As campaigns for November elections gear up for early voting and Congress considers bipartisan reforms to limit consolidation and enhance competition in U.S. healthcare, prospective voters are sending a cleat message to would-be office holders:
Healthcare Affordability must be addressed directly, transparently and now.
Polling by Gallup, Kaiser Family Foundation and Pew have consistently shown healthcare affordability among top concerns to voters alongside inflation, immigration and access to abortion. It is higher among Democratic-leaning voters but represents the majority in every socio-economic cohort–young and old, low and middle income and households with/without health insurance coverage., urban and rural and so on.
It’s understandable: household economic security is declining: per the Federal Reserve’s latest household finances report:
- 72% of US adults say they are doing well financially (down from 78% in 2021)
- 54% say they have emergency savings to cover 3 months expenses ($400)—down from high of 59% in 2015.
- 69% say their finances deteriorated in 2023. They’re paying more for groceries, fuel, insurance premiums and childcare.
- Renters absorbed a 10% increase last year and mortgage interest spike has put home ownership beyond reach for 6 in 10 households
Thus, household financial security is the issue and healthcare expenses play a key role. Drug prices, hospital consolidation, price transparency and corporate greed will get frequent recognition in candidate rhetoric. “Reform” will be promised. And each sector in the industry will offer solutions that place the blame on others.
Granted, the U.S. health system lacks a uniform definition of healthcare affordability. It’s a flaw. In the Affordable Care Act, it was framed in the context of an individual’s eligibility for government-subsidized insurance coverage (8.39% adjusted gross income for households between 100% and 400% of the federal poverty level). But a broader application to the entire population was overlooked. Nonetheless, economists, regulators and consumers recognize the central role healthcare affordability plays in household financial security.
Handicapping the major players potential to win the hearts and minds of voters about healthcare affordability is tricky:
- Each major sector has seen the ranks of its membership decrease and the influence (and visibility) of its bigger players increase. They’re easy targets for industry critics.
- Each sector is seeing private equity and non-traditional players play bigger roles. The healthcare landscape is expanding beyond the traditional players.
- Each sector is struggling to make their cases for incremental reforms while employers, legislators and consumers want more. Bipartisan support for anything is a rarity: an exception is antipathy toward healthcare consolidation and lack of price transparency.
- All recognize that affordability is complicated. Unit cost and price increases for goods and services are the culprit: excess utilization is secondary.
Against this backdrop, here’s a scorecard on the current state of preparedness as each navigates affordability going into Campaign 2024:
| Sector | Advantages | Disadvantages | Handicap Score1=Unprepared to5=Well Prepared |
| Hospitals | Community presence (employer, safety net) Economic impact Influence in Congress Scale: 30% of spending + direct employment of 52% of physicians Access to capital | Lack of costs & price transparency Unit costs inflation due to wage, supply chain & admin Shifting demand for core services. Low entry barriers for key services Regulator headwind (state, federal). Operating, governing culture Value proposition erosion with employers, pre-Medicare populations Consumer orientation | 3 |
| Physicians | Consumer trust Influence in Congress Shared savings (Medicare) Essentiality Specialization Access to technology | Care continuity Inadequacy of primary care Disorganization (fragmentation) Value of shared savings to general population (beyond Medicare) Culture: change-averse (education, licensing performance measurement, et al) Data: costs, outcomes | 2 |
| Drug Manufacturers | Increasing product demand Influence in Congress Public trust in drug efficacy Insurance structure that limits consumer price sensitivity to OOP Potential for AI -enabled discovery, market access Access to private capital Congress’ constraint on PBMs | Unit cost escalation Lack of price transparency Growing disaffection for FDA Long-term Basic Research Funding State Price Control Momentum Market access Restrictive Formulary Growth Transparency in Distributor-PBM business relationships Public perception of corporate greed | 2 |
| Health Insurers | Availability of claims, cost data Employer tax exemptions Growing government market Plan design: OOP, provider access Public association: coverage = financial security Access to private capital | Escalating premiums Declining group market Growing regulatory scrutiny (consolidation, data protection) Tension with health systems Value proposition erosion among government, employers, consumers | 4 |
| Retail Health | Non-incumbrance of restrictive regulatory framework Consumer acceptance Breadth of product opportunities Access to private capital Opportunity for care management (i.e. CVS- Epic) Operational orientation to consumers (convenience, pricing, et al) Potential with employers, | Lack of access, coordination with needed specialty care Threat of regulatory restraint on growth Risks associated with care management models | 3 |
The biggest, investor-owned health insurers own the advantage today. As in other sectors, they’re growing faster than their smaller peers and enjoy advantages of scale and private capital access to fund their growth. A handful of big players in the other sectors stand-out, but their affordability solutions are, to date, not readily active.
In each sector above, there is consensus that a fundamental change in the structure, function and oversight of the U.S. health is eminent. In all, tribalism is an issue: publicly-owned, not for profits vs. investor-owned, independent vs. affiliated, big vs. small and so on.
Getting consensus to address affordability head on is hard, so not much is done by the sectors themselves. And none is approaching the solution in its necessary context—the financial security of a households facing unprecedented pressures to make ends meet. In all likelihood, the bigger, more prominent organizations in their ranks of these sectors will deliver affordability solutions well-above the lowest common denominators that are comfortable for most Thus, health care affordability will be associated with organizational brands and differentiated services, not the sectors from which their trace their origins. And it will be based on specified utilization, costs, outcome and spending guarantees to consumers and employers that are reasonable and transparent.
HENRY KOTULA 