The Peterson Foundation is doing its best to keep the US from going over a financial cliff. One of its activities, in conjunction with the Kaiser Family Foundation is to track US health spending. It issued a report identifying potential important health trends in 2025. Health care spending is growing and has grown faster than the economy. Over half of all health spending is paid for by governments. Health spending is the major contributor to federal deficits. The current administration, like the last, has not put forth any realistic plan to reduce health spending, which is what has to happen. Not reduce the growth of health spending, but actually reduce the amount.
Most of the 2025 trends identified by Peterson relate to increased costs. The first is the new weight reduction drugs, exorbitantly priced with unclear long term benefits or safety issues. The second is other high-cost drugs and therapies like cell and gene treatments. These are extremely expensive but uptake of gene therapies has been slow. Other specialty drugs continue to be a primary driver of increased health spending. A third cost trend relates to hospitals, which continue to use their market power to drive up prices rapidly.
The report then discusses potential actions by the Trump administration, such as cuts in HHS staff and grants and possible cuts to Medicaid. The former has a de minimis impact on the deficit and the latter I will believe when I see it. Other potential actions include more price transparency, site neutral payments to providers and using international reference pricing for drugs. Again, let’s see if any of that actually gets through the wall of lobbyists or makes a real dent in spending.
States are also getting in on the health spending action, with several reforming certificate of need laws in the interest of creating competition. Another supposed spur to competition would be eliminating state-by-state licensure and forcing reciprocity. Too late when you allowed such grotesque consolidation, which is what really keeps prices high. Other states are looking at reforming pharmacy benefit manager regulation, which also won’t really change how much manufacturers charge for their products. (Peterson Report)
I don’t see anything in the works that would actually meaningfully reduce health spending, especially by the federal government. Raise the eligibility age for Medicare to be consistent with Social Security, audit every supposed disabled person, make wealthy people pay the full cost of Medicare, make Medicaid recipients work, break up large health systems and plans and eliminate tax-exempt status for hospitals with excess management staff and compensation; all that would actually help.
