Template Talking Points about Hospital Prices as a Driver of the Health Care Affordability Crisis
Below are some suggested talking points to convey the urgency of the health care affordability crisis and point to hospital prices as a cost driver. We recommend supplementing these talking points with a brief, succinct overview of the hospital pricing strategy your state is pursuing, and providing any other state-specific context.
We’re facing a health care affordability crisis.
Health care spending in the commercial market is rising at alarming rates. High and growing health care costs:- Squeeze state budgets – health care costs crowd out investments in other essential public services.
- Hinder local economic growth – escalating health care costs drain resources from local businesses, limiting job creation,1,2 suppressing wages,2,3 raising consumer prices, and undermining competitiveness.
- Consume a growing share of household budgets – health care costs are rising faster than wages, leaving families with less money for essentials and forcing difficult tradeoffs between medical care and everyday needs.
- Worsen the health of communities – surveys show that many people respond to high health care costs by delaying or avoiding care. [Insert state-specific information on the percentage of consumers that avoid or delay care due to costs in your state using the Consumer Healthcare Experience State Survey, another state-based survey, or the 2023 Commonwealth Fund Health Care Affordability Survey.] Care delay or avoidance contributes to worsening health problems and to more costly health care needs down the line.4
- Exacerbate inequities – the effects of high and growing health care costs fall hardest on vulnerable populations, e.g., people of color, people with disabilities, low-income households.2,5,6
Addressing excessive hospital prices is critical to making a dent in overall spending growth
Consumer price index for major categories of consumption since 2000
(2000 prices = 100)
Hospital prices are unfair and unjustifiable.
- Hospital prices are high because there is little accountability for how much they charge.
- In highly concentrated markets with little competition, dominant hospitals and health systems demand and receive higher prices for their services. This market power leads to unwarranted price variation, where hospital prices for the same service differ wildly across locations with no meaningful differences in quality or outcomes.
- Over the past two decades, prices for hospital care are among the very fastest growing compared to other major categories of consumption (see figure above).7
- High and rising hospital prices are a primary driver of increased health care spending. These services make up almost 50% of all state health care spending in the commercial market.8
- The math is simple: we cannot make a dent on reducing health care spending without addressing hospital prices.
- [Insert state-specific information on your state’s longitudinal data on hospital price growth – for example, a line graph of percentage change in hospital prices for the past five years or a table that shows payment per unit for hospital services in the past five years and the average annual growth percentage.]
Why now?
- With H.R.1 (aka the Big Beautiful Bill) cutting federal funding to our state, there is simply not enough money to pay for unjustifiably high hospital prices.
- Double-digit premium increases in 2026, combined with the potential expiration of enhanced health care cost-sharing subsidies, has deepened the affordability crisis.
- This heavy burden for our state budget, in combination with a growing affordability crisis, creates an imperative to act now on hospital prices.
- The longer we wait to act, the higher the baseline of prices becomes, making future reforms more difficult and expensive.
While hospitals may argue that they can’t slow price growth because they are limited in their ability to reduce costs, the reality is…
- Evidence shows that when hospitals are faced with financial pressures that limit their ability to raise their rates, hospitals manage their operating costs more efficiently, debunking the assertion that hospitals have little control over their costs.9,10
- Research shows that high hospital prices are driven primarily by market power, rather than by unmanageable increases in labor and other input costs.11
Hospitals do not raise prices in response to lower Medicare and Medicaid payment levels, but rather to maximize revenue.
- Evidence does not support industry assertions that higher commercial payments are needed to compensate for underpayment in Medicaid and Medicare.12,13,14
- Extensive literature shows that hospitals largely raise commercial prices to maximize revenue, rather than to recoup losses due to lower Medicare and Medicaid payment levels.15
Responding to Hospital Counterarguments to Slowing Hospital Spending Growth
For access, please reach out to Alyssa Vangeli at avangeli@bailit-health.com.
8 Health Care Cost Institute. 2022 Health Cost and Utilization Report. April 2024.
9 See the following:
Stensland J, Gaumer ZR, Miller ME. Private-Payer Profits Can Induce Negative Medicare Margins. Health Affairs 2010;29(5):1045–51.
MedPAC. Assessing payment adequacy and updating payments in fee-for-service Medicare (chapter). Report to Congress: Medicaid Payment Policy. March 2024.
Blavin F, Kane N, Berenson R, Blanchfield B, Zuckerman S. Association of Commercial-to-Medicare Relative Prices With Health System Financial Performance. JAMA Health Forum. February 2023, 4(2).
Owens C. 1 big thing: Into the hospital margin rabbit hole. Axios Future of Health Care Newsletter, Aug 30, 2024.
Smith T, Medical Group Management Association. Physician practice losses: Why losses are typical in health system practices. Nov 9, 2018.
10 MedPAC. Report to Congress. March 2023 (pages 47, 78, 101 [endnote 26]).
11 Congressional Budget Office. The Prices That Commercial Health Insurers and Medicare Pay for Hospitals’ and Physicians’ Services. January 2022, 18, 22, 39–41.
12 Blavin F et al. (This study found that for large health systems, higher commercial-to-Medicare relative prices and a lower Medicaid payer share were associated with higher profits and more days with cash on hand. These findings show that relatively higher commercial prices were used to increase profits and liquidity, rather than primarily to offset losses from public payers.)
13 Congressional Budget Office. The Prices That Commercial Health Insurers and Medicare Pay for Hospitals’ and Physicians’ Services. January 2022, 26-28. (Data analysis and literature review found no evidence that the share of providers’ patients covered by Medicare or Medicaid played any part in commercial market hospital and physician services price variation in most settings.)
14 MedPAC. Congressional request on health care provider consolidation (chapter). Report to the Congress: Medicare Payment Policy. March 2020, 468-469, 497-499 (Appendix 15-A). (Examined literature testing the cost-shift theory and found that when Medicare or Medicaid revenues increase, hospitals with more market power still aim to negotiate larger, rather than smaller, rate increases from commercial insurers.)
15 MedPAC. Report to Congress. March 2023 (pages 47, 78, 101 [endnote 26]).