April 27, 2026
The Honorable Jason Smith
Chairman
U.S. House Committee on Ways and Means
Washington, DC 20515
The Honorable Richard Neal
Ranking Member
U.S. House Committee on Ways and Means
Washington, DC 20515
Dear Chairman Smith, Ranking Member Neal, and Members of the Committee,
On behalf of National Taxpayers Union, the nation’s oldest taxpayer advocacy organization, we commend the Committee for holding a hearing on the impact of rising health care costs on patients and families by examining the role of health systems. We urge the Committee to focus on how government incentives, particularly reimbursement practices in Medicare, make hospital prices higher than they need to be.
Between 2022 and 2024, spending on hospital care alone amounted to $277 billion, representing 40% of the overall growth in national health expenditures. This increase outpaced every other source of medical spending, including physician services and prescription drugs. According to the Centers for Medicare and Medicaid Services, in 2024, hospital prices rose at their sharpest rate since 2007.
Any serious attempt to get federal health spending under control needs to address the role played by hospitals. Unfortunately, perverse incentives created by the government reward hospitals for their size instead of the value they provide patients.
Medicare reimbursement policies that pay hospitals more for the same medical service simply because they are delivered in a hospital-owned facility are a key driver of provider consolidation. A study found that, in 2021, the average Medicare reimbursement for drug administration services was 129% to 211% higher in hospitals than in independent doctors’ offices.
Hospital markets suffer from a stunning lack of competition. Nearly half of all metropolitan areas across the country had just one or two hospital systems controlling the market for inpatient care in 2022. By 2024, nearly 80% of all doctors across the country were employed by hospitals or other corporate entities.
This lack of competition raises prices. According to data from the Department of Health and Human Services, hospital-to-hospital mergers in concentrated markets can raise prices anywhere from 6% to 65%. Even when hospitals acquire smaller independent physician practices, prices for identical medical services from those doctors rise on average by 14%.
The nonpartisan Medicare Payment Advisory Commission has repeatedly urged Congress to enact “site-neutral” payments that would reimburse the same service at the same rate regardless of where it is performed. Bipartisan legislation passed by the House of Representatives in 2023 would have saved taxpayers roughly $4 billion over the next decade solely through its reforms to Medicare’s reimbursement rules.
Hospitals are not the villains of America’s health care system. They are simply responding to incentives created by Washington. As such, we urge the Committee to make the enactment of site-neutral payments in Medicare a key priority. Equalizing Medicare reimbursements would remove the financial incentives that encourage provider consolidation and inject much needed competition into hospital markets.
Sincerely,
Alexander Ciccone
Policy and Government Affairs Manager
National Taxpayers Union