A New Report Lays Out Just How Detrimental Left Health Policy Really Is
Earlier this month, the federal Centers for Medicare and Medicaid Services (CMS) released new data on the state of U.S. health spending.
The agency's report offers a chilling diagnosis of the challenges facing the U.S. health system. It also reveals just how misguided the Democrats' health policy agenda has been over the last decade and a half.
Take prescription drugs.
The left continues to treat drug costs as an emergency that necessitates unprecedented government intervention.
Last year's Inflation Reduction Act (IRA) created a sweeping system of drug price controls through Medicare.
Earlier this month, the Biden administration proposed a framework that would allow the government to revoke patents on medicines it deems too expensive.
But prescription drugs represent a relatively small share of our nation's health bill.
According to the new CMS data, retail prescriptions accounted for a mere 9% of all healthcare spending in 2022.
Hospital care, by contrast, was 30% of national health spending. Physician and clinical services were another 20%.
Moreover, there is mounting evidence that prescription drugs actually slow the overall growth of healthcare spending.
In an article published last month (November) in the International Journal of Health Economics and Management, Columbia University economist Frank Lichtenberg found that the average amount spent per-episode of care for a given disease was inversely related to the number of drugs approved to treat that disease five to 20 years before.
In other words, pharmaceutical innovation reduces health costs over time — and those benefits accrue as drug utilization increases.
Lichtenberg also writes, "[T]he drugs approved during 1984 to 1997 reduced the number of hospital days by 10.5%. The hospital cost reduction was larger than expenditure on the drugs."
That makes intuitive sense.
Drugs make it cheaper to manage many diseases, in part by reducing the need for hospital care.
That's an argument for spending more, not less, on prescription drugs.
Yet instead of treating investment in drug innovation as a means of reducing health spending, Democrats have mounted an all-out war against the creation of new medicines.
CMS also finds that spending on Medicaid increased by 9.6% last year, totaling $805.7 billion. This marks the third year in a row where the program's spending growth exceeded 9%.
Medicaid spending has mounted because enrollment in the program has exploded.
Obamacare made all patients earning up to 138% of the federal poverty level eligible for the entitlement, unless their state refused to expand the program.
The federal government has tried to entice states to do so by picking up 90% of the cost for the expansion population in perpetuity.
As of August 2023, nearly 90 million Americans were enrolled in Medicaid and the related Children's Health Insurance Program. That's roughly one-quarter of the U.S. population.
Ten states have yet to adopt Obamacare's Medicaid expansion. Democrats have made it a political priority to break the will of the ten holdouts. It's one more step toward their long-term goal of forcing all Americans into a single-payer healthcare system, where government is the only insurer.
That's something taxpayers can ill afford. All told, the United States devoted more than 17% of its gross domestic product — $4.5 trillion — to healthcare in 2022. As the population grows older in the years ahead, these costs will continue to grow, siphoning away resources from other national priorities and dragging down our economy in the process.
There's still time to right the ship.
What's needed are market-oriented policies that can get costs under control without undermining the quality of care or choking off funding for future medical innovations.
On every count, the Democrats' health policy vision moves us in the opposite direction.
Sally C. Pipes is president, CEO, and the Thomas W. Smith fellow in healthcare policy at the Pacific Research Institute. Her latest book is "False Premise, False Promise: The Disastrous Reality of Medicare for All," (Encounter Books 2020). Follow her on Twitter @sallypipes. Read Sally Pipes' Reports — More Here.
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