Senate deadlocked over health care spending amid shutdown threat
Senators are deadlocked over Medicaid cuts and ACA subsidies as a government shutdown looms.
The affordability of health insurance is severely strained right now, with premium increases in the double digits being passed along to many Michiganders for the past several years in a row.
Tackling this affordability crisis isn’t something we can do alone. It requires partnerships — across health systems, providers, insurers, regulators and pharmaceutical companies — to address the root causes of rising costs.
Rising health care costs hurt everyone
Skyrocketing medical and drug costs drove Blue Cross Blue Shield of Michigan’s claims expense higher by $12 million per day in 2024.
According to a recent survey from the Small Business Association of Michigan, the impact of rising premiums is now causing employers to shift more costs to their employees and to reevaluate the richness of their benefit plans, or even whether to provide coverage at all.
In Michigan, a state with such a strong tradition of employer-sponsored health insurance, we need to recognize the factors driving these costs higher and work together on system-wide solutions to keep high-quality health insurance affordable for our members.
It’s important to note that rising upstream costs for medical care, hospital care and new, expensive drugs are not just being felt downstream by health insurers — but also by employers who self-fund their health plans and the members who pay into them.
These employers assume the financial responsibility for paying a significant portion of their employees’ medical and pharmacy costs. Many of the largest Michigan companies fall into this category. The more they spend on health care, the less they spend to hire the workers, invest in the new products, and drive the growth that keeps Michigan’s economy strong.
Value-based payments
At Blue Cross Blue Shield of Michigan, 47 cents of every premium dollar was paid for hospital care in 2024. Insurers and hospital systems must partner more strongly to put more of that money to work paying for patient health — with a growing share of payment tied to the success of hospitals in achieving quality patient outcomes. The solution is leaning into the value-based payment model, and away from the antiquated “fee-for-service” where providers get paid for every test, treatment or procedure they perform — whether it helps the patient during their first visit or not.
Value-based payment models incentivize coordinated care between doctors and health systems and emphasize keeping patients healthy, reducing the need for expensive follow-up treatment.
We can’t just pay hospitals more for the same level of quality and care. We need to pay them to achieve better results.
This approach is at the heart of the multi-year payment contract Blue Cross signed earlier this year with Corewell Health. This five-year deal strives to improve the quality and affordability of patient care through multiple health outcomes-based initiatives.
We also must address — on a national level — the skyrocketing cost of prescription and specialty drugs for complex, chronic conditions and the enormous advantages provided to drug makers in pricing and marketing their expensive, but often life-changing, products.
Rising drug costs
Blue Cross’ claims expense for drugs grew 15% in 2024 — five times the rate of inflation.
The cause? Drug makers can price their products with no regulation, and enjoy patent protections that keep lower-cost competitors out of the market. This is a government-sanctioned monopoly and must be reformed to encourage competition that lowers costs.
For example, Blue Cross is investing in biosimilar drugs to provide lower-cost, effective alternatives to brand name medications. Biosimilars are interchangeable, FDA approved drugs with the same clinical effectiveness as their brand name counterpart. Our switch to a biosimilar for the autoimmune and inflammatory disease drug Humira resulted in saving our customers over 90% of the list price of that medication. We need more competition like this because it lowers costs.
The high cost of advertising
As we all know well, there is also drug advertising. In just the first three months of this year, drug makers spent $729 million on television advertising to drive demand for their high-priced products. In 2024, they spent $5.3 billion on television ads. And it’s all tax-deductible.
Recently, the current administration announced a proposal to rein in TV advertising for prescription drugs. Why does this matter? Direct-to-consumer advertising for prescription drugs increases patient demand, which raises the ability of manufacturers to negotiate higher prices for already expensive drugs. Meaning these higher costs impact individuals and businesses downstream.
The Blue Cross and Blue Shield Association supports a proposal to eliminate the tax deductibility of pharmaceutical advertising, saving $137 billion from 2026-2035. The bottom line is, we need to reform this system that drives drug prices — and health insurance premiums — higher.
These are among many initiatives that Blue Cross supports to help our members, customers and economy better afford health care. Affordability matters. But we need more system-wide solutions to curtail escalating costs and keep health insurance within reach for businesses and people ― and we have to work together to reach them.
Tricia Keith is president and CEO of Blue Cross Blue Shield of Michigan. Submit a letter to the editor at freep.com/letters, and we may publish it online and in print.
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