The Sad State of the Healthcare "Market"

A typical hospital bills your insurance 10-20x more than a fair market price for any given medical procedure. This isn't surprising: the healthcare industry is a chaotic mess of middlemen and bureaucrats, and everyone takes a cut. When you cut out everyone except a doctor and a patient, you'd be amazed at how low prices can get.

The healthcare industry is simple in theory: doctors provide medical services to patients in exchange for money. Brilliant! But a generation ago, patients stopped actually paying for these services themselves, instead relying on their insurance plans to cover everything on their behalf. This is already extremely strange; in what other industry does a third party pay for everything you buy, in exchange for a flat monthly rate?

Imagine what this would look like in the restaurant industry. You'd pay $2000 per month for "food insurance", and in exchange your food insurance company would pay for all your meals! Go out to any restaurant, provide your food insurance information, and order what you like! Of course, you'd save a ton of money if you just payed the menu prices, but since your employer (and Obamacare) mandated that you buy a comprehensive food insurance policy, you might as well use it!

Already this "free market" is looking a little worse for wear. Now let's look at the other side of the equation: the doctors. In the past decade, hospitals and clinics across the country have consolidated into a handful of huge corporate behemoths. In the last 6 years alone, the number of doctors employed by one of these "health systems" has increased from 25% (2012) to over 44% (Jan 2018). Doctors who work in these systems are kept entirely in the dark when it comes to money. They typically have no clue how much the hospital charges for each service; often, they don't even know what services the hospital is charging for! The process of a hospital requesting payment from your insurance company is dizzyingly complicated; that's why hospitals are consolidating in the first place—to manage the administrative burden of billing.

So that's the state of the healthcare market: the two main players—doctors and patients—have no clue how much anything costs. Instead, they've both hired a third party—health insurance companies and huge corporate hospitals—to decide prices on their behalf.

This bizarre, anti-competitive scenario is why healthcare prices have been rising steadily for years. In principle, the negotiations between hospitals and insurance companies should eventually shake out a fair price. But that's not what happens. You see: insurance companies are regulated. They're only allowed to make a fixed profit margin. So if they bring in $1M in premiums, they're required to pay out at least $800k. So the only way for them to increase their profits is to increase the amount of money that flows through them. That's right: the insurance company would prefer to pay for more procedures and at higher prices, so next year it can legally increase its premiums and, by extension, its profits. What could go wrong?

growth of administrative overhead

Answer: just about everything. The total amount spent on healthcare in America has increased by an average of 6.4% annually for the past two decades. That's faster than inflation AND average wages, so everyone in the country is spending a bigger and bigger chunk of their paycheck on healthcare.

Fortunately there's a way to get of the runaway train that is American healthcare and enjoy fair prices for medical care! It's called direct primary care, and it's a totally new model for healthcare that throws useless middlemen out the window! Learn more about it here, or find a practice near you on the DPC Mapper.

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Join over a quarter million other Americans and become a member of a DPC practice! There are over 1,000 DPC practices spread across in 48 states, including multiple in every major city. To find a practice near you, go to the DPC Frontier mapper and search for your zip code. If you find a practice that looks good, visit their website directly for more information on how to schedule an initial visit.

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