The Great Insurance Swindle: How Healthcare Got Captured and How to Take It Back
The Great Insurance Swindle: How
Healthcare Got Captured and How to Take It Back
Insurance was supposed to be one
of society’s noblest ideas. Pool our resources so that when tragedy struck, no
one person was financially destroyed. A collective cushion against life’s
risks.
But that noble idea has been
hijacked. In the hands of insurers, PBMs, hospital chains, and complicit
politicians, it has become one of the most corrupt businesses in the world a
system that pretends to protect while actually exploiting.
How It All Went Wrong
The playbook wasn’t complicated:
- Buy influence with campaign donations and
lobbyists.
- Rewrite the rules to shield insurers from
lawsuits and oversight.
- Buy the supply chain hospitals, clinics, PBMs,
pharmacies.
- Hide prices behind “proprietary” contracts and
gag clauses.
- Steer patients to facilities they own, then
inflate bills.
- Upcode and reprice until the numbers make
sense only to them.
The result? Costs explode, care
shrinks, and transparency disappears.
Who’s Who in the Modern Scam
- Insurance-owned providers: Hospitals and
clinics run by insurers. They set the premium, control the network, and
decide how much they’ll pay themselves the ultimate conflict of interest.
- Independent providers: Doctors and clinics
outside insurer ownership. They compete on price and quality but are often
locked out of networks.
- Self-insured employers (ERISA plans):
Companies pay claims directly, with insurers as administrators. ERISA
preemption blocks state oversight, letting insurers bury fees.
- HMOs & provider groups: Capitation sounds
efficient, but when the insurer is also the provider, it’s just
self-dealing.
- PBMs (pharmacy benefit managers): Marketed as
cost-savers, but in reality they profit from rebates and spread pricing,
often steering patients to higher-cost drugs.
The Mechanics of Cost
Inflation
- Site-of-service inflation: The same procedure
costs 2–4× more in an insurer-owned hospital than in an independent
clinic.
- Network steerage: Patients are pushed toward
facilities the insurer owns, with bloated “allowed amounts.”
- Upcoding: Risk scores and “coding
optimization” make patients look sicker on paper, boosting payments
without improving care.
- PBM rebate games: Favoring high-list-price
drugs with big rebates, excluding cheaper alternatives.
- Data darkness: Fee schedules hidden behind gag
clauses. If you can’t see the cost, you can’t fight it.
- Legal shields: ERISA and arbitration rules
make lawsuits nearly impossible. Occasional headline settlements create
the illusion of accountability.
Where the Dollar Really Goes
Here’s the breakdown of the
American healthcare dollar (illustrative, but directionally correct):
- 45% → Providers (hospitals, physicians, clinics)
- 20% → Pharmaceuticals & devices
- 15% → Insurance admin & profits
- 10% → Middlemen/overhead
- 10% → Patient out-of-pocket
Compare that to Switzerland: 95%
to care, 5% to admin.
In the U.S., even the 75% that
reaches “providers” isn’t safe; hospital owners and insurer-owned facilities
take a cut before it ever reaches doctors or nurses.
Case Study: How Patients Get
Trapped
A kidney stone removal costs
$40,000 at an insurer-owned facility. Insurance covers 80% ($32,000), leaving
the patient $8,000 out of pocket.
At an independent clinic, the
same procedure costs $15,000. Patient’s share? $6,000.
The truth: that $8,000 likely
covers the real cost. The rest is profit captured by the insurer’s “integrated
stack.”
The Pharma Pricing Trap
Pharma is the most blatant abuse
of all.
- Taxpayers pay for the research. NIH and public grants
fund much of the early-stage science.
- Pharma sets monopoly prices anyway. The same drugs
cost 5–10× less in Canada, Mexico, and Europe.
- Americans pay the highest prices in the world for
medicines they helped invent.
This isn’t inefficiency. It’s
exploitation.
Fixes:
- Tie U.S. drug prices to Canadian/EU benchmarks.
- Empower Medicare and public payers to negotiate
directly.
- End patent “evergreening” and rebate schemes that
block competition.
If Americans paid Canadian
prices, national healthcare costs would drop by hundreds of billions annually.
Provider Cost Realignment
Doctors should not be squeezed
while middlemen profit. When more dollars go directly to providers instead of
being siphoned into insurer overhead, patients pay less and get better care.
It’s not complicated: cut
bureaucracy, pay providers fairly, and patients win.
The Middleman Problem
Middlemen insurers, PBMs, and billing
firms are supposed to take a 5% administrative slice. Instead, they’ve turned
it into a profit funnel: spread pricing, inflated bills, “preferred” networks.
Fixes:
- Cap middleman take at 5%.
- Mandate pass-through pricing and full fee disclosure.
- Independent audits of insurer-owned facilities.
Accountability and Punishment
Without enforcement, caps are
meaningless. Middlemen must face consequences when they abuse their gatekeeper
power.
- Selective payment to insurer-owned facilities should
be treated as anti-competitive conduct.
- Penalties: fines, loss of public contracts, and
potential criminal liability for executives who manipulate payments.
- Patients choosing qualified, lower-cost providers
must receive equal coverage.
Healthcare is not a casino. If
insurers rig the table, they should lose their license to play.
What Must Change
Structural Separation
- Break up insurer-PBM-provider vertical monopolies.
- Enforce site-neutral payments.
Transparency & Governance
- Strengthen medical loss ratio rules.
- Publish binding, machine-readable prices with
penalties.
- Modernize ERISA for oversight and lawsuits.
Competition &
Accountability
- Ban gag clauses and anti-steering.
- Independent prior auth standards.
- Antitrust enforcement against roll-ups.
Public & Mutual Options
- Enable co-ops and public options.
- Allow community self-insurance without red tape.
Final Word
Insurance was meant to protect.
Today, it exploits. The complexity of U.S. healthcare, from coding games to PBM
rebates, isn’t accidental. It’s a business model designed to transfer wealth
upward.
If lawmakers refuse to fix it,
they aren’t neutral. They’ve chosen a side. And it isn’t the public’s.
Better data, kudos, but and still lack details to back your claims. Let's take the example of 40,000 bill 8000 out of pocket. If it's a HMO plan, then it doesn't make sense from deductible stand point. If it's a ppo plan then consumer has the choice to use another provider. You need to break down where that 8k going before making claims that is the real cost.
ReplyDeleteAppreciate the comment, and you're right that context is key when discussing healthcare costs, especially with plan structures like HMOs and PPOs. But let me be clear: the numbers I shared aren’t hypothetical or pulled from headlines, they’re from my own medical and dental bills.
DeleteThat $40,000 charge was for a kidney stone procedure about eight years ago. I’ve had multiple procedures over the years, and under a different plan, the bill was $17,000. In both cases, I had already hit my out-of-pocket max, so I wasn’t stuck with the bill. But had I not, and many people don’t, I’d be on the hook for thousands. That’s not theory. That’s the system working exactly as designed.
Same story with dental: one insurance-owned clinic quoted $5,400, insurance covered just $2,400, and I was told to cough up $3,000. I shopped around and found the same procedure at the University of Michigan dental clinic for $3,800, which cut my out-of-pocket expense to $1,200. That’s a 60% savings, purely by rejecting the first quote. Most people don’t realize that’s even possible, because the system counts on passive patients.
Regarding your point about HMOs, they may appear efficient on paper, but in practice, they hinder access and timeliness. The trend is clear: large insurers are consolidating care, replacing in-person visits with virtual ones, and sidelining physicians in favor of nurse practitioners doing scripted online consults. This isn’t innovation, it’s cost-cutting dressed up as convenience.
The core issue is this: healthcare has been commandeered by profit-driven corporations that have monetized human pain. When insurance companies claim they're operating at a loss, it's often a paper loss, a narrative crafted to justify premium hikes and cost-shifting to patients. Copays for basic clinic visits have gone up from $5 to $70 in less than 10 years, along the actual burden on consumers keeps climbing.
Over the past decade, healthcare costs have risen more than 10% annually, even while general inflation has hovered around 2%. That’s not a coincidence, it’s a business model. These companies use their "losses" as leverage to lobby for higher rates and more favorable regulations, while patients are left rationing care or drowning in bills they didn’t see coming.
The result is a system so bloated and opaque that even people with insurance are putting off care because they can’t risk the out-of-pocket hit. At that point, this isn’t just a broken model; it’s a moral collapse.
That’s the truth I’m putting on the table in these posts. And no, I’m not here to sugarcoat it.