Editing Openai/692cb885-da9c-8002-9696-e985fae204bd


{{DISPLAYTITLE:Healthcare financial model}}

''This conversation was exported from ChatGPT''<ref>{{cite web|title=Healthcare financial model|url=https://chatgpt.com/share/692cb885-da9c-8002-9696-e985fae204bd|publisher=ChatGPT|access-date=2025-11-30}}</ref>

== research ==
=== User: what could be a good financial model for the healthcare industry if all of the healthcare insurance companies were made… ===
what could be a good financial model for the healthcare industry if all of the healthcare insurance companies were made non-profit, all profits seized and distributed to (customers?), and what other mechanisms can you think of that can reduce the cost of insurance for enrollees ? 

please create a chart for convenience if you see fit.

=== Assistant: To build a useful financial model and explore cost-reduction mechanisms, could you please clarify a few things: ===
To build a useful financial model and explore cost-reduction mechanisms, could you please clarify a few things:
# Are we focusing on the U.S. healthcare system, or another country's?
# When you mention redistributing seized profits to 'customers', do you mean directly to policyholders as rebates, or reinvested to reduce premiums?
# Should the financial model be built from the perspective of government policy, insurance providers, or overall system economics?
# Are you interested in long-term sustainability or short-term cost-cutting?

With these details, I can provide a more targeted model and effective cost-reduction strategies.

=== User: 1. ===
# US 2. perhaps create a two tiered column to show the choices, pros and cons to either 3. system econ - a bit of both 4. both; i'm interested in you analyzing the top insurance companies' profits from the last 10 years since ACA was passed, and seeing what can be done with shareholder value if it is redirected somehow

=== Assistant: Great. ===
Great. I’ll analyze the financial performance—especially profits and shareholder value—of the top U.S. health insurance companies over the last 10 years since the Affordable Care Act (ACA) was passed. I’ll also model what a non-profit insurance system might look like if those profits were seized and redistributed to enrollees, including a chart comparing the pros and cons of different redistribution methods.

I’ll get back to you shortly with the findings. You’re welcome to keep chatting with me while I work on it.

=== User: Address this and propose fixes in an organized manner like above: ===
Address this and propose fixes in an organized manner like above: 

The systemic issues of high medical prices and administrative complexity would still need to be addressed to bend the cost curve substantially.

=== Assistant: To make the analysis more actionable, could you clarify a few details: ===
To make the analysis more actionable, could you clarify a few details:
# Should we focus on specific categories of medical pricing (e.g., hospital services, prescription drugs, physician fees), or take a broad view across all?
# Are you primarily interested in federal policy-level solutions, or should we also include state-level reforms and private-sector strategies?
# Would you like this structured as a continuation of the previous report – with charts, financial modeling, and reform proposals organized in sections – or more as a concise summary list of recommendations?

Once I have your preferences, I’ll deliver a structured policy and cost-reduction proposal focused on tackling high medical prices and administrative complexity.

=== User: 1. ===
# all 2. both 3. structured as a continuation please

=== Assistant: Got it. ===
Got it. I’ll build a structured continuation to the previous report, focused on addressing the two systemic challenges: high medical prices and administrative complexity. This will cover all major pricing categories and include both federal and state policy options, as well as private-sector strategies.

I'll organize the findings into actionable sections with supporting analysis. I’ll let you know as soon as it's ready—you can continue chatting with me while I work on it.

== gpt-? ==
=== Assistant:  ===
=== ## ===

In the United States, most health insurance is provided by for-profit companies. The Affordable Care Act (ACA) of 2010 expanded coverage through private insurers and fueled industry growth – along with rising profits. In the decade-plus since ACA’s passage, the five largest insurers (UnitedHealth Group, Cigna, Kaiser Permanente, Elevance/Anthem, and CVS/Aetna) have collectively amassed over $371 billion in profitstruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref>. UnitedHealth Group alone accounts for about 40% of that sum, with its annual net income soaring nearly 400% since 2010truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref>. In 2023, UnitedHealth (the nation’s largest insurer) made $23 billion in profit while covering over 50 million peopletruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=UnitedHealthcare%2C%20the%20largest%20U,to%20UnitedHealth%20Group%E2%80%99s%20financial%20statements|publisher=truthout.org|access-date=2025-11-30}}</ref>. This equates to roughly $460 in profit per member that year – money coming out of premiums paid by individuals, employers, and government programs.

Yet these gains for insurers have coincided with skyrocketing costs for consumers. The average annual premium for an employer-sponsored family plan now approaches $26,000truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>, having risen over 50% since 2014 (far outpacing general inflation)truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>. Individual employees pay nearly $9,000 on average for their own employer-based coveragetruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>. Despite higher premiums, patients often face denied claims and high out-of-pocket expenses. Nearly 17% of in-network claims on ACA marketplace plans were denied in 2021truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=out%20of%20pocket%20for%20procedures,exchange%20were%20denied%20in%202021|publisher=truthout.org|access-date=2025-11-30}}</ref>, and one analysis found UnitedHealthcare rejected about one in three claims – the highest denial rate among major insurerstruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=insurance%20exchange%20were%20denied%20in,2021|publisher=truthout.org|access-date=2025-11-30}}</ref>. As a result, millions of Americans incur medical debt or skip needed care. In short, for-profit insurers are thriving financially even as enrollees shoulder increasing costs and coverage gapstruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=Insurers%20garnered%20these%20profits%20as,which%20acquired%20Aetna%20in%202018|publisher=truthout.org|access-date=2025-11-30}}</ref>truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>.

A key reason is that the for-profit model incentivizes insurers to prioritize shareholders and profits. Companies generate profit by collecting more in premiums than they spend on medical claims. This dynamic can encourage restrictive practices – such as narrow networks, coverage denials, and high cost-sharing – to keep payouts low and margins high. It also fuels high administrative overhead: dollars spent on marketing, underwriting, executive salaries, and profit distribution rather than on health care. In 2014, U.S. insurers on average spent about 18 cents of every premium dollar on administration (and nearly 3 cents on profit), leaving ~80 cents for medical carejamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>jamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=But%20even%20a%20profit%20margin,health%20care%20workers%20and%20facilities|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>. By contrast, public programs like Medicare have overhead closer to 2–5% (about 2–5 cents per dollar) while private plans’ overhead is around 17%americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Medicare%20and%20Medicaid%20hover%20around,relatively%20high%20health%20expenditures%2C%20the|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. The multi-payer, profit-driven U.S. system has roughly double the administrative costs of simpler non-profit or public systemsjamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=But%20even%20a%20profit%20margin,health%20care%20workers%20and%20facilities|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>. These excess costs ultimately get baked into the premiums that individuals and employers pay.

Given this context – soaring insurer profits, high premiums, and wasteful overhead – it’s natural to ask if a different financial model could deliver better value. One bold proposal is to convert health insurance companies into non-profit entities, effectively eliminating the profit motive and redirecting resources toward consumers. Below, we explore how a non-profit insurance model might work, its pros and cons (versus the status quo), and other mechanisms to reduce costs for enrollees.

==== Envisioning all health insurers as non-profit (or even government-run) organizations would be a transformative shift. In a non-profit model, insurers would no longer have shareholders expecting quarterly profits or stock price growth. Any surplus revenue (“profit”) an insurer generates would be reinvested in the organization or returned to the insured members rather than paid out as dividends or share buybacks. Essentially, policyholders would become the primary stakeholders instead of stockholders. This approach parallels how some cooperative or mutual insurance companies operate, where customers are members who may receive dividend rebates in profitable years. It’s also analogous to certain international systems: for example, Switzerland legally requires basic health insurance to be provided by private '''non-profit''' insurers, who must use any excess funds to benefit enrollees (while only supplemental plans can be for-profit)commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/international-health-policy-center/countries/switzerland#:~:text=age%2C%20and%20disability%20insurance%2C%20made,percent%20of%20spending%20in%202016|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>reddit.com<ref>{{cite web|title=reddit.com|url=https://www.reddit.com/r/Switzerland/comments/1gplui8/does_no_profit_for_basic_health_insurance/#:~:text=,on%20basic%20health%20insurance|publisher=reddit.com|access-date=2025-11-30}}</ref>. Historically, many U.S. Blue Cross/Blue Shield plans were non-profit member-based organizations (though some have since demutualized into for-profits). ====

In a fully non-profit insurance landscape, all profits would effectively be “seized” (i.e. retained in the non-profit trust) and redistributed to the insured population – likely in the form of lower premiums, expanded benefits, or rebates. For instance, consider that the top five insurers accrued $371 billion in profits since 2010truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref>. If that sum had instead been used to reduce premiums or out-of-pocket costs, it could have substantially eased the financial burden on tens of millions of Americans. Even on a yearly basis, UnitedHealth’s $23 billion profit in 2023 could, if not taken as profit, have been used to lower premiums by an average of several hundred dollars per member (e.g. roughly $460 per person in UnitedHealth’s case). Across the industry, removing a typical profit margin of, say, 5% could similarly translate into single-digit percentage premium reductions for consumers – not a silver bullet for affordability, but a meaningful relief given current family premiums in the tens of thousands. And beyond direct premium impact, a non-profit orientation might encourage insurers to spend more on member health (care management, preventive services, etc.) rather than cost avoidance. The overall mission of insurers would shift from profit maximization to maximizing coverage and health outcomes, treating health insurance more like a public utility or service.

Of course, implementing this model would be complex. For-profit insurers would need to convert their corporate status (potentially through government action or buyouts of shareholders). There is precedent in other sectors for converting to non-profit or mutual status, but doing so at an industry-wide scale would likely require legislation. Alternatively, the government could establish a single-payer or public insurance system that displaces private insurers – which is another route to eliminating profit, though that goes even further by centralizing payer functions. Short of a single-payer overhaul, one could imagine regulating insurers like utilities, with caps on profit margins and requirements to rebate excess earnings to consumers (the ACA’s Medical Loss Ratio rule already takes a step in this direction by requiring insurers to spend at least 80–85% of premiums on medical care, capping profits/overhead at 15–20%jamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=The%20nearly%2080%20cents%20per,entities%20who%20offer%20health%20care|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>). Strengthening such regulations or converting insurers’ governance would institutionalize a consumer-first financial model.

In evaluating this idea, it’s important to weigh the potential benefits and drawbacks of a non-profit insurance industry compared to the current for-profit system. The following table summarizes some key pros and cons of each model:

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(Table: Comparison of the current for-profit insurance model vs. a hypothetical non-profit model, highlighting key advantages and disadvantages of each.)

As shown above, moving to non-profit insurers offers clear ethical and practical benefits – refocusing on patients, reducing overhead, and easing financial burdens on enrollees. It aligns the insurance industry with a social mission of health protection rather than profit extraction. However, it’s not a panacea; careful implementation and parallel reforms would be needed to realize the full potential (for example, ensuring nonprofits still operate efficiently and tackling the root causes of high medical costs in the US).

==== It’s worth noting that the choice need not be a stark binary between today’s for-profit system and an all-or-nothing nonprofit takeover. Hybrid approaches (“a bit of both”) could combine elements of each model to reduce costs for consumers: ====
* Regulated Utility Model: Treat private insurers more like utilities, with strict rate regulation or profit caps. For instance, regulators could enforce a tighter medical loss ratio (say, 90% of premiums must go to care, leaving only 10% for admin/profit) – effectively limiting profits and forcing efficiency. Some states already review and must approve premium increases. Strengthening these oversight mechanisms can protect enrollees from unfairly high premiums.
* Public Option or Medicare Buy-In: The government could offer a public health insurance option (non-profit by design) to compete with private plans. If a public option operates with lower overhead and no profit motive, it could offer lower premiums, pressuring private insurers to trim costs to stay competitive. Similarly, allowing people to buy into Medicare or Medicaid (which run at low administrative cost) could expand coverage and reduce premiums for those who choose those public plans. This mixed system lets private insurers exist, but pushes them to be more cost-effective or focus on supplemental benefits, while the public/non-profit plans set a benchmark.
* Two-Tier Systems: The U.S. could move toward a two-tier health financing system. In a first tier, a basic package of coverage is provided to everyone (either via a public program or mandated non-profit plans), ensuring universal affordable access. This could be funded or administered publicly (like Medicare-for-all-basic) or through tightly regulated non-profit insurers as in Switzerlandcommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/international-health-policy-center/countries/switzerland#:~:text=age%2C%20and%20disability%20insurance%2C%20made,percent%20of%20spending%20in%202016|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. A second tier would allow optional private insurance for those who want to purchase upgraded coverage or extras. In such a model, essential health needs are met without profit-driven cost barriers, and the private market can still function on top for supplementary services. This reduces the reliance on for-profit insurers for fundamental coverage and can significantly lower overall insurance costs for the average person (since the basic tier spreads risk across the whole population and eliminates profit margins on that portion).
* Expanded Government Subsidies with Cost Controls: Another mechanism to lower costs for enrollees is through targeted subsidies and price regulation. The ACA’s subsidies help reduce premiums for millions, but they primarily shift costs to the government without directly reducing the underlying price of insurance. To truly cut costs, policies could address provider prices and drug costs (e.g. through Medicare drug price negotiation, hospital rate setting, or reference pricing for services). Lowering the prices that insurers have to pay for medical services would allow them to charge lower premiums. In tandem, reinsurance programs or risk-pooling arrangements (where the government covers the most expensive claims or high-risk individuals) can reduce premiums in the private market by removing some of the costliest risks from insurers’ balance sheets. Indeed, reinsurance or “high-risk pools” funded by the government have been used in ACA marketplaces to bring down premium levels by covering a portion of expensive claims.
* Administrative Simplification: A significant portion of insurance costs comes from complex billing and bureaucracy. Efforts to standardize billing, simplify claims processing, and improve interoperability can cut down on administrative expenses that drive up premiums. For example, moving toward uniform billing codes, one set of comprehensive provider networks, or even a single claims clearinghouse for all payers could achieve some efficiencies of a single-payer system while retaining multiple insurers. Reducing the need for armies of billing clerks on both the insurer and provider side would translate to cost savings for consumers. Studies have found that administrative costs account for as much as 25–30% of U.S. health spending, much higher than in countries with more streamlined systemsjamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=But%20even%20a%20profit%20margin,health%20care%20workers%20and%20facilities|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=administrative%20costs%2C%20the%20NAM%20report,14|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. Cutting this waste – through technology, simplification, or consolidation – can yield major premium savings.
* Non-Profit Co-ops and Member-Owned Plans: Short of mandating all insurers be non-profit, the government could encourage the growth of member-owned insurance cooperatives. The ACA initially seeded some co-op health plans (consumer-governed, non-profit insurers) to compete in the exchanges, though many struggled or folded due to limited capital and other challenges. Learning from those lessons, new support could be given to establish robust regional or national non-profit insurers (for example, offering federal reinsurance or start-up grants, and ensuring a level playing field). Mutual insurance companies in other sectors (like some life and auto insurers) have successfully operated for decades, often delivering good customer satisfaction and competitive rates because their incentives are aligned with customers. Fostering a non-profit mutual segment in health insurance could give consumers more low-cost choices and prod for-profits to improve value.
* Wellness and Preventive Care Incentives: Another mechanism to ultimately reduce insurance costs is focusing on preventive care and chronic disease management. While this goes beyond the insurance company structure per se, insurers (especially nonprofits or those in value-based arrangements) can invest in keeping people healthier to avoid expensive treatments. If insurers cover wellness programs, care coordination for chronic patients, or social services that improve health, it can lower hospitalization rates and costs in the long run – leading to slower premium growth. For-profit insurers have sometimes been hesitant to invest in long-term health outcomes (since a healthier population in 10 years doesn’t help this quarter’s profits), whereas a non-profit or public insurer with a broader mission would be more willing to fund such initiativesrochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0Finally%2C%20think%20about%20the%20alignment,contribute%20to%20a%20healthier%20society|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>. Over time, a healthier risk pool means lower claims expenses and thus lower premiums for all enrollees.

 Figure: '''Combined Annual Profits of Top Five U.S. Health Insurers Since the ACA (2010–2023).''' This chart illustrates how the net income of major insurers skyrocketed after 2010, roughly '''230% growth in annual profits''' since the ACA’s implementationtruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref>. UnitedHealth Group (orange) leads with the largest share of industry profits. Such profits – totaling '''$371+ billion''' over 2010–2023truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref> – represent funds that could alternatively be used to '''lower premiums or improve coverage''' if the industry were structured as non-profit.

==== As highlighted above, the magnitude of insurance company profits in the past decade is enormous, and it has direct implications for what could be achieved if those funds were redirected. Since the ACA took effect, private insurers’ revenues and enrollment have expanded (due to the individual mandate, Medicaid expansion, and marketplace subsidies), giving them a much larger premium base to earn profits fromtruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=Securities%20and%20Exchange%20Commission%20and,other%20disclosure%20forms|publisher=truthout.org|access-date=2025-11-30}}</ref>. The result: record profits year after year. By 2024, the top five insurers’ combined annual profit was around $60–70 billion, up from about $18 billion in 2010 (before ACA) – an increase of roughly 230% in yearly profit generationtruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref>. Over 2010–2024 they accrued $9 trillion in revenuetruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=Insurers%20garnered%20these%20profits%20as,which%20acquired%20Aetna%20in%202018|publisher=truthout.org|access-date=2025-11-30}}</ref>, of which $371 billion became net incometruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref> rather than being spent on health care. ====

What could be done with these funds if they weren’t treated as private profit? In a non-profit or publicly oriented model, that money could be deployed in several ways beneficial to enrollees:
* Premium Reduction: The most straightforward impact would be to charge lower premiums. If insurers only aimed to cover costs (claims + reasonable admin) without taking profit, premium prices could be set lower. Even a 5% reduction (roughly equivalent to eliminating a typical profit marginjamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=,Advantage%20program%20for%20older%20people|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>) is meaningful when annual family premiums are ~$26,000truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref> – that’s about $1,300 saved per family per year, which could be used for other household needs. Some nonprofit insurers might go further, using any surplus to issue rebate checks or credit premium holidays to members in profitable years. In fact, the ACA’s MLR rebate provision already forced insurers to return billions to consumers in years they failed to spend enough on medical care; expanding such mechanisms ensures excess earnings go back to the people paying the premiumscommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/sites/default/files/2019-07/Hall_MLR_rule_protects_consumers_insurers.pdf#:~:text=,capping%20insurers%27%20profits%20and%20overhead|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>.
* Lower Out-of-Pocket Costs and Better Benefits: Redirected “profit” money could also be used to enhance coverage. For example, insurers could lower deductibles and co-pays, or include extra services (like dental, vision, or more robust mental health coverage) without raising premiums. If an insurer normally has a profit margin of a few hundred dollars per member (as seen with UnitedHealth’s ~$460 profit per member in 2023), that amount could instead fund, say, a reduction in the annual deductible by a few hundred dollars, directly saving money for patients when they use care. Over a large population, tens of billions in freed funds could eliminate many minor out-of-pocket expenses entirely (for instance, covering preventative services at no cost, providing free chronic disease supplies like insulin pumps, etc.). Essentially, the value created by the insurance pool would be returned to the pool in the form of richer benefits, improving affordability of care.
* Community Health Investments: Non-profit insurers, especially if overseen to fulfill a social mission, might allocate a portion of former “profits” to community health programs. This could include investing in clinics in underserved areas, public health campaigns (e.g. anti-obesity or smoking cessation programs), or social services that keep people healthier (food security, safe housing initiatives, etc.). While these are not traditional insurance pay-outs, they can reduce claims in the long run and improve population health. For example, funding a diabetes prevention program today could mean fewer expensive complications (and claims) five years down the line. For-profit firms under shareholder pressure often avoid such longer-term investments; nonprofits would have more latitude to pursue them, as noted by public health expertsrochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0Finally%2C%20think%20about%20the%20alignment,contribute%20to%20a%20healthier%20society|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>. In the big picture, using a slice of the $371 billion that went to profits for public health could yield large societal benefits.
* Reserves and Price Stability: It’s also possible that instead of immediate distribution, some profit-derived funds would bolster reserves of non-profit insurers. Non-profits still need financial stability (especially to pay claims in high-cost years). Strong reserves can prevent large premium spikes in bad years (for instance, if a pandemic or new expensive treatments drive up costs unexpectedly). In a mutual model, building capital during profitable periods is a way to keep premiums smoother over time, benefiting consumers with more price stability. For example, rather than paying windfall profits to shareholders when times are good, a nonprofit insurer could hold that surplus in a rainy-day fund – which might have prevented some of the big premium hikes we’ve seen after insurers underpriced ACA plans early on. Over a decade, a non-profit insurer might accumulate enough cushion to then moderate premium increases or even reduce premiums for a year as a dividend to members.

It’s important to stress that redirecting insurer profits, by itself, would modestly lower costs but not solve the entire affordability problem. Even if that full $371 billion (since 2010) had gone back to consumers, U.S. health spending is so large (around $4+ trillion per year recentlyrochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=and%2C%20more%20generally%2C%20America%20benefits,worthwhile%20projects%2C%20such%20as%20infrastructure|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>) that it would be a few percent of total expenditures. The systemic issues of high medical prices and administrative complexity would still need to be addressed to bend the cost curve substantially. However, those profits do represent real money paid by consumers and taxpayers that yielded no health benefit – so reclaiming it for public benefit is certainly worthwhile. It could make insurance more affordable at the margins and, coupled with deeper reforms, contribute to a more sustainable system.

==== Transforming all health insurance companies into non-profit entities is an ambitious idea aimed at realigning the industry with the public interest. In theory, removing the profit motive would lower premiums, improve coverage, and reduce the adversarial behavior (like excessive claim denials) that policyholders currently endurerochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0First%2C%20consider%20the%20focus%20on,pocket%20costs%20for%20policyholders|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>. Other developed countries show that you can have privately delivered insurance that is tightly regulated or non-profit and achieves universal coverage with lower administrative costsjamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=But%20even%20a%20profit%20margin,health%20care%20workers%20and%20facilities|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/international-health-policy-center/countries/switzerland#:~:text=age%2C%20and%20disability%20insurance%2C%20made,percent%20of%20spending%20in%202016|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. At the very least, the question shines a light on how much of Americans’ premium dollars are siphoned to profits and overhead rather than actual health care. ====

Even if a fully non-profit model isn’t immediately attainable, there are numerous mechanisms to reduce insurance costs for enrollees in the nearer term. Stronger regulations (like stricter medical loss ratio requirements), introduction of a public option, competitive pressure from non-profit plans, and direct cost control strategies can all push premiums down or slow their growth. Moreover, focusing insurers (whether for-profit or not) on value-based care, preventive health, and administrative simplification will help ensure that the maximum share of our national health spending actually goes to keeping people healthy. The ACA began to implement some of these ideas – for example, it capped insurer profit margins and provided subsidies – but the past decade has also shown that insurers can thrive under those rules, sometimes at consumers’ expensetruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=Securities%20and%20Exchange%20Commission%20and,other%20disclosure%20forms|publisher=truthout.org|access-date=2025-11-30}}</ref>truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>.

Reimagining the financial structure of insurance to prioritize patients over profits could yield a more equitable and cost-effective system. By converting profits into consumer benefits, a non-profit insurance model (or a hybrid with strong public options) would essentially return wealth from shareholders to the population of people paying into the health care system. It’s a way of saying that health insurance should be treated less as a high-return corporate enterprise and more as a social good or utility. Combined with robust cost-control policies and coverage expansions, this approach could help bend the cost curve and make quality health care more affordable for everyone.

Ultimately, the goal is a system where the trillions we spend on health care deliver real value in health outcomes and financial protection – rather than generating billions in profit while families struggle with medical bills. Moving toward non-profit insurers and related reforms could be a powerful step in that direction, ensuring that any surplus in the system finds its way back to patients, enrollees, and the improvement of health services instead of into shareholders’ pocketsrochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0First%2C%20consider%20the%20focus%20on,pocket%20costs%20for%20policyholders|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>rochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0Second%2C%20there%20is%20the%20matter,invest%20in%20preventive%20care%20programs|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>.

Sources:
* Santoro, H. (2024). Top 5 US Health Insurers’ Annual Profits Jumped 230 Percent Since ACA’s Passage. Truthout/The Levertruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=America%E2%80%99s%20largest%20health%20insurers%20have,medical%20claims%20from%20its%20policyholders|publisher=truthout.org|access-date=2025-11-30}}</ref>truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>.
* Reinhardt, U. (2017). Where Does the Health Insurance Premium Dollar Go? JAMA Health Forumjamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>jamanetwork.com<ref>{{cite web|title=jamanetwork.com|url=https://jamanetwork.com/channels/health-forum/fullarticle/2760129#:~:text=But%20even%20a%20profit%20margin,health%20care%20workers%20and%20facilities|publisher=jamanetwork.com|access-date=2025-11-30}}</ref>.
* Batabyal, A.A. (2024). The health insurance industry ought to be nonprofit. Rochester Beacon (Op-ed)rochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0Second%2C%20there%20is%20the%20matter,invest%20in%20preventive%20care%20programs|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>rochesterbeacon.com<ref>{{cite web|title=rochesterbeacon.com|url=https://rochesterbeacon.com/2024/12/09/the-health-insurance-industry-ought-to-be-nonprofit/#:~:text=%E2%96%A0%C2%A0Finally%2C%20think%20about%20the%20alignment,contribute%20to%20a%20healthier%20society|publisher=rochesterbeacon.com|date=2024-12-09|access-date=2025-11-30}}</ref>.
* Commonwealth Fund (2017). Big Five Health Insurers’ Membership and Revenue Trendstruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=These%20five%20insurers%20control%20over,helped%20Americans%20buy%20private%20insurance|publisher=truthout.org|access-date=2025-11-30}}</ref>.
* Commonwealth Fund (2020). International Health System Profile – Switzerlandcommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/international-health-policy-center/countries/switzerland#:~:text=age%2C%20and%20disability%20insurance%2C%20made,percent%20of%20spending%20in%202016|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>.
* Center for American Progress (2022). Excess Administrative Costs Burden the U.S. Health Care Systemamericanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Medicare%20and%20Medicaid%20hover%20around,relatively%20high%20health%20expenditures%2C%20the|publisher=americanprogress.org|access-date=2025-11-30}}</ref>.
* Kaiser Family Foundation (2023). 2024 Medical Loss Ratio Rebatescommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/sites/default/files/2019-07/Hall_MLR_rule_protects_consumers_insurers.pdf#:~:text=,capping%20insurers%27%20profits%20and%20overhead|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. (ACA mandate capping insurer profits/overhead).
* GAO & KFF data on premium trends and market concentrationtruthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=This%20year%2C%20the%20average%20health,risen%2052%20percent%2C%20outpacing%20inflation|publisher=truthout.org|access-date=2025-11-30}}</ref>truthout.org<ref>{{cite web|title=truthout.org|url=https://truthout.org/articles/top-5-us-health-insurers-annual-profits-jumped-230-percent-since-acas-passage/#:~:text=These%20five%20insurers%20control%20over,helped%20Americans%20buy%20private%20insurance|publisher=truthout.org|access-date=2025-11-30}}</ref>.

=== Assistant: Addressing High Medical Prices and Administrative Complexity in U.S. ===
=== Addressing High Medical Prices and Administrative Complexity in U.S. Healthcare ===

Continuing from the previous analysis, this report examines two systemic challenges driving up U.S. healthcare costs: (1) High Medical Prices across hospital services, prescription drugs, physician fees, etc., and (2) Administrative Complexity. For each area, we provide a detailed analysis and propose multi-level reforms (federal, state, and private sector), including potential financial impacts. The aim is to outline how targeted policies – like price regulation, all-payer rate setting, reference pricing, transparency measures, and administrative simplification – can curb excess costs while maintaining or improving care quality.

==== High Medical Prices: Escalating Costs and Policy Solutions ====

U.S. healthcare prices are the highest in the world, making medical care and insurance increasingly unaffordable. Research shows that Americans spend twice as much per capita on health care as peer nations, primarily due to higher prices rather than higher utilizationhealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=The%20largest%20category%20of%20health,drugs%20administered%20in%20inpatient%20and|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>healthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=Spending%20on%20health%20administration%20is,party%20payers%20and%20programs|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>. For example, in 2021 the U.S. spent about $7,500 per person on inpatient and outpatient care versus ~$3,000 in comparable countrieshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=The%20largest%20category%20of%20health,S|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>, despite Americans having fewer hospital stays and doctor visits on average. Many services and products – from hospital procedures and physician visits to brand-name drugs – cost far more in the U.S. than elsewherekff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/health-policy-101-health-care-costs-and-affordability/#:~:text=U,large%20and%20wealthy%20countries%20do|publisher=kff.org|access-date=2025-11-30}}</ref>. High prices, rather than greater service use, explain around 80% of the spending gap between the U.S. and other wealthy countrieshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=Image|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>.

 Figure: Per capita health spending by category in 2021 (U.S. vs. average of other wealthy nations). The U.S. spends dramatically more on inpatient/outpatient care and administrative costs than peer countries, despite similar utilization rateshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=The%20largest%20category%20of%20health,S|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>healthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=Spending%20on%20health%20administration%20is,party%20payers%20and%20programs|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>. Higher U.S. prices – not greater use of services – are the primary driver of excess spending.

Several factors contribute to high medical prices in the U.S. system:
* Limited Price Regulation: Unlike most countries, the U.S. traditionally lets private market negotiations set prices, with minimal direct regulation. Neither the federal nor most state governments have systematically regulated or negotiated the prices of medical services (outside of public programs) to the extent other nations dokff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/health-policy-101-health-care-costs-and-affordability/#:~:text=The%20U,name%20prescription%20drugs%2C%20hospital|publisher=kff.org|access-date=2025-11-30}}</ref>. This often leaves hospitals, physician organizations, and drug manufacturers free to charge much higher prices, knowing that insurers and patients have limited alternatives.
* Provider Market Power and Consolidation: The past two decades saw extensive consolidation among hospitals and physician practices, giving providers greater monopolistic pricing power. Over 90% of U.S. metropolitan areas had highly concentrated hospital markets by the mid-2010smilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=or%20improve%20efficiency,10|publisher=milbank.org|access-date=2025-11-30}}</ref>. As of 2024, 77% of physicians are employed by hospitals or corporations, up 15 percentage points in five yearsmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=or%20improve%20efficiency,10|publisher=milbank.org|access-date=2025-11-30}}</ref>. This consolidation consistently leads to higher prices – horizontal hospital mergers have raised prices by 20% or more in many casesmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=There%20is%20clear%20evidence%20that,Private%20equity|publisher=milbank.org|access-date=2025-11-30}}</ref>, vertical hospital–physician integration has raised physician fees ~14%, and private equity acquisitions of medical practices have driven price increases around 11%milbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=There%20is%20clear%20evidence%20that,Private%20equity|publisher=milbank.org|access-date=2025-11-30}}</ref>. In short, less competition means providers can demand higher payments, especially from private insurers.
* Opaque Pricing and Billing Practices: Prices for medical services are often non-transparent and vary wildly. Historically, hospitals and providers used confidential chargemasters and negotiated rates, making it hard for payers or patients to compare or challenge high prices. This opacity weakens price competition and enables excessive charges, especially for out-of-network or emergency care.
* High U.S. Input Costs: In some cases, higher prices also reflect higher input costs – for instance, U.S. physicians (especially specialists) and nurses earn higher salaries than in peer countries, and certain devices or equipment are costliercommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=,and%20peer%20nation%20health%20spending|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. However, these factors account for a smaller share of the spending gap than pure price-setting power. Studies estimate that about 30% of the excess spending in the U.S. vs. other nations comes from administrative and billing costs (addressed in the next section), ~20% from higher drug prices, ~15% from higher physician and nurse wages, etc.commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=,and%20peer%20nation%20health%20spending|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. This underscores that skyrocketing provider prices and administrative waste are prime targets for cost containment.

Reforming High Medical Prices – Policy Options: Tackling high prices requires interventions at multiple levels. Below we explore potential reforms and their financial impact at the federal, state, and private-sector levels. These include direct price regulations (like all-payer or Medicare-based rate setting, price caps, and reference pricing), efforts to increase competition and transparency, and measures to curb the pricing power of consolidated providers.

===== Federal Policy Options for Price Containment =====
* Establish All-Payer or Medicare-Based Rate Setting: A bold federal approach would be to regulate prices for hospital and physician services across all payers, for example by capping commercial payment rates at a specified percentage of Medicare rates. Medicare prices are often 40–50% lower than private insurance rates for the same services. If commercial plans had paid Medicare-equivalent rates for all services, U.S. health spending for the privately insured would have been '''$352 billion (roughly 35%) lower in 2021'''kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=quality%E2%80%94key%20considerations%20for%20any%20proposal,margin%20services%20or%20care|publisher=kff.org|access-date=2025-11-30}}</ref>. This indicates enormous savings potential from all-payer rate setting or global budgets. However, cutting commercial prices to Medicare levels would deeply impact provider revenues (average hospital revenue would fall ~35%kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=quality%E2%80%94key%20considerations%20for%20any%20proposal,margin%20services%20or%20care|publisher=kff.org|access-date=2025-11-30}}</ref>), so more gradual or moderated approaches are discussed. One option is setting uniform rates as a multiple of Medicare (e.g. 150% or 200% of Medicare prices) to preserve margins while reining in extremes. Policymakers could also target rate regulation to highly consolidated markets or high-priced providers firstkff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=Another%20consideration%20for%20policymakers%20is,due%20to%20low%20population%20density|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=Decisions%20about%20whether%20to%20target,blunt%20any%20adverse%20effects%20on|publisher=kff.org|access-date=2025-11-30}}</ref>. Adopting Maryland’s model nationally is another idea: Maryland is unique in operating an all-payer hospital rate system with global budgets (annual spending caps per hospital) which has slowed its cost growth. Vermont’s recent reforms (discussed below) also point toward all-payer global budgeting as a future strategymilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=The%20reference,implemented%20by%20Maryland%20in%202014|publisher=milbank.org|access-date=2025-11-30}}</ref>.
* Implement Broad '''Price Caps''' or Reference Pricing: Rather than fixing exact rates, the federal government could impose price ceilings on what providers can charge. For example, capping out-of-network hospital or physician charges at a reasonable multiple of Medicare or average in-network prices would protect patients and also pressure in-network rates downwardkff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=Price%20caps%20could%20also%20be,of|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=capping%20out,network%20prices%20alone%20may%20not|publisher=kff.org|access-date=2025-11-30}}</ref>. Research shows that when out-of-network prices are capped (as in Medicare Advantage, where the default is Medicare’s rate), negotiated in-network prices tend to gravitate closer to that benchmarkkff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=closer%20to%20the%20out,network%20prices%20nearly%20as%20much|publisher=kff.org|access-date=2025-11-30}}</ref>. Policymakers could also cap in-network prices for certain high-cost procedures or services, or overall price-growth caps tied to inflation. Reference pricing is a related strategy: a payer (or government program) sets a maximum contribution for a service, often based on a reference (like median market price or an international price index), and providers charging above that reference must justify or patients pay the difference. At the federal level, prescription drug pricing is seeing a form of reference-based negotiation. The Inflation Reduction Act of 2022 empowered Medicare to negotiate prices on select high-cost drugs. In the first two rounds of this policy, Medicare has achieved substantial discounts – for example, the 2025 negotiation of 15 costliest drugs is projected to cut their prices by 36%, saving about $8.5 billion in 2027reuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=Nov%2025%20%28Reuters%29%20,in%20net%20covered%20prescription%20costs|publisher=reuters.com|access-date=2025-11-30}}</ref>reuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=negotiated%20prices%20for%2015%20of,in%20net%20covered%20prescription%20costs|publisher=reuters.com|access-date=2025-11-30}}</ref>. These negotiated prices are being benchmarked in part against what other countries payreuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=irritable%20bowel%20syndrome%20medicine%20Linzess,of%20%24136%2C%20down%20from%20%24539|publisher=reuters.com|access-date=2025-11-30}}</ref>. Expanding Medicare’s negotiation authority to more drugs (and potentially tohospital services or equipment contracts) could capture greater savings. Some proposals also suggest international reference pricing (often called “most-favored-nation” pricing), where U.S. payers would not pay more than an average of what other wealthy nations pay for the same drug or servicereuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=Analysts%20said%20they%20will%20also,nation%20pricing%2C%20or%20MFN|publisher=reuters.com|access-date=2025-11-30}}</ref>. This could dramatically lower prices for medications that are much cheaper abroad.
* Promote Price Transparency and Antitrust Enforcement: The federal government has recently mandated price transparency for hospitals and insurers – requiring hospitals to post machine-readable prices for all services and insurers to disclose in-network and allowed amounts. Enforcing and enhancing these rules can empower payers and patients to identify egregious prices. Transparency by itself doesn’t set prices, but it exposes price variation and can shame some providers into moderating charges or justify regulatory intervention for outliers. Additionally, robust antitrust enforcement is crucial to prevent further consolidation and anti-competitive behavior. The current administration has signaled a tougher stance on healthcare mergers. The FTC and DOJ are increasingly challenging hospital system mergers, acquisitions of physician groups by dominant health systems, and even anti-competitive contract clauses (like all-or-nothing contracting or gag clauses that prevent sharing price information). Blocking mergers that would create monopolies can save future cost increases – for instance, stopping a hospital merger that might have led to a 20% price hike averts that added costmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=There%20is%20clear%20evidence%20that,Private%20equity|publisher=milbank.org|access-date=2025-11-30}}</ref>. Federal regulators and Congress can also boost competition by banning certain practices that inflate prices, such as “site-neutral payment” reforms (paying the same for a service regardless of whether it’s done in a hospital outpatient department or a free-standing clinic). Site-neutral payment policies effectively cut prices for hospital-owned facilities (which often charge facility fees far above independent clinics). MedPAC estimates site-neutral payments for certain services could save Medicare billions and similarly reduce commercial costs. Congress is considering such policies to discourage hospitals from buying up physician offices just to charge more.
* Reforms to Drug and Device Pricing: Beyond Medicare negotiation, federal policy could include capping price increases for drugs (e.g. penalties if list prices rise faster than inflation, a provision already applied to Medicare Part D in the IRA) and encouraging generic and biosimilar competition to bring prices down. The creation of Prescription Drug Affordability Boards (PDABs) at the state level (discussed below) could be mirrored federally or supported via grants. Additionally, allowing safe importation of lower-cost drugs from Canada or Europe is another tool states and the federal government have explored (with FDA pilot programs under review)nashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,health%20plans%20in%20the%20state|publisher=nashp.org|access-date=2025-11-30}}</ref>. For medical devices and equipment, bulk purchasing by Medicare/VA or reference pricing could help standardize lower prices.
* Financial Impact: Federal price reforms can yield significant savings but must be calibrated to avoid harming access. As noted, all-payer rate setting at Medicare levels might save on the order of '''$300–$350 billion per year'''kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=quality%E2%80%94key%20considerations%20for%20any%20proposal,margin%20services%20or%20care|publisher=kff.org|access-date=2025-11-30}}</ref>, though such an aggressive approach would face industry pushback and require offsetting support for providers in underserved areas. More moderate caps (e.g. capping commercial rates at 150% of Medicare) would save somewhat less but still hundreds of billions over time, while giving providers higher-than-Medicare revenue. Medicare’s drug price negotiations are already slated to save tens of billions over the next decade in the Part D programreuters.com<ref>{{cite web|title=reuters.com|url=https://www.reuters.com/business/healthcare-pharmaceuticals/us-negotiated-medicare-prices-15-more-drugs-test-cost-savings-promise-2025-11-25/#:~:text=Nov%2025%20%28Reuters%29%20,in%20net%20covered%20prescription%20costs|publisher=reuters.com|access-date=2025-11-30}}</ref>, and expanding this authority would multiply the effect. Transparency is harder to quantify, but even a 5% reduction in prices for the highest-cost hospital regions (due to public pressure or competition) could save on the order of tens of billions annually, given hospital care alone is a $1.3 trillion expense. Vigorous antitrust actions, by preventing future price hikes from mergers, protect consumers from hidden “costs” that would have materialized – for example, blocking a merger that would have added $100 million in annual costs keeps that money in consumers’ pockets or public programs. In summary, federal intervention sets the stage for broad cost containment by resetting the baseline of prices or curbing price growth nationally.

===== State Policy Innovations to Regulate Prices =====

States serve as laboratories for healthcare cost reforms, and recently many states have advanced policies to tackle high prices and provider market power:
* All-Payer and Reference-Based Price Caps: In 2025, states broke new ground by extending reference pricing caps beyond state employee plans to the broader market. Vermont became the first state to enact across-the-board hospital price caps for all payers, directing its Green Mountain Care Board to set upper limits on hospital payments as a percentage of Medicare ratesmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=In%20June%202025%2C%20Vermont%20became,are%20passed%20along%20to%20ratepayers|publisher=milbank.org|access-date=2025-11-30}}</ref>. These caps (to be in place by 2027) are a stepping stone toward all-payer global hospital budgets by 2030 for Vermontmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=settings%2C%20such%20as%20primary%20care,services|publisher=milbank.org|access-date=2025-11-30}}</ref>, similar to Maryland’s global budget model. Indiana likewise passed a law capping hospital prices (though limited to nonprofit hospitals): by 2029, Indiana’s nonprofits must lower their average prices to or below the statewide average (which will be calculated by the state) or else lose their tax-exempt statusmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=Like%20Vermont%2C%20Indiana%20also%20established,nonprofit%20hospital%20fails%20to%20meet|publisher=milbank.org|access-date=2025-11-30}}</ref>. This approach essentially pressures high-priced hospital systems to rein in charges under threat of significant penalty. Washington State, meanwhile, built on earlier efforts by capping prices in its public employee health plan: reimbursement to in-network hospitals is limited to 200% of Medicare rates (185% if out-of-network)milbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=|publisher=milbank.org|access-date=2025-11-30}}</ref>. Washington also set minimum floors for primary care and rural critical-access hospitals (e.g. paying at least 150% of Medicare for primary care) to ensure cost-cutting doesn’t undercut essential servicesmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=As%20of%20this%20legislative%20session%2C,law%20establishes%20separate%20reimbursement%20caps|publisher=milbank.org|access-date=2025-11-30}}</ref>. These state initiatives were inspired by evidence from earlier pilot programs: Oregon’s state employee plan capped hospital payments at 200%/185% of Medicare and saved over $81 million in the first plan year (around 5% of costs)kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=In%202017%2C%20lawmakers%20in%20Oregon,of%20total|publisher=kff.org|access-date=2025-11-30}}</ref>. Montana’s state employee plan similarly saved $47.8 million over 3 years by using reference-based pricing agreements with hospitals (capping inpatient at ~220% and outpatient at 230–250% of Medicare)kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=between%20230%C2%AD%E2%80%93250,by%20the%20decrease%20in%20prices|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=prices%20of%20between%20239%E2%80%93611,by%20the%20decrease%20in%20prices|publisher=kff.org|access-date=2025-11-30}}</ref>. The average state could save ~$150 million in their employee plan by implementing such caps, according to one analysismilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=employee%20health%20plan%20used%20reference,2%20million%20from%20the%20policy|publisher=milbank.org|access-date=2025-11-30}}</ref>. Now that Vermont and Indiana are applying caps market-wide, we will see much larger impacts. For instance, Vermont expects its all-payer hospital cap and subsequent global budgets to bend the cost curve statewide, directly lowering premiums for employers and consumers as mandated savings are passed throughmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=hospital%20price%20caps%20for%20all,law%20also%20permits%20GMCB%20to|publisher=milbank.org|access-date=2025-11-30}}</ref>.
* Increasing Competition and Oversight of Consolidation: States are also directly addressing provider monopolies. In 2024, Indiana and New Mexico enacted laws requiring notice and state review of any proposed hospital mergers or acquisitionsnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,hospital%20and%20health%20system%20costs|publisher=nashp.org|access-date=2025-11-30}}</ref>. More states are considering such “merger review” or pre-approval requirements to stop deals that would create dominant systems. Some states are revisiting Certificate of Need (CON) laws – while traditionally CON regulations aimed to prevent redundant facilities, today there’s debate: some argue loosening CON could allow new entrants and more competition, whereas others prefer tightening CON or adding state oversight of expansions to control consolidationnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,increase%20competition%20and%20address%20consolidation|publisher=nashp.org|access-date=2025-11-30}}</ref>. Massachusetts has a Health Policy Commission that reviews major provider transactions for cost impact and can impose conditions. California in 2023 launched an Office of Health Care Affordability with authority to review large healthcare mergers and set cost growth targets. These state oversight mechanisms act as a check on unchecked growth of big health systems. Additionally, states have moved to ban anti-competitive contract clauses between providers and insurers: for example, some states prohibit “all-or-nothing” contracting (where a hospital system forces an insurer to include all its facilities in-network) and anti-steering or anti-tiering clauses that previously allowed dominant hospitals to block insurers from steering patients to lower-cost competitors. By outlawing these practices, states foster more price competition and give insurers leverage to negotiate better rates.
* Prescription Drug Pricing Initiatives: States are tackling drug costs through multiple avenues. Over 10 states have established Prescription Drug Affordability Boards (PDABs) – independent boards that review extremely high-cost drugs or those with rapid price increases and can set upper payment limits for certain payers. For instance, Maryland’s PDAB (the first in the nation) can put price caps on select drugs purchased by state and local government plans, and other states (e.g. Colorado, Washington) have similar powersnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>. Insulin price caps have become common – nearly 22 states limit insulin co-pays (often $25 or $35 per month). In 2024, New York went further by eliminating cost-sharing for insulin altogether for state-regulated plansnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,health%20plans%20in%20the%20state|publisher=nashp.org|access-date=2025-11-30}}</ref>, essentially ensuring insulin is free at point of sale (shifting cost to insurers/employers, who in turn have negotiating pressure on insulin manufacturers). Washington capped out-of-pocket costs for asthma inhalers and EpiPensnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,health%20plans%20in%20the%20state|publisher=nashp.org|access-date=2025-11-30}}</ref>. While these caps help patients directly, some states are also exploring drug price regulation at the source: Vermont, for example, is studying a drug review board to potentially regulate launch prices or price hikes for medications (similar to how some countries use health technology assessments to set drug prices)nashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>. States are also enforcing transparency from pharmacy benefit managers (PBMs) and banning PBM practices like “spread pricing” to ensure savings from negotiated drug rebates are passed to consumersnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,particularly%20independent%20pharmacies%2C%20and%20more|publisher=nashp.org|access-date=2025-11-30}}</ref>. For example, Idaho, Vermont, and Washington in 2024 all enacted comprehensive PBM reforms to increase transparency and fairness in drug pricingnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,hospital%20and%20health%20system%20costs|publisher=nashp.org|access-date=2025-11-30}}</ref>.
* Other State-Level Price Measures: A notable trend is states targeting specific billing practices that inflate costs. Facility fee bans or limitations are emerging: Connecticut extended its ban on additional facility fees for telehealth servicesnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>, so providers can’t tack on extra charges beyond the professional fee. This is essentially a site-neutral payment reform at the state level to prevent hospitals from charging more for services delivered remotely or at hospital-owned clinics. Some states also set or negotiated out-of-network payment standards for surprise bills (building on the federal No Surprises Act) – for instance, Oklahoma in 2024 adopted reference-based reimbursement for out-of-network ambulance servicesnashp.org<ref>{{cite web|title=nashp.org|url=https://nashp.org/state-legislatures-pursue-policies-to-address-high-health-care-prices/#:~:text=,the%20cost%20of%20prescription%20drugs|publisher=nashp.org|access-date=2025-11-30}}</ref>.
* Financial Impact: State reforms, while varied, are starting to move the needle on costs. Reference pricing and caps in public employee plans have saved states tens of millions within a few yearsmilbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=network%20hospitals,2%20million%20from%20the%20policy|publisher=milbank.org|access-date=2025-11-30}}</ref>milbank.org<ref>{{cite web|title=milbank.org|url=https://www.milbank.org/publications/how-states-strengthened-their-health-care-markets-in-the-2025-legislative-session/#:~:text=employee%20health%20plan%20used%20reference,2%20million%20from%20the%20policy|publisher=milbank.org|access-date=2025-11-30}}</ref>, and by expanding these caps to all payers, states like Vermont anticipate hundreds of millions in savings annually once fully implemented (Vermont’s hospital spending was >$2.5 billion annually, so even a 10% price reduction would save $250M+). Stronger competition oversight prevents future price hikes that could cost state residents dearly – for example, stopping a merger that would have allowed a hospital to charge 30% more in a region protects employers and consumers from those higher premiums (potentially saving hundreds of dollars per person annually in that area). Drug affordability boards, although new, aim to negotiate or cap certain high-cost drugs; if, say, a state PDAB caps the price of a $1 million gene therapy to $700k for state plans, that’s $300k per treatment saved for payers (and similar logic for insulin: capping co-pays reduces patient costs immediately, while pushing manufacturers to keep net prices lower). In aggregate, states that aggressively pursue cost containment could slow healthcare premium growth and yield billions in system-wide savings, especially as more states learn from early adopters. Importantly, many state actions also serve as pilots for federal policy – successful state models (like Maryland’s all-payer system or Massachusetts’ cost growth benchmark, which kept growth around 3.2% for several years) could be scaled up nationally to amplify savings.

===== Private-Sector Initiatives and Market-Based Approaches =====

In parallel with government action, employers, insurers, and healthcare purchasers in the private sector are adopting strategies to mitigate high prices:
* Employer Reference Pricing and Direct Contracting: Large employers and union plans have pioneered reference pricing for certain “shoppable” services. For example, the California Public Employees’ Retirement System (CalPERS) set a reference price for procedures like knee surgeries and colonoscopies – they would pay, say, $30,000 for a knee replacement, and employees going to a hospital that charged more would pay the difference out-of-pocket. This steered patients to cost-effective providers and forced some high-priced hospitals to lower rates to avoid losing patients. The result was millions in savings and dramatically reduced price variation for those services. Many self-insured employers are now adopting similar reference pricing or centers of excellence contracts (negotiating a fixed bundled price with select high-quality hospitals for surgeries, often including travel costs for the patient). These private initiatives effectively regulate prices via market pressure, and when done at scale (e.g., Walmart’s direct contracting with top hospitals for spine surgery at a fixed price), they can influence local pricing norms.
* Price Transparency Tools and Plan Design: Insurers and employers are rolling out tools that enable employees to compare prices for medical services and choose lower-cost options. Under the federal transparency rules, insurers now publish massive data files of negotiated rates; tech firms are crunching this data to build consumer-friendly price comparison apps. While healthcare isn’t a truly consumer-driven market in emergencies, for elective outpatient services these tools increase pressure on overpriced providers. Some employers also use tiered networks or narrow networks, wherein providers are tiered by cost and quality – patients pay less (or nothing) if they use “preferred” high-value providers. For instance, an insurer might designate certain labs or imaging centers as Tier 1 (low-cost) with zero co-pay, while using a high-cost hospital’s MRI could come with a hefty co-pay. Such benefit designs incentivize patients to choose lower-price facilities, thereby forcing providers to compete on price. Early evidence shows tiered networks can reduce employer spending by steering usage to more efficient providers.
* Negotiating Leverage through Alliances: Coalitions of purchasers (like the Health Transformation Alliance or regional employer health coalitions) pool their covered lives to negotiate better deals. By banding together, employers gain bargaining power closer to that of a public purchaser. Some are even contracting directly with provider systems for a flat per-member-per-month payment (similar to an HMO model) to cover all care – shifting risk to the provider in exchange for cost control. Others leverage third-party negotiators or benefit consultants to push back on hospital contracts with unreasonable terms. While individual employers often lacked leverage, these collaborative approaches are beginning to crack the pricing power of dominant providers in certain markets.
* Private Antitrust Litigation and Market Pressure: The private sector isn’t waiting for government alone – there’s a rise in lawsuits by employers or health plans against hospital systems for anti-competitive practices. For example, the Blue Cross insurers in some states sued hospital systems over contract clauses that inflate prices, leading to settlements that prohibit those practices and deliver price concessions. Additionally, large national employers can threaten to exclude an entire health system from their employee plan if prices are too high (e.g., Wal-Mart reportedly did this in areas to force price cuts). These market pressures, while uneven, show that private payers are increasingly unwilling to simply absorb ever-higher prices.
* Financial Impact: Private-sector measures, when effectively implemented, can yield moderate savings and complement public policies. For instance, CalPERS’ reference pricing program for just a couple of procedures saved a reported $5 million in one year and cut surgical prices by 20% at some hospitals (as the overpriced providers lowered fees to avoid losing patients). Broadly, the RAND Hospital Price Transparency studies have shown employers pay 2.5x Medicare rates on average; if employer coalitions negotiate that down even to 2x Medicare, that’s a 20% cost reduction – which for a Fortune 500 company’s health spend could mean tens of millions saved annually. Price shopping tools have shown patients often will choose cheaper options when informed – one study found giving consumers transparency and rewards for choosing lower-cost providers yielded average savings of ~$300 per procedure for imaging and lab tests, about 10–15% off those service costs. Scaling this up, if even 10% of elective outpatient spending in the U.S. (a subset of the ~$4 trillion) sees a 10% price reduction from consumer choice, that’s on the order of $10–$20 billion in savings. In sum, while private strategies alone may not fix the systemic pricing problem, they can drive incremental efficiency and send a message to high-cost providers, especially when aligned with supportive public policy (e.g. price transparency mandates or antitrust enforcement).

Summary of High-Price Reforms: The table below summarizes key reform options to address high medical prices, along with examples and estimated impacts:

| Policy Option                                | Level                                          | Description & Examples                                                                                                                                                                                                                                                                                                                                                                                                                                    | Potential Impact                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
| -------------------------------------------- | ---------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------ |
| All-Payer Rate Setting / Global Budgets      | Federal or State                               | Set uniform payment rates for all payers (often tied to Medicare rates) and/or cap total spending per hospital (global budget). Example: Maryland’s all-payer hospital model; Vermont’s law phasing in all-payer hospital budgets by 2030
milbank.org
.                                                                                                                                                                                                   | Very large savings by eliminating price extremes. KFF estimates using Medicare rates for all private plans could save ~$352 billion in one year
kff.org
 (but with substantial provider revenue cuts). More moderate caps (e.g. 150–200% of Medicare) would still save tens of billions while preserving some margin. Maryland contained per-capita hospital cost growth to ~2%/year (below national average) under all-payer global budgets
milbank.org
.                                                                                                                        |
| Price Caps / Reference Pricing               | Federal, State, or Private                     | Limit the maximum price for services (percent of Medicare or a fixed reference). Examples: Montana & Oregon capping state employee plan hospital payments at ~200% of Medicare saved $47.8 M (2017–19)
kff.org
 and $81 M in one year
kff.org
; Vermont (2025) and Indiana (2025) extend caps to all hospitals statewide
milbank.org
milbank.org
. Employers like CalPERS set reference prices for surgeries, forcing high-cost hospitals to lower rates. | Significant savings targeted at overpriced services. State employee plan caps saved ~5% of costs
kff.org
; applied broadly, similar 5–10% cost reductions across commercial markets could yield dozens of billions in savings nationally. Reference pricing by employers has cut certain procedure prices ~20% and steered patients to lower-cost providers (millions saved for large employers).                                                                                                                                                                                 |
| Anti-Consolidation & Competition Enforcement | Federal (FTC/DOJ) and State (AGs, Commissions) | Prevent or mitigate provider monopolies through merger reviews, anti-trust lawsuits, and regulating anti-competitive contract clauses. Examples: FTC blocking hospital mergers (e.g. prevented a merger in New Jersey that would have combined the only two hospitals in a city); Indiana’s 2024 law requiring state approval for hospital acquisitions
nashp.org
; states banning contract clauses that prevent tiered networks.                         | Avoids future cost hikes of 10–30% that often follow mergers
milbank.org
. Hard to quantify “savings” except by comparison to higher alternate future costs. However, preventing a single large hospital merger can save local employers and patients from millions in annual price increases. Over time, preserving competition keeps downward pressure on prices, which could be worth tens of billions nationally versus a fully consolidated system.                                                                                                                          |
| Drug Price Regulation                        | Federal and State                              | Government negotiation or caps on drug prices; promote generics. Examples: Medicare negotiation (IRA 2022) cutting negotiated drug prices ~36% for 2027 on key drugs
reuters.com
; State PDABs setting upper payment limits; capping insulin co-pays at $35 (now national for Medicare, many states for commercial).                                                                                                                                      | High impact for targeted drugs. Medicare’s negotiation on 25 drugs by 2030 is estimated to save tens of billions. States’ PDABs could similarly trim extreme drug costs for state plans (e.g. saving $millions on a single expensive therapy). Insulin cap laws greatly reduce out-of-pocket costs; if paired with pricing reforms, overall insulin spending could drop substantially. An international reference pricing policy for drugs is projected to cut U.S. brand-name drug prices 30–50% on average, yielding tens of billions in annual savings if implemented broadly. |
| Price Transparency & Consumer Tools          | Federal (mandates) and Private (tools)         | Mandate disclosure of hospital and insurer prices; develop consumer-facing price comparison and reward programs. Examples: CMS Hospital Price Transparency rule (2021) and Transparency in Coverage rule for insurers (2022) – now databases of prices are emerging; employers offering shopping rewards (e.g. cash incentive if an employee chooses a facility that charges less for an MRI).                                                            | Indirect but meaningful impact. Transparency alone might shave a few percent off prices in competitive markets (hospitals that were 500% of Medicare might drop to 400% if exposed, for instance). Even a 5% reduction in prices for shoppable services due to informed consumers could save several billion dollars. Over time, transparency can compound with other tools (e.g. making reference pricing easier to implement) and foster a culture of accountability for high-cost providers.                                                                                   |

Table Note: Estimated impacts are rough and context-dependent. Large savings from price regulation must be balanced against potential effects on provider finances and patient access. Effective policy design (phasing in caps, exempting critical rural providers, etc.) can mitigate unintended consequenceskff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=that%20much%20is%20likely%20to,130%C2%A0%2C29|publisher=kff.org|access-date=2025-11-30}}</ref>kff.org<ref>{{cite web|title=kff.org|url=https://www.kff.org/health-costs/price-regulation-global-budgets-and-spending-targets-a-road-map-to-reduce-health-care-spending-and-improve-affordability/#:~:text=effects%20would%20be%20larger%20for,providers%20to%20participate%2C%20commercial%20payers|publisher=kff.org|access-date=2025-11-30}}</ref> while still capturing most of the savings.

==== Administrative Complexity: Streamlining the System and Reducing Waste ====

A second major driver of U.S. healthcare inefficiency is administrative complexity and overhead. The U.S. spends exorbitant amounts on billing, paperwork, and insurance administration – resources that do not directly improve patient care. Multiple studies show that administrative costs account for 25–30% of U.S. healthcare spending, far higher than in other countriescommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=,5%20percent%20of%20total%20hospital|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/issue-briefs/2023/oct/high-us-health-care-spending-where-is-it-all-going#:~:text=,and%20peer%20nation%20health%20spending|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. This includes the costs of processing bills and insurance claims, coding and documentation, insurer overhead and profits, provider administrative staff, credentialing, utilization management (like prior authorizations), and compliance with myriad differing rules. By comparison, other wealthy nations spend much less on administration: for example, the U.S. spends around 7.6% of total health spending on insurers’ administrative costs alone, versus about 3.8% in peer countrieshealthsystemtracker.org<ref>{{cite web|title=healthsystemtracker.org|url=https://www.healthsystemtracker.org/brief/what-drives-health-spending-in-the-u-s-compared-to-other-countries/#:~:text=health%20spending%20in%20the%20U,on%20average%20in%20comparable%20countries|publisher=healthsystemtracker.org|access-date=2025-11-30}}</ref>. All told, the U.S. spends over $1,000 per person on health administration – roughly five times the per-capita administrative spending of other high-income countriespgpf.org<ref>{{cite web|title=pgpf.org|url=https://www.pgpf.org/article/how-does-the-us-healthcare-system-compare-to-other-countries/#:~:text=hospitals%20%E2%80%94%20leading%20to%20a,the%20same%20amount%20on%20both|publisher=pgpf.org|access-date=2025-11-30}}</ref>. In fact, the U.S. likely spends as much on healthcare administration as it does on long-term care services, an imbalance not seen elsewherepgpf.org<ref>{{cite web|title=pgpf.org|url=https://www.pgpf.org/article/how-does-the-us-healthcare-system-compare-to-other-countries/#:~:text=hospitals%20%E2%80%94%20leading%20to%20a,the%20same%20amount%20on%20both|publisher=pgpf.org|access-date=2025-11-30}}</ref>.

What drives this complexity? The U.S. has a multi-payer financing system (hundreds of private insurers, plus Medicare, Medicaid, etc.), each with their own billing requirements, provider networks, and payment rules. Providers must interact with numerous insurance plans, often employing large billing departments to file claims, chase reimbursements, and handle denials. There is also extensive complexity in coding (with thousands of billing codes and ever-changing rules for documentation), as well as fragmented health IT systems that often fail to seamlessly share data. For example, a single physician practice in the U.S. might deal with a dozen different insurer portals for eligibility checks and claims – versus, say, a practice in Canada that bills one provincial insurer with one set of codes and rules. A 2019 analysis estimated that billing and insurance-related (BIR) costs alone were about $496 billion annually in the U.S., roughly twice what should be necessary for a system our sizeamericanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=addressing%20waste,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. The excess administrative waste – on the order of $250 billion per year – stems from duplication, inefficiencies, and the high overhead of our complex payment systemamericanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=addressing%20waste,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>.

Importantly, higher administrative spending doesn’t translate to better care. Studies comparing hospitals internationally found no link between higher admin costs and quality of carecommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=product%20%28GDP%29%20rose%20from%200,quality%20care|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Hospital%20administration%20costs%20ranged%20from,in%20Canada|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. It’s pure waste in many cases – time and money that could be redirected to patient care. As one commentator put it, “Healthcare should be about patients, not paperwork.”caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=%E2%80%9CHealthcare%20should%20be%20about%20patients%2C,%E2%80%9D|publisher=caqh.org|access-date=2025-11-30}}</ref>caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=Executive%20Officer%20at%20CAQH,%E2%80%9D|publisher=caqh.org|access-date=2025-11-30}}</ref>. The administrative burden also frustrates clinicians and patients: doctors spend hours clicking through electronic records and billing codes, and patients face confusing bills and insurance denials. Simplifying these processes could not only save money but also improve the care experience.

Reforming Administrative Complexity – Policy Options: Tackling administrative waste requires standardizing and simplifying the business of healthcare. Key strategies include billing simplification, unified data standards, automating manual processes, and setting limits on administrative spending. We will discuss approaches at the federal and state levels, as well as within the private sector, to streamline administration. We also highlight lessons from international models that achieve far lower administrative costs through unified systems.

===== Simplifying Billing and Claims Processing =====

A core issue is the complexity of billing transactions between providers and payers. Standardizing and automating these processes can yield huge efficiencies:
* National Standard Claims Clearinghouse: One proposal is to establish a single electronic clearinghouse for all medical billinghamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=The%20Proposal%20Establish%20a%20clearinghouse,automating%20prior%20authorization%20could%20help|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=transmission%20of%20billing%20and%20claims,associated%20with%20implementing%20prior%20authorization|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>. Currently, providers send claims to each insurer (or their designated clearinghouses), each potentially requiring slightly different information. A centralized or interoperable network could route all claims through a uniform format, reducing errors and admin effort. The U.S. already has HIPAA standard transaction codes (X12) for claims, but compliance and consistency are lacking. By mandating one set of data fields and protocols for all payers, providers could submit bills once in one format. This echoes systems in countries like France or Japan, where a standardized billing system processes claims for all insurers. If implemented, a central clearinghouse could cut down on the staff time and software needed to handle multiple billing systems, and reduce claim denials due to format issues. Estimates suggest that standardizing electronic billing and claims submission could save billions annually in administrative costshamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=patients,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>.
* Uniform Coding and Documentation Rules: Simplification also means aligning payers on common definitions for services and payment rules. The proliferation of different payment policies (for what’s covered, what documentation is needed, how prior authorization is done) adds burden. Federal regulators, working with industry, can push towards uniform billing codes and documentation standards. For example, requiring all insurers to honor a single set of procedure and diagnostic codes (we have CPT/ICD, but payers often add proprietary edits) and a single claim form structure would make life easier for providers. Additionally, moving toward streamlined clinical documentation – e.g., one universal form for a given service – would prevent the need to tailor notes to each insurer. Efforts like “administrative simplification” rules in the Affordable Care Act set some groundwork (like standardized insurance ID cards and rules for electronic funds transfers), but many provisions were not fully enforced. Revitalizing these efforts at the federal level could force payers to simplify and coordinate their requirements.
* Claims Payment Standardization and Prompt Pay: Another avenue is requiring faster, more automated claims payment. Some countries ensure hospitals are paid a fixed amount per case or per day directly from a government payer, eliminating drawn-out claims adjudication. Short of single-payer, U.S. payers could be required to adopt real-time claims adjudication for most routine claims – meaning a provider gets an instant response on payment when a claim is submitted (analogous to how credit card transactions are approved in seconds). This would necessitate clear-cut payment rules and high-quality data interchange, but would dramatically reduce back-and-forth appeals and resubmissions. Additionally, “prompt pay” laws (already existing in many states) mandate insurers pay clean claims within a certain time or face interest penalties. Strict enforcement of these can discourage insurers from delaying payments and burdening providers with cash-flow issues.
* Financial Impact: The Council for Affordable Quality Healthcare (CAQH) tracks potential savings from automating transactions. The 2024 CAQH Index found that routine administrative tasks (like eligibility checks, prior auth, claim status inquiries) cost $90 billion annually, and about $20 billion of that could be saved by fully automating and standardizing these workflowscaqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>. For example, moving from fax/phone-based processes to standardized electronic transactions can save providers an average of 70 minutes per patient visit in admin timecaqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=patient%20care.%20,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>. On a system level, that translates to clinicians having more time for care (or seeing more patients) instead of chasing paperwork. Another analysis (2019) suggested more ambitiously that comprehensive administrative simplification (including rate regulation and fewer payers) could cut administrative costs by '''$50–$100 billion+ per year'''hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=patients,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>. Even incremental steps – say, reducing billing-related costs by 10% – would save around $50 billion (given the roughly $496B in billing/insurance overheadamericanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>). These resources could be redirected to patient care or used to reduce premiums.

===== Streamlining Insurance and Administrative Overhead =====

Beyond billing transactions, there are broader reforms to reduce the administrative bloat in insurance and provider organizations:
* Administrative Cost Caps (Medical Loss Ratio Expansion): The Affordable Care Act already imposed a medical loss ratio (MLR) requirement on insurers, requiring at least 80–85% of premium dollars be spent on medical care (thus capping admin costs and profit to 15–20%). This has provided some discipline, leading insurers to issue rebates if they over-charge relative to healthcare spending. Policymakers could tighten this further – for instance, require an MLR of 90% for fully insured plans, or extend similar caps to third-party administrators of self-insured plans. Furthermore, one could explore caps on hospital administrative spending: for example, setting a target that no more than, say, 15% of a hospital’s expenditures go to administration (versus the current ~25% averagecommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=,as%20did%20rural%20facilities|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>). While enforcement is tricky, it could be tied to Medicare participation or state hospital regulation – hospitals exceeding the threshold might face penalties or need to submit a reduction plan. At a minimum, public reporting of each hospital’s administrative overhead percentage could create pressure (e.g., why is Hospital A spending 30 cents of every dollar on admin while Hospital B spends 15 cents?). Scotland and Canada spend only ~12% on hospital administrationcommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=,as%20did%20rural%20facilities|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>; if U.S. hospitals moved even partway to that benchmark, savings would be enormous (one 2014 study found '''$150 billion could have been saved in 2011''' if U.S. hospital admin were at Canadian levelscommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Administrative%20costs%20account%20for%2025,than%20%24150%20billion%20in%202011|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=United%20States%20had%20the%20highest,than%20%24150%20billion%20in%202011|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>).
* Billing Simplification for Patients (One Bill System): A related idea is simplifying the patient billing experience. Patients often receive multiple bills (hospital facility, physician, lab, etc.) and EOBs that are hard to decipher. Some health systems have moved to a “single billing” model for patients – consolidating charges so patients see one clear bill. Insurers and providers could collaborate on a system where patients have a single point of contact for any billing questions or disputes, reducing the time patients spend navigating bureaucracy. While this is more about patient experience, it can indirectly reduce administrative work too (fewer phone calls and confusion if billing is clearer).
* Standardized Insurance Product Design: Another contributor to complexity is the proliferation of insurance benefit designs – different copays, formularies, referral rules, etc., which providers must know. Regulators could push for standardized insurance plans (as some ACA marketplaces do) so that key features (like drug tiers or out-of-pocket structures) are uniform. If every insurer’s plan followed a few common designs, providers could manage administrative tasks (like prior auth or referrals) more predictably. This reduces complexity for providers who currently juggle dozens of plan policies.
* Reduce or Reform Prior Authorization: Prior authorization (PA) – requiring insurer approval for certain tests or treatments – is a notorious pain point. While intended to control unnecessary care, it imposes large admin costs. Reform proposals include automating PA processes, making PAs “real-time” for most requests, and selectively applying PA only to outlier providers or services with high misusehamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Simplify%20prior%20authorization,developed%20using%20information%20gathered%20in|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>. In fact, attaching a cost to prior authorization for insurers (e.g., if an insurer requires PA and the service is later approved, the insurer might have to pay the provider a small fee for the extra work) has been suggestedhamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Simplify%20prior%20authorization,developed%20using%20information%20gathered%20in|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref> to discourage excessive use of PA. In late 2022, CMS proposed a rule to streamline PA for Medicare Advantage and marketplace plans by requiring faster turnaround and electronic submission – such initiatives need to be implemented and enforced. Simplifying or standardizing PA forms and criteria across payers would also cut waste; providers could then check a universal electronic portal to get approvals rather than navigating each insurer’s website and rules.
* Health IT Interoperability: A significant portion of administrative hassle comes from incompatible electronic health record (EHR) systems and lack of data sharing. Doctors often manually transfer information or duplicate tests because records aren’t shared. Federal efforts via the 21st Century Cures Act are pushing for interoperability (through APIs and data standards like FHIR). Achieving true interoperable data systems would streamline many admin tasks – for example, automating insurance eligibility and benefit verification at the point of care, instantly fetching a patient’s coverage details, or automatically pulling prior test results from another provider rather than refaxing records. When data flows easily between providers and payers, administrative staff spend far less time tracking down information. Improved data exchange can reduce care delays and the need for redundant administrative coordinationhamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Enhance%20data%20interoperability,reduce%20prices%2C%20enable%20physicians%20to|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=Enhance%20data%20interoperability,reduces%20administrative%20costs%20associated%20with|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>, thus lowering costs associated with things like manual record requests or reconciliation of information.
* Fraud and Abuse Prevention vs. Administrative Burden: The U.S. expends a lot on administrative processes to combat fraud (audits, claims review, etc.). While important, some reforms look to balance fraud prevention with simplicity. For instance, targeting fraud enforcement on truly high-risk areas and easing up on low-risk claims can reduce paperwork for honest providers. Some international systems accept a small degree of fraud as a trade-off for simpler processing, whereas the U.S. layers on complex rules that burden everyone. Finding the right balance (via data analytics to catch fraud outliers, rather than blanket requirements on all claims) could cut administrative load without a major cost trade-off.
* Financial Impact: By various estimates, administrative simplification could yield anywhere from $50 billion to over $200 billion in annual savings, depending on the scope of reformsamericanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Administrative%20costs%20account%20for%2025,than%20%24150%20billion%20in%202011|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. A single-payer Medicare for All model is often cited as the extreme case, which might save $200–$300 billion per year in administrative costs by eliminating multi-payer complexity (though such a system has other cost implications)americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=for%20American%20Progress%20estimates%20presented,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. Short of that, achieving even a one-third reduction in billing and insurance overhead (which some incremental reforms might manage over time) would save around $160 billion a year (one-third of ~$496B)americanprogress.org<ref>{{cite web|title=americanprogress.org|url=https://www.americanprogress.org/article/excess-administrative-costs-burden-u-s-health-care-system/#:~:text=Each%20year%2C%20health%20care%20payers,annually%2C%20according%20to%20CAP%E2%80%99s%20calculations|publisher=americanprogress.org|access-date=2025-11-30}}</ref>. The Hamilton Project calculated that a suite of specific administrative reforms (standardized billing, streamlined PA, harmonized quality reporting, and better data sharing) could save about $50 billion per year (roughly $150 per American)hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=patients,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=discouragement%20from%20accessing%20health%20care,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>. These savings manifest as lower operational costs for providers (potentially allowing lower fees) and lower administrative loads for insurers (which could translate to slightly lower premiums if competition forces savings to pass through). Furthermore, less tangibly, physicians would reclaim hours of time – potentially spending more time seeing patients rather than doing clerical work, which could improve productivity and partially address clinician burnout.

===== Learning from International Models =====

Most other high-income countries manage to cover all their residents with far less administrative hassle, offering lessons for U.S. reform:
* Single-Payer or Unified Systems: Countries like Canada or Taiwan use a single public insurance payer, meaning providers bill one entity with one set of rules. Administrative overhead is extremely low – Canada’s single-payer provinces have insurer overhead of around 2% and hospital administrative cost ~12%commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=,as%20did%20rural%20facilities|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. There is no need for armies of billing clerks to navigate multiple payers. Of course, moving the U.S. to a single-payer system would be a massive change, but even steps toward a public option or streamlined public financing could capture some of these efficiencies. For example, expanding traditional Medicare (which has ~2% overhead) to more of the population could lower aggregate admin costs compared to private plans at 15% overhead.
* All-Payer Rate Setting with Simplified Billing: Many multi-payer countries (e.g. Germany, France, Japan) negotiate uniform provider rates and have central billing offices. In France, while there are multiple sickness funds, they all pay hospitals based on the same DRG (diagnosis-related group) rates, and the patient’s insurance card electronically conveys the billing info to the national system. Germany’s doctors have one association per region that handles billing with all sickness funds, so a doctor isn’t sending bills to 100 different insurers – they send to one entity which then manages distribution of funds. This significantly lowers the admin burden on providers. The U.S. could emulate this via all-payer rate setting (so every insurer pays the same amount for a given service), coupled with regional claims clearinghouses.
* Global Budgets for Providers: In nations like Canada or the UK, hospitals are funded via global budgets from the government, much like fire departments. They are not billing per patient at all (for most services), which eliminates the need for complex billing for each band-aid or aspirin. The Commonwealth Fund study noted that U.S. hospitals that engage in per-patient billing require more clerical staff and IT systems, whereas hospitals on lump-sum budgets avoid those costscommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Hospital%20administration%20costs%20ranged%20from,in%20Canada|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=The%20Big%20Picture|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>. Maryland’s global budget experiment similarly showed that if you give a hospital a fixed annual revenue, they can redirect resources away from coding and billing intensity and towards care management. Expanding global budget models (even in forms like capitated payments to health systems for patient populations) could cut admin costs by reducing the micro-accounting of each service.
* IT and Identity Infrastructure: Some countries have national health ID cards and integrated data systems – for example, Estonia’s digital health system allows secure sharing of records and nearly paperless administration for its citizens. Denmark has centralized electronic medical records and a single e-billing portal for all providers. These investments show that with political will, a country can modernize its health IT such that data flows seamlessly, drastically reducing administrative labor like manual data entry or repeated registration forms.
* Culture of Administrative Efficiency: Culturally, many systems prioritize minimizing non-clinical costs. In the U.S., however, a sizeable industry has grown around profiting from complexity (e.g., consultants for coding optimization, revenue cycle management companies, etc.). Learning from abroad might entail policy and cultural shifts to treat excessive admin costs as a failure to be corrected, rather than an inevitable cost of doing business. For instance, Japan keeps admin costs low in part by using uniform fees and not allowing hospitals to up-code for higher reimbursement – thus there’s less incentive to invest in aggressive billing tactics. Adopting some of these philosophies (like paying adequately but simplifying payment categories) could reduce the “arms race” of coding in U.S. healthcare.

===== Private Sector Efforts to Reduce Admin Burden =====

Just as with prices, private stakeholders are taking steps to simplify administration even before any sweeping national reform:
* Provider Practice Consolidation of Admin Tasks: Smaller physician offices often find the administrative load overwhelming. In response, some have joined independent practice associations (IPAs) or accountable care organizations that centralize admin services (e.g., one back-office handles billing for 50 doctors). By sharing admin infrastructure, each provider’s cost goes down due to economies of scale. Similarly, hospitals outsourcing or centralizing certain admin functions (like one central credentialing service for all hospitals in a system) can reduce duplication.
* Technology Solutions (Automation and AI): Tech firms are developing AI tools to automate coding, read documents, and even handle prior auth submissions. For example, optical character recognition and AI can process faxed clinical notes from one provider and auto-fill required fields for an insurance claim or referral, saving staff time. Robotic process automation can take over repetitive tasks like insurance verification. The CAQH Index highlights that transitioning remaining manual transactions (calls, faxes) to electronic could save $20 billioncaqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref> – and as AI improves, it could cut even deeper into the overhead by taking on tasks that currently require human intervention.
* Reducing Administrative Touchpoints: Some insurers are experimenting with approaches like “gold carding” for prior authorization – i.e., if a doctor has a history of appropriate requests, they waive PA requirements for that doctor. This kind of policy, if adopted widely, could eliminate a chunk of the busywork for providers who consistently follow evidence-based practices. Insurers also stand to gain because it improves provider relations and reduces their own admin costs from processing PAs. A few major insurers have announced plans to eliminate nearly 20% of current PA requirements due to provider feedback.
* Member-Friendly Administrative Simplification: On the insurance side, companies are trying to simplify things like claims explanations of benefits (EOBs) and customer service interactions. While this is more about consumer-facing admin rather than provider-facing, it still contributes to overall efficiency. If members can easily understand their coverage and claims, they make fewer calls and appeals, which reduces administrative workload for the insurer.
* Competitive Pressure to Lower Overhead: With rising premiums, large employers are demanding that insurance carriers reduce their administrative costs. Some employers are even moving to self-administration or using third-party administrators who promise lower overhead than traditional insurers. There’s a growing market for more efficient, tech-driven claims administrators (e.g., some startups claim they can run health plan admin with single-digit percent overhead). This competitive pressure may force legacy insurers to cut down on layers of bureaucracy to offer better pricing.
* Financial Impact: While private initiatives individually might have modest effects, together they can improve the system’s efficiency. If AI and automation cut just 5% of current hospital administrative staff costs, that could save on the order of $10–15 billion per year (given hospitals spend >$200B on admincommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=rural%20facilities%20,quality%20care|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>). If insurers streamline and cut their overhead by even 1 percentage point (e.g., from 15% of premium to 14%), that could mean tens of billions saved across the insured population in premiums or rebates. These savings often manifest as slower premium growth or the ability to invest in other areas (like care management). For providers, reducing admin burden frees up physician and nurse time – which, while hard to price, could indirectly improve productivity (more patients seen or more time per patient to improve outcomes). In summary, private sector efforts show that not all solutions need to wait for legislation; many efficiencies can be captured with existing technology and better management, though a supportive policy environment (with clear standards and incentives) can accelerate and amplify these gains.

Conclusion: High medical prices and administrative complexity are deeply intertwined problems making U.S. healthcare financially unsustainable. High prices extract resources from taxpayers, employers, and families, while excessive administrative waste diverts billions that could be used for actual care. The policy and financial analyses above suggest that comprehensive reforms – combining price regulation (or robust market discipline) with administrative simplification – could yield hundreds of billions of dollars in savings annually. Achieving these savings involves trade-offs and careful design: price controls must safeguard quality and access, and admin cuts must not compromise necessary oversight or patient privacy. Nonetheless, the experience of other countries and successful pilot programs domestically demonstrate that it is possible to “bend the cost curve” without harming outcomes, by paying smarter and streamlining how care is delivered and paid for. Policymakers at every level, along with private sector leaders, have an opportunity to implement these solutions. Over time, reining in prices and administrative waste will not only make healthcare more affordable, but also refocus the system’s energies on what truly matters – delivering high-quality, efficient care to patients.

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# CAQH – 2024 CAQH Index Highlights (2025)caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>caqh.org<ref>{{cite web|title=caqh.org|url=https://www.caqh.org/blog/new-caqh-index-reveals-20b-savings-opportunity-to-cut-waste-reduce-costs-and-improve-patient-access#:~:text=,efficiency%20and%20the%20patient%20experience|publisher=caqh.org|access-date=2025-11-30}}</ref>
# Hamilton Project – Proposal to Reduce Administrative Costs (2022)hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=patients,150%20per%20person%20per%20year|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>hamiltonproject.org<ref>{{cite web|title=hamiltonproject.org|url=https://www.hamiltonproject.org/assets/files/Cutler_PP_LO.pdf#:~:text=The%20Proposal%20Establish%20a%20clearinghouse,automating%20prior%20authorization%20could%20help|publisher=hamiltonproject.org|access-date=2025-11-30}}</ref>
# PGPF – U.S. vs. other country administrative spending (2025)pgpf.org<ref>{{cite web|title=pgpf.org|url=https://www.pgpf.org/article/how-does-the-us-healthcare-system-compare-to-other-countries/#:~:text=hospitals%20%E2%80%94%20leading%20to%20a,the%20same%20amount%20on%20both|publisher=pgpf.org|access-date=2025-11-30}}</ref>
# Commonwealth Fund – No link between admin costs and quality; global budgeting lowers admincommonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=product%20%28GDP%29%20rose%20from%200,quality%20care|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>commonwealthfund.org<ref>{{cite web|title=commonwealthfund.org|url=https://www.commonwealthfund.org/publications/journal-article/2014/sep/comparison-hospital-administrative-costs-eight-nations-us#:~:text=Hospital%20administration%20costs%20ranged%20from,in%20Canada|publisher=commonwealthfund.org|access-date=2025-11-30}}</ref>

== References ==
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