Why Health Care Is So Expensive

When you get sick, you shouldn’t have to decide between medical care and rent. Medical costs are already unreasonable for 25 percent of Americans, and are getting worse every year. Pricey insurance and unexpected medical bills are a potential ticket to bankruptcy, and you have little power to protect yourself.

It’s Not Just You: Health Care Costs More Every Year

There isn’t just one bad guy here. Health care costs are increasing every year, for a collection of reasons that range from the boring to the scandalous.

For example, there’s a new move toward crazy expensive drug prices, like the $84,000 hepatitis C drug that singlehandedly accounted for 13% of the increase in drug spending in 2014. Lots of “specialty” drugs were born when manufacturers realized they could charge whatever they want. Expensive drugs are mostly paid for by insurance, and drug companies like it that way: the patient gets free or cheap drugs, and the insurance company foots the gigantic bill. Of course, that means we all pay for it in the end, through high premiums.

Hospitals have also driven prices up by gobbling up their competitors. If every hospital in your area is owned by the same giant company, you can’t get a deal by going somewhere else. Some hospital systems even run their own insurance policies, which reduces their costs without necessarily reducing your premiums.

Your dollars aren’t necessarily buying better care, either. Prices are whatever the provider and insurer negotiate. “That’s why you’ll see wildly different prices for the exact same procedure, even in the same town,” says Elizabeth Mitchell, president and CEO of the nonprofit Network for Regional Healthcare Improvement. “One hospital can charge $5,000 for a service where another might charge $1,200 for the exact same service with no meaningful difference in quality.” Shopping around has been proposed as a solution, but that doesn’t always work, as we’ll see.

In other words, a lot of players in health care have figured out they can charge a lot just because they can. That’s not the only reason costs go up, of course: there are also the boring reasons, like that medical technology has become more expensive as it has improved over time. Medical care in, say, 1950 was vastly cheaper than today, but nobody in their right mind would time-travel backwards for care. According to David Newman, executive director of the Health Care Cost Institute, other reasons include an aging population (old people use more health care) and economic prosperity (the richer we are, the more we’re willing to spend to extend our lives).

Insurance Doesn’’t Buy Much Anymore

Decades ago, Newman says, insurance paid most of a person’s health costs when they had a major expense. But insurance plans today often pass a lot of the cost of care on to you. The general term for this is cost sharing, and besides copayments, it includes co-insurance (you pay a percentage of your care) and deductibles (a hefty amount you have to pay out of pocket before full coverage kicks in)…

Read full story at Lifehacker

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