In response to my math question from yesterday, some of you wisely pointed out that medical insurance costs have to plateau at the point where they become literally unaffordable.

This made me wonder about the trajectory of medical expenses. On one hand, you can imagine that technology will lower the cost of routine medical treatment. The cost of existing drugs will drop as they go off patent protection. And maybe gene therapy will, in time, end up being inexpensive relative to traditional medicine. One can hope.

On the other hand, scientists keep coming up with new and expensive medical procedures, and new and better drugs. For example, the surgery that gave me back my ability to speak is relatively new. So you can imagine a world where POTENTIAL medical costs rise indefinitely because science keeps coming up with ways to fix medical problems that might have otherwise gone untreated.

My prediction is that medical insurance will cover more and more procedures, but if you consider all of the things that can be covered, it will be a smaller percentage. In other words, if insurance currently covers 90% of what you might need, someday it will only cover 70%, because that's all the public can afford. But that might represent far more medical procedures than your insurance covers today, so it might not seem so bad.

As some of you pointed out, a person's health insurance should start out cheap when you are young, and increase every year as you age. So if you want to take a crack at yesterday's question by altering the cost/year assumption, I'd be interested in that result.

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Oct 5, 2009
You've forgotten a few other huge factors that drive up costs of insurance:

- Unlike other insurances you have (auto, home, etc) health insurance is no longer insurance against catastrophic costs... it is being used for day-to-day expenses. True catastrophic coverage would cost a lot less.

- Due to the medical malpractice lottery system, doctors have to practice defensive medicine and order tons of tests that they don't think are necessary, in order to cover their butts. If doctors were able to order only necessary tests, insurance would have to cover a lot less, driving down prices.

- States mandate that all insurance plans to cover X. When X is things like emergency and preventative care, that's not a big deal. But often there are lots of other things (chiropractic care, pregnancy) that you have to have coverage for, even if you never intend to use it, and these additions aren't free.

- Because of screwy tax laws, it is much more advantageous to get a plan through an employer than by yourself. This means that your company is deciding what health plan you need. If you are lucky, you get to choose between 3 plans which probably cover far more than you would pay for if choosing yourself. Scott and others have mentioned that a universal system would allow for portability across employers, so would changing the tax laws and making it more advantageous for people to buy their own. Removing barriers to inter-state insurance would also help.

- Medical costs in general would also go down with price transparency. Patients don't know how much the doctor is going to charge and so can't compare. Doctors/hospitals don't know how much they are going to be reimbursed, often have little control over the amount of reimbursement, and sometimes are paid less than their cost in materials, etc. This causes prices to inflate so that the providers are sure of making up their costs.
Oct 2, 2009
I think the other modification which will take place is a revolution of "economy class" medical procedures which will solve the most significant portion of your health issues. These solutions will be much cheaper but not address 100 percent of the problem, and the cutting edge procedures will still be available for the rich.

For example, the rich can pay $250,000 for a full heart transplant, while middle class folks can get a cheap artificial heart at 1/3 the price. The artificial won't allow us do jumping jacks or play sports, but we won't die of cardiac arrest either. I think this is the sort of thing that health care will cover in the future.

With radical change to our heathcare system inevitable within the next 10 - 20 years, economy class heath care procedures could be the next boom (or bubble) industry.
Oct 2, 2009
I'm a Canadian. Up here, we have universal health care, and our medical professionals don't get paid as much as U.S. medical professionals. If health care $$$ are provided by the gov't, then doctors are effectively civil servants, and will (eventually) end up getting income that reflects this more.

This is something you need to factor into your equation.

Then, of course, there's the fact that many doctors, faced with a pay cut, will likely run to greener pastures.
Which of course explains why, in Canada, we have a doctor shortage; they all go to the US where the money is.
Oct 2, 2009
Actually, I've heard this suggest as one of the main reasons that health care is expensive in this country, and I believe it. We not only have the money to spend (even if it involves going into debt I suppose, since there's plenty of that to go around among Americans as well), but we are at the forefront of medical technology. Basically it costs so much because we always want to get the latest and greatest treatment rather than settle for something older and less likely to help.

It's like saying Americans spend more on television sets than any other country (no idea if that's really true). Are TV manufacturers unfairly inflating prices? Is the system to blame? No, we're just obsessed with giant, hi def, expensive TVs.

Americans have a consumer, high spending, economy like nobody else. Should it surprise us that it extends to medicine as well?
Oct 2, 2009
So, if a lot of people start having a problem with their livers in the future, will the insurance companies stop offering to cover liver transplants and liver medications because the demand is too high?

This reminds me of a few years ago when Sears started having a problem with their lawnmowers and weedwackers. Because of the large volume of similar service calls with those items, they decided to stop honoring the warranty, rather than address the problem fix the machines.

How much is 70% of the body anyway? If I weighed 200 pounds when I signed up for my medical plan which pays 70% of my costs, and I lose weight down to 140 pounds, would I then be covered at 100%
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Oct 2, 2009
Lots of interesting comments in this blog entry and the previous entry. However, most entries about insurance is ignoring what insurance really is...insurance is suppose to be a pool of money that we all contribute to, and then the money is used by individuals to pay for extraordinary costs related to the insured event. As an aside, insurance shouldn't be used for costs that are easily born by the insured, ideally it should only be for costs that cannot be reasonably covered out of pocket (that's where deductibles come in, it keeps the individual insured's claims reasonable).

For health care costs, we are all paying a small amount (a premium) so that if we end up having to pay for a very large medical expense, the expense is paid by the pool of money and not out of our pocket at the time the expense occurs. And insurance premiums don't have to increase with age as long as the young use less (as they do on average) but pay the same premium over their lifespan.

Ideally, the premiums taken in cover the expenses paid out plus the cost of managing the insurance fund (the overhead). If private insurance companies were not-for-profit companies, then it could possibly work this way. But for-profit insurance companies WILL NEVER work like this. At that is the real problem we have in this country when it comes to ever increasing insurance costs.

For-profit insurance companies quickly found out that it is MOST PROFITABLE to collect premiums but pay as few benefits as they could get away with. It's obvious if you think about it. As long as insurance companies are profit motivated, insurance premiums will continue to rise and benefits fall. A government provided minimum health insurance coverage will cause the profit calculation used by the insurance companies to limit premiums (the higher the premium, the more likely your customers will gravitate to the baseline government program). That, coupled with the inability to legally refuse coverage at the time of need and no pre-existing conditions ineligibility, is the primary control that Obama's plan is trying to put into place.

Another area (totally unaddressed at the moment) is for-profit hospitals. If it is more profitable to manage sickness than to eliminate sickness then for-profit hospital costs will continue to rise.

The health care plan on the table is not the end all fix for the health industry in the US (as long as being sick is profitable, we will stay sick), but it is a start.
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Oct 2, 2009
We have universal healthcare here (Germany). The insurance company charges around 500$ a month. Half of that is paid by my employer, the other half by me. On my half I get considerable discount as long as I do not submit my medical bills. That means right now I'm paying 4000$ a year. Withouth the discount, that would be about 6000$. So that assumption was O.K. by me.
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Oct 1, 2009
what went bad was that at one time every one paid into a plan that covered all. then some sharpies got the idea that they could make a lot more money by not covering sick people. the younger are not as sick. what they did was sell cheaper insurance to the young. the ones who buy the same insurance at the same time stay to gather as they age. as they age the cost of that plan go up . the costs go up till the ones in that plan can't pay for it. then the healthy ones can go to a new plan thats cheaper without the sick. the rest stay in the same boat till they can't pay the every rising costs and do without. before most plans were single payer with everybody paying the same. the smaller group that pays more only pay for themselves. thats the same as not having insurance. the so called free market is not working.

Oct 1, 2009
Here in Australia, we hear a lot about president Obama's efforts to universalise medical coverage, and the figure we hear touted about is that comprehensive health insurance costs for a person (and their family) who hasn't got welfare access or employer payment, ie, self-employed small businessperson, or low-income casual employee, average 12K per annum, so rusty spatula's comment sounds right.
Oct 1, 2009
Need is so relative. TV always shows the protester in the wheelchair, looking sickly protesting at the capital because they can't afford their 20-30 pills a day. How does one get to the point where they need that many prescription drugs? I'm no doctor but basic chemistry tells me that after four or five the effectiveness of further medication must drop off exponentially. The engineer in me tells me that there is a fundamental flaw in the way these things are handled. The only way to have universal health care is to fix the system so everyone can AFFORD health care. I'm not talking about insuring everyone, I'm talking about making a trip to the doctor to see him/her for 20 minutes only cost $50. When everyone can afford it, everyone has it. I sprained an ankle and had an x-ray. My initial bill was $380. My insurance provider paid $16. No wonder people can't afford to be uninsured, the hospitals are charging too much!
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Oct 1, 2009
Scott, you overlook two phenomena.

1) No one makes the drug companies make drugs they don't make a bundle on. Witness the return of rampant tuberculosis in certain neighborhoods - the pennies-a-dose drug still works. But no one makes it, and the only alternative is dollars per dose.

2) Look at the history of treatment of cancer. At first nothing was covered. Cancer? "Oh, well," as my Uncle said when diagnosed, "everyone has to die sometime." Then they covered treatment - and found the accumulated costs were high. So they capped treatment for cancer at a million bucks or so, then rewrote the policy for a lifetime payout cap, and have been tweaking that kind of thing ever since.

The insurance industries have been very resilient about !$%*!$%*! coverage to minimize their exposure to having to pay out "too much", whatever that means to them.

Which implies that insurance companies will continue !$%*!$%*! coverages to include the low cost stuff, and limit their exposure on the expensive stuff, the rich and those willing to use the courts to batter their way to treatment will get the expensive drugs and treatments. Pretty much like today.

We would have to take a *lot* of lawyers out of legal practice to make much change.
Oct 1, 2009
This topic is boring. Please go back to be amusing or I'll be forced to withhold payment.
Oct 1, 2009
One of the big problems with criticizing your post yesterday for its assumptions is that most Americans have *no idea* what the real cost of their health insurance is. With employer-provided insurance, I only see a pre-tax deduction on my paycheck. I barely remember what it is, but even though I'm in my mid-20s and healthy, I know it's upwards of $100 every other week, or $400 a month. The problem is, THIS IS ONLY "MY" CONTRIBUTION. My employer 'pays' the other 50% or more of my premiums. If anything, your estimate of $6k / yr for a 21-year-old is generous.
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