Scroll Top

Hospitals Are the Biggest Cost Drivers in Our Healthcare System

Hospital care is the largest component of healthcare spending in the United States, where spending is growing faster than gross domestic product, inflation and wage growth. A new Op-Ed in the New York Times points out that while many people are focused on targeting health insurers, hospitals are actually the primary culprit behind soaring medical costs.

According to a recent RAND Corporation report, spending on hospitals represents 44 percent of personal expenses for individuals with private health insurance. That same study found that hospitals treating patients with private health insurance were paid, overall, 2.4 times the Medicare rates in 2017, and nearly three times the rate for outpatient care. If the plans had paid according to Medicare’s formula, their spending would be reduced by over half.

There is also the issue of hospital inequality. While some smaller or rural hospitals are struggling and shutting down, others are very prosperous. Dominant hospital systems use a variety of secret contract terms to protect their turf and block efforts to curb healthcare spending. This Wall Street Journal article explains the many ways hospitals are able to drive up costs and prevent competition.

When discussing ways to improve our healthcare system and to make it more accessible and affordable for everyone, it is important to look at all of the factors that contribute to the rising costs, not just the ones that may seem more politically palatable.