Why Health Insurance Is So Confusing

Health insurance in the United States is incredibly complex, filled with deductibles, co-pays, co-insurance, narrow networks and more. Why is our system such a maze? Is it the unintended product of decades of patchwork policies, or is the complexity intentional?

In this episode of CareTalk, hosts David E. Williams and John Driscoll break down the real reasons health insurance is so hard to navigate, exploring the structural fragmentation of the system, the role of intermediaries like PBMs and brokers, the impact of convoluted billing practices, and what meaningful simplification would actually look like.

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CareTalk is a weekly podcast that provides an incisive, no B.S. view of the US healthcare industry. Join co-hosts John Driscoll (Chairman, UConn Health) and David Williams (President, Health Business Group) as they debate the latest in US healthcare news, business and policy. 

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Transcript

David: 0:00

Health insurance in the United States is incredibly complex, filled with deductibles, copays, co-insurance, narrow networks, and more. Why is our system such a maze? Is it the unintended product of decades of patchwork policies, or is the complexity intentional? Welcome to Care Talk, America's home for incisive debate about healthcare, business, and policy. I'm David Williams, president of Health Business Group.

John: 0:31

And I'm John Driscoll, the chairman of the Yukon Health System. David Complexity, that's just such an Ivy League word for you. Don't understand. I mean, what are you talk, what are we talking about here?

David: 0:42

Oh, well, it means it's complicated, Sean. It's not it, it is complicated. I guess that's the thing. So I mean, when you say, wow, this is complicated. What are we, what are we talking about? Well, the thing is, part of it is just calling it healthcare system. Right. It's not one system you'd say like in, in, in the UK it'd say the NHS, there's National Health System. There is a system here. There's not one single system. There's a bunch of parallel ones. There's the employer sponsored, there's the Affordable Care Act, there's Medicare, Medicaid, the va, all sorts of stuff. I mean, I think that's where it starts, and each one of those has its own rules and structures and payment models. People can be in more than one. If you're a provider, you have to deal with all of them. Then the consumer is faced with all sorts of stuff in terms of cost sharing with all sorts of different names, and that's just the start of

John: 1:27

it. David, every healthcare system is complex, as you like to say it, like what makes that complex? What makes the US healthcare systems complexity a problem for anyone other than you? Ha.

David: 1:41

Oh, maybe I'm the only one. Alright, so I'll give Aha. Can I point out my wife? Sure. So before we were married, we were in business school and she had, uh, she needed surgery on her hand. And then she's from Canada. I should, I should indicate. So anyway, she ended up with a bill. Somebody sent her a bill, and she was in tears. They sent her a bill for like $30,000. Why? Because she was prescribed ot. Occupational therapy, but somehow she was given PT physical therapy, which wasn't covered. And she's like, oh my God. You know, it's like her whole, it was like, you shouldn't have that money. What was she gonna do? And I just told her, ah, you know, just ignore it and don't worry about it. So, I mean, that's an example John, and that's just one little example. But there are, that happens for people every day all the time, including people in healthcare who think they should know.

John: 2:32

But isn't healthcare always complicated? I mean, what makes the US healthcare system any more complicated than any other system in the world?

David: 2:40

Well, a lot of it is this third party payment, John. And the, and the, and the need to sort of pin the payment somewhere. Oh.

John: 2:46

Oh, okay. Smarty Pants. Healthcare guy. What is third party payment? Why? Why don't we speak in language that humans can understand?

David: 2:53

Well, John, the thing is AI is taking over. I'm not so sure it's important that language that humans can understand as long as they've got an AI to help them with it. But third party means somebody else. Sort of like if I were to pay, you know, like if I were to sell you a hamburger, John, which I'd be happy to do if I owned a McDonald's, um, you pay for it. Now, if it turns out that, you know, I give you the bill and let's say it's for a $5 hamburger, I give you a bill for let's say $50. And then if you don't have insurance, then you say, oh, you know, okay, then you pay it or you don't pay it, and you run out. But otherwise say, well, I'm insured, so in a few weeks or months I'm gonna get something and then the insurance is gonna pay me 3 26 for the hamburger. Then they're gonna charge you $5 for it. It's just very complicated as somebody else, other than the customer or the patient paying.

John: 3:40

But, but David, as we think about US healthcare systems versus other systems around the world, I. Almost all of them actually have a lot more of what you call third party payment. What I would just think of as insurance. So I, I'm not paying the bill if I get sick in the downtown London or, or, or the suburbs of Tokyo. Yeah. The, the government, you know, is some form of government insurance or if I'm in the case of Germany or Switzerland, um, it's. Sort of backstop by benefit design and, and in, in national coverage, but still private pay. Yeah. But I'm not paying the whole bill. Some form of government or private insurer is, yeah. What's so different about the us?

David: 4:19

Yeah. Well one thing that happens, so John, see I think you're changing the point because you don't wanna talk about the US you're trying to get me to talk about, uh, east Germany or whatever you're coming up with. I mean, one thing that makes the US different, so. Is that, uh, how this sort of insurance for healthcare started And a lot of it had to do with the, uh, the wage controls during World War ii where I couldn't pay somebody, I needed laborers. I couldn't pay somebody more. That wasn't allowed. So I had to get some, I had to entice them in some other manner and providing a nice little benefit, you know, sort of like a company car, uh, was one thing to be done and health insurance caught on then and then. Things were added to it over time. In particular Medicaid and Medicare, uh, in the sixties. And then you had things that came on that, and we've never, uh, kind of replaced one thing with another. It's always been additive. So I think that's one of the things that's a lot more complicated than in some of these social welfare states, let's say in Europe that emerged after World War ii.

John: 5:16

I'm trying to lead the witness back to your complexity point. The way to think about, um, you know, human history is that, you know, u up until the, probably the late 19th century, there was modest increases in, in, in, um, in how, how long you lived and how long you worked in the early 20th century. The, the combination of clean water and vaccines. Yes. Those things that are now being brought into question by people who just ask questions. Um. We're, we had a, had a massive effect on, uh, the advantage of public health and public sanitation and improving and extending lifestyle, which conti and so extending people's lives. And so the early, late 19th and early 20th century was also a period when many of the, initially in Europe and then, and then, uh, than spreading to the us. Uh, more and more folks were insured. The quirky thing about. About the US is when companies, to your point, couldn't pay any more money, they decided to compete for employees based on expanding, creating the health insurance that had already been eng, you know, uh, uh, innovated about engineered in in, in the uk. What that has left us with, I think. Is a system of incomplete private insurance and incomplete public insurance, the Medicare and Medicaid, Medicare for the elderly, Medicaid for the poor, and those three systems. Before you get into all your little specific examples, David, um, I think that's the, it's the, uh, it's sort of A-A-A-A-A-A-A, a table with three legs when it needs a fourth, and fourth is uncovered effectively. So it creates kind of a wobbly system that is hard then for. Everyone to navigate because it's incomplete. Do you wanna just kind of explain what that, that, how that incompleteness plays out in terms of for patients and for docs?

David: 7:09

Sure. But as long as you're doing the world historical tour. Let me do one other thing, which is to say, it's sort like, you know, it's like when they find that Japanese soldier on some Pacific Island, you know. 22 years later say, Hey, the war is over. I mean, the war ended 1945. You'd think we could have gotten past, you know, some of these, some of these, these things. I think there's actually a cultural, um, difference in the United States that actually has this impact, which is that in some other countries they actually start with the presumption of universal coverage. So you don't see a patient and you say, Hey, that per that person, they're not covered. People are covered. That's the idea here. There's the idea. Uh, well, you know, maybe it's okay if people aren't covered. And increasingly that's the case when we talk about someone based on, let's say their immigration status or some other factor, uh, that makes them ineligible. So there's even a question about whether an individual in the country, even a citizen, uh, is covered or not. And I think that has an impact when somebody's accessing the system because if it's a provider that has to pay their their bills, they're not even sure if they can, can get paid. For a fair fraction of the patients. And I actually think that may be something different here than elsewhere.

John: 8:15

You know, there's no question, but what's interesting is where Obamacare was super successful is extending coverage to the highest levels. You know, I think it's closer to 90% at its peak. Um, maybe it's just high eighties and from, you know, numbers that were substantially less and, and every incremental. No, no. A percentage point of person or people or person covered means those doctors don't have to worry about getting their bills paid, to your point, which creates kind of some stability in the system and allows for folks to stay involved and get, you know, since we're a a, a nation, that's a. That's, that's the whose, whose biggest challenge for public health is chronic illness. It allows you to get someone into chronic care management and, and potentially really reduce the amount of pain and suffering and also reduce the, the amount of costs for that, that patient or that, that that covered person over time. And you raise a really interesting point. So how's this, all these cuts in coverage for Medicaid? Immigrants or, uh, and just, just increasing cost, re reducing the ability for employee employers to pay for full coverage. How do you think that's gonna affect the healthcare system, Dave, given that that's what we're dealing with right now?

David: 9:32

Yeah. I mean, not in a great way, right? So if you look, if you look at what Obamacare did. One of the goals was to get more people into coverage. And it's quite successful at that. And I think it actually did go above, you know, 90%, uh, coverage. Now, the way it was done, it was actually the Democrats were trying, they thought it was important that it be bipartisan. And so they included a lot of the Republican ideas, such as they were, uh, in Obamacare. One of them had to do with individual responsibility, which meant that people had to have insurance. You know, they had to, they had to pay for it, and, you know, and to be in the system that since. Basically struck down, but what, instead of going for, let's say, single payer, like in some of these other countries, they said, let's actually work with what we've got and extend it. So one of the main ways that that coverage was extended was by expanding Medicaid and also by making, uh, private insurance more affordable through these exchanges. And so as those pieces are then pulled back, stripped away, or in the case of the Medicaid. Expansion never fully implemented due to, uh, resistance by certain Republican leaning states. You still have this patchwork where some people are covered and some people are not. When you pull that back further, but leave all the other mechanisms in place, it means the providers are gonna need to get paid somehow. So that's gonna make things more complicated. And John, it's gonna make it more expensive for those who actually have coverage. And ironically, John, there's, there is this talk about, you know, people being freeloaders on the system, usually talking about poor people, right? But why are we having the pullbacks? It's not because of some, uh, great, um, you know, insight. It's in order to fund tax cuts for the, you know, upper millionaire and billionaire class. That's just a fact.

John: 11:11

And so, Dave, why is, uh. I go back to, if you could use language that everyone could actually understand this time. Why is healthcare in the US so expensive?

David: 11:26

John, you know, you, you, they, me tie both hands behind my back.'cause it's hard to explain that. And I don't know if I could use it with the, uh, you know, the, the words that are taught in our, in our failing education system. Uh, so why is it so expensive? Well. I mean, one, one reason is that actually prices are high. And so, uh, you know, the price for a given, I'll try to use a simple word. So the price for a a, a doctor visit is higher here than elsewhere. Uh, and it's partly because the physicians are paid more. Uh, so let's say if you see a specialist, it, it may be that it's, uh, it's more expensive because their, their pay is higher. Now, another reason is because of the cost of complexity. So if you have to figure out whether somebody is actually eligible for payment at that moment, if you're gonna get paid and who to bill, and then what you're gonna do when they say they don't want to pay it. And what you have to do before to ask about being paid, that actually drives up the cost, uh, as well. So there's higher prices, higher unit prices, and then there's more overhead. Associated with those. Those are two of the big reasons

John: 12:35

I'd start with drug pricing because we don't have an agreement to a true agreement regardless of, I dunno what RX is. We do not have an agreement on how to reduce sustainably. Drug costs that are materially higher here than everywhere else. In the industrialized world, we do not have agreement on how to keep everybody covered and without people get staying covered. Those people are still gonna get sick and, but they'll be much more expensive when they get sick, and we've got a cost. Problem. And we've also restricted the amount of doctors and nurses that can come into the country and practice. So we've made it even harder to get care. Yeah. So I, I think that to me is the, the, you know, the, the, the, the four horsemen of the affordability matrix. I mean, I just, that, that, that the unaffordability, uh, uh, matrix, I guess Dave, if you were to, um. If you were to design a system, right? Uh, pardon me if you're, you, I, I keep forgetting. I think, aren't you responsible for the Republican alternative to Obamacare? How, how's, how's that Republican alternative to Obamacare kind of working for you?

David: 13:43

It's like, John, it's always like, um. You know that song? Yeah. Tomorrow. Tomorrow it's always a day away. So, uh, I think in the next two weeks we're expected to see a plan, John, the reason that you won't see a, the reason you won't see a plan, uh, is because certain concepts were actually incorporated into the Affordable Care Act, and then they became instantly poisoned because people were so excited to go after then President Obama. Uh, so. The things I hear are not, you know, are not, are not serious, uh, in terms of reducing cost. And I think this is really going to be an issue in the upcoming elections, assuming that we're expecting to continue forward with the, with the elections because this theme of affordability is so important. And when you talk about affordability, uh, healthcare is probably the number one issue. Really, because it's very big and it's grown fast and it's hard to control. So housing, which is, which has been a focus. Yeah, that's a problem too. But there's choices you can make. Whereas in healthcare is, you know, not that much. You can, you can do about it. And I don't think Republicans have any idea about really what to do about, about costs. If we get to the, uh, pricing issue of drugs that you raised, uh, there is a tool that's being used. John, the one tool that's being used is from the inflation reduction Act. Which is being a completely pilled, uh, by Republicans except when there's a negotiation for a drug that's actually from the IRA and that is what is using to actually negotiate, uh, prices with the

John: 15:17

inflation production Act. That's Biden genomics. John, I guess, I guess Dave, Mike, I, I, I'm Sim I I you've gotta, anyone has to have some sympathy for the Republicans to try to tackle. The, the total cost trends in healthcare. And I think that some of the solutions that they've been talking about, giving people more money for their HRA or HSAs, um, I dunno what, you know, write the check to the person, not the insurance company's gonna do because the insurance company's the one that's gotta pay the bills. Some of the stuff's will say, but I think they're trying to crack a. A real problem, but the foundational solution, which was the foundation of Obamacare, was everybody's gotta get covered. They would be all covered the same level. And perhaps you could say that the Obamacare may have had some richer. You can argue about how rich the plan should be. Um, and you could argue about the timetable, but without everyone being covered, to your point A when a substantial minority in an increasing minority, when. Benefits are being cut, uh, for the poor and the, and the, and the working middle class, and that value is being shifted to millionaires and billionaires who don't need it. Um, what that leads to is a higher cost trend, more people getting sick. And so I think the, the problem with a solution is it starts with a commitment to national coverage. Which, you know, seems to trigger a, a real reaction on the Republican side. Do you think they'll come up with a, will the Republicans come up with a, a, he a healthcare plan this year? David?

David: 16:51

No. And I, I'm gonna take issue with the first thing you said is that we have to have sympathy for the Republicans. No, I think that's bullshit. I think that, uh, as a lack of patriotism, uh, which is driving, uh, this, if you wanna go after healthcare cost and quality, it needs to be done. At a, it's a national priority, you know, it's like defense. It should actually be done in a bipartisan way and it should sort of hit the reset. And let's, let's look at the assumptions and not be blind to crazy ideas. Like the idea that you're gonna give somebody a couple thousand dollars in their HSA instead of as a, a subsidy to buy insurance and they're gonna go negotiate where they're gonna go negotiate with, you can't even get anybody, uh, to do it. No, I think it, we should, we should look at the plan so that, you know, maybe what should happen instead. The Democrat should go back to what their plan actually was gonna be if they're not gonna get any, uh, Republican support for it, including things like a public option, uh, which is health insurance. That is. Moving, basically saying, Hey, we'll compete with the private market

John: 17:48

before you, you get there. I mean, just, just the, the amount of, I mean, I think to cover a typical family of four is closer to, is closing, it's north of $25,000 a year on average, and the out-of-pocket costs are between six and $8,000 for e employee, e covered employees. So these, these dollars are, are, are, uh. Or, or tips not the substance of what would actually provide meaningful coverage. And again, everything has to start however, designed with meaningful, meaningful coverage for all before you even get into how you fund it and what you call it. David. I think that that has to be that. That was the. That was the clear assumption of Romneycare, the, the Republican LED reforms in Massachusetts. It's the clear application, but very bipartisan. It

David: 18:37

happened under, it happened under him, John, but it was bipartisan and it wasn't that Romney pushed it, that was a nice name for it. He signed it. He wasn't the champion of it. That was groups coming together and not just left and right either. It was, it was. It was the industry, the healthcare industry. It was businesses. It was community folks, and the idea was costs have been rising. Let's get everybody into coverage. Then we're gonna deal with the cost.'cause we've been talking a long time. We need to have affordability first before we can actually get everyone in coverage. And they said no. Two, let's actually get people in coverage. Now in Massachusetts, we have a huge cost crisis too, so that has to be covered. But before

John: 19:13

you get there, David, in both in the case of Romneycare and Obamacare, as more people got covered, cost trends, Eva. The, the math's pretty clear on that. So while he, well, he, a lot of the healthcare drivers, they, they didn't all go negative, but those cost drivers actually abated a bit. And that matters when you have man, when you introduce managed care organizations, HMOs at scale in the eighties and nineties, it really broke the back of healthcare inflation. That really plagued us as, you know, as a country in the eighties into, into. Up until when Clinton was elected in 92, the next big change in healthcare cost trends happened after we started covering more people, which was exactly the assumption, which is why I, I, I agree with you. I don't think we're gonna get a, a plan in a meaningful way to, to reform, uh, a program that I think there seems to be some tribal, still tribal distaste for at the leadership level. But honestly, there's a lot of happy Obamacare. Covered members in red states who are gonna get a root surprise when they see their, their, their, their premiums go up or their, or their, or they won't be able to get coverage at all.

David: 20:25

That's right. So John, one thing maybe the Republicans could, could do is just actually re-embrace some of the things that they liked in the first place. So one of them would actually be, um. Don't vilify insurance companies. I mean, if you say it's gonna be a private sector and someone's gonna manage the cost, it's the insurance companies. So maybe allow them to, you know, to do what they need to do. And also rethink this idea if you have an insurance pool, rather than saying let's rip people out of it and say they don't need to be in coverage. Or they can be in some sort of a MiniMed plan or something that's not really, uh, covering. So actually, yeah, get everybody to be in coverage. Uh, make it affordable, actually reduce some, reduce some of the regulations that do, and mandates that actually make it more, um, expensive and allow the market to work in places like negotiating for drug prices, uh, for which they've currently been hands off.

John: 21:14

So you're basically saying that the, the, the, the, the, the, the best fix for Obamacare is reform, not reject.

David: 21:23

Yeah. I mean, I think when, you know, as soon as the law was enacted. Uh, there was an attempt to undermine it. Also, you normally have such a big, complex piece of legislation and there's, there's, there's issues with it that need to be straightened out over time and in attempt to undermine it, which have been successful, uh, republicans refuse to make those adjustments. So one example is the, uh, ratio of premiums for the oldest versus the, the youngest. In the Obamacare exchanges and the ratio isn't high enough. So, uh, you don't actually have the right kind of a balance so that you can, you can make money with the full spectrum of, of ages in there. So there's a bunch of technical things.

John: 22:01

You, you make, you make a really important point though, David, that whenever you, any large bill has been passed historically, once the bill has been passed, Medicare, Medicaid, civil rights, even the. Defense authorization bill, the annual bills. There are things you've, we that emerge that one finds that there's largely bipartisan support to refine the fixes and tweaks to make it work. All of them were rejected by the Republicans during the early days of Obamacare, which is one of the reasons why it wasn't reformed even to solve some of the problems that they identified very early. Um, and I think but that, that, that tribal distaste for. Embracing anything, even if you, even if the Republican constituents liked it. Has, I, I Is, I think why we're gonna be continuing to, to, to circle around this, you know, Republican plan. I think what, what, what's, what I think is sort of sad though, is there's a lot of, there are millions of people who are gonna be caught, um, you know, have, have real personal tragedy and stress. Because they're gonna lose coverage because of tax policies that favor millionaires and billionaires, folks like you, David, um, and Amen. Who, who, who. But at the expense of people maintaining coverage, because a lot of the, a lot of those folks who being thrown off a Medicaid who can't afford Obamacare premiums are hardworking. Uh, you know, working class Americans who are in many cases, working in two jobs and they can't get coverage, they can get any coverage from either.

David: 23:32

Right. No, it's terrible. You know, one of my pet theories, John, is that because it's been nicknamed Obamacare, I mean, that's not the name of the law. Um, that is actually why the current president. Maybe some of the, uh, Republican colleagues are so against it 'cause it's associated, uh, you know, with a specific individual whom they, they don't like. It'd be better if they call going back to calling it, you know, ppaca Patient Protection Affordable Care Act or, or just maybe

John: 23:58

title it, make Obamacare great again,

David: 24:01

just call care, you know, the same thing and probably become very popular. Uh, at that point. It could be like, you know, what they do with, um, could

John: 24:08

kind of divide the country though.

David: 24:10

Well, it's sort of like, do they still have this? Um, you know, MLK slash lead day, you know, you could do it that way. So,

John: 24:18

so, so let's, let's, let's, let's move on to Okay. Maybe for one final, uh, yeah. Uh, uh, uh, challenge Dave. Yeah. Doctor complexity. Lots of complicated answers. Just gonna kind of take it into the weeds. Okay. What's the one thing you could, you would recommend Republican or Democrat, that would help us actually cover more people and deliver better care? Lower the cost. Turn one thing. That's all you get.

David: 24:44

Okay, fine. So, one thing that it's gonna focus on the simplicity, um, which is mandate that actually, that every payer has to pay the same price for a service so that a hospital has one price that they charge and that's it, and everybody pays it and you know what the price is. So

John: 25:03

it's the Maryland

David: 25:04

model,

John: 25:05

the all payer model.

David: 25:06

That's right, but at a federal, federal level. So keep all the payers, you're not gonna put them all outta business. But if I'm a provider offering a service, I'm indifferent to whom I'm, I'm charging for it.'cause it's gonna be the same price. Just like at a gas station. They have one price. They don't charge everybody a different amount. And you see the amount and that's what you pay it. So you gave me one thing. That's what I'm, that's what I'm gonna take.

John: 25:28

Yeah. I, I'd probably take. Medicaid managed care for anyone who doesn't, doesn't, doesn't, uh, qualify for commercial insurance. It's the idea that I stole from you, but I'm gonna take credit for it if it works. Yeah. Risk care, it would improve the risk pools for Medicaid. You could stabilize. One of the problems of Medicaid is the uncertainty of whether you're gonna stay and keep covered and the, the current big. Ugly bill actually is gonna make that coverage harder. But if you could meet and it, and it, and it's relatively low cost, it would be an investment, but it's really an investment in the health of working Americans. I mean, 50% of all kids, 40%, 43% of all kids today are born on Medicaid. There's a lot of good things about Medicaid. It would also, I think, require us to invest more resources. But I like your idea too. Um, so with that, I think we wrap today.

David: 26:20

That's it for yet another episode of Care Talk. We've been discussing what makes health insurance and apparently my choice of words so complicated. I'm David Williams, president of Health Business Group,

John: 26:30

and I'm John Driscoll, the president, uh, rather the chair of the Yukon Health System. If you like what you heard or you didn't, we'd love you to subscribe on your favorite service.