For many years, Democrats have been divided on the issue of healthcare reform. Some support a public insurance option, while others want a single-payer system, or “Medicare for All.” These structural reforms seek to both expand coverage and reduce costs, but any version would take years to fully implement. The Affordable Care Act’s coverage expansion, for example, launched years after the law was first enacted — and even then, serious glitches plagued the rollout.
Healthcare is a human right, and expanding coverage is crucial. But so, too, is delivering immediate relief to the 92% of Americans who are insured until broader reforms can be implemented. Addressing the cost-of-living crisis head-on with immediate relief would reengage a voter base that literally can’t afford to wait.
The cost of healthcare per person in the United States is nearly twice as high as in peer countries, even though the U.S.’ rate of utilization is lower.
Americans are fixated on healthcare costs for good reason — because they are too damn high. Premiums for employer coverage jumped 6% to an average of nearly $27,000 last year, crushing wage growth, while around one-third of covered workers now face a deductible of $2,000 or more. For many voters, these expenses are the biggest factor in their struggle to keep up with the rising cost of living.
In a KFF poll conducted earlier this year, 31% of voters, including 36% of independents, listed healthcare as their top economic concern, more than any other area. With the midterm elections approaching, this issue will surely be decisive. The public is demanding lower costs now — not five years from now, but now.
An agenda that will deliver immediate relief needs to directly address the real driver of healthcare costs: market power that enables rampant price gouging. Here is what that could look like.
The cost of healthcare per person in the United States is nearly twice as high as in peer countries, even though the U.S.’ rate of utilization is lower. Excessive prices explain the difference. The largest insurer in each U.S. state controls about two-thirds of employer markets. And on the hospital side, wide variation in prices suggests that markets are not competitive.
To see how this plays out, observe the dramatic variation in hospital prices within the same region. In the San Francisco metro area, for example, prices for a C-section delivery vary from around $15,000 to $40,000. Study after study confirms that hospitals charge exorbitant prices simply because they can, producing excess margins and waste. Hospitals spend only half their revenue on direct patient care, according to one study.
In the face of monopolies and anticompetitive markets, regulation can work to bring down costs. Under the Biden administration, Medicare drug price negotiation very quickly lowered costs by 22%. Similarly, regulation can slash deductibles quickly. The only way to lower deductibles without increased premiums is to curb the underlying cost of care. Other developed countries, including those with multiple private insurers, regulate hospital prices. In fact, insurers in the U.S. pay hospitals two and a half times more than what Medicare pays — much higher than what private insurers in other countries pay.
Self-dealing at the expense of patients must be stopped.
In Indiana, the Republican government enacted limits on hospital prices tied to statewide averages. Hospitals that fail to comply will lose their tax-exempt status. In concentrated markets, we should limit hospital prices to three times what Medicare pays, with the same level of enforcement as Indiana. Rural and community hospitals that do not price gouge would be unaffected. If plans are directed to use the savings to lower deductibles, the Center for American Progress — our organization — estimates that the average employer deductible would be cut in half.
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Of course, insurance companies are not free from blame either. Consolidation has created behemoth corporations where insurance companies owns pharmacies, pharmacy benefit managers and medical providers. The subsidiaries inflate their prices, and the insurer pays them and then turns around and increases premiums.
This self-dealing at the expense of patients must be stopped. Ultimately, these corporations need to be broken up, as proposed by Sens. Josh Hawley, R-Mo., and Elizabeth Warren, D-Mass. But in the meantime, the subsidiary prices should be limited to what other industry players charge.
Insurers should also be prevented from padding their premiums; premium increases should only reflect increases in the actual cost of medical care. States should have the first opportunity to review premiums. Insurers would then have the chance to justify any larger increases.
Although the Affordable Care Act limited the profits and administrative costs of insurers, this regulation does not apply to insurers that administer employer plans — even though enrollment in these plans is nearly four times enrollment in insurance companies’ own plans. The limit on profits should be extended to these insurers and should be based on the profits of insurers that serve the president, White House staff and retired members of Congress.
More than 60% of voters support these kinds of reforms, according to polling conducted by Blue Rose Research for CAP. When voters were presented with nearly 1,000 proposals across all policy areas, these ideas tied to reducing costs all were in the 86th percentile of popularity or higher, and outperformed all other healthcare proposals.
President Donald Trump and his Republican allies have the worst record on healthcare of any presidential administration in history. They have taken a wrecking ball to our healthcare system, doubling premiums in the individual market and throwing 10 million people off Medicaid. But simply reversing the damage will not be enough for voters who feel squeezed by higher premiums year after year. They want — and deserve — lower costs now.
Neera Tanden
Neera Tanden is the president of the Center for American Progress.
Topher Spiro is a senior fellow at the Center for American Progress.