (a huge part). You look at someone funny, and they sue. Med Mal is not cheap (it doesn't cost doctor's $1,000,000 in premium a year). They can get $1,000,000 in coverage (that is low), but that isn't the premium (my wife's company writes some med mal).
Med Mal is expensive and that cost gets passed on to the consumer.

Pharmaceuticals are expensive. I blame a lot of that on wasted advertising. 20 years ago you didn't see any prescription drugs being advertised on tv. Today, it seems like every other ad is for a drug. Advertisments costs money. That cost gets passed on to the consumer.

Those are just two simple reasons for the increase in costs. I used to underwrite group medical/dental/life about 6 years ago, and the prices just started jumping up through the roof back then. My company started introducing a 3 tiered pharmacuetical plan since drug costs (due to advertising) were getting out of hand. It has only gotten worse.

I've been out of the medical underwriting loop for a while now, but as a whole, all insurance costs have gone up. Med Mal prices have stabalized and the specialty market is in a "soft market" where prices are actually going down compared to last year (not much, but a flat renewal is expected and a decrease happens more often than not).

 

[Mxylplyx]

Lawyers
Illegal Aliens
Billing complexity
Excessive diagnostic tests stemming from fear of being sued (see lawyers above)
Over medication
Poor lifestyle choices in America
Lawyers

Watching cops, it seems they call an ambulance for every hood rat that stubs his toe. Since they never pay, thats probably why an ambulance trip costs thousands of dollars for people that actually pay.

All the inner city violence probably costs hospitals a fortune treating all the gunshot wounds, since very few of those people are likely insured.

The list goes on and on.

 

[Uppsala9496]

Billing is not that complex. The physician writes down a CPT code and that gets forwarded to the insurance company. It really can't get any more simple than that.
Where it becomes a burdon to the consumer is when the insurance company says it won't pay for part of something because a redundant or contradicting CPT code was listed. Then it comes down to the consumer arguing with the insurance company and potentially getting the physician's office involved.

 

[ElFenix]

because we spend a lot of money on people that are gonna die within the year anyway.

Originally posted by: Uppsala9496

Pharmaceuticals are expensive. I blame a lot of that on wasted advertising. 20 years ago you didn't see any prescription drugs being advertised on tv. Today, it seems like every other ad is for a drug. Advertisments costs money. That cost gets passed on to the consumer.

actually, advertised drugs tend to be less expensive than non-advertised drugs because the fixed costs are being spread over a much larger number of dosages. that's what i read in various FDA, health affairs, and other articles when i was writing a comment 2 years ago

 

[Mxylplyx]

Originally posted by: Uppsala9496
Billing is not that complex. The physician writes down a CPT code and that gets forwarded to the insurance company. It really can't get any more simple than that.
Where it becomes a burdon to the consumer is when the insurance company says it won't pay for part of something because a redundant or contradicting CPT code was listed. Then it comes down to the consumer arguing with the insurance company and potentially getting the physician's office involved.

What about when "THE" insurance company could be dozens of different providers, with the government being one of them.

Oh yeah, another example I thought of. When my wife was going to her OB appointments when she was pregnant, some insurance regulation required that a nurse be present with the doctor whenever the doctor had to do a pelvic exam. Apparently she's just there to witness in case a patient claims she was abused or something. Her OB was also female. Yep, that nurses time was billed to our insurance company.

 

[Xavier434]

Originally posted by: Uppsala9496
Med Mal is not cheap (it doesn't cost doctor's $1,000,000 in premium a year). They can get $1,000,000 in coverage (that is low), but that isn't the premium (my wife's company writes some med mal).
Med Mal is expensive and that cost gets passed on to the consumer.

That refreshed my memory and you are right. The 1 million was coverage and not premium. The effect is still the same though as you mentioned.

Originally posted by: Mxylplyx
Excessive diagnostic tests stemming from fear of being sued (see lawyers above)

Ya, I forgot to toss this in my theory, but it is very true. Doctors fear the malpractice suit so much that they will run tests which are unnecessary 99.9% of the time, but that 00.1% chance is expensive enough for them to recommend the test and make it seem really important. The patient is afraid and often allows the tests anyways because they do not know enough about medicine to understand which tests are necessary and which are not. They just want to be healthy.




I also recently heard that just under 50% of Americans do not have medical insurance and that number is rising due to the costs. Can anyone confirm this? I guess that makes sense to me because it isn't worth it for me to have insurance either aside from the possibility of getting a serious injury or illness which could financially ruin me. It really makes me sad because of all the things that are important to people, your health makes them all seem trivial. Especially medical insurance for children. I can only imagine how many kids are not taken to the doctor when they are sick because their parents can't afford insurance. I wish the government could try and do something about it, but I don't know what the answer is 🙁

 

[Mxylplyx]

I agree. We need some kind of universal health coverage in this country, it just scares the hell out of me having the government attempt to manage it.

 

[slsmnaz]

Originally posted by: Xavier434

I also recently heard that just under 50% of Americans do not have medical insurance and that number is rising due to the costs. Can anyone confirm this?

Thats way too high. The last numbers I looked at said 47mil in the US without coverage (about 16% including non-citizens). My next question is how many of those want to make choices to get insurance or just want to complain about it.

 

[ElFenix]

Originally posted by: Xavier434

I also recently heard that just under 50% of Americans do not have medical insurance and that number is rising due to the costs. Can anyone confirm this?

its 43 million americans, not 50% (which would be ~150 million americans.)

I guess that makes sense to me because it isn't worth it for me to have insurance either aside from the possibility of getting a serious injury or illness which could financially ruin me.

when i was just out of college i forewent medical insurance because i'd rather have had the cash at that point. i wonder how many of those other 43 million people feel the same?

It really makes me sad because of all the things that are important to people, your health makes them all seem trivial. Especially medical insurance for children. I can only imagine how many kids are not taken to the doctor when they are sick because their parents can't afford insurance. I wish the government could try and do something about it, but I don't know what the answer is 🙁

SCHIP exists, but i'm not sure if it's yet another blue based plan like medicare/aid, or something more modern. might even vary state to state.

 

[Xavier434]

Originally posted by: Mxylplyx
I agree. We need some kind of universal health coverage in this country, it just scares the hell out of me having the government attempt to manage it.

Or how much they will tax us for it...

Still, it may be worth it. I understand that it could lead to many disastrous outcomes, but I also think about the thousands of other funds that are setup by our national govt. and I have to wonder why this one doesn't exist. It's interesting to think about.

 

[ric1287]

Originally posted by: Mxylplyx
I agree. We need some kind of universal health coverage in this country, it just scares the hell out of me having the government attempt to manage it.

if we could do that without raising tax's to levels in countries with universal health care then fine. that is still unfair as people who dont need a huge level of coverage end up paying for the people that do. never gonna happen

 

[Fingolfin269]

Originally posted by: Xavier434

Originally posted by: Mxylplyx
I agree. We need some kind of universal health coverage in this country, it just scares the hell out of me having the government attempt to manage it.

Or how much they will tax us for it...

Still, it may be worth it. I understand that it could lead to many disastrous outcomes, but I also think about the thousands of other funds that are setup by our national govt. and I have to wonder why this one doesn't exist. It's interesting to think about.

Exactly. I have great insurance now and don't want to pay taxes towards someone else getting a universal coverage that will probably end up costing me MORE while the service I receive is LESS.

 

[rivan]

Originally posted by: Mxylplyx
I agree. We need some kind of universal health coverage in this country, it just scares the hell out of me having the government attempt to manage it.

I think the government picking up universal healthcare could have disastrous consequences. Healthcare is just too expensive as-is to simply implement it and cover it with taxes - adding a layer of govt bureaucracy would just add more stress to the whole thing.

I agree, however, that something needs to be done. Sadly enough, however, I don't think legislation against malpractice lawsuits would result in cheaper medical care. I believe that if they eliminated the ability of the consumer totally, today, the industries involved (medical and insurance) would simply see it as a reduction in costs/risk and consider it a boon for profit. Consumers would see little or no change, I think. At best, I think we might see rates stagnate for a couple years.

I'm not a fan of the idea of government regulation, but I think the insurance industry is totally out of control. The only arena there's sufficient freedom of choice is for auto and home, but there's a fear of using both of those. Since they're mandated either by the government for auto or by contract for mortgage holders - being dropped can mean a huge increase in premiums that you must pay when getting a new carrier. Health insurance is largely dictated by your employer, and the result is very little leverage as an individual consumer.

 

[homercles337]

Originally posted by: Uppsala9496
Pharmaceuticals are expensive. I blame a lot of that on wasted advertising. 20 years ago you didn't see any prescription drugs being advertised on tv. Today, it seems like every other ad is for a drug. Advertisments costs money. That cost gets passed on to the consumer.

This is exactly right. The US is the only developed nation that allows big pharma to advertise. Big Pharma will also tell you that high drug costs fuel research. This is complete bullshit. Big Pharma spends hundreds of millions more each year on advertisting than research.

 

[Aikouka]

Originally posted by: Fingolfin269
Exactly. I have great insurance now and don't want to pay taxes towards someone else getting a universal coverage that will probably end up costing me MORE while the service I receive is LESS.

I agree. It may be selfish, but I could get less and end up paying more? How is that something that I'd want.

 

[Xavier434]

From what I gather out of the little information that I have read is that govt health insurance would be cheaper because the govt doesn't seek to make a profit. Currently, you have the doctors, malpractice insurance companies, medical insurance companies, etc etc who all want a piece of the pie. Now, adding a govt regulated insurance plan alone would not be enough because of the greed of all these companies that set the prices, but it does take one of them out of the loop. It would require a well thought out plan and routine checks and balances for the government to enforce on these companies so that they limit how much they charge the public. Thus, how much it charges the govt.

From there, it boils down to what Fingolfin mentioned about the resulting cost and the quality and my guess is that is the government's dilemma as well. Making sacrifices here is not an option I would be willing to accept since it defeats the whole purpose.

 

[slsmnaz]

Originally posted by: Xavier434
From what I gather out of the little information that I have read is that govt health insurance would be cheaper because the govt doesn't seek to make a profit. Currently, you have the doctors, malpractice insurance companies, medical insurance companies, etc etc who all want a piece of the pie. Now, adding a govt regulated insurance plan alone would not be enough because of the greed of all these companies that set the prices, but it does take one of them out of the loop. It would require a well thought out plan and routine checks and balances for the government to enforce on these companies so that they limit how much they charge the public. Thus, how much it charges the govt.

From there, it boils down to what Fingolfin mentioned about the resulting cost and the quality and my guess is that is the government's dilemma as well. Making sacrifices here is not an option I would be willing to accept since it defeats the whole purpose.

How will it be cheaper? I will pay more in taxes for inferior coverage. Please name an efficient gov't program? The revenue raised will not go towards improving the healthcare in the US. How long before it becomes another SS free-money account for govt projects?

You may want to read up on the issues other countries are having with socialized medicine.

 

[vi edit]

There isn't any single reason. It's a cumulative effect of many little single and fractional percents that add up into a whale of a problem. You just can't point a finger and say "That's it...that right there is our issue!".

A few percent of our overall health care costs as a nation are more than the entire healthcare budgets of most countries.

 

[Xavier434]

Originally posted by: rivan
Sadly enough, however, I don't think legislation against malpractice lawsuits would result in cheaper medical care. I believe that if they eliminated the ability of the consumer totally, today, the industries involved (medical and insurance) would simply see it as a reduction in costs/risk and consider it a boon for profit. Consumers would see little or no change, I think. At best, I think we might see rates stagnate for a couple years.

I believe this is true as well. The big problem is not because of the lawyers alone, but they have dug a huge hole which cannot be covered back up using the same dirt.

 

[GasX]

One thing often overlooked in this discussion is the fact that most people over insure their health - especially when their employer pays.

What I mean is that insurance is supposed to be there to protect you from sudden unexpected large expenditures. With health insurance, people tend to look for plans that will allow them to go to the doctor on a whim for $10. So, not only are they protected from large expenses, they can frivously use the system with no consequences...

 

[Xavier434]

Originally posted by: slsmnaz
How will it be cheaper?

The short answer is that I don't know.

Remember that this thread is more about learning about the subject than it is proving what is right and what is wrong. You say that the result would be taxes that are more expensive that what people currently pay in health insurance and the quality would be much less. You could very well be right, but neither of us really know I suppose.

I do know that the universal health coverage idea I mentioned in brief detail has to do with how the government regulates the other players in the insurance game. The theory is that they regulate and cap how much is being charged based on whatever facts they choose to come up with. The end result is supposed to be quality insurance at a cheaper price because less profit is allowed to be made by all the players. In the end, the people are supposed to win.

I understand that I am generalizing these details far too much to suggest anything even close to being realistic. The idea is to think of it as more of a coloring book where we need to color between the dotted lines to make it work. The talk, from what I understand, by many of our pals in Washington is that they are trying to do just that. I think they are leaning more towards trying to figure out how to regulate the system rather than offer universal insurance though which could help.

 

[JeffreyLebowski]

Originally posted by: ElFenix
because we spend a lot of money on people that are gonna die within the year anyway.

Originally posted by: Uppsala9496

Pharmaceuticals are expensive. I blame a lot of that on wasted advertising. 20 years ago you didn't see any prescription drugs being advertised on tv. Today, it seems like every other ad is for a drug. Advertisments costs money. That cost gets passed on to the consumer.

actually, advertised drugs tend to be less expensive than non-advertised drugs because the fixed costs are being spread over a much larger number of dosages. that's what i read in various FDA, health affairs, and other articles when i was writing a comment 2 years ago

Why are they advertising prescription drugs? We can't just go out and buy them. The Dr has to prescribe them. And I know the drug makers send people to the Dr's office to do direct advertising. The last time I was at my Dr. office, no less than 6 guys came in for various drug companies.

 

[Syringer]

Aren't the monthly payments in countries with UHC higher than what is typically paid over here in insurance? In some instances it'd be $400-$500 a month in required payments for certain European countries for their services.. My employer pays $184/mo for my plan.

 

[Xavier434]

Originally posted by: JeffreyLebowski
Why are they advertising prescription drugs? We can't just go out and buy them. The Dr has to prescribe them. And I know the drug makers send people to the Dr's office to do direct advertising. The last time I was at my Dr. office, no less than 6 guys came in for various drug companies.

Have you ever seen a question in a commercial which ends with something like, "If you are one of thousands that have _____ then ask your doctor about _______."

Doctors will recommend drugs to you for fixing problems, but if you ask the doctor to prescribe a particular drug to you because you believe it will work then he will probably do it. The exception is when the doctor feels that such and such drug could have negative consequences for various reasons. In the end, there are tons of different drugs for the same thing. Some work on some people, but not on others and sometimes there is no way to know unless you try it.

Pharmaceutical companies look at the drugs they make more as a "product" than they do medicine. Sucks, but that's the way it is.