Medical Care in the U.S is Bad, But Insurance Sucks Too « techfounder

There's been a lot of media attention recently to the high cost of medical care in the U.S compared to other countries (see some nice graphs on this NY Times opinion piece). Most of the attention has been on medical care itself, with medical insurance getting a pass with reportedly low margins.

As someone who recently moved to the U.S (from Israel), I'd definitely put some of the blame for the cost disparity on the medical insurance system in the U.S. To explain why, I'll relate from my own experience -

A few months after I moved to the states, and before my travel insurance expired, I set up my health insurance with the Blue Shield of California. After much deliberation, I settled on a PPO plan costing 200$ a month. It might sound on the low side to you, but consider that up until now I was paying 71NIS (~19.5 US$) a month for the highest level of coverage (you can see the actual costs on this Google translated page of the "Gold" plan at the Maccabi Health insurance provider). In Israel, all citizens are covered by law, and most medical needs are subsidized through the social security tax (the rate of which is lower than the U.S one).

At this point I thought I was set - since I'm used to insurance that "just works". However, that was not the case when I actually needed medical care.

A couple of months later, I developed a minor condition in my ear - swelling and build up of fluids - a common affliction for those who train in grappling (I train BJJ - if you never heard of it, it's kind of similar to Judo / Wrestling). If not treated within a few days, this swelling can become permanent, leaving your ear permanently deformed (a condition called "califlower ear"). This was not the first time I had this condition, and in Israel I treated it with the help of a physician without any problems, so I figured I'd do the same now (time to finally use that 200$ a month insurance!).

So I go to my insurance's website, and find an ear doctor (an otolaryngologist - try saying that 3 times fast) in my area, set up an appointment and go to have the procedure done. On the day of the appointment, I arrive on time, hand out my insurance card and then I'm led to a small doctor's office. An interesting footnote about the operation they run here - one doctor is responsible for 4 (or 6?) closed offices, visiting one at a time and then assistants such as nurses and so forth take care of his instructions while he visits the next room. Pretty efficient for the medical center.

Anyway, after 10 minutes wait, the doctor comes to see me, we exchange pleasantries, he takes a look at the ear and says he can perform the operation right now, which is what I had expected. I say great, he says the nurse will bring me a form to sign since it's an invasive procedure (a small cut to the ear). After everything is signed and he comes back from one of the other rooms, he performs the procedure, which takes him about 2 minutes + 2 minutes to suture it and wrap it up. I say "Thank you very much, see you in a week (to remove the sutures)", and leave, feeling pretty good that it went as smooth as expected. At no time did were any medical costs discussed.

Well, you can guess what happened next - 3 weeks afterwards I receive a bill from my insurance company, for the sum of 1,076$. The breakdown was as follows:

• Doctor's visit - 300$
• Procedure - 776$

To say I was surprised would be an understatement. 1,076$ for a 5 minute doctor's visit? I'll mention at this point that this procedure is so simple, that many do it at home by themselves (and from now on that includes me). I call my insurance to see WTH is going on. I go over the claim with them, and slowly it dawns on me what makes the lower tier insurance plans relatively "cheap". I was in the dreaded "deductible" for both the doctor visit and procedure - which means I need to pay it all out of pocket. In Israel, many standard medical needs (such as a doctor visit) and procedures are covered completely by  insurance - there's no copayment or deductible for either. If there's any out-of-pocket expenses for the procedure, medicine or exam, they are listed visibly and are approved beforehand by the needing party. At no time was I informed of any expenses - let alone over $1k (for some people that might not sound like a lot of money, but for me at the time it definitely was - for an unexpected expense). I had just assumed that my insurance will cover it if no one informed me about the costs and asked for my approval.

At this point I call the medical center's billing department itself, trying to understand the nature of those costs and why wasn't I informed. Here are some excerpts:

• Me - Does 300$ for a 5 minute doctor visit sound reasonable to you?
• Medical Center Billing Dept. - Those rates are within the range found in this area.
• Me - I wasn't asking about that. Does 300$ for a doctor visit sound reasonable to you? for a physician within my insurance network?
• MCBD - Sir, let me check something with my supervisor. Could you hold on for a minute?
• Me - Sure. I'll be here
• ...
• MCBD - Sir, I checked with my supervisor, and he says we can offer 30% discount on the bill. Would that be fine?
• Me (after a short deliberation) - I guess if that's the best you can do, I have no real choice. I'll take it.
• Me - I'm surprised that neither the reception of the doctor informed me of the cost of the treatment.
• MCBD - They do not have that information.
• Me - I see... so for future reference - how can I tell in advance how much would a service cost me when I visit your center?
• MCBD - *pausing, not sure what to say* You could ask for the procedure codes and then check with your insurance.
• Me - You mean you guys can't tell me in advance how much a treatment would cost?
• MCBD - Unfortunately, no.
  (Meaning I would need to ask my doctor to wait, fetch the procedure codes, call my insurance, have them cross-reference against the medical center I'm visiting, probably wait for them to call me back while they get the specific cost from that center - all in the middle of a doctor's appointment).
• Me - Ok... thank you.

What we learned here

• (Conjecture) Medical providers will over inflate bills to insured patients assuming insurance will cover. When it doesn't, they are mandated to give a "discount" to appease angry customers.
• Since they are typically being overbilled, insurance companies will raise their rates so even the lowest packages are 10 times the cost of a top-tier insurance package in other counties.
• Medical providers and insurance will make it very difficult to know medical costs in advance. Providers will obfuscate their prices through procedure codes, and insurance companies develop complex insurance packages with a ton of fine print for actual coverage, copayments and out of pocket costs.

If you already lived in the U.S for a couple of years, you probably knew this already. For anyone arriving from other countries, this can be quite a shock.

Cost opaqueness makes competition and informed choices very difficult - if you can't easily tell how to minimize your costs, you are left with trial and error. It appears most states in the U.S do not require hospitals and medical providers to list their prices. See here how your state ranks in this respect (California gets a D).

The NY Times article I referenced in the beginning also mentions how Americans use health care less frequently than other countries - considering the volatility of costs, I think that's hardly a surprise. I have been very cautious in using health care ever since that incident (even though I upgraded my insurance). I can also understand why so many people are uninsured here - I heard about so many cases from friends here on how their insurance didn't help them when they needed it, and then having to spend thousands out of pocket - no wonder you wouldn't want to add the insurance cost itself to it. The only reason to have insurance here in the U.S is to avoid going bankrupt if you do need something more than a simple treatment (like an operation).

The medical services and insurance cycle of raising and obfuscating prices to squeeze more out of people who need medical attention, is terrible. In my opinion, medical care is one of the core things that a 1st world country should make available to anyone, for cheap, by subsidizing it and enforcing transparency and price normalization for common needs (In Israel, we have an umbrella of services and treatments that are declared as basic needs and are provided for free for anyone with insurance - which includes every citizen). The prospects of this happening in the U.S do not look good, and it's a shame.