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  • Writer's pictureAhsan Malyk

Why is Health Insurance So Expensive?

Life expectancy in the United States is 76.1 years as of 2021, yet only 91.4% of people have health insurance, unlike 99% to 100% in other industrialized nations.


The healthcare system in the US is complicated, and the market determines most expenses. Hospital care accounts for 31% of the country's healthcare costs, and high, unregulated prescription drug costs and healthcare worker incomes are greater than in other western countries. The cost of an individual is further increased by administrative rules governing billing and coding.


The cost of healthcare in the US is influenced by a variety of factors, and despite an increase in wages for American employees, net pay has stayed constant as a result of rising health insurance premiums.


1. Various Systems Produce Waste


Costs associated with "administration" are usually regarded as the root of excessive medical spending. Administrative expenditures make up roughly 8% of the U.S. health care budget, compared to 1% to 3% in the other 10 nations the JAMA study examined. 3


The healthcare system in the United States is extremely complicated, with different regulations, funding, enrollment deadlines, and out-of-pocket expenses for employer-based insurance, private insurance obtained through healthcare.gov, Medicaid, and Medicare, in all of their various forms.


Customers in each of these markets have a variety of coverage tiers, high deductible plans, managed care plans (HMOs and PPOs), and fee-for-service options from which to select. Pharmaceutical prescription insurance with its tiers of coverage, deductibles, copays, or coinsurance may or may not be included in these plans.


This requires service providers to comply with many usage, coding and invoicing restrictions. And the majority of administrative expenses are attributable to these operations.


2. Drug prices have increased


Americans often spend almost twice as much on prescription medications as people in other industrialized nations. Compared to Europe, where drug prices are government-regulated and frequently based on the clinical efficacy of the prescription, high drug prices are the single greatest area of overspending in the U.S.


The U.S. spends an average of $1,443 per person on drugs, compared to $749 spent by the other wealthy nations analyzed, despite there being minimal regulation of medication costs. The cost of drugs in the United States is 256% more than in comparable nations.


Private insurance in the US can bargain prescription pricing with manufacturers, frequently using pharmacy benefit managers' services. Medicare, which covers a sizable portion of the cost of prescription drugs nationally, is not allowed to bargain with manufacturers on pricing.


3. Medical Personnel Are Paid More Than Nurses


As of 2020, the average family physician salary in the United States was $214,370, and the average specialist salary was $316,000, far above the norm in other developed nations. Additionally, American nurses earn significantly more than nurses abroad. A nurse in the United States typically makes around $74,250 per year, compared to $58,041 in Switzerland and $60,253 in the Netherlands.


By demanding prior authorization before seeing an expensive specialist, U.S. managed care plans (HMOs and PPOs) can reduce healthcare expenses. Another way to cut costs is to use a nurse practitioner rather than a family physician.


4. Hospitals Are Business Hubs


31% of the country's healthcare costs are related to hospital treatment.


A 2019 study published in Health Affairs found that physician prices increased significantly more slowly between 2007 and 2014 than the prices for inpatient and outpatient hospital treatment.


5. Hospital spending increased 6.4% to $1.27 trillion in 2020.


Hospital surgical procedure costs are significantly higher in the United States than in other nations. For instance, the average cost of an angioplasty to open a clogged blood vessel is $6,390 in the Netherlands, $7,370 in Switzerland, and $32,230 in the United States. In a similar vein, a cardiac bypass surgery in the United States costs $78,100 while it only costs $32,010 in Switzerland.


Many hospitals nowadays are financially in peril. Additionally, the coronavirus lockdown is responsible for a significant portion of the drop in the general economy, the halting of elective surgery, and the sharp decline in provider visits.


Defensive medicine in U.S. healthcare practises


Doctors and hospitals may prescribe "just in case" tests and scans since both parties have a stake in avoiding legal action. These tests can also be expensive. While a CT scan only costs $97 in Canada and $500 in Australia, it costs $896 on average in the United States.


In the United States, an average MRI scan costs $1,420; in Britain, it costs about $450. According to research, healthcare in the US is so expensive not due to the sheer volume of tests and procedures but rather to their high cost109 6. US Prices Vary Dramatically


Due to the system's complexity and the absence of any established fees for medical services, providers are free to determine their own prices. Depending on the payer (private insurance or government programs like Medicare or Medicaid) and location, the healthcare service's cost might differ dramatically.


The Conclusion


Part of how most other affluent nations keep expenses in check is by giving the government a bigger say in negotiating healthcare costs. The large administrative expenditures that increase prices in the United States are not necessary for their healthcare systems.


These governments can bargain for reduced prices for drugs, medical supplies, and hospital care since they are the global administrators of their nation's systems. They may have an impact on the kind of therapies used and patients' access to experts or more expensive procedures. Although consumers may have fewer options, prices are kept in check.


In the United States, the government has been unable to play a more significant role in regulating healthcare expenses due to a lack of political support. While maintaining the existing quo to promote competition among insurers and healthcare providers, the Affordable Care Act concentrated on providing access to healthcare.


People need to do their study to discover the best health insurance company to fit their needs because the costs associated with the healthcare crisis of 2020 and 2021 threatened to swamp the healthcare system and government finances.


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