My last post, “The Challenges of American Health Care,” describes the huge demographic and cost pressures facing American healthcare and lays out a comprehensive reform plan by the Hoover Institution’s Scott Atlas to address them. Today I will give more details about these pressures on both private care as well as care subsidized by the Affordable Care Act.
- The cost of providing health care to an average American family surpassed $25,000 for the first time in 2016, $1,155 higher than last year, and triple the cost in 2001.
- A significant cost driver is the rapid growth in what health plans and insured people are paying for prescription drugs, now comprising $4,270 annually, or 17% of the total.
- 80% of healthcare costs come from just 20% of the population.
- The insurance company United Healthcare announced that it is withdrawing from most ACA exchanges because it lost $475 million on plans sold in 2015 and expects to lose another $650 million in 2016.
- Overall $2.5 billion was lost by insurance companies on the exchanges in 2014. The government’s “risk corridors” program is insufficiently funded to reimburse these losses to the insurance companies involved.
- The fundamental problem is politicization of the marketplace. Insurers were pressured to set premiums low initially to ensure that the rollout was not a flop. Now premiums are increasing rapidly to cover the initial losses. Households with income over 250% of poverty already find the plans offered on the ACA exchanges unattractive.
Conclusion: The overall rapid increases in the cost of healthcare, public and private, is unsustainable for individuals, families, employers and government. Something has to give. We need a total reform of healthcare spending in the U.S. Many good suggestions have been made for how to do this. Now is the time to act!