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America’s Health Care System is Broken: What Went Wrong and How We Can Fix It. Part 2: Health Insurance

Unlike most Western democracies, health insurance in the United States is provided by a haphazard mix of employer-based plans, Medicare for those over age 65 years or on social security disability or with chronic renal failure, Medicaid under varying state-dependent rules for some low-income recipients, and no insurance for tens of millions. Administrative costs, which include both the direct costs of the insurers and the indirect costs imposed on physicians and hospitals, make up nearly 25% of our bloated national health care expenditures. This high cost adds no proven value to health care outcomes. Our current system of covering health care expenditures is both inefficient and unfair. Changes must be made.

  • The best diagnostic and therapeutic interventions are of no use if they are not available to patients. Our current health insurance system leaves too many Americans without access.
  • Health insurance is a recent addition to the world and functions unlike most other forms of insurance.
  • In the United States, the way health insurance is structured adds enormously to the cost of health care without adding value.
  • Neither physicians nor patients are well served by our current health insurance system.
  • Major changes are needed in the way we provide health insurance.

The idea behind any form of insurance is, in essence, a simple one: share the risk of a possible catastrophe among many people, so that an illness or accident does not financially ruin any one individual or family. That is why most of us have homeowner’s insurance or life insurance. Homeowner’s insurance does not cover the predictable costs of painting the house or replacing the roof every 20 years; it protects us from the disaster of having our house burn down. We all know we are eventually going to die, but life insurance will keep a roof over the family’s head if the breadwinner dies at an unexpected young age. The original American health insurance plans functioned to share risk in this way, but current plans no longer do.

Through most of human history, medical care was neither very effective nor very expensive. Doctors would comfort and advise, and offer what few remedies were available, but the sick or injured largely recovered despite treatment rather than because of it. Doctors’ fees were modest and affordable to most, and if the family had no money, a chicken would suffice. As we moved into the 20th century, medical care for serious conditions became both more effective and more expensive. The original health insurance plans sprang up in the 1920s and 1930s to cover the cost of hospital stays. The plans were provided through unions or bought individually, and by 1939 some 3 million people had signed up for what were by then called Blue Cross plans.

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-Edward P. Hoffer, MD

This article originally appeared in the July 2019 issue of The American Journal of Medicine.

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