Setting the Record Straight: Three Ways the Hospital‑blame Narrative Gets it Wrong

A May 4 guest essay published in The New York Times frames hospitals as the leading “culprit” behind rising health care costs. It reduces a complex health care system and a much-needed conversation on affordability to a caricature. At a moment that calls for constructive dialogue, the essay chooses to inflame the debate, urging the public to direct its “anger” at hospitals rather than commercial insurers. That framing is hardly surprising given the author’s close ties to UnitedHealth Group and Arnold Ventures.

But it is wrong.

Here are just three ways the essay misses the mark.

1. It Treats “Hospital Prices” As The “Driver” of High Health Care Costs And Ignores That Hospitals Are Price Takers

The fulcrum of the essay is the following passage: “Hospital prices are the leading driver of the 320 percent increase in insurance premiums that Americans have experienced over the past 25 years. Since 2000, prices at hospitals have grown faster than prices in virtually any other sector of the economy.”

Let’s start with a basic point — the entire concept of hospital “prices” is flawed. Hospitals are largely price takers, not price setters. Government programs like Medicare and Medicaid set rates administratively. But Medicare reimbursement continues to lag behind inflation — covering just 83 cents for every dollar spent by hospitals in 2023 — resulting in over $100 billion in underpayments. Needless to say, government rates fall far short of covering hospitals’ actual costs. Likewise, commercial insurers aggressively negotiate payment terms with hospitals. In many cases, these are large, vertically-integrated companies that hold significant shares in their markets. With that kind of market power, commercial insurers do not simply accept the numbers that hospitals offer and then sign on the dotted line. Thus, the notion of hospital “prices” does not reflect how those purposed “prices” are set in the real world.

With that in mind, pay attention to what the essay does in that key passage. It observes that commercial insurance premiums have increased enormously — 320 percent — but then blames insurers’ decisions to raise their premiums on hospitals, simply because hospital “prices” also have grown. The essay does not try to link the two through anything other than guilt-by-association. Nor does it explain why rising hospital prices necessarily “drive” the size of premium increases. It instead treats correlation as causation, assigning blame where it does not belong.

But here’s the reality: Over the same time frame, commercial insurance premiums have increased more than hospital prices. Employer survey data from the independent Kaiser Family Foundation shows that premiums have risen faster than hospital prices as measured by the Producer Price Index — the measure that the Centers for Medicare & Medicaid Services relies on to track hospital prices in its National Health Expenditure report.

Likewise, the essay incorrectly states that hospital prices have grown three times as fast as inflation. Reputable sources disagree with that statistic. Researchers at the independent Brookings Institution recently found that commercial hospital price increases went from 2.3 percentage points above the general inflation rate in 2000-10 to 0.5 percentage points above the general inflation rate in 2011-24. Relatedly, over the last four decades, hospitals’ percentage of the overall health care pie has remained constant. Just as it did in the 1980s, hospital spending accounts for the same one-third of overall U.S. health care spending.

All of this suggests that rising premiums cannot be blamed on hospitals. But don’t take our word for it. Consider what the CMS actuaries have to say. They explain that “prices are a factor. They’re part of the equation. But non‑price factors are the driver.” In other words, premiums are primarily growing due to an increased need for services: People are sicker and they need more care.

2. It Excuses Commercial Insurer Behavior

The essay also hinges on another revealing sentence: “Insurers, in the business of making money, pass on higher hospital prices to their customers in the form of higher premiums.” This statement is mistaken in two important ways.

First, that sentence appears to excuse commercial insurers’ role in deciding to raise their own premiums because they are in the “business of making money.” Insurers, in the essay’s view, can increase their premiums by 320 percent, but hospitals must be held to a higher standard because they’re not “in the business of making money.” Or, as the essay itself acknowledges, insurer practices like “bureaucratic processes” and “high out-of-pocket costs included in many insurance plans” directly harm patients, leading to denials of much-needed (and often critical) care. By contrast, the essay rightly recognizes that “[w]e lean on hospitals when our children are born, when our parents get sick and when we approach life’s end.” Put simply, hospitals are in the business of providing care. All too often, it seems like commercial insurers are in the business of denying it.

Nevertheless, having largely let commercial insurers off the hook, the essay argues that policymakers must be harder on hospitals. To do so, it contends, we must encroach upon “the relationship we have with our health care providers” — potentially severing the “trust” the public has for “doctors and hospitals” — and “scrutinize” hospitals more.  But because commercial insurers are in the “business of making money,” and because the public has a “transactional relationship” with them, the essay suggests that we can expect less of them. This kind of double-standard, not hospital behavior, is what warrants more scrutiny.     

Second, the article assumes that commercial insurers pass all cost increases onto patients “in the form of higher premiums.” But let’s remember that commercial insurers are “in the business of making money.” So, isn’t the appropriate question to ask: How much of those increased premiums are large commercial insurers keeping for themselves? Would large commercial insurers really keep less of their premium-dollar if hospital prices went down? Would they really pass along any of those savings to employers and consumers? Would patients really see any benefit in the form of lower prices, or would they just receive lesser care? And while we’re at it, why do insurers hike premiums as high as possible before triggering the statutory Medical Loss Ratio, which requires them to give back premium money not spent on patient care? Those are some of the most pressing questions facing the health care system, but the author ostensibly has no interest in asking them, let alone answering them.

3. It Overlooks the Real Cost Pressures Hospitals Face

The essay also fails to ask another important question: Why are hospitals forced to raise their “prices”? The author offers the familiar simplistic answer — consolidation — without acknowledging the crushing costs hospitals are confronting.

In 2025, total hospital expenses grew 7.5%, more than twice the rate of growth in hospital prices. Costs increased in every major category — workforce, drugs, medical supplies, and more. Hospital expenses also increased because of increased patient complexity; growing uncompensated care; continued government underfunding; changes in the policy landscape; and the many commercial insurer tactics like prior authorization and improper denials that the essay observes.

This is why many hospitals, especially those in rural communities and safety-net facilities, are operating at a financial loss and many are forced to either close their doors or merge with another system. And this is why the essay’s preferred policy solution — capping the prices that hospitals charge to commercial insurers — is a recipe for disaster.

Hospitals struggle with these burgeoning costs while performing a vital mission — what the essay correctly calls an “immense good.” They must fund 24/7 emergency readiness, trauma centers, neonatal intensive care units, disaster response, teaching and research and more. They must support a wide spectrum of services — emergency care, inpatient treatment, surgery, diagnostics — all operating simultaneously. They must treat whoever comes in their door, including the uninsured and underinsured who cannot pay for the care hospitals provide. And hospitals must do this while operating in a market like no other — one where their primary payer (Medicare and Medicaid) pays them less than cost. On this general point, in fact, we agree with the author: “Economists generally prefer to rely on competition to determine what companies get paid.” Hospitals don’t work that way, however, because the government has no real competitor and chooses to pay them considerably below-cost.

If we want hospitals to be able to continue caring for our communities, we must account for the costs they face, both in the form of higher input expenses and inadequate payment by price-setters like the government. Unfortunately, the essay ignores them.

If we are serious about making health care more affordable, we need solutions that reflect the full picture — not narratives that assign fault to one part of the health care system. Hospitals and health systems are committed to being part of the answer. But providing affordable care for all Americans requires policies grounded in facts and realities, not biases and blame.