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Private health insurance drives up costs

Written by Diane Archer

Because of private health insurance, buying heath care services is unlike buying products on Amazon or through Airbnb. University of Massachusetts Amherst economist Gerald Friedman in an article for explains that private health insurance undermines price competition. As a result, “competition” in the health care market drives up costs.

No question, health care is complicated. For the most part, we must trust doctors to tell us what treatment we need. We generally don’t know our costs until after we’ve received treatment. And, we usually have no clue what another doctor would have proposed for treatment or what those treatment costs would have been.

Patients are largely in the dark. And, with private insurance, they tend to have to go through all kinds of processes and administrative headaches to get approvals for the services their doctors said they needed. The burden of dealing with private insurers now consumes more than 4 percent of GDP, up from under 1 percent in the 1970s.

The private health insurers’ incentives in part explain these high administrative costs. Whatever they can do to make it hard for people to get their care covered helps their bottom lines. As myriad studies show, high deductibles and copays keep people who need care from getting it. (Click here, for the fundamental differences between Medicare and commercial insurance.)

To fix the problem we need one payer, such as Medicare, for everyone. For-profit private insurers are not the solution. While policymakers and regulators have made fixes–e.g., creating appeal processes, mandating essential benefits–the fixes have also created additional administrative burdens with attendant costs on everyone. Deregulation of the hospital industry only increased administrative costs and prices.

A single health care system, such as improved Medicare for all, administered by the federal government would reduce administrative burdens and costs and could enable us to cover everyone in America at no additional cost.

If you support improved Medicare for all, please sign this petition to Congress.

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