"Public Money, Private Control: Hidden Government Subsidies for the Rich and Powerful" by David Himmelstein, MD

Two recent news stories highlight how the hidden flow of government health dollars provides cover for public officials who slash funding for the poor while idly watching as wealthy private institutions drain the public treasury.

Faced with a mounting budget crisis, our leaders have cut hundreds of millions from Medicaid, and tens of millions more from block grants to safety net institutions like Cambridge Hospital (disclosure: I work there). As a result, thousands of patients with severe mental illness will find care unavailable, and many of the poor face unaffordable co-payments. At the same time, the Globe tells us that Partners HealthCare (disclosure: I also work there) has used its market muscle to extract higher rates – about 20% above average for the same services, and twice as much as Cambridge Hospital - from private insurers. That’s how Partners has managed to amass huge surpluses in recent years, money they’ve invested in expensive high tech facilities that drive costs ever higher, while studiously avoiding investments in facilities for the chronically mentally ill or other unprofitable patients.

The Partners story may seem disconnected from the state’s budget woes, but its not.

You see, state and local governments in The Commonwealth will spend about $3.6 billion on private health insurance premiums for their employees and retirees this year. About 12% of that – about $430 million - will go for care at Partners’ facilities. (Partners gross receipts account for about 12% of total health expenditures in Massachusetts, and they probably have about the same market share among state workers). Hence, if private insurers paid Partners at the same rate they pay other hospitals in the Commonwealth, state and local governments would save nearly $90 million annually on their employees’ health insurance premiums. If they paid Partners the rate they currently pay Cambridge Hospital the savings would be more than $200 million.

Millions more go for tax subsidies for private insurance. In fact, these tax subsidies – which accrue largely to the wealthiest families – cost government treasuries almost as much as Medicaid. But these tax expenditures on behalf of rich and powerful institutions and individuals are carefully hidden. When it comes time to cut, they’re out of sight, while programs for the poor like Medicaid are in the spotlight.

When times are tough – as they surely are right now – government should not selectively spare the wealthy.

David Himmelstein, MD
Associate Professor of Medicine at Harvard Medical School
and Co-Founder of Physicians for a National Health Program