By Adam W. Gaffney, M.D., M.P.H.; David U. Himmelstein, M.D.; Steffie Woolhandler, M.D, M.P.H.; and James G. Kahn, M.D., M.P.H.
International Journal of Social Determinants of Health and Health Services, January 30, 2023
U.S. hospitals provide large amounts of low-value care and devote inordinate resources to administration, while some hospitals leverage market power to realize large profits. Meanwhile, many rural and safety net hospitals are financially distressed. The coexistence of waste and want suggests that U.S. hospital financing is neither efficient nor equitable. We model the economic consequences of adopting the mode of hospital payment used in Canada and the U.S. Veterans Health Administration and proposed in the leading congressional single-payer Medicare-for-All bill: global budgeting. Our models assume increased utilization due to expanded and upgraded coverage; gradual reductions in administrative costs from simplified payment; and the elimination of hospital profits, with hospital capital expenditures funded by explicit grants rather than from profits or borrowing. We estimate that non-federal hospital operating budgets will total $17.2 trillion between 2021 and 2030 under current law versus $14.7 trillion under single-payer with global budgeting. This difference reflects $520 billion in foregone profits and $1,984 billion in reduced expenditures on hospital administration; expenditures on clinical operating budgets, however, would be higher than under current law, funded out of profits.