On my recent travels, I met a healthy, active man in his early 60s who runs a small business. This year, his family’s monthly premium reached nearly $5,000 — more than a quarter of his pre‑tax income. He made the difficult choice to keep coverage only for his wife and two children, hoping to stay healthy until he is eligible for Medicare.
No family should have to make that choice, but this story is not unusual. More than 27 million Americans lacked health insurance in 2024, and millions more have coverage they cannot afford to use because their deductibles are so high. The average employer‑sponsored family premium is nearly $27,000 a year.
So why not just have the federal government pay more? Increasing federal subsidies is helpful in the short term, but it is not a sustainable long-term solution. In August, the federal debt exceeded $40 trillion. This sum is larger than the entire American economy and is nearly enough to purchase every single-family home in the country. Meanwhile, nearly 70% of federal, non-interest spending is on health care and income support like Social Security. Therefore, the only way to make health care affordable for everyone is to get costs under control.
The core problem is that the economics of the U.S. health care system are broken: There is no mechanism to keep total spending within any reasonable bounds. Every other major industry faces market checks when prices rise, from groceries to the family car. Health care does not.
One clear way to break this cycle is to put American health care on a budget, one that applies to all participants in the system. Everyone must be tasked with holding health care cost inflation at or below the rate of inflation, and must be held responsible for meeting the same target.
One way to do this is to create a national office of health care affordability responsible for ensuring that health care costs become sustainable. This new body would require reporting and analysis of how prices are set to drive greater transparency in health care costs. It would set thresholds for year-to-year cost increases, holding health care cost hikes at or below the rate of inflation.
When targets are not met, the office would work with the organization on corrective actions and, as a final step, could levy progressive financial penalties on organizations that did not fall within these thresholds. Finally, the office would establish mechanisms to ensure these savings resulted in lower premiums and out-of-pocket costs for families, employers, and taxpayers.
California is showing what this could look like. Its Office of Health Care Affordability sets enforceable cost‑growth targets for the whole sector and for individual organizations, with fines beginning in 2028 and a goal of holding growth near 3%, in line with wages. This is not the first time a state has tried such an idea. Eight states have set cost-growth targets over the past decade. But California is the first state to combine transparency of cost increases with financial enforcement that holds entities accountable to a target.
California’s approach was supported by a coalition of unlikely allies, including health plans like mine, labor unions like the Service Employees International Union (SEIU), large businesses including the Purchasers Business Group on Health (PBGH), and consumer groups led by Health Access California. Today, California’s Office of Health Care Affordability continues to seek feedback on its work from an advisory committee and workgroups comprised of stakeholders to ensure it has the benefit of a breadth of experience and expertise, including California consumers, insurers, labor unions, hospitals, and physician organizations.
As my colleagues and I at Blue Shield of California have said publicly, we support this approach because it is rooted not in the costs of one industry segment, but in a complete transformation of the entire health care system in the state. For example, a big part of OHCA’s work is focused on encouraging value-based payment models and ensuring investments in primary care.
But even with that support, California’s approach is drawing fire. The state’s hospital association has gone to court to block the targets, arguing they don’t reflect the real cost pressures providers face. Those concerns deserve a serious answer. But they also reinforce the need for a federal version of this model since these issues are national forces.
Without enforceable cost targets, every breakthrough, from GLP‑1s to gene therapies to artificial intelligence, risks becoming another layer of cost rather than a source of savings. Because the entire system is rewarded by doing more, investments in prevention are financially irrational. Without accountability, payment reform stays incremental. And without cost certainty, policymakers cannot responsibly expand access to coverage.
Health care has put Americans and America in a massive financial bind, and no one is coming to bail us out. The only way fix this is to make our wasteful health care system a lot more efficient and effective, which is only going to happen when we demand that the health care industry do what most American families have to do every year: manage to a budget.
Paul Markovich is president and CEO of Ascendiun, the nonprofit parent company of Blue Shield of California, Blue Shield Promise Health Plan, Altais, and Stellarus.
Source: www.statnews.com
