Glaring imbalances in the healthcare system threaten access to care for millions
Gary Alexander
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Hospitals have been financially struggling for years, but the past few have been some of the most difficult. Staring down the barrel of what some public health experts have deemed could be a “triple-demic,” it is likely to be another long and difficult winter for healthcare providers. Yet while our nation’s hospitals, most notably those serving rural areas, continue to struggle and are likely to face another round of closures in the coming months, one part of the healthcare sector has been reaping significant financial rewards.
Health insurance companies have created a perfect system to increase their bottom line consistently. A wave of consolidation since the passage of the Affordable Care Act in 2010 has created an oligarchy of five large for-profit commercial health insurers: UnitedHealthcare, Anthem, Aetna, Cigna, and Humana. These companies now collectively cover 43% of the total U.S. insured population and have been provided with disproportionate influence to create a system that allows them to take less risk and cover fewer services.
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This has put the healthcare sector on an unsustainable path on which insurer profits have soared while patients, providers, hospitals, and healthcare workers are faced with financially devastating surprise medical bills and reimbursement rates that are many times too low to cover costs. There is a glaring imbalance in the healthcare system that needs to be corrected.
A recently issued press release from the UnitedHealth Group illustrates this broader issue. The company has seen record profits during the pandemic and has paid its CEO well north of $300 million over the last decade as other parts of the healthcare sector have struggled to keep the lights on. UnitedHealth’s 2022 earnings amounted to a whopping $324 billion, and their 2023 earnings are expected to grow by over 10% to as much as $360 billion, demonstrating how this trend shows little evidence of slowing down.
To put that into perspective in our often complicated and confusing healthcare system, $360 billion equates to the average yearly operating cost of almost 1,800 hospitals. With only 6,093 hospitals in total in the United States as of October 2022, including 1,796 rural hospitals, that means that UnitedHealth’s projected revenues for 2023 could cover the entire operating cost of these facilities that are most at risk of closing and still have some leftover change.
Rural hospitals serve over 46 million people. In many places, they are the only healthcare facilities available to their communities. Despite significant financial challenges, they provide an abundance of critical services, including emergency care, inpatient care, mental health services, laboratory testing, and primary care, as well as rehabilitation and long-term care. These hospitals truly are the lifeline of their communities, and as more of them reach their breaking point, more people suffer.
In addition to direct healthcare services, rural hospitals are also often the biggest employers and economic impactors in their areas. One study found that every dollar spent by a hospital supports $2.30 of additional business activity. And these facilities not only provide jobs but also serve as development anchors that bring new companies and residents to their area as well.
Unfortunately and unsurprisingly, the COVID-19 pandemic hit them the hardest. Already operating on razor-thin margins in the best of times, these facilities struggled to overcome pandemic-induced financial shocks, including unexpected PPE expenses and revenue shortfalls that resulted from pauses in more lucrative outpatient surgeries.
With decreased funding and increased pressure, rural hospitals are closing at frightening rates. Between January 2010 and February 2022, 138 rural hospitals closed. As a result, more Americans have found themselves in healthcare “deserts” that require traveling long distances to reach care, sometimes in excess of 35 miles. This is simply unacceptable in a life-or-death situation.
The pandemic was an opportunity for health insurance companies to fulfill their intended role as stabilizing influences in the healthcare industry, but their actions over the last few years have unfortunately done the opposite. If something is not done soon, millions of patients, especially those in rural areas, may lose the ability to see their doctor for preventive and primary care visits and access to care in emergency situations as well. It is time for insurers to step up or Congress to step in to resolve the issue.
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Gary D. Alexander served as Health and Human Services secretary in Rhode Island from 2006-2011 and Human Services secretary for the Commonwealth of Pennsylvania from 2011-2013.