Last year, the Biden administration announced the largest monthly increase in Medicare Part B premiums in the program’s history. The anticipated hike was based on unrealistic assumptions about the number of Medicare beneficiaries who would use the new Alzheimer’s drug Aduhelm.
But the administration subsequently changed course and decided to significantly restrict access to the medicine. With the “savings” generated by this decision, officials recently revised their premium estimate from a historic increase to a $5 monthly decrease for next year. This sleight of hand made for a nice press release — small wonder that it was announced in advance of the election, much earlier than usual — but left unsaid is that it set a dangerous precedent that could delay access to promising new treatments in the future.
The administration’s approach to prescription drug prices is a similar story of illusion. Empowering Medicare bureaucrats to dictate pharmaceutical prices will lower older adults’ out-of-pocket costs but will likely lead to higher launch prices for new drugs and raise prices for the rest of the market and taxpayers.
Simply shuffling health care costs around the system or adding more people to government programs does nothing to address the underlying problems in the system that drive costs up. Given the country’s skyrocketing debt, it’s an unsustainable strategy that’s dangerous to our future.
By kicking the can down the road and leaving rising costs for future generations to handle, older adults and all Americans should expect premium increases in the years to come. There’s no such thing as a free lunch — and no substitute for a genuine, comprehensive strategy to reduce health care costs, and address health care disparities by increasing access and improving quality.
Fortunately, that strategy already exists, and it was formulated by the previous administration. We showed that the key to lower health care costs isn’t greater government control or ever more creative accounting tricks; it’s the interlocking strategies of market competition, unleashing innovation and empowering patients.
The results are hard to argue with. For example, Medicare Advantage monthly premiums in 2021 were the lowest in 14 years, and premiums in the individual market also went down. While the current administration is taking credit for reducing insulin prices, the reality is that we created a new program almost three years ago, in 2020, that capped monthly copays for older Americans who use insulin to $35 — without government price controls.
Our strategy rejected the notion that Washington always knows best. By taking the government’s thumb off the scale, we worked to aggressively move the nation’s health care system toward a value-based model in which providers are compensated based on the results they achieve for patients. This commonsense system was the standard by which we formulated policy and measured our progress.
One of the most significant results of that approach was our decision to lift the veil on health care prices, requiring hospitals and health insurance companies to disclose what they charge and unleash the competitive forces that drive down costs. It’s no exaggeration to call this the most patient-oriented reform of the past half-century.
We also empowered patients by making it easier for them to bring their medical records with them between providers and insurers. With this approach, patient and provider alike have greater transparency into patients’ treatment history, promoting high-quality care and reducing costly duplication while making it easier for patients to move their care to providers offering the highest quality at the lowest price.
Untangling the expensive, time-consuming and ineffective thicket of government regulations that are driving up costs was critical too. U.S. spending on health care administration, including billing and insurance functions, generates an estimated 15% to 30% of the nation’s total medical expenditures and has long exceeded levels spent in comparable countries. We slashed labor-intensive reporting requirements that were costing the medical community billions of dollars and millions of hours they could have spent on patients. We also worked to speed innovative treatments — such as access to breakthrough devices — to older adults and reduce the cost of bringing new products to market.
The pandemic was a particularly fruitful time for deregulation. Many such policies were created or accelerated under the pressure of the emergency but soon showed that they should remain for the long haul. For example, we allowed eligible patients to receive acute hospital-level care in the comfort of their homes — known as “hospital at home” — which can reduce costs and give patients safe alternatives to expensive care.
One of the more transformative deregulatory results of pandemic policy was telemedicine. This was a focus of ours even before COVID-19, but we kicked the transition into high gear in 2020, delivering a genuinely new era in health care delivery that will never be fully reversed.
Taken together, the success of these reforms demonstrates that lower costs and higher quality can be achieved only through more competition and less government micromanagement. Unfortunately, the current administration’s approach has been exactly the reverse.
If moving numbers around on a ledger and playing bureaucratic shell games don’t seem like signs of an effective strategy, that’s because they’re not. Such superficial ploys can’t replace the hard work of advancing sustainable, long-term reforms to modernize American health care and bend the cost curve down. It’s not easy, but we’ve shown it can be done.
• Seema Verma served as the administrator for the Centers for Medicare & Medicaid Services from 2017 to 2021.