3% more expensive than the year before, the average insurance premium for US families with employer-sponsored health insurance in 2017 was $18 764. The vast disparity in the quality of healthcare that Americans receive from one another is concealed by this mean value. 6 Purposes of Medical Insurance.
Huge differences in health care spending are a direct result of this variation. The highest 5% of US health consumers in 2016 spent 50% of the country’s total health expenditures, or roughly $50,000 per individual. According to health expenditures, only 3%, or $276 per person, of all health spending was spent on the lower half of the population in 2016. Both types of people purchase health insurance, but they derive different advantages from doing so.
Our system of health insurance serves at least six purposes to ensure that everyone can profit from having insurance, in addition to assisting people in staying well and enhancing their health when they become ill. But sometimes these functionalities are incompatible.
Financial protection for people who experience catastrophic medical crises. Like auto insurance, health insurance shields people from unforeseen and expensively disastrous situations. Similar to auto accidents, catastrophic health crises are uncommon, unpredictable, and extremely expensive. Most individuals cannot afford them. For everyone but a select few, the cost of cancer or multiple sclerosis medications might exceed $10,000 per month. Costs associated with organ failure that necessitates a transplant can reach the hundreds of thousands. Policies including limiting annual out-of-pocket costs, eliminating lifetime benefit caps, and guaranteeing coverage for those with previous diseases are aimed at enhancing this role of health insurance.
Wide access for nominal usage charges. Theoretically, insurance is meant to protect against catastrophic occurrences, but in practise, health insurance in the US serves a role that is much closer to that of a club membership than that of auto insurance. Beneficiaries have access to free or low-cost services, like routine doctor visits, in exchange for an annual fee. These services, like well-child checkups for parents of young children or medication refills for those using lipid-lowering drugs, are often predictable. The overall goal of policies geared towards the club membership function is to tailor regulations to individual demands. In order to identify the plan that best subsidises their current drugs, Medicare enrollees enrolling in Part D prescription drug coverage, for example, list the medications they are presently taking.
Bargaining for medical care. Health insurance use their position as a dominant player in the market to negotiate price reductions with doctors, hospitals, and healthcare organisations. They can also use this position to exclude expensive providers from their networks. Except for prescription pharmaceuticals, where patients frequently pay list pricing even when they have insurance, covered consumers still receive these reductions when paying out of pocket for services. The negotiation power of doctors and hospitals in relation to insurers is impacted by policies that emphasise this function of health insurance. For instance, Medicare establishes payment rates through fee schedules as opposed to allowing healthcare organisations to raise their prices through market leverage. Insurance companies were pushed by the Affordable Care Act (ACA) to create “narrow” networks of doctors’ offices and hospitals.
Improving and ensuring the standard of hospitals and doctors. Government and private insurers have created measurement programmes with the goal of assessing and enhancing hospital quality. Examples include quality ratings that aid patients and insurance plans in choosing which hospitals to use as well as the exclusion of specific hospitals from offering particular treatments depending on quality. There are quality rankings for Medicare Advantage programmes. Medicare only permits facilities with sufficient volume and proficiency to carry out the transcatheter aortic valve replacement surgery. More thorough measures and quality measurement are the focus of policies that address this aspect of health insurance.
Encouraging people to maintain their health. Over the past ten years, health insurers have experimented with benefit structures that promote healthy behaviour. This covers premium discounts for people who start working out at health clubs or give up smoking. Another illustration is value-based insurance design (VBID). In accordance with VBID-style insurance plans, people pay little to nothing out of pocket for medical services that are deemed necessary, including as preventive care and specific drugs that reduce the risk of developing problems from conditions like diabetes.
Transfer of wealth. Significant wealth transfers are carried out through health insurance. Medicare and Medicaid are funded in part by the wealthiest paying more in taxes than the less wealthy. The tax benefits of employer-paid health insurance premiums, however, favour the wealthy more than others. The “Cadillac tax,” which would lessen the tax subsidy for exceptionally lavish insurance plans, is a common policy that targets these transfers. Another illustration is the ratio of premium differences between young and old, which in the ACA was restricted to 1 to 3; however, one of the measures designed to repeal the ACA proposed expanding the ratio to 1 to 5, which would have reduced the wealth transfer from younger to more elderly people. Rural hospitals receive financial transfers from urban and suburban areas. And
The fact that health insurance serves a variety of purposes could be the reason why policymakers come up with such a wide range of reform ideas. The goal of selling insurance that is highly customised to a patient’s predicted needs is at odds with the goal of providing better catastrophic financial protection, which depends on sharing the risk of those who will not experience those occurrences. If prices are commensurate with quality, encouraging narrow networks may result in cheaper costs, but at the expense of eliminating high-quality providers.
While the aforementioned list attempts to outline the roles that health insurance plays in the United States, it would be much shorter if we only focused on the things that health insurance does well. Insurance companies may bargain for reduced unit costs, but US health care costs are still greater than those in other developed countries. Although many people may consider prescription drug insurance to be adequate, US citizens are six times more likely than citizens of other nations to forgo medication due to out-of-pocket expenses. Insurance may also attempt to encourage people to adopt better habits, although maternal mortality, diabetes, and obesity rates are higher in the US than in Europe. The US maternal mortality rate is higher than even with quality measures in place, at more than