The All-Out Guide to Health Insurance


I have to tell you guys I am super afraid to buy private health insurance this year. Actually, I’m terrified, frozen with fear, wracked with paralyzing anxiety about buying private health insurance this year.

For the better part of forever my health insurance has been mostly free, give or take a $10 co-pay here and there. It’s part of why I have been able to save so much at my young age.

Thanks mom & dad!

So what do I do when I’m afraid? I turn it into a tool of change. I researched and analyzed the hell out of healthcare in an effort to find out how to game the system that’s gaming us.

This healthcare guide is the fruit of fear and terror, which really is one of the best motivators around. I hope it might be helpful to all those millennials out there like me.

Part one is an analysis of where we are: what are the contributing factors to insanely high healthcare costs in the U.S. Part two is an all-out, no bullshit guide on how to game the system as much as possible to get your healthcare costs lower.

Yes, costs are insane.



World Bank Data


Why TF Is U.S. Healthcare So Expensive

More Complicated System = More Administrative Structure

Our healthcare system in the United States is so complicated it requires extra people to figure out wtf is going on with billing. Duke University Hospital has 900 hospital beds and 1,300 billing clerks. These extra clerks have to figure out how to bill which insurers, how to collect money from people, and even what price to charge. Each private insurer pays a different price for the same medical service.

It’s not just at hospitals, this fuckery happens at every level of the healthcare system.

The doctor’s office needs more staff to interact with payers, file claims, and obtain authorizations. Personnel are also needed to charge patients for copays.

The private health insurer has to devote most of its administration to billing concerns and less to healthcare concerns.

Doctors have to be knowledgeable about what services cost the patient and which will be covered. I don’t know how many times I’ve had to ask my doctor if a test will be covered.

In 1993, administrative personnel accounted for 27% of the health care workforce, a 40% increase over 1968. Similarly, administrative costs as a percentage of total health care spending more than doubled between 1980 and 2010.

Pay the Doctors

High cost of healthcare is also contributed to by physician pay.
We send our doctors fresh out of med school with 200k in student loan debt. The monthly payment on a $150,000 loan at an interest rate of 3% is around $1800. It’s no wonder a doctor is the U.S. makes two or three times their counterparts in Europe.

Medical malpractice insurance is also very expensive. According to The Cunningham Group, an OBGYN in Florida can expect to pay $100,000-$200,000 in annual malpractice premiums. Of course it varies by specialty, a general practitioner would only owe about $30,000.

High physician pay in the U.S. is less about physicians being greedy, exorbitant millionaires with gold toilets and more about how we pass costs onto the health professional in this country.

I literally couldn’t find information on what medical malpractice insurance costs in Europe. My conclusion is that apparently no one is concerned enough to write about it.

According to Princeton economist Uwe Reinhardt, physician pay accounts for an estimated 10% of healthcare costs.

Lobbying and the Branding of Healthcare

So far this year we’ve spent 1.67 Billion on lobbying. The highest spending by industry was, you guessed it, healthcare— more than defense, more than the oil industry. Half of the healthcare lobbying money goes to drug lobbying, with lesser percentages going to things like hospitals, health services, and other issues. OpenSecrets

In the U.S., lobbying is the WD40 that keeps the wheel of healthcare spending going.
It fuels laws that loosen restrictions on drug prices, it helps health insurers charge whatever they see fit, and generally tries to keep people from organizing groups that would bid down the price of care.

The function that government has in countries with Single Payer healthcare is mostly to organize the people. When people are assembled into large groups they can bargain for lower prices on drugs and care.

In the U.S. the lowest drug prices go to medicare patients. This is because medicare is a large pool of people and it can bargain for the very best prices. Medicare also bargains for lower payments to providers and lower costs of medical devices. “The more leverage the buyer has, the lower the price they get. That’s true in every industry,” says Harvard economist David Cutler.

A part of the lobbying process that we don’t often hear talked about is the direct to consumer lobbying the drug companies are doing through television advertising. Fun fact! The U.S. is one of three countries in the world that allow drug advertising on TV. The other two are Brazil and New Zealand.

How does this contribute to healthcare costs? It means that patients have a high awareness of “branded” medications rather than generic ones. Drug commercials mean higher sales of branded drugs, which give the drug more incentive to further market and popularize their name brand.

I’m sure you’ve heard of Lipitor but have you heard of Atorvastatin? You’ve heard of Pepto Bismol but how about bismuth subsalicylate? Did you know you can buy bismuth subsalicylate at the 99 cent store at a higher dosage than the $12 bottle of Pepto they sell at the drugstore?

A bit more about healthcare branding…

I read an article recently about a struggling hospital chain in New York that overhauled its brand, running tv ads and online videos, boasting an 80% boost in online appointments.

“The reality is that the competition has gotten fierce— we have competitors moving into our backyard. It’s now critically important to a consumer knows who you are, what your value is and why they should go to your organization.” -Ramon Soto Chief Marketing Officer

Now go back and read that paragraph and see if you can tell if it’s coming from a healthcare organization or the local Wal-Mart store.

Branding drives up costs. Go to any mall in America and see how much Calvin Klein is charging for a 5 cent t-shirt made in indonesia. Probably about $50. That’s a 999% markup. Same phenomenon happens to hospitals, healthcare chains, and particularly drugs.

Branding can also be dangerous in healthcare because it shifts the focus from care to image.

Hospitals should be like fire stations, any local one will do. Can you imagine seeing a commercial for how great the local fire station is?

Come to Glendale Fire Station 21 where our hoses are thick and we always slide down the pole when you call.

Defensive medicine (not preventative medicine)

In the U.S. it’s much more common to do a test for everything. You’re worried about cancer let’s get you a mammogram! Tired all the time? Why not some thyroid tests? I know this one well because I’m a super hypochondriac and I’m always at the doctor asking for some outlandish test.

I went to my rheumatologist a few months ago complaining about pain in my hands. He did blood tests for inflammation that came out negative. He said, “well, we could do an MRI of your hands.” I thanked him but said that sounded a little drastic at this stage. Doctors are much more likely to always do the testing because they don’t want to get sued. I saw this all the time working in the hospital.

According to the Organization for Economic Cooperation (OCED), compared with 34 other countries the U.S. delivers (population adjusted) almost three times as many mammograms, two-and-a-half times the number of MRI scans, and 31 percent more C-sections.

All this defensive care, doing a test for everything, is partly why the U.S. spends so much but isn’t particularly better off.

Defensive medicine is differentiated from preventative medicine, which is taking measures to actually stop disease before it occurs. An example of preventative medicine would be eating a healthy diet or stopping smoking 30 years before you actually develop the heart condition or lung condition.

Preventative medicine isn’t popular in the U.S., partly because people skip necessary care steps. We skip check-ups and flu shots and screenings because we think we are saving money. I had an HMO for many years, which is basically a type of health insurance designed to deny your claim enough times until you give up.

They required me to go through a series of steps (go to the GP, then go to physical therapy for 2 months, then go back to the GP and get a referral to only one of their approved doctors) before they would allow me to see a specialist for my knee. So I just didn’t do it, it was too much hassle and I lived with the knee pain without knowing what was wrong.

This repeats itself all around the system with people who are much sicker and far poorer than I.

So we skip necessary maintenance sort of care to save money, then when we are sick we receive the high-technology expensive tests and highest cost drugs, and way more of them than is probably medically necessary.

In the words of my mother, we have this bass-ackwards.

Hospital Cost Structures

So it turns out hospital cost structures are totally fucked. That is to say, prices are arbitrary and essentially based on nothing.

We all know a hospital stay is incredibly costly, but not for the reasons you might think.

Exhibit A 

You can see here that the patient stayed in the hospital for two days, running up a bill of around $10,000 per day. Now take a look at what the insurance company actually paid for that hospital stay $2,052.

Where did that extra $19,172.54 go? It just vanished! It’s magic! The patient only owed $50.

Before the rise of private health insurance as we know it today, hospitals operated like most businesses. Their prices reflected operating costs and market price of supplies, with a little added on top to make a profit.

But then private health insurers, representing large groups of insured people, started to negotiate deep discounts with hospitals and the profit margin began to suffer.

The result? Hospitals began charging astronomical prices so that they could make it look like they were giving the insurer a discount.

Different payers will agree to pay for different services, and will ignore services they don’t intend to pay for. But obviously, if the hospital doesn’t list a billed service the insurance company is never going to add anything to the bill. The incentive is to bill for every possible thing on every bill in the hopes the hospital can scoop up as much money as possible.

These days, the hospital billing system is more resemblant of a whimsical wish-list than a business transaction.

So what happens when you’re uninsured? Best believe the hospital will come after you for every penny of that imaginary pricing. If that patient with the medical bill above would not have had insurance she would’ve been on the hook for the $19,000 that never really existed as a real cost in the first place.

This is why you need insurance.

This system is not set up for people with no insurance. It lives in fantasy land and the rules are set up with the assumption that no one would ever go uninsured.

In most health systems around the world, prices are pretty much set. They’re still based on the market but they are not allowed to go to fantasy land. Those health systems are more economical than ours, and they are closer to a truly free market.

Prices for any item or service are set by each [U.S.] hospital and move up and down yearly, and show extraordinary variability, health economists say. The codeine that costs $20 and the bag of IV fluid that costs $137 at California Pacific are charged at $1 and $16 at the University of California San Francisco Medical Center, across town. But U.C.S.F. Medical Center charges $1,600 for an amniocentesis, which costs $687 at California Pacific. –New York Times

Variable prices happen in other industries, of course.

One week squash will cost 3.99 and the next week it costs 99 cents. What happened? Did we have some sort of squash embargo last week? Nope, it’s just the sale cycle. The store arbitrarily decides pricing and if you comparison shop you always win.

But can you imagine comparison pricing with healthcare?

Ok I’m having chest pain and your EKG costs $2,000 hold on I’m going to go across town and see what they charge at Simi Valley hospital.

Try calling the local hospital to ask them how much their hip replacement costs. They aren’t likely to tell you. It’s generally tolerated and accepted that hospitals and health providers don’t say up front what the price is.

I’ve asked my doctor what specific health services cost and he was all shoulders and shrugs. Most people just accept that answer and it’s killing our wallets.

We’d like to be savvy shoppers in a healthcare system but consumers are at a number of disadvantages out of the gate.

  • We are usually in a hurry
  • The price is generally secret
  • We are not doctors

In economics, this is called information asymmetry. This occurs in an economic transaction in which one party has much more material knowledge than the other.

If I go buy a car I can check Kelly Blue Book. When I walk into that car dealership I know how much I should be paying.

For car buying we have KBB. For health buying we have go fuck yourself.

So What Do We Do?

It seems to me that most uninsured people just pray they don’t get sick.

In this recent wave of healthcare fear I’ve mostly hoped that if I ever got sick, It would at least be a terminal illness I wouldn’t have to foot the bill for later.

What really needs to happen, though, is that we need to arm ourselves with information about healthcare buying options.

A number of startups and nonprofits have begun to spring up to help. They’re designed to give people side-by-side comparisons and more transparent health pricing.

Most of all though, I think we really need to remember that the healthcare system in the U.S. is set up for a profit, which is to say it is designed to make the most money possible with the least amount of inputs.

It isn’t really designed to deliver healthcare efficiently or particularly well. Ultimately it isn’t even designed to make people get better. You must understand that this is a game, and it’s one you will be forced to play.

You might as well learn how to play it.

The rules are pretty well stacked against the healthcare consumer, unfortunately people need healthcare and so their hands are pretty tied. It isn’t like boycotting the bus system for a while.

I hope this article has imparted on my younger readers the idea that YOU NEED HEALTH INSURANCE.

Stay tuned for part two where I show you how to do that.





  1. Matthew says:

    Super comprehensive. It shows just how universally fucked the system is, from front to back. You know it’s a bizarre industry when a drug company is marketing directly to a consumer on TV, knowing that the consumer will mostly likely never directly pay for the drug. Yet indirectly we all pay.

    I recently had to go on Cobra due to loss of my union health insurance. $650 a month for me as an individual. I can’t switch to a cheaper plan right now because I had surgery and there is quite a bit of post-op care that is required. I am in the awkward “middle class” where I make too much $ to qualify for public assistance with health care, but not enough that I can pay that without it being a hardship.

    I suspect this will get worse (way worse?) before it gets better.

    • Elsie says:

      Yes oddly enough the middle class is in the worst position here as far as healthcare goes. Especially those who are freelance with no access to group insurance from an employer. I think it’ll get worse as long as people go along with the system. The owners and profiteers of the system certainly have no incentive to improve it. The people who feel the effects of our crap-tastic healthcare system are often kind of marginalized and generally feel powerless. I know I feel powerless.

      I heard a quote from Frederick Douglass today, “Power concedes nothing without a demand. Find just what any people will quietly submit to and you have found the exact measure of injustice that will be imposed upon them.”

      Sounds about right

  2. Brian Fitzpatrick says:

    Health care is such a huge part of the economy! The profit motivated system we have is unsustainable as currently existant. IMO a single payer system seems the most practical. Michael Moore’s movie Sicko points out how Canadian doctors don’t need the billing staff which reduces their iverhead. One small example of ways to reduce costs. Canada also regulates drug pricing at tremendous savings. To counter the predictable hysterical talk about socialism, it needs to be pointed out that in most single payer countries, Doctors don’t work for the government.

    • Elsie says:

      I think as soon as we talk about socialism, single payer, or Michael Moore for that matter people’s politics start to perk up and they shut their ears to the conversation. I hope that people can at least talk to each other. That tends to be why I write in economic terms rather than political terms. Economic factors and effects are more self-evident.

      It’s sad that a decade after Sicko has come out we are in the same situation, with healthcare still the #1 reason people file for bankruptcy.

      Another thing I think about is, the economy is ostensibly doing well right now. What’s going to happen when the next bubble bursts.

  3. ZJ Thorne says:

    With my dad’s recent illness, I was so grateful that he was receiving care from the VA. Almost everything was covered. He got some minimal bills (think under $100) for some copays, but most everything was free. It has been helpful as I start the work of winding down his small estate. His illness shouldn’t eat up the ~$1500 he had remaining in the bank.
    ZJ Thorne recently posted…Net Worth Week 85 – Thanksgiving EditionMy Profile

    • Elsie says:

      I had a teacher growing up who was a veteran and I still follow him on Facebook. He’s had a lot of trouble with the VA I guess. I’ve heard good things about tri-care insurance. No system is perfect, but I’m much more willing to deal with some bureaucracy for free care than for expensive care.

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