The Culprit Complicating America’s Hospital Cost Crisis

Summary

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Federalist Radio Hour Summary

Episode: The Culprit Complicating America’s Hospital Cost Crisis
Date: April 22, 2026
Host: Matt Kittle
Guests: Brian Blase (President, Paragon Health Institute), John Graham (Visiting Fellow, Paragon Health Institute)

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Episode Overview

This episode examines the soaring costs and complex problems plaguing America’s hospital system, focusing on the drivers of high prices, underlying government policies, and what could truly reform the system. Drawing from Paragon Health Institute’s recent report, “The Hospital Cost Crisis: How Government Policies Drive Consolidation, Undermine Competition and Fuel Soaring Prices,” experts Brian Blase and John Graham join Matt Kittle for a detailed discussion of bad incentives, ineffective oversight, and paths forward.

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Key Discussion Points and Insights

How Bad Is the U.S. Hospital System?

• Rising Costs and Inefficiency
  • Hospital-centric care is unaffordable and unsustainable for both families and government ([03:40]).
    • Example: 32% of Americans have postponed surgery due to cost; 50% fear bankruptcy from a major health event.
    • Since 2000, hospital prices have gone up three times the rate of inflation and twice as fast as wages ([03:40]).
  • “Hospital prices since 2000 have gone up more than twice as fast as Americans' wages.” – Brian Blase, [03:40]
• Consolidation and Monopoly Power
  • Government policies facilitate hospital monopolies and acquisitions of private practices, reducing competition and driving up prices ([03:40], [09:54], [13:46]).

Government Policies That Drive Costs

• Medicare and Medicaid Payment Structures
  • Medicare pays hospitals more for procedures that could be done in less expensive settings, subsidizing high-cost facilities instead of encouraging cost-effective care ([06:33]).
    • “If you can do it as high quality and as effectively at a lower price at a different site of care, that's where we should be paying for it to be done.” – John Graham, [06:33]
  • Medicaid “money laundering” lets hospitals use financing tricks (provider taxes, intergovernmental transfers) to drain more federal funds than allowed ([06:33], [09:54]).
• The 340B Drug Discount Program
  • Hospitals get steep drug discounts for outpatients but keep the extra profit, not passing savings to patients ([06:33]).
• Certificate of Need Laws
  • State-level laws protect incumbent hospitals from competition by requiring new entrants to gain approval from boards dominated by current providers ([09:54], [40:09], [41:09]).

Lobbying Power and the Perpetuation of the Status Quo

• Hospitals spent $155 million on lobbying in 2025, efficiently blocking common-sense and bipartisan reforms ([14:24]).
  • “Their lobbying is very effective. And hopefully with this paper and with interviews like this, we can help to change that.” – John Graham, [14:24]

Lack of Price Transparency

• Hospitals resist federal and state efforts to force price transparency. Only 2% of hospital revenues come directly from patients; the rest comes from insurers and government payments ([15:39]-[16:27]).
  • “For some reason, hospitals are just terrified that patients should know how much things cost.” – John Graham, [15:39]

The Myth of Hospital Poverty

• Hospitals often plead poverty, citing the struggles of rural hospitals, but overall margins on Medicare and Medicaid are healthy for most providers ([24:25]-[25:20]).
  • "On average, hospitals make money on Medicare patients. ...and we estimate that on the Medicaid side they're making similar margins.” – John Graham, [25:20]
• Subsidies intended for rural hospitals often are funneled into large urban academic centers due to system consolidation ([25:20]).

Nonprofit Hospitals: Tax Privileges and Charity Care

• Nonprofits avoid taxes and secure lower borrowing costs, but their executives receive exorbitant salaries and for-profit hospitals sometimes provide more charitable care ([35:07]-[38:00]).
  • “For-profit hospitals which pay taxes typically provide more charitable care than non-for-profits.” – Brian Blase, [38:00]

Solutions and Reforms

• Key Recommendations from the Report ([39:22]-[41:37])

  • Implement site-neutral payments: Pay the same rate for the same procedures, regardless of venue, ending the incentive for costly hospital care.

  • End Medicaid “money laundering” schemes and the 340B abuse.

  • Repeal Certificate of Need laws to foster competition.

  • Encourage price transparency so consumers can make informed decisions.

  • Target subsidies to genuine rural and safety-net providers, not generalized hospital overhead.

  • “Site-neutral payment... is a very bipartisan proposal... Barack Obama proposed it in 2012. So by now we should be getting that done.” – John Graham, [39:23]

  • “If you do think you need to help rural providers, safety net providers... then target subsidy money to rural safety net providers.” – Brian Blase, [43:33]

Debate Over "Socialized Medicine"

• Expanding government control and moving toward single-payer would exacerbate existing issues, increasing bureaucratic allocation and political lobbying over patient-centered care ([18:54]-[21:45]).
  • “We do not have a free market in health care. We have a system that's very government centric...” – Brian Blase, [18:54]
  • Market-based sectors like LASIK and cosmetic surgery show declining prices and improving quality.

The Immigration Angle

• Public funds for hospital systems can be stretched by undocumented immigrants; federal funding formulas get manipulated so all federal taxpayers end up shouldering the cost ([41:37]-[42:53]).

The Political Path Forward

• Building a reform coalition is key but difficult; entrenched lobbyists and system beneficiaries oppose changes. Broad public support may be possible as affordability wanes and wage growth stagnates ([43:33]).
  • “Hospitals and largely insurers do not have interest in health care becoming more affordable. They make more money the more Americans spend on health care and the less affordable it is.” – Brian Blase, [43:33]

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Notable Quotes & Memorable Moments

• “Hospital prices since 2000 have gone up more than twice as fast as Americans' wages.” – Brian Blase, [03:40]
• “The health spending crisis is a hospital spending crisis.” – John Graham, [06:33]
• “If you can do it as high quality and as effectively at a lower price at a different site of care, that's where we should be paying for it to be done.” – John Graham, [06:33]
• “Their lobbying is very effective. And hopefully with this paper and with interviews like this, we can help to change that.” – John Graham, [14:24]
• “For some reason, hospitals are just terrified that patients should know how much things cost.” – John Graham, [15:39]
• “For-profit hospitals which pay taxes typically provide more charitable care than non-for-profits.” – Brian Blase, [38:00]
• “Hospitals and largely insurers do not have interest in health care becoming more affordable. They make more money the more Americans spend on health care and the less affordable it is.” – Brian Blase, [43:33]

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Key Timestamps

| Timestamp | Segment | |-----------|---------| | 03:40 | Problems with hospital-centric healthcare: cost, consolidation, government’s role, faulty incentives | | 06:33 | How Medicare, Medicaid, and 340B drive up prices and fuel consolidation | | 09:54 | “Legalized money laundering,” lobbying, and government-protected monopolies | | 14:24 | Hospital lobbying: scale and impact | | 15:39 | Hospitals’ resistance to price transparency; revenue sources | | 18:54 | What increased socialization/government control would actually mean | | 25:20 | Falsity of hospital “poverty”; rural vs. urban/suburban financial reality | | 35:07 | Non-profit hospitals, tax privileges, and outsized executive compensation | | 39:22 | Paragon’s 12 policy solutions—key highlights and rationale | | 41:37 | Immigration impacts and state/federal funding manipulation | | 43:33 | How to politically overcome industry resistance and achieve reform |

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Conclusion

The episode delivers a comprehensive critique of America’s hospital cost crisis, arguing government policy sustains inefficiency and high prices through subsidies, protections, and anti-competitive laws. With rising prices and stagnating wage growth, meaningful reform—transparency, competition, and market-based discipline—is overdue but faces intense lobbyist resistance. The hosts and guests agree: while the problem is dense and multifaceted, targeted policy changes could deliver significant savings and better care, but political will and broad coalition are essential.

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Transcript

[A]

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[B]

Foreign.

[A]

We are back with another edition of the Federalist Radio Hour. I'm Matt Kittle, senior Elections Correspondent at the Federalist and your experience Sherpa on today's quest for knowledge. As always, you can email the show at radio the federalist.com follow us on XDRLST. Make sure to subscribe wherever you download your podcast and of course to the premium version of our website as well. Our guests today are Brian Blaze and John Graham from the Paragon Health Institute. Brian is Paragon's president and previously served as Special assistant to the President for health care in the first Trump administration. John is a visiting fellow at Paragon who has nearly three decades of health policy experience. We're going to need all of that knowledge to delve into our topic today, and that is the mess of this health care system, a $1.6 trillion per year hospital system alone that crushes patients, all while the industry claims it's barely surviving. Paragon details it all in an alarming new report, the Hospital Cost Crisis, How Government Policies drive consolidation, Undermine competition and Fuel Soaring prices. Gentlemen, thank you so much for joining us in this edition of the Federalist Radio Hour.

[C]

Thank you.

[B]

Thank you.

[A]

Well, you bet. Listen, there's a lot of a lot of blame that is going around. We'll talk about who is to ultimately blame for all of this. But your report really delves into some alarming statistics and I'll be honest with you, this is a comprehensive report. But I don't know if we needed to report to know how messed up this system is. You just do an excellent job of detailing just how messed up it is and how it can be fixed. But here are some statistics and I want you and I guess, Brian, I'll start with you on this. 32% of Americans have postponed surgery because of concerns about cost. 50% of Americans fear bankruptcy from a major health event. Medical debt is directly linked to Untreated mental illness. One third of people with mental illness and medical debt forgo treatment entirely. These really are the fruits of, of a bad harvest in a system that has, has failed the American consumer and the, the American patient overall.

[C]

Yeah, the health care system that Americans have is complicated, complex, frustrating and increasingly unaffordable. You know, there's pockets of American health care that are exceptional. But the hospital centric model that we have is increasingly unsustainable for middle class families and for government programs. You know, if you look at. And one of the main motivations for this paper is what we refer to as the chart of the century. It was put together by a scholar at the American Enterprise Institute, but it tracks price increases this century by major areas of the economy. And hospital prices are at the top. The growth in hospital prices is larger than the growth in prices in any other sector of the economy. They have outpaced inflation by a factor of three. And hospital prices since 2000 have gone up more than twice as fast as Americans wages. Hospitals benefit from numerous government policies that protect them from competition that have led to significant consolidation in the market, particularly hospitals buying up independent doctor offices and which subsidize costs and inefficiency. So the root of the problem is really bad government policy. And the solution is to reverse a lot of the policies that government has put in place over decades that have caused hospital prices and costs to escalate without really meaningful increases in productivity at hospitals and with disappointing quality of care too often an outcome for patients that are treated in hospitals.

[A]

Here's another eye popping statistic. It goes with what we talked about in the introduction. Americans spent over $1.6 trillion on hospital care in 2024, more than the entire gross domestic product of Spain. That I think really drives home just how expensively, insanely expensive all of this. So John, I turn to you. What are the sort of policies over the years, you know, that have been entrenched that have affected the overall outcome of health care, hospital healthcare in America and the cost?

[B]

Well, thanks for asking. We're focusing on hospitals here because they are the biggest cost driver in the healthcare system and because as Brian mentioned, the prices for hospitals have increased much faster than general inflation. But they've also increased almost twice as fast as other medical services like physicians operating in independent offices. So until we get a grip on the hospitals, we're never going to get a grip on the health spending crisis. The health spending crisis is a hospital spending crisis. We've got a whole bunch of items in this report I'LL just pick up three in the interest of time. One is how Medicare pays for hospital services. For many years now, they have paid hospitals more to do the same service that could be done in an outpatient facility or in a physician's office or in an ambulatory surgery center. And Medicare pays them more simply because it costs more to do it in a hospital. Now, that's not a way to pay for something. If you can do it as high quality and as effectively at a lower price at a different site of care, that's where we should be paying for it to be done. And if the higher cost facility cannot get its cost down to compete, the taxpayers should not be making that difference. Another problem is on the Medicaid side, and Paragon calls this Medicaid money laundering. These are financing techniques that states and hospital systems use to launder money through complex financing mechanisms. They call them things like provider taxes or intergovernmental transfers. And what they do is they result in grabbing more money from the federal government than the strict letter of the funding formula allows. So again, that just drives up costs. And a third one is a program that it just goes by a number like so many government programs. They call it 340B. And what it is is a mechanism whereby hospitals and they have this unique privilege. They can buy prescription drugs for outpatients, not for inpatients, but for outpatients at a deep discount. And other pharmacies that are not in this program can't do it. But hospitals can do it. They make a lot of profit off this 340B drug pricing, drug program. And they don't pass that on to patients, as far as we can tell. They keep it and it adds to their bottom line.

[A]

Well, that sounds. How do I describe this? Like, legalized theft. And I'm curious because this is,

[B]

I

[A]

think, a flaw, to say the least. But it reminds us of how much fraud is inherently in the system. And Paragon has been doing a lot of reporting on that over the last while. And I guess that's the question, Brian, is this stuff, I mean, in the minds of most of us, it seems a lot like fraud. How does it compare to the actual fraud that is going on in the system?

[C]

Yes. So there's tremendous problems with waste, fraud and abuse in government health programs. A lot of that is because the individual consumer, the patient, they're not cost conscious. They're not in control of the spending. I think the case with hospitals is not as nefarious as what we see in places like California, where hospice Providers have popped up and they're clearly shams and they are not providing services to patients or in other parts of the country where you've got this autism treatment fraud, where the patient, the children don't have autism and they're being incorrectly diagnosed because of kickbacks that go actually to the parents. I mean that's, there's the medical equipment that is never delivered to patients but is billed to the Medicare program. Medicare's pay and chase model is a recipe for waste, fraud and abuse. And as we've talked about before, the Medicaid program suffers because states are spending mostly with federal dollars and they create what we have termed these legalized money laundering apparatuses. I would say with what hospitals have done, it is not illegal. It is reaction to government policies that have grown over the years to benefit hospitals over other types of providers and to protect hospitals from emerging competition. So it is part of how politically powerful hospitals are that they've been able to, you know, in Obamacare, one of the things John didn't mention, Obamacare contained a provision that targeted physician owned hospitals. So physician owned hospitals are large source of competition for a traditional hospital. Obamacare limited Medicare payment for physician owned hospitals which basically stopped all of the growth of new physician owned hospitals. So benefiting the traditional hospitals. You know, states enact what are called certificate of need laws that protect hospitals from competition. So if you have a facility that wants to come into a market in states that have these certificate of need laws, they'll have to appeal to a board, basically a government planning board. And that planning board tends to be dominated by incumbent hospital providers that don't want any competition. So it is, it is about, I think it is the most anti competitive policy that exists. And again, this is, this is government coming in and protecting hospitals from competition. It's in many cases giving them monopoly pricing power. So we have tremendously bad government policy that is restricting supply and then distorting the market by favoring hospitals over independent doctors. You know, one of the stats that you didn't mention that is a major trend is doctors employed by hospitals. Yeah, it used to be that doctors were independent. Now most doctors are employed by hospital systems. Hospital systems have just taken over these independent practices. And part, a large part of that reason is because that's what the government payment policies have incentivized.

[A]

That's the word, incentivize. That's, that's what, what's happened here over the years. Isn't it that, it's that these hospitals aren't stupid. They know how to work the system. How much money is involved in the keeping the status quo? How much money is involved in the lobbying arm? Because they've been able to use that money, obviously to lobby for more of the kind of control that they've had and they continue to gain in the marketplace.

[B]

Yeah, thank you. Last year it was $155 million that hospitals spent lobbying, and it's been very effective. They're getting their money's worth. And what's remarkable about some of the recommendations we've discussed here, they are very bipartisan. This question of Medicare paying the same for a procedure in a lower cost ambulatory surgery center or physician's office than in a hospital. I first learned about that in Barack Obama's 2012 budget. This is not some right wing notion, and yet the hospitals are able to block it. And so their lobbying is very effective. And hopefully with this paper and with interviews like this, we can help to change that.

[A]

John, let's take a look at transparency, because that is a huge issue in the health care crisis at large, and it's a huge crisis in the hospital cost situation. Have the hospitals, and have they fought, and do they continue to fight transparency in pricing? I know there's a lot of movement in state governments on that front.

[B]

Absolutely. And some state governments have taken action and the President has taken some action. But we still have a big problem. There are laws, there's a federal law that they're supposed to be transparent pricing of hospitals, and they have blocked it. Dr. Oz and his colleagues in CMS are really pushing on that. They're having some success. But for some reason, hospitals are just terrified that patients should know how much things cost. And what's a, kind of a remarkable fact is only 2% of hospital revenues come directly from patients. The rest comes from government programs or from private insurers.

[A]

Wow.

[B]

So what are they so scared of? Only 2% of their revenues are coming from us, and yet it's almost impossible for us to know how much we're supposed to pay them for a procedure.

[A]

Yeah, but ultimately it's coming from us. It all is coming from us through our insurance premiums and through the, the, the cost that's levied on our taxes to the government. All of that stuff is, is paying for this. Speaking of Dr. Oz, by the way, my understanding, Brian, is that Paragon will be welcoming Dr. Oz, CMS director, in to talk a little bit more about this crisis. My, my understanding is he's taken a serious look and wants to take a more detailed look at it.

[C]

All. Well, your understanding is correct. Dr. Oz is the first CMS administrator that I think we've had in our history, certainly in recent memory, who is really dedicated to combating waste, fraud and abuse in government health programs. He inherited a mess, the Biden administration's legacy. We refer to his enrollment at any cost. They're really trying to maximize enrollment in the ACA and in Medicaid and deliver additional subsidies through health insurers, but many of which would get to hospitals through those programs. So Dr. Oz has already taken many steps to address the problem and we're very excited to welcome him for a discussion at the National Press club on Tuesday, April 28th. We're going to talk about the federal government's efforts to combat waste, fraud and abuse in health care programs.

[A]

The left solution, of course, has long been let's have the government take it all over. And you've noted some, some very powerful statistics that show us how stupid that would be, quite frankly, and how costly that would be ultimately to consumers. But let's play devil advocate for a moment. Brian, you know that that has been the hue and cry from the, the progressive, so called progressive movement in America. What would that do? If the fix, and you have a president and a Congress that would push socialized medicine, what would that mean for the current hospital system as we see it today?

[C]

So socialized medicine is substituting even more than we already do. And I would say we have a lot of socialized medicine right now in the U.S. if people say we have a free market in health care, it's actually one of the things I will often start talks with, is that we do not have a free market in health care. We have a system that's very government centric. What we need, and this is throughout any sector of the economy, you need the providers, the suppliers to be delivering products that consumers want and value. And, and there's a real value in the price mechanism in delivering information about the services and goods that provide value that Americans will part with their money to purchase. Now in health care, 90% of what we spend runs through third party payers. And the government has such a huge role in allocating resources. And the government right now is picking winners and losers in order to bring, in order to have like new products in healthcare, you need to hire lobbyists, you need to go to the centers for Medicare and Medicaid services and you need to have Medicare reimburse it. And then if it's reimbursing it, you then have to hire lobbyists to go and fight for higher reimbursement rates. So we allocate resources too much in terms of political power rather than best serving patient and consumer needs. If we were to move all the way to single payer, those problems would get worse, right? And we would have hospitals, insurers, they wouldn't be serving the needs of the patient, they'd be serving the needs of the overlords in the bureaucracy. And we would be allocating even more resources through the political process rather than through a market process. The best areas, and this is somewhat off the hospital topic, but the best areas where we've seen productivity in health care, meaning falling prices and increased costs quality over time, are segments where third party payment is rare. Lasik surgery, cosmetic surgery prices have declined in those areas while quality has improved.

[A]

It's not all sunshine and rainbows. Sometimes you have to embrace the suck. The Watchdog on Wall street podcast with Chris Markowski Every day Chris helps unpack the connection between politics and the economy and how it affects your wallet. When there's a lot of market volat, you have to embrace the suck. If you have a high quality portfolio with high quality companies, you should be fine. No need to worry. Whether it's happening in D.C. or down on Wall street, it's affecting you financially. Be informed. Check out the Watchdog on Wall street podcast with Chris Murkowski on Apple, Spotify, wherever you get your podcast. Our guests today are Brian Blaze and John Graham from the Paragon Health Institute talking about their new eye opening report, the hospital cost crisis. Policies drive consolidation, undermine competition and fuel soaring prices. That report has gone live. It is available, I would assume, Brian, on your your webpage.

[C]

It is, it is up, it's online. John was the sole author of that paper. It was a major research product, took over a year of us being very careful, running it through many policy experts, those people with expertise in hospital finance. We wanted to make sure that we got the analysis down correct. And you know, it's got really interesting findings about the fact that, you know, a lot of what you hear from hospitals is they can't make money on Medicare, they can't make money on Medicaid. That's why they need to charge people with employer plans so much more. That is what we call the hospital cost shift theory. It doesn't make any sense. And John can explain why. It also is inconsistent with the evidence. So we go through, John carefully, goes through a lot of these, the hospital finances, looks at the fact that hospitals can and do make money treating Medicare and Medicaid patients. And then the Bulk of the paper is an analysis of all of these programs and policies from the government that advantage hospitals and that deliver either benefits from restricting competition, that incentivize consolidation, or, or that deliver subsidies that really were subsidizing high costs at hospitals.

[A]

Well, John, let's talk about the differential here, the differential between fact and fiction, reality and fantasy we keep hearing over and over again. I've heard a lot of this kind of talk, the crying of poverty, the pleading of poverty, particularly from smaller rural hospitals. And it does make sense to me that, you know, they're not going to necessarily have maybe the same income flow as a larger regional hospital might have or a city based hospital. What is, what is the, you know, the, the, the real story when it comes to hospitals and how they are faring rural versus city, just hospitals in general, financially speaking?

[B]

Well, they're actually doing quite well. Now what the hospital lobbyists will do is point out to rural hospitals which are in areas which being rural or less populated and losing population, and they can be under financial stress and the hospital lobbyist will then say that describes the entire hospital system. That's just absurd. And that's not the case. There are most hospitals. On average, hospitals make money on Medicare patients. They make, over the last 10 years, their profit margins on Medicare patients has been between 6% and 10% every year. And we estimate that on the Medicaid side they're making similar margins. We don't have as precise an estimate, but we think it's similar because of this Medicaid money laundering scheme that we've described. So one of the problems, and we describe this in the paper, and it's almost numbing in its detail of how many overlapping and complex programs are subsidizing hospitals that say they're for rural or for low income, but it just disappears into the big hospital blob. And when we trace this money that's supposed to go to a rural hospital, oh well, it actually might end up in an academic medical center in, you know, a major city. So one of the action items is that there should be, Congress should charge GAO with describing exactly where all these billions and billions of dollars of subsidies are going because they were just added on by Congress over a period of over half a century now. Well, here's a problem. Throw more money at it. Here's a problem. Throw more money at it. And the hospitals are very sophisticated at taking advantage of these things. Health systems acquire other health systems. That's another consolidation we haven't yet described so much. We've talked about the hospitals buying physician practices, but they also buy other hospitals. So as that has developed that consolidation, it becomes more and more difficult for us to observe how much of these subsidies are actually going to a very rich academic medical center versus what is actually going to a rural county hospital that actually needs it. And I should say that Congress did a great thing in one big beautiful bill which created a fund for rural health transformation. And again, there's a key thing there. It's meant to transform health care in rural America, not to subsidize hospitals in rural America because there's some healthcare in rural America. You don't need a hospital to deliver. You need an emergency room, you need some maternity care. You do need hospital services. But again, we have to be very careful that we're not just subsidizing overhead for medical services that could be delivered at lower cost and better lower cost venues.

[A]

How much could we save today? You talk about a $1.6 trillion sector in hospital subsector in health. How much money could we save if we applied some basic private market practices to all of this? Some, just some basic stuff that you lay out in this report? Because I think taxpayers are absolutely fed up with the fraud that we've seen and they're pretty tired of the results that they're seeing and what they're paying for. And John, I'll ask you that question because you dug into the numbers.

[B]

Sure. All I'm going to say on that, it's a great question for the past, since in this century, as we've pointed out, hospital prices increased three times as much as general inflation and almost twice as much as prices of other medical services. If we just get it down to the same as other medical services, that would cut our problem by about a third. Right. Just doing simple arithmetic, I would hesitate to put a dollar figure on that. But you know, we've got about, we've got 12 recommendations and all of them will save money. And the more that Congress and the states take up, the more money we will save and we will get out of this crisis.

[A]

Brian, this is kind of a political question that goes along with all of this. We've heard from Democrats over and over in this campaign CYC about affordability. Americans can't afford this, they can't afford that. You know, I think about the, the regulation that goes into the energy sector and how that relates to the price of gas in California. So much more expensive even in higher inflationary times than it is anywhere else in the country. And I think the same thing applies to the hospital system, the healthcare system at large. How can they talk about affordability when they were in power? They created a lot of this stuff. And I'm not saying this isn't a bipartisan problem, but the left has tried to force obviously bigger government and more government control in these kinds of policies over the years.

[B]

So

[C]

it's a good question, I think when the left. So the center for American Progress has a paper out two weeks ago on increasing unaffordability of health care and they're specifically talking about hospitals too. And my, on some policy recommendations we agree strongly. So on moving to site neutral payments so that the government, Medicare in particular doesn't pay more for the same service in a hospital than in a physician office. That incidentally, that saves Medicare money and taxpayers money because Medicare spending goes down. It also reduces the incentives for consolidation. And by reducing the incentives for consolidation, that's going to lower health prices in the commercial market as well. And one of the major findings from health economics is that the more consolidated the markets, the higher prices that there are. Now they go too far. We, we think if government has caused the problem and these regulations are protecting, are anti competitive and leading to consolidation and our inefficient subsidies will get at the problem and get rid of those regulations and get rid of those subsidy programs or significantly reform them. They're now layering their proposal to include price regulation. Price regulation has, you know, government price controls generally lead to economic chaos because the government can't set prices, it doesn't know how to set prices and incorporate all, all of the information from the market. And then the prices will be, they'll all be wrong and then they'll be out of date and then they'll be subject to more lobbying pressure. So I think we do have some agreement right and left on the unaffordability here and problems with rising hospital prices. And I think we have some agreement on solutions, but I think we have some strong disagreement on solutions as well. And I'll say one of the main reforms in the one big beautiful bill, the one that I think we're most proud of at Paragon, is restricting this massive corporate welfare that goes to hospitals through the Medicaid program. Medicaid is now paying much more than Medicare in many states because of these financing gimmicks where the states are inflating payments to hospitals with just federal dollars. If your listeners are interested in that. Paragon has done a lot of work on this called addressing Medicaid money laundering, but that is just pure corporate welfare. The hospitals Fought very hard last year to protect that. And Congress, to their credit, Republicans in Congress stood up to the hospital lobby and were like, no, this is corporate welfare. I had one senator say, we can't just turn the U.S. treasury over to hospitals, most of which are nonprofit, by the way, which is something we should probably talk about. Sure. And so I think, you know, if you're. You cannot get at healthcare affordability if you don't take on the underlying drivers of high hospital prices.

[A]

Well, I just to finish up on your point on government price controls and how the history shows us that government has been an absolute failure and chaos always results from that. Yes. The government can't do that. The government can hardly govern. And so to ask them to do anything more is a recipe for disaster, particularly in the healthcare system. But John, let's get at that. Brian is absolutely right. There are so many hospitals out there. I think in my community, everywhere I've lived, I've heard about these non profit health institutions that seem to be making a great deal of money. Is that a tax issue that we need to take a look at as well?

[B]

It is definitely something worth examining. And they are nonprofit because historically they were charitable organizations. In the paper we highlighted some examples. There's a big health system in the western United States called Common Spirit Health, which is a product of a wave of mergers. It now covers 18 states and their CEO. His annual income in the last few years has been between, you know, high 20s, 28, $30 million a year. Well, if you go back to all these Catholic hospitals that eventually got consolidated into Conspirit Health with their multimillion dollar earning CEO. For example, the Sisters of Mercy was a hospital founded in the 1850s. Eight religious sisters came from Ireland on a boat to set up a little hospital to take care of cholera patients. I mean, what would they think if they could see what was going on today with these very highly paid C suite executives?

[A]

Well, I'll tell you what they think right away they would think first and foremost they'd say, man, they cured cholera people because of that thing. Good job, everyone. Now why are you making $40 million a year at a non profit? Would be their next question, of course.

[B]

Yeah, exactly. And they benefit from not paying a corporate income tax. Yeah. So that gives them an advantage. Also, they finance themselves not only through the revenues, but they're building new buildings all the time and making capital investments. They issue debt at a artificially low interest rate because they're what you call municipal bonds. Right. The investor doesn't have to Pay income tax on the interest he earns from that. So they get a couple of percentage points advantage when they issue debt. And they also, when they have cash reserves, which they do, they don't just make operating profit, they invest and they invest in securities, you know, like, like they're a hedge fund, what's going on there? And sometimes they make money, sometimes they lose money. Most of the times they make money and they don't pay any income tax on that. So I'm not saying I'm advocating raising taxes on anybody. I'm just saying why do they get this special privilege when they're so wealthy, so influential politically and they're able to pay their, their executives such high, high wages, high salaries. And we do have a fact in the paper showing the growth in the last 20 years or so of CEO salaries versus the salaries of nurses. You know, nurses salaries have gone up about 2.3% annually, whereas the CEO salaries have gone up like a rocket.

[C]

And they get this charitable care because they're supposed to or they get this tax benefit because they're supposed to provide charitable care. Charitable care. And what we found is that for profit hospitals which pay taxes typically provide more charitable care than non for profits.

[A]

That is a remarkable fact and a sad fact because I mean, I think I, I can speak for the American taxpayer. I know I can speak for myself as at least I don't begrudge anybody making millions and millions or billions of billions of dollars. I just don't want to be screwed and have my taxpayer dollars going to them on an uneven playing field. And that's what this paper I think really exposes, the uneven playing field. We're quickly running out of time, I'm afraid. But John, I'm going to go back to you again because this isn't just, as we've noted throughout this conversation, a paper on the problems with the current system. It is also addressing the solutions. You talked about 12 points early on. I wonder if we could quickly go over, you know, the key solutions that you find to the healthcare hospital crisis.

[C]

Sure.

[B]

Obviously I won't go through all 12. Your audience can enjoy reading the entire paper and I look forward to their comments. Comments. Some of the big ones would be what we discussed. Site neutral payment. Congress can do that. It is a very bipartisan proposal. They just have to roll over the hospital lobbyists because as I say, paying a higher price just because it's in a higher cost facility doesn't make any sense. And Barack Obama proposed it in 2012. So by now we should Be we should be getting that done. Again, further advances on the Medicaid money laundering that Brian has mentioned and Paragon's done a lot of research on that. Keep clamping down on these financing schemes

[A]

that

[B]

hospitals use in conspiring with states to get more money out of the federal government. That drug pricing program which I call the 340B program allows hospitals to buy drugs at an artificial discount and make money off that. That drives up drug prices for everybody else. That should be addressed. And those three are just about Congress. Right. But states have a lot to do as well. Certificate of need laws which allow hospitals to prevent new competitors from coming in. Imagine in the media landscape if outfits like the, I probably shouldn't name them, but imagine if the New York Times or CNN had the power to prevent an outfit like the Federalist from getting up and running. You needed permission from them to get up and running that would.

[A]

Oh, they've tried.

[B]

Yeah, exactly.

[A]

Not necessarily cnn but certainly all kinds of different news outlet. Keepers of the gate, so to speak. And we're currently in litigation on that front.

[B]

Oh well, I shouldn't have named anybody, should I have? Because I don't want to. But the. So yeah, many states still have these certificate of need laws which prevent innovative providers from coming in. And that's one thing that drives up the prices for private payers. You know your employer based health plans, they suffer from that. So those are a few of this, this dozen proposals that we've put forward.

[A]

Real quick. And I know this isn't in the proposal, but there are a lot of outside issues here too that we can't ignore. One of the biggest would be would many consider the invasion of this country, the open door immigration policies inviting millions upon millions of illegal immigrants. We have states like California because money is fungible. Tax dollars are fungible. They are paying for people who came here illegally to begin with. I know that there are executive orders and laws, but bills being debated on this. But do you know how much the impact of has been over the last several years in the hospital system?

[B]

Well, there is California specific example that they were able to spend more state money. They took their state money and spent it on illegal immigrants. And that using these creative money laundering mechanisms, they then got more federal money. So money is fungible. So even if you're not living in a state like California which uses state only money for illegal immigrants, you're still paying for it through federal taxes.

[A]

Yeah, for sure.

[B]

And it is a significant amount of money. We'd have to go state by State to look at that. But the administration and the one big beautiful bill took some steps to mitigate

[A]

that more legal fraud in the system. As we talked about before, Brian, we'll close with you. John was talking about in many of these circumstances, taking on the industry, taking on the industry lobbyist and the amount of money that is going into the coffers of campaigns. How do you do that successfully? Because that seems to me to be a big part of the track to, you know, dealing with this problem.

[C]

Yeah, I mean, you have to build the political coalition. And I think that at some point we're at a tipping point. Families cannot spend this much on health insurance premiums. Wage growth is stagnating because of how much health insurance costs. The federal budget situation is deteriorating largely because of the growth in spending on our health care programs. So I think we're at a tipping point in hospitals. More than a third of the spending with health care is through hospitals. And there are just so many problems and inefficiencies. And I think you see coalitions coming together to support several of the reforms. I mean, certainly price transparency is broadly popular and I think addressing some of these payment distortions are also would resonate with the American people. And you could build a coalition in support of. Of course, you need to take on the incumbents that benefit from the corrupt status quo. So hospitals and largely insurers do not have interest in health care becoming more affordable. They make more money the more Americans spend on health care and the less affordable it is. And I think in the reconciliation bill last year, Congress took on hospitals. They took on some of their fraudulent arguments about how the Medicaid reforms would devastate them. I think did some important things. If you, if you do think you need to help rural providers, safety net providers, that bill made broad system reforms and then targeted subsidy money to rural safety net providers. And I think you're probably going to have to have those types of, of policies where you exempt safety net rural providers. But you really do take a hard look at these large academic medical center, these massive health systems that are charging an arm and a leg because the government policy has incentivized that outcome.

[A]

Well, there's clearly a lot at stake here. If we don't get this, I don't know if we'll ever get it fully fixed. But if we don't start the process and if we, we don't really look at the issues that we've talked about today, one of the things we didn't even get to is what else is at stake is the solvency or insolvency of these taxpayer funded safety nets that are integral to these systems. That's a big issue here, too. But ultimately, it comes down to the fact that we have a lot of people in this, this country that can no longer afford health care. And that's a big problem that's not going to be solved by big government. It's going to have to come from changes in the marketplace, but it's going to have to be driven by the market. There is no doubt about that in my mind on how to go about fixing this broken system. Thanks to my guests today, Brian Blaze and John Graham from the Paragon Health Institute. You've been listening to another edition of the Federalist Radio Hour. I'm Matt Kittle, senior elections correspondent at the Federalist. We'll be back soon with more. Until then, stay lovers of freedom and anxious for the pre.