Cutting Health Care Costs

Jun 18, 2023

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President Biden is making health care a key aspect of his reelection pitch.

By David Leonhardt and Ian Prasad Philbrick

As his re-election effort gets underway, President Biden is signaling that health care — and particularly the cost of it — will be central to his campaign.

“We’re taking on powerful interests to bring your health care costs down,” he has said. “I’m just tired of seeing Americans ripped off,” he said last month. Tomorrow, he will hold an event at the White House at which he is expected to announce the first 10 drugs that will be part of a new program in which Medicare officials can negotiate with pharmaceutical companies to reduce drug prices.

Biden is emphasizing the cost of health care partly because it has been one of his administration’s biggest priorities, even if other policies — such as those on the climate and infrastructure — receive more attention. His administration has reduced the cost of hearing aids, reduced the cost of health insurance for people who buy it though an Obamacare exchange and reduced an array of expenses for Medicare recipients.

“Millions of people benefit from the health care provisions,” Larry Levitt, an executive vice president at KFF, a health care research group, told us. Some people, he added, will save “a lot of money.”

Biden and his aides understand that these policies are popular with swing voters, who, as this newsletter has described before, tend to lean left on economic issues while being more conservative on many social issues. That’s particularly true of swing voters who don’t have a four-year college degree. The president has described his health care policies as part of “Bidenomics in action.”

“If you look at the polling data, it’s overwhelmingly popular, what we’ve proposed,” Biden said earlier this year. “Matter of fact, it’s a hell of a lot more popular than I am.”

Today’s newsletter delves into the specifics — and some of the criticisms — of Biden’s health care agenda.

The Inflation Reduction Act — a law that Biden signed last year, centered on clean-energy funding — also includes measures to lower drug costs for Medicare recipients. Virtually every American age 65 and older is on Medicare, and many will save hundreds of dollars a year in out-of-pocket expenses. Those who spend the most on drugs will likely save a few thousand dollars a year, according to KFF.

Where do those savings comes from?

As of this past January, the law caps a Medicare recipient’s out-of-pocket spending on insulin at $35 per month. The cap will save about 1.5 million Americans almost $500 a year on average.

A provision allows Medicare recipients to receive some vaccines, like those for shingles and tetanus, at no charge.

The law caps a recipient’s total spending on prescription drugs at $2,000 a year, although the provision will not take effect until 2025, after the upcoming presidential campaign.

The law penalizes pharmaceutical companies that increase drug prices faster than the overall rate of inflation; in recent years, half of the drugs Medicare covered would have qualified. The law also includes the policy that allows Medicare officials to negotiate with pharmaceutical companies to reduce prices.

Those last couple of provisions will probably have a bigger effect on the government’s health care spending than on household spending. But less government spending still benefits Americans in the long run by reducing the need for taxes.

People under 65 don’t benefit as much from Biden’s agenda, but many do benefit to some degree:

The Inflation Reduction Act increased tax subsidies for Americans who get health insurance through the Obamacare exchanges. More than 13 million people will each save about $800 a year on average. The policy is temporary, expiring in 2026.

An executive order that Biden signed in 2021 led the F.D.A. to allow drugstores and other retailers to sell hearing aids over the counter. The change reduced the cost of hearing aids by more than half. Before the change, the average cost of hearing aids was about $5,000.

Biden is trying to close some loopholes that some hospitals and insurers have used to continue sending large, unexpected bills, despite a bipartisan 2020 law, signed by Donald Trump, to prevent the practice.

The underlying reason for Biden’s push is that Americans pay more for medical care than the citizens of any other country. There are several causes, but many experts believe that the main factor is simply that the U.S. government doesn’t prevent drug companies, hospitals and insurers from charging high prices. An influential 2003 article in an academic journal made this argument bluntly in its headline: “It’s the prices, stupid.” These high prices translate into higher profits for health care companies.

U.S.

$12,914

Germany

7,383

Sweden

6,262

France

6,115

Canada

5,905

Australia

5,627

U.K.

5,387

Japan

4,666

U.S.

$12,914

Germany

7,383

Sweden

6,262

France

6,115

Canada

5,905

Australia

5,627

U.K.

5,387

Japan

4,666

Note: Data for Australia and Japan from 2020; others from 2021. All are in U.S. dollars.

Source: Peterson-KFF Health System Tracker

By The New York Times

Still, there are some potential advantages to the U.S. system. High prices create an incentive for companies to develop new drugs, some of which save lives. Four of the world’s five largest drug companies are based in the U.S. The pharmaceutical industry warns that lower Medicare prices may hamper innovation, although many independent analysts — including those at the nonpartisan Congressional Budget Office — predict any such effect will be minor.

Another possible unintended consequence is that drug companies will respond to lower Medicare prices by increasing prices for people on private insurance. If that happened, it would effectively shift money from younger Americans to older Americans, and would probably worsen economic inequality.

Most experts are also relatively sanguine about these potential downsides. But, as Levitt told us, “The truth is, we don’t know.”

Biden has suggested that if he wins re-election, he will try to take more steps to reduce medical costs. Among them: making Obamacare subsidies permanent and capping insulin costs for privately insured Americans. “There’s more to do,” he has said.

Medicare will negotiate with drug companies over the first 10 drugs next year, HuffPost’s Jonathan Cohn explains. The negotiated prices will take effect in 2026.

Some older Americans are being charged hundreds of dollars for R.S.V. vaccines.

Hundreds gathered in Moscow to mourn the mercenary leader Yevgeny Prigozhin, a sign of his Wagner fighters’ continued appeal among Russians.

The Wagner group, once powerful, faces an uncertain future with its leader and its founding commander dead.

Jacksonville, Fla., is again confronting its long history of racism after a white gunman killed three Black people in a Dollar General store.

The gunman was held by the authorities in 2017 for a psychiatric evaluation. He bought the guns he used in the shooting this year, legally.

Angela Michelle Carr, 52, was among the victims. She was someone who always extended an invite to cookouts and family events.

Gina Raimondo, the commerce secretary, is in Beijing to discuss technology and business with Chinese officials.

As Hyundai expands electric vehicle production in the U.S., labor unions are pushing the company to protect and train workers.

Egypt’s government is razing ancient tombs and gardens for urban renewal.

People feel forgotten in northwestern Syria, where an earthquake six months ago compounded the damage of years of civil war.

Scientists and educators are searching for ways to improve air quality in schools.

The federal government has been investigating nearly 5,000 pilots accused of falsifying medical records to keep flying, The Washington Post reports.

Tropical Storm Idalia is expected to reach Florida’s Gulf Coast this week as a Category 2 hurricane.

Trump and his co-defendants in Georgia are fighting about when and where to hold the trials.

The Air Force is starting to use A.I. to fly robot aircraft. But there are concerns about how much autonomy to give a lethal weapon.

Jimmy Carter’s time in hospice is a lesson for a country that has long been uncomfortable with mortality, Dr. Daniela Lamas writes.

Gail Collins and Bret Stephens discuss Vivek Ramaswamy.

Here’s a column by Nicholas Kristof on backpacking.

Octopus’s garden: The creatures are thriving in an underwater hot spring.

Snap judgment: Scientists are working on the first dictionary of crocodile communication.

Metropolitan Diary: Putting the sand in sandwiches.

Lives Lived: Claude Ruiz-Picasso was a photographer and son of Pablo Picasso who ran his father’s estate after being legally recognized as his heir. He died at 76.

Simone Biles: Just weeks after her return to elite contests, the 26-year-old won a record eighth U.S. all-around title and became the oldest gymnast to win the championship.

A golfer’s ascent: Viktor Hovland is ready for superstardom after his dominant performance at the Tour Championship yesterday.

U.S. Open: The first round of the tournament starts today. Novak Djokovic is back in New York after missing last year’s tournament because of Covid vaccination rules.

Popcorn for puppies? A cinema chain in Britain is welcoming dogs to select screenings, starting with “Strays,” a movie that follows a group of dogs (voiced by actors including Will Ferrell and Jamie Foxx) that unite to seek revenge on an owner.

The moviegoing dogs aren’t allowed on the seats, and their owners must clean up any accidents. But it’s a still a good deal: They don’t need their own tickets, and they don’t need to turn off their cellphones.

Museums are rolling back perks for executives, including luxury housing. See the executives’ pay and other benefits.

Stuff meat and vegetables into egg foo young.

Open these cans of tomatoes for sauces.

Clean your keyboard and mouse.

Take our news quiz.

Here is today’s Spelling Bee. Yesterday’s pangram was amicably.

And here are today’s Mini Crossword, Wordle and Connections.

Thanks for spending part of your morning with The Times. See you tomorrow. — David and Ian

P.S. Are you a resident of Lahaina, Hawaii, whom land speculators have approached in the aftermath of this month’s wildfires? Times journalists want to hear from you.

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David Leonhardt writes The Morning, The Times’s flagship daily newsletter. He has previously been an Op-Ed columnist, Washington bureau chief, co-host of “The Argument” podcast, founding editor of The Upshot section and a staff writer for The Times Magazine. In 2011, he received the Pulitzer Prize for commentary. More about David Leonhardt

Ian Prasad Philbrick is a writer for The Morning newsletter. More about Ian Prasad Philbrick

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