Ok, looking at a real example from 2009 my doctor charged $150 to the insurance for an x-ray. They paid him something like 24 dollars.
edit, in the interest of fairness, the reduction in his fee was meager (maybe like 10-15%)
A couple of points I haven’t seen yet. First, group policies (such as through an employer) can’t drop someone based on their health condition, although they can have annual or lifetime maximums. Individual policies can drop or fail to renew people based on health conditions. It wasn’t clear if we were talking just about people in the individual market.
Lacking insurance can also mean that some providers will not do business with you. Yes, the ER needs to stabilize you in an emergency, but a surgeon isn’t required to extend you credit to operate on a chronic condition. So unless you are seriously wealthy and can pay cash, that puts you in a difficult situation. Unless you have enough liquidity to pay cash up front, your access to providers will be limited without insurance.
Some providers do negotiate discounts with people who pay cash. Some insurance companies negotiate discounts by buying “in bulk.” This is probably a YMMV thing depending on exactly what your issue is, whether you are able to negotiate for the cash discounts, etc. One area where insurance companies do a lot of negotiating is prescription drugs. So people with ongoing prescriptions are more inclined to buy insurance.
Another thing to keep in mind is that costs are somewhat normally distributed. By the time you are out to 105 days of hospitalization, you are in the “long tail.” Picture the normal curve. The people in the thick part of curve under 30 days benefitted from the insurance without risking bankruptcy.
I’m not sure I agree. I guess I assume that the distribution is more like the right half of the bell curve, with the vast majority of people consuming relatively little health care and not requiring any hospitalization in a year. And that’s balanced by a very small group – like me – out in the long tail with a huge expense. The average may work out, but I’m guessing the median is under a grand.
Yes, there are a lot of zero consumers when you look at health expenses overall. I was actually referring to the subset that consume some hospital services in a year, but I realize I wasn’t clear. I focused on that subset because pretty much any hospitalization means you come out ahead on insurance for the year. The people who consume some hospitalization but under 30 days benefit from the policy. Also, a 30 day limit on hospitalization has not been, at least historically, a common feature of good, employer-based health insurance. I’m sorry that it applied to your family, but it doesn’t apply to a lot of policies and therefore doesn’t factor into a lot of people’s decisions. I have no doubt it would become a more common feature, though, without changes to the current system.
Assuming that all other things were equal (ie., you can obtain the fee schedule rates), a combination of ultra-high-deductible health insurance and HSA (health savings account - basically a tax-free account that can only be used to pay for medical care) would be just about perfect for most people.
Unfortunately, the Bush Administration combined HSAs with what they called high-deductible health insurance plans, but aren’t. There is an upper limit on the deductible portion of HSA-accompanying plans, currently $5,600 for individual policyholders.
This makes the cost of a private health insurance policy of that type hardly any lower than a low-deductible policy.
For me, the same is true of automobile and home owners insurance - but I would not dream of objecting to having that insurance. In fact, my state and my mortgage company insist on each.
While it’s probably not as high as 95%, most people probably do pay more for health insurance than they consume in any given year. This is a case where the mean expense and the median expense are not the same. But the problem is not knowing whether you will be one of the luck ones or not.
95% ignores a lot of baseline expenses. Every baby that is born probably costs the insurance company close to a year’s premiums. Every person with diabetes probably has expenses equal to about a year’s premiums. Most people on a daily medication that doesn’t have a generic probably have expenses of about 20% of a year’s premiums.
The employer-based system with its annual open enrollments has conditioned people to think about health expenses on an annual basis. There’s nothing particicularly rational about that. People will have varying health costs over the life cycle. People will also accumulate and eventually spend down assets over their lifetimes. Annual (or 6-month, or quarterly) health insurance doesn’t handle that reality well at all.
It is not true that the goal of any insurance is to break even or come out ahead monetarily. I don’t know of anyone who hopes he will become severely ill so that he can stick it to his insurance company. The point of insurance is to mitigate risk, and the money you give up is the price you pay to offload some of the risk you face. Yes, many health insurance plans have benefit limits, so there are limits placed on the amount of risk you can avoid. But that doesn’t mean you’re not getting some benefits of reduced risk for your money. In your example, yes, if you face a $500,000 bill, $100,000 from the insurance company is going to be little comfort. But the insurance you outlined is useful in avoiding costs associated with anything that costs $100,000 or less, so you are getting that benefit. Presumably, if covering up to $500,000 was important enough to you, you could open up your wallet and pay even more money for secondary health insurance, thereby mitigating your risk further.
Risk is not simply about the value of expected outcomes; it is also about variance of those outcomes. For instance, you could choose to flip a coin once where you win $2 if it comes up heads and you lose $1 if it comes up tails. Alternatively, you could choose to flip a coin once where you win $100,000 if it comes up heads and you lose $99,999 if it comes up tails. These two propositions have the same expected value, but vastly different risk profiles.
You wouldn’t even need to get hit by a truck. I fell and shattered both lower leg bones (at age 28), and the emergency care, surgery, and rehab cost upward of $100k. Given, it wasn’t an ordinary leg break, but even the first 48 hours of care (for which I didn’t have insurance - I was 2 days short of coverage at a new job) cost nearly $5k.
It doesn’t take a super-severe incident to make insurance worth it even to a young, healthy person, given the high cost of even basic emergency care. Nothing I had done in those 48 hours would have been done much differently 100 years ago (X-rays, oral opiates, and having a nurse or two hold me down while the doctor yanked the bones back into place and put the leg in a temporary cast pending later surgery). If the insurance hadn’t kicked in after those 2 days, I would have had to declare bankruptcy.
One of the problems is that people opting out of health insurance are the ones with the lowest costs. This means that the highest cost individuals are left and thus the premiums go up even more. If you look at health insurance as a social cost, you want everyone, especially the lowest cost individuals, in the pool. That will keep premiums reasonable for everyone.
Remember that the low cost 20 year old of today is the high cost 70 year old of tomorrow.
One of the reasons U.S. health insurance became so bad is that for profit insurers saw there was a market for it back in the 1950s and siphoned off the lowest risk consumers leaving the non-profit agencies with the highest risk consumers.
Health Insurance has to be run as a single pool in order to help keep costs down. There also has to be some mechanism to encourage the medical consumers to watch for costs.
Not all medical costs have gone up. Costs for cosmetic surgery has substantially dropped over the last 20 years because medical consumers have to pay for it themselves. Lasic eye surgery is now advertised as being cheaper than disposable contacts. Nips and tucks that once only the very rich can afford are now given to bridesmaids, so they all have identical boob sizes. You might not be able to afford that life saving surgery, but you’ll be a beautiful corpse.
The cost of LASIK has gone down because the technology has matured.
And there is competition.
It’s also a heck of a lot more reasonable to shop around for someone to do your Lasik than it is for Eva Luna to shop around for someone to set her broken legs. Relying on individual consumers to price shop is of limited practical use in reducing costs. When you’re facing a really big cost, it’s not realistic to shop around. When you’re facing a trivial cost, like $15 or $25 for a flu shot, it’s not going to make much difference if you shop around. If an insurance company or government agency shops for thousands or millions of flu shots, that could make a worthwhile difference.
By the same reasoning you shouldn’t buy home or car insurance, as most people pay out vastly more than they collect. Why do they do it? To protect against the extreme life-changing accident, not against everyday expenses.
I would assert that this is not necessarily what people by “medical coverage” for, which is why I think it’s partially incorrect/odd to label it as “insurance”
for instance, medical risk can only be (reasonably) mitigated to a certain degree by the insured’s activity; property and automobile casualty risk can be mitigated far, far more
One strategy going through life is the “kamikaze defence” - go ahead and sue, you won’t even recover the cost of your lawyer. However, if you hope to accumulate significant assets going through life, this gives others leverage to make you pay.
So insurance of any kind is a gamble - I pay a little now to avoid the chance that I lose it all. I guess the real problem with health insurance is finding the right one. If your employment has limited options, you’re kind of stuck. Paying huge premiums for limited coverage is not a great option unless the other choice is worse.
Again, I find this sort of discussion amusingly frightening, like watching a bad horror movie. I just don’t understand it. In Canada here, you go to emergency, you go to your doctor, or you end up in the hospital - no cost to you. I shudder now to think I rode all across the USA from Canada on a motorcycle with no health insurance several times.
The other major consideration is that for most of us, probably 3/4 of all medical costs happen in the first or last 6 months of life - the trick is to be covered then. The rest of life is a gamble. I suppose the worst case is not so much the big incident that puts you in hospital, as the the onset of an even minor chronic condition that may take months or years and many doctor or hospital visits to fix; especially if you will have a separate deductible/co-pay for each visit.
No one in this thread (that I noticed) mentioned childbirth. Between the doctor’s fees, the hospital charges for the mother, and the hospital charges for the baby, the cost out-of-pocket will easily exceed a year’s worth of health insurance premiums. And that’s a bare minimum (unless you’re one of these “back-to-nature” types)…an insurance plan will also cover (to varying degrees) extras like pre-natal sonograms, epidural anesthesia, and prescription pre-natal vitamins.
You said it: My wife just gave birth to our first child a few weeks ago via c-section. The bills are already around $60K and rising. Thank goodness we have insurance.
Earlier this year, I found this article on childbirth abroad to be a fascinating commentary on American healthcare.
Two key differences, however. First, in the US you’re required to have car insurance if you own a car and homeowners insurance if you have a mortgage on your house. You can’t simply elect not to buy it.
Secondly, and more to the point, these are policies against the value of an asset, which have a calculable maximum value. So they actually do what you describe – protect against the extreme life-changing accident. Most health insurance policies don’t.
I still believe that for the vast majority of people, it makes more sense to bank their health insurance premium each year than to buy insurance.