How to save three-quarters of a trillion dollars in health care costs
By Kim Keck
This article was originally published by STAT on February 14, 2023.
Over the last 20 years, the United States has made great strides in expanding access to care, with 92% of Americans now covered by health insurance — a historic high.
Yet millions of people still struggle to pay for their health care, from paying for medications to grappling with exorbitant hospital bills. These challenges can be mentally and emotionally taxing when access to quality care should bring peace of mind.
The reason for the affordability crisis is clear: rising prices for health care services and prescription drugs. Simply stated, rising costs result in higher premiums and out-of-pocket costs. According to the Health Care Cost Institute, health care prices increased at roughly double the rate of general inflation between 2016 and 2020.
Americans aren't just paying more: they are paying more for poorer health. A Commonwealth Fund survey shows that the United States spends far more on health care, but with worse outcomes, than other high-income countries. They deserve better health at lower costs. The significance of this challenge requires action — now. The right solutions that tackle the right problems can deliver real results.
That's why the Blue Cross Blue Shield Association, which I lead, has released "Affordability Solutions for the Health of America," a realistic set of policy recommendations that Congress can take to collectively reduce health care costs by more than $767 billion over the next 10 years, including reducing private insurance premiums by $298 billion.
These solutions address the root causes of rising health care costs in three areas.
Improving competition among health care providers
In industries ranging from automobiles to telecommunication, competition reduces the prices that consumers pay. Congress should do the same for health care by enacting competition-inspiring policies that foster fair and transparent billing practices, including preventing physician practices owned by hospitals from charging steeper rates triggered by a change in practice ownership.
People must be protected from being overcharged for a medical service simply because a physician practice happens to be owned by a hospital. This commonsense solution would save patients and taxpayers $471 billion over 10 years. No one should pay more for health care because a hospital is gaming the system.
As hospitals continue to acquire physician practices, they often maximize revenue by charging higher prices than they would have been able to before they were acquired by the hospital. In 2021, nearly 70% of physician practices were owned by hospitals, health systems, private equity firms, and other corporate entities — a 12% increase in just two years. When big hospitals and health systems acquire private practices, the prices they charge grow by an average of 14%.
Increasing access to lower-cost prescription drugs
Americans also bear the brunt of the rising cost of prescription drugs which, on average, are 190% higher than what consumers pay in other high-income countries. Between July 2021 and July 2022, prescription drug prices for more than 1,200 products rose at an average rate of 31.6%, with some increasing up to 500%, according to the U.S. Department of Health and Human Services.
More competition and more choices will drive down costs, while delivering more options to patients. Congress must end drug companies' ability to exploit the patent system and leverage legal loopholes that block competition so it's easier for generic and biosimilar medicines — which cost less and are just as effective and safe as brand name drugs — to be available and accessible to patients.
Several bipartisan bills are now moving through Congress that would crack down on drug companies' anti-competitive tactics, resulting in improved access to prescription drug alternatives like generics and biosimilars that lower costs for patients. These bills include the Preserve Access to Affordable Generics and Biosimilars Act, the Stop STALLING Act, and the Affordable Prescriptions for Patients Act.
Ensuring the delivery of the highest-quality health care
Increasing the adoption of models that move away from fee-for-service payments will reward providers for delivering safe, high-quality care. They can also help close equity gaps.In addition, modernizing the prior authorization process will enable providers to make safe, appropriate, and cost-effective treatment decisions with their patients, while also enhancing transparency and reducing unnecessary burdens.
Data interoperability and excellence are important for improving efficiencies across the health care system. Data should be interoperable and shareable among all health care stakeholders, including insurers and providers, to promote overall consumer price transparency and encourage more cost-effective options for patients seeking care. Policymakers must support federal enforcement of rules that encourage secure data-sharing among vendors, providers and insurers, and prohibit business practices that block the transparent sharing of information, in accordance with federal and state privacy and protection laws.
Affordability remains one of the U.S.'s top health care challenges. Enacting sound policies and passing legislation could help achieve that by saving three-quarters of a trillion dollars in health care expenditures over the next decade.
Kim Keck is the president and CEO of Blue Cross Blue Shield Association.