Features

January/ February 2014 After Obamacare

A frenzy of hospital mergers could leave the typical American family spending 50 percent of its income on health care within ten years—and blaming the Democrats. The solution requires banning price discrimination by monopolistic hospitals.

By Phillip Longman and Paul S. Hewitt

With Obamacare’s troubles continuing, the economy still underperforming, and yet another battle over the long-term federal debt looming, here’s a thought experiment that reveals much about how we got here.

Imagine if, starting during the early years of George W. Bush’s presidency, the government had imposed a new payroll tax that by now was extracting almost one out of every five dollars earned by middle- and working-class Americans. Does it seem reasonable to suppose that the loss of that much discretionary income would have caused a lot of people to take on a lot of debt? Doesn’t it seem plausible that a new regressive tax of that magnitude would have pushed a whole lot of people out of the middle class—maybe even to the point of having caused a Great Recession?

Well, guess what. Almost all of us are now burdened by something akin to such a payroll tax, and the wonder is that so few people realize how big it is or who is responsible for imposing it on us. According to the Milliman Medical Index, which is a standard measure of health care costs, a typical family of four has seen the amount it pays for health care, including premiums and out-of-pocket costs, rise from about 18 percent of its income in 2002 to 35 percent today.

That’s the equivalent of a 17 percent hike in the payroll tax. If you’ve been buying your own health insurance, you know exactly what we’re talking about. For the majority of Americans who get their health insurance through their employers, the full extent of the tax is not always as obvious, but is no less real.

Workers with employer-provided health insurance have wound up paying this tax largely in the form of foregone wages, pensions, and other benefits. That’s because, in the typical pattern, employers have covered the mounting cost of health care premiums by reducing or holding the line on other forms of compensation. This dynamic almost entirely explains the paradox of how the productivity of American workers can go up year after year but wages no longer do. In effect, all our gains from working longer and smarter have gone to pay for the inflating cost of health care.

Worse is the fact that we get virtually nothing in return for paying this added health care tax. Some 60 to 75 percent of rising health care costs reflects nothing more than higher prices for the same services. As prices rise, many Americans are actually seeing fewer doctors and receiving fewer treatments, even as life expectancy is falling for large segments of the population. Americans consume less of most kinds of health care than Europeans, but pay more for the treatments they get. Meanwhile, a wide range of studies documents that at least 20 to 30 percent of U.S. health services have no benefit to patients. Paying more for unnecessary surgery, redundant tests, and other forms of overtreatment is the ultimate in health care inflation.

Recently there has been a slowdown in the nominal rate at which American health care costs are rising. According to the S&P Healthcare Economic Composite Index, the average per capita cost of health care services covered by commercial insurance and Medicare increased by 3.06 percent over the twelve months ending July 2013. This compares with a rate of 7 to 8 percent that was prevailing as recently as 2009.

It is easy, however, to misinterpret these numbers. One reason is that they lump together Medicare and non-Medicare spending, which are on starkly diverging paths. For example, per capita health care costs for those of us with private insurance have been increasing at an annualized rate of 4.15 percent, compared to a 1.4 percent increase for people covered by Medicare.

Inflation-Adjusted Change in Medicare and Commercial Health Insurance Claims Costs, 2003-2012

It also needs to be remembered that most people are already paying so much for health care that even a small percentage increase comes to big money. In 2013, a typical American family of four paid $22,261 in health care costs, meaning that a “mere” 4.15 percent increase comes to
over $920.

Another reason it is easy to misinterpret these numbers is that they do not take into account what is happening with inflation generally. Relative to other prices in our economy, health care costs for people covered by Medicare have held even in recent years, but they continue to move up as sharply as ever for people covered by private health insurance. (See the above chart.) And with wages stagnant or falling for most people, even small percentage increases in the cost of health care dramatically reduce its affordability.

Meanwhile, the biggest reason behind the slowdown in cost growth is one that everyone hopes will go away, namely the lingering effects of the Great Recession. According to a study by the Henry J. Kaiser Family Foundation, about 77 percent of the slowdown comes from negative economic factors such as persistently high unemployment.

The other 23 percent, the study estimates, comes from factors within the health care system that are holding down utilization. Most prominent of these is the sharp rise of the percentage of Americans who now have high-deductible health insurance plans, and who are accordingly, for better or worse, consuming less health care. Says Kaiser Foundation President and CEO Drew E. Altman, “The problem of health costs is not solved.”

Going forward, the government’s official forecast estimates that national health care spending (including Medicare) will accelerate to 6.1 percent in 2014, fueled largely by the eleven million Americans expected to gain health insurance coverage through the Affordable Care Act. The Centers for Medicare and Medicaid Services’ Office of the Actuary projects that health care spending will grow persistently faster than the economy, averaging 5.8 percent per year between 2012 and 2022.

Let’s take that estimate and see what it would mean for a typical family of four. Assuming that the growth in family income remains at around 2 percent a year, the typical family of four would go from spending 35 percent of their income on health care today to over 50 percent within ten years and more than 63 percent by 2030. That’s the equivalent of a new 28 percent payroll tax!

Adding to the urgency of these numbers is another fact that barely registers in our political debates: were it not for the explosion in health care costs, there would be no long-term federal budget deficit crisis. According to the model used by the Congressional Budget Office, the federal deficit would shrink to essentially zero (one-third of 1 percent of GDP) within eight years if federal health spending just remained at its current, already highly inflated, level.

So the next time you hear people saying how you must accept some “Grand Bargain” under which you retire later and accept cuts in your Social Security and other earned benefits, all while paying more taxes, just bear this fact in mind: the United States doesn’t have a structural budget deficit except for the ever-mounting cost of health care.

Sadly, neither the administration nor its critics have a solution to health care inflation that is anywhere near adequate to the problem. But fortunately, we do have options that would dramatically reduce health care inflation, and that can be explained without using phrases like “In Sweden, they …”

To be sure, as the population ages and effective new medical technologies come along, future generations of Americans may well want to consume more of at least some types of health care, and may be willing to pay more for it. But that doesn’t mean we have to remain punished by rampant health care inflation—that is, by paying higher prices year after year for the same treatments and procedures, such as, say, an MRI scan, an angioplasty, or a prostatectomy.

Moreover, we can fix this problem without waiting for a political consensus to emerge that would allow for the creation of a single-payer system at the federal level (something that even Democrats, negotiating among themselves, could not agree to in 2010). Nor does this approach involve the typically Republican strategy of cutting insurance coverage so that individuals bear more financial risk.

But first we need to understand who and what is causing this inflation.

From two different sides of the Mall in Washington one can hear two very different-sounding messages about how to control health care inflation. At the Department of Health and Human Services (HHS) on Independence Avenue, the message stresses the vast savings possible through a less “fragmented” and more “integrated” health care delivery system. With this vision in mind, HHS officials have been encouraging health care providers to merge into so-called accountable care organizations, or ACOs.

An essential feature of an ACO, as defined by the Affordable Care Act, is that it organizes and coordinates care among a broad range of previously independent specialists and other providers, somewhat like a health maintenance organization (HMO). Providing this coordination requires scale, and in practice has often entailed hospitals merging or forming business partnerships with one another and buying up the practices of local doctors.

Meanwhile, on the other side of the Mall, officials at the Federal Trade Commission (FTC) have been sounding a different note. Their pronouncements are about the need to counter the record numbers of hospitals and doctors’ practices that are merging and using their resulting monopoly power to drive up prices. Under the Obama administration, the FTC has stepped up antitrust actions against health care providers of all stripes, though the mergers and consolidations continue at a ferocious pace.

If the assumptions behind these two messages seem at least superficially contradictory, that’s because they are. Yet both are simultaneously true in different ways. Taming health care inflation requires being clear about just how that is so. And it requires doing a far better job than the Obama administration has done thus far in crafting a coherent policy that takes both truths into account.

Let’s start with the assumption that larger, more integrated health care systems are capable of delivering greater value in health care. It is importantly true that several such systems have proven records of combining low cost and high quality.

This magazine, for example, has long championed the “still-news-to-most-people” story of how the Veterans Health Administration has become a benchmark of health care quality and efficiency. (See “Best Care Anywhere.”) Another prominent example of the potential for large integrated systems to deliver exceptional value is Intermountain Healthcare, a network of hospitals and clinics in Utah and Idaho that many experts have described as a model for health reform. Researchers at Dartmouth estimate that if all providers adopted the coordinated care and integrated electronic medical records used by the Intermountain system, overall health care spending in the U.S. would fall by 40 percent, without any reduction in quality.

Clearly, bigness in health care can lead to efficiency and lower prices. But just as in other industries, bigness in health care can also lead to monopolistic pricing and other abuses. And sadly, rampant, unregulated monopolization of health care is what has been going on in virtually every medical community in America, as hospitals, doctors, and other providers combine in ways that drive up costs for everyone without improving care.

Start with the sheer number of hospital mergers, which has become staggering. In recent years, the tally has run up from fifty-two in 2009, to seventy-two in 2010, to ninety in 2011, and reaching 105 in 2012. In 2012, only 13 percent of hospitals surveyed said they intend to remain independent from other hospitals or systems. Booz & Company, a consulting firm, reckons that an additional 1,000 hospitals could merge in the next five to seven years.

Announced Hospital Consolidations by Year

This trend of increasing concentration has been building since the 1990s and is a major reason why health care costs rose dramatically during the last decade. By 2009, the mega-trend of consolidation already meant that most Americans were living in metro areas where there was little if any competition between hospitals.

The FTC uses a measure called the Herfindahl-Hirschman Index (HHI) to gauge how competitive or monopolistic different industries are in different markets. Back in 1990, the typical American metro area had a hospital market with an HHI number of 1,576, which the FTC characterizes as “moderately concentrated.” By 2009, 80 percent of metro areas had hospital markets with HHI numbers above 2,500, considered “highly concentrated.” Of these, 10 percent ranked as pure monopolies (with HHIs of 10,000). Based on FTC standards, fewer than 6 percent of hospital markets were robustly competitive even before the latest round of mergers took off.

Most individual doctors are also combining forces, either by joining large multi-specialty group practices that are aligned with hospitals or by becoming salaried employees of hospitals and hospital chains. In the San Francisco Bay Area, for example, two large group practices, Brown & Toland Physicians and Hill Physicians, have thousands of doctors who negotiate fees as a group. Meanwhile, the percentage of physicians employed by or affiliated with hospitals rose from 43 percent in 2000 to 57 percent in 2009. This year, only 33 percent of physicians will be “totally independent,” according to estimates by Accenture, a consultancy.

What are the consequences of this increasing concentration in health care? It is not right to say the trend is inherently harmful. As we’ve seen, the example of Intermountain and other large, integrated systems shows that there are huge potential clinical and economic advantages to bigness in health care. But in practice, even when the mergers and acquisitions are done in the name of coordinating and otherwise improving care, they often wind up creating local monopolies that abuse their market power.

How do we know this? Because there is a clear pattern of hospitals raising their prices dramatically after mergers, and of prices being the highest where there is the least competition. Often, the level of gouging is extraordinary. According to studies synthesized by the Robert Wood Johnson Foundation, when hospitals merge in already concentrated markets, the price increases often exceed 20 percent, and sometimes more than even 40 percent.

One thoroughly investigated example comes from what happened in 2000 when Alta Bates hospital in Berkeley, California (which was and is owned by the hospital chain Sutter), merged with a nonprofit hospital called Summit located two and a half miles away in Oakland. Prior to the merger, Summit officials predicted that it “would give them more clout in negotiating with health insurers,” and sure enough, that proved true.

In a 2008 working paper examining the consequences of the merger, FTC economist Steven Tenn found that Summit was able to raise the prices it charged different insurance companies from between 28.4 and 44.2 percent above what other local hospitals were charging. This was true despite the presence of seventeen other hospitals within a twenty-mile radius, underscoring how hyper local health care markets are.

Another example comes from Illinois, where Evanston Northwestern Healthcare Corporation merged its two local hospitals with nearby Highland Park Hospital in 2000. Following the merger, the new entity was able to grab price increases of between 11 and 17 percentage points beyond what non-merging hospitals in the area charged. At the time, hospital executives boasted in internal documents that

[s]ome $24 million of revenue enhancements have been achieved—mostly via managed care renegotiations [and] none of this could have been achieved by either Evanston or Highland Park alone. The “fighting unit” of our three hospitals and 1,600 physicians was instrumental in achieving these ends.

You may not be accustomed to thinking of hospitals and doctors as “fighting units,” but the phrase accurately applies to the raw power struggle between large-scale purchasers and providers of health care in what passes for the health care “market” these days. Basically, the pattern is that hospitals charge the highest prices to those who have the least power, starting with uninsured patients, who are charged the highest prices of all. Meanwhile, the price that hospitals charge to treat any given privately insured patient depends on whatever deal the hospital has struck with that patient’s insurance company. And who gets the upper hand in these secret deals is basically just a matter of who is bigger than whom, with all parties trying to shift costs onto others rather than competing to provide patients with better care.

Back in the 1990s, the balance of power tended to favor large-scale buyers of health care, as insurers and large employers set up “tight” managed care systems in the form of health maintenance organizations. HMOs forced providers to bid against one another for the privilege of being included in their networks. As a result, while American doctors, and particularly specialists, remained by far the highest paid in the world, they were forced to accept considerable reductions in income. In today’s dollars, the average incomes of specialists declined from $849,194 in 1990 to $610,469 in 2000. Cost savings from lower payments for services were the primary reason health care costs remained contained throughout 1990s. For a few brief “Goldilocks” years, health care costs grew more slowly than the wages of the average American and overall health care spending held constant as a share of GDP.

Yet following this brief interval of sustainable health care spending came the “managed care backlash,” a largely physician-led media and lobbying campaign centering on charges that HMOs were preventing doctors from performing, and even discussing, necessary care. Armed with talking points supplied in part by lobbyists, patients’ rights advocates argued that HMOs were costing lives. This populist theme of corporate callousness (amplified by the hit movie As Good As it Gets) resonated among healthy consumers exasperated by sluggish gate keeping and unstable relationships with primary care physicians, as both physicians and employers cycled among HMOs in search of better deals.

Today, researchers find no evidence that clinical outcomes deteriorated under managed care except in isolated occurrences. Indeed, in general, by cutting down on unnecessary surgery and other forms of overtreatment, managed care generally improved the quality of health care. Hospital stays did shorten and investments in costly technology waned, but not in ways that harmed patients. Meanwhile, nine out of ten dollars in cost reductions came from lower payments for services.

But that result could not hold. The backlash against managed care weakened the bargaining position of insurance companies and other large purchasers of health care by discrediting the narrow networks and utilization reviews that insurers had used to bargain down prices and limit unnecessary volume. Even more significantly, providers resolved to fight back by bolstering their market power through mergers and acquisitions. And as they consolidated in more and more markets, they were more and more able to dictate to insurers and other purchasers of health care what its price would be.

Today, the effects can be seen in the prices providers receive for the same procedures in markets with different degrees of concentration. For example, Berkeley health care economist James C. Robinson has studied the prices hospitals charge insurance companies (and, by extension, insured patients) for different procedures. In concentrated markets, the price for a pacemaker insertion averages $47,477, but in markets that remain comparatively competitive the cost of the procedure averages $30,399.

Similarly, providers in concentrated markets make far larger profits on the procedures they perform. Thus, for example, in concentrated markets, the average hospital makes a return of $20,000 above its direct costs on every angioplasty it performs. But in more competitive markets, while the margin is still astoundingly high, at $10,900, it is nonetheless 90 percent less than in concentrated markets.

More evidence of how consolidation is driving up health care costs comes from Massachusetts Attorney General Martha Coakley, who subpoenaed claims data (reflecting negotiated prices) and contracts from health plans and providers in her state. By examining the behavior of individual hospitals and physician practice groups, Coakley’s office was able to document a strong link between market concentration and price. Within markets, prices charged for the same services typically varied by 200 percent or more. This variation correlated almost exclusively with “leverage”—the relative market position of the provider. Prices did not correlate with quality, patient mix, or a hospital’s status as a research or teaching facility.

The market power of some so-called “must have” hospitals is now virtually unchallengeable. These are hospitals that insurers must include in their networks in order to be able to sell policies in a given area because the hospital enjoys a local monopoly or a particularly strong brand or reputation. Such hospitals use their market power to win “anti-steering,” “anti-tiering,” “guaranteed inclusion,” or “product participation parity” clauses that forbid insurers and employers from using copayments to steer patients toward less costly providers. Thus, a hospital in Oakland might dictate to an insurer: You are forbidden to even tell your customers that they could receive lower-cost chemotherapy at that other hospital in Berkeley.

Another widely used monopolistic practice is for multi-hospital systems to negotiate as a single entity. This allows hospital chains to parlay their dominance in one market into higher prices in others where they are less dominant. Even nonprofit university teaching hospitals play the game. Hospitals in the University of California system, for example, now negotiate as a group rather than as individual entities. If an insurance company wants a contract with, say, UCLA’s medical center, it will have to agree to the system’s price for treating patients at UC Davis’s hospital. As one hospital executive explains in a study published in Health Affairs, “Contracting as a full [University of California] system is frightening to the payers.… These are contracts with big leverage.”

Beyond inducing more demand for health care, the Affordable Care Act has two features that could, without corrective action, make this kind of price gouging much worse than it already is. First, the ACA calls for dramatic reductions in the rate of increase in Medicare reimbursements. That’s great for saving the government money. But the Medicare Payment Advisory Commission and others have warned that hospitals could try to make up for their slower-growing Medicare reimbursements by using their increasing market power to raise prices still more on private insurers and their customers. Meanwhile, the ACA’s encouragement of accountable care organizations is already leading to still further rounds of hospital consolidation and monopolistic pricing.

What is the solution? More rigorous antitrust action is a key part of the answer. The FTC, which takes the lead on mergers, devotes just twenty-two full-time professional staff (economists and attorneys) to monitoring an industry that this year will take in $3.1 trillion. Under this regime, consolidation has proceeded to the point that some analysts now predict that the national health system will eventually consolidate into just a handful of competitors, like the airlines.

But remember that at the same time there are strong clinical and economic reasons why we should be moving toward larger, truly integrated health care systems. A broad consensus now exists among those who study quality and efficiency in health care that only integrated systems can overcome the massive problem of fragmented care—of specialists ordering up redundant tests and contraindicated drugs as they each treat one body part at a time, often with costly treatments of dubious effectiveness. If there is any larger cause of U.S. medical inflation than the monopolization of providers, it is continued fragmentation of care.

So the question then becomes not how we can prevent bigness in health care but how we can encourage the growth of large-scale, integrated providers in a way that does not lead to their degenerating into abusive monopolies.

One approach would be simply to set prices administratively. This is not as infeasible nor, dare we say, socialistic, as it may sound. Since the 1970s, Maryland, for example, has had a public process, akin to a public utility commission, for setting hospital prices for all payers, including Medicare. The cost of a Maryland hospital admission for commercially insured patients was 26 percent above the national average in 1976, but by 2011 had dropped to 4 percent below the national average.

Yet Maryland has enjoyed very generous Medicare reimbursement rates that some argue are the only reason it has been able to hold down costs for commercially insured patients. And in any event, the example of Medicare itself shows how the process of setting rates administratively is subject to capture by providers. Today, for example, a committee of the American Medical Association effectively sets Medicare prices, and in ways that harm patients by overcompensating specialists and under-compensating primary care. (See Haley Sweetland Edwards, “Special Deal.”)

Even if we fixed that problem, we’d still be left with—how else to say it—government bureaucrats setting prices in health care. That may fly in Maryland, but how about Texas? And might there not in fact be some real virtue in creating a pricing system that leaves a role for effective and well-regulated market competition in setting prices?

For this approach to work, there must be a combination of better antitrust enforcement with what’s known as a “common carrier” regime. It’s an approach that Americans have used for generations in other realms in which there are both large, desirable economies of scale and the potential for monopolistic abuse.

The term common carrier traces its roots to early English common law. Its main purpose is to prevent enterprises that control critical infrastructure from hindering competition among the users of that infrastructure. Thus, for example, in the 1890s, the United States used common carrier laws to prevent railroads from offering lower freight rates to other monopolistic enterprises, such as Standard Oil or U.S. Steel. Reforms required that railroads instead offer all shippers the same rates for the same service. That way, competition between producers wasn’t over who could leverage their market power, but over who could deliver the best product to the consumer.

A more recent example is the Justice Department consent decree governing the Microsoft Windows operating system. Antitrust regulators did not break up Microsoft or dictate the prices it could charge, but did force the company to sell Windows bundled with Internet browsers built by other software companies. Similarly, pipeline owners must transport gas from other producers, and telephone monopolies must carry signals from other carriers—all at nondiscriminatory rates. The hot issue of “net neutrality” is a fight over whether common carrier status should apply to Internet service providers.

There are realms where an economic case can be made for price discrimination. Aviation is one such realm. It may be irritating to discover that the guy sitting next to you on a plane paid $200 less for his ticket just because he bought it two weeks before you did. But at least that kind of price discrimination can fill seats that would otherwise go empty and thereby at least arguably reduces the average cost of flying for everyone.

But there is no way such logic applies in health care. As Princeton’s Uwe Reinhardt and other health care economists have noted, in this realm charging different people radically different prices for the same procedures does not even in theory lead to greater efficiency or lower prices. Rather, it just wastes enormous resources as different parties scheme to shift costs onto one another through secret, special deals.

It doesn’t, for example, cost a hospital more to run a patient through a CAT scan if the patient has insurance with one carrier verses another. Nor are there savings to the system even theoretically obtainable by offering discounted scans to some patients and their insurance companies but not others. Much less is there any clinical case for widespread price discrimination in health care. Either a patient needs a scan or does not; getting a “special deal” on a scan you don’t need just exposes you to unnecessary radiation.

Applied to health care, a common carrier regime might work like this: A hospital over a certain threshold of market power—let’s say, one-third or more of a community’s beds—would be required to publish a full schedule of its prices for all its different services and procedures. It would also be required to charge all customers the same price, whether those customers were large or small insurance companies, employers, or individual patients.

Hospitals already draw up such a schedule of prices, known in the business as a “charge master,” but hardly anyone except people without insurance are actually charged the prices on the charge master, and many hospitals won’t even give you a copy. Under a common carrier regime all commercial customers would pay the same published price.

A common carrier hospital could also not discriminate between independent doctors and doctors employed by or otherwise affiliated with hospitals. All would have the same scheduling rights and pay the same overhead allocations for services such as operating rooms, CAT scans, and intensive care beds. A common carrier physician group, likewise, would have a single rate structure.

From the consumer’s point of view, all common carriers would be effectively “in network,” in the sense that all customers would pay the same price. Meanwhile, nothing would prevent common carriers from integrating with an insurer to operate an ACO or HMO, so long as they did not use their pricing power to disadvantage competing health plans.

Or to think of it another way, common carrier health care providers would effectively be part of a community’s basic infrastructure. They might be publicly or privately owned, or run by a nonprofit or for-profit organization. But equal access to this infrastructure would be a given rather than itself a subject of competitition. Who would want to live in a town where all the local businesses—restaurants, lawyers, copy centers, hardware stores—competed not over which produced the best product or service, but over which could use its market power to win the most concessions on the prices it paid for basic inputs like water, electricity, or the cost supporting the local road network? We should not think of health care infrastructure as being categorically different.

With lower barriers to market entry, competition among health plans would no longer be primarily over who can use their pricing power to maximize market share. Rather, it would be over who can provide the most value to the consumer. The plans most likely to gain acceptance by price-sensitive consumers will be those that implement the most efficient clinical protocols—a balance that Intermountain calls “the best clinical result at the lowest necessary cost.”

Providers that didn’t meet the threshold for being designated common carriers (in our example, those with one-third or less market share) would remain free to gain market share by underbidding the published prices of the giants. But if these providers grew too large, they, too, would become common carriers. Conversely, large institutions could divest their way out of common carrier status. This incentive structure limits the need for antitrust enforcement, while helping to ensure that the economic returns to bigness result from actual efficiencies rather than pricing power.

But, of course, this set of incentives does not remove the need for more vigorous antitrust enforcement. A hospital or ACO with a 100 percent monopoly in its local market might well impose high costs and inefficiencies on all of its customers equally. In practice, there are certainly towns too small to support more than one hospital or ACO, but we need a Federal Trade Commission that is empowered to ensure that wherever possible there are at least two that are operating in true competition with one another.

Conservatives might object that it is beyond government’s competence to perfectly calibrate the balance of concentration and competion in each local health care market. But as politicially and administratively difficult as this approach will be, it’s basically the only way to create the conditions under which markets in health care can operate efficiently even in theory. You will not find Adam Smith defending the notion that the hidden hand works in monopolized markets with secret prices.

The only actual sustainable alternative is to have government directly set prices and thereby allocate resources in health care. Some liberal readers may well say, “Yes, let’s just do that.” But whatever the merits of that model, it is not going to happen anytime soon in America at the federal level.

What will happen, though, on our current course, is unrelenting health care inflation that could easily, as we’ve seen, bring the equivalent of a new 28 percent payroll tax on middle-income families by 2030. If the Republicans manage to kill Obamacare, then they will take ownership of that reality. If Obamacare survives but the ongoing inflation in health care continues, then a majority of Americans will conclude that the Democrats are the ones to blame. Either way, it would seem that both parties have an enormous interest in taking on monopoly in medicine and in using true, all-American competition to stop the price gouging.

Phillip Longman and Paul S. Hewitt are, respectively, a senior editor at the Washington Monthly and the author of Best Care Anywhere: Why VA Healthcare Would Be Better for Everyone; and a former deputy commissioner for policy at the Social Security Administration and current vice president for research at the Council for Affordable Health Coverage. The views expressed in this article do not necessarily reflect those of the CAHC or its members.

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