Breaking the cost barrier: A wake-up call for U.S. healthcare
Healthcare spending is reaching unsustainable levels. Collaborative efforts, innovative solutions, and systemic reforms are essential to create a more affordable, transparent, and equitable healthcare landscape.
In doing research for an article on healthcare costs in the U.S., I was amazed anew at the staggering amount that’s spent annually. Frankly, the data took my breath away.
It was $4.9 trillion in 2023. Let that sink in for a moment. That was 17.6 percent of gross domestic product and a 7.5 percent increase from the previous year, according to the data from the Centers for Medicare & Medicaid Services. That means, for all intents and purposes, the total healthcare bill for 2024 is almost assuredly north of $5 trillion.
For a nation of 336.3 million people, the 2023 total represents an annual expense of $14,570 per person.
Just to explain my sense of awe about this, I began working for Modern Healthcare in 1984. At that time, national healthcare expenses totaled $387 billion, approximately 10.7 percent of the gross national product. Expenditures per capita were estimated at $1,580.
Absent a significant bend in the annual increase curve, the numbers will get more untenable. CMS foresees no slowdown in the growth of expenditures, estimating average annual growth of about 5.6 percent, thus consuming nearly 20 percent of GDP by 2032. If that annual percentage increase holds steady, national spending on healthcare could reach $8 trillion by 2032, pushing annual expenses per person to nearly $24,000.
Also, consider that out-of-pocket (non-insurance) spending rose to $505.7 billion in 2023, according to CMS data, or approximately $1,503 per capita (that’s above and beyond any amount paid for health insurance coverage). Imagine that out-of-pocket hit rising 60 percent over the next eight years, on top of steadily rising health insurance premiums.
And realize that data exists demonstrating that more than a third of Americans can’t afford an emergency expense over $400. Additionally, a recent analysis of government data estimates that people in the United States owe at least $220 billion in medical debt. About 14 million people (6 percent of adults) in the U.S. owe more than $1,000 in medical debt and about 3 million people owe medical debt of more than $10,000. This can have dire consequences – a column published by the American Bankruptcy Institute relates data indicating that 62 percent of the 2 million personal bankruptcies filed each year are the result of medical debt.
Cost consternation
Now that everyone’s eyes are glazing over at this dump of numbers and links, it’s time to think about the impact that this is having on patients/consumers, who often feel like they have no option but to suck up the high cost, without any consultation. Perhaps the only relief they get is an Explanation of Benefits that states “This is not a bill” (cue the temporary sigh of relief…).
This also hit home with me as I talked to a healthcare-versed colleague who was explaining his strategy with insurance and healthcare expenses. He came out on the plus side, with overall expenses less than what he would have paid for typical insurance coverage for a family of seven.
However, I stopped counting the number of times he said the words, “Roll the dice” in explaining the underpinnings of the approach. Yes, essentially, he’s gambling that nothing major happens to anyone. No car accidents. No cancer surprises. No aneurysms. No broken bones for his son, who’s playing football in high school.
And understand, this guy knows healthcare inside and out. There are millions of consumers not in that position, and they’re just winging it, without any emergency funds, or friends or family that could bail them out of a tough spot. “Roll the dice” should not be the motto of a nation that doles out $5 trillion on healthcare.
It’s no surprise, then, that consumers have a negative perception of the healthcare industry. Delays in care, contentious relationships with payers viewed as obstructing access to care and byzantine rules governing care delivery are exacerbating consumer anger at the healthcare industry. It’s resulting in recent protests, much of it targeted at insurance companies because of high costs and perceived obstacles to care.
Part of the anger results from a sense of powerlessness that’s often amplified when dealing with health insurance companies, which govern the care that patients receive, noted an article published by National Public Radio. “Navigating those huge and opaque companies can be maddening at best, and consumers rarely have much of a say; for about 154 million Americans, employers select and provide health insurance coverage.”
Instances of insurance company overreaches have gone viral, most recently a TikTok video by Dr. Elisabeth Potter about a breast cancer patient undergoing a operation and that had to be interrupted because of a call from United Healthcare questioning whether an subsequent inpatient stay was warranted. “It’s beyond frustrating and, frankly, unacceptable. Patients and providers deserve better than this. We should be focused on care, not bureaucracy,” she notes. The video has received more than 20,200 comments as of January 10 – most not complimentary toward the insurer.
No effective brakes on prices
Insurers are not solely at fault. Rates for insurance rise because prices charged by providers have soared, for a variety of economic reasons. But clearly, industrywide, cost constraint efforts have proven ineffective.
In the 1980s, CMS sought to restrain price increases by setting prices for procedures prospectively, rather than just doling out payments for services. Health maintenance organizations turned out to be too restrictive in enabling access to services. Other initiatives such as preferred provider organizations, accountable care organizations and integrated delivery systems have promised more efficient care delivery, but also have narrowed competition among providers. Lately, value-based care has been offered as a panacea, but it and related approaches haven’t significantly restrained costs.
The anger against rising costs was perhaps best illustrated by the reaction to the December 4 murder of Brian Thompson, chief executive officer of UnitedHealthcare in New York. Without any immediate evidence, the initial perception of the murder was that it was a result of denials of coverage by UnitedHealthcare, one of the nation’s largest health insurers.
Other insurers have received pushback from coverage policies, and providers, who are often the ones most likely to interact with anxious or angry patients getting the bad news on coverage, also have faced abuse and outrage.
Some progress around the edges has helped. For example, in 2022, President Biden signed the Inflation Reduction Act, which included a provision that requires all Part D plans to charge no more than $35 per month for all covered insulin products, and also limits cost sharing for insulin covered under Part B to $35 per month. And because of the prescription drug law, known as the Inflation Reduction Act, Medicare was set to be able to negotiate directly with drug companies to improve access to some of the costliest single-source brand-name Medicare Part B and Part D drugs. However, that ability to negotiate was rescinded as one of multiple executive orders by President Trump on his first day in office.
Still, the challenge of effectively restraining annual medical care costs in the U.S. will loom as one of its most vexing problems and largest challenges facing the nation. And it’s not to be assumed that the current “situation normal” will be tolerated indefinitely.
The cautionary tale of interoperability
Harken back to the federal push to incentivize the use of electronic health records with the HITECH ACT of 2009, intended to promote and expand the adoption of health information technology. To receive the incentives, providers had to meet specific targets to demonstrate the meaningful use of their systems. Interoperability was one of those criteria, although one that the industry successfully lobbied to ease the requirements for exchanging records – for years.
In 2016, the Department of Health and Human Services tried a new tack – at the HIMSS annual conference that year, it announced that it had cobbled together information sharing commitments from about 15 major EHR vendors, 16 healthcare provider organizations and 16 of the nation’s largest and most influential provider, technology and consumer organizations. At the time, I wrote that federal agencies were going to increase the stakes on achieving information exchange.
And then, four months later, I wrote about the need for more cooperation and less blaming on interoperability challenges. “The big news, it seemed then, was that so many prominent players in the industry seemed aligned on the goal. Given the passage of time, however, segments of the industry seem to be falling back into fortified positions.”
Federal agencies raised the stakes again by renaming the meaningful use program in April 2018, calling it Promoting Interoperability. At the time, it indicated that “this change moved the programs beyond the existing requirements of meaningful use to a new phase of EHR measurement with an increased focus on interoperability and improving patient access to health information.”
Still, the industry was moving at a snail’s pace. Finally, its patience exhausted, the federal government took the reins. First, the 21st Cures Act signed into law in late 2016 set requirements for access to patient data through standardized means and introduced information blocking provisions intended to penalize healthcare organizations that interfered with data exchanges. In 2023, part of the culmination of this push was the Trusted Exchange Framework and Common Agreement, a public-private collaboration facilitated by the Office of the National Coordinator for Health Information Technology “to remove barriers for sharing health records electronically among healthcare providers, patients, public health agencies and payers.”
This short segue is meant to serve as a cautionary tale for those believing that healthcare costs will be impervious to eventual outside intervention. There will be only so many opportunities for the healthcare industry to address cost as a matter of national concern.
While there’s great disruption and angst surrounding the ascendancy of a new administration in Washington this January, healthcare will only be temporarily out of the bullseye. It will need to make a credible effort to solve the high cost of care conundrum before an outside force decides to step in and ham handedly solve the issue for the industry.