A Complicated Patchwork: You Shouldn’t Feel Bad If You Don’t Understand U.S Healthcare

  Author: Alexandra Djonovic (Left Leaning)

I would have never believed you if you told me, a proud and archetypal member of Generation Z, that I would be coaching disgruntled adults, sometimes significantly older than myself, on what a deductible is. Some things are too emblematic of adulthood, and grasping healthcare in this country is one of those things. And yet here I am. 

I work as an administrative assistant for a primary care office and unfortunately for me, understanding why and how patients are billed is within the scope of my job. Yet I can’t fault my younger self for the ignorance, because something I would learn soon enough is that many people don’t understand this system. That’s because it doesn’t make any intuitive sense. Healthcare in the U.S. can best be described as a complicated and uneven patchwork, with many different players and facets added on throughout the years. 

The self described moderate leaning think tank, the Niskanen Center, quoted a Policy Brief from Brandeis University that quite aptly described this behemoth of a system as “expensive, fragmented, highly decentralized, and poorly organized…made up of a fragmented network of public and private financing, health care delivery, and quality assurance structures.” 

A notorious lack of transparency within this system only adds to patient frustration and financial anxiety since it’s very difficult to give an estimate on how insurance may process a claim, a statement that makes concierge service seem extremely reasonable in comparison.

Most people are busy working more than 40 hours a week, there is often little time or desire to learn about health insurance or to do the necessary research and self advocacy about which plan might best fit a patient’s needs. It is for that reason that patients do not enjoy being told to call the ‘member services’ number on the back of their card, when that’s truly their best and most accurate source of information when it comes to all insurance-related questions or concerns.

With health insurance, you (usually) pay for it monthly and most people keep paying for it in the form of copayments and deductibles, and even those out-of-pocket costs do not guarantee that services, drugs, or procedures will be fully paid for. Nothing quite works in a comparable way, in every other situation, you get what you pay for but in healthcare, you keep paying and hope that means you are “covered” which is the word patients use to mean paid for fully. The CommonWealth Fund highlighted how in 2018, households paid for approximately the same share of total healthcare costs (28%) as the federal government did.   

Part of the uniqueness of the U.S. healthcare system is the high proportion of people who gain access to insurance via their places of employment. Employers sign contracts with insurance carriers and agree to give health benefits, usually covering the employee and their dependents. Sometimes an employer will give their employees a choice of different plans but often there is only one contracted insurance carrier that the whole company has the option to opt into or not. They are often not given the proper education on the differences between plans, or what their plan’s rules for coverage may be. According to the Census Bureau, “56 percent of the population had employer-sponsored health insurance (ESHI) as of 2017. ESHI accounts for 83 percent of all of those with private insurance of any kind. People whose health insurance is tied to their jobs far outnumber the 38 percent of the population served by government insurance of all kinds.” 

Employee sponsored health insurance actually originates from World War II. During this time, there was a freeze on wages and a shortage of workers so employers had to offer something to make their companies more attractive to people, and that something was health insurance. Eventually, the IRS declared these benefits nontaxable and with that, ESHI’s popularity skyrocketed and to this day, health insurance remains a huge appeal to people although it has eaten up wages.

In this current system, there are over 800 health insurance companies who contract with millions of employers, which adds a ton of different players including “armies of consultants, benefits managers, and brokers” adding to administrative costs of healthcare in the country as highlighted  by a Health Affairs journal article. There are so many players involved in the healthcare delivery system that it makes it confusing to know who is responsible for what, leaving people with little to no recourse.

Employer-based insurance does not mean that employees do not incur costs, they certainly do, and this contributes to lowering wages. 

Despite substantial increases in productivity, inflation-adjusted hourly wages have not increased in more than thirty years, and average weekly earnings have declined. Before taxes, the cost of $10,000 per year is borne approximately equally by a worker making $30,000 and one whose salary is many times that. After taxes, higher-paid workers actually pay less for health insurance than lower-paid workers, because they are in higher tax brackets.

Health Affairs

While the cost remains the same, the paradox of it all is that the less you make, the higher percentage of your wages you will have to contribute to health costs, like premiums. The increase in premiums have outpaced the increase in compensation, which makes this a pressing problem. As The Committee for Economic Development points out, “The average employer-group family health-insurance premium in the United States is now almost $15,500 (shared between employer and employee). For a worker earning the minimum wage of $7.75 per hour over a 2,000 hour year, that premium cost is equal to the annual wage the worker would earn.” In order to be desirable, employers have to pay most (if not all) of the premium cost, contributing to the stagnation of wages we have seen in this country for decades.

The pervasiveness of employer sponsored health insurance begs the question: should something as rudimentary as healthcare be contingent on employment status or should healthcare be a basic human right?

Intuitively, it does not make much sense that healthcare would have anything to do with an employer and it raises many complex issues and questions we have to contend with. For example, there is a phenomenon known as “job-lock” which happens when people feel forced to stay at jobs just to keep benefits. This is a big reason people choose not to go pursue their own business ventures or freelance, for example. This has caused many people to take pay cuts just to keep their insurance plans because they know anything off the exchange would be significantly more expensive. In fact, according to a survey conducted by America’s Health Insurance Plans (AHIP) 56 percent of survey respondents reported that insurance impacted their decision to stay at a job.

In every other country, healthcare is simplified and the government heavily regulates it. In countries like the United Kingdom, they advocate for patients and negotiate aggressively with healthcare providers, drug manufacturers, and medical device companies to be sure patients are not exploited. Healthcare is socialized so the government owns hospitals, making healthcare providers government employees.

COVID-19 makes this topic especially pertinent. In May, the jobless rate reached 15 percent and upwards of 36 million Americans filed for unemployment. An approximate 12.7 million Americans have lost their insurance as a result, and this number is likely to grow according to the Economic Policy Institute. Those who have lost their jobs can enroll in COBRA which stands for Consolidated Omnibus Budget Reconciliation Act. This acts as an extension of their ESHI for 18 months but they incur the cost of the full premium as well as an administrative fee, making it an inaccessible option for many.

Despite all these structural issues and inadequacies, the U.S leads the world in annual average healthcare expenditures per capita at 11,172 as of 2018 with costs increasing over the past several years according to the CommonWealth Fund. 

Yet still, we have a healthcare system with outcomes that have been described by the Niskanen Center and other experts as  “no better and often worse than in most developed nations,” a statement that in and of itself should warrant further analysis and bipartisan efforts to address. 

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