‘Dysfunctional’ health care market blamed for skyrocketing costs

Affordability is the top concern among voters of all political beliefs. So how can the health care system advance and sustain affordability? Experts weighed in during the AHIP Medicare, Medicaid, Duals and Commercial Markets Forum in Washington.

Possible solutions to health care affordability can be put into one of three buckets, said Cynthia Cox, senior vice president and director of KFF’s program on the Affordable Care Act.

The first bucket is Democrats in Congress who want to use regulation and subsidization to cover people who are sicker and are lower income. The second is congressional Republicans who want to roll back enrollment in publicly funded health programs.

“These two buckets are mostly talking about moving money around, redistributing money between healthy and sicker people,” Cox said.

The third bucket is cost containment. “I think we are at a place where we are starting to enter a conversation on cost containment and affordability,” she said.

What drives cost growth is complex

Conventional wisdom is that the prices we pay for health care goods and services are what’s driving health care cost growth. But the situation is more complex than that, said Sabrina Corlette, research professor at the Center for Health Insurance Reforms at Georgetown University.

She pointed to vertical integration in the health care system, which she said amounts to self-dealing. Coding intensity is on the rise, particularly among bigger health care systems. In addition, what she called “the mushrooming of profit-enhancing middlemen” is also driving up costs.

“Hospitals are using market power to drive up prices,” she said. “This is a core problem. But it’s much more complex than just about the prices hospitals or drug manufacturers are charging.”

Corlette said surveys show the majority of voters are calling for government intervention and price controls “because the market has become so dysfunctional in so many places across the country.”

Cox noted that when you compare health care spending in the U.S. against that of other wealthy nations, 80% of care dollars are spent on inpatient and outpatient care combined, while 20% is spent on prescription drugs.

“But that 20% is where the political attention is focused,” she said. “What do we do about it? This is not sustainable.”

Not much of health care is shoppable

Cox said the idea that consumers can be turned into savvy health care shoppers is not the answer to affordability.

“Not much of health care is shoppable,” she said. “Half of health care spending is concentrated on 5% of very sick people who blow through their deductible before the end of January and who don’t have a lot of incentive to shop for care.”

In addition, she said price transparency between payors and providers can work. But the challenge is that it’s not always possible to produce prices for services where there isn’t a standard price “that will neatly fit into the rubric.”

Corlette said allowing multiyear health plans or non-network plans won’t be a solution for the majority of those who obtain health insurance in the ACA marketplace. In addition, policy changes will make ACA premiums higher for a majority of enrollees, leaving a smaller and sicker risk pool.

The employer-based market also struggles with affordability, with the biggest issue being the cost of covering GLP-1 drugs, she said. The second-biggest issue among employers is how to pay for high-cost claimants.

Corlette said employers are open to trying things such as individual coverage health reimbursement arrangements, onsite clinics and partnering with primary care providers.

“Employers are hungry for ideas on reducing their costs,” she said.

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