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Why is Healthcare so Pricey?

Why is Healthcare so Pricey?
May 12
15:54 2016
The Affordable Care Act went into effect in 2010. Fast forward to 2016, where rising medical costs and flawed insurance policies leave 25% of Americans with unreasonable monthly premiums. Meanwhile, the year 2014 saw more than 30 million Americans (10.4% of the population) uninsured.

When you suffer an injury or succumb to sickness or disease, the last thing you should have to worry about is whether or not you can afford to see a doctor. But this is the norm for low- and middle-class Americans, many of whom skip regular checkups that are necessary for early diagnosis and prevention.

Instead, they save their money for rent and other necessities. But what happens when an emergency happens? Unexpected medical bills coupled with expensive insurance can lead to bankruptcy… a situation in which you have little power to protect yourself and your family.

Healthcare costs are rising

Healthcare costs are on the rise, increasing annually for a variety of reasons. We can thank the inflated price of a single drug (used to treat hepatitis C) for 13% of the increase in drug spending for the year 2014. This trend began when manufacturers realized they could charge whatever they wanted for “specialty drugs.”

These outlandish costs are mostly covered by insurance, which is what the drug companies want. Think about it: the patient receives free or inexpensive medication while insurance companies foot the bill.

But this is a slippery slope that leads to high premiums and gaps in coverage.

Big hospitals have also been adding to the problem by gobbling up smaller competitors like clinics and urgent care centers. If every medical facility in a given area is owned by the same company, patients have no hope of finding a better deal.

Some giant hospitals have even made the move to run their own insurance policies – saving money on their end without reducing patient premiums. And those high price tags don’t necessarily mean better care, either. The price is whatever the insurer and provider negotiate. “That’s why you’ll see wildly different prices for the exact same procedure, even in the same town,” says CEO Elizabeth Mitchell of the nonprofit organization Network for Regional Healthcare Improvement.

“One hospital can charge $5,000 for a service where another might charge $1,200 for the exact same service with no meaningful difference in quality.” A study conducted last year by Castlight Health found that the cost of a mammogram in the US ranges from $43 to over $1,500.

In New York City alone, the cost of a mammogram ranges from $130 to $1,898.

“Despite mandated insurance coverage for certain services, evidence shows that women forgo basic preventative care due to cost considerations and that delaying preventative care can harm patient health and increase future medical spending,” explains Vice President Kristin Torres of Castlight.

The study, conducted in late 2015, examined the cost of several women’s health procedures including HPV tests, OB/GYN follow-up visits, and mammograms.

These worrisome statistics shows that the big players have realized they can charge whatever they want simply because they can. More reasons for the price hike include:

• Expensive medical technology
• Aging population
• Economic prosperity

Insurance doesn’t cover the basics

Back in the day, health insurance covered nearly all of a person’s health costs. Today, plans pass most of that cost on to consumers in addition to monthly premiums. This is called “cost sharing.” In addition to copayments, cost sharing includes deductibles and co-insurance (in which you pay for a percentage of care).

The idea here is that you’ll “shop smarter” and avoid unnecessary care. But is there really such a thing as “unnecessary care?”

Deductibles are rising along with total out-of-pocket costs. And those who decide to forgo insurance altogether will be punished at the end of the year with a hefty fine.

There’s simply no way out: plans with low deductibles have high premiums. Even if you’re lucky enough to have an employer-sponsored plan, that money likely comes out of your wages.

Another pitfall is reference pricing – this is when an insurer sets a cap for how much they are willing to spend. “It’s the most unfair shift that I’ve seen,” says Mitchell. “They’re asking you to be an informed consumer when you may not have the ability or information to choose cost-effective care.

Hospitals keep secrets

Perhaps the worst part about this whole healthcare mess is that insurers and hospitals aren’t required to tell you how much an upcoming procedure or surgery will cost. All they have to do is cite “confidential negotiations.” “It’s not universal, but not uncommon,” says Mitchell.

If you encounter this situation, I recommend searching for a database that tracks how much people pay for healthcare in your state. You can also check out national and state averages here:

Clear Health Costs
Health Care Blue Book

Even if your hospital does tell you how much a procedure will cost, you may want to consider a road trip. As I explained above, there may be a price difference of several thousand dollars between your hospital and one in the next state.

Still, many aspect of healthcare are not shoppable. The Health Care Cost institute found that a mere 43% of health care spending goes to things you could technically have shopped for. This number dwindles when you think of those too sick to look around or those who can’t afford transportation to another city or state.

Is there any good news?

It is theoretically possible for every American to attain health insurance. The number of uninsured is slowly dwindling (most likely due to the threat of fines), and even if your plan is expensive, you’ll still benefits from the negotiated rates.

It’s reasonable to look for discounts on your own, but you will rarely score the type of deal an insurer can get. You should, however, try to shop for care – even if you can’t save much money doing so.

Do whatever you can, and when you find yourself facing high costs – realize that it’s not you, it’s the system.


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April Kuhlman

April Kuhlman

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