Why health-care costs are rising in the U.S. — except this isn’t it

Most Americans don’t have much of a choice when it comes to their insurance plan. More than 54% get health insurance through their employer. This lack of choice limits competition, which can drive prices higher.

Source: Why health-care costs are rising in the U.S. more than anywhere else


Large employers are mostly (60% of employers) self-funded, they don’t use insurance. Employers of any decent size typically offer a choice of plans. It might be among high deductible plans, HMOs, PPOs, etc.

But what choice are we talking about? What competition? If a lack of choice for health insurance is a driver of costs, why are we talking about Medicare for All as the key to saving money?

The fact is creating more competition among insurance companies is counter productive. To be competitive insurers use networks and attempt to get providers to accept the lowest possible fee. To do that they offer the providers patients. That is much harder the more insurance companies are in the same area.

The view expressed in the quote is why we can’t solve the health cost problem.

Health insurance premiums are not the price of health care.


  1. Of course, the authors ignore the #1 reason why employer-sponsored coverage seems so standardized and costs so much. Since 1983, Congress has imposed price controls in the form of DRGs, RBRVS and Balance Billing limits when it comes to Medicare coverage. States and Feds also colluded to limit the reimbursement rates for Medicaid. The winner in limiting covered charges is the Veterans Administration. Physicians and hospitals, in turn, raise rates. A recent Rand Study confirmed that employer sponsored coverage pays 241% of Medicare, a much higher difference for Medicaid and the VA.

    Couple that with dramatic shifts in enrollment, and whaddaya get? Just what we’ve received!

    From 1983 to 2022, Medicare enrollment increased from 64MM, Medicaid enrollment increased from <20MM to ~85+MM in 2022, and millions more are in the VA system. Yes, almost half of Americans with coverage are in a government sponsored plan (taxpayer funded, with limits on provider charges). All three systems limit reimbursements, which shifts costs to everyone else – and especially employer-sponsored plans.

    There is a reason why the average annual rate of health care inflation in these three programs is between 3% – 4% for the last 40 years!

    Employers, in response, have tended to limit point of purchase cost sharing (deductibles, copayments, coinsurance, out of pocket expense maximums) – so that American's out of pocket spend declined from 30+% to less than 10% of all medical expenditures. That is, the premiums for coverage (contributions where self-insured) have risen significantly because deductibles and out of pocket maximums were moderated. For example, a $100 deductible in 1983, inflated 8% per year would exceed $3,000 in 2022.

    Liked by 1 person

  2. What a great linked BS article. Substitute the word “car” for healthcare. Cars cost less in 1960 too. In some countries, people still can’t afford cars so they spend less on cars. Some poor villages don’t have doctors, I mean roads, so why would they spend money on cars. Because some countries do not spend a lot of money on cars, they do not have a lot of car part manufacturers to make vaccines, I mean spare car parts.

    I know that the cost of healthcare is an issue, but when you try to show how bad that you have to resort to data from 60 years ago, it doesn’t help. Over 60 years there has been a lot of innovation and cures for diseases that people just plain died from before. That all costs money.

    Liked by 1 person

    1. The article harkens back to 1960 and much less healthcare cost as percentage of GDP. That was before Medicare and Medicaid were created to muddy the water. Of course healthcare was more primitive and simple then also.
      What then is to be done about healthcare costs going forward. More and more folks are climbing onto the Medicare and Medicaid trains. The remaining workers will be faced with higher and higher costs. How to fix this is the question that the CNBC article was totally unable to address. I’m beginning to think no one knows the way out.

      Liked by 1 person

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