Health Care Spending in the United States: What is Next?

Abstract

Health care spending will always command public policy attention given the prominence of government payers in this market and the role played by the tax system in subsidizing health insurance purchases. But, with President-elect Trump's campaign promise to repeal and replace the Affordable Care Act (ACA), and a Republican House and Senate that have campaigned on the same agenda, the health care insurance market will face another round of reforms. This study examines the past path and possible future paths of health care spending. It also discuss several ways to reform the public insurance programs and to reform the tax treatment of employer provided health insurance. These reforms would constrain the growth in explicit and implicit government spending on health care. Limiting government spending on health care while still replacing the ACA's coverage of the newly insured can be accomplished by a tax reform that reduces tax expenditures on employer sponsored health insurance, by offering risk-adjusted tax credits for the newly insured, by Medicare reforms that include more flexibility, premium support and increased means-testing, and by state-level innovations in the Medicaid program.