In May, Connecticut Gov. Ned Lamont released a report suggesting the state consider selling its only remaining public hospital to help relieve the facility’s financial woes. Opponents quickly lambasted the idea, warning that privatizing the hospital could make it harder for low-income patients to get care.
“We need our governor to value affordable, accessible and quality health care and stand up against the harmful and expensive impacts of excessive hospital consolidation,” wrote a coalition of almost all the state’s unionized employees. “Selling off UConn Health...does exactly the opposite.”
As of mid-August, the UConn Health John Dempsey Hospital was still in state hands, but its potential fate is not uncommon. Privatization — or shifting the provision of public goods to private companies or organizations — has long been trending in the health care sector. Today, for example, most Medicaid patients have their benefits delivered via for-profit and nonprofit managed care organizations, and a majority of Medicare patients are enrolled in private Medicare Advantage plans.
Public control of hospitals has fallen considerably, declining 42% between 1983 and 2019.
Despite the large and meaningful shift, sources told The Nation’s Health that a lack of data and transparency makes it difficult to get a full picture of how such privatization is impacting health. The complexity of U.S. health care delivery and wide variations by state also make it hard to study.
But there is some research showing the shift can have negative health effects and restrict access to care for already-vulnerable patients.
A global literature review on health care privatization in rich countries published in March in The Lancet Public Health found that aggregate increases in privatization often correspond with worse health outcomes. Authors concluded that the “scientific support for further privatization of health services is weak.”
In the U.S., a 2023 paper from the National Bureau of Economic Research found that profitability generally improves when private operators take over public hospitals. But those new profits are gained, in part, by taking in fewer low-income patients with Medicaid, which reimburses providers at lower rates than Medicare and commercial health insurance.
Another study, published in May in JCO Oncology Practice, found some concerns for privatizing Medicaid delivery. It examined Connecticut’s transition in 2012 from a privately delivered Medicaid program to a publicly administered one, finding the switch was associated with a 4% increase in overall early-stage cancer diagnosis and improved survival after diagnosis. In New Jersey, which had privately administered Medicaid throughout the study period, no such improvement was detected.
Loren Saulsberry, PhD, an assistant professor of health policy and health services research at the University of Chicago, said the findings should raise concerns among officials who oversee state Medicaid programs.
She said a challenge obscuring the true impact of Medicaid privatization is lack of consensus on equity metrics across states. Research already shows that within Medicaid managed care organizations, enrollees who are people of color often report considerably worse experiences than white peers.
“But if you’ve seen one Medicaid program, you’ve really just seen one Medicaid program,” Saulsberry told The Nation’s Health. “The jury is still out on the full impact of Medicaid privatization and the evidence to date is really mixed.”
As of 2023, 41 states and Washington, D.C., used managed care plans to serve at least part of their Medicaid populations, according to the Kaiser Family Foundation. Elizabeth Hinton, MSPH, an associate director of the foundation’s Program on Medicaid and the Uninsured, said data generally show the shift to Medicaid managed care organizations has improved budget predictability for states, which is a main reason policymakers push for it.
However, the effects on access to care vary — “some (studies) find better outcomes and others have found worse outcomes.”
“The evidence is limited and mixed and difficult to generalize,” Hinton said.
Privatization can be more costly to taxpayers. Meredith Freed, MPP, a senior policy manager at Kaiser Family Foundation’s Program on Medicare Policy, said research comparing traditional Medicare and private Medicare Advantage plans often find similar rates of patient satisfaction and care coordination.
But, in general, the federal government pays more to private Advantage plans than it would if those patients were enrolled in traditional Medicare, Freed said.
“It’s not necessarily problematic to cost more if we’re seeing better health outcomes and meaningful differences but that’s not entirely clear,” she said. “They’re getting more money but we’re not sure of the overall benefit to people in the program.”
Mark Duggan, PhD, MS, a professor of economics at Stanford University and co-author of the NBER public hospital study, said two factors have driven the decline in publicly delivered hospital care: closures and privatizations. Mostly because of the latter, he said, with about six times the number of public hospital privatizations than closures in the last 35 years.
The NBER study found that formerly public hospitals typically admitted 15% fewer Medicaid patients in the years after privatization. In comparison, the change in Medicare patients was insignificant.
Duggan said policymakers could help plug that loss by raising state Medicaid reimbursement rates for providers, which are notoriously low.
“I’m not trying to vilify anyone, but to be clear there is harm here,” Duggan told The Nation’s Health. “When public hospitals close, we find, on average, that mortality goes up.”
There is no sign privatization is slowing down. But policymakers do have power to limit and track negative health impacts. For instance, some states require Medicaid managed care organizations to have health equity plans, address social determinants, and train staff on racial bias, according to the Commonwealth Fund. And many, but not all states, require the organizations to report quality metrics by race and ethnicity.
In April, the U.S. Centers for Medicare and Medicaid Services issued a rule to address access, quality and equity within Medicaid managed care organizations. Among its measures are maximum waiting times for primary care appointments and secret-shopper surveys to ensure organizations are complying. Hinton at KFF said the rule is a notable development.
The CMS rule also requires new data reporting on costs and quality.
“Sunlight is one of the best disinfectants,” Duggan said, echoing a familiar saying.
For more information, visit www.kff.org.
- Copyright The Nation’s Health, American Public Health Association