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James Myall is the senior economic policy analyst at Maine Center for Economic Policy.
Two decades ago, health economists summed up the problem with the American health care system succinctly: “It’s the prices, stupid.” Comparing the United States to other wealthy nations, they found we don’t spend more because we’re sicker. We spend more because prices are far too high.
That remains true today. Americans spend two-and-a-half times more per person on health care as those from other wealthy countries, yet often get worse outcomes. We have fewer doctors, more avoidable hospital visits, and shorter lifespans.
We’re paying more for less because we’ve failed to control and negotiate prices aggressively, as most other countries do. Health care cannot function like a typical market: People don’t shop around in an emergency, and access to care shouldn’t depend on income. That’s especially true in Maine, where a handful of large health systems dominate and many patients effectively have only one hospital choice.
LD 2196 offers a chance to begin correcting decades of unchecked price growth that are driving crushing insurance premiums. Nearly half of Maine families carry medical debt — most of it from hospital bills. That debt weighs down our economy and hurts families, making it harder to afford basics, pursue education, or start a business.
Hospital spending is the largest share of health care costs in Maine — and one of the fastest growing. In response, Rep. Drew Gattine, D-Westbook, in coordination with Maine’s Office of Affordable Health Care, has proposed LD 2196. The amended bill would limit how quickly hospitals can raise prices charged to some insurers, tying future increases to the rate set by Medicare. Hospitals would keep their current prices but face reasonable limits on future growth.
According to the Office of Affordable Health Care, this policy could save patients $182 million over the next five years and save the state employee health insurance plan— which we all contribute to as taxpayers — another $45 million over the same period. Some of those savings go back to the hospitals through a new minimum price for primary and behavior health services, but the net savings still amount to $203 million by 2031. That’s money that will lower premiums and out-of-pocket costs.
The outgoing head of the Maine Hospital Association recently said the health care “affordability crisis is not solvable.” I believe that’s simply wrong. Other countries — and several U.S. states — have managed to slow cost growth significantly, often through government negotiation with providers and insurers.
If hospitals believe affordability is out of reach, LD 2196 may provide the incentive to prove otherwise. This bill doesn’t impose cuts — it asks hospitals to moderate future price increases and operate more efficiently.
Other states are already taking steps to rein in hospital costs, with promising results that show savings can be achieved without compromising patient care.
Hospitals aren’t the only driver of an unaffordable and broken health care system. Insurers, drug companies, and others all play a role. But hospital services account for 39% of all health care spending in Maine, and those costs have risen three-and-a-half times faster than other expenses over the past 20 years.
If we’re serious about making health care affordable, tackling runaway hospital costs is a logical place to start.
