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The Trump administration is desperate for good news on inflation, so when they saw that prescription drug prices had dropped by the largest amount in 60 years, they grabbed onto that for dear life. “No previous Administration achieved this,” the White House boasted in a press release, congratulating themselves for “delivering real relief to American families and putting patients first.”
It seems reasonably clear that the administration that delivered this was, in fact, the “previous Administration,” namely, Joe Biden’s. The lion’s share of the drop is attributable to drug price negotiations in Medicare, which just kicked in this year for ten high-priced medications. Some of the negotiated prices are 79 percent below the previous level. That Democrats put together a health care intervention designed not to lower prices until the next president’s term is severe political malpractice, but it happens to be the truth.
Trump’s innovation, the TrumpRx “discount” program, offers the same deals available on direct-to-consumer drug company websites and only assists people who don’t already have a prescription drug plan, while helping to maintain stubbornly high list prices. His “most favored nation” deals, which were touted in the press release, haven’t even been implemented. By ending subsidies for Medicare Part D premiums, drug costs for seniors are likely to go up even if drug prices go down. “None of the PR stunts that Trump has pulled on drug prices are actual serious policy,” said drug policy expert Alex Lawson of Social Security Works.
The Consumer Price Index for medications is a real black box that doesn’t equal out-of-pocket costs and doesn’t count expensive specialty drugs. But even if you take it at face value, the bigger story is that, regardless of who should take credit, the greatest prescription drug price drop in 60 years is only a reduction of 3.1 percent, and that’s a crude average; we know that over 270 drugs went up in price this year. When the White House says that TrumpRx has saved customers more than $700 million in the first six months as if that’s a meaningful number, they leave out that annual prescription drug spending is likely to top $1 trillion this year.
The structure of the American health care system is driving the higher costs, worse outcomes, and medical worker misery.
Americans were paying nearly three times as much for their prescriptions as patients in other countries in 2024, and a minuscule decrease isn’t going to meaningfully change that.
The larger point is that the structure of the American health care system is driving the higher costs, worse outcomes, and medical worker misery. Adding new structures that replicate the old, cover only portions of the system, or fail to strike at the heart of the matter will inevitably fail, and a stressed public will look at the war to take credit for a meaningless improvement they don’t feel and wonder what planet Washington policymakers are from.
A new research paper from the American Economic Liberties Project, shared exclusively with the Prospect, actually undertakes the task of transforming the health care system, and while it’s complementary to a Medicare for All approach, single-payer insurance is not mentioned. The paper is called “Break Up Big Medicine,” and it identifies the drivers of American health care dysfunction as corporate infiltration, relentless consolidation, vertical integration, and an endless series of middlemen and new methods for extracting public money.
In effect, the public pays twice: first through higher premiums and out-of-pocket costs, and then through higher government payouts to corporate health care companies. The United States spends the equivalent of $15,000 per year for every man, woman, and child on health care; this is around 20 percent of the economy and more than twice the level of other industrialized countries.
The report is critical at a time when Medicaid cuts and the expiration of Affordable Care Act subsidies engineered by the Trump administration are significantly boosting the uninsured population and the burden on hospitals to deliver uncompensated care. The belief perpetuated by rising costs that America can’t afford to provide its citizens with medical care is incorrect, advocates argue: Solutions outlined in the report are estimated to save not $700 million, but $795 billion annually, primarily by reducing administrative bloat and corporate profit-taking.
“In tandem with moving toward a Medicare for All system, we have to address consolidation that is the cause of health care being so expensive, with degraded quality, and the squeezing of health care professionals,” said Emma Freer, one of the co-authors of the report. “Otherwise we end up with something like Medicare Advantage for All, which would be disastrous.”
THE AUTHORS, FREER AND MORGAN HARPER, sketch out an interesting history of how medicine went corporate and got big. After the advent of Medicare and Medicaid in the 1960s, economists stoked fears of patient overutilization of treatments and services. This led to a policy theory that private industry could make health care higher-quality and more efficient. Giving patients “skin in the game” in the form of co-payments and rationing care would also reduce utilization.
The revolution was called managed care, and it was generally a gradual practice in corporate outsourcing, starting with the Health Maintenance Organization (HMO) Act of 1973, which led to exemptions of state corporate practice of medicine laws to allow private insurers to better direct care outcomes. “At the time this was maybe done in good faith,” Freer said. “[But] this approach has really failed on its own terms. It has not lowered cost or improved quality, and it has made a small number of companies a fortune … we’re paying for this private apparatus to tell us we can’t get the care that we need.”
Anybody can clearly see the results. Twenty-five years ago, there were no health care companies in the top 15 of the Fortune 500; today, there are six (insurance conglomerates UnitedHealth, CVS, and Cigna, and wholesale supplier giants McKesson, Cencora, and Cardinal Health). The Big Three wholesalers control 98 percent of the market; the above insurers own the Big Three pharmacy benefit managers (PBMs), which control 80 percent of the market. In almost half of U.S. metro areas, one insurance company controls half the market.
It’s not even right to call these companies insurers or wholesalers. UnitedHealth has 2,700 subsidiaries, and is the leading American employer of physicians and the leading processor of claims. CVS is the dominant pharmacy chain and a PBM and a health insurer (Aetna) and a provider at its MinuteClinics. Drug wholesalers increasingly own physician practices, too. And then you have hospital conglomerates and private equity–owned staffing firms. Forty years ago, 80 percent of doctors owned their own practices; today, 80 percent of doctors are employed by a large hospital network, an insurer, a wholesaler, or private equity. There were 161 private equity deals for dental practices—just in 2024.
Even the public side of health care is not immune from this agglomeration. Over half of Medicare beneficiaries are enrolled in private Medicare Advantage plans, which costs $76 billion a year above traditional Medicare. An even bigger percentage of Medicaid patients are in private managed care.
The consequences of handing over health care to Big Medicine have been immense. The cost of coverage through employers has tripled since 2005, and another 10 percent increase is expected next year. Prices charged to commercial insurers are double that of Medicare. When private equity buys out a physician practice, prices immediately jump 11 percent.
Moreover, the health outcomes are garbage. Patients are routinely rejected access to brand-name prescriptions and charged more for deductibles and co-pays that worsen insurance coverage. “Prior authorization,” which means a delay or rejection of treatment, are carried out at a rate of 40 per physician per week. Hannah Garden-Monheit, a colleague of Freer’s at AELP, tells the story of her late father being denied rehab after his leg was amputated and feeling like they couldn’t talk about it because they might be denied cancer treatments, too.
And the U.S. has a shortage of 96,000 physicians and countless numbers of vital drugs, too. Despite the stupendous spending, the system isn’t even meeting current demand.
When policymakers try to fix this madness, it’s usually with well-intentioned tweaks that just open different loopholes. The report describes one critical example: the Affordable Care Act’s medical loss ratio. On the surface, this sounds great: Large insurers have to spend at least 85 percent of premium dollars on actual medical care. But in practice, this has incentivized vertical integration among insurers and providers. “If we can’t keep the profits, we can buy providers and overpay them,” Freer explained.
That’s right. According to recent research, UnitedHealth pays providers owned by its affiliate Optum as much as 61 percent more than unaffiliated providers. This accomplishes two things. First, it moves money from one of UnitedHealth’s pockets into the other, with no bearing on the parent company’s profits. Second, it increases overall health spending, and since the insurance company gets to keep a percentage of that spending in profits, it increases UnitedHealth’s earnings.
This has become a standard practice, and it shows that incremental steps will ultimately fail to challenge the power and ingenuity of giant health care companies. “It’s a real ‘road to hell is paved with good intentions’ situation,” Freer said.
THE SOLUTIONS THE REPORT OUTLINES are varied, but most of them are analogous to what the Glass-Steagall Act did for the financial industry. Preventing insurers and other middlemen from buying providers would end the absurdity of the same conglomerate on both sides of the transaction and close the medical loss ratio loophole. PBMs that control prescription transactions shouldn’t also own pharmacies, the report recommends. A federal ban on corporate practice of medicine, as was enacted in Oregon last year, would separate private equity firms from owning doctors, hospitals, and nursing homes. (At the least, they could be held responsible for negligence or other actions leading to injury or death.)
The report also counsels the need for public options that go beyond the insurance sector. Public PBMs have been incorporated at the state level, and they save states money while giving independent pharmacists higher reimbursements. Public manufacturing of prescription drugs is another option. And a reimagining of a public option is inherent in the report’s endorsement of standardized pricing for health care treatment based on Medicare rates, eliminating the entire morass of billing and administrative negotiation from the system. “I think those two pieces reinforce each other, public options and public standardized pricing,” Freer said. “Providers would have to compete on the quality of what they’re providing rather than increasing market share.”
Freer also believes that investment is needed to ensure that competitive medicine can survive. That includes a revolving loan fund for independent practices so they aren’t at the mercy of insurance claims, as well as more investment in public providers like community health centers. This may sound perverse given the $2 trillion a year the government already spends on health care. But, Freer says, “it isn’t just enough to break up Big Medicine, we have to think about how to rebuild a health care system to be friendlier to independent medicine.”
In the report’s vision, health care would be consumer-friendly as well, by ending prior authorization and co-payments designed to ration care. The enormous savings from the other proposals can finance this.
Polling consistently shows these ideas with 70 percent or more support across party lines, as the report indicates. The obvious reason that we still have the health system nobody wants is that Big Medicine is, well, big, and has a lot of power to maintain the status quo.
That said, reform efforts are starting to bring policymakers more in line with public anger. “The states are really ahead of Congress,” Freer said, citing novel approaches in Arkansas and Tennessee to break PBMs from pharmacies, direct price regulation of hospitals in Indiana, public PBMs in Ohio and Kentucky, and a public drug manufacturing plan in California. That most of these efforts are happening in red states shows that there is real opportunity for bipartisanship; many of the federal bills that mirror the report’s recommendations have Democratic and Republican co-sponsors.
“For a lot of time the conversation was how to preserve the Affordable Care Act, which did important things but essentially continued the managed care paradigm,” Freer said. “We’re starting to see the conversation shift to how to build on the ACA by moving away from that paradigm and really tackling the consolidation piece.”
