These differences have a direct impact on the wide range of healthcare prices. Top healthcare spenders in the United States spent roughly $50,000 apiece in 2016. In 2016, those in the bottom fifth of the income distribution paid just $276 on health care, or 3% of total spending. People in both groups buy health insurance, but they benefit in different ways. There are at least six advantages to having health insurance, such as preventative care and better access to treatment options. But there are occasions when the two positions simply cannot coexist.
- Individuals must be guaranteed financial security in the case of a catastrophic health incident.
Health insurance, like car insurance, protects policyholders from potentially ruinous medical bills. Extreme medical emergencies are both rare and unpredictable, and the costs connected with them typically exceed the means of the normal person. Treatments for cancer and multiple sclerosis can often cost over $10,000 per month, making them unaffordable for all but the richest individuals. The price tag can easily reach six figures when an organ fails and a transplant is necessary. US health advisors try to serve this purpose
by setting maximum out-of-pocket costs each year, doing away with caps on total benefits received, and guaranteeing coverage for those with previous conditions.
- Low per-use costs across the board.
In the United States, health insurance is more like a membership to a social club than car insurance. However, the primary purpose of insurance is to safeguard against such catastrophic events. Beneficiaries pay a yearly fee to have access to services with minimal or no out-of-pocket charges, such as routine medical checkups. These are appointments that are made on a regular basis, such as paediatric checkups or prescription refills for medications used to decrease cholesterol. Most clubs have membership regulations with the primary intent of catering to each member specifically. To find out which Medicare Part D plan will provide the best value for their prescription drug coverage needs, Medicare beneficiaries can enter their current medication list.
- We are discussing health care costs.
Insurance companies reduce the amount they pay to medical providers like hospitals, clinics, and doctors’ offices to keep rates low. Patients who pay in cash are still eligible for these savings (with the exception of prescription medicines). Lawmakers can offer hospitals and doctors more bargaining power with insurance companies if they pay more attention to this aspect of health insurance. Instead than letting healthcare providers use their market power to artificially inflate their prices, Medicare, for example, sets payment rates through fee schedules. To aid commercial plans in negotiating for reduced price, the Affordable Care Act (ACA) bucked up the formation of small networks of clinicians and hospitals. When insurance firms join forces, consumers gain leverage in negotiations.
- It is maintaining and improving healthcare providers and facilities.
Hospitals have benefited from quality assurance and improvement initiatives funded by both private and public health insurance providers. The prohibition of particular hospitals from doing specific treatments is one example, while quality ratings assist patients and plans choose which hospitals to collaborate with. The quality of Medicare Advantage plans can be rated. Medicare will pay for a transcatheter aortic valve replacement, but only in specially equipped hospitals. Health insurance reforms that try to solve this issue focus on collecting and analysing more data and evaluating the quality of services provided.
- Providing gentle reminders to encourage healthy behavior.
Insurance companies in the healthcare industry have been experimenting with benefit designs that reward healthy habits for the past decade. Health club members and ex-smokers may qualify for insurance premium discounts. One more is the VBID, or value-based insurance framework. Beneficial health services, such as preventative care and some medications that lessen the severity of diseases like diabetes, are covered entirely or almost entirely under VBID-type policies.
- The sharing of wealth.
Health insurance facilitates substantial monetary transactions between individuals. The wealthy contribute more of their tax dollars to Medicare and Medicaid than do the middle class. However, the government generally subsidises the premiums that employers pay for health insurance, which primarily helps the wealthy. The “Cadillac tax,” which would reduce the tax subsidy for more extravagant insurance policies, is only one example of a policy that aims to reduce these kinds of transfers. The Affordable Care Act also set a maximum of three years between policyholders of different ages. However, one draught to repeal the ACA contemplated lowering the eligibility age to five (thus lessening the wealth gap between generations). Subsidies for hospitals in rural areas take money away from cities. Through some form of risk pooling or redistribution, the healthy contribute to the care of the ill.
Because health insurance is used for a myriad of distinct functions, it is possible that this helps explain why politicians propose such a vast range of reforms with such a low level of unanimity. The goal of selling highly customised insurance to a patient’s predicted needs. However, in the event that costs are proportional to the level of service provided, the promotion of narrow networks may result in lower costs, but at the expense of the elimination of high-quality suppliers.
The above bullet points are an attempt to catalog health insurance’s roles in the United States. Still, this article would be much shorter if we focused just on the things that health insurance does exceptionally well. Despite insurers’ best efforts to negotiate lower unit pricing, medical care in the United States remains more expensive than in other developed countries. While many people have access to adequate coverage through their health insurance, statistics show that Americans are far more likely to forego medication due to high out-of-pocket costs, despite having prescription drug insurance. While health insurance policies should encourage better choices, the United States nonetheless has much higher rates of diabetes, obesity, and maternal mortality than Europe.