Question

Why are Americans paying more for healthcare?

What are the fiscal challenges rising healthcare cost?

What are some options or solutions to bringing down healthcare costs?

Answer 1

There are many possible reasons for this increase in healthcare prices:

• The introduction of new, innovative healthcare technology can lead to better, more expensive procedures and products.
• The complexity of the U.S. healthcare system can lead to administrative waste in the insurance and provider payment systems.
• The consolidation of hospitals can lead to a lack of competition or even a hospital monopoly, granting providers the opportunity to increase prices. High healthcare costs put pressure on an already strained fiscal situation. Containing our rising healthcare costs is important for our nation’s long-term fiscal and economic well-being. For ideas on how to solve some of these issues, visit our Solutions page and the Peterson Center on Healthcare. Fiscal sustainability presents a national challenge shared by all levels of government. The federal government and state and local governments share in the responsibility of fulfilling important national goals, and these subnational governments rely on the federal government for a significant portion of their revenues. To provide Congress and the public with a broader perspective on our nation’s fiscal outlook, we developed a fiscal model of the state and local sector. This model enables us to simulate fiscal outcomes for the entire state and local government sector in the aggregate for several decades into the future. Our state and local fiscal model projects the level of receipts and expenditures for the sector in future years based on current and historical spending and revenue patterns.2 This model complements GAO’s long-term fiscal simulations of federal deficits and debt levels under varying policy assumptions. This statement addresses a few key points: • the state and local government sector’s long-term fiscal challenges, • the rapidly rising health care costs which drive the sector’s long-term fiscal difficulties, and • the immediate considerations involved in targeting supplemental funds to states through the Medicaid program during economic downturns.   This statement is based on our previous work on intergovernmental fiscal issues, including reports and testimony on state and local government fiscal challenges, our nation’s long-term fiscal challenges, and approaches to providing federal fiscal assistance through Medicaid. The options to bring down healthcare costs:- 1) Setting cost growth goals – This means literally setting a cap on the growth of a state’s per capita health care spending and basing it on growth in the state’s economy. 2) Publishing a state scorecard on health and cost outcomes. This reform requires only limited funding and doesn’t necessitate new legislation, so there’s no reason why most states shouldn’t try it. A scorecard would allow health care providers, insurers, patients and other stakeholders to track progress towards’ states’ cost-curbing goals and increase public accountability.   3) Adopting reforms of the payment and delivery system. This move, growing in popularity, is designed to set goals and change the payment and delivery system to reward high-value care instead of the doctors and hospitals that submit the most charges.   4) Improving price transparency. There is currently a huge mystery as to how hospitals, doctors and other health care providers set costs. Frequently, consumers don’t know how much a procedure, medication, or hospital stay will cost them or their insurance companies. Moreover, prices for the same service can vary significantly by providers, and some providers charge different payers different amounts for the same service.   5) Decreasing the unnecessary use of hospital emergency rooms. States have options within their Medicaid programs to reduce costs and improve health outcomes without unduly restricting access to care, according to the report.