American Healthcare Doesn’t Lack Money. It Lacks Alignment.
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Colleagues:
We now spend roughly $14,500 per person per year — about $5 trillion nationally — yet the average American pays only about $1,500 out of pocket in a given year. That disconnect matters. When someone else is paying most of the bill, prices rise without resistance. Corporate health systems expand administrative layers. Insurers grow utilization management departments. Profit and bureaucracy accumulate far faster than value. As Margaret Thatcher eloquently stated, “The problem with socialism is that you eventually run out of other people’s money.”
Spending is also highly concentrated. In 2022, the top 1% of out-of-pocket spenders paid about $23,700 annually. The top 10% paid $6,126. Meanwhile, the bottom 50% spent just $24. That tells us something critical: routine care is modest for most people in most years, while catastrophic events drive the extreme tail of spending.
So, what would costs look like in a competitive marketplace stripped of hospital bloat, opaque pricing, and insurer overhead?
Look at sectors already exposed to competition — LASIK, cosmetic surgery, direct primary care, imaging centers that post cash prices. When consumers shop and providers compete, prices often fall 30–60% relative to hospital-based negotiated rates. Administrative overhead in traditional insurance routinely runs 15–20% or more; corporate health system administrative costs can exceed 25% of total spending. Remove layers of billing complexity, prior authorization bureaucracy, cross-subsidized markups, and opaque contracting — and the underlying clinical cost of many common services drops dramatically.
If even a conservative 25–30% of the $14,500 reflects administrative friction, inflated facility fees, and market consolidation pricing power, that implies several thousand dollars per person annually are not tied to actual care delivery. In a disciplined competitive environment, routine annual healthcare consumption for most Americans could plausibly cost far less than current system-wide spending suggests — because much of today’s spending is transactional overhead, not medicine.
This is where a public-private structure makes sense:
- Healthcare savings accounts, funded by individuals, employers, and public support for lower-income families, would cover predictable care. When patients control the dollars, price transparency becomes meaningful and competition works.
- Catastrophic and life-event insurance would protect against rare, devastating events — cancer, trauma, neonatal ICU stays. That’s what insurance is designed to do: absorb low-frequency, high-severity risk.
- Real price transparency would allow patients to compare bundled prices before elective procedures — when they choose to undergo services. The decision to move forward should rest with the patient and physician, not a third party whose financial incentives reward delay or denial.
Care denials should be limited to clinical safety standards and clear contractual boundaries — not opaque utilization management designed to preserve margins. If a patient elects to proceed with a transparent, competitively priced service using their HSA funds, the friction should be minimal. Catastrophic coverage would activate only when true high-cost risk emerges.
The current system spreads $14,500 per person across layers of cross-subsidies, hidden pricing, and administrative gatekeeping. A system that separates routine spending from catastrophic protection — and reintroduces transparent competition — would force cost discipline where markets function and reserve insurance for what only insurance can responsibly manage.
If we want sustainable healthcare, we must stop treating every dollar as if it requires third-party control. Routine care should operate in a competitive marketplace. Catastrophic care should be insured. And administrative profit should not be mistaken for medical value.
Until we reach a proper balance in private and public funding, then we need to continue to fight for physicians to have a fair ability to appeal insurer underpayments to state and federal Independent Dispute Resolution (IDR) systems and for the preservation of private practice.
To this end, please come make your voice heard at MSSNY’s Physician Advocacy Day on March 10. Register for Physician Advocacy Day
All the best,
David Jakubowicz, MD, FACS
MSSNY President
