Late May’s passage of the House Reconciliation Bill has generated a hurricane of outraged debate and fevered analysis over the near-trillion dollars of government spending cuts it might feature over the next decade. All of it is to be expected; threaten to apply even a partial tourniquet to the eternal flood of DC swamp-gold, and fear-mongering grievance will follow, every time. No matter the final details once it survives Senate scrutiny and House/Senate conference negotiations, one fact will remain unaltered: America’s hospital system is conspicuously missing from the “waste, fraud, and abuse” decries from President Trump, DOGE, Speaker Johnson, and other sober voices regarding the unsustainably rising costs of the US Healthcare system.
The American people – or at least those who recently have been subject to a hospital experience – already know this sad reality first hand: overcrowding, soaring prices, degraded service, a total lack of price-transparency, and phantom-billing. These are just a few of the hallmarks of the modern-day hospital visit in the richest country on earth, which will only be worse for those who lose insurance coverage or are underinsured with these potential cuts.
But if American taxpayers had greater visibility regarding the underlying financial health practices of their average local hospital, how receptive would they be to their elected representatives trimming some of the fat? Very receptive, one imagines, considering they spent over $1.5 trillion on hospital care in 2023 (out of pocket, and not counting their sizeable tax contribution) – and that represented the largest segment of a nearly $5 trillion pie. Furthermore, if taxpayers understood the extent to which “non-profit” hospitals abused – ridiculed, really – that term, and the cushy tax breaks they enjoyed at their expense, taxpayers wouldn’t just be receptive to cutting certain hospital subsidies, they would be demanding them.
Consider the components of hospital spending: Prices of services and Quantity of services. Hospitals in the US have seen increases in both price and quantity. Over the past 25 years, hospital prices have risen over 250%. This is twice the overall rate for medical care and triple the rate of inflation. Hospital consolidation has exacerbated the problem with over 1600 hospital mergers taking place between 2000 and 2020. While these mergers should bring benefits of scale, research has shown that hospital mergers have historically driven price increases and lower wages in the markets they serve. In terms of quantity, there is also a skewed incentive for American Hospitals, which primarily operate on a “fee-for-service” (FFS) model. Because insurers pay for each test or treatment, regardless of its necessity, hospital providers have a financial incentive to deliver as many services as possible.
Consider the “Fair Share Deficit,” which is a term to describe the discrepancy – often vast – between the benefits a “non-profit” hospital provides to its patients and the surrounding region in which it operates, and the amount of federal, local, and state tax exemption it receives. In 2024 alone, these disparities totaled $25.7 billion, with a full 80% of non-profit hospitals revealed to be “in the red,” not only to the people they “serve” locally, but also to the average American taxpayers footing the bill, with little knowledge, no consent, and zero recourse, save that which they entrust to their elected officials.
Consider also “non-profit” hospital CEO pay, and the extensive network of so-called “administrators” required to run one of these bloated “charitable” endeavors. Between 2012 and 2019, non-profit CEO compensation grew 30 percent, reaching a mean average annual salary of over $600,000. The individual stories are even more compelling, and atrocious. Take Ohio’s fabled – perhaps because they spend so much on advertising? – non-profit hospital, the Cleveland Clinic. Its tax subsidies aside, it took in over $1billion in federal funds over a 38-month period ending in June 2023, specifically to provide inexpensive medications to low-income patients, which it neglected to do, and instead ploughed the dough right into its general coffers. Rather than offer affordable medication to needy patients, the Cleveland Clinic instead provided more than one million dollars apiece to 22 executives, paid another 30 individuals over $500,000, and finished the year with almost $1 billion in “net income,” or, what your accountant would call, “profit.” And if your accountant neglected to call that profit, the Internal Revenue Service (IRS) – empowered by your elected officials – would come knocking on your door.
It would be an exercise in hilarity to hear a U.S. Senator’s “constituent services” aid to discuss the waste, fraud, and abuse in the Medicaid or Medicare programs without mentioning hospital costs. Especially to a voter back home, lucky to be making a median annual salary of $61,984, and very much paying taxes on it. Americans are waking up to what’s going on – hospitals have been ripping them off for years and the government should be taking steps to rectify the situation. Once hospitals start pricing their services more fairly, American taxpayers will be left with the better, more affordable services that always stem from a competitive (rather than a government price-fixed) marketplace.
There have been hospital reforms proposed for years. Luckily, there are several bills in this session of Congress including bills to enhance price transparency at hospitals, align payment rates with the health services offered rather than the location in which they are offered (known as “site neutrality”), and even hold non-profit hospitals accountable to meeting federally codified community benefit standards. Let’s hope that we don’t try to address the US Healthcare system problems without addressing the $1.5 trillion elephant in the room.
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