The online vitriol that has been unleashed against the health insurance industry in the past two weeks has unmasked a profound level of despair, powerlessness and anger experienced by millions of Americans who feel betrayed by our healthcare system.
When you visit the “About us” pages on major health insurance providers’ websites, you are met with lofty mission statements such as Aetna’s pledge to help individuals “live a healthier life” and United HealthCare’s goal to “make the healthcare system work better for everyone.” Meanwhile, UnitedHealthcare’s press release for its investor conference describes projected cash flows from operations to be $32 billion to $33 billion in 2025.
This cognitive dissonance isn’t entirely the fault of insurance companies. Rather, it is a reflection of how the United States healthcare system is designed. Unlike other countries, we rely on a market-based approach to healthcare in which insurance companies and hospitals are expected to act as economic entities. It’s a system long overdue for reform.
Before health insurance companies existed in the early 20th century, Americans paid for healthcare out of their personal savings or through charitable and mutual aid societies. Health insurance emerged in the 1930s and 1940s with the purpose of protecting individuals from unexpected financial risk and improving access to needed healthcare services. From the beginning, healthcare insurance in the United States has been predominantly employer-based (meaning offered by employers as a benefit to employees) and delivered through private companies such as UnitedHealth, Aetna and Cigna. While government-sponsored programs such as Medicare, Medicaid and the Affordable Care Act marketplaces serve certain qualifying populations based on age or income, employer-sponsored health insurance remains the largest source of coverage in the country.
So what is the current state of affairs? In the United States today, 1,176 private health insurers offer a bewildering number of plans. In 2022 alone, the six largest health insurers collectively earned $41 billion in profits, according to Becker’s Healthcare. With so many companies, effective regulation is difficult and costly, despite documented reports of false advertising, deceptive marketing and fraudulent sales practices. Private insurance plans also carry an average administrative overhead of 12.4%, compared to just 2.2% in traditional Medicare.
The United States spends more than $4.5 trillion on healthcare, according to the Kaiser Family Foundation. Yet, despite the fact that we pay so much for care and that 92% of the population has health insurance, 41% of U.S. adults still struggle with healthcare debt.
This issue goes beyond health insurance coverage; it calls for a foundational rebuild of our healthcare system to reduce waste and increase value. Experts have estimated that creating a single-payer healthcare system could save about $450 to $503 billion dollars annually. Single-payer doesn’t always have to take the form of the United Kingdom’s National Health Insurance, for example, where most hospitals and healthcare providers are publicly funded. Countries like Canada and Spain use single-payer systems that are regionally administered and financed, with more private delivery of healthcare services and a greater role for private insurance. And certainly there are other options that may be well-adapted to the U.S. context, such as Germany’s multi-payer system, which pools risk to provide universal coverage. Perhaps the most promising pathway for the United States is the public option, which I’ve discussed in a previous article. This approach would allow people to opt into a government-administered plan, likely at the state level, that could compete with private insurers.
As an emergency physician who has lived and worked in numerous countries with universally funded healthcare, it is clear to me that overall Americans receive poorer care and face greater barriers to care. Despite this, we pay far more — to the tune of $88 billion in medical debt, according to the Kaiser Family Foundation. This is not just a burden for a small proportion of the population; 100 million Americans — nearly one in three — are plagued by medical debt. This level of financial hardship is simply unheard of in other developed countries.
We simply cannot afford to continue heading down this path. Whether it be a public option, multi-payer system, single-payer system, or something entirely new, reforming how we finance and deliver care is the only true way to fundamentally address the dysfunction that is causing so much despair across our country.
