How the Presidential Candidates Plan to Control Health Care Costs

How the Presidential Candidates Plan to Control Health Care Costs

Per capita, the United States spends more on health care than any other developed country. Despite growing awareness over the issue, new reports show the numbers are getting worse. According to the Health Care Cost Institute’s 2018 Health Care Cost and Utilization Report, average health care spending for people with employer-sponsored insurance rose to an all-time high in 2018, costing $5,892 per person annually. From 2014 to 2018, total annual spending per person increased 18.4%. Average out-of-pocket spending increased to $907 per person annually.

Price increases were more responsible for the overall increase in cost than usage. Professional services made up 33.7% of the increased spending; outpatient services made up 28.2% of increased spending; inpatient services made up 19.1% of increased spending; prescription drugs made up 19.0% of increased spending.

These numbers join the growing chorus of reports with similar conclusions. The average premium paid by the employer and employee for a family plan in 2019 topped $20,000, which is an increase (five percent) from 2018. Unless major changes are made, this trajectory is expected to continue. Employers expect health care cost increases of 4.9% in 2020 (up from 4.0% in 2019). Reducing health care costs and increasing affordability is a top three-year priority for 93% of employers.

Presidential candidates for the 2020 election have made health care reform and reducing costs a key concern. Some have turned to a complete overhaul of the health care system, while others have called for tweaks to the existing system. Given the slate democratic debates that continue to cover this topic and state primaries, this piece will cover how each presidential candidate plans to reduce health care costs.

Biden has decided to tweak the existing system by offering a public option with Affordable Care Act improvements, retaining employer-sponsored and private insurance but modifying the Medicaid program.

To control costs, Biden vows to:

  • End surprise billings
  • Tackle market concentration across the health care system
  • Partner with the health care workforce and find solutions to improve quality of care and increase wages for low-wage health care workers
  • Allow Medicare to negotiate with drug companies on pricing
  • Limit launch prices for certain drugs
  • Allow consumers to buy prescription drugs from other countries
  • Improve the supply of quality generics

Bloomberg has also decided to tweak the existing system by offering a public option with Affordable Care Act improvements, retaining employer-sponsored and private insurance but modifying the Medicaid program.

To control costs, Bloomberg vows to:

  • Cap out-of-network hospital charges at 200% of Medicare rates
  • End surprise billings
  • Allow Medicare to negotiate with drug companies on pricing
  • Cap drug prices at 120% of the average in other advanced nations
  • Ban drug company payments to pharmacy benefit managers
  • Reform the Medicare Prescription Drug Benefit act to encourage greater competition and cap beneficiaries’ annual out-of-pocket costs at $2,000
  • Change patent laws to get generic drugs on the market faster
  • Leverage the federal government’s investments in drug research to reduce prices

Warren has also decided to tweak the existing system by offering a public option with Affordable Care Act improvements but plans to transition to a Medicare for All system mid-term. This system would replace employer-sponsored and private insurance, as well as Medicaid. Warren believes Medicare for All will control costs by sharply reducing administrative spending, reimbursing physicians and other non-hospital providers at current Medicare rates, reimbursing hospitals at an average of 110% of current Medicare rates, and restoring health care competition.

Warren vows to control costs through these additional methods:

  • Reduce prescription drug costs via Medicare negotiating with drug companies, compulsory licensing and public manufacturing
  • Use global budgets, population-based budgets and automatic rate reductions to bring health spending rates in line with GDP growth
  • Redirect existing state and local government insurance spending into Medicare for All
  • Replace employer health spending with a new employer Medicare contribution
  • Implement antitrust enforcement for hospitals and health systems
  • Invest in medical research and drug research
  • End surprise billings

Sanders has decided, alongside Warren, to overhaul the health care system by creating a Medicare for All, single-payer, national health insurance program that is free at the point of service.

To control costs, Sanders vows to:

  • Capping prescription drug payments at $200 per year
  • Allow Medicare to negotiate with drug companies on pricing
  • Allow consumers, pharmacists and wholesalers to buy low-cost prescription drugs from other countries
  • Cut prescription drug prices in half by pegging prices to the median drug price in Canada, the United Kingdom, France, Germany and Japan.

Trump has been working to reform the current health care system by rolling back parts of the Affordable Care Act, such as repealing the individual mandate.

To control costs, Trump has:

  • Approved generic drugs
  • Reformed the Medicare program to limit the amount hospitals charge seniors on drugs
  • Created new insurance options through association health plans, short-term plans and health reimbursement arrangements
  • Worked with Congress to end surprise billings
  • HHS released a tool for Medicare consumers that would allow them to participate in negotiating lower prescription drug prices
  • FDA to create a work group that will study the effects of importing prescription drugs to the U.S. in order to battle prices

Many of the democratic candidates’ solutions overlap, particularly pertaining to reducing drug prices. This topic has even garnered bipartisan support with President Trump. Since professional services accounted for the largest category of spending in 2018, which partially comprises of office visits, psychiatry, radiology and immunization payments, candidates should shift some focus on the amount physicians charge.

Sources:

  1. https://www.healthcaredive.com/news/price-hikes-drove-employer-sponsored-health-costs-to-record-high-in-2018/572344/
  2. https://www.jhsph.edu/news/news-releases/2019/us-health-care-spending-highest-among-developed-countries.html
  3. https://www.kff.org/slideshow/where-do-the-democratic-candidates-stand-on-health-reform-and-prescription-drug-prices/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+kff%2Fhealthreform+%28Reports+on+Health+Reform+from+the+Kaiser+Family+Foundation%29
  4. https://www.mikebloomberg.com/policies/drug-prices
  5. https://www.mikebloomberg.com/policies/health-coverage-plan
  6. https://elizabethwarren.com/plans/paying-for-m4a
  7. https://elizabethwarren.com/plans/m4a-transition
  8. https://joebiden.com/healthcare/
  9. https://berniesanders.com/issues/medicare-for-all/
  10. https://www.promiseskept.com/achievement/overview/healthcare/#
  11. https://www.kff.org/health-costs/report/2019-employer-health-benefits-survey/
  12. https://www.willistowerswatson.com/en-US/News/2019/10/with-health-care-costs-projected-to-rise-another-5-in-2020-employers-look-to-new-strategies

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