LOS ANGELES — In 2015, U.S. health care spending increased 5.8 percent, totaling $3.2 trillion or $9,990 a person. In 1960, the cost was just $146 per person, which when adjusted for inflation, is equivalent to $1,198 in 2017. What accounts for this dramatic increase in the cost of health care? And why does health insurance cost so much more than all other types of insurance? PragerU contributor Lanhee Chen, research fellow at the Hoover Institution, explains that American health insurance plans are not actually insurance at all, but instead have become prepaid health care plans.
In PragerU’s newest video, Why Is Health Insurance so Complicated, Chen begins by defining what insurance actually is. As with homeowner and vehicle insurance, Americans pay a set monthly fee to protect themselves financially from unforeseen, potentially catastrophic, events. With large groups of people paying into the pool, there are enough resources to cover these incidents. However, insurance is not designed to cover routine expenses such as oil changes, brake pad replacements and getting new tires, because everyone has to do them as part of the basic maintenance of their vehicle. In other words, there’s no risk.
Similarly, someone with two car accidents will pay more into the insurance pool than someone who hasn’t been in an accident. Why? Because their track record indicates they are more likely to get into an accident in the future, making them higher risk. Higher risk individuals are required to pay increased rates for most forms of insurance.
Health insurance is a different story. Every health insurance provider must also cover low-risk health “maintenance” expenses, such as routine doctor check-ups, making coverage more expensive and complex.
Attempting to fix health care policies, the Affordable Health Care Act of 2010, nicknamed “Obamacare”, only made things worse according to Chen. This proposal did two things: First, it “limited the variety of health insurance plans private companies could offer” by requiring coverage for a set of 10 health benefits. Second, it “prevented insurers from charging premiums based on the risk they were assuming.” Because of “Obamacare”, every American now pays for health insurance in order to receive every health benefit, whether they need it or not.
These restrictions have caused health insurance prices to skyrocket. In Arizona, health care prices have more than doubled between 2016 and 2017 alone.
Chen offers a simple solution to the health care crisis in America: Make health insurance more like actual insurance. “Stop making people buy plans that include things they won’t use and don’t want,” says Chen. “[And] allow health insurers to offer more options at different prices.”
And what about people with preexisting conditions? Chen argues, “We do what any compassionate society does. We make sure they get the medical care they need. But we don’t need to upset the whole concept of insurance and make health care more expensive for everyone else to do it.”
“Most Americans want to do the responsible thing and insure themselves against catastrophic health care emergencies,” Chen concludes. “But with health insurance costs rising every year, being responsible is becoming more difficult.”
MEDIA NOTE: PragerU contributor, Lanhee Chen, is available for interview as is PragerU’s Founder, Dennis Prager and CEO, Marissa Streit. Contact: MediaInquiries@theKcompany.co
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