Why are your health insurance costs going up?
To understand why health insurance costs are going up we must look at healthcare costs overall. The US spent almost $11,000 per person on health care in 2017 and if historical data holds true that number will be at $17,000 per person by 2027. But why? As medicine and healthcare improves, shouldn’t things become cheaper?
Let’s start off by looking at some facts. Americans haven’t been getting significantly more unhealthy. Americans go to the doctor significantly less than most developed countries. So what is the problem?
Well the reason simply boils down to increases in prices. We can cite 91% of the change in healthcare cost since 2000 solely to the reason of an increase in prices. But why are these prices increasing if our need for healthcare isn’t?
The real reason boils down to administrative incompetence. When was the last time you used a fax machine? Well if you are in the healthcare industry, the answer is probably today. The healthcare industry is one of the few industries — if not only industry — that couldn’t function if fax machines went away… yes you heard that right. In an era when you can swipe your card and the restaurant will get payment in 2 days, it takes on average 49 days for hospitals to get paid by insurers. Not only that, but even before insurers will authorize treatment they often require the provider to call some insurance representative to get approval. Just imagine how expensive it is to deal with the 900 health insurance companies and stay in compliance with the thousands of government laws and regulations. Also add on the cost of trying to get payment from patient bills (99% of patient bills over $3,000 dollars aren’t paid in full) and redoing the over 5–10% of claims that get rejected for some arbitrary reason.
The percentage of healthcare costs that go to administrative costs in the US is almost double the total costs of the second place country. No country comes close to us in comparison — Woolhandler and Himmelstein estimate that the United States currently spends $1.1 trillion on healthcare administration. The sad part is that unless we fix the problems that have existed in US healthcare administration for decades, that number will only go up.
