# Why is healthcare so expensive without health insurance, and was it always this way? **URL:** \ **Category:** Factual Questions\ **Created:** [August 16, 2012, 10:18pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717 "2012-08-16T22:18:54Z")\ **Posts on this page:** 18\ **Page:** 4
**Author:** ![Lynn\_Bodoni](https://avatars.discourse-cdn.com/v4/letter/l/e47c2d/32.png) [@Lynn\_Bodoni](https://boards.straightdope.com/u/Lynn_Bodoni)\ **Post date:** [August 19, 2012, 3:53am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/61 "2012-08-19T03:53:16Z")
> [@snowthx](#): > > I do not think we will see govt-run hospitals any time soon. > > What I think we WILL see in the near future, as consumers, is something called a “Narrow Network”, or “Preferred Network”. These offereings to large employer groups will restrict the doctors, hospitals, and/or pharmacies you can go to to get the best out of pocket cost. If you go somewhere outside of that network, you will be expected to pay more out of your pocket. These types of offerings will not necessarily lower health insurance premiums, but they will stabilize them (meaning they will not rise as swiftly). It will limit choices, but who needs access to thousands of doctors and pharmacies, when a few close-by will do. And what if the patient needs a specialist? Or the patient needs some specialized equipment? These things are not always close by. And what if all the doctors in the area who are in the network are not accepting new patients? There are already “Preferred Provider” insurance offerings. They suck. I mean, they’re better than not having insurance at all, but I’ve spent way too much time trying to find a new podiatrist who was on the provider list AND who was accepting new patients, for instance. ---
**Author:** ![clairobscur](https://avatars.discourse-cdn.com/v4/letter/c/839c29/32.png) [@clairobscur](https://boards.straightdope.com/u/clairobscur)\ **Post date:** [August 19, 2012, 6:14am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/62 "2012-08-19T06:14:55Z")
> [@Mdcastleman](#): > > Comparing care at a doctors office to a doctors office you have figures a lot more closer to each other. An American doctor would charge more than E32, most likely a couple of hundred dollars for that level of care, but E30 for a simple X-Ray and E10 for a tetanus shot are closer to the costs at a private physicians office in the US. Emergency rooms, as noted and by contrast are fantastically more expensive, which is why insurance companys are building in disincentives for using them. Then, why? Obviously, it’s not a tetanus shot+antiseptic+an X-ray+15 minutes of nurse time+2 minutes of doctor time that amount to a cost of $2 500. So, what did the poster really paid? He paid for some absurd amount of overhead in the hospital? He paid for the next ten patients in the emergency room who couldn’t pay anything? He paid the rebate given to insurers? He paid for the deficit of the heart surgery department? What? ---
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [August 19, 2012, 12:30pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/63 "2012-08-19T12:30:31Z")
> [@Lynn\_Bodoni](#): > > And what if the patient needs a specialist? Or the patient needs some specialized equipment? These things are not always close by. And what if all the doctors in the area who are in the network are not accepting new patients? > > There are already “Preferred Provider” insurance offerings. They suck. I mean, they’re better than not having insurance at all, but I’ve spent way too much time trying to find a new podiatrist who was on the provider list AND who was accepting new patients, for instance. Yes, you are correct. Some will be out of luck if not near a “preferred provider”. However, those that are not geographically near a provider in the network can and should ask for an exception (to go to a doctor outside the network at in-network pricing) - these policies will usually have a \ exception process, and proximity can be a good reason for one. Remember, it is the employer groups that are demanding and choosing such offerings from the health insurers, so an appeal can also be made to the employer. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 19, 2012, 1:09pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/64 "2012-08-19T13:09:18Z")
> [@Fear\_Itself](#): > > You posted a cite that claims premiums are too high. You still haven’t provided a cite for your claim that tort reform will reduce premiums. > > In states where tort reform has been passed, [premiums did not come down](http://www.gpo.gov/fdsys/pkg/CHRG-112hhrg63871/html/CHRG-112hhrg63871.htm): As I originally stated, it varies widely by the specialty. It’s driving OB doctors out of business. Tort reform is absolutely part of the equation. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 19, 2012, 2:36pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/65 "2012-08-19T14:36:51Z")
> [@Magiver](#): > > Tort reform is absolutely part of the equation. Is that an opinion, or do you have any evidence that tort reform will reduce premiums? ---
**Author:** ![snowthx](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/snowthx/32/10660_2.png) [@snowthx](https://boards.straightdope.com/u/snowthx)\ **Post date:** [August 19, 2012, 5:20pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/66 "2012-08-19T17:20:33Z")
> [@Magiver](#): > > As I originally stated, it varies widely by the specialty. It’s driving OB doctors out of business. Tort reform is absolutely part of the equation. It may be part of the equation locally, but it is not a big part of the equation nationally. For example, [hospitals](http://www.forbes.com/sites/aroy/2012/05/12/how-employer-sponsored-insurance-drives-up-health-costs/) and [doctors](http://www.regence.com/transparency/regence-and-reform/what-drives-up-health-care-costs.jsp) make up at least half of the reasons health care costs continue to rise. Lawsuits are, of course indirectly part of “defensive medicine”, but it does not appear to be one of the major drivers contributing to rising costs. ---
**Author:** ![Mdcastle](https://avatars.discourse-cdn.com/v4/letter/m/958977/32.png) [@Mdcastle](https://boards.straightdope.com/u/Mdcastle)\ **Post date:** [August 19, 2012, 6:48pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/67 "2012-08-19T18:48:15Z")
> [@clairobscur](#): > > Then, why? Obviously, it’s not a tetanus shot+antiseptic+an X-ray+15 minutes of nurse time+2 minutes of doctor time that amount to a cost of $2 500. > > So, what did the poster really paid? He paid for some absurd amount of overhead in the hospital? He paid for the next ten patients in the emergency room who couldn’t pay anything? He paid the rebate given to insurers? He paid for the deficit of the heart surgery department? What? Yes, all of the above. The overhead of a hospital is fantastically expensive compared to a doctors office, and not all departments make money. Psychiatric units in particular tend to be moneylosers because you can’t charge for a lot of dxl and other services. Hospitals have a large amount of uncollectable debt- a private doctor can just refuse to see you if you can’t pay. Although providers generally make money on private insurance, they tend to lose money on Medicare and especially Medicaid. ---
**Author:** ![Pixel\_Dent](https://avatars.discourse-cdn.com/v4/letter/p/bc8723/32.png) [@Pixel\_Dent](https://boards.straightdope.com/u/Pixel_Dent)\ **Post date:** [August 19, 2012, 7:36pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/68 "2012-08-19T19:36:49Z")
I’ve discovered part of it is that health care providers charge insurance companies inflated rates for services they provide. During a period when I was self insured one of my children needed an operation. The billing department knew we hadn’t given them any insurance information so when we were settling up they gave us a statement, “to submit to your insurance company.” I told them we didn’t have insurance and would pay cash. She said, “Oh, let me fix that then.” We were given a new bill with just about every charge reduced by close to 75%. The 10k bill for the insurance company became a few thousand for us to pay. ---
**Author:** ![Lynn\_Bodoni](https://avatars.discourse-cdn.com/v4/letter/l/e47c2d/32.png) [@Lynn\_Bodoni](https://boards.straightdope.com/u/Lynn_Bodoni)\ **Post date:** [August 19, 2012, 8:06pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/69 "2012-08-19T20:06:14Z")
> [@Lynn\_Bodoni](#): > > And what if the patient needs a specialist? Or the patient needs some specialized equipment? These things are not always close by. And what if all the doctors in the area who are in the network are not accepting new patients? > > There are already “Preferred Provider” insurance offerings. They suck. I mean, they’re better than not having insurance at all, but I’ve spent way too much time trying to find a new podiatrist who was on the provider list AND who was accepting new patients, for instance. > [@snowthx](#): > > Yes, you are correct. Some will be out of luck if not near a “preferred provider”. However, those that are not geographically near a provider in the network can and should ask for an exception (to go to a doctor outside the network at in-network pricing) - these policies will usually have a \ exception process, and proximity can be a good reason for one. Remember, it is the employer groups that are demanding and choosing such offerings from the health insurers, so an appeal can also be made to the employer. I’ve never had an exception granted. That might be just my experience, but it’s happened with more than one insurance company. I’ve also never heard of an exception being granted. I’m lucky enough, now, that my husband works for the federal government, and he has a variety of companies that will offer policies. But this is definitely a case of “cheapest to buy isn’t always the best bargain”, and it’s not always obvious just how limited the PPOs’ offerings are, without doing a lot of Googling. Back before the internet, about all I could do was to avoid any group that advertised PPO. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 20, 2012, 12:13am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/70 "2012-08-20T00:13:49Z")
> [@Fear\_Itself](#): > > Is that an opinion, or do you have any evidence that tort reform will reduce premiums? It’s not my opinion that lawsuits are driving OB doctors out of the specialty. If an insurance company will only pay X and a doctor needs 1.2X to stay in business then either they raise the price or discontinue the service. ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 20, 2012, 12:19am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/71 "2012-08-20T00:19:14Z")
> [@Magiver](#): > > It’s not my opinion that lawsuits are driving OB doctors out of the specialty. If an insurance company will only pay X and a doctor needs 1.2X to stay in business then either they raise the price or discontinue the service. But your solution, tort reform, won’t lower premiums, so you must have another motive for advocating it. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 20, 2012, 1:02am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/72 "2012-08-20T01:02:15Z")
> [@Fear\_Itself](#): > > But your solution, tort reform, won’t lower premiums, so you must have another motive for advocating it. because I don’t think rice paddies are the optimal delivery system. Tort reform does lower the cost to doctors of certain specialties. It states right in the cite about tort reform in Texas that they lost doctors prior to tort reform and gained them back after tort reform. Jon Opelt, executive director of Texas Alliance for Patient Access, said tort reform in Texas has benefited patients by adding nearly 5,000 more physicians than can be accounted for by population growth. Opelt also said that patients have greater access to specialists in high-risk fields of medicine, and more emergency room doctors are willing to be on call because their fears of lawsuits have been reduced. Before the 2003 reforms, “55 Texas counties saw a net loss of physicians and … some 99 counties lost a high-risk specialist,” Opelt said. “An estimated 5,000 high-risk specialists restricted their practice due to liability concerns.” ---
**Author:** ![Fear\_Itself](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/fear_itself/32/19637_2.png) [@Fear\_Itself](https://boards.straightdope.com/u/Fear_Itself)\ **Post date:** [August 20, 2012, 10:34am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/73 "2012-08-20T10:34:00Z")
Where does it says premiums went down after tor reform? ---
**Author:** ![BobLibDem](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/boblibdem/32/3149_2.png) [@BobLibDem](https://boards.straightdope.com/u/BobLibDem)\ **Post date:** [August 20, 2012, 12:13pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/74 "2012-08-20T12:13:31Z")
> [@Wesley\_Clark](#): > > Divide the annual growth rate by 72 to determine how long before prices double, so if the rate of inflation is 7% a year, in 10 years prices will be double. In 30 years they will be 800% higher. Health insurance rates are going up 10-50% a year. At my employer the rates went up 30-45% a year each year for the last few years. I question the mathematics. If something goes up by X% per year, what you need is the number n such that (1+X)^n=2. Then n\*log(1+x)=log 2, then n=log 2/log(1+x). For 7%, n=10.24 yrs. If it was 12%, then log 2/log 1.12 = 6.12, not 6.00 as your rule of 72 would lead. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [August 20, 2012, 12:56pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/75 "2012-08-20T12:56:29Z")
> [@BobLibDem](#): > > I question the mathematics. If something goes up by X% per year, what you need is the number n such that (1+X)^n=2. Then n\*log(1+x)=log 2, then n=log 2/log(1+x). For 7%, n=10.24 yrs. If it was 12%, then log 2/log 1.12 = 6.12, not 6.00 as your rule of 72 would lead. The “Rule of 70” has been a longstanding _ **approximation** _ of interest rate calculations in the range that’s normal for western world financial calculations. Of course it breaks down when you get to ludicrous rates, like 50% compounded monthly, or 0.5%p.a. but in the range of about 2% to 15% it’s not a bad approximation. > [@Nametag](#): > > In 1975, California passed MICRA, the Medical Injury Compensation Reform Act. This law was one of the first medical tort reform laws in the country, if not the first. It limited both awards for non-economic damages and lawyers’ fees, and in its wake, defendants’ costs did go down dramatically. Malpractice premiums, on the other hand, continued to rise until 1988, when Proposition 103 forced a rollback of all insurance premiums, and gave regulatory authority to the Department of Insurance to keep them low. Nonetheless, loss ratios (the quotient of payments to premiums) for California malpractice insurers have been incredibly low – never over 40%, usually below 25%. In 2009, The Doctors Company, California’s largest medical malpractice insurer (and a major insurer in all 50 states), reported an estimated loss ratio of 10%. When we compare this to the 50% - 60% range for the largest insurance markets, auto and workmen’s comp, or to the 65%-70% that insurance experts claim assures an adequate profit, we can see that the need for reform is great – but not tort reform. Huh? I hope you don’t mean that insurance companies pay $40 or $50 - $60 for every $100 they take in. That sounds like a better racket than even collecting taxes. ---
**Author:** ![Magiver](https://avatars.discourse-cdn.com/v4/letter/m/4491bb/32.png) [@Magiver](https://boards.straightdope.com/u/Magiver)\ **Post date:** [August 20, 2012, 8:50pm UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/76 "2012-08-20T20:50:06Z")
> [@Fear\_Itself](#): > > Where does it says premiums went down after tor reform? If the prices didn’t go down then the savings is the rate of inflation using a health care index. Haven’t kept track of it in awhile but from 1981 to 2006 my insurance costs rose an average of 5.5 percent a year. That was for an HMO policy. That would be in Ohio. If I were to hazard a guess I would say the article I questioned (the numbers quoted) was off by 2 digits. instead of being a savings of .05% it was a 5% savings. ---
**Author:** ![Nametag](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/nametag/32/406_2.png) [@Nametag](https://boards.straightdope.com/u/Nametag)\ **Post date:** [August 21, 2012, 11:52am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/77 "2012-08-21T11:52:28Z")
> [@Nametag](#): > > In 1975, California passed MICRA, the Medical Injury Compensation Reform Act. This law was one of the first medical tort reform laws in the country, if not the first. It limited both awards for non-economic damages and lawyers’ fees, and in its wake, defendants’ costs did go down dramatically. Malpractice premiums, on the other hand, continued to rise until 1988, when Proposition 103 forced a rollback of all insurance premiums, and gave regulatory authority to the Department of Insurance to keep them low. Nonetheless, loss ratios (the quotient of payments to premiums) for California malpractice insurers have been incredibly low – never over 40%, usually below 25%. In 2009, The Doctors Company, California’s largest medical malpractice insurer (and a major insurer in all 50 states), reported an estimated loss ratio of 10%. When we compare this to the 50% - 60% range for the largest insurance markets, auto and workmen’s comp, or to the 65%-70% that insurance experts claim assures an adequate profit, we can see that the need for reform is great – but not tort reform. > [@md2000](#): > > Huh? I hope you don’t mean that insurance companies pay $40 or $50 - $60 for every $100 they take in. That sounds like a better racket than even collecting taxes. That’s exactly what I mean. An insurance company’s loss ratio is the amount paid on claims divided by the amount collected in premiums. This number does not take into account administrative costs, lawyers’ fees, and other overhead, nor does it account for earnings on investments (insurance companies invest premiums and pay claims out of earnings, when all is going well), but it’s a useful indicator of an insurer’s health and profitability. Malpractice claims can take years to pay – as long as ten years – so malpractice insurance companies are usually sitting on larger reserves than other insurers, and earn enough income to pay off claims without depleting premiums. This is true even for a 70% loss ratio, but over the past five years, The Doctors Company’s net profit margin has been over 30%. At least half of their expenses are lawyers’ fees, not claims, and their acquisition of another large insurer was a big expense in 2008. The net profit is also after dividends and taxes, so their business expenses were even lower than these numbers show. ---
**Author:** ![Grim\_Render](https://avatars.discourse-cdn.com/v4/letter/g/a87d85/32.png) [@Grim\_Render](https://boards.straightdope.com/u/Grim_Render)\ **Post date:** [August 22, 2012, 1:25am UTC](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717/78 "2012-08-22T01:25:33Z")
> [@supery00n](#): > > Is there anyone/thing to “blame” for this, or is this just the way things are? Health care costs in the United States have increased about twice the rate of other nations since 1980. Economic orthodoxy is that health care is badly unsuited to market delivery. [This](http://www.aeaweb.org/aer/top20/53.5.941-973.pdf) was parth of Kenneth Arrows work on uncertainties for which he got the 1972 Nobel Price in economics. Among the strikes against health care in a market environment is that its rife with externalities -if an insured person is admitted to hospital, neither the hospital nor the insured person bears the cost of treatment. Thus, the fundamental brake against overprovision is removed. Also, it has no price elasticity. Price elasticity represents the customers ability to not purchase a serivice, if the price is too high. If your kid has cancer, you will pay anything. Hence, a fundamental market mechanism for correcting unreasonable pricing is not present. In addition, barriers to entry are present. Barriers to entry means that it is very difficult for any small businesses to enter the market and compete with the large established businesses. It is just too expensive to get a toehold in the market. This means that the basic market mechanism where a provider that does not perfom efficiently gets eliminated is severly weakened. And it is far more profitable to form cartels and increase prices than compete for customers. [Previous page](https://boards.straightdope.com/t/why-is-healthcare-so-expensive-without-health-insurance-and-was-it-always-this-way/631717.md?page=3)