Speeches & Floor Statements

Full Committee Hearing: How to Reduce Health Care Costs: Understanding the Cost of Health Care in America

Posted on June 27, 2018

  • For the last seven years, Republicans and Democrats have been locked in a debate over health insurance, primarily the individual insurance market, which is important but is where only six percent of insured Americans get their health insurance.
  • But the hard truth is that we will never get the cost of health insurance down until we get the cost of health care down.
  • So today, we are beginning a series of hearings looking at how to reduce health care costs, including examining administrative costs, waste, how to improve transparency, private sector solutions, and other important issues as they come up.

What we spend on health care 

  • According to the World Bank the United States produces 24 percent of all the world’s wealth.
  • And according to the Centers for Medicare and Medicaid Services (CMS), in 2016, we spent 17.9 percent of our Gross Domestic Product on health care, and CMS projects that share will rise to nearly 20 percent of our GDP by 2026. 
  • The United States spends a significantly higher percentage of our GDP on health care than other countries, however, I expect several witnesses here today will say we should be cautious about how we compare the United States economy to other countries around the world.
  • According to the Assistant Secretary for Planning and Evaluation at the Department of Health and Human Services, which is the health data office at HHS, we spent $2.2 trillion dollars on health care in 2006. This is projected to grow to $5.7 trillion in 2026 – that is a 159 percent increase.
  • Warren Buffett has called the ballooning costs of health care…“a hungry tapeworm on the American economy.”
  • What does this mean for families, businesses, and taxpayers?
  • According to the HHS health data office, in 2016, American families spent an average of $1,095 per person on their health care – up from $705 a person in 2000, not including insurance premiums. Most people don’t even know what they are paying for because their medical bills are so confusing. 
  • In 2016, according to the HHS health data office, private businesses and employees paid for over half the $3.3 trillion we spend on health care. Which is money that is going to increasing health care costs instead of paychecks and bank accounts.
  • And according to the Congressional Budget Office, American taxpayers spend more on health care programs than anything else, including our national defense and the National Institutes of Health.

Understanding the Cost of Health Care in America

  • The first step to reducing health care costs is to better understand the cost of health care in America and understand why health care in America costs so much more than it does in other countries.
  • The most obvious fact about health care costs, other than that they’re too high, is that they are indecipherable. 
  • Any one of us who has received a hospital bill in the mail or has tried to figure out their health insurance benefits has wondered what it all means.
  • And the complexity of the health care system not only means it is difficult to determine what is driving up the cost of health care but this complexity itself is driving up the cost of health care.
  • Over the last 18 months, the HELP Committee has had hearings on 4 different areas of health care spending:

1)                 The cost of prescription drugs – Why is the cost paid by patients rising and what can Congress do to help?

  1. We saw the complexity of the health care system in the list price and rebate process, which seem to benefit everyone but the consumer.

2)                 Wellness programs – There is a consensus that a healthy lifestyle helps people live longer and better lives, and reduces the nation’s health care costs.

3)                 340B Drug Pricing Program – According to researchers at New York University and Harvard, the New England Journal of Medicine, the 340B Drug Pricing Program incentivizes consolidation in the health care industry, which reduces competition and drives up costs.

4)                 Electronic health records – The federal government has spent over $38 billion incentivizing the adoption of electronic health records to help share data, improve care, and reduce costs only to find that electronic health records  do not work very well, add tremendous administrative burden to doctors, and are expensive to maintain and update.

Setting the Table

  • Now, the Committee is going to focus on ways to reduce health care costs, and before we come up solutions, we must identify the drivers of health care spending.
  • Who is spending all of this money on health care?
  • What is the money being spent on? 
  • When in a person’s life do they spend money on health care?
  • Where does the money go?
  • According to the HHS data office, 31 percent of the $3.3 trillion we spent on health care in 2016 was for care in hospitals;
  • 20 percent was spent on physician and clinical services;
  • Five percent on nursing care and home health; and
  • 10 percent was for the prescription drugs we pick up at the pharmacy. But according to witnesses at our drug pricing hearings, the percent we spend on prescription drugs is closer to 17 percent when we account for prescription drugs given in a setting such as a hospital or nursing facility.

Conclusion

  • The average American is shocked by the cost of their health care, they don’t understand what they are being charged for and why it costs so much, and they want better answers.
  • That is what I heard from Todd, a Knoxville father, who recently took his son to an emergency room after a bicycle accident. His son was treated, Todd paid a $150 copay because the emergency room was “in-network” for his health insurance, and they headed home. 
  • So Todd was surprised when he received a bill for $1800 – because even though the emergency room was “in-network,” the doctor who treated his son was not.
  • Todd wrote me, trying to figure out why it is so hard to understand what health care really costs and said, “If I’m expected to be a conscientious consumer of my own health care needs, I need a little more help.”
  • Today we will take the first step toward reducing health care costs by understanding the cost of health care – to taxpayers, employers, and individuals like Todd.

 

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