Rising healthcare costs is both puzzling and worrisome to many Americans. Health insurance premiums increased more than 60% over the past eight years. Deductibles— the amount you pay out of pocket for doctor visits — also increased; so you’re actually getting less for the money you pay in. Thinking about paying this increased cost while American wages have stagnated, maybe you’re wondering if it’s worth it to get rid of your health insurance plan.
How did costs get this out of control?
1) We don’t know how much it costs when we go to the hospital, so they can basically charge whatever they want.
This sounds basic, and you’re right. But when was the last time you went to the hospital, and they told you the prices ahead of time? When was the last time you saw a list of prices posted? And you can’t call them to comparison shop between two local hospitals, because they won’t tell you their prices. You’ll have no idea how much you’ll pay ahead of time.
This is crazy. Can you imagine going to eat at a restaurant, and having no idea how much the food prices are until the bill comes at the very end? As in that steak entree could cost $5 or $500, but they don’t tell you until the end. No one would be very happy about this. At least the customers wouldn’t be happy, because they lose since they don’t know their choices ahead of time. The restaurant might be happy, because they can charge whatever they want. This is basically what hospitals are doing to you.
One reason hospitals are getting away with this is because most people will never see that end price. They don’t have to think about it since their health insurance company pays most of it. The hospital knows it’ll get this money from the health insurance company, so why not? But not everyone has health insurance to pay the bulk of these large healthcare bills on their behalf.
So what happens to someone who gets into a major accident or needs an operation, but doesn’t have health insurance?
2) More and more people are unable to pay these high healthcare bills. So the hospital increases the prices of all their services even more to make up for these uncollected bills. Further continuing the cycle of increasing healthcare costs.
If I asked you to guess the #1 reason for bankruptcy in America, what would you guess? Maybe the inability to pay for too big houses or cars? Gambling? Some other reckless pursuit? No. Bankruptcies resulting from unpaid medical bills is the number one reason, affecting nearly 2 million Americans in 2013.
It’s easy for anyone who’s uninsured to find themselves in this predicament. Imagine you fall down some stairs and break a few bones; maybe you suffer a concussion and stay in the hospital for a few days. When you get home, you get a bill from the hospital for $200,000. You probably don’t have that amount of money just lying around. Most people in this situation would be forced to file for bankruptcy if they can’t pay their hospital bill.
The hospital isn’t able to collect that money from you, so they need to make up for it somehow. They pass this cost onto all the other patients by raising all their prices. I go into more detail about the costs of uninsured patients on society in my past article: An Argument for Forced Health Insurance.
In the next post, I’ll tell you about two counterintuitive laws that help keep healthcare prices high. And what’s being done about it right now.
Photo via Flickr user flirtcr