This co-mingling has led the county to erroneously focus on health insurance as an equal target of wrath for the rising cost of medical care, when in truth, healthcare has been the driving force. This understanding is critical if we’re to wrestle the ever escalating cost of medical care in this country.
Healthcare is defined as “the field concerned with the maintenance or restoration of the health of the body or mind.” This also pertains to any “procedures or methods” related to the care of a person’s physical or mental health.
The industry in which medical professionals work is often referred to as the “healthcare industry.” Healthcare is provided by doctors, nurses, dentists, therapists, hospital systems, and pharmaceutical companies. The price these providers set for their products and services is the primary driver of health insurance costs.
Health insurance is defined as “insurance that compensates the insured for expenses or loss incurred for medical reasons, as through illness or hospitalization.” Health insurance companies assist with financial means to help pay for said healthcare. While health insurance is part of the overall medical care “industry,” it should not be confused with healthcare.
Health insurance is provided by companies like Blue Cross Blue Shield, Aetna, Cigna, Humana and UnitedHealthcare. The price these providers set for their services is a direct reflection of the prices healthcare providers set for theirs (in fact, their profit margin, or medical loss ratio, is regulated by the government in a provision of the Affordable Care Act). There are certainly other factors which go into the price of individual and group health insurance — in the case of group insurance: the overall health of an organization’s workforce and their covered dependents, and their claims history, which often times can be a reflection of the quality and efficacy of healthcare being provided. But but the main driver is the prices set by healthcare providers and pharmaceutical companies.
Understanding the difference between these terms is critical in taming the ever escalating cost of medical care.
Let’s pretend you have an Allstate homeowners insurance policy to protect your house. We all know that what Allstate charges you for homeowners insurance doesn’t impact the price you paid for your house, but conversely, we know (and fully accept) that the price you paid for your house does impact the price your pay for homeowners insurance. We all understand that the cost of your Allstate policy is a reflection of the cost of your home.
While that example is greatly simplified, the same principle applies to the field of medicine. Why doesn’t the general public see the cost of health insurance as a reflection of the cost and quality of healthcare? Furthermore, why don’t people understand that the best path to broadening access to healthcare is through reductions in the cost of healthcare rather than government mandated access and insurance subsidies which do nothing to bring down underlying costs?
In an upcoming blog post we’ll address several measures which we believe will create market conditions to bring down costs while improving quality of care. These include empowering consumers to shop for value, increasing care options, and stimulating competition.
What questions do you have about healthcare vs. health insurance? Leave us a comment below or contact us. We’re happy to provide answers!