CMS now requires hospitals to publish machine-readable price files under the Hospital Price Transparency Rule (effective 2021, enforcement added 2022). Compliance rates are technically high. The problem is the files run tens of thousands of line items in inconsistent formats, negotiated rates vary by insurance plan, and chargemaster list prices bear no predictable relationship to what any patient actually pays.
RAND's Round 5.1 study analyzed actual paid claims rather than posted prices and found commercial insurers paid 254% of Medicare rates for identical procedures at the same hospitals. The transparency is on paper. The opacity is structural: a price list is only useful if a purchaser can act on it, and the moment of care is not when most patients can comparison shop. Which is why reference pricing works at the employer level (purchaser can act in advance on a population basis) but published hospital price lists have not moved the market.
Agreed on the diagnosis: the inpatient hospital market does not function as a competitive market. Patients arriving by ambulance do not shop on price. Insurance insulates consumers from marginal cost. Regulatory and capital barriers prevent new entrants. The HCRIS FY2023 data for 3,193 hospitals shows what this produces: a 2.6x median markup to actual cost, with the highest-markup hospitals rarely losing patients to lower-cost alternatives nearby.
Your examples of what works are instructive. Generic OTC, needles, blood panels all share the same conditions: price-visible, consumer-controlled, no third-party payment insulation. The RAND hospital data shows the identical procedure (hip replacement) costing $29K commercially in the US versus $14.7K in Germany and $8.7K in Spain. Same implant, same surgeon training requirements. The patient's insurance status varies; the procedure does not.
Montana's commercial reference pricing is not deregulation, but it creates the price-visibility function you are describing: a known floor price that makes it possible for a purchaser to act on price information. Employers have adopted it nationally with documented savings.
For-profit structure is part of the problem but not all of it. Issue 3 analyzed 3,193 hospitals using CMS HCRIS FY2023 cost reports. For-profit hospitals do have the highest cost-to-charge markups: 4.11x median. But nonprofits are 2.46x, and nonprofits hold 75.5% of total national hospital supply spend. The ownership form does not reliably determine pricing behavior when market conditions are the same: opaque prices, patients who cannot shop, no reference price to anchor negotiation.
Maryland has had all-payer hospital rate-setting since 1977 with a largely nonprofit hospital sector. It produces significantly better cost control than the national average. The structural fix for hospital pricing (commercial reference pricing at 200% of Medicare) works regardless of tax status because it creates a known floor price. That is what the RAND data and the Montana Medicaid experience both show. The mechanism matters more than the ownership form.
I’m willing to agree on some points however, the for-profit model is what incentivizes the convolution in the first place. It has been the main driver for injecting complexity at every level. In turn, even nonprofits have to spend capital to make sense of it.
In other words, it does measurable harm to the entire industry and builds the moat wider in favor of the for-profits and shrinks the margins of the nonprofits trying to compete.
The direction is right. Total US healthcare spending is $4.87T for 335M people ($14,570/capita, CMS NHE 2023). Japan's per-capita is $5,790, with the highest life expectancy in the world and lowest infant mortality in the OECD. The annual national gap is approximately $3T.
The series is not arguing for a specific coverage structure. It is documenting where the excess goes, mechanism by mechanism. Four issues in, $128.6B is accounted for conservatively: drug pricing, hospital commercial markups, PBM extraction. Each mechanism has a defensible, operationally precedented fix that does not require redesigning the entire system. Montana Medicaid adopted commercial reference pricing at 200% of Medicare and measured no quality deterioration. The FTC documented PBM specialty drug markups and three states have already enacted clawback restrictions. None of that required universal healthcare.
Thanks for sharing the OSU piece, good read. A few things it surfaces that complicate the "discount cards help patients" narrative: discount card companies still contract with PBMs to set pricing, they don't bypass them entirely. The savings often come out of the pharmacy's margin rather than the PBM's: the article shows a pharmacy receiving $5 on a drug it acquired for $15, with the PBM still collecting a transaction fee either way. GoodRx was also fined by the FTC for selling patient health data to advertisers without authorization, so there's a second extraction happening on the data side.
The deeper point the card market reveals: a profitable arbitrage layer can consistently undercut the insurer's "negotiated" rate, which tells you the negotiated rate isn't really a discount. Generic apixaban costs £1.16 per 30-day supply in the UK. Medicare's gross cost for Eliquis (same molecule) is $862.
Your example captures two distinct extraction mechanisms in one transaction. The $25 to $125 gap is spread pricing: the PBM pockets the difference between what they pay the pharmacy and what they bill the plan. The deductible non-application is a separate mechanism: by routing through their own channel, the PBM ensures that cost doesn't reduce your out-of-pocket maximum, extending your exposure for the year.
The FTC's 2024 Interim Report documented $7.3B in specialty drug markups from the Big 3 PBMs in a single year. The Ohio Auditor found PBM spread pricing extracted $224.8M from one state's $2.5B Medicaid drug budget annually.
Author here. Issue #4 is now live — pharmacy benefit managers.
Three companies process 80% of US prescriptions. The FTC spent two years
investigating them and documented $7.3B in specialty drug markups at
PBM-owned pharmacies alone. Ohio's state auditor found $224.8M in spread
pricing extracted from one state's Medicaid program in a single year.
Six mechanisms, $30B/year booked conservatively. Running total across
four issues: $128.6B.
The NHS prices in the Issue #2 analysis are not subsidies. They are the generic reimbursement rates from the UK Drug Tariff after patent expiry on each molecule. Apixaban (Eliquis) costs £1.16 per 30-day supply on the Drug Tariff. That is what the open market charges for the active compound once patent protection expires. The NHS does not manufacture it or subsidize the price: that is the market rate for the molecule itself.
The $862 Medicare gross cost for the same molecule is not explained by active R&D recovery, either. The IRA's first ten negotiated prices (effective January 2026) cut Medicare gross costs 40-70% per drug, which does not happen if those gross costs were development-cost-justified.
The data supports this. The AMA's 2024 Prior Authorization survey found 93% of physicians report PA requirements delay medically necessary care. Twenty-nine percent reported a PA delay causing a serious adverse event for a patient. Seven percent reported PA contributed to a patient death.
The requirement that patients fight for care isn't just a frustration. It's a documented cost driver: Health Affairs (2025) puts the total system-wide cost of prior authorization at $93.3B/year, including $35.8B borne directly by patients navigating the process. The persistence required to appeal a denial is unevenly distributed across income, education, and time availability. That is a structural equity problem as well as a cost problem. Issue #5 of this series covers the full mechanism.
The RAND Round 5.1 study (2023) puts US commercial insurer payments at 254% of Medicare rates for identical procedures. That's the mechanism behind the international gaps — it's not complexity or quality, it's that commercial insurers negotiate against chargemaster list prices rather than against cost. The HCRIS cost-to-charge analysis (3,193 hospitals, FY2023) puts median markup at 2.6x actual costs.
RAND's Round 5.1 study analyzed actual paid claims rather than posted prices and found commercial insurers paid 254% of Medicare rates for identical procedures at the same hospitals. The transparency is on paper. The opacity is structural: a price list is only useful if a purchaser can act on it, and the moment of care is not when most patients can comparison shop. Which is why reference pricing works at the employer level (purchaser can act in advance on a population basis) but published hospital price lists have not moved the market.
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