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News from EPI The rising price of health care costs American families thousands of dollars a year in forgone wages, out-of-pocket costs, and increased taxes

In a new report, EPI Research Director Josh Bivens examines the rapid growing cost of U.S. health care, and the sustained downward pressure this growth has put on the resources of U.S. households. Bivens calculates that health costs’ outpacing overall economic growth since 1979 has crowded-out almost $390 billion in potential cash-wage increases for American workers, or about $2,740 per worker in the bottom 90 percent of earners. Further, excess health care cost growth in public health programs since 1987 increased spending on these programs by $260 billion (or 1.3 percent of GDP) by 2017.

“Rising health costs are the clearest sign of how dysfunctional the American health care sector is. We spend far more for the same—or worse—quality health care as our international peers, which has a tremendous impact on typical workers’ wages and their ability to secure healthcare on the job,” said Bivens. “Health care debates need to move beyond the Affordable Care Act, and the clearest remaining goal for policymakers is reining in the fast-rising costs of American health care—without sacrificing households’ access to needed medical care.”

Bivens argues that policymakers need to focus on controlling health care prices, not restricting use. While much attention has understandably focused on the ambitious vision of adopting a “single-payer” or “Medicare-for-all” plan, there are steps policymakers could adopt in the nearer term that would allow many of the virtues of single-payer to be realized piecemeal, and hence potentially more quickly. These could also potentially serve as useful stepping stones to even more ambitious reform. These steps include:

  • Extend already existing public plans and incorporate a public option into ACA exchanges.
  • Adopt all-payer rates—mandating that the same prices apply regardless of who is paying—to allow private insurers to benefit from the bargaining power of Medicare.
  • Pursue policies that would diminish the intellectual property rights monopolies of key health care sectors, like pharmaceutical companies.
  • Increase antitrust scrutiny of consolidation of hospitals and physician networks.

Outsized health spending in the United States is not because Americans consume more or better health care than our peers, it is simply due to prices. Prices for pharmaceuticals, physician salaries, and medical procedures are almost uniformly higher in the U.S. than in peer countries—sometimes staggeringly so. Efforts to contain costs by controlling use are not only economically inefficient, but dangerous—leading to decreases in medically indicated and preventive care that would improve health outcomes for Americans and that is more cost efficient in the long run.