Former White House advisor on the real reason your health care costs are going up: Medicare’s doctor pay gap

In this op-ed, Emeritus Prof. Tomas J. Philipson argues that Medicare payment rules are behind rising health insurance premiums and out-of-pocket costs.

Medicare’s disparate payment policies, which reimburse hospitals significantly more than independent physicians for identical services, are driving a rapid consolidation of the US healthcare market and inflating costs for patients and taxpayers. The federal government has created a perverse incentive structure that has pushed the share of hospital-affiliated doctors from 29% to 47% in just over a decade. By offering higher "facility fees" to hospitals while inflation-adjusted reimbursement for independent physicians has plummeted by 33% since 2001.

This vertical integration stifles market competition and drives up premiums, prompting experts to advocate for "site-neutral payments"—a policy reform that would equalize reimbursement rates across settings, potentially saving Medicare $202 billion over ten years by incentivizing care based on quality and efficiency rather than bureaucratic distortions.

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