Hospital Expenditures Under Global Budgeting and Single-Payer Financing: An Economic Analysis, 2021-2030.

Area of Science:

• Health Economics
• Healthcare Policy
• Hospital Administration

Background:

• U.S. hospitals exhibit significant low-value care and administrative spending, alongside financial distress in rural and safety-net facilities.
• Current U.S. hospital financing is characterized by inefficiency and inequity, with market power leading to profits for some while others struggle.
• The juxtaposition of waste and financial hardship indicates systemic issues in hospital payment models.

Purpose of the Study:

• To model the economic impact of implementing global budgeting for U.S. hospitals, a system used in Canada and the U.S. Veterans Health Administration.
• To analyze the financial consequences of a single-payer Medicare-for-All bill proposing global budgeting for hospital payments.
• To compare projected hospital operating budgets under current law versus a global budgeting model.

Main Methods:

• Economic modeling of a global budgeting system for hospital payments.
• Assumptions include increased utilization, reduced administrative costs, and explicit grants for capital expenditures.
• Comparison of projected non-federal hospital operating budgets from 2021 to 2030.

Main Results:

• Projected non-federal hospital operating budgets: $17.2 trillion under current law vs. $14.7 trillion under single-payer with global budgeting.
• Estimated savings of $520 billion from foregone hospital profits and $1,984 billion from reduced administrative expenditures.
• Anticipated increase in clinical operating budgets, funded through grants rather than profits.

Conclusions:

• Global budgeting offers substantial potential savings for the U.S. hospital system.
• The single-payer model with global budgeting could lead to a more efficient and equitable distribution of hospital resources.
• Transitioning to global budgeting may necessitate a shift in how hospital capital expenditures are financed.