Swift Bipartisan Action Needed on Health Care

Policy Memo
Tuesday, August 01, 2017

With the Senate’s failure to pass health care legislation in last week’s votes, Congress should turn to a bipartisan approach. This is needed both to fix the serious, short-term problems with health care marketplaces around the country and to propel health care cost-control initiatives over the longer term.

Because insurers are finalizing decisions on whether to participate in state insurance exchanges and at what prices, quick congressional action to clarify the marketplace environment could lead to lower premiums and budgetary savings.

The point in need of the most clarification and congressional action concerns Cost-Sharing Reduction payments (CSRs) -- monthly payments the federal government makes to insurance companies to reimburse them for lower deductibles, co-pays and other out-of-pocket costs for low-income individuals.

The Trump administration is threatening to stop making these payments. If it did, insurance companies would likely exit some marketplaces or raise premiums by 15 to 20 percent for the marketplaces in which they remain.

Furthermore, halting the payments will actually increase costs (by over $2 billion in 2018) for the federal government because as premiums rise throughout the marketplaces, the government is on the hook for subsidies that cover insurance premiums.

Already a bipartisan group, called the “problem solvers” in the House of Representatives, is working on legislation to deal with the CSRs and proposing other measures to increase competition and lower costs in insurance markets. Some of these measures mirror provisions from the House and Senate Affordable Care Act repeal proposals. Some senators in both parties, including the Republicans who voted to against the legislation last week, are also pushing for similar steps.

These efforts are important and encouraging. Improving how the marketplaces work is key to getting past the wasteful divisiveness of fights over past legislation. However, the next step should also include a focus on long-term cost control -- something that none of the recent health care proposals have included.

Immediate congressional efforts on that front should start with encouraging the administration to continue efforts already undertaken by the Department of Health and Human Services (HHS) to find reforms to physician payments that incentivize lower costs and higher quality care.

HHS Secretary Tom Price has already twice delayed implementation of one of the most promising Medicare cost-control models -- paying for health care services in “bundles.” The secretary’s next decision on whether to keep delaying is due by Oct. 1 and Congress could direct Price to follow through on implementation.

Beyond that there are numerous areas where experts have already studied solutions and congressional action could be helpful in bringing down long-term costs. These areas range from tackling prescription drug pricing, to reducing the variation in the costs for post-acute care, to the inefficiency in Medicare’s benefit design and prevalence of supplemental coverage.

Ultimately, to provide a lasting benefit for individuals, states and the federal government, the growth in health care costs needs to slow. While cost growth has slowed recently, there is a fair amount of bipartisan consensus on some steps that still need to be taken and the sooner changes are made, the quicker we can make the health care system more efficient and even improve health care while doing so.

Finally, acting sooner rather than later means a lesser chance that rising federal debt levels impede economic growth and hold down future standards of living.