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  • Writer's pictureNick Allen

How healthcare hurts us

As much as I wish this were not the case, most of the things I write probably hit home with only a small subset of the population. Only some are willing to dedicate significant effort to their health for health purposes exclusively. This changes when money enters the picture.

Healthcare is a massive drain on individual finances, but this is often lost on people. You often hear “insurance is covering it” or “it’s government money.” In reality, insurance companies are constantly raising premiums to cover every cent they pay and more. “Government money” for healthcare comes directly out of your pay (seriously - look at the Medicare subtraction on your most recent paycheck).

Even those lucky enough to have their health insurance subsidized by their employer are losing money as a result. Any money your employer pays towards your healthcare is money they could be paying you in wages. In fact, the historically low wages we are seeing today can be partially attributed to employers dealing with rapidly rising healthcare costs.

I truly believe there are solutions to this, but it requires demand from the general public. The problem is that healthcare is so nuanced and complicated that waste and wrongdoing can go unrecognized. The Price We Pay, a book by Johns Hopkins physician Marty Makary, presents these issues in a manner that someone with no healthcare experience can appreciate. Even with people like Dr. Makary exposing these flaws, the problems are spread in so many places that there doesn’t appear to be a single fix.

There is certainly a common theme, however. The unfortunate reality is that people will act (knowingly or unknowingly) according to their incentives. Doctors will recommend and conduct unnecessary procedures if it means bringing more money home to their family. Drug companies will push their poor-performing products past the FDA if that’s all it takes to profit from them. Insurance companies want you to rack up more healthcare costs, because current U.S. law states that their profit cannot exceed 20% of their revenue from premiums. For their profit to grow, they literally need healthcare costs to increase. One of the worst ones, in my mind, is that we as individuals have no incentive to prioritize our health. Tobacco use is the only health behavior that can legally impact your individual insurance price.

Simply aligning incentives can cut out a good chunk of the issues present in American healthcare. Many health systems are already shifting to a model where providers are paid on a salary, rather than being compensated per procedure. One step further would be to incorporate health outcomes into the compensation model for providers. The drug issue is a little more complex, but the key is for payers to have the leverage to turn down products that are either ineffective, or so minimally effective that they are not worth the astronomical price tag. This way, pharmaceutical companies would no longer have a reason to force drugs that don’t even work past the approval process.

Shifting to insurers and individuals, I think their roles go hand-in-hand. Major reform is required in this space to both improve the health of our population and reduce individual spending. Both groups should have an interest in keeping people healthy to begin with. The insurers should be willing to invest in preventive health measures, because this will lead to fewer expenses down the road (this is not current practice because we change health insurance so often, and insurers don’t want to pay for their competitor’s future benefit). Individuals should be rewarded for healthy behaviors, because those who exercise, eat well, and are proactive with their health will cost the system far less in the future.

When you consider taxes, insurance premiums and copays, and lost wages, healthcare spending is one of our greatest individual expenses. This space holds a lot of promise if incentives can be properly aligned, however. It sounds too good to be true, but keeping people healthier (important in itself) can save us trillions of dollars in the long run. The obstacle is convincing people that this matters, and sparking the systemic change that will put the proper conditions in place. I’m confident that we’ll get there, because a lot of people care about their health, and even more care about their bank account.


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