The Refocused Health Policy Sandstorm

Kate Dixon, M1, Class of 2023

The world of health policy has been consumed with the concern of drug prices – just absolutely and utterly offended by the list price of brand name drugs. How could you not be? When you have drugs like Zolgensma – a brand new drug approved to treat spinal muscular atrophy – running $2.1 million for a single treatment course, it’s pretty easy to throw blame at Big Pharma for the egregious state of the United States’ health care spending. However, when you zoom out and compare drug spending to other expenditures in the vast and complex world of US health care, it becomes pretty clear where the true financial abuse is present – Big Name Hospitals.

During my time in DC, I had the opportunity to complete an analysis of hospital prices alongside health care policy expert Tara O’Neill Hayes….and the results were astonishing. We found that hospital costs in the United States account for nearly 40 percent of personal health expenditures. And this is not because of their heavy utilization, it is because of the excessive price increases. From 2007 to 2014, in-patient care at hospitals grew 42 percent.

Contributing factors for these price increases include increased facility fees and hospital consolidation. We found that the areas in which there was the least competition, hospital prices increased by as much as 65 percent. Many hospital markets have sold this monopolization as being beneficial to the patient, selling themselves as a method to consolidate and streamline care. Further analysis proved this argument false, as quality of care was often found to decline with increased consolidation and prices.  

We can’t entirely blame hospitals for the increased prices. We set them up for this vertical and horizontal consolidation through policies enacted over the years – it would be illogical of them not to take advantage given our capitalistic health care environment. However, if we are serious about bringing down the cost of care and eventually achieving universal health care, it is imperative we begin with policies that reduce the abuse of hospital pricing.

All of this is not to suggest that prescription drug prices are not a pressing policy challenge. Drug costs are an understandable focus of health-policy conversations…It would be worthwhile, however, for policymakers not to lose sight of the larger health care spending picture.

Check out the rest of Tara’s great work for more information on health care spending – both in the drug and hospital space – at American Action Forum.

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