Health Policy Updates: October 3 2015

Recently, I’ve given some attention in this space to growing out-of-pocket costs to patients. This week, Health Affairs posted a great summary of the history of this trend.

“Overall out-of-pocket spending has been on the rise for some time, growing nearly 40 percent from 1996-2005. While it has since slowed due to enactment of the Affordable Care Act (ACA) coverage provisions, National Health Expenditure projections call for increased growth over the next decade.”

There has been a lot in the popular press recently about high drug prices, especially increasing prices on previously low-cost generics. Some good news on that front is that such media attention actually works – drug companies feel the pressure to keep their prices low, and to some extent they do just that. TheIncidentalEconomist blog just covered a paper that examined how pharmaceutical companies responded to anger over drug prices during the health reform debates in the 1990s, and saw such an effect back then.

“From 1991 through 1996, overall CPI growth was steady, but by all drug measures, drug price growth fell, and dramatically so just as health reform was being formulated.”

Heard of the “Cadillac Tax”? It is a part of the ACA that applies a new tax to high-cost private health insurance plans. The idea is that such plans are likely contributing to overall growth in health care costs by subsidizing patients to get more, potentially unneeded care. So, this tax would both raise money for the government to pay for the law, and also go some small distance in controlling health care costs. Economists, both liberal and conservative, have tended to like the tax for that reason.

Unfortunately, if something is a good idea, that must mean politicians hate it, right? There is currently a bipartisan effort to repeal the Cadillac tax in Congress. Economists are pleading with them NOT to do so, and have sent a letter to that effect.

“‘The so called Cadillac tax is about the only thing in the bill I liked,’ said Robert Helms, an economist and resident scholar with the American Enterprise Institute, who said he was not asked to sign the letter. ‘I’d hate to see them repeal it.’

Henry Aaron, an economist at the Brookings Institution, said that the Affordable Care Act is an unquestionable success. He also agrees that the tax is a good thing.”



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