Do you know how health insurance really works?

[Like2Plan]

I agree because people who are rich afford like Mr Money Mustache is NO insurance and concierge medicine. He even discussed how paying for a private dr was more affordable than insurance. I mean great if you can afford it and for most of us here, we'd probably afford it and probably scrimp and save to do it. But for the majority of people they couldn't.

Also the gap between affordable to middle class and the rich is huge.

Even if you do have some money- I am wondering how that would hold up to some really serious expenses? Like how about an aortic aneurysm or a stroke that requires a life flight for care/rehabilitation?

[LivingAlmostLarge]

This is the system we already have, is it not? The only difference is right now there's a gap between affordable private health insurance and medicaid eligibility. Those in upper incomes just pay the deductible or out of network costs, out of pocket costs to get the care they want, where they want it, from private health systems.

I agree because people who are rich afford like Mr Money Mustache is NO insurance and concierge medicine. He even discussed how paying for a private dr was more affordable than insurance. I mean great if you can afford it and for most of us here, we'd probably afford it and probably scrimp and save to do it. But for the majority of people they couldn't.

Also the gap between affordable to middle class and the rich is huge.

[ua_guy]

The only solution that I can come to - and I haven't settled on it as a solution - is to place everyone on Medicare by default, and ration care big-time. If you want a concierge plan where you can go and do this and that procedure at your pleasure, you buy that on the open market as a supplement. However, as soon as the government starts tampering with the concierge plan, we are back to where we started. So this would be a split-baby situation: The government could run health care for the masses, which it desperately wants to do, it would be cheap (er), and it would be rationed. It would be the Greyhound bus. It will get you there, but without all of the frills. If you need a knee surgery, you might literally be taking a bus to Denver to get that done. If you want to fly first class and go wherever you want for care, you go on the open market - a market not tampered with by the government, and you buy additional coverage. Everyone wins. I think.

This is the system we already have, is it not? The only difference is right now there's a gap between affordable private health insurance and medicaid eligibility. Those in upper incomes just pay the deductible or out of network costs, out of pocket costs to get the care they want, where they want it, from private health systems.

[TexasHusker]

See above responses

How to fix the college cost situation? That's a tough one, as once the toothpaste is squeezed out of the tube, trying to get it back in the tube is tedious, if not impossible. Once government tampering begins, things become so entangled that the government can't see its way out. This is exactly what we are seeing with manipulation of treasuries by the U.S. government to keep interest rates low. Keeping interest rates low should be beyond the purview of the government in a free market economy. Yet since really 2007, the Feds have been tampering, and tampering, and tampering. The U.S. Treasury is literally issuing new bonds (paper money), and then buying them back, itself. That is essentially like playing Monopoly with someone and suddenly, the player produces a whole new wad of fake cash from their wallet and inserts it into the game. It creates an imbalance and the destroys the integrity of the board game. Only with the Fed, the game is real, and it is a potentially catastrophic situation for all of us.

Right now, the Fed has become afraid of A) a recession, and B) a stock market selloff. Thus, they are playing even more games to manipulate interest rates to keep them artificially now, all while reassuring us that there is no inflation. Yet we all know that there is significant inflation. Housing costs are skyrocketing, as are groceries and consumer goods. So we have a fundamental problem in that we can't trust the very people that are supposed to be representing us. Yet in a free market economy, recessions and expansions, as well as stock market bears and bulls, are just a normal part of the economic cycle.

As for college costs, currently, the only real solution being discussed is forgiveness of the loans. Well, those loans are backed by investors - bond holders, and we cannot default on those, so you and I, through our taxes, will have to fund the payoffs. We cannot discharge debt with the stroke of a pen, just like we cannot create more buying power with the stroke of a pen (i.e. minimum wage). Someone pays, somewhere.

If and when the government can extract itself from higher education finance, we can return to the normal ebb and flow of buyers and sellers agreeing on a price. But we all know that the government will not walk away from college loans; it will only double down and further entangle itself in the process.

As for medical inflation, there is no doubt that it began with Medicare, as the government stepped in as the payor for the demographic that represented the largest consumer block of healthcare services. Providers were short changed through inadequate reimbursement, and were forced to "cost shift" to their other paying patients. And so it began.

Comparing the U.S. healthcare system to other countries is problematic, as care is not rationed in the U.S., like it is in most of the rest of the developed world. For example, I would guess that there are only a few places in all of the U.K. where one might receive a PET scan. In the U.S., every MSA of 100,000 or more has at least one PET scanner. Chicago probably has more PET Scanners than the entirety of the UK and Canada combined. Certainly, the U.S. could implement a significantly less expensive healthcare system with rationed care.

The only solution that I can come to - and I haven't settled on it as a solution - is to place everyone on Medicare by default, and ration care big-time. If you want a concierge plan where you can go and do this and that procedure at your pleasure, you buy that on the open market as a supplement. However, as soon as the government starts tampering with the concierge plan, we are back to where we started. So this would be a split-baby situation: The government could run health care for the masses, which it desperately wants to do, it would be cheap (er), and it would be rationed. It would be the Greyhound bus. It will get you there, but without all of the frills. If you need a knee surgery, you might literally be taking a bus to Denver to get that done. If you want to fly first class and go wherever you want for care, you go on the open market - a market not tampered with by the government, and you buy additional coverage. Everyone wins. I think.

[disneysteve]

Say WHAT?!? A 50-yr mortgage?? Never heard of that except maybe with commercial property? I assume that's not conforming, and can't imagine it's very common... Many folks wouldn't even live long enough to ever see it paid off!

It's not the norm (yet) but there are 40 and 50-year loans.

And I was wrong. There are now car loans as long as 10 years, and 8-year loans are increasingly common.

[kork13]

. That's why we now have 7-year car loans and 50-year mortgages.

Say WHAT?!? A 50-yr mortgage?? Never heard of that except maybe with commercial property? I assume that's not conforming, and can't imagine it's very common... Many folks wouldn't even live long enough to ever see it paid off!

[disneysteve]

"because the cost of borrowing to buy the asset is so cheap it fuels the rise of people paying more and "affording" more."

That's the age-old problem of people using the monthly payment to decide what they can "afford" rather than the total cost. That's why we now have 7-year car loans and 50-year mortgages.

[LivingAlmostLarge]

Generally, when the end-user/consumer of a good or service is removed from purchasing such by a substitutionary third party, there is a significant inflationary effect on the underlying good/service. Usually, it is the government acting as the substitutionary third party - substituting for the tax payer - and the end results are almost always disastrous. I call this "governmental tampering in an otherwise free market economy."

I could write a book of the instances of such tampering over just the last 20 years, but I will mention three:

1. College loans. When the government is guaranteeing student loans, the student is then removed from the purchasing process. The tuition could be $5,000, $10,000, $20,000, or even $50,000 a year, and the student, and university, no longer care, because the loans are subsidized by the federal government. There is no longer any price sensitivity. Hence, you have inflation in college costs that is a multiple greater than general inflation. I graduated college in the late 1980s. Back then, I could work a full time job in the summer and pay for the entire year of school - room, board, tuition, and books. Fast forward to today, it isn't uncommon at all for college costs to be half or more of the annual family median income in the U.S. Now, many politicians want to toss all of those college loans to the feet of the tax payer through forgiveness. Forgiveness to the borrower means great sacrifice for everyone else. Yet is the government, itself, which started the crisis, through tampering.How do you suggest we fix the costs? I'm all for no loan forgiveness but it doesn't work without fixing the underlying problem you mention of how expensive it's been and that it is NOW not possible to work full time during the summer and pay for college. The costs are so exorbitant that it's impossible.

2. Housing loans. In the 1990s, the President and Congress decided that more Americans needed to own a home. Freddie Mac and Sally Mae, the federal government guarantors for conforming loans, were ordered to loosen their underwriting and down payment standards significantly. Before long, a home buyer could get a federally-guaranteed home loan with a down payment less than five percent, many even zero percent. Thus, the home buyer was removed from the purchasing process, meaning they had no "skin in the game" in terms of what an appropriate price for the house was, since it cost them little to nothing to buy. Price sensitivity disappeared. The result was runaway inflation of home prices. In 2009, that bubble finally burst. The government (we, the people) then had to construct, and fund, a massive bailout.

As a side note, we are currently in the end-stages of yet another housing bubble also created by the fed, this time not with generous lending, but rather tampering with the bond market, which is keeping mortgage backed-securities at artificially low rates, which is again, driving house prices through the proverbial roof. There is no longer any price sensitivity, as it is now all about the cheap interest rate. This bubble will also burst, sooner rather than later. I also have issue with how artificially inflated the housing market is. My cousin is saying "oh mortgages are so cheap that we can easily buy and extra 20-30% home" True very true because the cost of borrowing to buy the asset is so cheap it fuels the rise of people paying more and "affording" more.

4. Health care. Health care costs have been in a rapid inflationary cycle since Medicare. We currently spend 17 percent of our GDP on healthcare. Some say that a total government takeover is the only solution, and at this point, they may be right. Yet it is the government that bore the baby to begin with. Medicare removed a large swath of healthcare purchasers from the health care economy and acted as a substitutionary payer. The patient was only responsible for maybe a small copay or deductible and everything else was covered by Medicare. Thus, the patient no longer had any price sensitivity. Worse, the government slapped price controls on medical providers in the form of fee schedules. The fee schedules were never reasonable compensation, so the providers had no choice but to tax their other patients with extra fees to offset their shortages. Hence, rapid inflation settled in. Every time the government steps in and tampers further, i.e. the Affordable Care Act, etc., costs shoot higher. Actually one might argue in socialized government systems it's cheaper because of medicare. But perhaps I'm wrong. I see the point that medicare drove costs up, but did it really? I mean other countries people are price sensitive yet they have 1 system.

This is why, when you call the hospital and ask them how much you will have to pay for a chest xray, they often can't tell you, not because they don't want you to know, but because they don't know, themselves. Their system isn't set up like a grocery store - carrots are $2 a pound and applies are $3 a pound. Because the end user usually isn't the buyer, and the provider isn't accountable to the end user. They simply bill as much as they can, as often as they can, and hope the substitutionary payer plays along.

This crisis will continue unabated until either 1) The federal government abolishes private pay altogether and completely takes over the system, or 2) The federal government extracts itself from the system completely. I am not betting on the latter.

See above responses

[Captain Save]

This is one of the BIG problems with our system. Patients don't care what things cost or if the bills are even correct as long as their insurance is paying it.

When I was in private practice, I heard it all the time. "Why can't I have a whole body MRI? My insurance will cover it." Well, maybe they will but I'm not ordering a $10,000 test for you that I don't think is medically necessary. --- You can be quite certain that patient wouldn't want that test if he was paying for it himself.

and that's one of the reason insurance premiums is going up ..

[TexasHusker]

Generally, when the end-user/consumer of a good or service is removed from purchasing such by a substitutionary third party, there is a significant inflationary effect on the underlying good/service. Usually, it is the government acting as the substitutionary third party - substituting for the tax payer - and the end results are almost always disastrous. I call this "governmental tampering in an otherwise free market economy."

I could write a book of the instances of such tampering over just the last 20 years, but I will mention three:

1. College loans. When the government is guaranteeing student loans, the student is then removed from the purchasing process. The tuition could be $5,000, $10,000, $20,000, or even $50,000 a year, and the student, and university, no longer care, because the loans are subsidized by the federal government. There is no longer any price sensitivity. Hence, you have inflation in college costs that is a multiple greater than general inflation. I graduated college in the late 1980s. Back then, I could work a full time job in the summer and pay for the entire year of school - room, board, tuition, and books. Fast forward to today, it isn't uncommon at all for college costs to be half or more of the annual family median income in the U.S. Now, many politicians want to toss all of those college loans to the feet of the tax payer through forgiveness. Forgiveness to the borrower means great sacrifice for everyone else. Yet is the government, itself, which started the crisis, through tampering.

2. Housing loans. In the 1990s, the President and Congress decided that more Americans needed to own a home. Freddie Mac and Sally Mae, the federal government guarantors for conforming loans, were ordered to loosen their underwriting and down payment standards significantly. Before long, a home buyer could get a federally-guaranteed home loan with a down payment less than five percent, many even zero percent. Thus, the home buyer was removed from the purchasing process, meaning they had no "skin in the game" in terms of what an appropriate price for the house was, since it cost them little to nothing to buy. Price sensitivity disappeared. The result was runaway inflation of home prices. In 2009, that bubble finally burst. The government (we, the people) then had to construct, and fund, a massive bailout.

As a side note, we are currently in the end-stages of yet another housing bubble also created by the fed, this time not with generous lending, but rather tampering with the bond market, which is keeping mortgage backed-securities at artificially low rates, which is again, driving house prices through the proverbial roof. There is no longer any price sensitivity, as it is now all about the cheap interest rate. This bubble will also burst, sooner rather than later.

4. Health care. Health care costs have been in a rapid inflationary cycle since Medicare. We currently spend 17 percent of our GDP on healthcare. Some say that a total government takeover is the only solution, and at this point, they may be right. Yet it is the government that bore the baby to begin with. Medicare removed a large swath of healthcare purchasers from the health care economy and acted as a substitutionary payer. The patient was only responsible for maybe a small copay or deductible and everything else was covered by Medicare. Thus, the patient no longer had any price sensitivity. Worse, the government slapped price controls on medical providers in the form of fee schedules. The fee schedules were never reasonable compensation, so the providers had no choice but to tax their other patients with extra fees to offset their shortages. Hence, rapid inflation settled in. Every time the government steps in and tampers further, i.e. the Affordable Care Act, etc., costs shoot higher.

This is why, when you call the hospital and ask them how much you will have to pay for a chest xray, they often can't tell you, not because they don't want you to know, but because they don't know, themselves. Their system isn't set up like a grocery store - carrots are $2 a pound and applies are $3 a pound. Because the end user usually isn't the buyer, and the provider isn't accountable to the end user. They simply bill as much as they can, as often as they can, and hope the substitutionary payer plays along.

This crisis will continue unabated until either 1) The federal government abolishes private pay altogether and completely takes over the system, or 2) The federal government extracts itself from the system completely. I am not betting on the latter.

[HundredK]

Managed care plans are health insurance plans with the goal of managing two major aspects of healthcare: cost and quality. With these plans, the insurer signs contracts with certain health care providers and facilities to provide care for their members at a reduced cost. These providers and facilities all have to meet a minimum level of quality. Besides having healthcare providers agree to certain prices for medical care, managed care plans also attempt to reduce healthcare costs by focusing on preventive care and by using financial incentives such as charging less for generic drugs than branded ones.

Thanks, great description! So yes, that's what Kaiser is, except they are both your doctor and your insurance company. For example, I have to go to one of their Kaiser branded facilities to be seen, I have no choice in doctor except wtihin their doctor group who are all (as far as I know) Kaiser employees. I've been meaning for a while to switch insurance plans because I think this is generally not the greatest system for either the patient or the doctor (I imagine it takes the doctoring right out of being a doctor when the computer tells you the lowest cost way to proceed and then insists upon it, and if you as a doctor disagree, you have to go to great lengths to get overrides etc to be allowed to proceed with what you think is best). But then I bump into a scenario where I literally pay $20 for a foot surgery that turned out quite well and have a hard time jumping over to the HDHP world. I imagine at some point I'm going to regret not making the change, like if there's a scenario where I'm not able to advocate for myself. But so it goes.

[disneysteve]

Not familiar with the term managed care. But yeah, if managed care is what it is and that's supposed to make a doctor visit feel like going to war, kaiser does it well. Lol

Managed care plans are health insurance plans with the goal of managing two major aspects of healthcare: cost and quality. With these plans, the insurer signs contracts with certain health care providers and facilities to provide care for their members at a reduced cost. These providers and facilities all have to meet a minimum level of quality. Besides having healthcare providers agree to certain prices for medical care, managed care plans also attempt to reduce healthcare costs by focusing on preventive care and by using financial incentives such as charging less for generic drugs than branded ones.

[HundredK]

It is called MANAGED care for a reason.

Not familiar with the term managed care. But yeah, if managed care is what it is and that's supposed to make a doctor visit feel like going to war, kaiser does it well. Lol

[disneysteve]

The downside of this of course is that it's kaiser, and to be treated well there, you have to go in ready to do battle and self advocate. Once you get through the primary doc whose job seems to be solely to save kaiser money

It is called MANAGED care for a reason.

[HundredK]

We are on an HMO plan with Kaiser Permanente through an employer. Paycheck deduction is a little over $200 a month for the two of us. I basically know that whatever I see a doctor for, it will be $20. I had foot surgery earlier this year, it was $20 total with all followup visits free. The downside of this of course is that it's kaiser, and to be treated well there, you have to go in ready to do battle and self advocate. Once you get through the primary doc whose job seems to be solely to save kaiser money, I have found the specialists to be pretty good.

As far as negotiating bills, I just went through some of this with my mom and with my dad before he went on hospice and died. They had some very large bills, and the hospital had a program where you could fill out papers stating your income and life story and they would reduce the bill and then let them make payments on whatever was not forgiven.