Emerging trends and enduring challenges in U.S. health care

The passage of the Patient Protection and Affordable Care Act of 2010 (ACA) ushered in a series of reforms to health care and health insurance markets in the United States. Importantly, from 2013 to 2014, the share of individuals without health insurance coverage fell to 10.4 percent—a decline of almost three percentage points, or 8.8 million people. Many of the ACA’s reforms are still taking hold, making it too soon to know exactly how they are affecting the health-care system, but it is clear that many enduring challenges remain. Looking ahead, these challenges center on three areas: enhancing access to health care; reducing waste in the delivery of high-quality care; and directing technological innovation toward productive medical treatments.

Policies addressing these challenges would help support a fundamental tenet of The Hamilton Project’s economic strategy: that long-term prosperity is best achieved by policies that foster sustainable economic growth and individual economic security. To draw attention to these enduring challenges, The Hamilton Project has released a new set of economic facts on health care and health insurance markets, and will host a public forum featuring three new proposals: “A Floor-and-Trade Proposal to Improve the Delivery of Charity-Care Services by U.S. Nonprofit Hospitals,” by David Dranove, Craig Garthwaite, and Christopher Ody of Northwestern University; “Getting the Most from Marketplaces: Smart Policies on Health Insurance Choice,” by Ben Handel and Jonathan Kolstad of the University of California, Berkeley; and “Correcting Signals for Innovation in Health Care,” by Nicholas Bagley of University of Michigan, Amitabh Chandra of Harvard University, and Austin Frakt of the Department of Veterans Affairs.

These proposals address several key economic challenges of health care and health insurance markets. For one, over the last five decades, health care spending has been on a rising trajectory. Since 1965, growth in spending on health care has been faster than overall economic growth, and experts generally agree this trend is likely to continue absent major policy reforms. These concerns motivated the payment reforms of the ACA, which reinforced ongoing trends favoring value-based payments, whereby providers are compensated based on patient outcomes rather than on the number of services or treatments they provide. But these reforms do not affect what is perhaps the single most important driver of health spending growth: the adoption of new medical technologies. In many cases, these advances provide health benefits that far exceed their costs, but in other cases the U.S. health-care system pays for highly expensive therapies with uncertain health benefits. Excessive spending on ineffective technology can divert resources away from other health-improving investments, such as education or preventive care.

Another challenge in the U.S. health-care system is the remaining gap in the health-care safety net, with an estimated 33 million Americans uninsured and many more underinsured. In particular, individuals with limited resources do not necessarily have the ability to avoid severe financial burdens when they become sick, suggesting that the health-care safety net could be further strengthened. In addition, consumers are afforded considerable discretion in selecting their health plans: more than half of private-sector workers have more than one health insurance option from which to choose, and older Americans enrolling in Medicare, the government’s health insurance plan for the elderly, may choose from traditional coverage or numerous Medicare-approved plans from private insurers (also known as Medicare Advantage). However, a growing body of research indicates that consumers often lack the information and insurance literacy to pick the plan best-suited for their preferences and needs, resulting in annual excess payments that can run into the hundreds of dollars.  

The Hamilton Project will host a forum on Wednesday, October 7 to address the economic challenges presented by an evolving health-care market and to discuss the policy proposals of these three new Hamilton Project papers. Former U.S. Treasury Secretary Robert E. Rubin will open the forum with remarks on the subject, which will be followed by a keynote address from Jason Furman, Chairman of the Council of Economic Advisers.

Each proposal will then be discussed by a panel of assembled experts. For the first panel, Craig Garthwaite will be joined by Martin Gaynor, E.J. Barone Professor of Economics and Health Policy at Carnegie Mellon University; Peter Orszag, Nonresident Senior Fellow, Brookings Institution and Vice Chairman of Corporate and Investment Banking, Citigroup, Inc.; and Rick Pollack, President and CEO of the American Hospital Association. Julie Rovner, the Robin Toner Distinguished Fellow and Senior Correspondent for Kaiser Health News will moderate.

Amitabh Chandra and Ben Handel will be joined during the second panel by Peter Orszag; Niall Brennan, Chief Data Officer, the Centers for Medicare & Medicaid Services; and Dan Durham, Executive Vice President, America’s Health Insurance Plans. Hamilton Project Director Diane Whitmore Schanzenbach will moderate.

For the full agenda and to register for the forum, please click here.                      

For updates on the event, follow @hamiltonproj and join the conversation using #HealthEcon.