The central unanswered question in the U.S. health system is how to discipline costs. The choice is between reliance on regulatory controls put in place by the federal government or injection of stronger financial incentives for consumers into the markets for medical services and insurance. Currently, the U.S. has a mixed public-private system with pricing controls applied to payments made by public insurance, and markets that function poorly because they are hobbled by misaligned incentives, some of which are caused by government policy. The result is widespread inefficiency. Credible estimates put the amount of wasted spending at about one-third of total costs.
Congress has twice delayed the Cadillac Tax—originally set to take effect in 2018—and weakened it by allowing employers to deduct the levy itself from their profits. But repealing the Cadillac tax is a bad idea. Instead, Congress should modify it to encourage the use of health savings accounts. It would be better to shift the tax advantage toward HSAs and away from third-party payment—especially high-cost employer-sponsored insurance—to encourage consumers to shop around and assess what’s worth the cost. This would give employees greater control over their health spending and reduce the incentive to overconsume care in the mistaken belief that someone else is paying for it.
If there is one thing that tends to unite economists across the political spectrum it’s the view that the government should not give unlimited tax subsidies to employer-provided health insurance. Yet that is what we have been doing. To remedy the problem, in place of the Cadillac Tax, we should offer employers and their employees the option of a dollar-for-dollar tax credit up to the amount of the tax subsidy they have been getting through the tax exclusion. This would solve the problem economists complain about, put health insurance and take-home pay on a level playing field at the margin, and greatly reduce the incentives we all have to over-spend on health care.
Determining whether the prices for medicines are appropriate or not is critically important, which is why studies that attempt to answer this question must stand up to scrutiny. Studies that undervalue medicines jeopardize the development of future cures, while studies that overvalue medicines justify the imposition of excessive health care costs today.
A closer look at the evolution of Medicare Advantage demonstrates that the private sector has proven to be a remarkable laboratory for innovation and progress in our health system’s core evolution—to align the payment and care delivery system with value and the outcomes we care about most for America’s seniors.
The prices of health care services are a key consideration in the debate over “Medicare for all” and related single-payer proposals. The term prices refers to the allowed payment per unit of service. In the broadest versions of these reforms, in which commercial insurance plans would transition into a universal Medicare–like program, physicians and hospitals face the prospect of receiving Medicare prices for all patients they serve. Relative to the status quo, in which commercial insurer prices generally exceed Medicare prices, this price reduction could have important consequences for clinicians and patients.
“Medicare for All” proposals may vary greatly, but a common feature is their call for the regulation of prices for hospital care. This element has widespread support among establishment Democrats, and it lacks the enormous cost and controversy associated with other aspects of single-payer health care.
Comprehensive hospital-payment regulation is not a new idea: it’s been widely tried at the state level for half a century, including in Maryland—the only state where it remains. Maryland therefore provides a useful case study.
Public health insurance benefits in the U.S. are increasingly provided by private firms, despite mixed evidence on welfare effects. We investigate the impact of privatization in Medicaid by exploiting the staggered introduction of county-level mandates in Texas that required disabled beneficiaries to switch from public to private plans. Compared to the public program, which used blunt rationing to control costs, we find privatization led to improvements in healthcare—including increased consumption of high-value drug treatments and fewer avoidable hospitalizations—but also higher Medicaid spending. We conclude that private provision can be beneficial when constraints in the public setting limit efficiency.
President Trump on Wednesday announced an executive order on a topic rather far afield from his usual concerns: improving care for patients with kidney disease.
That might seem like an obscure topic, but it’s a crucial one. A shortage of kidneys for transplant kills about 43,000 people every year.
Lawmakers are trying to set aside their irreconcilable differences over the Obama-era Affordable Care Act and work to reach bipartisan agreement on a more immediate health care issue, lowering costs for people who already have coverage.
Returning from their Fourth of July recess, the Senate and House are pushing to end surprise medical bills, curb high prices for medicines, and limit prescription copays for people with Medicare.