The health care debate entered a new phase in 2017. While the effort to repeal and replace Obamacare failed in dramatic fashion in the Senate, the tax bill removed the individual mandate setting up concerns about the future of the individual insurance market.
At the end of the year, the Children’s Health Insurance Plan received temporary funding, however questions about the future of the program will return in 2018. We ended the year with conflicting statements about the future of Medicare from the Speaker of the House and the Majority Leader in the Senate.
Entering 2018, health represents an enormous challenge for the Congress and the country. At the most basic level, we are facing a decrease in life expectancy as a result of the opioid epidemic, the continuing obesity epidemic, and we have identified significant disparities in life expectancy across income levels of the population. The factors shaping these adverse health care outcomes reflect shortcomings of both public health and health care delivery systems.
From an economic perspective, health care represents almost 18 percent of the gross domestic product, the highest level of health care spending in the world.
Yet, even with this level of spending, we are clearly not observing the health impacts we expect as a nation. At the same time, this level of spending poses an enormous fiscal and economic challenge. Is healthcare spending a pathway to job creation desired on both sides of the aisle, or do high health care costs represent an enormous drag on every other sector of the economy.
In terms of value, it is increasingly clear that the differences in health care costs across economies reflects enormous pricing power exerted in the U.S. healthcare market by consolidated provider systems and monopoly technology providers, and administrative costs that are some of the highest that have been documented.
Entering the mid-term election in 2018, there will be a continued debate about health care as a construct. Is health care a right available to all citizens, or is health care available to those fortunate enough to have access to health insurance. Is health care a social responsibility for each of us, or is it a more typical consumer service left to individual discretion.
Does health care require a heavy level of public regulation to ensure access and affordability? Or is this market a service economy where price and quality can be addressed through private market competition? Finally, will the entry of the technology industry into the health care market enhance the value of health care services, or will incumbents use their market power to defeat entry of these potential competitors?
In terms of 2018, the major issues before the Congress will involve funding issues, starting with CHIP, addressing mandatory spending reductions to Medicare as a result of the tax cut and the Pay-As-You-go Act of 2010, the unrealized promises to Senator Collins about the Senate’s effort to make individual health insurance more affordable, and the annual appropriation for HHS Agencies including NIH.
Beyond CHIP, a debate on entitlement reform would entail a detailed look at Medicare and Medicaid. This will be a challenge at a variety of levels. Some of the public is aware that the Medicare Part A trust fund will be exhausted in 2029. Few recognize that Medicare Parts B and D, the fastest growing parts of Medicare, are funded largely through general tax revenues.
By 2025, Medicare will be a $1.2 Trillion program with a $542 billion annual deficit.Federal Medicaid spending is projected to increase by 50 percent between 2017 and 2025, and is expected to be $584 billion by 2025. These figures reflect in part the enormous costs of an aging population, with Medicare enrollment increasing from 58 to 72 million beneficiaries during this period The Medicaid program also is impacted by the aging population since it is the major source of public funding for long-term care in this country and for health care access for the dual-eligible population.
Finally, Congress has yet to tackle the issues surrounding drug prices in the branded and generic drug markets. Scott Gottlieb at the Food and Drug Administration has pushed to streamline entry of generic drug products as a means of enhancing competition in the generics market, but it’s too soon to assess the results of this effort.
CMS is working to reduce a set of statutory financial incentives that allow hospitals to benefit from high drug prices, but is meeting resistance on this effort. Drug rebates on branded products have shed light on the lack of transparency in the prescription drug market. Despite these initial efforts, there still needs to be a much broader debate on the conflict between innovation, efficiency and affordability of branded pharmaceuticals.
From the regulatory perspective, consolidation of provider systems appears to be accelerating despite significant concerns about the impact of these combinations on prices for health care services.
Health insurers have responded to this market leverage by attempting to merge to increase their market power in response, an effort that was successfully blocked by the Department of Justice. A proposal by CVS to acquire Aetna has the potential to address market power issues by offering a competitive delivery system model, a strategy being adopted by UnitedHealthcare.
Kevin A. Schulman, M.D. is a professor of medicine at Duke University School of Medicine.