Why do healthcare costs continue to rise? A policy expert weighs in.

Recent national polling from KFF, a nonpartisan health policy association, shows that the rising cost of healthcare is now the main concern for Americans in the United States. Two-thirds of the public say they worry about being able to afford health care for themselves and their family, ranking higher than concerns about affording utilities, food and groceries, housing and gas.

To understand the implications of rising healthcare costs and explore policy solutions, we asked McCourt’s Health Policy Institute Research Professor Emeritus Jack Hoadley five questions on the impacts of higher expenses.

Expert insights from a leading health policy researcher

Jack Hoadley, Research Professor Emeritus

Hoadley’s health policy expertise spans several areas, including Medicare, Medicaid and private health insurance. His recent work has included research on consumer protections around surprise medical bills; access, costs and coverage for prescription drugs; Medicaid coverage for children and families in small towns and rural areas and the impact of health system concentration in certain markets.

Q&A with Research Professor Emeritus Jack Hoadley

A: Yeah, it definitely is a concern. People struggle to figure out exactly what it’s going to cost them to get healthcare services, even for people with insurance. They may have a high deductible and have to pay out of pocket until they meet their deductible.

They go in, and they don’t know what something’s going to cost in advance. There have been some proposals to do a better job of giving people advance information, but some of those either haven’t ever been put into effect, or they’re not completely solving the problem.

I think it’s even more of an issue that some people are struggling even to have health insurance at all. Of course, we were doing much better on that just a couple of years ago. Some of the things that we’ve seen happen in the last year or so have made it harder for people to get themselves insured, and that puts even more of a challenge in front of them.

A: Higher premiums are obviously a big part of that, but it also gets more complicated. When people see that higher premium, they may instead pick a less comprehensive insurance policy, or none at all.

I want to focus on those less comprehensive policies. They may suddenly elect to purchase a catastrophic plan. We’ve heard encouragement from this administration on that, saying those [less comprehensive policies] are good alternatives for people. They are less costly on a premium basis, but they’re going to saddle you with high deductibles, where, for most people, you may have to pay all of your expenses out of pocket.

That’s going to put people in tough situations where they have to choose between going to see the doctor when they really need to and having to pay out of pocket, or saying, maybe I can postpone this. That can have health consequences.Some people are also seeking out other substandard forms of health insurance, and they can find themselves caught when they are confronted with a more serious health care situation.

A:  Rising costs definitely affect everybody, regardless of where you get your insurance. When we see hospitals buying up physician practices, there’s often a facility fee added when you go to your doctor’s visit. The hospital may justify that by saying they have more backup contingencies if something goes wrong during your visit. But that’s not what’s going on with most visits. Mostly, we’re seeing doctors for routine conditions that need to be monitored. The doctor is the one doing that, and they don’t need that backup. That facility fee ends up being an additional cost to you. Those are the kinds of things that are adding to the cost.

Part of the rise in costs is always the increased capabilities of medicine. We have a lot of new prescription drug treatments available now, so that we can treat conditions with drugs that maybe we couldn’t have done a few years ago.

The GLP-1 drugs to treat obesity and related chronic conditions like diabetes and cardiac disease are treatments that weren’t available just a couple of years ago, but they come with a high price tag, and sometimes they’re not covered by insurance. While people are benefiting from getting those treatments if they can afford them, they are another factor adding to cost. Some of these new costs are unavoidable because we do want to see those advances, but the pricing of those things is where the challenges lie.

 A: Some states have tried to take a closer look at hospital prices. I’ve worked a lot on surprise medical bills — bills that come up when you see an out-of-network provider in an emergency or when you’re already in the hospital for an in-network procedure, but the anesthesiologist is out of network.

One piece not addressed in the original federal legislation passed in 2020 was protections for ground ambulance trips. You don’t pick what ground ambulance comes to treat you, and those sometimes turn out to be out of network, leading to surprise bills. We now know there are 22 states that have passed laws to help protect people from surprise medical bills for ground ambulance services.

States can only go so far, but they’re trying to fill a gap that hasn’t been dealt with at the federal level. Some states have also taken action on facility fees to try to limit them or make them more transparent so that you’re aware you’re going to get these extra bills and can make a more informed decision about where to get your healthcare.

Indiana enacted some laws recently to look more closely at hospital pricing. It’s too early to know how effective that will be, but hospitals can often be drivers of higher cost.

Although l, when we are, it’s one of the most expensive things we deal with. More transparency on hospital costs and trying to address them as a major source of health costs is something several states have looked at.

A: There’s really not one single reform. We’re in a political environment where it’s very hard to pass things. There are small steps that could be done. On surprise bills for ground ambulance trips, there are recommendations for how Congress could provide protections similar to the No Surprises Act to make sure that if somebody calls an ambulance, they’re not stuck with a big out-of-pocket bill. That issue has not generally been very partisan, and I’d love to see Congress step up and agree on that. It’s a small piece compared to larger hospital costs, but it’s something. 

Congress could also address facility fees. Some of the bigger issues, like the growth in middlemen organizations, are much harder. There was a little action on pharmacy benefit managers in the most recent budget bill, but there are many intermediary organizations that add cost to the system without necessarily providing much benefit, and those will be hard to address.

A: In some cases, hospitals and physicians contract with billing services or revenue management companies that are meant to help control billing and make it more efficient. But they come with added fees and are often about revenue maximization — coding encounters in ways that maximize the revenue they receive from the insurance company, which is eventually an added cost to the patient.

While that may be stated as helpful in addressing costs, in reality, it ends up adding costs to the system.

Pharmacy benefit managers, when they work right, can allow purchasers to exploit competition between brand drugs and find the lowest possible price. In reality, they often add costs because they take a slice of the action, collect fees, and maintain spread pricing between the list price and discounted price. Not all of that savings ends up in the hands of consumers.

The challenge is how to address this complex system without turning it into added profits for intermediary organizations.