Healthcare In The United States

Access to proper health care should be affordable and accessible. Instead, our healthcare system is focused on volume rather than value and prioritizes profits over good care, people, and even scientific research.^† As a result, not only is our health care system flawed, but it’s EXPENSIVE, MAN!!! Adopting a single-payer healthcare system or setting up some cost transparency measures is probably a good starting point to create efficiencies in our already regrettable system. However, that’s a topic for a different day.

Let’s talk about the complex machine—American Healthcare. Healthcare Plans in The United States is undoubtedly a commodity we purchase. Despite our high premiums, the U.S. is an outlier where we spend more money on health care, and yet, we have the lowest life expectancy amongst other developed nations- and it’s becoming relatively clear that our system prioritizes treatments over cures.

Navigating through our health care system is tedious and complicated, and indirect costs such as advertisements and attracting new patients/customers add to further wastage of resources. If you disagree, think about those fancy brochures and lollipops in your doctor’s office—you’ll soon conclude that amenities and marketing matter more than good care.

I’ve always dreaded the open enrollment period because it’s a HARD choice to make. Studies have shown that uninsured and self-pay patients pay about 2.5x more than those covered by health insurance!^* So, carrying health insurance is important, and it’s on us to understand the gray areas of these insurance products. After all, healthcare IS a business, and we owe it to ourselves to be educated enough before purchasing a plan. 

Figuring out this complex system is already challenging. Still, it becomes even harder to understand when one must navigate through a buffet of options of tiers (Platinum, Gold, Silver, Bronze) and acronyms (HMOs, PPOs, EPOs, POSs, HDHP, and HSAs) to find the right plan. So, here’s my attempt at breaking it down to make this complex topic slightly less complex.

When the enrollment period kicks in, and you’re deciding what plan to go with, know that it doesn’t matter WHAT those daunting acronyms (HMOs, PPOs, EPOs, etc..) STAND FOR, but it’s important to be AWARE that each of these ARE “COMMODITIES,” and you should treat them as such and understand that they all differ in flavors and levels of flexibility. Of course, the more flavorful and flexible a product is, the more it’ll cost.

So a:

Health Maintenance Organization (HMO) Plan: Is the least flexible plan and they typically have lower premiums and so you can likely expect to pay less out of pocket. Consequently, this also means that your freedom to choose your care within this plan is also limited, and you’ll need to have your Primary Care Physician (PCP) named on file. It is your PCP who will refer/authorize your care. If you believe HMO is inferior, it may be worthwhile to think again. A closed medical system like HMO may not necessarily be a bad thing. In HMOs, doctors from many disciplines may work together rather than in silo to provide better overall care. If patients remain in such systems for decades, it may translate to better financial incentives.

Think of this as when you were young, and you always had to ask your parents permission to do anything, so you were completely dependent on them. 

Preferred Provider Organization (PPO) Plan: There is freedom to choose your healthcare providers in this plan. Essentially this is the opposite of an HMO plan.

Think of this as the times when you were in your mid 20’s. You likely have your driving license and can go out whenever you want without needing permission (ideally). But, of course, with great power also comes great responsibility, which means you must pay more for your excursions (and by excursions, I mean premiums.)

Exclusive Provider Organization (EPO) and Point Of Service (POS) Plans: They are kind of a blended and somewhat hybrid plan between the HMO and PPO options. EPO offers a bit more flexibility than the HMO but is less expensive than PPO, and just like PPO, you don’t need a referral to get care from a specialist.

Think of this as when you first got your license—you could go out and didn’t have to depend on your parents to take you from place to place. However, you still had to be home by 7 pm for dinner.

Deductible, Coinsurance & Copay 

Deductible- Most health plans don’t contribute anything until you’ve pitched in a certain amount out of your own pocket. Many of these “high-deductible plans” are typical and may not kick in until you’ve paid out your share (sometimes thousands of dollars). Interestingly, these plans used to be called “catastrophic” coverage.

So, a deductible is an amount you set foot out of your own pocket before insurance kicks in. So, for example, if your deductible is $100, then that’s the amount you pay BEFORE your insurance kicks in. Once your deductible is met, you pay a percentage of health care expenses called coinsurance. Copays, on the other hand, are a flat fee you pay to see a doctor. The copay usually does not apply toward a deductible.

Now that we know what Coinsurance and Copays are, let’s talk about this briefly because I feel like these two easily get swept under the rug. After all, they are usually not on top of our minds, but they are more important than your deductible because they have the potential to impact your costs significantly. Remember, your deductible is what you pay BEFORE your insurance kicks in and after you either go into a Copay or Coinsurance model (though these two may not be mutually exclusive). With copay, you pay a flat fee, whereas, with the coinsurance model, you pay a percentage (usually about 20%) until you reach your out-of-pocket maximum (at that point, your plan should cover 100% of the expenses).

So, to give you an idea of why Coinsurance and Copays are important to think about, here is an example scenario: Suppose you’re due for surgery and you’re on a Copay model (assuming you’ve reached your deductible). As an educated consumer, you’ve narrowed down two potential surgeons. Surgery from Dr. Pepper will cost you $10,000, and surgery from Dr. Soda will cost you $9,000, but you like Dr. Pepper a lot more, and you know your plan has a Copay of $500 no matter your choice of doctor; therefore, you’d pay $500 no matter which surgeon you see. 

Now, the numbers could look very different if you were on a Coinsurance model.

So…What About HSA Accounts?

A significant advantage of being on a High Deductible Health Plan (HDHP) is the Health Savings Account (HSA) component offering a triple tax advantage. Naturally, as a young guy prioritizing investing, I am drawn to the shiny HSA plan. But fair warning, friends—all that glitters is not gold.

Deductibles are usually higher with an HDHP (hence the name) and often follow a coinsurance model. The attractive feature of HDHPs are lower premiums (lower monthly payments) and usually appeal to young, healthy individuals. The HSA part is like an investment account; you can contribute to it and let it grow. HSAs, unlike Flexible Spending Accounts (FSAs), are yours to keep, and you can take your HSA with you even if you leave your employer.

Normally HSAs are advantageous IF you are single OR married with no kids OR relatively healthy AND IF you’re financially stable enough to front-load your health insurance costs should an emergency arise.

Should I Enroll In A HDHP For Access To HSA Accounts?

Don’t let the tail wag the dog. While HSAs are great, you shouldn’t necessarily want to opt into them just because they offer a triple tax advantage. If anything, HSAs can also be very dangerous. HSAs make great sense for the high earners but are almost useless unless you have thousands of dollars sitting around that you can deploy if an emergency arises. Therefore, choosing such a plan requires making important and thoughtful decisions. In my opinion, there are THREE things to at least consider thinking about before you decide to enroll in an HDHP.

1^st Do you have enough saved to up pay your deductible IN FULL within the first half of the year?

2^nd If needed, can you cover your full out-of-pocket maximum for the year without putting yourself in financial jeopardy?

3^rd and probably the most crucial—can you afford to pay for your health care WITHOUT dipping into your HSA accounts? (Ideally, you want your HSA account to grow for decades without dipping into it. But if you plan on contributing to HSA only to use those funds in the same year, you’re not really getting much of a tax advantage; therefore, you’d likely be better off going for the low deductible plan.)  

A Few Closing Thoughts

Imagine buying an airplane ticket and getting different charges from the gate agents, pilots, and flight attendants. Crazy, right? But this is precisely how the U.S. Health care system works! Separate billing, confusing medical codes, and lack of cost transparency create a chaotic consumer market.

Illness and wellness in the healthcare system are two sides of the same coin in that it treats them both as another object of commerce: Revenue generation. Things sold and services rendered. Similar to how airlines charge extra for Exit Row seats and Priority Boarding, the healthcare system does the same with its fee structure. This whole system is slow, broken, antiquated, and probably the most messed up market in the world.

BUT there is a pill for taking back our health care, and that begins by taking the initiative in educating ourselves, asking questions and seeking out the necessary information. But, unfortunately, when profit is the primary metric, the system is tuned to be rigged against us by default. It’s constructed to keep us in never-ending payment plans while maxing out credit cards and forcing us to dip into our retirement savings.

Maybe this is the unavoidable burden of being an American—Or maybe it’s a slow-moving heist in broad daylight.