Emeritus Prof. Tomas J. Philipson argues that Medicare payment rules are behind rising health insurance premiums and out-of-pocket costs.
January 15, 2026

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.

Read the full article here

Tomas Philipson
Faculty Spotlight

Tomas Philipson
Daniel Levin Professor of Public Policy Emeritus

Tomas J. Philipson is the Daniel Levin Professor of Public Policy Studies at the University of Chicago Harris School of Public Policy and a director of the Health Economics Program of the Becker Friedman Institute at the University.