How did we end up with such an opaque and expensive health care system?
On Halloween, my sixteen-year-old daughter slipped and fell on broken glass. She came home from a party with a nasty-looking cut on one of her fingers, and I convinced her to go to the local emergency room. After I filled out some forms, presented our family insurance card, and confirmed the emergency room was in network, we were escorted to a sick bay with a hospital bed and chair. The doctor examined the wound and confirmed that it needed stitches. Not long after that, his assistant came and numbed my daughter’s finger with Novocaine. He then inserted two stitches and covered the wound with a small bandage. On a busy night, we were in and out of the facility in less than three hours, and left happy to have received professional care.
A few weeks later, we received an invoice, and my immediate reaction was relief. “Current balance: $150.00,” she said. I thanked our lucky stars that we had an insurance plan that covered ER visits. But the other numbers in the bill were staggering. The total hospital charge was $11,339.96, which was broken down into $6,346.39 for “Simple Procedure,” $4,985.25 for “Emergency Room,” and $8.32 for “Drug Code/Details.” It appears that our insurance company did not provide anything close to this amount to the hospital. The invoice has three more lines, which say the insurance company “Disbursements $2,358.17,” the insurance company “Settlements $8,208.79,” and “Total Payments and Settlements $10,566.96.”
I put the bill aside and didn’t think about it again until the murder of Brian Thompson, CEO of UnitedHealthcare, and the astonishingly unsympathetic reaction it sparked in some quarters. (The main suspect in the murder, a twenty-six-year-old named Luigi Mangione, was arrested and carried a handwritten note in which he said that major health insurance companies were exploiting the country for profit.) The wave of harsh criticism against health insurance companies was renewed. The US healthcare system talked me into it and sent me to look up my emergency bill. How can a hospital charge eleven thousand dollars for a few stitches? Would the price quoted be the same if we had not had insurance? How did the hospital and insurance company settle on these alleged amendments worth more than eight thousand dollars?
In a system that delivers high-quality care to those who can afford it and manage it successfully, but angers many people who face its limitations and high costs, it is often difficult to find answers to these kinds of questions. In 2023, when researchers from KFF, a healthcare research organization, surveyed about 3,600 participants in group plans, individual plans, Medicare, and Medicaid, 81% of participants rated their plans favorably, but more than half (58%) also reported that they had a problem with Within the past 12 months, such as having their prior authorization request denied or discovering that their insurance company paid a lower percentage of their bill than they expected. Among people who were “highly benefiting” from care – that is, they had visited a health facility more than ten times in the previous twelve months – or who were undergoing mental health treatment, the proportion reporting problems was about seventy-five per cent, or three in four. .
How can these results be reconciled? Knowing you have coverage in the event of illness is reassuring, so it is not surprising that most people rate their insurance positively, the KFF researchers noted. But any healthcare system should be judged on the way it treats patients, and in the American system, it seems that the sicker you are, the more likely you are to get into trouble, including the nightmarish kinds that people create. on social media since Thompson’s murder.
Anger over treatment being refused or delayed is particularly prevalent. Another KFF study published last year found that in 2021, insurers offering individual plans in the Obamacare marketplace denied seventeen percent of health insurance claims involving in-network doctors and hospitals. For reasons that are not entirely clear, the denial rate appears to vary depending on treatment, type of health care plan, and insurance company. In a recent report on Medicare Advantage, the privately run arm of the public health care system for older adults, a majority of the staff of the Senate Permanent Subcommittee on Investigations found that between 2020 and 2022, rates of denial of post-acute care — treatment provided to individuals recovering from illnesses Sudden or serious medical procedures – more than doubled, from 10.9 percent to 22.7 percent. Insurers “use advance authorization to protect their billions in profits while forcing vulnerable patients to make impossible choices,” the report said.
Complaints don’t just come from patients and their families. For many in the medical field, trying to deal with the vagaries of the insurance system is now an inevitable feature of their work. In a survey of physicians conducted by the American Medical Association last year, seventy-eight percent of respondents said prior authorization requirements led to a delay in needed care, and twenty-four percent said they led to a “serious adverse event” for a patient in their care.
The American health care system has long been an unwieldy mix of public purpose and private profit-seeking, and in recent years has become dominated by a handful of private insurance companies. (UnitedHealth Group is the largest. It employs more than four hundred thousand people, and had revenues of $371.6 billion in 2023.) Health insurance began with individual policies designed to cover catastrophic illnesses. Employee insurance plans date back to the postwar years, when big corporations were eager to attract workers and the federal government made employer-provided benefits tax-deductible. Lyndon Johnson then introduced Medicare and Medicaid as part of his Great Society programs.
Widespread complaints about health insurance companies restricting access to care first arose in the 1990s, with the emergence of health maintenance organizations (HMOs), which promised less expensive coverage but came with narrow networks of providers and strict prior authorization requirements. Larry Levitt, executive vice president for health policy at KFF, who has studied the U.S. health care system for decades, told me how the backlash against HMOs led to the proliferation of preferred provider organizations, which had fewer restrictions. But as costs continue to rise, “insurers have gradually brought back many of the restrictions we saw in the 1990s,” Levitt said.
At the same time, the role that insurance companies play in the system has expanded, especially through the Medicare Advantage program. This year, more than half of Medicare beneficiaries—some thirty-three million Americans—enrolled in private plans, which, in contrast to traditional fee-for-service Medicare, often include dental, vision, and hearing coverage. Private insurers claim they can provide coverage at a lower cost, but Levitt said it’s more complicated than that. “They game the system and end up getting more money from the federal government, so the cost per patient goes up,” he said. Medicare Advantage plans also have more limitations on coverage, including smaller provider networks and strict prior authorization requirements, which insurers appear to be monitoring more stringently than ever before.
In addition to imposing mental and physical burdens on patients and their families, endless haggling over prior authorizations and billing inflates costs. In 2021, private health insurers and government insurance programs spent $925 per capita on administration, while comparable states spent just $245 per capita, according to a study published earlier this year by the Peterson-KFF Health System Tracker, a joint project of the Peterson Center. . On healthcare and KFF. These numbers tell only part of the story, as they do not include money that health care providers themselves, such as hospitals and doctors’ offices, spend on administrative tasks, such as billing and dealing with insurance companies. Of course, patients, policyholders and taxpayers ultimately bear these costs as well.
Focusing exclusively on health insurance companies can create a misleading picture. “Most of the additional dollars the United States spends on health go to inpatient and outpatient care providers,” the Peterson-KFF study said. In 2021, per capita, Americans paid $7,500 to providers, while other similar countries spent $2,969. In addition to incurring high administrative costs, hospitals and other healthcare facilities spend a lot of money to pay their medical staff and invest in things like medical equipment and new wards. “Many major hospitals and hospital chains are engaged in arms races,” Levitt said. “They want nicer facilities and expensive new technology.” He added that the fact that most hospital chains are still technically not-for-profit has not stopped them from aggressively raising their prices.