For starters, insurance smooths risk. It is not there to save you money. By definition, insurance will always cost more than than paying out-of-pocket in the long run[0]. Think of insurance as a luxury that mitigates (but does not eliminate!) the worst-case scenario for you. It costs more (a premium[1]) because this luxury has value to you.
The fact that this does not always apply to health insurance is a sign that health insurance isn't entirely (in the economic sense) insurance; we just happen to use that word.
> One thing I've never understood about the US system is why do the doctors charge more for paying cash e.g. $200 for a visit, whereas insurance reimburses them less than half e.g. $80.
In general, Medicare and Medicaid reimburse the least - the amount that they reimburse is actually less than COGS (not on all individual services, but in the aggregate, it amounts to 7% less)[2]. As a result, providers have to overcharge private insurers and uninsured patients in order to cover their own costs.
The price that you see on your bill is basically a starting point for negotiations. A company like Aetna will say "okay, there's no way we're paying that, but we will pay you 250% of what Medicare reimburses for the same procedure".
As an uninsured patient, you can do this as well if you know to ask. It's less of a practice for outpatient care, since that tends to cost less and also have more predictable costs associated with it, but for (e.g.) unexpectedly large bills for inpatient care, you can always just tell them "I will pay $X today in cash if you reduce the bill to that amount." They'll always be willing to do it, because they literally do not care about the money that they get from uninsured patients - the large bill is intended to be received by an insurance company, not by an individual.
[0] ie, on an infinite time horizon.
[1] The fact that your fixed monthly payment to an insurer is also called a premium is not a coincidence.
[2] To preempt the inevitable question: COGS refers to the direct costs of providing a service, so this is before even accounting for the fact that an outpatient office has to pay rent, pay its staff, etc.
I don't understand how doctors paying less to medicare/medicaid causes them to have to overcharge other customers. If they are not making money on Medicare or Medicaid patients it's my understanding they aren't forced to see them.
Sort of.
It's less the case for outpatient practices unaffiliated with any hospital network, which is why the disparity between insured cost and out-of-pocket costs for those practices tend to be smaller. But unaffiliated outpatient practices are a dying breed.
For hospitals, it's more complicated. In theory, this would be true. In practice, almost all hospitals other than the ones the VA operates do take both Medicare and Medicaid because of a confluence of other regulations that makes it unfeasible to refuse care to them. That said, despite this, the amount of money that hospitals lose on public insurance has increased to the point where a number of large hospital networks have discussed rolling back the services they offer to Medicare patients (such as outpatient care) or even cutting it off entirely.
Would you mind either explaining the regulations or pointing me at some sources that explain the regulations that bind hospitals into paying for Medicare and Medicaid? And by affiliated, does that mean has admitting rights, or is owned by the hospital network?
Sorry not trying to be argumentative just trying to learn about the convoluted world of healthcare.
This ignores the money saved from group bargaining. It is often not possible to negotiate on price as an individual. A good health insurance company will have more information on pricing than an individual would have and is in a better position to negotiate for the group.
However most, if not all, doctors will absolutely charge you less if you pay cash, you just have to ask for it and have the conversation.
Everything else in your comment is true, but this line is not. Healthcare is expensive, just like cars, houses, and enterprise software, but the reason that healthcare prices are high is very specific to healthcare (there aren't any other industries that have similar models).
If you don't have insurance, you just pay the chargemaster rate. Keep in mind this is negotiable.