The rising cost of health insurance coverage has imposed a heavy burden on our nation. Over the past decade, insurance premiums for working families have grown three times faster than have wages. Small businesses have seen health care become one of their biggest operating expenses. And rising state and federal spending on health programs has crowded out critical investments in better schools, new roads and other areas.
If health care costs continue to rise unchecked, they will threaten America’s ability to compete and will become unaffordable for most families. One of the major reasons we passed the Affordable Care Act was to bring down costs, something the health care law does in three ways: by increasing insurance-market competition, assisting those who can’t afford coverage, and tackling the underlying cost of medical care.
The 2010 reform law gives Americans a truly competitive health insurance market. In the past, insurers could get away with huge premium hikes because there was little transparency or accountability. People saw their insurance rates rise but had little way of knowing whether the increase was justified. In a market where consumers had little information, prices and insurance-company profits soared.
The Affordable Care Act is putting consumers back in charge with two new rules that shine much-needed light on the health insurance market. The first requires insurers to justify premium increases of more than 10 percent and to post that information online. The second is the “80-20 rule,” which requires insurers to spend at least 80 percent of premium dollars on health care, rather than on advertising or executive pay. If they don’t, you get a rebate. Together, these changes are creating a health insurance market where premiums stay in check and Americans get their money’s worth .
The Affordable Care Act also makes health plans more affordable for small businesses and individuals by creating a marketplace of state-based insurance exchanges. In this new marketplace, consumers will be able to see all their options in one place. Health plans with similar benefits will be compared on an “apples to apples” basis, creating a new level of competition that drives down costs even further. And under the law, Americans with low incomes will be eligible for tax credits to make sure they can afford coverage. Insurers will also be prohibited from using “pre-existing conditions” to lock people out of the market.
But helping individuals and small businesses afford health insurance is only part of the answer. All Americans with health coverage, whether they receive it directly or through their employer, have faced unchecked increases for many years because of rapid growth in the underlying cost of care. The Affordable Care Act gives us tools to reduce costs by promoting better health and providing better care, especially in Medicare and Medicaid, which can be tremendous forces for positive change across the entire health care system.
The law emphasizes prevention because we know it is far less expensive to prevent disease than to treat it. Under the Affordable Care Act, many preventive services are available without cost-sharing so patients avoid chronic conditions and the painful and costly complications they often lead to.
In addition, several initiatives in the health care law are designed to support physicians, hospitals and other providers in their lifesaving work. For example, the Partnership for Patients is a nationwide effort to reduce patient infections and hospital readmissions. Together with hospitals and clinics, we are helping to share and replicate the most significant improvements that some of the country’s best hospitals have already achieved. Simple activities such as hand-washing and discharge planning, done systematically, can save lives and money. By helping these innovations spread, the Partnership for Patients alone could reduce costs to Medicare by $50 billion in the next 10 years.
The health care law gives us dozens of tools to improve chronic-disease management, coordinate care among multiple providers and foster innovation. Experts who have studied the law, from the Medicare trustees to the independent Congressional Budget Office, agree that it will put the brakes on skyrocketing Medicare costs. And last January, 272 of America’s top economists wrote to the House Budget Committee that the ACA “contains essentially every cost-containment provision policy analysts have considered effective in reducing the rate of medical spending.”
It won’t be easy and it won’t happen overnight. But at a time when some claim that our only options are to allow health care costs to continue to skyrocket or to make some of the most dramatic cuts to our health care programs ever proposed, the Affordable Care Act provides a better way forward.
Kathleen Sebelius is U.S. secretary of health and human services.