The healthcare system in the US needs reform. It’s no secret. Many families are facing expensive insurance premiums and out-growing out-of-pocket costs. But why health insurance is so expensive?
Keep reading to know more.
Why Health Insurance is So Expensive?
1. Admin Costs
They are typically the most common cause of excess medical spending. The US spends 8% on admin costs. The country has a complex system with separate rules in every piece.
In every option, consumers can choose among various tiers of coverage, deductible plans, and managed care plans, among others. Not all plans include pharmaceutical drug insurance.
With those options, providers have various regulations to deal with. Processing these concerns make up a huge share of admin costs.
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2. High Pharmaceutical Drug Prices
People are paying a significant amount of money on synthetic drugs. Compared to Europe, the US drug costs are one area where the US overspend.
Unlike the US, European countries regulate their drug prices. They based the regulation on the benefit of the drugs to the users.
Because of minimal regulation, the US spends more than $1,000 per person. The prices of drugs in the US are over 250% more compared to other countries.
Private insurers, however, can negotiate with manufacturers to lower their pricing. But Medicare isn’t allowed to negotiate prices with drug manufacturers.
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3. American Doctors and Nurses Earn More
An average US family doctor can earn more than $200,000 a year. If the doctor is a specialist, he can earn more than $300,000. That’s above the average in other industrialized countries.
Nurses in the US are also earning more than their counterparts from other countries. For instance, a US nurse has an average salary of $74,000 a year.
But managed care plans can lower healthcare costs. They first need authorization before insured individuals can see a high-priced specialist.
Furthermore, insured individuals are encouraged to go to a nurse practitioner, rather than visiting a family doctor to save money.
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4. Medicare and Medicaid
In various ways, government policies can contribute to the high cost of healthcare. When a person has Medicare, the government reimburses hospitals at lower rates. The rates are lower than what private insurers will pay.
Although it’s a good deal for the government, hospitals and providers wind up charging patients and private insurers more just to make up the difference.
The US government wants to subsidize the healthcare of poor people and those who are chronically ill.
However, lawmakers don’t want to tax and spend. Thus, they hide transfer in cross-subsidies.
Since ER requires to treat everyone who needs it, hospitals will have to overcharge other people. Medicare policyholders don’t pay the full amount of their treatment cost.
To make the difference, hospitals overcharge private insurance.
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Most of the diseases are the result of lifestyle. It plays a huge role in making healthcare more expensive. Poor diet and no exercise contribute to the costliest health problems, including obesity, cancer, heart disease, and diabetes.
Hence, if you don’t want to suffer from those diseases, you should act now to mitigate your bad lifestyle.
Pursue a healthy lifestyle for the sake of your budget. It will not only make you happier but it will also prevent you from going to the doctor frequently.
There are different ways to become fit. You may talk to your doctor about the best way to lose weight if you’re obese.
If you’re a smoker, you may consider cognitive behavioral therapy. Your doctor may also recommend a certain method to help you give up smoking.
Keep in mind that if you’re a smoker, your monthly premium tends to be higher than those who don’t smoke.
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6. Health Insurance Prices Vary Wildly
The complexity of the healthcare system allows providers to just charge what the market can bear. The amount paid will depend on the payer and geographical area.
Do You Need Health Insurance?
Because of the high health insurance cost, you might wonder whether or not you need it.
The answer is yes.
Indeed, it’s expensive and confusing. However, it’s the only thing that stands between you and a financial disaster should you need medical care.
Because you don’t know when you’re going to need medical care, having health insurance is good for your wallet.
If you need medical treatment but you’re not insured, you’ll be spending more. You’ll be paying enormous medical bills out of your wallet.
Keep in mind that treatment for a sprained ankle can force you to pay thousands of dollars for x-rays, medication, medical devices, and doctor visits, among others.
If it’s a major medical issue, you’ll soon find yourself in enormous medical debt.
It’s a devastating financial setback that you don’t want to experience. Health insurance can transfer some of the risks of medical expenses to the insurer.
In other words, health insurance can protect you from paying high medical bills that you can’t afford.
Ways to Lower Health Insurance cost
There are different ways to save money on health insurance costs. If you’re employed, your employer can pay a huge portion of your premium.
You can also obtain a low-cost insurance plan, like a catastrophic health plan.
There’s a health savings account that allows you to save pretax dollars to assist you in paying for qualified medical expenses.
Why health insurance is so expensive? There are many factors that affect the high cost of health insurance — admin costs, drug prices, Medicare, lifestyle and doctor’s and nurses fees, as well as your lifestyle. But no matter how high the insurance cost is, you should not go without health insurance. Talk to an insurance agent today to help you obtain the coverage that you need.
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