Hospitals & Their Fake Prices

Hospital prices are out of control. We know this.

A patient recently posted a bill showing a hospital charge of $17,813 for an MRI. Her insurance absorbed most of it, but she was still left owing about $2,600 herself. This is not some isolated curiosity. In the recent House Energy and Commerce hearing on health care affordability, Rick Pollack of the American Hospital Association defended hospital finances by arguing that “Medicare and Medicaid payments generally do not cover the full cost of providing care.”

That is the standard hospital defense. Privately insured patients, they say, must make up the difference. They are the cross subsidy.

But the same MRI can often be purchased in a competitive cash market for a fraction of the hospital charge. That alone tells us the hospital bill is not simply the price of an MRI. It is an opaque financing mechanism for the hospital’s broader cost structure.

Hospital defenders insist they need this. They say they must absorb public payer shortfalls. They say they must maintain 24/7 readiness, expensive infrastructure, unprofitable service lines, trauma capacity, and teaching functions. Fine. But once they make that argument, they have already conceded the central point. The bill is not really a price. It is a hidden tax.

And here is the deeper problem: that patient is not subsidizing the hospital only once. She is subsidizing it over and over again.

She pays taxes for Medicare and Medicaid. Pollack’s testimony explicitly argues that those programs underpay hospitals and that this underpayment must be absorbed somewhere else.

She pays another way through the tax code. A 2024 JAMA study estimated that US nonprofit hospitals received $37.4 billion in total tax benefits in 2021, including $7.8 billion in property tax relief and $9.1 billion in sales tax relief. A KFF analysis estimated the value of nonprofit hospital tax exemption at about $28 billion in 2020, and found that this exceeded total charity care costs that year.

She pays through direct and indirect public supports such as disproportionate share hospital payments, graduate medical education, and research support. KFF notes that DSH payments alone were worth $31.9 billion in fiscal year 2020.

She pays through the 340B drug discount program, which functions as a major revenue stream for many hospital systems, while increasing the price of her private insurance. This program also drives hospital consolidation and increases the costs of drugs.

She pays again through higher private premiums driven by hospital market power. Recent price transparency research found that a hospital in a system with a 10 percentage point higher market share can command $880 to $1,180 more per admission in commercial rates. Another 2025 study found that hospital concentration is associated with up to 11 percent higher hospital prices, while insurer concentration is associated with lower prices.

So the obvious question is: after all of those subsidy streams, what exactly is still unfunded?

That is the question hospital executives never want to answer. They want the moral credit that comes from claiming to serve the poor and the economic freedom that comes from opaque extraction. They should not get both.

If hospitals truly need additional support to cover public obligations, then they owe the public a real accounting. Show us the net Medicaid shortfall after supplemental payments. Show us the value of the tax exemption. Show us where 340B revenue goes. Show us executive compensation, administrative headcount growth, capital expansion, reserves, acquisitions, lobbying, and political spending.

Show us the books.

Nobody is saying poor and sick patients should be abandoned. Hospitals do perform some genuine community functions. Trauma care, standby capacity, teaching, and care for vulnerable patients are real obligations. But if those functions require public support, then subsidize them directly, transparently, and in a form that can be audited. Do not launder those subsidies through routine MRI bills marked up to absurd levels and then pretend the public is confused for noticing.

These fake prices are not harmless abstractions. They shape negotiations, premiums, deductibles, coinsurance, and the broader cost-shifting game that makes health coverage more expensive for everyone. Even when insurance pays most of the immediate charge, households still bear the burden through lower wages, higher premiums, and higher taxes.

Hospitals often speak as if this system were simply imposed on them. That is not true either. Hospital trade groups have long defended payment differentials and other policies that preserve incumbent advantage. In the same March 2026 testimony, Pollack argued that current Medicare reimbursements “appropriately recognize the differences between these sites of care,” which is another way of defending higher hospital outpatient payment rates relative to lower cost competitors.

Every year, millions of patients are told they need seemingly routine services. Then they get grotesque bills. Then they are told the bill is not really for the MRI and that they should feel virtuous for subsidizing the system.

No.

If the system needs subsidy, prove it. Quantify it. Audit it. Fund it honestly.

Until then, stop pretending that an outrageous hospital bill is just a misunderstanding.