Ask the Readers: What Do You Want to Know About the Economics of Health Care?
Published on - August 24th, 2012 (by J.D. Roth) Today’s “ask the readers” is a little different. Instead of giving another GRS reader advice, we’re asking you to give us advice.
For years, GRS readers have been asking for more information about health insurance and health care. We spend a lot of our money on health care, and that will only increase as we age. With all of the political wrangling recently over the Affordable Care Act, it’s difficult to know exactly what’s really going on and what our choices actually are.
With that in mind, we’ve contracted with a professor who teaches Health Economics and Policy at Texas A&M (and regularly reads Get Rich Slowly) to write a limited series of articles using up-to-date research to answer your most pressing questions.
Of course, first we need to know what your most pressing questions are! You might, for instance, be wondering:
- What are the reasons for skyrocketing health care costs in the US, and are they worth it?
- Does keeping up with the Joneses really lead to worse health outcomes, and if so, what can you do about it if you’re not one of the Joneses?
- All those acronyms… what’s an FSA vs an HSA? When can you and when should you use one or the other? Are HMOs all bad? HMO, PPO, FFS, ACO, what are the pros and cons, which is right for you?
- What should I know about Medicare? Medicaid? SCHIP?
- Rumors about the Affordable Care Act — what’s true and what isn’t? (What is your favorite rumor?) How is universal coverage in Massachusetts working out, and will lessons learned there apply to the rest of the U.S.? Was the Supreme Court “right”? What will new options be?
- How will health costs change in the future?
- What programs are available for low income families?
- What if your employer doesn’t offer health insurance? What if you’re self-employed? What are your options?
- What should I do if I think my insurance company made a mistake in my billing? Do they make mistakes? When and why?
- What kinds of careers are available in the health care sector, and is health care really a growth industry?
These are just a few common questions. Are they questions you have? What would you like to know about health care? Leave a comment if you’d like a post on any of these topics, or if there are other topics that have been burning a hole in your brain. We want to know what interests you!
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I’m very interested in skyrocketing healthcare costs, and whether the Affordable Care Act will address healthcare costs in any meaningful way (from what I’ve read, I think the answer is no).
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One of the drivers of the excessive growth in health care cost is the medical community’s response to lawyers: defensive medicine. They feel compelled to perform needless tests and procedures in order to ensure that they don’t get sued for malpractice.
And they spend a fortune on malpractice insurance. Both those costs have to built into their compensation, else we wouldn’t have any doctors at all.
Other countries spend less per person on health care than we do, and the quality they receive is probably close to ours. It’s impossible to agree on a universal measure of quality of health care, but as a general view I believe that to be true. Let’s put it this way: I don’t think anybody is dramatically worse off in Switzerland, Japan or Germany than in the USA.
It sounds to me it would benefit everybody if we studied their systems to see how they’re able to provide comparable care at much lower cost.
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William:
This is a common misconception. I’m not saying that tort reform isn’t a good idea, but the CBO estimates that enacting it would only drop healthcare costs by 2%. Any little bit helps, but it’s not the cost busting option that a lot of folks think (I wish it was!).
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This is fantastic news!
As someone with a preexisting condition, I want to know if I will *really* be able to purchase my own health insurance in the future.
Also, I teach students who will eventually work in health care, so I know some reasons why health care is so expensive. But how can we make things more affordable?
Honestly, though, I would be interested in answers to almost all the questions posed in the article.
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Same question from me! We currently have private insurance for our family (was tough to get and is expensive). Now we are moving to get it through my husband’s employer. If anything should happen to his job, or if he simply doesn’t want to stay there, he now has two preexisting conditions, and I’m worried about getting private insurance again.
We were almost thinking of turning DOWN the employer-offered insurance (which would save us up to $600/month) because of our fear of applying for and getting private insurance again. I think ACA says we can’t be denied coverage in the future, but will it be more expensive for those with preexisting conditions?
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WOW!! My family of three spent less than $600 on medical expenses all year.
As a non-American I would like to hear how much Americans actually spend on healthcare. Not per capita stuff but how much the average American spends (of their own money) on insurance, a hospital visit, and care if they get something like diabities or a heart attack. It’s really hard to compare without information like this.
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Let’s just say that one (1) trip to the ER via an ambulance for my son’s seizures was $900 out of pocket since his insurance only covered up to $1500 per incident. That’s about 15 min. of care in the typical hospital, I think.
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Nadine – it depends on what kind of insurance.
I have a PPO (the expensive kind, through my company), and they cover the big stuff (including expensive fertility treatments, unheard-of!) so long as you are in-network. Generally I only have to pay the co-pay, $15/visit or about $8 for prescription medicines. I have had less-quality insurance where I worried about coverage, and care was pretty crappy – you could tell that the only doctors in-network were doctors who couldn’t make it out-of-network.
Even with as good as my current insurance is, if I want to go to an alternate doctor not in-network (e.g. a homeopathic doctor), I have to pay out of pocket and try to get 1/4 – 1/3 paid back. I have gone to an in-network marriage therapist ($6.61/visit, woot!) and an out-of-network therapist ($200/visit, I think we got $60 back).
Insurance companies also have a weird glitch where they will nickle-and-dime you on minor conditions (“sorry, we only covered 60% of that test” and then sometimes you get a bill from the doctor, sometimes they have already built into the rate that the insurance companies will only pay 60%), but happily hand over $500k for major things. I had a condition that was slow to be diagnosed, and they gave me a hard time over the relatively small tests (small price to them, huge to me out of pocket!), but then shelled out without complaint for me to stay in a special unit for 2 weeks. My dad’s a doctor in hospital administration, and said that is a common mental glitch that he sees.
As a single lady, no kids: I pay $315/month (medical, dental, vision, life insurance, and Medicare tax); the medical insurance part of that is $170/month. Most months I don’t go see the doctor, but then some months I see a doctor several times, so say $20/month in copays. So I’d say my average medical monthly cost is $335/month. I forgot how much my company pays into my insurance, it is a significant amount.
With my premium health care, I’m pretty frugal still – I don’t waste money on ambulances unless I am on death’s door (as a former EMT, I can tell you that lots of people without insurance use ambulances as taxis and emergency rooms as primary care doctors, and with the way the system is set up I’m not sure I blame them that much). But that is a conversation for another time…
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I third this question. I also have a preexisting condition (MS). I’m currently in great health (run regularly; eat healthy; outstanding cholesterol, blood sugar, weight; get enough sleep, etc…), but I know that with this diagnosis, insurance would either be outrageously expensive or not available for me to purchase. This is both scary and frustrating. I have money stashed away to pay for COBRA if I lose my job, but I know I couldn’t stay on that forever. Also, I feel like self-employment isn’t a possibility for me because of lack of healthcare. It’s incredibly frustrating because I do all the right things heath-wise, but feel penalized by our current system because of health problems beyond my control.
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ditto regarding wanting to know more about health insurance for people with pre-existing conditions
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Not sure if other non-U.S. readers feel the same, but I would to know more about the Affordable Care Act. I’d like a run down that doesn’t unfairly praise or criticize other countries. (It’s not about us, after all!) I’d like to cut through the bull and find out what’s really going on.
I’d also like to know why health care in the U.S. is so expensive. I’ve read that the U.S. spends the most $ per capita on health care, yet its people aren’t necessarily healthier.
(J.D. – thanks for asking this question! It’s nice for us international readers to have a say too.)
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My question is more about the Affordable Health Care Act too. It’s not really about health though. My husband and I are trying to sell our house in another state after we moved for a job, and the market is awful. My mother-in-law sent me an article about a tax that was tacked on to the Affordable Health Care Act, and basically it claims that any house sold after January 2013 will be subject to a 3.5% tax on the seller. I’ve tried to research this a little, but I didn’t get very far, and I’d just like to know if this is true. Also, are there any other little add-ons like this that have absolutely NOTHING to do with health care that would affect some of us that we should know about?
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http://www.forbes.com/sites/toddganos/2012/07/06/how-the-obamacares-tax-on-the-wealthy-might-hit-the-middle-class/
I think it hasn’t been determined yet but unless you clear 500k more than what you paid after sale it shouldn’t matter
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I think there will be federal tax on tanning salons.
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There’s a 10% tax on indoor tanning services that’s been in place since 2010 (as part of ACA).
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I somehow suspect that most of us GRS readers won’t be too badly impacted by this one
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I would like to know why U.S. health care insurance companies provide coverage for illness, but don’t like to pay for preventive care and teaching people how to live healthier lifestyles. Seems like they could save a lot of money by helping people Before they are sick.
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I believe wider preventative care coverage is a mandate of the ACA. My insurance currently fully covers 1 physical, 1 GYN visit and PAP for my wife, and all well-baby appointments & vaccinations, even if I haven’t met my deductible.
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Yup, since 2010 – there’s a list here. http://www.healthcare.gov/news/factsheets/2010/07/preventive-services-list.html
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that’s a good deal for sure. In my mind though, that’s only tip-of-the-iceburg as far as preventative care goes. What about incentives or discounts for regular exercizing, maintaining a healthy weight, eating well, not smoking, etc…..I feel that most insurance company’s idea of preventative care is going to the DR for regular checks, when that aint’ even the half of it in my mind!
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Re insurers providing wellness incentives – some do, and some companies do too. My insurer gives us $200 cash (well, Amazon gift cards) if we do 2 wellness events per year. They provide free consultations with nutrition and exercise experts. The company gives us get free wellness testing (blood pressure, etc) on certain days, say monthly. They even do desk adjustments (say of the angle of your chair and monitor) to prevent things like carpal tunnel or backaches.
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This is the math as I was given it from someone in the business:
Insurance companies (all of them) work on a business model that resembles something like:
Premiums this year = Last year’s claims + 40%
If you stop and think about it, it makes sense, because every business that buys and sells works on a similar model.
That being the case, it’s actually in the insurers’ best interest to pay out a lot of claims, because they point to that and say, see, claims are up. We need to increase premiums.
There are no claims insurers can pay for preventive care. There’s your problem.
There’s a corollary to that: you and I don’t pay the doctor, the insurance company does. You and I want to pay as little as possible, insurers want to pay as much as possible (within limits, of course).
Since retiring, I pay cash for my doctors’ visits and they routinely give me a 40% discount for cash. Just saying…
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I did that too before becoming eligible for Medicare, and my health care practitioners also gave a “self-insured” discount, thereby making necessary health care expenses quite affordable, much to my surprise. And yes, I do have a chronic health condition which requires regular visits and testing in addition to the normal stuff. But I’m not one to run to the doctor for every cold, etc., so months can go by without my going to the doctor. But insurance premiums would go on anyway. So I figured it out and my costs were less paying my own way, plus I felt more in control of my health care decisions and talked to my doctors more who knew I was self-insured and each was very helpful in try to minimize expenses without compromising care.
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Melissa:
Although there are a lot of wonderful things about preventative care, it’s not as cost-saving as many believe. Think of it this way:
Let’s say you have a group of 100 people. Without preventative measures, 10% of this group will get an illness that costs $10,000. Thus, the insurance company will have to pay 10 people*$10,000 = $100,000.
Preventative care can drop this percent in half (so 5% of folks get it), but it costs $1000 per person. At first, this seems like a great deal, right? And a lot of folks would calculate this as a savings of $9,000 per person. But, because we can’t predict exactly who will be the 10% that gets this illness, the insurance company will have to pay for all 100 people to receive the preventative treatment. So, ($1000*100 people) + (5 people *10,000: for the 5% who still get sick) = $150,000.
Thus, the insurance company would actually pay 50% MORE for the preventative care option.
Preventative care is great for a lot of reasons, but it isn’t always a cost-effective solution (although there are a lot of other reasons to be in favor of it). It depends on the likelihood of folks to get the illness/issue as well as the cost of preventative measures.
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I’d like to know what the downside to a public option is, and ultimately why it never made it through legislation. I’m more interested in the economic analysis, not a larger government is bad/death panels/political argument.
Also, why cover children until 26? Seems like an arbitrary number.
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Just a comment on the age thing – college. If kids are raised with parental expectations of going to college then parents should be able to come up with a strategy so that illness doesn’t keep their kid from attending college.
With an August birthday you can graduate college at age 21, an October b-day will graduate you at age 22, if you transfer from a community college to a university, or switch universities that might add on more time to your degree completion, or if you double major, go on mission, that’ll put the graduation age up to 24 or 25, 26 if you were ever held back a grade in K-12.
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The Public Option was killed by politics, not by economics. Generally folks agree it wasn’t necessary but would have been useful (though there’s some disagreement). Arguments against are mostly increasing the size of government, insurance companies free-ride on the gov’t when setting prices etc., things that could be pros or cons depending on your beliefs.
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Tom:
Economically, for a public option to succeed, you need (at least) two things:
1) A public that is comfortable paying higher taxes (because money that would have gone to the insurance company now goes to the government, possibly more or less, depending on how healthy you are compared to the average population)
2) A public that trusts the government to make health-related decisions. By this I mean that the public trusts the government to make decisions on what gets paid for and what doesn’t. Currently, the insurance company makes that choice based on profit. The government would have to fill that role, similar to how it is done in Britain or other single-payer countries.
The US has neither of these things. Americans are very anti-tax (ever since the early 18th century) and, traditionally, don’t have the necessary trust in the government. Because of this, there is no way a single-payer system would be economically feasible. Folks wouldn’t be willing to pay enough in and they wouldn’t be comfortable with government efforts to curb costs. It’d be like the current budget issues with Medicare (seniors aren’t putting enough in, but are fairly unlimited in the care that they can take out), but on a larger scale.
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@Katie–
I think you’re talking about single-payer insurance. A public option would just be one government run insurance program competing with the private companies. It would be (would have been) optional, not required. Depending on how a public option is designed, it could actually make money (or lose money… entirely depends on the design).
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My DH retired, so I was forced to sign up for my own private (non-employee sponsored) individual health insurance (he is still covered in retirement on his work plan). I have not had an illness my entire life, literally, aside from an occasional cold/flu;
10 months after I signed up for this insurance, I have now discovered that I may have Crohn’s disease or colitis (still in testing mode) and have had to make four trips to the ER in 6 days (crohn’s onset is notoriously a flare-up usually brought on by unfavorable conditions, such as a bad stomach virus as in my case).
My questions are: Is it my responsibility to determine when I have reached my $1800 OOP expenses, or the ins. company’s? And will they jack up my premiums due to this sudden onset of illness? And can they possibly fail to renew my coverage if I do have a chronic disease? I have already had them deny an important procedure a radiologist had recommended…they simply deemed it ‘unnecessary’!
I have not been able to work in over 3 weeks and do not get vacation/sick time, so all lost wages. Never having been in the hospital for anything but delivery of 3 children, it is scary and sometimes overwhelming.
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It is ALWAYS in your interest to keep track of what your expenses have been. There are several good services that can help with that (Simplee.com being one).
Being an informed consumer of health care services pays.
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A technique that worked surprisingly (and infuriatingly) well when I had a serious medical condition and they refused to pay for portions: simply write a formal letter back and explain that yes, they do have to pay for this procedure, it is medically necessary and here’s why. I ended up writing about 10 of these letters, and always had the tests paid up in the end. It was so frustrating – they basically figured that most people would pay $60 – $100 here and there out of pocket. I did, until they sent me a bill for $1000+ and I freaked out. The magic letter resolved that, if it also left me a bit bitter.
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Universal healthcare for all! Why the ACA is not going to go far enough to bend the cost curve.
My hunch is that companies will start dumping people into the exchanges anyways. Why let people insurance profit off it when it’s a public good?
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I’d like to know more about the penalties for opting out of coverage.
Also, I’d like to look further at whether the new rules will be financially sustainable for private insurance companies. Will this drive them out of business leaving the fed as the only solution?
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The penalty will be a monetary fine levied through the IRS.
When medicare was passed that put the federal gov on the hook for the health outcomes of life long smoking. Then all of the sudden the government was concerned about consumers.
I’m hoping for Insurance Lobbies VS Corn Syrup, Beverage, and Junk Food Marketing Lobbies.
I’ve seen canned spaghetti sauce that has HFCS as the number one ingredient — And that is supposed to be part of an entree? Commonly paired with the simple carbohydrate of pasta??
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I’d like to know if the health care exchanges proposed in Obamacare are going forward. They appear to be one of the most exciting parts of the bill, and to me, appear as though they could really bring costs down.
I’m a firm believer in the changes enacted with the ACA. But I think it’s important to dispell the rumors and concerns people have about it though. For instance businesses under 50 people won’t be subject to the mandate, and will be given subsidies if health insurance is offered. Also people within 400% of the poverty line aren’t subject to mandate. The 80/20 rule is another interesting aspect.
I look forward to this series. Thanks.
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I think 2014 is the year of exchanges. Some states have already started organizing the infrastructure. Some states have not. Citizens living in states that fail to act will have a federally set up one to use.
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I’d also like to know how the exchanges come in to play & look at what’s currently done today, compare to the future in regards to businesses, i.e. how they pick their benefit plans & its effect on their employees. I think the majority of us get our insurance from our employers(?), so that’s what I’m interested in. Although, I’d also love to hear about for those that are uninsured, what’s next for them?
I also had someone tell me that over the next few years our healthcare are going to skyrocket, while everyone is figuring how to implement this and also keep making their profits, but after the initial few years, prices should then plummet & stay relatively low. What’s your take on this?
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Check out Mass. state health care plan implemented by MITT ROMNEY.Obamacare is based on this plan. MASS> health insurance is the highest in the nation now, since this was put in. I read that it runs $14,500 for a family of 4 in premiums.http://www.newburyportnews.com/local/x906055757/Analysis-Mass-health-premiums-highest-in-nation
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I’d like to know from the outset where this professor stands politically. And then I’d like to hear a response from someone with the opposite viewpoint. There’s so much politics surrounding this healthcare bill that whenever I see the politicos talking about it, I’m left with the impression that I’m not getting the real story. One side is predisposed to love it while the other side is predisposed to demonize it. I suspect there are things all of us will love and hate in this bill, but I’d like a fair, unbiased representation of them so I can decide for myself.
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Great question– I will tell you now instead of devoting a post to it (since my political views aren’t what I was asked to write about).
Politically, I am a pragmatic economist. That means that I care about what the evidence and theory says and I’m willing to change my mind based on research results. It also means that I want to be on “the production possibilities frontier”– basically I want government to be efficient, I want solutions that aren’t completely dominated by other solutions. But it also means that I don’t care so much about where on the production possibilities frontier we are– with every decision there are trade-offs, and pros and cons based on what your individual preferences are. (We talk a lot about efficiency-equity trade-offs in my public finance class.) Most of my economist colleagues feel similarly on most issues as I do even if they identify as a different political party.
One of the things we teach our students at the Bush school is that the world really isn’t as black and white as they’re used to thinking about it, there are trade-offs for every decision, if it were easy government would be getting things right, that there are usually reasons for both viewpoints that they should understand even if they don’t agree with them, and that politics frequently screw up good economics. In the economics classes they learn to put prices on things, but it takes ethics, philosophy etc. to decide if those prices are worth it.
I get both flaming liberals and cold-hearted conservatives in my classes and everything in between. By the end of their time at our school, the most passionate on both sides realize that there can be unintended consequences to many of the policies they used to espouse that go directly counter to their underlying beliefs. They have learned to think more critically about what it is they actually want and how policy achieves those aims.
In terms of political detail: I admire both George H.W. Bush and Bill Clinton’s policies and ability to get compromise. I think we get the best and most thoroughly vetted policy when the White House and Congress are different political parties and they’re working together to do big legislation like welfare reform or the clean air act. When that happens, they poke at the flaws in each other’s side until evidence-based economics has a chance to win over partisan ideology.
Oh, and probably more importantly for understanding the background of my economic analysis… I think both Marxist economics and Austrian economics are jokes. (There is a good reason mainstream is mainstream.) I lean towards Cambridge-school over UChicago, though I do not completely repudiate UChicago style. I had fantastic professors in graduate school who have been politically active for Democratic administrations and those who have been politically active for Republican administrations. They were (and are) all amazing.
So in short, my biases are from an economist standpoint. I always do my best to show pros and cons and why each side has decided what they have. Sometimes they have economics on their side, sometimes it could go either way but they have different preferences, and sometimes politics messes up good policy completely.
Does that answer your question?
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In my second year of college I took a Human Geography class, and for each reading assignment we had to summarize as much about the author we could, just to always keep in mind real humans are doing the research and not borg drones or vulcans. (I’m currently watching Star Trek Voyager)
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My family is greatly involved in healthcare, from a doctor to multiple nurses and front office staff (office manager, billing department). How will ACA affect them?
My thoughts are the office staff, besides a possible layoff, won’t be affected much. but for the doctors and nurses, lower pay and higher malpractice insurance seem to be coming.
Thanks
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None of those concerns are valid really. The reason is the 80/20 rule. Health insurance providers are mandated to spend at least 80% of the premiums on actual service. This is a good indication that they’re bringing in at least 20% profits. When your business is profiting that much, it makes no sense to cut benefits. Furthermore, reducing expenses would also have the corollary affect of reducing profit, something no investor wants.
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At least 20% profit? There is no way they are making 20% profit. Have you ever heard of overhead? It is very exensive having all those fancy buildings and all those departments they switch you to when you call with a question.
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They are indeed making 20% profit. This is the cause behind insurance companies sending out rebates this summer. You have been misinformed.
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Not even Apple makes 20% profit. You’ve been misinformed.
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Go read about it on healthcare.gov, that 80% is for medical care. The 20% is for all the cost of running the business, even a small BCBS like Delaware has over 700 employees and it costs alot a money to run a business.
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Insurance is a low margin business. The 20% is to cover overhead including fraud investigations. Medicare and most non-profit private health insurance companies run about 5% overhead. However, overhead is not profit.
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I want to know how I go about getting affordable health insurance on my own. What do I need, what can I afford, what are my options, who can supply it, how not to get in a situation where my budget is wiped out my health care costs.
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This will really rely on your income level. Because of the ACA you will be elligible for medicaid if you are now within 133% of the poverty level. If you are below 400% of the poverty level you will be elligible for subsidies. The limit of the amount you will be responsible for health care under the ACA is 4%. Sounds like a great deal to me.
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For now, go to ehealthinsurance.com and choose the costliest high-deductible plan that you can reasonably afford — you can choose individual or family plans. You can also call their customer service line and an actual person will help you with your questions and ultimate decision. Great, helpful site.
You will have to wait a week or two to see if you are approved as well as get a signature from your primary care doctor to verify your current state of health. Good luck!
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I’ve heard that employers will probably stop providing their employees with health coverage and make them buy it on the exchanges once the ACA goes into effect. I work for a Fortune 500 company. Is my company likely to do this?
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My husband and I own a small business with 8 full time employees, plus a few part timers. I can tell you that we have no plans or excitement about dumping coverage for our people. Providing good benefits is one way employers compete for talent.
Speaking as an individual rather than as an employer, however, I think it could be a positive development. Employer-provided health care in the U.S. is a complete accident of history dating back to WWII and competition for labor. Losing your job should not mean losing your healthcare. I think it would be better to get my healthcare in a state exchange, pooled with other residents of my state, for a plan I choose, rather than what an HR rep chooses for me.
Here’s hoping people can be respectful with comments moving forward.
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How I wish health care coverage would be decoupled from employment. It is a horrible feeling to be stuck in a job just to have access to coverage. I think it would be much better for individuals and for the economy (happier, more-productive workers; more entrepreneurs) if people’s health insurance were easily portable.
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Totally agree with you, but I don’t see it happening politically. I think Romney has said he would like it that way, but I don’t think he or Obama will ever push for it, there is just too much entrenchment.
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Kingston, you’re absolutely right. It would be so much better in every way if health insurance was not employer-based. Just so you know it was not an accident. Employer-based coverage is a trick politicians use to make you feel as though you’re getting something for free. Not only are you not getting it for free (cuz otherwise you’d get higher wages), but, like you said, you can get stuck at a job, unable to quit, and unable to take a better job if you have a pre-existing condition. It’s all in the way that tax system is structured. Voters need to become more educated about how the tax system affects their healthcare. When the government creates one problem, they blame greedy capitalists (insurance companies), which is easy right? Then they come up with a “solution,” which actually makes the problem worse (ACA).
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The Employer provided Health Insurance was started as a way to give “raises” to employees and not violate the wage and price controls in place at the time. Once it got started, getting is stopped is not easy.
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Definitely want to know more about HSAs and FSAs. Why doesn’t everyone have an HSA/FSA if it makes your health care dollars stronger? What are the benefits of HSAs/FSAs, and if the benefits are good for most people, then why doesn’t everyone have one? Are there barriers that prevent people from getting an HSA/FSA? As stupid as this sounds, why can’t all (many?) health care costs be paid with pre-tax dollars?
Years ago we saved money in an HSA and I’m wondering if it’s still as complicated today as it was then– I was always filling out paperwork/mailing in little stubs, for every little medical bill in order to get reimbursed. It seemed tedious and the tracking was stressful. I’ve gotten more on top of my finances so maybe now it would be easier to manage now.
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And this reminds me of my other question…
if I sign up for the HSA to go with my private individual high-deductible ins. plan (I checked and it is an HSA eligible plan, btw), can I use my HSA dollars to pay for medical costs for my whole family, or just for my own?
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Holly,
Funds in your HSA account, even if it is an individual account, may be used to pay for qualified expenses for you AND your family members.
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I administer the benefits at my (very small) company and HSA’s always smelled like a scam to me. So I have to try to *guess* my health care costs for the next year? And if I guess wrong it could cost me money? That seems to contradict the whole point of health insurance.
The brokers and HMO’s seem to be selling HSA’s pretty hard. What’s in it for them?
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You are talking about the FSA, I believe. That is the “use it or lose it” account. HSA’s are yours for the long haul, so you don’t have to guess what your expenses will be ahead of time. Actually, one of the nice things about an HSA is that you can fund it AFTER you have an expense (in the same year). You can pay the expense when you incur it, then reimburse yourself from your HSA with the pre-tax dollars once they are in the account.
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Funny how the ‘flexible’ spending account has that time restrictions on money.
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No, that is right. You can lose the money in health savings account. At my husbands work, it says if the money isn’t used by end of year the company that sets them up gets whatever is in the account.That’s why we didn’t set one up.
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Well,I know the rules have changed recently and since we no longer have one I can’t speak to their current usefulness, but for several years they were a real gift to larger families or people with health conditions. Not having dental or vision insurance, we knew we could always do the maximum and have no trouble using all that was in it.
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I’m very pleased with my HSA, which I’ve had for seven years. We all incur medical expenses at some point(s) in our lives, and the HSA simply forces us to save for those unfortunate occasions while also offering incentive by using non-taxable income and opportunities for investment.
The main thing I like though is the concept. We don’t expect our auto [collision or comprehensive] insurance to pay for oil changes, replacing worn shocks, car-washes, or new tires. We have auto insurance to help us out with major repair/replacement expenses after a mishap, and we have liability insurance to protect us and others on the road. I don’t expect my [high deductible] health insurance to pay for routine tests and doctors’ visits. I do expect it to help me out when something so expensive happens to my health that I can’t handle it. I am reponsible for maintenance of MY own health, and I’m personally responsible for those expenses, but I think it’s nice that the government doesn’t tax me on the income I save and promise to use only for those health purposes. I do still have to buy insurance however, and I know firsthand how nice it is to have that HSA-savings ready to go, and to have the insurance ready to kick in for major (insurable) expenses.
To me the HSA epitomizes the GRS philosophy (besides “spend less than you earn”): Save in an emergency fund for unexpected expenses (car, home, health, etc.) – but with incentive granted by the IRS in the case of healthcare – and still have relatively low-cost high-deductible insurance to cover you for expenses beyond what you can afford.
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I can try to answer your questions based on my knowledge of how my HSA works.
What are the benefits of HSAs/FSAs, and if the benefits are good for most people, then why doesn’t everyone have one?
The benefit of the FSA is you’re using pre-tax money for expenses. This is particularly useful if you can’t itemize deductions or your medical costs.
The HSA has the same benefit, plus the funds can earn interest through various investment vehicles, and when the interest is used for medical expenses, is also not subject to taxation. I believe my company markets this as a triple tax advantage.
There is risk in putting money into an FSA if you can’t accurately predict how much medical expenses you’ll incur in a given year, because that money disappears at the end of the year. That’s not true of the HSA, but you are supposed to have a High Deductible Health Plan in order to have the HSA, and some people don’t want to (or can’t afford to) front that kind of money – having to shell out $1050 to $3000 – before getting any coinsurance coverage.
Are there barriers that prevent people from getting an HSA/FSA? As stupid as this sounds, why can’t all (many?) health care costs be paid with pre-tax dollars?
One barrier might be that your employer doesn’t offer it. HSAs and FSAs are an employer benefit, but if a company is being newly mandated to offer health insurance, they might pick a plan with the HSA since they tend to be cheaper than PPO/HMO insurance (To answer the other reply, what’s in it for them? It’s less insurance risk on the insurer. Also HDHP customers are more likely to forego unnecessary medical care or find cheaper alternatives, also saving the insurer money).
Can I use my individual HDHP + HSA for my family’s expenses?
I had to look this up, and yes you can. You can be audited for your purchases by your insurer, or whoever runs the HSA (usually a 3rd party bank), or possibly the IRS.
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Thanks, Tom! That clears a lot of things up for me.
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Thanks for the answers Tom. So helpful!
I, like most, seem to be in a “no win” situation with health insurance:
HSA isn’t available from my company, as I do have a low deductible, but I get a maximum of only $2000 total benefits per year, which explains why I am paying off a $13,000 balance in “out of pocket” expenses for my knee surgery last year post-tax– ugh!
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I would like to discuss what effect the new medical law has on things like vision and dental. I’d would also like to have him explain to people why paying for your own dental insurance is often not worth it (if it’s paid by the employer that’s a different story.)
As a small business owner I want to know if I will be penalized if I stop buying medical insurance and instead give them the money to purchase their own on an exchange. As a side note: It’s frustrating that because I pay my employees well I do not get any benefit from the tax incentives for their health care.
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*her (I’m assuming given the name)
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As a Florida resident, I live in a state with lots of retirees; if my employer health insurance (which is going up), goes away, will my family’s access to insurance via state exchanges be skewed/more expensive since Florida has (presumably) higher health care costs than residents of, say, Colorado, where the population is generally younger?
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Peter Schiff explains the healthcare crisis in his new book, The Real Crash. One of the main problems is that the federal government incentivizes employer-based health insurance through the tax system. So, if you lose your job or get a new one, you lose your coverage, and, if you have a pre-existing condition, it will be hard to find new coverage at an affordable rate. If the government stepped out, and allowed the market to decide, then people would get their own coverage (some may still get it through their employer – or both). That way, you don’t have to switch coverage should you lose your job or get a new one, so any pre-existing condition won’t matter. This would also make people more price sensitive (when was the last time you looked up the price of an X-ray?). Also, routine, expected things like check-ups and one-time visits should not be covered: you just end up paying for administration and profits for the insurance company.
The problem isn’t the big bad insurance companies: it’s the government’s well-intentioned but disastrous system.
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If you ever have to deal with an insurance company over coverage of an expensive illness, you will not doubt that the “big bad insurance companies” are the problem.
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My family, including myself, have had several (open heart surgery, brain surgery, etc.). We just made sure to get good coverage from an honest company. Never had a problem because my parents did their research before I was born, and taught me to do the same.
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Do you purchase insurance privately? Or through an employer?
Due to your reasoning above, many people don’t really have options to seek out “good” coverage from a “honest” insurer. I’m offered a PPO, HMO, or HDHP from my employer (with 90,000 US employees), but all through Cigna with essentially the same network . I don’t imagine smaller companies offer so many that you could research the correct option.
I think a big issue with billing is the distance between your healthcare provider and insurance company. Go to a hospital and ask every doctor there what a procedure in their expertise costs. If you get a correct answer (let alone an educated guess) from any of them, I’d be impressed.
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Tom,
My family has done both private end through an employer. The reason why there’s so much distance between you and your insurance company and your provider is because the government’s tax system facilitates it. The only reason why politicians would want an employer-based health insurance system is because there are more voters who are employees rather than employers. Therefore, when you health insurance is paid by your employer, you’re getting it “free” (in reality you’re paying them by accepting necessarily lower wages). If you paid it yourself, your wages would be higher, you could pick your own plan, and you wouldn’t lose coverage if you lost your job (unless you could no longer afford to pay premiums).
The employer-based system is worse, but unfortunately fickle American voters will vote for politicians who will “force employers to pay for the well-being of their workers.” Politically, it’s a home-run. Economically, it’s a disaster.
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I agree that the employer based system doesn’t work but I don’t agree that employees will be given larger wages if the system changes. I would love to system healthcare decoupled from employment but it wouldn’t work unless the government was heavily involved, the free market for profit system has not worked for years. I think 40 years ago if the had done it wages wouldn’t be an issue but most for most employers that worship the quarterly earnings, finding new ways to cut costs is more important and wages would barely move. The govn’t would need to subsidize the transition to a system reward efficiency and cost cutting through competition and penalized the greed machine in the health care system, they are only a partial road to this now.
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Mike,
We don’t currently have a free market system. If we did, insurance companies would be able to compete across state lines, and there would be no tax breaks related to health insurance. When the government manipulates a market, it causes problems. Then the government blames greedy capitalists, because it’s easy and fashionable to do so (see housing). The health insurance industry is no more free of a market than was the housing market in 2006.
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Yes, but what you use as a free market system as an example as truly free market doesn’t exist almost anywhere in this country. Everything is regulated in some sense and you talk about tax breaks, every industry has them and we constantly see the extreme examples of these breaks. So we are using “free market” as a basis point but there basically is no free market system anywhere that isn’t touch by government intervention either on the regulation side, subsidies, tax breaks, so on and so forth. While I agree with one of your earlier posts about the costs of regulation, the anti-thesis of which would and has been a nightmare for consumers. We are constantly being nailed by corrupt, greedy, organizations that go out of their way to hurt the consumer to make a buck, without the govn’t stepping in, even with their failures, they would continue to do so. The market doesn’t regulate itself well and it never will.
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Actually the problem is the “Big bad insurance companies” in that no health insurance company in a free market setting would ever insure someone with a pre existing condition any more that a life insurance company would sell insurance to someone with cancer or heart disease.
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If you have a pre-existing condition, it’s not “insurance” anymore. What’s the point of buying insurance if I can just wait til I get sick, then buy the coverage? If I have cancer, and the treatment is going to cost $1 million, then why would any sane businessman agree to cover me for any less than $1 million?
Would it be morally defensible to allow people buy fire insurance after their houses burned down?
You might as well argue that casinos are immoral for not allowing you to bet on 7 after the roulette ball already landed on 7.
At one point in the late 90s and 2000s, banks weren’t allowed to check for proof of income when underwriting mortgages. We all know how that ended…
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From an economic standpoint you are absolutely correct (Mike Huckaby made the same point). However, from a moral standpoint you are describing a system that denies coverage to the sick, disabled and elderly. This is called eugenics and I believe the Germans made it part of their health care policy in the 1930’s.
There is another way. Keep ACA but replace the individual mandate with an open enrollment period. No discrimination for pre existing conditions but no coverage if you don’t buy insurance during a 30 day window around your birthday. Australia does this with some success.
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Stu,
The whole point of insurance is to attain it before you get sick. You can argue that the government (ie taxpayers) should pay for the uninsured sick and disabled, but keep in mind that you’re subsidizing irresponsibility. If you subsidize something, you get more of it. You have to consider whether or not someone was really, truly incapable of getting health insurance. What if someone didn’t pay for health insurance, but instead bought boats, went to the casino, took fancy vacations, etc.? Should we cover those people?
Your arguments regarding pre-existing conditions are still wrong. No sane businessman will start an insurance business if he can’t reasonably predict premiums versus claims. Plus, the companies that would survive and thrive would be based largely on luck, and not on any sort of superior business model or customer satisfaction. You could argue, once again, that the government should “insure” those with pre-existing conditions. However, again, you’d have to consider that some people could have bought health insurance, and by subsidizing them, you’re incentivizing others to not attain health insurance.
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The Nazis’ inspiration for eugenics was actually based on how it was practiced in the US: http://en.wikipedia.org/wiki/Eugenics_in_the_United_States
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You assume that people have pre-existing conditions due to irresponsibility; that they are actively sick and it’s their own fault. Guess what, something as simple as high blood pressure or high cholesterol is considered a pre-existing condition.
I run 3 miles every other day, and strength train on the alternates. I’m not as slender as I was in college, but I’m not obese either — I’m 5’9″ and weigh 170. No one in my family has ever had a heart attack, but high blood pressure is common.
I was turned down by 3 health insurers because they considered my genetically high blood pressure “a pre-existing condition”. My husband chose to return to work after less than a year of retirement so that I could have health insurance. If I’m already sick I’d like to know how it is that I have no problem being more physically active than many teen-agers and ALL of my friends who are pushing 50.
It’s especially frustrating because I have no way to change something genetic, and it doesn’t help to have folks like you implying that I have no one to blame for the situation but myself.
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I am confused. We have been watching the market decide and it has been a disaster. People with pre-existing conditions cannot get coverage (my parents are overall healthy but my mother has had migraines her whole life – she was told she was uninsurable when they needed to get private insurance after COBRA ran out). Also, I called around to see how much having a baby would cost (I have insurance through my employer) at different places (hospital, birthing center, etc.) – and no one could give me a price! What you describe sounds nice but is not realistic in my experience.
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We have been watching the market decide and it has been a disaster
Ha! I wish you were joking. The market is certainly not allowed to operate in healthcare. If the government didn’t structure taxes to incentivize employer-based coverage, then pre-existing conditions wouldn’t matter! You could keep your coverage if you lose your job or if you take a different job, etc.
Also, competition is crushed by government regulations regarding state lines. Also, there are so many regulations that health insurance companies must follow, they pass those costs onto the consumers. This inevitably raises the price of everything in healthcare, from doctors, to nurses, to machines, to tuition for med school!
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While I believe that the free market has answers for many things, health care is not one of them. Insurance companies make money by paying out less than they take in. Naturally, they would not willingly insure the elderly, the disabled, or any one with a chronic health history as they know they will lose money on that policy. The free market has no answers for sick people or they would have come up with them years ago!
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The market does have an answer: get insurance BEFORE you get sick. You might as well argue that people whose houses burn down can’t get the funding to rebuild it, and that some magical, angel company should just pay for it.
People like to argue that healthcare is different: it’s not. It’s been so manipulated by the government that it may seem different.
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What if you had insurance before you got sick, but then want to change insurance providers? What if I want to start my own business and go onto the individual market?
It is not realistic that I would be able to carry the exact same insurance policy that I happened to have at the time of diagnosis for the rest of my life.
This is the situation I am now in – covered by group coverage through my employer, recently diagnosed with a chronic (but not life threatening) condition. I am 31. It is no2 much harder for me to leave my employer and start my own business. This is a huge handicap to me, as I am a consultant – without the ability to go independent under my own LLC, it is much harder to fully capitalize on opportunities in my field.
Summary: Even when you are insured, once you are diagnosed, future options are limited.
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The issue I see with this is that insurers would move to the model that auto insurers use, where as you become more expensive to insure they have the option to raise your rates or drop your coverage. Otherwise, if the insurer is losing money on you, they have to subsidize that with the premiums of healthy people who are less expensive to insure. Those are also the most desirable consumers for them, and so their incentive will be to keep their rates as low as possible to remain competitive.
Right now, since employer policies bundle many people together, this model is fairly workable. If we went to a more free market system, then an unhealthy person could be priced out of the insurance market very quickly, closing them out just as effectively as a denial for preexisting conditions.
This isn’t to say I particularly disagree with your point that employer based plans aren’t a pretty awful thing. They have a ton of drawbacks, and don’t provide much market efficiency or humanity. The issue is that the more market oriented we make the healthcare system, the less humane it’s going to become, and quite likely vice versa.
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Matt, that’s ridiculous. What about the people who were born with a preexisting condition? Do they just get a sorry, that sucks, better get ready to bankrupt yourself?
I was born with a genetic disorder, I’d like to hear how I irresponsibly achieved that before I could get health insurance at the stunning age of a minute old.
People who don’t have preexisting conditions seriously have no idea how terrifying it is out there for those of us who know that there’s no way anyone is going to sell us health insurance, ever.
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Lacy says:
“Matt, that’s ridiculous. What about the people who were born with a preexisting condition? Do they just get a sorry, that sucks, better get ready to bankrupt yourself?
I was born with a genetic disorder, I’d like to hear how I irresponsibly achieved that before I could get health insurance at the stunning age of a minute old.
People who don’t have preexisting conditions seriously have no idea how terrifying it is out there for those of us who know that there’s no way anyone is going to sell us health insurance, ever.”
Lacy, I’m afraid Matt is correct. I too have a pre-existing condition. It has no known cause, and no known cure, but I don’t expect society to forcibly insure against it after the fact. Insurance is insurance… and insurance underwriters are literally investing in the probability that you won’t get sick. Would you walk up to the owners of a home while their house is burning down and say, “Pay me a $500 premium and I’ll rebuild your house?” Of course not, but you might look at neighborhood statistics, their fire-safety habits, and place a bet against the probability of a fire beforehand. That’s what insurance is, and that’s what health insurance does too.
We are responsible for our own health, including maintenance and seeking insurance against FUTURE major expenses. It is not up to society to figure that out for us.
What you could do is look for high deductible, low premium, plans with a Health Savings Account, and be prepared to agree to exempt your pre-existing condition from your coverage. Begin saving aggressively in your HSA to cover your own exempt condition (Although not “covered” it would still be eligible for payment from your tax-free HSAccount).
This may or may not be the best option for your situation, but it might be a start in the right direction, and it’s the best I’ve come up with for myself. I accept my condition and my fate, and it’s my responsibility to figure out how to make it – nobody else’s. I wouldn’t insure against a pre-existing condition, so why should I expect anyone else to?
That all said, I absolutely agree with you in the sense that…
I does seem that it’s largely the political mess and “games” insurance and providers play with fees (anyone who’s been through a major procedure has been baffled by billing disasters) that have contributed to skyrocketing healthcare costs, and this only places the un-insure-able at a further disadvantage. It’s one thing to not be eligible for insurance, but to be further penalized for it with exorbitant fees, especially through circumstances outside our control, is beyond unconscionable.
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LPortland,
That’s why you get a good insurance policy that will pay for your treatments for your whole life.
You wouldn’t be stuck with your employer’s coverage if the government didn’t incentivize employer-based coverage.
If the government would let insurance companies compete, instead of helping monopolies, everyone would be better off.
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Thanks, Brian. Forcing insurance companies to pay for something that is already guaranteed to cost a certain amount is economic nonsense, let alone unfair.
Also, some pre-existing conditions are largely avoidable with a healthy lifestyle. If insurance companies charge more for smokers, or those overweight, etc., then that incentivizes people to stay healthy. That’s good for everyone.
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Lacy,
If you read my posts, you’d see that I argued that we (tax-payers) should cover people who are born with a pre-existing condition. The reason is that there was obviously no incentive for you to buy insurance beforehand. That being said, the incentive was on your parents to make sure that they had adequate coverage for anything that may pop up. My parents made sure to do so, and it was a good thing they did. Parents, therefore, should be punished for not buying adequate health insurance for their children should the tax-payers be forced to pay for any medical expenses (how to do that is a different topic). If you can’t afford to buy adequate health insurance for your unborn child, then use a condom because you can’t afford children.
I am not arguing that all of those with pre-existing conditions should be left out in the cold. I’m arguing that we should not force insurance companies to pay for those people. Most importantly, I am arguing that the fact that there are so many people out there with uninsurable pre-existing conditions is not due to market forces: it’s mainly because of the government’s market manipulation and intervention.
Most people do not understand the unintended consequences of government intervention in a market even after a disaster happens, like housing.
Forcing insurance companies to pay the health bills of the already sick is bad enough just on the surface. When you think about how that incentivizes people to not buy insurance, you can see how it is unsustainable, because the insurance business will no longer be profitable enough to attract investors. We should always keep in mind how a government policy will affect everyone in the long run, and how it will alter the incentives of all those involved.
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Years ago I had the privilege of being a graduate assistant to the dean of the medical school at a university hospital.
He told me at the time (more than 20 years ago) that the lawyers would be one of the biggest drivers of medical cost, because it require doctors to perform more and more what he called “defensive medicine.” That translates to: I know you don’t need this test or procedure, but I could get sued if I don’t do it.
I believed him then and still do.
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That is a question I would like this series to cover: how much of our expenses come from “defensive medicine”? I have heard that same anecdote but do not know what the research says – is there any evidence to back this up?
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Yes, there is a lot of research about how malpractice laws affect medical spending, and it’s pretty consistent. Completely fixing malpractice (something we don’t know how to do) would help but it wouldn’t solve everything (10% is the upper bound usually quoted).
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There are some health issues that are insidious, that DO require multiple tests to diagnose; why not be better safe than sorry?
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As for the ACA: it is absolutely unconstitutional. Justice Roberts even admitted that the federal government can’t force people to buy insurance, but that’s the point of the penalty, or tax, or whatever you want to call it. If it’s a penalty, then it’s 2 minutes well worth it (D2 anyone?). Because the penalty is below the amount for which you could pay for coverage, then you still save money by not getting health insurance. When you combine that with the fact that insurance companies aren’t allowed to discriminate based on pre-existing conditions, you can see that any smart, healthy person would simply pay the penalty, and should they get sick, apply for health insurance. What sane businessman would start a health insurance company with those kinds of rules?
If it is a tax, as the SC says, then it is still unconstitutional. Article 1 Section 8 states that any direct taxes must be apportioned equally amongst the states (except income taxes thanks to the 16th amendment – also a disaster). So, since this tax is not apportioned throughout the states equally, it is unconstitutional. The SC was wrong twice.
If we stopped subsidizing corn and wheat, we wouldn’t have such a big healthcare problem. Our federal government needs to take a 2 week break to actually read the constitution, and perhaps even think about the logic behind its provisions.
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The SC have already declared it constitutional. It’s a moot point.
About the issue as to why any business would still offer the insurance, I would ask you, why does any business currently offer insurance when there is no penalty at all? Everybody wants health insurance and it’s a fallacy to think that young or healthy people are better off without it.
The ACA is the best bill I’ve seen in my lifetime.
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Businesses offer insurance because they get a tax break for doing so, and so do you. If they offer to pay your car insurance, no tax break (none for you either). The government tilts the system in favor of employer-funded health insurance. That’s the main reason why pre-existing conditions even matter.
I agree: everyone should buy health insurance. It’s dumb not to. My point is that it’s something that should be left up to the states, not the federal government, the way the constitution intended. By forcing people to buy into it, it distorts and inflates the market (sound familiar to housing?).
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Again disagree with your reasoning. Almost everyone uses the health care system at some point. They just may or may not have insurance – and if they don’t, they end up in the emergency room (less efficient/more expensive way of delivering care), and those of us who do have insurance ultimately end up paying for it through increased premiums. THAT is what truly distorts the market. I do not see how making people buy something they need, and which lets them seek more affordable care options before they become emergencies, distorts anything.
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Healthcare and health insurance are two different things. We have been brainwashed into thinking that everything in healthcare should be covered by health insurance. If something is predictable, expected, and not going to crush you financially (like a yearly physical, a trip to the doc for strep throat), then it shouldn’t be covered. Would you want to pay for gas insurance for every time you run out of gas? You know you’re going to run out of gas, and you can afford to fill the tank. If you paid an insurance company for every time you ran out of gas, you’d just be paying for their overhead and profits, since the company wouldn’t exist unless it was charging you more for the gas than what they are paying. Likewise, health insurance should only cover unexpected, financially disastrous things like cancer, car accident bills, etc. It’s a bet that you should hope you lose.
As for emergency rooms: we have again become brainwashed into thinking that anyone who comes into an emergency room deserves coverage. That has incentivized people to not buy health insurance, use the emergency room as their PCP, and wait until treatable conditions become untreatable. One solution to this is to charge the person who isn’t covered with the bill. If they can’t pay it, they go to jail, lose custody of their children, and work while incarcerated until the debt is paid off. Either that or have a registry for all who are covered. I would gladly pay more to be part of that registry.
As for distorting the market: you’re forcing people to pay for something that they otherwise would not have bought. That increases prices (Economics 101). You say they will use it anyway, but the economics is plainly false. The whole point of the mandate is so that healthy people pay in to decrease the cost for the sick.
Again, it’s something the states should have the power to enforce, not the federal government. That’s why the constitution was written.
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You’re honestly advocating debtors prisons for health coverage? That sounds sickening to me.
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You know Matt you treat health care and insurance like it was in a vaccuum in a utopian society based on your rules. It doesn’t work like that, just like your jail everybody rule that can’t pay, in a society that already has the highest % of population in jail as it is. How much doesn’t it cost to keep all those people jail and you can’t force them to do labor either, those laws are being overturned as we speak? Healthcare and insurance is a national issue not just a state issue, letting states take over on it would be foolish, what we need now is consenuse not 50 states doing their own thing. Consequently we need people who can tackle complex issues in compromising way. It’s not that I entirely disagree with your thinking and I semi-understand where your coming from, having paid tons of money for premiums the last 20+ years and never being sick, but essentially we are already subsidizing everyone who doesn’t have care anyway either through medicare, medicaid or overall higher premium costs to both employers and employees. If your standpoint about not having insurance was valid than the current system would be working better with or without employers involved but its not as part of the costs involved with escalated premiums is directly tied to people not being in the system. Everyone should be in and be held accountable instead of riding on the coat tails of society so I fully believe in a comprehensive individual mandate but its not enough, as it has to be tied with reduction in fraud, efficiency savings, more quality vs quantity analytics, etc… Everyone should have skin in the game, healthcare or insurance isn’t a game and while I agree they are different beasts and need to be differentiated they also are not separate and can’t be treated that way.
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Mike,
If you’re arguing that it shouldn’t be left up to the states, then you’re throwing the constitution out the window. The reason why the founding fathers wanted states to decide on things like healthcare is so that there’s freedom of choice. You can always move to a state that has mandated or tax-payer funded healthcare. If they all decide to pursue those routes, then that means that the market decided that’s what’s best.
My whole argument is that we should stop subsidizing those who don’t have health insurance. Why force people to pay in? If someone’s healthy and doesn’t want healthcare, they should be free to make that decision themselves. We just also have to be comfortable with the fact that they may get sick, and not get the treatment that they otherwise could have received. If we subsidize poor judgment, we’ll get more poor judgement.
Consequently we need people who can tackle complex issues in compromising way
Yes, and we elect them via a democratic process. The equivalent process in economics is a free market: consumers are the voters. I always find it strange that political democracy rarely has to be defended here in America, but economic democracy is constantly on the defensive.
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Obviously we are going to disagree, the constitution was written in ink, not carved in stone and people are going to interpret parts differently. Certainly there is no way the founding fathers could have anticipated the issues of the modern society or applied their thinking even in the most general terms to issues such as healthcare. They expected those that followed them as you said elected in a democractic process to grow and change as it seems necessary. Since the S.C. court held the A.C.A. as constitutional even with reservations than your point is moot but I do agree with the election of said individuals and we will see if this time next year the A.C.A. is overturned but once again this quasi-free market system you speak of doesn’t truly exist. In order to have a truly free market system you have to start at square one at thats not going to happen.
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The only way to implement healthy people deciding to opt out of insurance would be to make it illegal to treat people unless they pay for it at the point of sale. I’m not sure that would ever happen (or that it should). But it would sure solve the problem.
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lol, or you could move to a country that doesn’t have ‘promote genreal welfare’ in it’s constitution.
Because, yeah, no ER visit w/o payment doesn’t seem like such a great society worth putting up with.
The academic year I graduated high school, 2002, the only health class my school was offering was the health unit that was part of the required Freshman PE class. This was a small school but not too rural, we were right outside of Tacoma Washington.
I learned exactly how soluble fiber helps lower cholesterol levels by watching the Good Eats cooking show episode about steel cut oats, because I bought some steel cut oats on an impuls buy and then had to learn how to cook them.
Why isn’t Human Body Care a part deeply ingrained into k-12?
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Mike,
That’s why it’s important to understand the logic behind each part of the constitution. They had doctors, drugs, etc. back then. It isn’t by accident that healthcare was not named an inalienable right in the DOI either.
Honey,
The ER is a tough dilemma, but it could be solved.
Jen,
“Promote general welfare” is in the preamble to the constitution, and the constitution itself lays out how that is to be achieved. Nowhere in the constitution does it say that healthcare should be mandated or government-run. Furthermore, if you look at the future effects of ACA, it does the exact opposite of what it intends to, much like rent-control, minimum wage, etc., which share the faulty argument that they are covered by the “general welfare” clause.
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It could be argued, at some level that the legal debate over ACA was political not constitutional. The original structure of the bill was first proposed by a paper by the Heritage foundation in 1989 then reaffirmed by Heritage in 1991 in a paper providing guidelines on how to make it the law. These papers included guidelines for the individual mandate and read like talking points for Obamacare. In 1993, Rep. Sen. John Chafee (Rhode Island) took the Heritage blueprint and crafted it into a bill which enjoyed the broad support of Republican leadership. This legislation was also supported by the CATO institute and was hailed by conservatives as a shining example of the work of their market place of ideas. Conservatives applauded by the economics of the legislation and it legal standing.
By the time Gov. Mitt Romney pushed this proposal through the Mass. Legislature and hailed it as his own singular shining achievement in 2006 the idea of the individual mandate and exchanges had already been codified as part of conservative doctrine. Indeed Romney would later advise Obama that the mandate was essential to ensuring the proper functioning of a free market for health insurance.
In 2009, Senate minority leader Mitch McConnell made it clear that the primary focus of the Republican party was to defeat President Obama. In the political realm you defeat a president by defeating his legislative agenda. In this case, party discipline required that the Republicans and their religious, legal and media arms be mobilized to defeat any proposal this president made, even if he adopted the very bill that the Republicans had championed for over 20 years. At the grass roots level, it became a simple matter to rile up the Republican base, which appears to be somewhat uninformed and have an amazingly short memory.
Subsequent Republican health care proposals, including the one sponsored by John Boehner provide for individuals to purchase insurance through exchanges but people with pre-existing conditions would be forced to apply to high risk pools. Ironically, high risk pools represent a highly regulated market where buyers and sellers are forced to participate against their will – the opposite of a free market. If you are accepted into the pool (no guarantee) they you would be charged up to 50% over the going rate for insurance – put differently, Boehner creates a free market eugenics system. No cost controls, no limits on insurance company overhead charges which reach 30% in the individual insurance market.
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It could be argued, at some level that the legal debate over ACA was political not constitutional. The original structure of the bill was first proposed by a paper by the Heritage foundation in 1989 then reaffirmed by Heritage in 1991 in a paper providing guidelines on how to make it the law. These papers included guidelines for the individual mandate and read like talking points for Obamacare. In 1993, Rep. Sen. John Chafee (Rhode Island) took the Heritage blueprint and crafted it into a bill which enjoyed the broad support of Republican leadership. This legislation was also supported by the CATO institute and was hailed by conservatives as a shining example of the work of their market place of ideas. Conservatives applauded by the economics of the legislation and it legal standing.
By the time Gov. Mitt Romney pushed this proposal through the Mass. Legislature and hailed it as his own singular shining achievement in 2006 the idea of the individual mandate and exchanges had already been codified as part of conservative doctrine. Indeed Romney would later advise Obama that the mandate was essential to ensuring the proper functioning of a free market for health insurance.
In 2009, Senate minority leader Mitch McConnell made it clear that the primary focus of the Republican party was to defeat President Obama. In the political realm you defeat a president by defeating his legislative agenda. In this case, party discipline required that the Republicans and their religious, legal and media arms be mobilized to defeat any proposal this president made, even if he adopted the very bill that the Republicans had championed for over 20 years. At the grass roots level, it became a simple matter to rile up the Republican base, which appears to be somewhat uninformed and have an amazingly short memory.
Subsequent Republican health care proposals, including the one sponsored by John Boehner provide for individuals to purchase insurance through exchanges but people with pre-existing conditions would be forced to apply to high risk pools. Ironically, high risk pools are highly regulated and force participation by buyers and sellers against their will – the opposite of a free market. If you are accepted into the pool (no guarantee) they you would be charged up to 50% over the going rate for insurance – put differently, Boehner creates a free market eugenics system.
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Thanks for the history behind it. Perhaps this is why George Washington warned against factions in his farewell address. The whole republican v democrat thing is silly to me, as both parties think borrowing/debt, printing money, and giving stuff away for free is good for the economy, but I digress.
Either way, if one is going to argue in favor of anything other than a truly free market healthcare system, public and private must be separated. Everything must be separate. Otherwise, the government would have to control the price of everything, including the wages of doctors and nurses, of the manufacturers of equipment, etc. It simply wouldn’t work unless you’re in favor of complete socialism, which we should at this point in human history, does not work.
There could be an argument made for covering people who truly can’t afford it (ie extremely disabled from birth). That’s a very small population, and wouldn’t affect everyone else much. Insuring or paying for healthcare for anyone other than that group means that you’re incentivizing not buying health insurance.
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It works for every single other developed nation on Earth. I’m positive America can make socialized medicine work and be a positive asset to the entire country.
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The rest of the world is going bankrupt. We’re on deck. You can’t print and borrow your way to prosperity as a country any more than you can as a person.
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Matt:
Overall I like your reasoning. If there is a way to introduce free market mechanisms to this issue by separating out public and private entities to deal with the disabled and chronically ill we should pursue it.
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“Article 1 Section 8 states that any direct taxes must be apportioned equally amongst the states (except income taxes thanks to the 16th amendment – also a disaster).”
Wiki offers a pretty simple rebuttal to this:
“However, this clause does not require revenues raised by the tax from each state be equal.”
http://en.wikipedia.org/wiki/Taxing_and_Spending_Clause#Uniformity_Clause
That is, if that’s the point you’re making – that the taxes collected from uninsured taxpayers in one state won’t be equal to the taxes collected in every other state. If you’re making a different point, then there’s perhaps a different argument.
“Justice Roberts even admitted that the federal government can’t force people to buy insurance, but that’s the point of the penalty, or tax, or whatever you want to call it.”
It isn’t. In fact, your exact argument is that (healthy) people should CHOOSE not to buy insurance, and CHOOSE to pay the tax. You’re advocating that people choose not buy health insurance – how can you also claim that buying it is mandatory?
“The reason why the founding fathers wanted states to decide on things like healthcare is so that there’s freedom of choice. You can always move to a state that has mandated or tax-payer funded healthcare.”
First, let’s not pretend that the Constitution says anything about healthcare. Second, the Constitution does not give “freedom of choice,” at least not to individuals. The Constitution is about the nation and the states, not about individual citizens. The Bill of Rights is what address the rights/responsibilities of individual people. And finally, when the Constitution was written, people were more loyal to their states than to the nation, which is why the Constitution is so protective of states’ rights. To say that any part of the Constitution was written in order to facilitate citizens moving from state to state to find the best deals on healthcare/other services is historically inaccurate.
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The taxes collected via direct taxation must be apportioned to the states based on their percentage of the population. So it shouldn’t be equal amongst the states in that regard, so I agree with you. So, the states with more people should have to pay more. That’s not the case with ACA, which makes it unconstitutional. I’m sure some of you will argue that the SC ruled that it is not a direct tax, but it is. It’s taken directly from citizens who choose not to buy health insurance. It would be different if it was a tax on the purchase of health insurance. That would be an indirect tax, and the government is allowed to impose those.
Buying insurance is mandatory in order to avoid the tax or penalty. My point is that the idea behind the ACA is to compel people to buy insurance, which isn’t allowed based on the constitution, which was admitted by Roberts. My other point was that the best financial choice to make is to opt out, pay the penalty, and then apply for insurance if you get sick, since insurance companies can’t discriminate based on pre-existing conditions. It’s admittedly designed to be abused.
First, let’s not pretend that the Constitution says anything about healthcare.
Exactly my point! Thank you!
Second, the Constitution does not give “freedom of choice,” at least not to individuals.
Have you actually read the Constitution? That’s the entire premise.
To say that any part of the Constitution was written in order to facilitate citizens moving from state to state to find the best deals on healthcare/other services is historically inaccurate.
The founding fathers are rolling in their graves. If you got 100 US citizens, and asked them if they’d agree with you, you’d definitely have the majority. And that’s why it’s so sad that the whole concept of sovereign states has been almost completely lost. Allowing competition amongst the states is the lynchpin of the constitution. Allowing the federal government to get so big and powerful is why we’re heading for bankruptcy. The ACA is just another nail in the coffin.
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I’d like to know how healthcare works in countries outside the U.S., i.e. the “socialized” medicine we hear so much about.
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How long is a piece of string?.
There are so many models in use.
From the govt owns all the publicly funded hospitals – UK/New Zealand
Public funding private owners (single payer) – Korea/Taiwan
Compulsory Health Insurance – Switzerland, France, Ireland (planning to do this)
Non profit compulsory health insurance – Germany
Public funding for all healthcare, private treatment illegal – Canada (but not the UK)
Compulsory savings plus govt. subsidy – Singapore.
Communism (all doctors work for govt on low wages, lots of cheap preventive care) – Cuba.
No money no care emergency care may be provided – any-time someone from the USA visits one of these countries without insurance.
Now each model has it’s own varieties and differences. In this debate you can simply not just use one overseas model and say that is socialised medicine and bad. Each system has it’s virtues and problems.
The main difference is these countries above have some form of universal coverage, versus the USA where there is no universal coverage.
NB: I am not American, I’m from New Zealand.
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The national health care system in Canada is a publicly funded, privately run single payer system. Funding comes from the federal and provincial levels of gov’t, the latter managing public hospitals, and doctors billing the gov’t fee-for-service payments. To the public, covered services are free at point of delivery, with mandatory payments made into the national system billed either monthly or rolled into taxes, depending on the province. Payments are based on income level.
In simple terms, this means that when I see my family doctor, I don’t pay anything. I walk in and out and that’s it. When she sends me for xrays or blood testing or other services, it’s the same. Walk in, walk out, no bill. When I had surgery twice, no bills. I filled out one basic information form prior to each surgery. When the surgeries were over, I left. No other paperwork. I did pay for prescribed painkillers purchased outside the hospital after the surgery (cost: $12). I live in a province which bills monthly for care and I pay about $60/mth.
This also means that beyond determining which services are covered at the national level, the gov’t has no say in my health care. All decisions are between me and my doctor. My doctor and I agree on a treatment, then he turns around and bills the gov’t for that treatment. If I don’t like my doctor, I can get another one. If I don’t like the suggested course of treatment, I can choose a different route. I have the freedom to choose my care without interference from the gov’t or a middleman.
Not all healthcare in Canada is publicly funded. Basic health care is covered, as well as in-hospital drugs and treatments. Certain services such as dental and optometry, some types of surgery, fertility treatments, most drugs not issued in-hospital, medical transport etc, are not covered. Most people here are covered for those things through work insurance.
Private treatment is not illegal in Canada. There are quite a few for-profit medical clinics in the city where I live, and other clinics and hospitals across the country that are investor-owned and privately funded. Their existence is a major bone of contention here, but if I’d like to pay for certain medical services, I can do so.
It is not a perfect system but I am extremely grateful to have it. If not for universal coverage here I would have depleted all of my savings and gone into debt over those two surgeries as I have a “pre-existing” condition. Several members of my family would be either dead or bankrupt. Instead they have a new heart, a new hip and a new breast and did not suffer financially for it. I don’t think I could ever live in a country without universal coverage.
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Private treatment is not against the law – but charging more than the government has set to pay is though, correct?
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Yes, there are a number of restrictions on private providers, one of which is physicians cannot charge above the set-fee schedule for insured persons (but they could charge non-Canadian residents). Another is a prohibition on “extra billing” which is charging for medically necessary services already insured under the national plan. There are, however, clinics which technically contravene these prohibitions. In my province the gov’t is preparing an injunction to stop one such clinic now. The argument is that permitting extra-billing allows wealthy patients to move to the front of the line, creating a two-tier level of service and draining resources from the public system.
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So much has been written on the ever increasing cost of insurance. Besides insurance, what are the reasons for skyrocketing health care costs in the US?
Also, did the Affordable Care Act tackle the right issues? There seems to be impossibly high barriers to become a health care provider. Lack of space in medical school, limited facilities. Could congress have done better by providing a second tier (possibly government run) level of care?
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It tackled many of the important ones, and it focuses on Affordability and Availability, just like the name of the bill states. It’s not perfect, but at least it gives people with pre-existing conditions a fair shot. It also prevents spikes in pricing and offers a lot to small businesses.
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I have heard an interesting idea that goes like this: medical school should be free. That way we are not setting up doctors to have these unbelievable loans when they finally graduate. That way, they will not expect to make enormous salaries (especially in some specialties – tends not to be the case for primary care). That way, one of the levers that drives costs up can be pushed in the opposite direction. I also hear that doctors in other countries have good salaries but not the really high salaries that are more the norm in the US. Could one of the posts present data and analysis that compares salaries of US doctors (specialists vs. primary care) and international doctors (same split), and the implications?
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There’s a difference between free and tax-payer funded that most people can’t seem to grasp. If we use tax-payer money to fund medical education, there will be no incentive to make a better doctor, no incentive to innovate, etc. If you’re arguing that we should pay above market-value for medical education, then we should expect more doctors, but of less general quality. If you’re arguing that we should pay below market-value for medical education, then you can expect less doctors. Nothing is “free.” Also, today’s medical education is caught in the tuition bubble that the government created, quite similar to the housing bubble.
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I’d like to see a sample analysis of factors to consider when comparing health care plans. For example, if I’m choosing between a PPO and a high deductible plan with an HSA, I need to consider premium costs, deductibles, out of pocket maximum, lifetime maximum coverage, and what percentage the plan covers after the deductible is met. Am I missing something? Seeing an example of that analysis would be helpful.
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Why should the insurance exchange be limited to the state level?
Some argue that eliminating the state regulations would cancel state-level patient bills of rights, thereby removing insurance companies from being required to provide cancer coverage. I think that if we are going to have a federal level mandate saying that you must have health coverage, then they could easily mandate a standard level of coverage (including cancer) so the insurance companies wouldn’t have to be held to so many small regulations. Opening it up to more competition, thus lowering prices. Money is the underlying force, and if used properly to leverage, we can use choice to lower prices and still offer help to those less fortunate.
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Very well said. More competition would mean lower prices, better coverage, and more rapid advances.
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One thing I’d really like to know – why have so many states gotten rid of old-fashioned high-deductible catastrophic insurance? I don’t know about the rest of the country, but in so many NE states HMOs are your only option; and they are so much more expensive.
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I’ve almost found the opposite. In the last few positions I’ve had, high-deductible plans with HSA’s have been pushed hard. At one place it was the only thing offered.
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I would love to see more information on what the Affordable Care Act is.
Favorite rumor: Death panels… hahaha!! Or the rumor that it will make getting to see a doctor impossible.
My questions:
What is the difference between HMO and PPO… which benefits me? Defining and explaining all the acronyms would be great.
I have family in Massachusetts who are democrats. They think that “RomneyCare” is awesome and has helped the average resident save money on health care. I have family here in the midwest with me (around Chicago) who are republicans who think that Obamacare will cause all of us to wait for weeks for emergency treatment and that we will all have to “pay for everyone’s abortions”. Just silly!
Please bring some clarity!
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Yes – could the series kick off with a brief (nonbiased) explanation of this healthcare pacakage? Just so we’re all starting on the same page.
Also, I like to see every question mentioned in the main article addressed.
Thanks!
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Very timely post for me. Our group health insurance plan is up for renewal in October and we have to decide as a group whether to stay with Anthem or pick another group plan. Even though we are all healthy and have hardly been to the doctor at all this year (there are only 10 of us on our group healthcare plan including family members, our premiums with Anthem are set to go up 12% in October!
12% is absolutely ridiculous for an annual increase. However, our insurance agent said that many employers he is working with now had increases from 10%-30% this year.
How can this possibly continue for years into the future?
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Our very small group was dinged with a 37.2% increase from Humana this year. That after a 20% increase last year.
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A lot of you guys have lost focus. The question was: What do you want to find out about? Instead you are proposing solutions and pointing out problems. Not helpful at this juncture.
I question this blogs ability to provide real facts on most of the issues. I would love to know if lawsuits are a major driver of health costs, but I doubt the data for that analysis is available to this site and therefore becomes anecdotal. I would love to know if it is true that 80% of healthcare costs are incurred in the last two weeks of life, but are those facts available? I would like to know what percentage of health costs are procedural versus RX based. Do the drugs represent 50% of health costs? 80%? 95%? When I hear stories like “my drugs cost $800 per month” it would seem health care reform would benefit from focusing on drugs. But without facts I am guessing and dont really know.
In summary, I dont care at ALL for proposed solutions, especially those politically based. I only want facts. Tell the facts, and only then is this blog useful. Healthcare is a great source of reader interest, but stick to the facts.
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There’s a solid literature on how much malpractice law is responsible for costs. That topic is something economists are fairly sure about, or at least agreed upon within a range based on the research. (Spoiler: small but still sizable %– important but not a panacea.) Unfortunately, fixing it is more difficult than you would first think, for various reasons. So no, not anecdotal!
Research is still ongoing with drugs– it’s a complicated topic with all sorts of nuances. In some ways they are thought to reduce costs, in others they increase them. Advertising has an effect, laws on how drug companies can sell have an effect, same with gov’t funding of research, FDA approval processes, or medicare part d etc. A very interesting topic.
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I’d like to know how medical bankruptcies affect the economy and how the ACA potentially addresses bankruptcy.
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Why do we not know what our health care is going to cost? If I go to buy anything I have an idea of the cost, but with health care you never know the cost until it is done. Also why does it vary so much?
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I absolutely agree with you. I can’t tell you how many times over the years I have asked doctors or administrators the cost of a procedure and they have refused to tell me. Once a nurse suggested I get a procedure. They would neither tell me if it would be covered nor tell me the cost beforehand. I ended up not doing the procedure, because I couldn’t know if I would have to pay or what the projected costs would be. It was too risky on my small graduate stipend to go ahead.
Can you imagine a retail store not telling you the cost of an item until after it is purchased? It should be pretty straightforward how much an MRI or a surgery will cost ahead of time. And if there are complications, well lay out what the projected cost of those would be.
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Please explain why people cannot buy ins across state lines. My belief is bec certain states want to mandate too many reqs. Not every person needs or wants in vitro fert or trans gender sex change operations like we have in MA including for people on Medicaid. We even pay for drugs and sex changes for people in prison. Those policies have to drive up costs in MA. We are getting a lot of fedl subsidies in MA. Ins is very high for everyone business included even with exchanges.
Is it true that ins is deductible for business but not for individuals?
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Our small business offers a premium only plan (POP). It is part of Section 125 like cafeteria plans (FSA).
The employee portion of the health insurance premium is deducted on a pre-tax basis. This is a fairly uncomplicated process.
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I’d like to know the economic effect our current very much capitalistic healthcare system is having on socialists countries. My coworker thinks that our current system drives all the innovation in world healthcare industry and if the crazy profit motive goes away in US which he suspects will happen with Obamacare or UHC, the world will come to a standstill in terms of developing medical advances.
It makes sense. In technology there is a term “early adopter”. The people that buy ridiculously overpriced and underdeveloped technology that pays the cost of R&D and eventually allows companies to come out with a much improved iteration of the product at lower cost. I do wonder if US is the world’s healthcare early adopter.
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Hmmm. Maybe your coworker should learn more about innovations and research going on outside the U.S. (Like in Europe, perhaps?)
I don’t mean to sound like a jerk — I just read a lot of international news and see a lot of incredible things happening all over the world. I doubt all of that is going to come to an end with Obamacare.
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Why people are so against public healthcare? Wouldn’t it be better for everyone to have access to basic healthcare? If you need more care and can afford it then you can pay for private care. Everyone will get sick eventually, right?
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An excellent question, but better answered by a political scientist!
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1. Can folks on Medicare use an HSA?
2. I thought I read somewhere that the privacy policies on med records would be changed. –Something about a central registry— ????
3. Why didn’t we model the US plan after successful health plans in other countries? Or, did we? I don’t know much about plans elsewhere. How is our plan similar or different?
4. How will folks who don’t buy health insurance be provided health care? How much is someone who does not buy insurance allowed to earn and still not pay a penalty (for not buying it)?
Thanks.
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People approaching Medicare age need to have better understanding of how much that is going to cost the person. When company sponsored ins has been provided, it’s pretty upsetting to find out 3 months in advance, how much it’s going to cost. As you are about to have less income, your costs go up. I have learned that my orig amount will be higher bec I am still working and make more than a certain amount. Beware! Do more research than I did! Company benefit depts are not helpful! They can’t wait to get rid of you!
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I would like to know why premiums keep going up by such unsustainable percentages.
For me the questions have to do with keeping healthcare options affordable. I think it is already unaffordable. Being eaten alive by insurance premiums alone — and I am very healthy and have not been sick or needed medical care in over five years.
Why are we not free to choose to put our dollars towards alternative treatments instead of mainstream doctors, drugs, surgeries? Many alternative treatments really work and at much lower cost. I would much rather keep some of my insurance premium dollars to purchase healthy, organic food, and alternative remedies for myself and my family.
Why can’t I have this freedom?
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I have a background in economics (and several PhD’s in the family) and we are all mystified by the idea that we can let the free market settle the health insurance issue. We are all huge proponents of free markets and have tons of cash invested in capital markets. But, all of the available peer reviewed academic literature seems to indicate that the demand for health care is inelastic – a fancy economic term for the concept that you would pay anything to save the life of a loved one. In the face of an inelastic demand curve the mathematical functions for much of economics tend to break down and, predictably, prices rise dramatically. This has nothing to do with government overregulation as some have suggested (without evidence I might add).
Consider, when the US deregulated the airlines, interstate commerce, rail roads, telecommunications and oil and gas prices for these goods and services tended to drop, more companies entered the market and consumers gained greater access. Here, free markets worked wonders.
However, the market for individual health insurance which is the least regulated is also the most expensive and restrictive. The next most regulated market, the employer based market which is covered by HIPAA is less expensive than the individual market and provides greater access to those with pre existing conditions. The most regulated market, Medicare, is also the least expensive. Finally, if you lump in Canada, which has single payer insurance (not socialized medicine) they spend 50% as much for care as we do and yet have far better access and virtually identical health outcomes according to the Centers for Disease Control and World Health Organization.
All of this points toward classic market failure in health insurance markets which is exactly what an inelastic demand curve would predict. While I abhor government regulation, we traditionally expect government regulation in the presence of market failure. That is why we have a Securities and Exchange Commission and other regulatory bodies.
Religious and political dogma seem to be driving the move toward free market health insurance solutions, not sound data based economics.
I would enjoy letting the professor chime in on this….
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Oh, I really hate when people use Canada to support their arguments. I know that Canada spends less money per capita on health care than the U.S., but what is actually included in those numbers?
From what I can tell, U.S. insurance covers a lot more than provincial health care plans. We rely on employer’s group insurance for things like eye exams, physiotherapy, trips to the dentist, medications, etc.
Are the stats looking at “all in” costs — or are we comparing apples to oranges? Does anyone know? I’m curious
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You can look up a number of studies on spending per capita and as a % of GDP and overall health outcomes by country. Canada is actually the next most expensive compared to the US. Canadian coverage is quite comprehensive. Also not that each provence in Canada negotiates their own contracts with US Pharma companies – they buy in bulk and that is why they get a far lower price as opposed to Medicare part D which requires that we pay full retail price.
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I’d like to see a study showing ‘far better access’ in Canada, because I’ve seen no evidence that this is the case. As a Canadian, I can say that finding a family doctor can be very hard, with multi-year waiting lists. Similar stories abound regarding surgery wait times and access to specialists. And let’s not talk about hospitals.
I hear many stories about the great treament they receive once they finally make it through the queue, but I rarely hear a fellow Canadian discuss how happy they are with access to health care. Of course, this is all anecdotal, not data.
I’ve lived in both Canada and the USA, and in my experience the access and speed of care was incredible in the USA. The doctors and hospitals in Washington were fantastic, and there were no acess issues or long waiting lists.
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Glad you have had a good experience with US healthcare. My families experience has been dreadful. Kaiser deneid cancer treatment to my brother after waiting months to grant him an appointment to address his complaints. He died. My father on the otherhand had excellent health insurance and received great treatment. The quality of care you receive in the US is a function of your income and insurance.
As for choosing doctors and hospitals, that is up to my insurance company.
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I took a couple Geography of Health classes in college, when we were comparing health systems our prof mentioned that the city of Seattle had more MRI machines per capita than the country of Canada did, per capita.
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Of course I can’t find the link now, but there was a study that was recently published that showed you were more likely to get certain treatments and stay longer in the hospital if you have insurance versus not having insurance. And I do believe there were worse outcomes associated with insurance status, controlling for other factors.
I believe it was a big impact journal, JAMA or NEJM. If someone would find the link, could you post it? I think it informs the discussion here.
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There’s a 2009 AER (American Economic Review) paper by Card et. al that shows that, I believe.
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I have had numerous experiences with hospitals and ERs in Ontario, Canada. My son was at Hospital for Sick Children for many years and the care there was excellent. My son never had to wait for an appt or any tests. More recently, my MIL has been spending time in the local hospital. Very fast service, even for MRIs.
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I’m Canadian and I’m quite satisfied with the level of access to health care I’ve received.
I’ve lived in several major cities and never waited more than few months for a family doctor (and that was without trying very hard). I’ve had surgery twice in the past couple of years – the first time I waited one month, the second time I waited one week. All of the xrays and blood testing I needed prior to the surgeries I got the same day they were ordered. The longest I waited for anything was two months for a dermatologist checkup appointment.
My family has had similar experiences – swift access for things like quadruple bypasses, masectomies and optical nerve cancer. I do know someone who waited quite a while for hip replacement, but it was not life-threatening.
Anecdotal, but there you go.
I am sure ease of access depends somewhat on where you live. There are inherent challenges in providing prompt service to a geographically huge country with a relatively small, spread-out population.
It’s certainly not a perfect system, but I would rather live in a country where I had to wait a bit for non life-threatening services than in a country where I couldn’t afford them at all. If a system is not affordable it is not accessible. The stories I hear from my American friends are horrific.
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If Obamacare brings healthcare costs down, will it bring wages of healthcare workers down with it, ultimately attracting less qualified and gifted individuals to the field as they go to more lucrative fields? And if the answer is yes, will we then as a result see the quality of healthcare diminish?
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What’s the difference between Romneycare and the ACA?
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Besides obesity, alcohol, street and prescription drugs, fast food, cable tv and alcohol, the one thing that is killing the American healthcare system is Medicaid.
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Evidence?
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I would like to know whether forecasts of Medicare costs under either the Obama or Romney/Ryan plans include costs for medigap coverage. In all discussions of Medicare coverage I’ve read, it sounds like Medicare is “free” to recipients. It is not. About $100 is deducted from SS payments and then a standard supplement plan costs about $175.00 a months with Part D coverage coming in at about $35.00/mo (these figures are based on what my father pays for his Medicare coverage). I have not seen a single analysis of Medicare coverage that takes into account the out-of-pocket costs that are already in place to get full coverage. Medicare without a supplemnt leaves seniors very vulnerable but everyone pretends it doesn’t exist.
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Amy Finkelstein, a top health economist at MIT, called for more research on out of pocket spending effects of government regulation at a talk she gave at the big economics conference last January. The answer is: we don’t know as much as we should at this point. But we do know some things.
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A Canadian’s perspective on why US cannot contain it’s health care costs. Please note – the numbers are just for illustration, and have no actual value.
The people pay an insuance company 100,000,000 per year. 30,000,000 is profit, leaving 70,000,000 for care.
The hospital receives 70,000,000 per year. 21,000,000 is profit, leaving 49,000,000 for care.
The employment agencies employing all doctors, nurses, and support staff receives 10,000,000 per year. 3,000,000 is profit, 7,000,000 pays the staff.
The technologies cost 10,000,000. 3,000,000 is profit, 7,000,000 is the cost of the technology.
The drugs cost 10,000,000 per year. 3,000,000 is profit, 7,000,000 is the cost of the drugs.
Legal costs 19,000,000 per year. 6,000,000 is profit, 13,000,000 is the cost of the lawyers and lawsuits.
Total cost for the system: 100,000,000
Total spent on care: 34,000,000
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I want to know if anyone has looked at a National Health corps that is funded like the VA and Military health system.
What I propose, is that the Medicaid and Medicare be staffed by MDs and Nurses that have committed to work a a given salary in exchange for their training. Right now the best way to pay for being a doctor is college ROTC scholarship or a state funded program to agree to serve in an under served area. With the student loans being where they are and the need for MDs and nurses what it is, why don’t we use the ROTC model for MDs and BSNs. They would make a living salary and the reimbursement rates issue would not be there.
We already have a single payer system for Medicare and Medicaid. This would also allow for more preventive care for those who need it and may not have the resources.
We are discussing a financial issue, paying to care for our citizens, but we discuss everything but the finances.
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When I turn 45 I will have put in 20 years with my company-making me eligible for a deferred retirement. With my own savings I would be very much in a position to quit this job and start a second career doing something I love more but which pays less. The thing that will stop me from doing this is health care.
Since insurance is tied to my employment I feel trapped in my job. Is this situation going to be different in 5/10 years?
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I am in the exact same boat.
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Another question I have:
If there is an pool of insurance providers how can consumers realistically compare between them. Some insurance providers tell you what your copay for procedures will be using straight dollar values. Others tell you that you will pay 20% of the allowed cost.
How in the world does a consumer know what the ‘allowed cost’ for procedure x is or how much a particular doctor’s office charges for that procedure.
The medical billing establishment and insurance is the most confusing entity I have ever encountered. I can never plan for how much a procedure will end up costing me. How can a consumer truely ‘shop’ around when the store you are shopping in is such a black hole?
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One of the most informative things I’ve ever heard about health care, in layman’s terms – http://www.thisamericanlife.org/radio-archives/episode/391/more-is-less
Synopsis: Health care costs are rising because both hospitals and insurance companies are looking to raise revenue, often at the expense of each other. Health care isn’t like other goods in which you can shop around for the best price — if you need heart surgery you can’t shop around and find the ‘best value.’ When the real costs of health care are hidden from consumers ($20 co-pay vs $50 co-pay may reflect thousands in real costs), the traditional market forces that could drive down costs are eliminated.
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I really hope that there is a big HSA push in the future. It’s mutually beneficial for all parties involved. You shop around when you’re gonna buy a tv right? Why wouldn’t you shop around when you get a $10,000 MRI? Just because you’re not paying the upfront costs, people wonder why their premiums go up ever year??
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Part of the reason is because healthcare costs are far from transparent. At one point, I needed physical therapy because of a back injury. I called every physical therapy office within a 20 mile radius and none of them could give me any inkling as to what I would be paying. My health insurance plan at the time did not cover physical therapy.
After talking to many offices, I concluded that I could not find out the price of physical therapy ahead of time. Each office said that there were too many factors involved to give me an estimate and that I would find out my final cost once I got the bill.
Also, when someone goes in the hospital for a lifesaving emergency it is not reasonable for that person to take costs into consideration. If you are having a heart attack or your appendix burst, there is simply no time to figure out what it may cost and which hospital has the best deal. You just go to the closest one because you don’t want to die.
I agree with you- in theory- that it makes sense to price check procedures ahead of time. However, our current healthcare system does not require price lists at the door or even for offices/doctors to disclose their pricing policies at all.
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That’s not how it worked out with Medicare Advantage. Let’s learn from our lessons, privatization is not always a panacea.
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The Affordable Healthcare Act seems to be a decent step for United States citizens, if I’m understanding it correctly. I’m curious as to what loopholes the healthcare industry is going to find in order to avoid its new responsibilities.
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Wow! Can’t wait for this series. Thanks JD and Joann!a
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Good idea, and I hope we can get articles that offer facts and the pros and cons of different options, with minimal political bias. My questions are:
1. If I want to retire early, what are my options for health insurance and how do people afford the costs?
2. What steps can I take to make it easier to find out how much a procedure will cost before I have the procedure performed?
3. Why is it so hard to find out how much a given procedure will cost?
4. What is health insurance like in other high-income countries?
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