Why Health Insurance is so Costly

An estimated $2,262,000,000,000 was spent on health care in the United States of America in 2007. Of that, $776,000,000,000 was paid for from private health insurance, according to information supplied by the Centers for Medicare and Medicaid Services published in the Blue Cross Blue Shield Association’s 2008 Medical Cost Reference Guide.

The guide lists heart disease, cancer (neoplasms), injuries (trauma-related disorders), mental illness and heart/lung (pulmonary) conditions as the five medical areas costing the most to treat. In 2004, the treatment of 20 million heart disease patients cost $90 billion, an average of $4,500 per patient per year.

Most of us would tend to believe that those with unhealthy lifestyles, such as smokers and obese people, would require more medical expenditure than those who eat and live healthy. Compared on a yearly cost basis this is so. But it is not the case when the medical costs accrued over a person’s lifetime are considered. A 2008 study into the medical costs of obesity in the Netherlands, led by Pieter van Baal of the National Institute for Public Health and the Environment, found that while medical costs were highest for obese people up to age 56 years and smokers over that age, total lifetime medical expenditure was highest for those with healthy lifestyles because of longer average lifespans, with increased medical costs in their extended old age.

Those who live longer, while eventually requiring more expenditure on medical care, will be paying premiums for longer to offset this. Which is why a young person with a healthy lifestyle and a normal body/mass index is not charged as high a medical insurance premium as an overweight, smoking and/or older person. It’s a matter of risk assessment.

Obesity is linked to diabetes mellitus type II, a disease of the endocrine system that results in problems with high blood sugar levels, known medically as hyperglycemia. A 2008 study by Greg Nichols and colleagues at the Center for Health Research in Portland found health costs increased significantly even for people with relatively high blood sugar levels, above normal but below those of diabetics. An average increase of $3,863 per year was determined for macrovascular complications such as heart disease and stroke alone.

The high cost of medical insurance premiums is directly related to the high cost of medical care. Doctors and nurses are highly trained professionals and need to be paid accordingly. Advanced medical equipment such as magnetic resonance imagers, commonly known as MRIs, and modern radiography equipment, commonly called X-ray machines, are expensive to manufacture and run. Medications can be very expensive, especially the most recent.

Generic drugs, such as aspirin, are relatively cheap because the pharmaceutical companies are in competition and the mass production of drugs is not particularly expensive. Patented drugs produced by individual pharmaceutical companies can be very expensive. The companies charge high prices while they have a monopoly, to recover their research, testing and drug approvals process costs, not only for the actual drug but for hundreds, possibly thousands, that fail that lengthy process. And, of course, they have to make a suitable profit to satisfy their shareholders.


“2008 Medical Cost Reference Guide.” Blue Cross Blue Shield Association. http://www.bcbs.com/blueresources/mcrg/ of dysglycemia and medical costs associated with nondiabetic hyperglycemia.” Gregory Nichols, Bhakti Arondekar & William Herman. December 2008. The American Journal of Managed Care 14(12): p791-798.

“Lifetime Medical Costs of Obesity: Prevention No Cure for Increasing Health Expenditure.” Pieter van Baal, Johan Polder, G. Ardine de Wit, Rudolf Hoogenveen, Talitha Feenstra, Hendriek Boshuizen, Peter Engelfriet & Werner Brouwer. February 2008. PLoS Medicine 5(2). http://www.pubmedcentral.nih.gov/articlerender.fcgi?artid=2225430