Understanding Healthcare Costs in America by Contextualizing Hospital Revenue Losses under the ACA and Probing the Culture of Medical Practice and Care

Abstract

The Patient Protection and Affordable Care Act (ACA) was supported by the American Medical Association (AMA) and American Hospital Association (AHA) with the premise that reductions in Medicaid and Medicare Disproportionate Share Hospital (DSH) payments would be offset by an increase in the insured population. However, the Supreme Court ruled in 2012 that states had a choice to not expand Medicaid without addressing the DSH cuts, resulting in severe reductions in hospital revenue. The context of these losses, though, remains ambiguous. A loss of tens of millions of dollars may seem severe, unless the revenue is in the billions, in which case these losses translate into merely single-digit percentages. This paper seeks to elucidate the context of hospital financial losses under the ACA, investigating current hospital financials by considering healthcare costs (hospital bills) and hospital operating costs. It further probes the reasons behind rising healthcare costs in the United States, focusing on the providers (physician workforce) in terms of the culture of healthcare and workforce makeup. In consolidating the various financial implications from government reports to investigative journalism pieces, it was found that rising healthcare costs are the result of high markups as well as excessive care. Moreover, the shortage of primary care physicians (PCPs) in the workforce contributes to the inefficiency of the American health delivery system. This paper proposes that changes in medical education, which can be address the PCP shortage and promote efficient practice of care, are needed in addition to policy reform to address rising healthcare costs in the United States.