A Way to Cut America's Outrageously High Healthcare Costs

Competitive marketplaces exist in health care, and consequently help to control healthcare costs. The government should capitalize on the expansion of competition in the healthcare industry.

President George W. Bush enacted Medicare Part D, which now offer over 1,000 plans to beneficiaries across the country. Furthermore, in the past 9 years, Medicare Part D has cost $197 billion less than government projections. This is largely due to the fact that plans have figured out how to stay profitable with lower bids by promoting the use of generic drugs.

Medicare Part D also allowed for competitive bidding for hospital beds, wheelchairs, oxygen equipment, and other devices used by seniors and paid for by Medicare. Medicare used to set prices according to a fee schedule, but now there is competitive bidding.

The Affordable Care Act will continue to expand Medicare Part D because of the free-market competition resulting in large savings. On average, expenditures for equipment declined by 42%, the government's actuary expects $26 billion in total government savings, and seniors will save more than $17 billion out-of-pocket by 2022.

Competition also moderates costs in Obamacare's health insurance exchanges. Kaiser Health News reports that in 34 states with federally operated exchanges, counties with no new insurers in the market had premiums that increased an average of 7%, while markets with at least one new insurer had premiums that only increased by 1%.

A couple of suggestions could promote more competition and reduce prices in healthcare. A board of experts could advise Medicare on how to handle competitive bidding properly. Also, Medicare Part C (the privately-run Medicare Advantage plans) should be pushed towards competitive bidding. Medicare Part C over pays, and this could be avoided if payments were correlated to what insurers actually bid to provide services to seniors. More competition in the exchanges could be stimulated by boosting enrollment, and price/quality could be monitored through only allowing a certain number of plans per insurer at each metal level based on premiums. Lastly, price and quality transparency would be ideal because it will allow consumers to choose the best value care and create competition among providers.

To read more from Fortune click here