America is facing an affordability crisis when it comes to our health care.
The average premium for an employer-provided family health insurance policy reached $22,221 in 2021. That’s one-third of the median household income and nearly triple what it was in 2001. Some growth over time is to be expected due to inflation and advancing health care innovation. However, the Health Care Cost Institute (HCCI) found that the primary driver of this growth comes down to the rapidly increasing cost of health care. HCCI also reports that between 2016 and 2020, health care prices increased at roughly double the rate of general inflation.
This means more Americans than ever before are at risk of not being able to afford their health care.
3 factors driving unsustainable health care costs
At the root of these rapidly growing costs are anti-competitive practices and misaligned incentives across the health care ecosystem:
- As hospitals continue to acquire physician practices, the result is often using reimbursement to maximize revenue and drive higher prices for patients.
- Drug manufacturers have taken advantage of U.S. patent laws and Food and Drug Administration rules to delay equally effective alternative medicines from being available to patients, leading to soaring drug prices. On average, Americans pay prices that are nearly double what consumers pay in other high-income countries.
- Fee-for-service payment models incentivize the delivery of more health care services—even if unnecessary and often without better health outcomes.
Real affordability solutions must address all three of these factors.
A proposed solution
To keep health care costs down for everyone, regardless of how they get their coverage, Blue Cross and Blue Shield companies—which collectively insure 1 in 3 Americans—are working with local and national partners to tackle this affordability crisis.
The cost of health insurance is driven by the cost of health care. The Blue Cross Blue Shield Association has put forth a set of comprehensive proposals for how policymakers can address the root causes of rising costs that would reduce health care costs by approximately $767 billion over 10 years. This includes a $298 billion reduction in health insurance premiums.
- Improving competition among health care providers
- Enhancing consumer access to lower-cost prescription drugs
- Ensuring patients receive high-quality care at the right place and time
Over 10 years, these solutions would generate federal savings of $337 billion and would save enrollees in Medicare and private health plans a total of $206 billion in out-of-pocket costs.
To derive the estimated savings from these proposals, Philip Ellis, president of Ellis Health Policy, Inc. and formerly with the Congressional Budget Office, analyzed BCBSA’s policy solutions and calculated the cost savings they would have to make health care more affordable for Americans.
The Blue Cross Blue Shield Association is an association of independent, locally operated Blue Cross and Blue Shield Companies.