Chairman Alexander: Up to Half of Health Care Spending is Unnecessary

Posted on December 11, 2018

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** Click here for video of Senator Alexander’s remarks **

“The five hearings we held reminded us of something else we should agree on: one major reason for the unnecessarily high cost of health care is that the health care system does not operate with the discipline and cost saving benefits of a real market. Too many barriers to innovation drive up costs. And most Americans have no idea of the true price of the health care services they buy—which also drives up costs.”

—Sen. Lamar Alexander 

WASHINGTON, December 11, 2018 — Senate health committee Chairman Lamar Alexander (R-Tenn.) today said “Up to half of health care spending is unnecessary.”

Alexander today sent a letter to leading health care experts at the American Enterprise Institute and the Brookings Institution, economists, doctors, nurses, patients, hospital administrators, state regulators and legislators, governors, employers, insurers, and innovators asking them to identify specific ideas about how to reduce health care costs for taxpayers, employers, and families after concluding a series of five Senate health committee hearings exploring the same topic.

“The five hearings we held reminded us of something else we should agree on: one major reason for the unnecessarily high cost of health care is that the health care system does not operate with the discipline and cost saving benefits of a real market. Too many barriers to innovation drive up costs. And most Americans have no idea of the true price of the health care services they buy—which also drives up costs,” Alexander said in a speech delivered on the Senate floor.

“Last July, at the Senate health committee’s second in a series of five hearings on reducing health care costs, Dr. Brent James, a member of the National Academy of Medicine, testified that 30 percent, and probably as much as 50 percent, of all the money spent on health care is unnecessary. That startled me, as I hope it startles you,” Alexander continued.

“So I asked another witness, Dr. David Lanksy, from the Pacific Business Group on Health, if he agreed with Dr. James’ estimate, and he said yes. And then at our next hearing not one witness on our distinguished panel disagreed with Dr. James. That means we are spending as much as half of all that we spend on health care on unnecessary treatment, tests, and administrative costs.”

“For the last eight years, most of the debate about health care has not been about this extraordinary fact that we may be spending up to half of what we spend on health care unnecessarily but instead on health insurance, and in fact on six percent of the health insurance market. The truth is we will never have lower cost health insurance until we have lower cost health care. Instead of continuing to argue over a small part of the insurance market, what we should be discussing is the high cost of health care that affects every American.

Background:

At the first hearing of the series, the committee established a common understanding of how much health care costs; at the second hearing, the committee explored ways to reduce unnecessary health care spending; at the third hearing, the committee focused on ways to reduce the administrative burden on doctors and hospitals; and at the fourth hearing, the committee focused on finding ways to improve access to information about the cost and quality of healthcare for patients. At the fifth and final hearing of the series, the committee examined what the private sector is doing to encourage innovation and what Washington can do to get out of the way to lower costs.

Alexander concluded his remarks today saying: “I am asking for as many specific legislative, regulatory, or sub-regulatory solutions as possible, in writing, by March 1, 2019. The federal government is not going to lower the cost of health care overnight, but I believe there are steps we can take that would make a real difference to American families. That might be two or three big steps, or a dozen smaller ones, but we shouldn’t let this opportunity to make progress pass us by.”

Click here for a full video of Alexander’s floor speech, and here for a transcript of Alexander’s prepared remarks.

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Lamar Alexander is the senior senator from Tennessee, and he serves as chairman of the Senate Health, Education, Labor and Pensions Committee, and the Senate Appropriations Subcommittee on Energy and Water Development. For his full biography, click here.