Navigating the healthcare economy: Why is it so messy?

The healthcare industry is massive and can be confusing for some Americans to navigate as they are hit with medical bills from various entities.

Yahoo Finance health reporter Anjalee Khemlani joins Wealth! to explain who the players are, what they do, and why your medical bills are so confusing.

For more expert insight and the latest market action, click here to watch this full episode of Wealth!

This post was written by Nicholas Jacobino

Video Transcript

Well, we all know the health care industry is extremely complicated and if you've ever had to advocate for yourself with an insurer or provider or a pharmacy, then you know, just how disconnected and confusing and discombobulating it can all be.

So, yeah, financing your health reporter Angelique Kani is here to break down some of the intricacies of the industry.

So, and let's start with different parts of the health care industry.

Just tell us how it works and how it affects our wallets at the end of the day.

Yeah, we all know it's complicated but I'm gonna, I, I can't promise I'm gonna make it uncomplicated, but I'm gonna explain to you why the infighting that cons consistently and constantly happens is a affecting you.

So let's take a look at what the different parts are that I'm gonna talk about.

First of all, you have to think about the way that uh everyone is being paid within the industry.

You've got the health providers and tech service providers like your telehealth and the like they are being paid by insurers.

Then you've got the pharmacies.

Now they're technically being banned by insurers as well because the pharmacy benefit managers sit underneath them and those are the entities that negotiate with the Pharma company.

So those are the drug companies and the money is being exchange back and forth.

So I'll give you the health service providers because I think that's the most uh popular sort of interaction that you as a consumer would have with industry, health providers constantly negotiate with insurers in order to get paid.

So when a health provider, especially those who are publicly traded, we see when they have strong quarters, what that means is they got more of your money either through, directly out of pocket for you or through the insurer.

That means their reimbursements were higher, they were able to negotiate better with the insurers.

They saw more patients or more volumes so they could charge more and more volume means more procedures done.

So while that does come with a cost and expense to them, they were able to cover their costs with the money that came into their pockets.

And why that's important to understand is because it's not as simple as you go to the doctor, get a visit, a claim gets submitted and then they get reimbursed.

It's actually an ongoing negotiation.

Despite the fact that insurers already have a negotiation, a great set with these providers, they still continue that negotiation process.

So let's look at the insurers and how they make money off of you.

If you think about insurance companies, you pay a premium every month.

Well, that premium goes towards covering costs and is part of a pool set of money that goes towards costs and claims.

Now when an insurer has a strong quarter, and we know they've been having those, that means they have more of your money.

And because they are these vertically integrated really, really broad companies, now that money also gets shifted inside of it.

And now they pay fewer claims.

That means they have more money.

They kept it on the books for longer.

The days of payment claims is also there.

And also if fewer members utilize the health system, the health services that also is good for them because it means they kept more of your money.

And all of this is just to tell you that that is not necessarily the best use of the money.

And they have a specific number that they're supposed to pay out every single month.

And if they don't meet that, then they're technically supposed to give it back to you.

But because they're these complex systems right now, they're able to move it around internally and keep that money inside.

So they, for example, some of the biggest uh insurers are also service providers.

So they're also PB M. So they're dealing with your prescriptions as well, all that goes into the flow.

Meanwhile, pharmacies are battling it out with the PB MS.

They're constantly negotiating the same way the health service providers are with the insurance companies, the pharmacies are doing the same thing.

They're constantly having to negotiate for these drugs and the payment that they get for them.

In some instances, if you get a prescription filled, that pharmacy could get a negative reimbursement in the sense that it costs them more to fill your prescription than the money that they're getting in for it.

So, they're working at a loss sometimes and we've got some big health care companies that are, of course reporting over the course of this week.

And it's gonna be interesting where as they continue to really look across the consumer set right now, how many consumers are opting in continuing to be able to pay certain health care procedures or health care services and where that's also impacting their wallet or their pocketbook at the end of the day because of the costs that the health insurers are pushing down to them as well for servicing.

All right.

I, I think I, I think I got it all there and thanks so much for breaking this down.

Appreciate it here.