"Mind-boggling to me" — Shark Tank mentor Mark Cuban reflects on the country's health insurance system with Jon Stewart

Shark Tank investor Mark Cuban appeared on Jon Stewart's podcast The Weekly Show on December 13, 2024, and discussed the US health insurance system. They spoke about the inefficiencies and challenges the industry is facing as Cuban offered candid insights into its structural flaws.

Cuban shared an observation about how hospitals and doctors often bear the financial risk of unpaid deductibles, copays, and coinsurance, rather than insurance companies. He also spoke about how it highlighted the hidden dynamics of the healthcare ecosystem.

"This is something, like, was mind-boggling to me. I was almost this many days old when I found this out," he said about the system's design.

The podcast addressed the recent public outrage over insurance algorithms being used to deny coverage, culminating in the murder of a healthcare executive. Cuban argued against the practice of involving insurance companies in preauthorizations. He also questioned why entities designed to reduce payouts are tasked with making such critical decisions.

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Mark Cuban highlights hidden burdens on healthcare providers

Mark Cuban shared details about how hospitals and doctors handle financial risks in the U.S. healthcare system. Speaking to Jon Stewart, Cuban said that the system was "turning hospitals and doctors into subprime lenders" without any assets against them.

He explained that when patients cannot pay their deductibles, copays, or coinsurance, healthcare providers cover these costs. This often leads to default rates of 50% or more in some hospitals, depending on their location. According to Cuban, hospitals have two bad options, they can either act as debt collectors or raise their prices.

“They turn into a mortgage servicer where they try to collect it. It makes them look bad...patients hate you,” he said.

Even when hospitals try to recover money, the efforts are often unsuccessful, leaving them with huge financial losses, Cuban noted. To compensate for these losses, hospitals increase the cost of services, which impacts everyone, including insured patients.

As an example, Cuban said that an MRI might cost $350 for a cash-paying patient but could cost $2,000 through an insurance company, claiming that it was "insane."

Cuban also noted that this situation hurts patients, who often face medical debt and bankruptcies. Meanwhile, hospitals are left in a tough spot, trying to cover their losses while maintaining their services. The businessman called for a system that removes these financial risks from healthcare providers, making the process fairer for both hospitals and patients.

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Mark Cuban questions insurance company practices

Mark Cuban raised concerns about the role of insurance companies in making healthcare decisions.

“Why would anybody hire an insurance company who tries to make money by reducing the amount they pay out? That’s their interest,” he observed.

He then criticized the widespread use of insurance companies for preauthorizations, where they decide whether a treatment will be covered. The investor argued that instead of relying on insurers, who often prioritize profits over patient care, employers and unions could make these decisions themselves.

Cuban explained that this system allows insurance companies to negotiate higher prices with hospitals, creating more problems.

“You would think that a big insurance company negotiating with a hospital would bring prices down, but they actually want those prices to be higher,” he said.

He pointed out that the Affordable Care Act (ACA) incentivizes higher spending because insurers are required to spend a percentage of premiums on healthcare services. This creates a situation where inflated costs benefit both insurers and hospitals, leaving patients to pay the price.

Mark Cuban wondered why people were putting insurance companies in that role before calling for more transparency and accountability. He also questioned why the system continues to operate in a way that benefits insurers at the expense of patients and healthcare providers.

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Watch Mark Cuban in the recent season of Shark Tank, airing every Friday at 8 pm ET on ABC.