The US health care system is financed through a combination of public and private funds.
Public funds are created by the taxes collected at the local, state, and federal level and are used to finance various health programs. For example, Medicare is financed by payroll taxes, and Medicaid and the Children’s Health Insurance Program (CHIP) are financed by the federal government and each state. Other programs like VA Health Care and Tricare have their own finance models.
When it comes to non-profit hospital systems, it gets even more complicated. These hospitals are exempt from paying most taxes because they are supposed to be operated for charitable purposes—as long as they provide a “community benefit.” Community benefit activities generally include providing free or discounted services to patients, education for health professionals, health research, and cash or in-kind contributions to groups in the community. Too often, this doesn’t happen at the level it should be happening—or at all.
No matter how hospitals and health systems are financed and reimbursed, it should not come at the expense of patient affordability.
Rather, it should improve the care experience for patients and their families, increase staff well-being, help to ensure equity, and improve health outcomes.
Transformational policies and practices that center the needs and experiences of people who are often most hurt by the health care system can help. This may include value-based care and community driven approaches to health innovation, screening for Social Determinants of Health, eliminating aggressive medical debt collection practices, and limiting fees to no more than the Medicare or Medicaid rate for patients who are uninsured or underinsured, and for any portion of a bill that is self-pay. It also includes ensuring that non-profit hospitals actually provide community benefit activities that are designed to improve the health and well-being of the community the hospital or health system serves.
For over a decade, Community Catalyst has advocated that communities should have a stronger influence over how health systems and hospitals respond to their needs.
Our goal is to help redesign how our health care system is financed, from ensuring that community benefits truly benefit the community to ending predatory billing practices.