How Health Insurance May Have Made Health Care More Expensive

Health Insurance

A problem that is specific to America is widespread medical debt. According to a survey by the Kaiser Family Foundation, around 40% of American people owe at least $250 in medical debt.

“The history of medical debt is basically a history of the changing answer to the following question: When the patient can’t pay the bill, who foots it?”

Dr. Luke Messac, an emergency physician at Brigham and Women’s Hospital in Boston who is writing a book about the history of medical debt. 

Patients have had to spend more out of pocket for healthcare as costs have increased over the previous 50 years.

There are numerous complex factors contributing to the rise in healthcare costs, such as a lack of emphasis on preventative treatment or a lack of price transparency, but the expansion of health insurance was one of the major drivers of inflation.

“It was when you get this third-party payer system where the patient doesn’t have to pay all of the cost of it directly, the insurer pays a chunk of it”, “That gives you relentless upward pressure on pricing, because if you’re going to get paid, why not get paid some more?”

Dr. Peter Kongstvedt, a senior health policy faculty member, George Mason University

With the 2003 Medicare Modernization Act sparking a boom in high-deductible health insurance plans, federal legislation in the early 2000s led to a significant reworking of how insurance companies split expenses.

A policyholder must pay a deductible before their health insurance plan begins to pay benefits. When adjusted for inflation, the average deductible for an individual in 2022 will be about $1,760, which is twice what it was in 2006.

About 70% of respondents with lower incomes claimed they couldn’t pay a $500 unforeseen medical charge. Nearly 25% of people in households making at least $90,000 a year also indicated they wouldn’t be able to pay for it right away.

“It doesn’t really take a Nobel Prize in economics to realize that if most people can’t afford a $500 bill, and the average deductible on a health plan that someone gets at work is north of $1,500 now, that’s that’s going to create a problem”, “You can’t walk into an emergency room or a hospital in this country and get out usually for less than a few thousand dollars.”

Noam Levey, Senior correspondent for Kaiser Health News

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