Over the years, I, along with many others, have expressed frustration with the economic state and financing of healthcare in this country.
The frustrations have become familiar. Studies show that American healthcare is far more expensive than that in other developed countries, while having more limited access. Over time, the payment system has become extraordinarily complex, rife with cross-subsidies and unintended incentives. The number of uninsured people is unacceptable. Shortages of nurses and physicians are pervasive and persistent. Hospitals, particularly those small and rural, struggle to maintain a margin sufficient to fund current operations, much less invest in necessary facilities and technology.
What too often is left unsaid is that, despite these complexities and challenges, the U.S. health system does function, and in many ways functions extremely well.
The United States health system is recognized as elite in science and technology, including medical advances, scientific discoveries and health digitation. The U.S. is a leader in new drugs and medical devices, scientific Nobel prizes per capita, scientific impact in academia and research and development expenditures per capita, giving Americans access to the most innovative medical treatment options in the world.
In a single year, America’s 6,000 hospitals handle 34.4 million admissions. Hospital emergency departments have more than 155 million visits annually. One out of six jobs in this country is with a hospital, and America’s teaching hospitals train 77,000 residents each year.
Over the last 20 years, America’s hospitals have provided $620 billion in uncompensated patient care to those in need. During Covid, hospitals’ support of a suffering population was nothing short of heroic. Hospitals were instrumental in developing and administering Covid tests, tracing Covid’s path, educating communities about the virus and how to avoid it and providing front-line care for the huge swath of Americans affected by the virus. In this period, hospitals provided increased charity care and took on more bad debt in spite of rising expenses and declining revenue.
The foundational importance of the U.S. healthcare system, coupled with its extraordinary complexity and consequent fragility, dictates that any changes to the system be undertaken with extreme care. Therefore, it is worth looking carefully at trends in current healthcare legislation to discern their potential effect on populations, on hospitals and on what is currently working well in U.S. healthcare.
Effects on populations
A clear trend in current legislation is to reduce federal expenditures on government-sponsored health insurance, particularly Medicaid. To that end, legislative proposals include imposing work requirements for Medicaid eligibility, increasing Medicaid eligibility checks, adding cost sharing for services on adults under Medicaid expansion, reducing participation in the Healthcare Marketplace, limiting individual contributions to Health Savings Accounts and delaying rules to reduce barriers to Medicare enrollment for low-income individuals.
Thus, while reducing federal expenditures, these proposals would reduce significantly access to healthcare. The Congressional Budget Office estimated that the 2025 Budget Reconciliation Act and other proposals would lead to nearly 13 million people losing health insurance coverage. Many who retain coverage could face reduced and more expensive services.
Effects on hospitals
Legislative proposals also make serious efforts to reduce government payments to hospitals. Tactics include limiting state-directed Medicaid payment to inpatient hospitals and nursing facilities, prohibiting states from increasing tax rates or creating new taxes to fund Medicaid expenses, restricting the 340B drug pricing program, making government payments for outpatient services the same for hospital and non-hospital settings and changing the disproportionate share hospital payment for services to low-income patients.
Hospitals, especially those with weaker balance sheets and narrow or negative margins, are poorly positioned to absorb this potential revenue loss. To compensate for this loss, hospitals with narrow margins may need to consider difficult options such as reducing needed services, cutting staff and delaying or canceling investment in facilities and technology. In the direst circumstances, some hospitals may find themselves hard pressed to carry out their missions or even to keep their doors open.
Effects on U.S. healthcare excellence
Deserving our very close attention is the way legislative proposals and other government initiatives could affect what makes this country a global leader in healthcare safety, effectiveness and innovation.
Government provides a large proportion of the funding for U.S. healthcare research. The National Institutes for Health provides more funding for cancer research than any entity in the world, supporting thousands of initiatives for medical interventions, preventive measures and public education, and helping fuel a 33% decrease in cancer deaths from 1991 to 2020.
NIH funding into research about risk factors, prevention and treatment of heart disease has helped bring about a 68% decrease in deaths from heart disease from 1969 to 2015. NIH funding supported the first heart valve replacement, a procedure now performed 100,000 times per year.
And one study found that “NIH funding contributed to research associated with every new drug approved from 2010-2019.”
As of May 27 of this year, 712 NIH grants to U.S. medical schools and hospitals for $1.4 billion have been cancelled, along with an additional 712 grants for an additional $1.1 billion to other institutions for healthcare research. Also proposed is elimination of student loan programs poised to affect nearly half of all medical students at a time of serious clinician shortages.
The dimension of these cuts calls into question the country’s ability both to maintain its leadership position in healthcare research and to meet the complex and changing healthcare needs at the level of excellence our population deserves and expects.
A broader look at legislative philosophy
In his landmark 1973 book The Coming of Post-Industrial Society, sociologist Daniel Bell wrote: “If there is anything which…marks off the second half of the 20th century from the first half, it is the extension of the specialization of function from the economic to the intellectual realm….The husbanding of talent and the spread of educational and intellectual institutions will become a primary concern of the society; not only the best talents, but eventually the entire complex of prestige and status will be rooted in the intellectual and scientific communities.”
The philosophy of proposed healthcare legislation appears to offer a distinct change in direction from the social phenomenon described by Bell. Rather than supporting intellectual and scientific excellence, legislation and government actions prioritize funding cuts over the nation’s ability to continue as a leader in healthcare innovation that benefits people who suffer from medical conditions and healthcare needs both common and complex.
A game of Jenga
The U.S. healthcare system has evolved over time into a large and complex assemblage of interdependencies among individuals, providers, governments, employers, payers and many other stakeholders. Because U.S. healthcare has evolved without a clear blueprint to govern its structure and growth, the system is both fragile and unpredictable. As a result, no one really knows how any single change, or group of changes, would affect the whole.
The situation is like a game of Jenga, in which wooden blocks, each with a subtle imperfection, are arranged into a tower, and players take turns removing one piece and then another. The person who removes a piece that causes the tower to collapse is the loser.
In the healthcare system, any change to one part—Medicaid enrollment, hospital reimbursement, research funding and many others—could create multiple, hard-to-predict effects on any and every other part of the system.
When making changes to a fragile system that serves so many, the watchword should be caution. Unfortunately, the nature and scope of recent legislative proposals do not strike me as cautious.
As in the game Jenga, the loser in healthcare legislation will be the one who makes the change that topples the whole. That will be the political loser. There will be, however, a broader set of losers: those who depend on the fragile tower built of imperfect pieces that is the U.S. healthcare system. That group includes not only vulnerable populations, but everyone who requires effective and innovative healthcare. And that is all of us.
