Imagine this: you go for the same routine medical test at two clinics. One charges $100. The other, $300, because it’s owned by a hospital. Same nurse, same machine, same results. The only difference? A hospital logo on the sign out front.
If that sounds absurd, it is. But under Medicare’s outdated payment rules, it’s also perfectly legal. Only in Washington would we pay triple for identical care because of the name on the door.
America’s seniors—and taxpayers—are footing the bill. Medicare routinely pays hospitals two to three times more than independent clinics for the same outpatient procedures. That “hospital markup” is nothing short of a hidden subsidy, fueling a corporate buying spree as hospitals scoop up local physician practices just to bill Medicare at inflated rates.
It’s a classic shell game: consolidation masquerading as care. And the cost is enormous. Medicare’s own advisory body, MedPAC, determined three years ago that if all outpatient services had been paid at independent clinic rates, Medicare would have saved $6.6 billion annually, and seniors’ co-pays would have dropped by $1.7 billion. That’s not pocket change—it’s money that could be keeping premiums down and extending the life of Medicare’s trust fund.
So why hasn’t this been fixed? Two reasons: opacity and lobbying.
Hospital bills remain a masterclass in obfuscation—stuffed with cryptic “facility fees” and unexplained surcharges that show up long after the patient leaves. It’s like a restaurant adding a $75 “table ambiance fee” for sitting near the window. And while patients drown in paperwork, hospital lobbyists flood Capitol Hill with warnings that any payment reform will “threaten care.”
Let’s be clear: it won’t. Routine services like X-rays and MRIs don’t magically become more expensive because they’re performed inside hospital walls. Medicare already reimburses hospitals separately for real overhead and charity care. What the lobbyists are defending isn’t patient care—it’s a sweetheart deal.
The fix is almost embarrassingly simple: site-neutral payments.
If the service is the same, Medicare should pay the same. Period. Whether it’s in a hospital or a corner clinic, an MRI is an MRI. Paying fair prices would level the playing field, reward efficiency, and remove the perverse incentive for hospitals to buy up independent doctors simply to exploit higher reimbursement rates.
Experts across the political spectrum agree. MedPAC supports it. The Government Accountability Office supports it. So do fiscal watchdogs from the Heritage Foundation to the Committee for a Responsible Federal Budget. Health officials in both the Trump and Obama administrations endorsed it. In 2023, the House passed a version of the reform by a vote of 320 to 71—a rare show of bipartisanship.
Yet here we are, still paying champagne prices for tap-water care.
The hospital lobby will, of course, cry foul. They’ll warn of “cuts to patient care,” conflating reduced overpayments with reduced quality. But not one senior’s benefit would be touched. Protecting essential rural hospitals is fully compatible with ending these bloated subsidies for large systems expanding into every suburb.
Transparency is the other half of the cure. A 2020 Trump-era rule required hospitals to post their prices online, but by 2024, only 46% were in full compliance. That’s unacceptable. Patients deserve to know costs upfront, and Medicare deserves the power to use competition to drive prices down. Sunlight remains the best disinfectant for a system built on secrecy.
The stakes couldn’t be higher. The latest Medicare Trustees report warns that the Hospital Insurance Trust Fund will be insolvent by 2033 if nothing changes. Site-neutral payments and true price transparency won’t just save upwards of $150 billion over the decade ahead—they’ll protect seniors’ benefits and extend Medicare’s lifespan without raising taxes or cutting care.
If Washington can’t fix a waste this obvious, what hope is there for the harder stuff?
It’s time to end the hospital billing shell game and restore common sense to Medicare. Seniors paid into the system all their lives. They deserve a program that spends their dollars wisely—on their care, not on hospital markups.
Medicare doesn’t need more subsidies. It needs sunlight.
James Carter is a Principal with Navigators Global. He previously served as Deputy Undersecretary of Labor (2006-07) and as the Director of the America First Policy Institute’s Center for American Prosperity (2021-23). Brady Walczak is a U.S. Senate aide.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller News Foundation.
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