Healthcare -- Who pays for what?

Obamacare, Medicare, Medicaid, Private Insurance.  Who pays for what?

The answer, unless you have absolutely zero assets, is you.

First, if you are employed and your employer offers health insurance as a benefit, you pay premiums to an insurance company so that you will have health coverage.  These premiums are usually deducted from each paycheck.  (Your employer typically also pays a portion of your premium, but we'll get to that later.)

But you're not finished paying yet.  Your policy, in order that you can "share" the cost of healthcare with your insurance company, requires that you pay a deductible.  For hospital related charges, that means you must pay everything up to a certain level.  That's what the deductible is.  If I have a $1,000 deductible, I must pay hospital (and lab, x-ray, CT, MRI) charges up to $1,000 before the insurance company starts to pay.

Wait, there's more.  If you go to a doctor, there is  something called a "copay".  If I have a $30 copay, that means I pay $30 every time I go to the doctor, and the insurance company pays the rest of the charge.

Finished?  No.  Now we have to talk about co-insurance.  The easiest way to understand this is to consider an example.  Let's suppose you have an appendectomy.  Further, let's suppose your doctor charges $1,000 for the procedure.  Your insurance company has decided that they will only "allow" $800 for the procedure.  So your doctor has a fee schedule, but the one that counts is your insurance company's.  Your doctor, by agreeing to be part of the insurance company's "network", also agrees to the discounted rate on the company's fee schedule.  Now, your policy usually has language like "the company will pay the doctor 80% of the allowed amount".  That means the company will pay $640 for the appendectomy and you foot the bill for the remaining $160, the co-insurance.  If you have a second insurance policy (e.g., both you and your spouse are covered through work), then the secondary coverage steps in to pay the "co-insurance".

Let's summarize so far.  You pay insurance premiums, deductibles, copay, and coinsurance.  Got it so far?

That's all, right?  No, next you pay for health coverage for when your retire.  That's called Medicare.  Every time you are paid, 1.45% of your pay is deducted from your check and sent to the Federal Government for deposit into something called the Medicare Trust Fund.  Your employer contributes an equal amount to the Trust Fund.  So, in a way, you are paying premiums for your healthcare now and for when you retire.

Whew, thank God that's over, right?  Not by a long shot.

Let's talk about Medicaid, government provided health insurance for the poor.  It is a collaborative program provided by both the Federal and state governments.  Taxes fund Medicaid.  Who pays taxes?  You do.

Now, to the uninsured.  People lack insurance for one of two reasons:  they can't afford it or they refuse to have it, preferring, they think, to pay for all their healthcare out of their own pocket.

The problem with the latter approach is the cost of healthcare.  If you don't have insurance, then you don't get to take advantage of the discounted rates that come into play when you do have insurance.  So that appendectomy?  You pay $1,000 unless you personally negotiate with the doctor for the discount.  If you have appendicitis, you are not in a good bargaining position.  You are in just as poor a position with regard to the hospital bill that is sure to come and is likely to be even higher.

In the United States, the average costs of a day in the hospital are $1,878 (for state/local government hospitals), $2,289 (non profit hospitals), and $1,791 (for profit hospitals).Average Cost of Inpatient Care  That's just paying for the privilege of being in a hospital bed and receiving nursing care.  That doesn't include charges for operating room services, emergency services, and forget about intensive care services.

It's easy to see how a 10 day stay in the hospital can reach five figures.

Getting back to those uninsured people.  The ones who couldn't afford to pay insurance premiums sure can't afford to pay for this kind of care.  The ones who think they will pay for their care out of pocket are headed for bankruptcy.

This is the situation that the Affordable Care Act (Obamacare) attempted to address, to have more people covered either by commercial insurance or by expanding Medicaid to cover more poor people.  For people who can't afford their entire premium, subsidies were offered.  Where do the subsidies and the additional expenses related to the Medicaid expansion come from?  Two guesses.

Believe it or not, there is one more leg to this stool.  Remember how, if you are employed and covered by insurance, your employer usually pays a portion of your premium.  Also, your employer pays half of your Medicare premium.  Your employer pays taxes.  Where does your employer get that money?  From you or people like you who buy their goods or services.

That should close the loop.   Thanks for staying with it.  It's actually more complicated than I've outlined hear.  More about healthcare in days to come.

I'd love to hear feedback from readers.