Delaware can follow Maryland’s example to curb health costs

Of the many problems in American healthcare, the sheer cost of medical care is perhaps the thorniest. American per capita spending on healthcare is approximately $12,000 per person, over $4,000 more than the second-place finisher, Switzerland.

The implications of our enormous healthcare spend are significant. More spending on healthcare means less money for schools, for infrastructure, for law enforcement, for clean energy. The oft-repeated refrain that the U.S. government is a military with a health insurance business is not far from the truth; healthcare comprises about 20% of government expenditures. And with the Medicare trust fund set to run out in 2028, the urgency to curb healthcare costs increases every year.

Why do we spend so much more than other countries? This problem has plagued health policy experts for the last several decades. Some argued that Americans use healthcare services more than citizens of other countries, thereby driving up costs — but this theory turned out not to be true. Instead, a simpler explanation exists: American healthcare is so expensive because the prices are higher. Or as the refrain goes, “it’s the prices stupid.”

Delaware happens to be an especially high-cost state. We rank in the top 5 among all states in per capita healthcare spend, for outcomes that are only middle of the road.

The reasons for high healthcare prices are myriad, and too much to cover in one column, but one driver of costs is consolidation of hospitals and healthcare systems. Consolidation leads to a lack of competition that gives healthcare systems greater bargaining power with insurers. When there are multiple hospitals and health systems in a region, hospitals are incentivized to offer insurers lower prices, which result in lower premiums for consumers and lower healthcare spend overall. But with a single dominant health system in a region, given the lack of competition, the health system may charge insurance companies higher prices. These higher prices charged to insurers are passed down to consumers in the form of higher premiums, and overall costs rise.

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