How to Contain Healthcare Costs

We’re well into the second Trump administration, yet efforts to address one of the country’s most pressing problems have amounted to a lot of talk and little meaningful action.

Economist worries about healthcare cost growth began when national health spending topped 6% of gross domestic product (GDP) in 1970. President Nixon persuaded Congress to pass the Health Maintenance Organization (HMO) Act and the Employee Retirement Income Security Act (ERISA; which freed large companies with employer-sponsored health plans from state insurance regulations), to introduce “market forces.” They worked about as well as everything else since: not so much. We spent 18% of our GDP on healthcare in 2024.

Now affordability questions are everywhere. Can I afford a quadrupled insurance premium? Can I pay for life-saving care if I’m uninsured? Can I find a specialist who will take my child’s insurance? Can rural hospitals afford to stay open? Do we really want to continue sacrificing better schools, nutrition, roads, and housing so we can pay at least 50% more for healthcare than the rest of the world?

Like Nixon before them, politicians today agree that something must be done but can’t seem to agree on what should be done. Republicans want to shrink public insurance programs and shift costs to emergency departments and patients, while Democrats want to protect the public from high insurance prices with debt or tax-financed subsidies. Neither approach gets at root causes, and will fail (again) as both are shifters, not reducers.

Historically, we’ve considered serious policies with teeth and always chickened out. The Affordable Care Act (ACA) included an Independent Payment Advisory Board with the power to reduce Medicare spending unless Congress passed an alternative strategy within 60 days. The ACA also included a “Cadillac tax” on expensive employer-sponsored plans, to force large employer support for private sector payment reforms. Both of these provisions were repealed before being implemented. Too scary for the threatened special interests, which pressured Congress to excise them.

Which makes our first point. Sustainable healthcare cost growth will require a new policy environment, but sensible laws cannot pass and be implemented until members of Congress no longer need huge campaign contributions to survive. Campaign finance reform must precede effective health cost containment. Period.

Citizens United, the Supreme Court case that fundamentally changed U.S. campaign finance, is lamentable, but not a death sentence for our health system. There are clever ideas that could reduce the power of special interests, by using state charters to rein in corporate political spending. Importantly, this could be passed by citizens in state ballot referenda. This is key since many state legislators are also afraid of health lobbyists. If elected officials don’t represent the people, the people have to find a way to make them — and the Montana Plan looks like a promising pathway. Some members of Congress would welcome this freedom to act in the public interest.

Once Congress is free from lobbyists’ thumbs, it can face point number two: organizations with the power to reduce health prices do not typically gain by lowering them. Drug companies, insurers, hospital systems, and some specialist groups all have sufficient market power to frustrate “payment reform” tinkering.

A Congress freed from lobbyist power can admit that it needs technical help to change the pricing norms of American healthcare. It starts with legislation creating the power to set all healthcare prices, yes, all-payer rate setting, with enough funding for technical staff to carry it out. There are plenty of ideas and examples of how this could work in conjunction with states and the private sector. This technical staff will need to continually re-earn the trust of the American people by conducting its business in public and allowing all voices to be heard before final recommendations are made for Congressional approval or revision within reasonable time frames. The Defense Base Realignment and Closure Act of 1990, essentially a transparent deus ex machina, is a useful precedent to revisit.

If we truly want a sustainable health system that serves all Americans, hard choices will have to be made that balance sometimes competing and sometimes complementary interests of clinicians, hospitals, taxpayers, and patients. Congress needs technical help, technocrats need transparency and oversight to explain their choices to a skeptical but hopeful public, clinicians need to focus on patient care, and Americans need leadership to set us on a sustainable path.

Are we up to the task? The alternative is the growing abyss of debt and inequities. If we cannot muster the will to fix campaign finance enough to enable Congress to act boldly, then buckle up buttercup, for only a shrinking share of us will be able to afford comprehensive healthcare in this country, forever.

Len Nichols, PhD, and Paul Hughes-Cromwick, MA, are semi-retired health economists, with careers spanning academia, government, think tanks and business. They have a combined 70-plus years of analysis, commentary, and testimony on health reform plans, successes, and failures.