As Americans continue to grapple with escalating healthcare costs, Congress’s debate over COVID-era Obamacare subsidies fails to address the biggest culprit behind medical inflation.
This focus on insurance companies only highlights this blind spot with data reinforcing the increasingly outsized role that hospitals are playing in the rising cost of healthcare in this country.
The conflict over reimbursement rates between insurance companies and hospitals has stretched on for years, but exploded following the pandemic. A report from FTI Consulting found disputes more than doubled over the past two years, rising from 51 in 2022 to 133 in 2024.
While these high-profile disputes involve both sides pointing fingers, importantly, they also highlight the fact that hospitals are digging in their heels in these negotiations, demanding higher and higher reimbursement rates, rates that insurance companies — and the customers they represent (employers, families, etc.) — simply can’t afford.
When UConn Health ran into contract problems with both ConnectiCare and Aetna this year in Connecticut, hospital officials said they were seeking higher reimbursement rates. Aetna, in turn, accused the hospital of demanding rate increases that would “drive up health plan costs” for members.
Similar accusations occurred in Louisiana, where UnitedHealthcare said LCMC Health wanted a more than 40 percent price hike, threatening to raise employers’ healthcare costs by $80 million.
Elsewhere, UnitedHealthcare’s fight with UNC Health in North Carolina involved an astronomical $570 million increase in costs over a three-year period.
These disputes are examples of the cost pressures behind expectations that healthcare premiums will rise 18 percent nationwide by 2026, according to an analysis by the Commonwealth Fund.
Congress established an independent arbiter program to resolve payment disputes in 2020. But an analysis by the Niskanen Center found providers increasingly turned to arbitration, and often prevailed. Government statistics show providers won 68 percent of roughly 65,000 disputes in 2023. By the end of last year, that share had risen to 86 percent across nearly 950,000 cases.
Health policy analysts say the disputes highlight how heavily the pricing system favors providers.
“Providers wield disproportionate control over how government influences prices for their services, which keeps those prices excessively high,” said Michael Cannon, director of health policy studies at the Cato Institute.
As hospitals have increasingly benefited from these favorable government payment decisions, financial disclosures show many have also expanded executive travel and nonmedical investments.
A review of IRS documents obtained by ProPublica found that nonprofit hospitals in multiple states paid for executives to travel first class or use private jets, often covering the travel expenses of spouses or partners. One hospital told the IRS it encouraged executives and board members to bring spouses and covered their travel, accommodations, and entertainment.
Hospital executives also expanded investment portfolios beyond healthcare operations. For example, when the longtime owners of a Maine pizza shop decided to retire, the nonprofit MaineHealth purchased the business and its three-story building as part of a $512 million expansion.
In New Orleans, a hospital bought a hotel it called a “home away from home” for visitors. IRS documents revealed the building is rented to a wholly-owned nonprofit subsidiary, which reimburses the hospital for related expenses.
Other disclosures point to broader nonmedical spending. One Missouri hospital reported $2.9 million in expenses related to Antarctica, without providing further detail in IRS filings.
Last year, a New York hospital promoted its lung transplant program by hiring Academy Award-winning director Alexander Payne and celebrated actor Paul Giamatti for a commercial. It also commissioned a Los Angeles street artist to create a mural and ad campaign that celebrated nurses. IRS documents show the hospital paid more than $50 million to the independent creative agency behind these projects.
These expenses are part of the “tremendous waste” by hospital systems, Cannon said. He blamed hospital lobbyists for standing in the way of meaningful reforms. “A market system would impose real accountability on high-cost, low-quality hospitals, which is why hospitals lobby against a market system,” he observed.
Despite these disclosures, government efforts continue to focus on insurance companies — not reforms that could drive underlying health care costs down, like site neutral payment reforms, mandating more pricing transparency as a condition of spending via Medicare, or focusing antitrust action on blocking hospital mega-mergers that many on the Left and Right agree create behemoths with overwhelming market dominance that allow them to steamroll health insurers in contract negotiations.
During a White House address, President Donald Trump suggested insurance companies “have gotten rich” from the current system, arguing the COVID-era Obamacare subsidies should be eliminated. U.S. Sen. Rick Scott (R-Fla.), himself a former hospital executive, has proposed new HSA-style accounts that critics say would do little to enable consumers to access healthcare given the high prices charged by big hospital systems. Scott did not comment on hospital costs.
Democrats on the party’s extreme Left have also demonized insurers in other ways. U.S. Rep. Pramila Jayapal (D-Wash.) cited recent polling showing Americans favor a “government-administered insurance system” like Medicare for All over traditional insurance models or paying out of pocket. Rep. Jayapal notably is a critic of Medicare Advantage, the private insurance alternative to Medicare fee-for-service — and one that more than 50 percent of eligible enrollees in her home state favor. Some hospitals prefer her policy proposals, believing it will be easier to extract payments from traditional Medicare than private insurers — a fair point, given that politicians are often less incentivized to achieve cost savings than businesses, and easier to muscle than corporate negotiators.
More traditional, Tea Party-type conservatives like U.S. Rep. Chip Roy (R-Texas), while no fan of insurance companies or government involvement in healthcare, have focused more on the role of providers in driving up costs. In an interview, Rep. Roy criticized hospitals, saying they support anticompetitive state laws that make it harder to open new facilities. He added that hospitals are incentivized to increase prices because they know insurance companies will pay.
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Irrespective of whether anyone in Congress seems to understand that provider charges are a key driver of insurance costs, a strong political incentive to act does exist. Recent polling by Republican firm Echelon showed that 72 percent of those polled considered healthcare “very” or “somewhat” expensive.
If the 2026 election will be about affordability, that provides a strong political incentive for both parties to tackle the issue of health care costs in ways that go beyond ACA subsidies.
