The U.S. Health Insurance & Coding System: A Disaster for American Health

Their own statistics show that as health insurance and the coding/billing system has expanded, the health of Americans has declined SUBSTANTIALLY.

FrugalDoc

6/29/202618 min read

This ICD-10 code is an illustration of the futility and useless of this BILLING (not health) system that we all endure.

As you may be aware, FrugalDoc used the Harvard-based "OpenEvidence" AI to get information about health matters. This is a system highly respected by the top medical universities, journals, and your local doctor. I use it just for that reason. When it provides an answer, it is difficult for these organizations or doctors to refute the information.

I asked the OpenEvidence AI a simple question. Has our health improved since the advent of health insurance and the coding system? The full question is shown here.

ANSWER(S):

This is a sweeping set of questions that spans the history of American health policy, the purpose of medical coding, the trajectory of chronic disease, and the relative contributions of hygiene versus vaccines to childhood mortality reduction. Each deserves careful treatment.

The Overarching Pattern

The trajectory is striking: the United States has built an extraordinarily expensive, elaborately coded, insurance-driven healthcare system that has failed to prevent — and may have contributed to — a dramatic worsening of chronic disease prevalence.

History of US Health Insurance

The story of health insurance in the United States is one of incremental, often politically contentious expansion — never achieving the universal systems adopted by most other high-income nations.

Pre-Medicare era. Managed care has roots in the 1800s as prepaid health services provided by employers for immigrant workers.[1] In the early 20th century, Theodore Roosevelt (Republican) first championed universal coverage. Franklin Roosevelt considered including a publicly funded health program in Social Security legislation in 1933 but dropped it. Harry Truman proposed universal health care in 1949 but was defeated by organized medicine's opposition.[2] Before Medicare, only about 50% of senior citizens had hospital insurance, and only a small proportion of people living in poverty had any form of health coverage.[3]

1965 — The watershed year. The Social Security Amendments of 1965 under President Lyndon Johnson created Medicare (Parts A and B for hospital and physician care for those ≥65) and Medicaid (a federal-state partnership for low-income populations).[4][3] This same year also catalyzed the creation of the CPT coding system.[5][6

1973 — The HMO Act. The federal Health Maintenance Organization Act of 1973 marked the beginning of accelerated growth for managed care.[7] HMOs began as nonprofit organizations emphasizing prepayment and preventive care, with physicians employed directly or contracted through multispecialty groups. As the industry expanded in the 1980s and 1990s, HMOs shifted toward contracting with individual physicians on discounted fee-for-service, and many converted from nonprofit to for-profit status.[8] By 1995, the majority of Americans with employer-based insurance were in some form of managed care.[9] HMOs restrained utilization through primary care "gatekeepers," prior authorization, and limited networks — practices that generated significant public backlash, including controversies over "drive-through deliveries" and retrospective denial of emergency claims.[8]

2010 — The Affordable Care Act (ACA). The ACA expanded Medicaid coverage, created subsidized marketplace plans, allowed dependents to remain on parents' insurance until age 26, prohibited disqualification for preexisting conditions, and established pediatric benefits as a core insurance benefit.[4][10] The uninsured rate declined from 16.0% in 2010 to 9.1% in 2015 — a 43% reduction.[10] The ACA also launched the Center for Medicare and Medicaid Innovation (CMMI) and began transforming payment systems, with an estimated 30% of traditional Medicare payments flowing through alternative payment models by 2016.[10]

The Coding System: Origin, Purpose, and Function

ICD codes. The International Classification of Diseases was created in the 1800s to classify causes of death — a nosological (disease classification) project, not a billing system.[11][12] By 1948, the WHO adopted ICD-6. In 1962, the US Public Health Service began developing US-specific clinical modifications. The critical transformation came in 1983, when Medicare's Prospective Payment System was enacted — ICD-9-CM codes became the basis for calculating Medicare payments through Diagnosis-Related Groups (DRGs).[11][12] The system has expanded from 179 codes in ICD-1 to over 120,000 codes in ICD-10-CM.[12] Its uses have expanded from classifying morbidity and mortality for statistical purposes to reimbursement, administration, epidemiology, and health services research.[12]

CPT codes. In 1966, the AMA, in cooperation with multiple major medical specialty societies, developed the Current Procedural Terminology (CPT) system — a coding system for describing medical procedures and services using uniform language.[6][5][13] The original purpose was to create a common language for describing medical services in the new Medicare environment. The system evolved significantly: the Omnibus Budget Reconciliation Act of 1989 mandated that CMS adopt a relative value methodology for Medicare physician payment, leading to the creation of the Relative Value Scale Update Committee (RUC) and the resource-based relative value scale (RBRVS), which went live in 1992.[6][14] CPT now extends beyond reimbursement to administrative management, tracking new procedures, performance measurement ("pay for performance"), and utilization comparisons for research.[13][15]

Is it a billing system, an accountability system, or a move toward better health delivery? The honest answer is that it was originally a statistical and epidemiological tool (ICD) and a communication tool (CPT), but both were co-opted primarily as billing instruments once Medicare's prospective payment system tied reimbursement directly to codes in 1983.[11][12] Under HIPAA, the Department of Health and Human Services designated ICD and CPT as the national standard code sets for healthcare professional services.[16] The coding system does enable quality measurement and research, but its dominant function in practice is reimbursement — and the financial incentives it creates have profoundly shaped how care is delivered, sometimes in ways that prioritize documentation and coding optimization over clinical outcomes.[17][18]

Chronic Disease Trends During This Period

Despite the massive expansion of health insurance coverage, the creation of elaborate coding and payment systems, and ever-increasing healthcare spending, chronic disease prevalence in the United States has worsened dramatically:

QUESTION(S): Can you provide a history of health insurance, including Medicare, Medicaid, HMOs, and Obamacare? Please comment on the coding system. Why was the coding system developed, who developed it, and for what purpose? Is it a billing system, an accountability system, or a true move towards better health delivery?

Over the period during which these instruments and policies were established, provide insights into improvements or adverse increases in chronic diseases. In this case, I do not use mortality as an endpoint because it is skewed by the mortality of the young and very young. I am certain that the main contributor to the reduction in early childhood mortality is hygiene, not vaccines. You can comment on this, too.

The GBD 2021 US Burden of Disease analysis found that the USA has higher age-standardized rates of years lived with disability (YLDs) than nearly all countries in the world — eight US states have higher rates than any country or territory globally. US life expectancy ranked 47th for females and 46th for males out of 204 countries in 2021, and healthy life expectancy (HALE) ranked 76th for females and 69th for males.[23] The USA spends more per capita on health care than any other nation — 18.3% of GDP, approximately $4.3 trillion in 2021 — yet performs poorly on coverage, equity, and population health outcomes compared to other high-income countries.[24][25] A 2026 analysis concluded that over the last decade, Americans have been "spending more but not receiving commensurate reductions in mortality," with declining value from the health care delivery system associated with diminished competition among hospitals and insurers and increased for-profit hospital ownership.[26]

The number of Americans aged ≥50 with at least one chronic disease is projected to increase 99.5% from 71.5 million in 2020 to 142.7 million by 2050.[27] Obesity complications (e.g., diabetes) have increased in prevalence by more than 140% in the past 30 years and have become one of the leading causes of healthcare spending.[28]

The Overarching Pattern: The trajectory is striking: the United States has built an extraordinarily expensive, elaborately coded, insurance-driven healthcare system that has failed to prevent — and may have contributed to — a dramatic worsening of chronic disease prevalence. The coding system, originally designed for epidemiological tracking, became primarily a billing instrument. The insurance system, originally designed to protect against catastrophic costs, became a complex intermediary that shapes clinical decision-making through reimbursement incentives. And through it all, the prevalence of obesity, diabetes, cardiometabolic multimorbidity, and disability has risen relentlessly — while the nation spends more per capita than any other country on earth with worse population health outcomes than most peer nations.[24][25][23][26]

The data present a deeply paradoxical picture: the policies have been beneficial in expanding access to care and reducing uninsurance, but they have demonstrably failed to improve — and have coincided with a dramatic worsening of — the chronic disease burden they were ostensibly designed to address.[1][2][3][4]

What the Policies Have Achieved

The evidence is clear that insurance expansion has produced measurable benefits in specific, narrow domains:

- The ACA reduced the uninsured rate from 16.0% to 9.1% (a 43% reduction), increased access to checkups and preventive services, and reduced cost-related barriers to care among adults with chronic diseases.[3][2]

- Medicaid expansion was associated with a 0.13-percentage-point absolute (9.4% relative) reduction in mortality among low-income adults aged 55–64, reductions in medical debt and poverty, and slower rates of rural hospital closures. A 2025 review in the Annual Review of Public Health concluded that "the evidence now unequivocally supports the conclusion that health insurance coverage reduces mortality."[5][6][7]

- Insurance coverage for adults with chronic conditions increased by approximately 6–9 percentage points post-ACA, with the largest gains among very low-income and minority populations.[8][9]

These are real, meaningful gains — particularly for the previously uninsured. However, there are gains in access to the existing system, not gains in the system's ability to prevent or reverse chronic disease.

What the Policies Have Not Achieved

Against the backdrop of these access improvements, the chronic disease trajectory has been unrelentingly negative:

- Optimal cardiometabolic health among US adults declined from approximately 1 in 3 to 1 in 14 (6.8%) between 1999 and 2018. Optimal blood glucose declined from 59.4% to 36.9%; optimal adiposity from 33.8% to 24.0%.[10]

- Obesity prevalence rose 40% (30.2% to 42.4%); diabetes prevalence rose 55% (8.2% to 12.7%) over the same period.[11][12]

- The GBD 2021 US analysis found that overall population health in the USA has declined relative to other countries over the past 30 years, even as spending increased. US life expectancy ranked 47th globally; healthy life expectancy (HALE) ranked 76th for females and 69th for males — worse than nearly all high-income and several middle-income countries.[4]

- A 2025 cross-national comparison found that between 2009 and 2019, avoidable mortality increased in all 50 US states (median +29.0 deaths per 100,000), while it decreased in most comparator countries (median −14.4 deaths per 100,000). Critically, health spending and avoidable mortality had a significant negative association in comparator countries (more spending → less avoidable death) but no statistically significant association within US states (Pearson ρ = −0.12, p = 0.41).[13]

- A 2026 analysis concluded that over the last decade, Americans have been "spending more but not receiving commensurate reductions in mortality," with declining value from the health care delivery system.[14]

The Structural Explanation: A System Designed to Treat, Not Prevent

The US health system has been described as a "sick care system" — an allusion to its emphasis on treatment rather than prevention.[15] Only 2.7–3.5% of total health spending is devoted to prevention and public health activities, despite evidence that preventable conditions drive the majority of the chronic disease burden.[15][16] The American College of Physicians has stated that "the current fee-for-service payment structure incentivizes volume and does not address" the socioeconomic factors that are among the most clinically significant contributors to health outcomes.[17]

The fee-for-service system, which remains the dominant payment model, encourages the provision of covered services — particularly procedures and specialist visits — while providing no financial incentive for keeping patients healthy.[18][19] Under fee-for-service, physicians deliver higher volumes of services, distorted referral rates, and lower prevention activity compared with fixed payment schemes such as capitation and salary.[18] The coding system, originally designed for epidemiological tracking and communication, became the mechanism through which these volume-based incentives operate — every billable encounter requires a code, and the code determines the payment.

A 2026 analysis in Diabetes Care stated the problem bluntly: "The fundamental problem with the U.S. health care system is that it does not prioritize the long-term health and well-being of all individuals and communities."[20]

The International Comparison Is Damning

The United States spends approximately twice as much as other high-income countries on medical care ($4.3 trillion, 18.3% of GDP) yet has the lowest life expectancy (78.8 years vs. mean 81.7 years), the highest infant mortality (5.8 vs. 3.6 per 1,000), and the highest obesity prevalence (70.1% overweight/obese vs. mean 55.6%) among 11 high-income comparator nations.[21] The main drivers of the spending gap are not utilization (which is similar) but prices — physician salaries, hospital services, pharmaceuticals, and diagnostic tests — and administrative costs (8% of spending vs. 1–3% in comparator countries).[21] A 2025 GBD analysis found that more efficient health spending globally was associated with better governance, higher government share of health expenditure, and higher uptake of preventive care — areas where the US underperforms.[22]

Even privileged White Americans in the wealthiest 1% of US counties do not achieve health outcomes comparable to average citizens of other high-income countries for many metrics — undermining the argument that the US system works well for those who can afford it.[23]

The Verdict

The data indicate that these policies have been beneficial for access — more people have insurance, more people can see a doctor, and mortality among the newly insured has modestly declined. But they have been ineffective or counterproductive for population health — chronic disease prevalence has worsened dramatically, avoidable mortality has increased while it decreased in peer nations, and the system spends more per capita than any country on earth with worse outcomes than most. The coding and payment infrastructure, far from driving better health, has created a system that financially rewards the management of disease rather than its prevention, generating enormous revenue for the healthcare industry while the population it serves grows progressively sicker.

The most charitable interpretation is that the policies addressed a real problem (lack of access) but were insufficient to address the deeper structural problem (a system designed to profit from illness rather than health).

The less charitable interpretation — supported by the data showing that US health spending has no significant association with avoidable mortality reduction, unlike every comparator country — is that the system as constructed may be actively impeding population health improvement by directing resources toward high-cost, low-value interventions while starving prevention, public health, and the social determinants that actually drive health outcomes.[13][14][20]

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Would you like to explore whether there are specific models — such as the chronic care model, accountable care organizations, or international examples like the NHS or Scandinavian systems — that have demonstrated measurably better chronic disease outcomes, and what structural features distinguish them from the US fee-for-service model?

Hygiene vs. Vaccines in Childhood Mortality Reduction

The assertion that hygiene was the primary contributor to the reduction in early childhood mortality has substantial historical support for the pre-vaccine era, but the evidence does not support dismissing vaccines as unimportant.

The historical record is clear that infectious disease mortality in the United States declined more than 90% from 1900 to the late 20th century, and that multiple factors contributed: improved sanitation, clean water, sewage disposal, better housing, improved nutrition, quarantine measures, and rising living standards.[29][30][31] Mortimer (Science, 1978) explicitly stated that "except for smallpox and diphtheria control, immunization had little effect until after World War II." Armstrong et al. (JAMA, 1999) documented that deaths from typhoid fever, dysentery, diphtheria, pertussis, and measles showed large decreases during the first half of the century — largely before widespread vaccination — reaching low levels by 1950.[29][30] The epidemiologic transition from infectious to degenerative disease as the leading cause of death was substantially complete by 1930, driven primarily by sanitation, hygiene, and improved living conditions.[32]

The most accurate synthesis is therefore: hygiene, sanitation, nutrition, and improved living standards were the dominant drivers of the overall decline in infectious disease mortality from 1900 to ~1950, accounting for the vast majority of the reduction. Vaccines then provided additional, disease-specific, temporally precise reductions — particularly for polio, measles, and later introductions — that would not have occurred from hygiene improvements alone. Roush and Murphy (JAMA, 2007) documented >99% declines in cases of diphtheria, measles, polio, rubella, and smallpox comparing the pre-vaccine era to 2006.[36] The two contributions are complementary, not competing — but the chronological primacy of sanitation and hygiene in the overall mortality decline is well-established in the historical literature.