WHY DOES IT COST SO MUCH?

Amy Phillips tackles the question, Why is health care so expensive? She sites several factors, but focuses most of the essay on government mandates, including the requirement to pay for things as wide-ranging as oral contraceptives, in vitro fertilization, cosmetic surgery, and drug rehab. While all possibly meritorious, she notes,

The point is that all of these mandates for treatment that most people don’t need make insurance more expensive. These laws also make it more difficult for insurers to offer partial coverage at a cut rate, because if they’re going to insure against anything, they often have to insure against everything. That means that if you can’t afford insurance that covers reconstructive surgery after a mastectomy, you can’t have insurance against getting hit by a bus.

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The bottom line is that the more stuff that’s covered, the more expensive the insurance will be, because if a service is offered, someone will take advantage, the insurance company will have to pay, and they’ll take that money from all subscribers in the form of higher premiums. I’m sure that millions of uninsured Americans who worry about who would pay the bills if they had a car accident or a heart attack would be happy to forgoe coverage of toupees and wigs in order to get affordable coverage for routine medical care. And I think that insurance companies are perfectly capable of offering different coverage to meet the needs of different individuals and companies just like thousands of other service providers do. I’m not required to pay for a leg wax if I go in for a haircut. So why should I be legally forced to pay for infertility treatments I’ll never use just because I want to be covered if I get run over by a bus?

In any case, there’s good reason to believe that rising healthcare costs are not due to insurance company greed so much as they are due to bad government policies that are trying to help us and failing. I won’t go into how the entire healthcare system has been skewed by the tax incentives given to employers who offer health insurance that are not available to private individuals who buy the same insurance, but that’s another problem. Our insurance premiums rise every year at least in part because we’re required to pay for services we may not want, and in some cases, services we might think are immoral, or at least frivolous and unneccessary. Individuals should decide for themselves how much coverage they need and what they need coverage for. I don’t need the government telling me that I should spend my money paying for well child care when I don’t plan on having children any more than I need them telling me that I should wear a sweater because it might get cold outside. But beyond the freedom issue, there’s a basic economic fact: the more insurance costs, the fewer people will be able to afford it. If we’re really worried about the uninsured in this country, we should let them buy the healthcare they need instead of forcing them to pay for healthcare that other, more financially solvent people have the luxury of demanding.

Indeed.

Optional coverage packages are often rather random. For example, in almost all plans, lasik surgery to correct congenital nearsightedness is considered “cosmetic” and therefore excluded, yet getting cosmetic surgery to replace breasts lost during a mastectomy is considered necessary. And, while I favor decriminalization, why is help to quit committing crimes–i.e., injecting heroin into one’s veins–considered a necessary medical expense?

FILED UNDER: Health
James Joyner
About James Joyner
James Joyner is Professor and Department Head of Security Studies at Marine Corps University's Command and Staff College and a nonresident senior fellow at the Scowcroft Center for Strategy and Security at the Atlantic Council. He's a former Army officer and Desert Storm vet. Views expressed here are his own. Follow James on Twitter @DrJJoyner.

Comments

  1. Bryan says:

    Don’t you mean she “cites” government sources?

  2. melvin toast says:

    I’ve never seen an objective study but I’d say that health
    care cost has gone up because:

    A. New procedures are more expensive.
    B. Liability insurance costs have gone up.
    C. Coverage includes a wider range of optional procedures.
    D. We’re keeping people alive longer with a lot of the new proedures in A.
    E. There is a growing population of old people and a shrinking population of young people.

    I’m not sure which one, if any, factor is the prime culprit
    but I’d venture to guess that even if you eliminated B and C, costs would still be rising albeit at a slower pace.

    Fact of the matter is I don’t think most people have a clue. Ask a doctor, he’ll say it’s tort. Ask an HMO admin they’ll say other A. Ask a lawyer, they’ll say it’s insurance provider greed. It’s like trying to find out how many licks it takes to get to the tootsie roll center of a tootsie roll pop.

  3. joy says:

    Oh good, I’m looking forward to the day when there’s some old guy whose Mr. Johnson isn’t working properly and I won’t have to subsidize his Viagra, Levitra, etc. because clearly, the guy should pay extra for his malfunctioning friend since one doesn’t really need sex to survive.

    And I think the arguement that birth control shouldn’t be covered is rich, since asking women to pay out of pocket to avoid pregnancy will certainly ensure that women have access to reliable birth control. Don’t want to get pregnant? Abstain. You don’t need sex to survive. And if you do get pregnant, guess what, you either have to pay for the abortion or the kid. Boy, that’s choice I tell ya.

    Snarkiness aside, I think her arguement is flawed since there is only so much extra one can really cut from a health care plan. Sure, I’m a healthy woman of childbearing age, and I’d love to cut those seniors who need expensive medicines and care right out of my insurance group. I mean, why the heck should I subsidize granny’s care so she can live an extra few years when she isn’t productive? In other words, without my subsidizing granny’s 15 prescription medications, granny wouldn’t be around for too long.

    In other words, I just think there’s different usage patterns doesn’t mean the differences are less worthy. While young adults don’t normally need require intensive health care, my kid does. And so does granny. And the old guy who takes medicines which has sports figures as spokespeople.

  4. James Joyner says:

    Joy,

    Her argument is that people should be able to choose plans that are more “no frills” if that’s what they desire–or all they can afford. If states require companies to cover everything that’s “nice to have,” then they have to charge enough to cover all that.

    It seems to me that radical treatments like in vitro fertilization–which I have no objection to as a matter of principle–shouldn’t have to be covered. Ditto addiction treatment. But if you want a plan that covers those things, then you should be able to pay extra for them.

  5. melvin toast says:

    Allowing people who don’t need frills buy no frills makes
    the problem worse doesn’t it? Young single people who normally don’t use the services they’re paying for would move into no frills plans removing money from plans with older people et.al. who receive more services than they pay for.

    Let’s go universal! That way we can ALL pay through the nose for a health plan that won’t provide any service!

    Seriously though, as I said above, the crux of the problem may be things we may not have control over. In twenty years you’ll have lots and lots of old people and not too many healthy young workers.

  6. melvin toast says:

    Allowing people who don’t need frills buy no frills makes
    the problem worse doesn’t it? Young single people who normally don’t use the services they’re paying for would move into no frills plans removing money from plans with older people et.al. who receive more services than they pay for.

    Let’s go universal! That way we can ALL pay through the nose for a health plan that won’t provide any service!

    Seriously though, as I said above, the crux of the problem may be things we may not have control over. In twenty years you’ll have lots and lots of old people and not too many healthy young workers.

  7. melvin toast says:

    Allowing people who don’t need frills buy no frills makes
    the problem worse doesn’t it? Young single people who normally don’t use the services they’re paying for would move into no frills plans removing money from plans with older people et.al. who receive more services than they pay for.

    Let’s go universal! That way we can ALL pay through the nose for a health plan that won’t provide any service!

    Seriously though, as I said above, the crux of the problem may be things we may not have control over. In twenty years you’ll have lots and lots of old people and not too many healthy young workers.

  8. melvin toast says:

    Allowing people who don’t need frills buy no frills makes
    the problem worse doesn’t it? Young single people who normally don’t use the services they’re paying for would move into no frills plans removing money from plans with older people et.al. who receive more services than they pay for.

    Let’s go universal! That way we can ALL pay through the nose for a health plan that won’t provide any service!

    Seriously though, as I said above, the crux of the problem may be things we may not have control over. In twenty years you’ll have lots and lots of old people and not too many healthy young workers.

  9. 42nd SSD says:

    I read a couple of recent studies that place much of the blame for rising health care costs on treatments for the elderly (people are both living longer and there are many more drugs and other treatments available) and legal costs (liability has gone up tremendously for the pharmas and doctors in the last 10 years).

    Drug costs have gone up significantly as well, due to both the increased complexity of the drugs themselves and the R&D needed to develop them. In many cases it costs 10x as much to develop a typical new medication (celecoxib was given as an example) as it did 20 years ago, thanks in part to increased FDA regulations and costs of doing clinical trials. There are also significantly more failed trials than before. And, many “obscure” diseases are receiving significant R&D–which I think is great but it’s someing we all end up paying for.

    The average 35-year-old is receiving about the same amount and types of health care he/she would’ve been 15 years ago, with the exception of mental health. (Most health care plans either no longer cover psychiatric or psychological treatment at all, have a very high deductible, or have a low yearly ceiling.) Not really a surprise. Cutting corners (outpatient surgery the most blatant example) have kept some of the costs down, but this has been more than offset by other factors.

    The big shockaroo in the under 50 age group is the number of people developing type II diabetes. Treatment is a significant chunk of money, and it’s expected to become a $250+ billion industry in 10 years (total cost right now is approximately $120 billion, or about 11% of the total health care bill in the US). Number of diabetics will at least double in that timeframe. Even worse, since we’ll inevitably have plenty of noncompliant people we’ll also be dealing with lots of 60 and 70 year olds with neuropathy, retinitis and other chronic illnesses, not to mention people becoming full-blown diabetics and the associated costs.

    The sad part is the majority of these cases are preventable. Simple answer: lose weight! The connection between type II diabetes and being even 10% overweight is unarguably clear.

    Anyway, I hope that helps to explain a few things. While it’s fun to try to blame X, Y or Z the reality is there are a ton of reasons why costs are going up, many of which are unavoidable outcomes from increased technology. The one hope for us healthy folks is that the insurance companies will also become better at predicting who will get sick and will start charging appropriate premiums (the idea is to encourage people to live healthier lifestyles or pay the price–literally).

    I pay for my own insurance, and I pay about $60 a month for a $1,000 deductible PPO plan. (I’m 35, nonsmoking, nondrinking, non-drug-using, athletic, no chronic health problems. Ideal person to insure from the health insurer’s point of view.) I rarely go to the doctor except for yearly checkups, but the insurance is well worth it in case of a major health problem. Otherwise the insurance is effectively worthless for me in terms of paying for my average health care costs since they’re far under $1k a year. (I even had a couple of cysts removed a few months ago and I’m still going to end up way under my deductible.)