- Throughout the fall, Harvard Chan faculty members will share evidence-based recommendations on pressing public health issues facing the next U.S. administration. Meredith Rosenthal, the C. Boyden Gray Professor of Health Economics and Policy, offered her thoughts on the challenges of health care affordability and opportunities for action in the short and long term .
Q. Why is health care accessibility such a pressing public health issue?
A. Affordability is a widespread problem, even as fewer Americans go without health insurance. The amount people spend directly on health care (excluding premiums), known as out-of-pocket costs, is rising faster than inflation, and this has a number of important consequences. Surveys consistently show that people are delaying or foregoing treatment because of cost, worrying about their ability to pay medical bills, and going into debt for medical expenses.
The accessibility of health care (or lack thereof) can be detrimental to a person's health. Affordability affects whether people can get the services they need, such as insulin for diabetes or mammograms. If these services are too expensive, people will delay or skip them, which then has a significant impact on both health and costs.
As health care costs continue to rise, household budgets have to be adjusted, which means people can't afford the groceries or housing they are used to. This is a public health problem that is particularly hard on low-income families with high needs.
Finally, rising costs increase the risk of people facing catastrophic health care situations with huge financial consequences ranging from home foreclosures to personal bankruptcy. This also has a direct impact on people's well-being.
Q. What are the biggest challenges facing the next administration in the area of health care affordability?
A. The biggest problem is simple: The forces that are making health care increasingly unaffordable are very complex.
The biggest threat we have found is consolidation in medicine. For example, there is a growing trend of hospitals and other corporate entities buying up physician practices and then negotiating as a unit with insurance companies, raising prices significantly.
To address the root causes, we must recognize where medical monopolies form and try to prevent them from passing inflated prices on to consumers.
Q. What are your main policy recommendations for addressing health care affordability?
A. There are two types of solutions to improve accessibility: band-aids and systemic changes.
Band-aids are short-term solutions that can improve the affordability of medicines for those in need, including providing government subsidies to help consumers pay their copayments. Such assistance would alleviate the immediate price shock to patients and make health care more affordable, which is a very good thing. However, there is a downside: because the government picks up the tab, health care conglomerates have an incentive to raise prices even more. Short-term gains can turn into long-term problems.
Another band-aid is to limit the prices that hospitals, for example, can charge. This may get to the heart of the problem, but carries a serious risk: providers may withdraw from the market for certain services, leading to shortages. Finding that balance is a real challenge.
In addition, efforts are underway to combat the underlying forces driving up prices - most notably antitrust laws aimed at combating the vertical integration occurring in health care, where independent physicians, hospitals and physician groups join together to form a medical network.
The combined power of large integrated health systems and other types of health care corporations means that some organizations can set prices for health care services without much oversight or opposition. The federal government has antitrust laws to combat these types of monopolies, but it has traditionally been reluctant to challenge health care mergers, especially when those mergers involve vertical integration or other types of consolidation.
Antitrust enforcement is a very complex task, requiring coordination between the federal government and state attorneys general, as well as considerable political will to resist the influence of health systems that have real power in their communities.
Given the complexities and drawbacks of Band-Aid solutions and systemic change, ideal policy recommendations should balance short-term and long-term solutions. Implementing modern policies that save consumers money while helping to break down the vertical monopolies that dominate health care is the best scenario for creating real and lasting relief for consumers.
Q. What is the evidence to support these recommendations?
A. My Harvard Chan School colleague Anna Sinaiko and I found that vertical integration is increasing - and driving up prices. We also found that vertical integration of primary care physicians and large health systems does increase costs per patient, but has no effect on readmission rates, meaning that the promise of "integrated" care remains unfulfilled, and the additional costs associated with integration do not necessarily make patients healthier.
Increased spending in itself is important for public health, and we know this because there is a large body of research pointing to the importance of access to health care for people's physical and mental well-being.
For example, Katherine Byker, a former Harvard Chan School economist now at the University of Chicago, led a series of studies examining the impact of Medicaid expansion in Oregon after the Affordable Care Act was passed. The studies found improved physical health, increased detection and treatment of diabetes, and greater adherence to preventive measures. In addition to the physical benefits, the peace of mind provided by health insurance was notable. Newly enrolled Medicaid beneficiaries showed lower levels of depression, in part due to the reduced financial burden. By making health care more accessible and affordable, we can significantly improve health outcomes.
Q. What do you think can be done to make healthcare more affordable in the next four years ?
A. Policymakers need to consider both short-term measures to help people most affected by high health care prices and long-term strategies to address the root causes of declining health care affordability. Some "Band-Aids" can be easily implemented - for example, extending the increased health insurance subsidies that were put in place during the health emergency [COVID pandemic] to help people afford insurance.
We can also pursue targeted policies, such as expanding spending limits on essential medicines - such as those for asthma and cardiovascular disease - similar to the recent restrictions on spending on insulin. These expensive treatments that keep people out of hospitals could be paid for in part by savings in health care costs and would yield better outcomes.
With respect to antitrust enforcement, hopes for action in the near future are mixed at best. Federal and state efforts to regulate health care prices may play a role in the future, although such efforts face significant political obstacles. For example, federal law allowed the Centers for Medicare and Medicaid to negotiate prices for a small number of drugs with manufacturers. The manufacturers sued the government, but price negotiations continued and the results were announced earlier this year. The federal government should learn from its first experience with price negotiation in Medicare and look for ways to continue to use its purchasing power to keep some of the most expensive drugs available, but these benefits apply only to Medicare. Whether and how Medicare's new price caps might affect privately insured patients remains unclear. I am hopeful that the next administration will make progress in this area, but real change will likely take more than four years.