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How high will health care prices go?

Written by Diane Archer

The incentives are aligned among health care providers and insurers–they all prosper when provider rates rise. Not surprisingly, doctor and hospital rates have risen significantly over the last several decades as well as more recently. How high will health care prices go?

The Health Care Cost Institute (HCCI) reports price increases in metro areas of 13 percent between 2012 and 2016, based on an analysis of 1.8 billion claims. It also reports wildly different prices for standard medical procedures among metro areas and within metro areas. For example, prices in San Jose, CA and Anchorage, Alaska were 15 percent higher than the next highest metro area, San Francisco, CA.

HCCI cannot explain why price varies so much among metro areas. Global budgeting–which means hospitals receive a fixed monthly rate for their services–would help with prices, as they do in Maryland. But, it would not help with utilization–the frequency with which services are delivered. And, utilization also varies wildly among metro areas.

While people may disagree on how to address rising health care costs, few believe that we can afford to let health care spending continue to rise. Dr. Margaret Hamburg and William Frist write for Health Affairs, “Without some constraints on spending growth, we believe we will not be able to achieve a health care sector in this country that produces health and well-being for all.” Today there are 44 million underinsured (29 percent of insured adults), people with insurance that does not meet their needs. Back in 2003, 12 percent of insured adults were underinsured.

So long as we rely on commercial health insurers to negotiate prices, prices will continue to  increase and health care costs will become even less affordable than they are today. Insurers generate more profits, the more health care prices rise. Their financial interests run counter to the public need for fair health care costs. Moreover, they often do not have the leverage to negotiate lower rates with hospitals and doctors, which effectively have monopoly pricing power in many communities.

Medicare for All is the only legislation introduced in Congress that would rationalize health care prices and rein them in. Until Congress acts to regulate health care prices, as does every other wealthy country, millions of Americans who need costly health care services will be hard-pressed to afford them.

I talk more about the benefits of Medicare for All on FAIR.org.

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