It may be a couple more weeks before the Senate votes on an effort to repeal and replace the Affordable Care Act, but critics say measures Republicans are considering would fail to stem the growing cost of health care in the U.S. even if they bring insurance premiums down for some patients.
Sen. Marco Rubio, R-Fla., told Politico Thursday that Republicans are eying the week of July 17 for a vote on their long-promised legislation to roll back the ACA, also known as Obamacare. The House passed its version of the bill two months ago.
The House GOP plan and the one under consideration in the Senate have drawn fire from the left and the right, as some say the legislation goes too far in undoing the patient protections in the ACA and others complain that it does not go far enough.
Senate Majority Leader Mitch McConnell, R-Ky., had hoped to get the bill through the Senate before the Fourth of July recess, but moderates rebelled against Medicaid cuts and conservatives balked at the elements of the ACA that were kept in place.
Sen. Ted Cruz, R-Texas, has reportedly put forth an amendment aimed at alleviating some of the concerns of both sides by allowing insurance companies to sell any kind of plans they want as long as they offer one that adheres to all of the ACA’s rules. Critics fear this would turn the Obamacare-complaint plans into de facto high-risk pools, saddling sick patients with extremely high prices while healthy people buy cheaper, less comprehensive plans.
While much of the political debate has focused on rising insurance premiums, less attention has been paid to the underlying issue of the cost of health care.
“Too many in the GOP confuse adjustments in how insurance premiums are regulated with bringing competitive pressures to bear on the costs of medical services,” wrote James Capretta, a resident fellow at the American Enterprise Institute, in a Real Clear Health op-ed.
Many of the measures Republicans are considering would shift insurance costs to different groups of patients, according to Capretta, but experts say finding ways to reduce the cost of care itself would have greater impact.
“The biggest determinant of insurance premiums is the cost of health care in local markets,” said David Blumenthal, a former physician and president of the Commonwealth Fund, a health and social policy non-profit.
Efforts to keep those insurance prices down have left patients paying much more out of pocket, including those mostly unaffected by the ACA’s provisions.
While some buyers on the ACA’s individual markets have faced double-digit premium increases, average family premiums on employer-sponsored plans rose only 3 percent in 2016, according to the Kaiser Family Foundation. Average premiums increased 20 percent from 2011 to 2016, a marked improvement from the 31 percent increase from 2006 to 2011 and the 63 percent increase from 2001 to 2006.
That is good news, but it has been accompanied by a rapid rise in deductibles. Kaiser found that half of workers in employer-sponsored health care plans faced deductibles of at least $1,000 in 2016. Average deductibles overall were up 49 percent since 2011.
“A rising tide lifts all the boats,” said Alan Sager, a professor of health law, policy, and management at Boston University. “Insurance premiums go up mainly because payments to doctors, hospitals, and drugmakers go up.”
According to the Bloomberg Health Care Efficiency Index, the U.S. has one of the least efficient health care systems in the world, despite spending more per person than most other countries. In 2014, per capita health care spending in the U.S. was $9,403, compared to $5,292 in Canada, $3,935 in Britain, and $5,411 in Germany.
The rate of increase in costs has slowed in recent years, but U.S. spending still outpaces comparable countries.
“Our costs are so high that those small percentages still amount to large amounts of money,” Blumenthal said.
There are a number of factors driving up costs in the U.S., a trend that began long before the ACA passed.
According to the Congressional Budget Office, health care spending in the U.S. went from 4.7 of GDP to 14.9 percent between 1960 and 2005. The Kaiser Family Foundation found it was up to 17.8 percent of GDP in 2015. Per capita spending in 2015 was nearly six times higher than in 1970, adjusted for inflation.
“There are many reasons our costs are so high,” Sager said. “One is that we don’t know what they are.”
Most workers have their insurance subsidized by employers and many have their contributions withdrawn from their paycheck before they even see them. If workers had to make those payments after the money is put in their pockets, he suggested they would be more cognizant of the cost.
“Other countries rely much more on taxes to raise money for health care…and having to raise taxes to finance increases in health care spending encourages politicians to find ways to hold down costs,” he said.
Sager also pointed to prescription drug prices as a significant element of rising costs. Other countries regulate prices, but drug companies insist that forcing them to charge less in the U.S. will stifle innovation.
“We have to find a way to surge innovation but keep the price of innovation out of the pill,” he said.
According to Blumenthal, it is difficult to reduce costs of care when prices are negotiated between insurance companies and providers. Medicare has more bargaining power and is able to negotiate better deals than private insurers.
“We don’t have a mechanism where the buyers have the power to negotiate lower prices,” he said.
He observed that insurer and provider profits and the administrative costs of dealing with the byzantine U.S. insurance system also push up costs, factors that are less relevant or nonexistent in other democracies.
When the Affordable Care Act became law in 2010, critics claimed it did too little to address the rising cost of care. Blumenthal noted that the “explosion of costs” that those critics predicted never arrived, but he acknowledged it is difficult to delineate what role provisions in the law like a shift toward making prices contingent on quality of service rather than volume of service played in that.
“It’s hard to draw a straight line of causation,” he said.
Neither Sager nor Blumenthal see anything in the Republican repeal-and-replace bills that they expect would make care more efficient or less costly, but millions of people no longer being insured could result in a decrease in health care spending.
“It may lower the cost of care by reducing the demand for services because it would reduce the number of people that are insured…. If people are not using services, the cost of care will go down,” Blumenthal said.
The Congressional Budget Office estimates 22 million fewer people will be insured by 2026 if the Senate bill passes in its current form. Though Republicans have attempted to frame this as people choosing not to buy coverage, the CBO analysis makes clear many would make that choice because they cannot afford coverage due to reduced Medicaid spending and smaller tax credits.
According to the CBO, the Republican bill would reduce insurance premiums relative to current law in the long run, but they would initially be about 20 percent higher. By 2020, average premiums for individuals on the non-group markets are projected to be 30 percent lower than they would be under current law.
However, the CBO also predicts out-of-pocket costs would increase even as premiums decline. Tax credits may not be as large as current subsidies for some demographics, some services currently covered as essential health benefits would no longer be, and a ban on lifetime limits for benefits could be lifted.
Cruz’s compromise has reportedly been sent to the CBO for scoring, but no legislative language has been made public at this point.
“The Republican bill will cut spending on care because fewer people will be covered,” Sager said. “That’s easy if you have the votes and you’re willing to throw 23 to 24 million people off the insurance rolls.”
Capretta laid out several changes that could be made to the Senate bill that he believes would inject more cost discipline in the marketplace while strengthening protections for the poor, including increased tax credits for families who earn too much to receive Medicaid but not enough to afford private insurance.
He proposed allowing people to use health savings accounts to pay for integrated health care systems that compete for customers by offering lower prices but would not be considered insurance. He also suggested setting an upper limit for the tax preference in employer-paid insurance plans, which would provide an incentive for companies and workers to accept changes to their insurance benefits that lower costs.
The amount the U.S. currently spends should be enough to cover everyone, according to Sager, if it was spent better and there was a truly competitive free market for health care. With another generation of Americans approaching Medicare eligibility, he suggested policymakers stop fighting and start studying what has worked in other countries to lower the cost of care.
“Health care is the easiest problem to fix in the United States--not easy but easier than the others--because we spend so much,” he said.