Last week, Congress passed landmark legislation to fight inflation, reduce carbon emissions and invest in domestic energy production. But the Inflation Reduction Act of 2022 also contains a number of health care provisions, including ones that would cut Medicare drug costs by about $287 billion over 10 years and cut Affordable Care Act premiums for three years.

This is good news for millions of individual patients and their families.

Much more will have to be done, however, if we are to truly curb the astronomical cost of health care in the United States, which reached $4 trillion in 2020.

What do we get for our $4 trillion?

It’s worth noting that people around the globe—including many world leaders—come to the United States every year for quality health care. At the same time, the public health outcomes of some of our most vulnerable citizens remain dismal. The United States ranks 31st in life expectancy at birth, with high rates of maternal and infant mortality, obesity, heart disease, and HIV/AIDS, among other diseases.

Some point to these poor results, as well as the fact that the United States spends roughly twice as much per capita as other wealthier countries on clinical care ($11,945 per person in 2020, compared to $5,268 in the UK, $5,564 in France and $6,731 in Germany), to suggest that the US has a “health care spending problem”.

But the suggestion that we simply “spend less” ignores the complexity of the U.S. health care financing and delivery system—a system that includes private and public insurance, a high degree of patient choice in providers and hospitals, and a cultural mandate to care for anyone who walks through the doors, regardless of ability to pay. All of these add to costs in a different way than anywhere else, as does the relatively high cost of labor.

To support this problem, we at the AAMC Research and Action Institute are publishing three papers that examine US health care costs in all their complexity. Not surprisingly, no single factor is to blame for the high cost of care, but the unique features of the American system contribute. First, the United States spends more on clinical care but less on social services for families than many similar countries, despite higher levels of poverty. Additionally, the United States is the only developed country that does not offer a basic health care plan to all residents. As a result, 27 million nonelderly people were uninsured in 2020.

The United States also spends an inordinate amount on administrative costs, including billing and insurance, and through inefficient cross-subsidies to compensate for government underpayments. While Medicare and Medicaid pay pre-negotiated fees for health care goods and services (though not, to this point, for drugs), these fees do not cover actual costs—Medicare covered 84% of average hospital costs, while Medicaid covered 88 % in 2020 – leading providers to charge multiple times for privately insured patients in an effort to recoup their fees. All this negotiation between doctors and hospitals and dozens of different insurance companies costs money — and raises the cost of care for everyone.

None of these cost drivers will be fixed in the near term. And frankly, the American public isn’t as concerned about them as they are about their out-of-pocket health care costs.

Today, nearly one in five Americans has medical debt, and out-of-pocket spending on health care has doubled in the past 20 years, from $193.5 billion in 2000 to $388.6 billion in 2020. These rising costs have fallen disproportionately on those with fewer resources, including people who are uninsured, blacks, Hispanics, and low-income families. But even solid middle-class families have been forced to make difficult health care decisions, due to increased cost-sharing through copayments and coinsurance.

So what is the solution? In the short term, policymakers should provide targeted subsidies to specific populations, such as households whose household incomes are outside the median or whose health care costs are extraordinary. These subsidies—such as those contained in the Inflation Reduction Act—may increase total health care spending in the short term, but will provide tremendous benefits in the long term, as patients may be more likely to require preventive care.

We must also pursue thoughtful and targeted policies that will reduce out-of-pocket costs for patients, as well as those that will improve outcomes, including better health promotion and disease prevention. And we need to focus on getting more for our health care dollars by helping those suffering from poor health and lack of access to care.

We may not be able to reduce overall health care costs as a nation, but we can reducing costs for families, reducing rising costs and hopefully improving health at the same time.

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