Who Owns Health Care? Part 2: The insurers and the large health systems

In a Capitalist society the idea of ownership is central. Goods and services are bought and sold. For this to work ownership must trade hands. Essentially everything has a price including food, work, land, and knowledge.

You would be hard pressed to find someone who would pay more than a portion of a dollar for an apple. The value of an apple is easy to comprehend.

The same cannot be said for a service. For example, a haircut may cost $10 at one salon but $200 at a different salon. In the example of the salon people may justify the added expense because of the expertise of the person cutting the hair or the amenities of the salon.

Health care is even harder to price. Like a haircut there is variability in quality and experience. Unlike a haircut the consumer may not have a good sense of what good quality means. Anyone can recognize a bad haircut. Could the same be true for medical care? Because human health is so complex, it is hard for a consumer to assign a specific value to good care.

Everyone needs health care at some point.

In addition to variability in experience, consider the fact that health care is often not discretionary. In other words, someone can choose whether to get a haircut without risk of bodily harm, but if one puts off health care for long enough there may be serious consequences.

Even the most fiercely independent Mainers will likely need health care at some point. There is also good evidence to show that spending on things like preventive care decreases the need for costly care further down the road.

Who decides?

We have established that health care is hard to price. So, who decides on the prices? The answer to this question is quite complex, but in the U.S. by far the biggest players are the insurance companies (both public and private) and large hospital health systems.

Insurance companies negotiate costs with hospitals and thus dictate cost. Without insurance many lifesaving procedures can be prohibitively expensive. This has created a two-tiered system in the U.S., those with insurance and those without.

If access to insurance determines a person’s ability to receive health care, then in some sense insurance companies do “own” health care. As the gatekeepers to medical care insurance companies have de facto power in people’s ability to maintain health and treat disease. Because around 9% of the US population does not have any health insurance folks have been forced to come up with workarounds. Unfortunately, this often means putting off care or going to the most expensive place to receive care, the Emergency Room.

This is where large health systems enter the picture.

As the entity delivering the care, hospital systems help decide rates with insurance companies and arbitrarily set prices for individuals without insurance. Surprisingly, the prices they set for individuals without insurance are astronomically higher than the prices they give to insurance companies. In the U.S., 66% of those declaring bankruptcy cite medical bills as a key contributor to their financial situation.

Hospitals and insurance companies are not inherently “good” or “bad.” They serve a function in our society. Unfortunately, their relative power to decide who has access to care and how much that care costs has outstripped their ability to distribute care equitably. A possible solution is to redistribute some of that power to patients and the individuals who care for them.