President Joe Biden is pushing Congress to fight America’s growing healthcare costs. Rising health care costs could be the next big battle in his war against inflation, but he might not win by time for a reelection bid in 2024.
Hospitals and clinics experience substantial margin pressure during a pandemic. For example, CEOs for health care organizations in Michigan say the pressures have made their system less able to provide care for all patients. As such, economists, business leaders and health care experts are warning that wages, revenues and supply chain stress will push up costs for health insurance or out-of-pocket medical payments.
A recent forecast by The Federal Reserve Bank of Dallas predicts that health care inflation will double by 2023. Health insurance providers are starting to factor in escalating labor costs for hospitals and medical networks, which will gradually increase the cost of health care.
A dramatic spike in the cost of health insurance would have a major impact on all parties involved, including consumers, businesses, and government alike. This could spell trouble for Democrats as they have long been able to use their record of expanding health care access and reducing costs in policy battles with Republicans.
The president and congressional Democrats have already taken steps to address the problem of rising health care rates. Launched in August, the Inflation Reduction Act includes several provisions which may help to alleviate sticker shock while providing a way to control health care costs. But health care advocates and budget hawks say it won’t be enough to remedy the significant deterioration in the affordability and quality of coverage.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, an organization that works to reduce the deficit, says that “consumers are going to be willing to pay a pinch per item they buy” if they are aware of the consequences. “The problem is nobody’s taken the lead on this issue.”
If the price of healthcare continues to rise, employees might not be able to keep up with the additional cost and decide how they access care. Government institutions that are already burdened with expensive health benefits may be forced to raise prices or get rid of them, which will make labor unions angry.
White House officials have acknowledged that healthcare costs might rise in the short-term, but they’re optimistic that these prices will start to decline after few quarters. Jared Bernstein, a long-time advisor to Joe Biden, took this position in an interview with the press, noting that healthcare costs had already been slowly on the decline.
The White House is hoping that the new health care and climate law, which Biden signed in August, will bring down costs for taxpayers. This legislation is just one of the many steps that could be taken to lower healthcare costs, including Medicare and Medicaid.
“No party has been a bigger defender of the exchanges and Medicare and Medicaid than this party. When it comes to people with cancer, or diabetes, or high blood pressure who are working really hard… No one on the other side is even putting this in the universe as making health care any less affordable for them,” Bernstein said.
According to Stephen Stanley, Chief Economist at the bond trading firm Amherst Pierpont, “It feels like squeezing air in a balloon with a knot in it.” The government is trying to squeeze providers, but providers are trying to pass the costs along by raising rates on insurance companies.
When he was asked whether or not the economy as a whole gets lower medical prices from the company, he responded with “It’s unclear if that is the case.”
Millions of Americans have expressed frustration at the rising costs of health care, and it’s completely understandable. Until recently, inflation in the healthcare industry was relatively mild—compared to other sectors such as rent and consumer goods. But that’s only because it usually takes time for supply chain barriers to make their way into contracts which dictate what consumers and insurance plans pay for healthcare.
The recent pandemic has made it difficult for hospitals and nursing homes to find adequate staff because of the long-time labor shortages in the medical industry. The cost of pharmaceuticals, such as Covid-19 treatments, also rose as suppliers navigated shutdown orders and other issues following the epidemic.
Covid costs were at an all-time high and that created challenges for providers. They had to pay more for basic care like seeing a doctor and going to the emergency room, but their revenue was stalling because people put off elective procedures in response to Covid. Providers are moving forward with these challenges by negotiating higher rates when they renew contract with insurance providers.
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