The Price of Private Health
This essay was
published in a shorter form by the on-line edition of the
Author: Samuel Metz
How much would you pay to keep your private health
insurance instead of a single payer system? A thousand
dollars? Ten thousand dollars? A million dollars?
How about $350 billion?
Americans are unique among civilized countries in our
persistent effort to finance health care with unregulated
private insurance. Consequently, our public health is the
lowest among civilized nations while our costs are the
highest, bar none, in the world.
Driving the high cost is overhead - plain old ponderous
paperwork generated by our antiquated private insurance
system -$350 billion a year. On a very personal level,
that's $1,125 annually paid by each one of us. Make no
mistake about it: This money does not pay for health care.
It pays for administrators, accountants, billing clerks,
and benefits managers to transfer our money to health care
Not all of this goes to private insurance companies
themselves, just $126 billion. And not all of that goes to
profit and lobbying either, only a couple billion. So
where does the rest go?
It goes to coercing insurance companies to pay up.
It isn't easy for a health care provider to collect from
an insurance company. After all, this industry denies 30%
of all first claims, survives by retaining as much money
as possible, and regards the 80% of policy premiums it
pays to health care providers as a "medical loss."
Hospitals, for example, need sprawling billing
departments, often larger than their nursing staff, to act
as collection agencies. That's not health care, that's
just the cost of doing business with the health insurance
industry. That's not all.
Physicians struggle to collect money, too. The average
doctor spends $68,000 annually cajoling private insurance
companies to pay what is owed. We have 1100 different
health insurance companies, each with a herd of benefit
schedules. A family practitioner in Chicago might need to
deal with 17,000 different schedules, each with a
different and complex form to complete. Suddenly you
realize what all those clerks are doing behind the counter
at your physician's office, staring at computer screens
and waiting on hold.
Your employer is not spared the burden of paperwork
either. If you're one of the lucky citizens to have
employer-sponsored insurance, your harried boss finds the
fine print of health insurance policies as baffling as you
do. Hence the need for an expert, maybe dozens, just to
keep track of your health care benefits.
It adds up - to $350 billion.
Clearly filtering our dollars through private insurance
companies squanders a lot of money (one dollar out of
every three to be exact ) before it gets to real world
health care. These losses evaporate if the US adopted a
single payer system. Mind you, single payer systems still
have administrative costs, just $350 billion less than we
Let's ponder a moment on how $350 billion in paperwork
compares to other costs.
It is more than we spend on immigrant health care ($40
billion ), defensive medicine ($60 billion ), and health
insurance fraud ($72 billion ) - combined. It's more than
all physicians earn ($160 billion ). It is more than we
spend on medications ($261 billion ). It's more than we
spend on obesity-related diseases ($144 billion ),
tobacco-related diseases ($168 billion ), or
alcohol-related diseases ($96 billion ). It's more than we
spent on the Afghanistan war last year ($179 billion ).
It's more than the annual interest on our national debt
($224 billion ).
And it's more than the extra funding we need to provide
comprehensive health care to every single American ($225
Every nation that abandoned unregulated private insurance
as a way of funding health care now enjoys better health
at lower cost. About half our cost on average, both per
person and as a percent of gross domestic product (GDP) .
Curiously, one of America's own single payer systems, the
Veterans Administration, takes care of the sickest
patients with the best results at the lowest cost with the
highest patient satisfaction in the nation. Can life
without private health insurance paperwork be all that
We pay a high price each year to bail out our private
health insurance industry. If this $350 billion subsidy
required Congressional approval, as did the TARP and
financial industry bailouts, would you demand your Senator
vote for it?
If we insist on protecting our private health insurance
industry with an extra $350 billion each year, we deserve
a fair return on our investment.
Are you getting enough value for your $350 billion?