It’s Jan, 20, 2021. A new president has been sworn into office. Assuming he or she wants to improve the American health care system, and assuming there are insufficient congressional votes to enact Medicare for All or similarly sweeping change, what should be done?
There are many levers a new administration can use to boost coverage. First on the agenda should be to work with the 14 states that have not adopted Medicaid expansion — or get expansion referendums placed on the 2022 state ballots. Five million people would gain coverage if these states expanded.
Second, there are 8 million people eligible for the exchanges who have not purchased coverage. Reversing the Trump administration’s efforts to sabotage the exchanges would be a start. The procedures he put in place have made it difficult for people to learn about the exchanges, that they are eligible and navigating is not simple — like getting Medicare Part A.
In addition, there should be efforts to:
- Extend the open enrollment period from the Trump-imposed limit of six weeks to three months. Increase funding for advertising the open enrollment and for navigators to help people sign up for coverage.
- End the bare-bones association and short-term plans.
- Simplify and standardize the exchange offering. Massachusetts and California are models; they require standardized plans offering identical out-of-pocket costs for most benefits, focusing consumer choices on premium and network composition.
The most important factor for those choosing a health plan is cost. Harvard and MIT research showed that raising premiums as little as $40 can drop coverage by 25 percent. Efforts must be put into lowering premiums. Reinsurance and risk corridors, which offset the cost of extremely high costs to patients, reduce insurers’ risks and lower premiums. States could use funds from so-called 1332 waivers — which allow states to create strategies to deliver comparable insurance — to enact their own reinsurance programs. Data from Avalere suggest this alone can reduce premiums by just under 20 percent. In addition, having the federal government resume cost-sharing subsidies to insurers — payments to defray their costs of forgiving deductibles and copays for people earning under 250 percent of the federal poverty line — would also lower premiums.
States could also emulate Massachusetts and enhance the subsidies for poorer individuals, effectively lowering the premiums. Massachusetts has made premiums $0 for people below 150 percent of the poverty line and caps them at $85 per month for people from 200 to 250 percent of the poverty line — compared with the $132 to $211 premiums found in other states.
While expanding coverage is important, what really agitates Americans is affordability. But getting costs under control is a longer-term endeavor that requires legislation.
Recent research has indicated that one major source of high health care costs is high prices in private insurance. Indeed, the Department of Health and Human Services’ most recent assessment of national health expenditures in 2018 suggests rising prices account for more than half of the annual increase in health care costs — more than the aging of the population or increases in use and technology. Two high prices need urgent attention: the cost of prescription drugs and hospital stays.
Prescriptions account for nearly $500 billion in health care spending. The United States remains the one developed country that gives pharmaceutical companies monopolies through patents and marketing exclusivity and then lets them set their own prices. It’s no wonder drug costs are so outrageously high. Legislation should create a panel that is empowered to negotiate maximum drug prices with manufacturers. The negotiations should cover not just drugs for Medicare beneficiaries — federal law currently prohibits the secretary of health and human services from doing so — but all drugs for all Americans.
The negotiations should be based on objective assessments of a drug’s health benefits, with higher prices for drugs that provide greater health benefits and meet international pricing standards. As a recent Congressional Budget Office analysis suggests, limits on drug prices would hardly impact innovation. It asserts that the Lower Drug Costs Now Act would limit drug prices to 120 percent of the prices in other countries. Over the course of 10 years, in which about 300 drugs would receive FDA approval, drug makers could end up with just eight fewer drugs. All the while, American consumers would save hundreds of billions of dollars. This seems like a rational trade-off.
Hospitals now account for nearly $1.3 trillion in health care spending. Just as with drugs, hospital prices are rising because of monopolistic pricing practices. Between 2011 and 2017, there were 1,587 hospital mergers. Consequently, as the Health Care Cost Institute recently reported, nearly three-quarters of hospital markets are “highly concentrated.” This has had the predictable effect on hospital prices for private insurance — hospital prices in Medicare and Medicaid are set by the government. In 2000, hospitals were charging private insurers about 110 percent of the Medicare rate. By 2012 that was 190 percent, and by 2017 it was about 240 percent of the Medicare rate.
This price gouging has to stop. Two approaches would be effective. One is more vigorous enforcement of antitrust rules to prevent further hospital consolidation. In addition, Republican-inspired legislation to control hospital prices should be passed. The idea is to institute a cap on hospital prices related to how concentrated the market is. The more concentrated the market, the lower the prices hospitals can charge private insurance companies. This would serve as its own antitrust mechanism, discouraging hospital mergers meant to increase bargaining power.
Finally, it will be hard to tame health care costs without changing payments to physicians away from fee-for-service to alternative payment models in which physicians and other providers have an incentive to deliver more cost-effective care and increase quality. This could be done by requiring all health insurers receiving federal funds through the Federal Employee Health Benefits Program, Tricare, Medicaid, Medicare Advantage, the exchanges, and other programs to have at least 50 percent payments to physicians move to capitation — a set fee for medical professionals based on their patient load — and bundles within three years. Medicare could also accelerate and expand some of the Trump administration’s efforts in this area, such as introducing more mandatory bundled payment models or global budgets. In addition, the Centers for Medicare and Medicaid Services could work more assiduously with private payers to introduce all-payer alternative payment models. This push on alternative pay models will help induce wavering physicians and others to change how they deliver care.
The United States spends more than $3.6 trillion on health care annually. No one doubts there is more than enough money to provide high-quality health care for all Americans. The problem is that we have the wrong incentives, monopolistic and uncompetitive markets, and administrative complexity. Solving these problems over the next decade must be a top priority for any new administration. The money saved will ease the financial burden on Americans, lower premiums to increase coverage, and encourage people to seek care and take their medications — necessary steps in improving the nation’s health.
Now all we need is a new administration that’s serious about expanding coverage and lowering costs.
Dr. Ezekiel Emanuel is vice provost of Global Initiatives and codirector of the Healthcare Transformation Institute Perelman School of Medicine and the Wharton School at the University of Pennsylvania. He is also senior fellow at the Center for American Progress and venture partner at Oak HC/FT.