In 2009, economist Dana P. Goldman supported the Affordable Care Act (ACA), primarily due to its promise to curb the escalating costs of healthcare. At that time, a report from the Institute of Medicine highlighted a staggering $750-$765 billion in wasteful healthcare spending annually, accounting for nearly 30% of all healthcare expenditures. Despite the ACA's initial success in expanding coverage, the promise of controlling costs has largely gone unfulfilled.
Analyses performed nearly a decade later revealed that wasteful spending now reaches approximately $1.6 trillion annually, maintaining that same 30% proportion of overall healthcare costs. Goldman expresses regret for endorsing the ACA as he reflects on the numerous provisions aimed at cost control that were significantly weakened or eliminated by Congress over time.
The Independent Payment Advisory Board, which was intended to automatically implement Medicare cuts when spending surpassed target growth rates, was repealed in 2018 without ever becoming operational. Similarly, the “Cadillac tax,” designed to deter excessively generous insurance plans, faced repeated delays and was eventually repealed in 2019. As lawmakers dismantled essential components of the ACA, the momentum for innovative spending solutions slowed. Efforts aimed at reducing fee-for-service care have met with varied success, as the stranglehold of healthcare consolidation continues to drive prices upward.
Goldman points out that the ACA surprisingly lacked a robust focus on affordability, likely exacerbating the trend of consolidation within the healthcare sector. This consolidation further raised prices and reduced competition. The regulations under the ACA inadvertently favored large insurance carriers, which gained negotiating power against providers. Additionally, the ACA’s intent to improve care coordination was misaligned, as it allowed hospitals to justify mergers and acquisitions of physician practices — bolstering their market dominance.
Confronted with rising costs and restrictions on examining wasteful spending, many health economists hesitated to investigate the ramifications of healthcare consolidation. Heightened political sensitivity surrounding the costs associated with end-of-life care created a narrative that discouraged rational discussions around the value of treatments and interventions, often branded under the derogatory term “death panels.” This term, famously coined by former Alaska Governor Sarah Palin, illustrated a deep-seated mistrust regarding government roles in healthcare.
In a prior op-ed for the New York Times, Goldman challenged the prevailing perceptions by asserting that targeted cost-containment strategies should prioritize high-value treatments over routine yet ineffective interventions. Now, years later, he argues that effective healthcare reform proposals — including those like “Medicare for All” — are unlikely to succeed without substantial cost-control measures.
While the current administration’s emphasis on combating fraud lays a good foundation, more comprehensive strategies must be instituted. The establishment of an independent Institute of Health Technology Assessment, as suggested by the USC Schaeffer Center for Health Policy & Economics and the Aspen Institute, would address these gaps. This proposed institute would consolidate the expertise of scientists, economists, and patients to rigorously evaluate the effectiveness and value of medical innovations and practices.
It’s crucial that Congress reconsiders the role of existing bodies like the Patient-Centered Outcomes Research Institute (PCORI), which has contributed substantial funding to healthcare studies. However, PCORI continues to be restricted from conducting formal cost-effectiveness analyses, prohibiting it from quantifying health benefits on a monetary basis. This limitation signifies the ongoing struggle to integrate value-based solutions into health policy while navigating political trepidation.
Goldman no longer endorses legislation as he did during the ACA discussions, but he remains open to supporting initiatives that would empower the proposed Institute of Health Technology Assessment or revise PCORI’s mandates to allow for critical analyses of cost versus benefits. Cost containment in healthcare demands innovative and pragmatic solutions, emphasizing transparency, effectiveness, and patient value to navigate away from inefficient spending practices.