Soaring health care spending continues to spiral up, tightening the financial noose on households and government coffers. Families are forced to make difficult choices between paying for essential medical care and meeting basic needs while the federal government struggles to rein in spending amid mounting debt.
These soaring health care costs must be addressed with market-based approaches before it’s too late.
When the Affordable Care Act (ACA) was passed in 2010, it was heralded as the panacea for reining in healthcare costs. However, the law’s complex regulations and mandates have contributed to administrative bloat and increased overhead costs, ultimately driving up premiums and out-of-pocket patient expenses.
Unfortunately, since then, subsequent politicians have failed to correct course. In 2024, federal spending on Medicare, Medicaid, and ACA subsidies will likely exceed the discretionary budget, posing a significant threat to long-term fiscal sustainability.
Compulsory spending on health coverage in the private sector infringes upon household earnings. This exacerbates economic challenges for families whose purchasing power is already reduced, as inflation-adjusted average weekly earnings are down 3.1 percent since Jan. 2021.
Moreover, the growing burden of health care spending poses a significant threat to long-term fiscal sustainability, as rising debt levels raise concerns about future economic prosperity.
The Congressional Budget Office (CBO) recently released its annual Budget and Economic Update, painting a grim budget picture. The trajectory is alarming, with expenditures expected to be $6.4 trillion this fiscal year before soaring to a staggering $10.1 trillion by 2034. Also, net interest spending is poised to balloon from $1 trillion to $1.6 trillion by 2034.
These projections underscore the urgent need for meaningful reforms to rein in healthcare costs and put the federal budget on a more sustainable path.
To address these challenges, policymakers must prioritize fiscal responsibility and adopt measures to remove government as much as possible from healthcare. This would help to quickly get healthcare back to a relationship between a doctor and patient. Today, too many middle layers rob time between the doctor and patient and raise healthcare prices.
Policymakers should make market-based reforms. It won’t be done overnight, so there will need to be some steps to get there.
It would be great if just making healthcare prices transparent would solve the problem. But the healthcare system is much more dysfunctional than that, unfortunately.
Many reimbursement rates are set between doctors and private insurance companies or government programs like Medicaid and Medicare. Those reimbursement rates are so different depending on which entity is negotiating that the prices won’t tell us much, other than how screwed up the system is, but we already know that.
A market-based approach should remove obstacles on the demand and supply sides of the market.
This should include ending the tax exclusion for employer-sponsored health insurance. There’s a long history of this exclusion, which started during WWII. But while it had good intentions, the result has been a major distortion to the healthcare market. There should also be consideration of a voucher program for Medicare and block grants to states for Medicaid with limited growth each year. These would help reduce the moral hazard and over-subsidization on the demand side.
On the supply side, the federal and state governments should remove rules that restrict the supply of doctor offices by removing certificate of need laws. They can also boost the supply of physicians by reducing or eliminating occupational licenses.
Unleashing supply and imposing market forces on demand will result in more innovative, affordable, and accessible care for everyone.
The resulting reduction in government spending and improved timely access to quality care can help support more prosperity. This would reduce the need for people on government safety net programs. It would also help mitigate higher prices, alleviate strain on household budget burdens, and safeguard the nation’s economic future.
These steps will require difficult choices and bipartisan cooperation at the federal and state levels, but the stakes are too high to ignore the issue any longer.
Vance Ginn, Ph.D., is the president of Ginn Economic Consulting, host of the Let People Prosper Show, and was previously the associate director for economic policy of the White House’s Office of Management and Budget, 2019-20. Follow him on X.com at @VanceGinn.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.
