Achieving Affordable Health Care: How Bipartisan Efforts Can Balance Spending and Access

Healthcare is a significant expense for families in the U.S. and for the federal government, which subsidizes insurance for many Americans. Given these costs, it’s essential for families and taxpayers to get value from their spending. Experts from organizations like the American Enterprise Institute and the Brookings Institution see potential ways to reduce healthcare costs while ensuring necessary care remains accessible. Here, we discuss four impactful reforms that could gain bipartisan support:

1. Site-neutral payments in Medicare
2. Limiting employer-sponsored insurance tax breaks for high-income workers
3. Implementing competitive bidding in Medicare Advantage
4. Restraining healthcare consolidation

These policies were chosen based on their potential savings for the federal budget, their overall impact on healthcare, and their appeal across party lines. While we believe that savings from these reforms should primarily go toward reducing federal deficits, there is caution about how these savings are allocated.

Site-Neutral Payments in Medicare

Medicare currently pays hospital outpatient departments (HOPDs) about 2.5 times more than it does for similar services in independent physician offices. This discrepancy doesn’t make sense for simpler procedures like imaging or lab tests. According to the Medicare Payment Advisory Commission (MedPAC), patients in both settings experience similar outcomes, yet HOPDs benefit from inflated payments. This leads to higher costs for Medicare beneficiaries and taxpayers, as patients pay 20% of these rates from their pockets.

By adopting site-neutral payments for basic services, Medicare could save significantly. MedPAC estimated that this change could have saved Medicare $6.6 billion and reduced beneficiary costs by $1.7 billion in 2019 alone. Meanwhile, the Congressional Budget Office anticipates similar reforms could cut deficits by $157 billion between 2026 and 2034.

Limiting Tax Breaks for High-Income Workers

The tax exclusion for employer-sponsored insurance (ESI) is outdated. While it has increased insurance coverage, it primarily benefits higher-income individuals. The Treasury projects this tax break will cost $5.2 trillion over ten years, with 88% of its benefits going to households with above-median incomes. A reasonable adjustment could save around $0.5 trillion in federal revenues while ensuring that middle and lower-income families are not negatively impacted.

Limiting this tax preference wouldn’t significantly affect insurance take-up, but it could encourage cost control among higher-income workers, leading to more prudent healthcare spending by employers.

Competitive Bidding in Medicare Advantage

Medicare Advantage (MA) plans cost about 22% more than traditional Medicare. While offering better benefits, the additional spending does not translate to equal value for enrollees. Implementing a competitive bidding system could efficiently reduce MA payments based on bids rather than on traditional Medicare spending. Such measures could yield substantial savings annually.

Restraining Healthcare Consolidation

The consolidation of hospitals has reshaped the healthcare landscape, decreasing independently operated hospitals from 90% in 1970 to 33% in 2019. Mergers often lead to significant price increases—sometimes by 20% or more. This not only raises healthcare costs but also strains the federal budget by increasing tax subsidies for private plans. A small drop in hospital prices could save the federal government billions.

One proposed strategy is to give hospitals in highly concentrated markets a choice: keep their consolidation and accept price caps or divest some of their holdings. While this plan carries risks, it might effectively reduce prices in stubbornly high-cost areas.

A Bipartisan Path Forward

These four proposals are not definitive solutions but are practical steps that could save taxpayers over $500 billion in ten years while still ensuring access to quality care. By focusing on efficiency and cost-control measures, these reforms could balance budgetary concerns with the need for healthcare accessibility. The shared insights stem from collaboration between the American Enterprise Institute, Brookings Institution, and Bipartisan Policy Center, highlighting potential for bipartisan support.

For more in-depth data and research, you can explore the resources from the Congressional Budget Office and MedPAC.

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