Summer Reading: Healthcare

Heading to the beach should be a relaxing experience. That is, until you swallow too much salt water or realize that you’re redder than a lobster because you left the sunscreen at home. Of course, don’t forget the snipers of the sea, jelly fish. The truth is that, no matter how tempting it is to relax, health-related concerns are always lurking around the corner, like a shark closing in on an unsuspecting minnow. While the American healthcare system is the most innovative in the world, out-of-control spending, government mandates, and a tsunami of misconceptions threaten to drown even the most careful consumers. Fortunately, the Taxpayers Protection Alliance (TPA) is here to put readers at ease about these current maddening maladies.

It’s tempting for politicians to paint the American healthcare system as private and unregulated. Lawmakers such as Sen. Ed Markey (D-Mass.) claim “Private equity firms and greedy corporate executives are using the health care system as a piggybank. But putting profit over patients results in substandard care, while health workers suffer, and communities are left to clean up the mess.” In reality, the problems facing the American healthcare system are the result of far too much government involvement.

As Cato Institute scholar Michael Cannon aptly points out, “Data from the OECD showed that in the United States, the government controls a larger share of health spending than in the average OECD nation, and in all but seven other OECD nations. […] [The US] Government controls a larger share of healthcare spending than in the United Kingdom or Canada, which have government-run, single-payer systems.” He added, “In other countries, their socialized health systems have budgets. The government puts a limit on how much it will spend. The government of the United States doesn’t do that. Medicare and Medicaid programs don’t have budgets.”

Medicare and Medicaid spending are key contributors to multi-trillion-dollar debts and deficits. According to the Centers for Medicare and Medicaid Services’ (CMS’) analysis of the latest available data (2023): “NHE [National Health Expenditures] grew 7.5% to $4.9 trillion in 2023, or $14,570 per person, and accounted for 17.6% of Gross Domestic Product (GDP). Medicare spending grew 8.1% to $1,029.8 billion in 2023, or 21 percent of total NHE. Medicaid spending grew 7.9% to $871.7 billion in 2023, or 18 percent of total NHE. … The largest shares of total health spending were sponsored by the federal government (32 percent) and the households (27 percent). The private business share of health spending accounted for 18 percent of total health care spending, state and local governments accounted for 16 percent, and other private revenues accounted for 7 percent.” It certainly doesn’t help that a key trust fund underpinning Medicare is now expected to go broke three years sooner than previously thought—2033 instead of the previously-projected 2036. It also really doesn’t help that Medicare is now on the hook for the gusher of red ink generated by the U.S. Postal Service.

Even modest attempts to slow down government healthcare spending are met with hysterical pushback by pundits and politicians. This was especially the case following the recent passage of the One Big Beautiful Bill Act (OBBBA), which instituted work requirements for Medicaid and more frequent eligibility checks. TPA senior fellow Ross Marchand notes, “[OBBBA] has become law, and misconceptions about the legislation are a dime a dozen. While many detractors from the left have slammed the (deeply-flawed) bill as cancelling the health coverage of nearly 20 million Americans, the truth is that the OBBBA’s Medicaid changes are far too small for what needs to be done…. The legislation stipulates that, to receive Medicaid benefits, individuals must be working, engaged in community service (e.g., volunteering) or receiving education or work training at least 80 hours per month…. The hype (both positive and negative) about this provision is simply not warranted. Taxpayers will save about $30 billion per year from the enactment of Medicaid work requirements, and about $100 billion per year once other Medicaid provisions of the bill (e.g., more frequent eligibility checks, curtailing state-directed payments) are taken into account. That still leaves about 90 percent of the pricey program untouched at a time of nearly $2 trillion annual deficits and a national debt of $37 trillion.”

Additional reform ideas “would not only provide more significant savings for taxpayers but also give beneficiaries better coverage. A far better approach would be a means-tested, refundable tax credit of approximately $550 per month for individuals to go out and purchase the private healthcare plan of their choice. This would allow households to purchase mid-tier ‘silver’ health insurance plans (which typically cost less than $550 monthly in low-income states such as Mississippi). Assuming a beneficiary population base of 75 million, this would save taxpayers $300 billion per year. Even if Congress used half of those annual savings to reimburse miscellaneous expenses (e.g., high co-pays, out-of-pocket medication costs), taxpayers would still save $150 billion annually on top of OBBBA savings.”

Not all proposals to reduce government healthcare spending survive closer scrutiny. The 2022 Inflation Reduction Act introduced Medicare drug price “negotiations,” which are little more than government-dictated price controls. As American Action Forum President Douglas Holtz-Eakin notes, “The law’s provision with the broadest – and most troubling – implications for future economic policy is perhaps its process of setting the maximum fair price (MFP) for drugs covered by Medicare. The MFPs delivered by this process are government-mandated price controls, backed by the threat of extremely punitive excise taxes on drug manufacturers – although the public is likely to perceive them as voluntary pricing arrangements. … Price controls are damaging and short-sighted, and an anathema in a market-driven economy. Lawmakers, however, are regularly tempted to overlook their manifest flaws in the pursuit of short-run political favor. The MFP process is likely to have pronounced implications for future economic policy by making price controls more palatable to the public and thus may see more widespread use as a policy tool.”   

The artificially low prices resulting from this process will make it all-but-impossible for drug makers to recoup development costs, leading to fewer products being made available to consumers. Developing a single drug is exceptionally costly and requires many years of research and clinical trials. Additionally, overly restrictive therapy approval policies pushed by public officials such as the Department of Health and Human Services (HHS) Secretary Robert F. Kennedy (RFK) Jr. and Food and Drug Administration (FDA) Commissioner Marty Makary do not help matters. Patients are left wondering whether they’ll be able to access promising treatments such as Elevidys (a gene therapy for a rare movement-related genetic disorder called Duchenne muscular dystrophy). Hopefully, TPA’s new campaign to hold these officials accountable will lead to a fairer, faster, and cheaper process.

If lawmakers want to enact real savings for taxpayers and make the healthcare system far better for consumers, they’ll ditch costly price controls, commit to comprehensive Medicaid reforms, and push the FDA and HHS to reform approval processes. With some commonsense changes, policymakers can keep patients from surfing a tidal wave of red ink. So, sit back, lounge out on the beach, and don’t worry (too much) about that gnarly sunburn.