Ask Americans about their long-term concerns and the topic of healthcare will inevitably come up. The cost of healthcare in the United States is among the highest in the world for most types of services including surgical procedures, diagnostic tests, and prescription drugs. According to studies, a hip replacement surgery in the US costs four times as much as one in Holland. And it is not just the big-ticket items that display this glaring discrepancy. The Humira Pen—a prescription medicine used to treat rheumatoid arthritis—commands a cost in the US that is over six times the cost in South Africa and almost three times the cost in Germany.
Our national healthcare expenditure (NHE) increases annually with healthcare costs growing 1.1 percent faster than the GDP. The federal government forecasts that NHE will continue to grow at an average annual rate of 5.4 percent to hit $6.2 trillion by 2028. However, elevated costs have not translated to better health outcomes for Americans. Life expectancy in the US is estimated at 78.9 years, the lowest of all the G7 countries and behind the OECD average of 80.6 years. In addition, the COVID-19 pandemic has revealed fundamental flaws in our healthcare system in terms of access and the population percentage served.
The Cost of Health
At the moment, the original Medicare package does not cover vision, dental, and hearing care. Whether you need to see a Keene dentist for a routine check-up or purchase a hearing aid in Huntsville to improve your auditory function, having access to quality medical care for our basic functions should be without question. While many of these services may be insignificant in cost compared to specialist surgery, it makes them no less essential. However, few benefits have been added to Medicare since it became law in 1965. In fact, in the 80s and 90s, a series of bills cut millions of dollars from Medicare, which was viewed as a fiscal liability. Hence, it has become less favorable than most private policy packages, with multiple gaps in critical care.
According to NHE reports, hospital care accounted for 31 percent of healthcare spending in 2019, with prescription drugs accounting for 10 percent and dental services 4 percent. Anticompetitive trends account in part for why hospital services are considerably more expensive in the US. In recent decades, multiple hospitals in the same geographic market have merged, effectively creating medical care monopolies. This lack of competition means that hospitals can drive up their prices, leaving consumers with little choice but to accept the rates. Health insurance companies have been acquired and consolidated as well, with Americans sandwiched between the two parties, both with increasing fees.
The price of pharmaceuticals is also a major factor in the burgeoning cost of our healthcare. On average, Americans pay almost four times as much for pharmaceutical drugs compared to our counterparts in Europe, where drug prices are regulated by the government. In the US, drug prices can be negotiated between private insurers and manufacturers, with the help of pharmacy benefit managers who reap a tidy paycheck themselves. On top of this, American consumers are often inundated with confusing information and feel compelled to purchase the prescription drugs favored by their doctors and insurers, even if there are cheaper alternatives.
The Road to Reform
With unaffordable out-of-pocket costs turning people away from medical care, treatable illnesses are allowed to exacerbate into serious conditions, which then result in dramatically increased treatment costs. This vicious cycle creates an unnecessary burden on both Americans and federal support systems. Fortunately, the urgency felt by the public and government officials during the pandemic has pushed forward certain proposals aimed at reducing healthcare costs.
On December 27, 2020, the Consolidated Appropriations Act was signed into law. The law provides new authority for the Federal Trade Commission (FTC) to examine the healthcare industry and address the anticompetitive consolidation of industry participants. Furthermore, the Competitive Health Insurance Reform Act of 2020 was passed on January 13, 2021, restoring the application of antitrust laws to health insurance companies. This move allows the FTC to now investigate antitrust violations by health insurers. However, the enhanced federal oversight of the healthcare industry does not necessarily lead to immediate reform, as the results of lawsuits and court challenges are not guaranteed.
On the drug front, the House Oversight and Reform Committee has been conducting an ongoing inquiry into pharmaceutical companies and prescription drug pricing. The information unearthed in the investigation has been crucial in helping policymakers come up with options to rein in drug spending. Along with his proposed Medicare expansion bill that covers vision, dental, and hearing care, President Biden has proposed a multilateral approach to lowering drug prices. The bill, if passed into law, will allow Medicare to negotiate for the price of prescription drugs, penalize manufacturers for exorbitant price hikes, and cap the out-of-pocket drug expenses faced by Medicare beneficiaries.
It appears that federal healthcare reform is coming gradually to America. Nevertheless, it remains to be seen how effective these measures will be in terms of curbing rising medical costs. Without industry-wide price control legislation, government assistance might only be a Band-Aid hoping to stem a large bleed.