As a European I still can’t understand the American health insurance, as why is it like this? Who profits with this system? As far as I know a vast majority of the population has to pay exorbitant bills while not having the funds, so why it is still going and hasn’t changed to a more affordable one?
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There are several reasons why it can’t change.
Some of the reasons are greed: there’s money to be made as an insurer, and they want to continue to make that money. With that said, the amount of profit an insurer makes from offering insurance is actually pretty thin. In fact, my company loses money each year on core health insurance. An insurer is essentially a bank you can only withdraw from under certain conditions, so they make money like other banks. They invest, create financial products to sell, amongst other activities.
Another reason is that health insurance is deeply rooted in how America works. One example is something called pharmacy rebates. In short, a drug company offers a drug for $100 but has a rebate for $80 for the drug. This rebate gets paid to insurance companies. Insurance companies “share” a percentage of this rebate with the company they are servicing (Different insurance companies offer different rebate share percentages, depending on corporate strategies). These rebates are paid out quarterly or yearly in giant lump sums. These lump sums fuel a lot of pension plans for the employees of the business being insured. So, if we rip insurance out of America, this would cause a major problem for pensions.
Another reason, and this one WILL get hate for it, but insurance companies do offer something the government can’t. Right now we have Medicare (government provided plans) and Medicare advantage (government subsidized plans provided by private insurance companies). These are both meant for people over 65. I recently read a paper that stated Medicare Advantage offered better health outcomes for less cost, even when accounting for profit. Why is that? Because the market for insurance is brutally competitive, which drives prices downward.
Just switching to single payer won’t solve all the problems in americas healthcare system. People like to think of it like a total solution, but it’s not that simple. Insurance faces many problems, the largest of which is waste. Wasteful spending on healthcare accounts for like 4% of total US GDP. Now, do people really want to say the government is good minimizing wasteful spending? Another huge problem is inflation. The rule of thumb is medical inflation is twice that of regular inflation. This is a massive problem for insurance companies who have a profit motive to resolve, and nothing can get better until it is. The government would likely manage this issue worse because they have no competitive incentive to solve the issue as efficiently as private industry.
Final point, I know we like to compare our system to other systems in the world to make America look bad. There are valid points to be made in those arguments and the American system can definitely be better. However, very important details are overlooked when making these statements. First, americas population is multiple times larger than the systems we are compared to. America is 10 times larger than Canada, between 30 and 60 times larger than Nordic countries, 5 times bigger than the UK, 4 times larger than Germany. The scale of Americas system drastically changes how much it costs. Moreover, the health of the American population is generally much worse than these other countries, plus our population age is typically higher as well. All these variables drastically impact the cost of healthcare, and make just switching the American model to another country’s model a shortsighted endeavor. People don’t harp on NASA on how to build rockets, but people will harp on one of the single most complicated systems in the world like they have all the answers.
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