To make health care cheaper, make it more expensive

Between 2000 and 2021, annual spending on health care in the U.S. tripled, yet most people still say that they are not getting enough of it. To make health care more cost-effective in the long run, we should consider making it more expensive.

The Centers for Medicare and Medicaid Services (CMS) is the 900-pound gorilla in the pricing game. To make it seem as though we are making progress in lowering costs, CMS has reduced the reimbursement rates for specific codes to force providers to work more cheaply. Private insurance has followed suit. The most recent Physician Fee Schedule will lower rates for doctors and hospitals by 3.34 percent next year. Upcoming changes to pharmacy charges related to Medicare Part D, among others, have already had an impact on pharmacy closures and staffing shortages. Low-income communities reliant on public health insurance and the hospitals and pharmacies reliant on CMS reimbursements will be the ones who suffer most when these changes occur.

The trend in the last 10 years has been hospital consolidation. According to the Commonwealth Fund, the U.S. spends more than double the amount of money on administrative tasks, including complying with the myriad of requirements put in place by public and private insurers. To save on overhead costs, hospital networks have expanded, offering centralized back-of-house services and sharing staff across facilities.

More than 150 rural hospitals nationwide closed between 2004 and 2019. Research has shown that when two hospitals in the same state merged, prices increased by 7-9 percent. Hospitals without a competitor within 15 miles had rates that are 12 percent higher. Higher rates mean that more independent hospitals have a chance to survive, providing communities with more access, choice and savings.

Higher reimbursement rates can directly translate into better quality care. When health care providers are adequately compensated, they have more resources to invest in patient care. This includes spending more time with each patient, investing in the latest medical technologies and adopting innovative treatment methods. Better care often means more accurate diagnoses, more effective treatments and faster recoveries — all of which can reduce long-term health care costs by preventing complications and reducing the need for repeat treatments.

The health care industry is facing a significant workforce shortage; by 2034 it is estimated that this country will lack almost 50,000 primary care doctors. These are the doctors who care for patients for years, and who get to know their patients and their patients’ families’ issues.

Primary care doctors coordinate preventive care as well as monitor aftercare from emergency and surgical visits. In other words, they provide an invaluable service. The average family medicine resident makes $58,500 for the 3-6 years of their residency; plastic surgery residents earn $10,000 a year more, and that disparity only gets steeper once they move further into their careers. In 2015, the average primary care physician made $195,000, and the average orthopedic surgeon made $421,000. That is hard to pass up when you are already in debt from four years of college and four years of medical school.

Increasing reimbursement rates could make careers in health care more financially attractive, drawing more individuals into the field. This increase in the workforce would not only alleviate current shortages but also foster a more competitive environment, driving improvements in care quality.

With better reimbursement, health care providers can focus more on preventive care and early intervention. These are crucial for managing chronic conditions and preventing minor issues from escalating into serious health problems that are more expensive to treat. Investing in preventive care can significantly reduce long-term health care costs by keeping the population healthier and reducing the need for extensive medical interventions. The U.S. spends only 4-7 percent on primary care, but each dollar saves $13 in long-term costs.

Better compensation can reduce burnout and turnover rates among health care workers, leading to more experienced and skilled professionals staying in the field. The Centers for Disease Control and Prevention is already seeking to reverse the trend of burnout in health care, as it is unsustainable. In a Mayo Clinic survey released last year, almost two-thirds of physicians showed one symptom of burnout, and only 30 percent felt satisfied with their work-life balance. In a recent study by Brigham and Women’s Hospital, a quarter of physicians said they planned to quit in the next two years.

Critics might argue that increasing reimbursement rates would lead to higher health care costs and insurance premiums for patients. However, this perspective fails to account for the long-term savings achieved through improved quality of care, preventive measures, a more robust health care workforce and more competition between more hospitals.

Additionally, higher reimbursement rates don’t necessarily mean higher out-of-pocket patient costs. With appropriate regulatory oversight, improved fee schedules and insurance reforms, the costs passed on to patients can be reduced. To make health care work, we must make it work for the workers.

Chris McGuinn served in the Labor Department in the Bush and Trump Administrations. He currently works in the addiction treatment industry and founded More Than 28, which seeks to increase insurance coverage for addiction treatment.