The Inflation Reduction Act’s health insurance subsidies and drug pricing reforms will improve health care affordability for Americans but won’t do a damn thing for our overall healthcare costs, which will keep rising.
High drug and health care costs prevent millions of Americans from achieving total health. Nearly 1 in 2 American adults report difficulty affording health care costs. It’s no wonder that voters consistently rank bringing down prescription drug prices and other measures to reduce the cost of care as among Congress’ top priorities.
Congress rightly chose to negioate drug prices for Medicare, but prescription drugs are only 10-12% of every healthcare dollar we spend.
High and rising drug prices block access to care and treatment. One in 4 U.S. adults has not taken their medication as prescribed due to cost. Congress has taken decisive action to reduce drug prices while ignoring that overall healthcare spending will be a substantial part of GNP.
Why?
1ne: A new analysis predicts that by 2030, 48.9% of adults in the United States will be obese, and 24.2% will be severely obese. This is going to lead to a lot of health problems and associated costs.
2wo: Obesity, depression, high blood pressure, and asthma are just a few chronic health conditions affecting almost 40 million Americans between 18 and 34, new federal data shows.
3hree: Physical inactivity accounts for roughly 8.7 percent of U.S. health care expenditures, or approximately $117 billion annually. Physical active adults spend nearly $1,500 less per year on health care than inactive adults.
A staggering 85% of healthcare costs in the U.S. are for the care of chronic health conditions.
As the U.S. population health issues increase, the risk of insuring the average American goes up. And in turn, the higher the risk, the higher the cost of annual health insurance premiums.
Data from the Kaiser Family Foundation (KFF) shows that between 2011 and 2021, the average premiums for family coverage rose from $15,073 to $22,221—an increase of 47.4%.
A Journal of the American Medical Association (JAMA) study investigated how five key factors were associated with healthcare increases from 1996 to 2013:
- Service price and intensity
- Population growth
- Population aging
- Disease prevalence or incidence
- Medical service utilization
The authors found that service price and intensity made up more than 50% of the increase. Other factors, which comprised the rest of the cost increase, varied by type of care and health condition.
According to the Center for Studying Health System Change11, mergers and partnerships between medical providers and insurers are one of the more prominent trends in America’s healthcare system.
Increased provider consolidation has decreased individual market competition, in which lower prices, improved productivity, and innovation can occur. Without this competition, these near-monopolies have providers and insurers in a position where they can drive up their prices unopposed.
For example, a study by the American Journal of Managed Care found that hospitals in concentrated markets could charge considerably higher prices for the same procedures in competitive markets. Price increases often exceed 20% when mergers occur in focused markets. However, reviews found these cost increases didn’t improve healthcare quality.
Finally, there are healthcare administrative costs.
According to another JAMA study, the U.S. spent about $950 billion on healthcare administration in 2019. This spending accounted for 25% of national health expenditures that year.
Why is administrative spending so high in the United States? The U.S. operates within a complex, multi-payor system, wherein many different payors finance healthcare costs. Healthcare administration becomes a complicated, inefficient process with so many stakeholders involved.
These inefficiencies contribute to excessive administrative spending. The main component of excess administrative spending is billing, and insurance-related (BIR) costs. These are overhead costs related to medical billing, including services like claims submission, reconciliation, and payment processing.
Insurance company profits make up the largest share of BIR costs. Healthcare providers also receive part of these administrative costs for notetaking and record-keeping during medical billing.
According to a 2019 McKinsey & Company report, the U.S. could reduce administrative spending by 30% by automating and streamlining BIR processes. Technologies like claims processing software can help automate these processes. But according to Definitive Healthcare technology data, only about 15% of U.S. hospitals use claims processing software.
Will the Bill save us money on Rx drugs? Yes, but it won’t help overall healthcare spending, which will continue to be out of control.