PRI Series: Flawed U.S. Health Insurance System Inflates Costs, Decreases Quality

Addressing the ongoing problems with the U.S. health insurance system, the Center for Medical Economics and Innovation at the nonpartisan Pacific Research Institute today announced the release of the first paper in the Coverage Denied series, which will analyze and propose reforms to fix the problems in the current system that threaten patient health outcomes and often lead to huge financial risks for patients facing unexpected or chronic health care challenges.

Click to download the first paper in PRI's Coverage Denied series

"America's growing medical debt problem and family premiums exceeding $20,000 annually makes clear that the U.S. health insurance system is failing to effectively manage patient financial risk," said Dr. Wayne Winegarden, director of PRI's Center for Medical Economics and Innovation and the author of the Coverage Denied series.

Research from the Stanford Institute for Economic Policy Research found that the U.S. has an $81 billion medical debt crisis. Nearly one-third of Americans in a 2016 Kaiser Family Foundation and New York Times survey said they have delayed care due to cost concerns.

The first paper in the Coverage Denied series breaks down the systemic flaws of the U.S. health insurance system. Winegarden notes that health insurance is supposed to mitigate the potential financial risks that can be incurred if a patient requires expensive medical care, but the current system does not adequately serve this purpose.

The paper notes that though the percentage of uninsured in the United States dropped by over 40 percent since 2010, the mortality rate for deaths amenable to healthcare grew by 4.1 percent between 2013 and 2017 – a reversal from more than two decades of decline.

Winegarden argues that health insurance has evolved to prioritize controlling rising health care expenditures through policies that make it more difficult for patients to receive their prescribed care – or denies it altogether. A June 2021 Harmony Healthcare survey of hospital reimbursement executives found that nationwide, the average denial rate was between 6 and 13 percent. Worse, a growing number of patients are being denied coverage due to prior authorizations, which causes delays, requires extensive paperwork from physicians, and can ultimately expose patients to additional financial risks.

"The Coverage Denied series will explore the flaws in the system that are driving up patient costs despite fewer numbers of uninsured Americans and offer reforms to reduce financial burdens on patients and improve health care outcomes," Winegarden said.

Future papers in the series will explore which reforms will improve health care outcomes and which will make things worse, and show how incentives in the current broken system are driving problems like higher patient costs.