ArticlesScience & HealthWhy Is Healthcare So Expensive?

11 months ago2 min

Healthcare in the United States is extraordinarily expensive and a large driver of that is administration costs.  Because each insurance company and plan has their own schedule of instructions, it requires an entire industry of people who do nothing but process medical billing.  They interpret the insurance plan flow-charts that explain which treatments are covered, how much of each treatment is covered and who gets paid what percent of the fee.

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A typical family physician’s office that accepts insurance coverage would need between 2 and 4 employees to do nothing but process billing.  The result is that visits to the doctor become more expensive in order to pay these staff members and still allow the practitioners to make a profit.  Even with those higher costs, the average family physician only takes home 20 cents on every dollar spent.  In comparison, a direct primary care physician who does not accept insurance (meaning they only are paid in cash by patients) is able to take home approximately 80 cents on every dollar spent.

One major consequence of this low profit margin is that because most physicians accept insurance coverage from their patients, they must see many more patients than a physician who does not accept insurance.  It simply takes more patient visits to make the same amount of money because of the administration costs that result from health insurance billing.  That means less time spent with each patient and a potentially more taxing work-life balance on the practitioner.

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