By Mike Koetting September 1, 2026
As various cuts to Medicaid and the Affordable Care Act (ACA) take effect, it becomes clear that they will substantially reduce the health care options available to millions of Americans.
This is awful.
But this note is not focused on the harm it does people impacted directly, rather on the fact that the entire premise of these cuts is fundamentally a lie. Despite any rationalizations by Republicans, the cuts in Medicaid and the ACA included in the Republicans’ budget bill are less reductions in health care costs and more shifts in who pays. In this case, it moves costs from the most wealthy (by reducing their taxes) to the rest of us (who pick up the pieces in various ways.) It is a stealth “tax” increase on those not specifically benefited from Republican Budget Bill.
If the country is ever going to have an honest discussion about health care, we need to understand the actual dynamics.
Health care in America evolved from independent entrepreneurs, most of them with rudimentary education or entirely self-taught. In truth, the services they could provide were very limited. Starting around the end of the 19th Century, however, health care was remade by science. Science led to technology and health care could actually make real differences in people’s lives.
Rather than developing new organizations forms to accommodate the new capabilities, as most of the developed world did, America doubled down on the entrepreneurial model and made health care an individual responsibility rather than a social one.
As medicine continued to expand its capabilities, the costs expanded as well, to the point that without some form of insurance, people could easily be bankrupted if they had the misfortune to get sick. Which led to the rise of insurance in case you were unlucky. All okay for people who could afford it. Over time, that got attached to work—another unique and problematic aspect of the American health care system. But the poor and the elderly, removed from work, couldn’t always afford insurance. Consequently, a patchwork of various local, state and federal programs were created, which eventually became Medicare and Medicaid. But health care costs continued to expand and employers became stingier with health insurance. At the turn of the last century, almost one-fifth of the population was without health insurance.
The ACA was enacted to plug the gap. Today, Republicans want to reduce the coverage in the name of “cutting costs.” What doesn’t get enough attention—either from ignorance or outright deception—is that these cuts don’t reduce health care costs proportional to the costs removed. Health care is in no way an ordinary market.
The key to understanding health care economics is to recognize that actual health care costs are remarkably concentrated. In part due to advances in science and public health, serious illness is relatively rare. In any given year, the most expensive 1% of patients account for more than 20% of the costs. Eighty percent of all costs are expended on behalf of one fifth the patients, while 50% of the population account for a mere 3% of costs. Without exception, the most expensive are very sick people. Choice is not involved.
The below shows graphically the extent to which health care expenditures are dramatically concentrated on a few individuals.
Removing people from Medicaid or the ACA has limited impact on actually reducing aggregate health care costs. Some people who lose coverage will forego care they would otherwise get, but that tends to be the least expensive things and often would either reduce or prevent subsequent more expensive care. When stricken by serious illness, if people don’t die outright, with or without insurance, they show up seeking care. Except now the doctors and hospitals don’t get payment from the programs that previously paid for these patients. The costs of treatment, however, are still there, real, and substantial.
Since, presumably, society doesn’t expect doctors and hospitals to turn their backs on those individuals who are the sickest even when they have no insurance, health care providers still have the costs for those without insurance. Witness the $100 million increase in uncompensated care anticipated in the Cook County Health System; this will eventually be picked up by Cook County taxpayers, through a largely regressive property tax. Private providers face similar burdens, but are not able to charge to taxpayers directly, so they increase charges to those who have insurance.
A recent post by Dick Dowdell on this same point (he is worth following) notes that most of the people in the most expensive tiers are not it in the next year. Some die, some have expensive procedures and get better. (In 2020 I needed an emergency valve replacement and was in a hospital for almost a month. Since then, I’ve been remarkably healthy. It was my first hospitalization since 1951, when I had my tonsils removed at a cost $12.75. My parents kept the bill for me.)
Since most people in their lifetime will fall into the high expense group for a period, shouldn’t we simply face the fact that these are better treated as social costs than individual costs left to the vagaries of chance?
In the meantime, we should all realize the actual impact of reducing health care supports in the Republican budget is increased pain among those directly impacted and increased costs for the rest of us, all to lower taxes for the most wealthy
It is hard to see this as a sensible system for our society.
Between Hell and High Water 