“The increase in Medicaid coverage since then has been gigantic,” Duggan says. The Affordable Care Act of 2010 alone added nearly 16 million low-income patients to the program, according to government data. “Our study underscores how changes that are occurring in the health care system, including the widespread privatization of public hospitals, can have unintended consequences for the most vulnerable patients.”

According to American Hospital Association data cited in the study, public control of hospitals declined by 42 percent from 1983 to 2019 as hospitals either closed or were taken over by private interests. As of 2020, roughly 80 percent of the approximately 4,500 general acute care hospitals in the United States are controlled by private non-profit or for-profit organizations. And as the share of public hospital beds dropped, Duggan and his collaborators find that the total number of patients admitted to newly privatized hospitals — including those on Medicaid — fell by 8.5 percent.

Job losses were also notable as private owners pared costs. Duggan and his co-authors estimate that full-time hospital staff declined by 8 percent on average, with many of the cuts hitting managers, medical technicians and back-office workers. They calculate, on average, a 30 percent decrease in the number of employed physicians. Privatization did not affect nursing staffs.

Duggan says the study findings are especially important given that health care represents the largest sector of the U.S. economy at 19 percent of GDP and that hospitals employ as many workers as the entire U.S. construction industry.

“The profit motive is embedded throughout the health care system, which can be both good and bad,” Duggan says. “Good in the sense that maybe things get done more efficiently, but bad in that it can end up having adverse effects for the least profitable patients who are typically poor.”

Duggan’s co-authors are Atul Gupta, an assistant professor at The Wharton School at the University of Pennsylvania; Emilie Jackson, an assistant professor at Michigan State University; and, Zachary Templeton, a doctoral student at Wharton. Gupta, PhD ’17, and Jackson, PhD ’20, are both former SIEPR graduate student fellowship recipients.

Why go private

The researchers look at nearly 260 privatizations of hospitals run by state and local governments between 2000 and 2018. While they find that admissions overall decline at newly private hospitals, neighboring hospitals absorbed most of the displaced patients.

But that wasn’t the case for low-income patients. Not only did newly private hospitals admit fewer Medicaid patients, but so did nearby hospitals — with the steepest declines in access occurring in markets with the highest levels of poverty and concentrations of hospitals.

Duggan says Medicaid patients lose out because hospitals in high-poverty areas already are financially strapped and that introducing a new competitor in the form of a newly privatized hospital makes it that much harder for all of them to stay afloat.

“At that point, all bets are off,” says Duggan, who first analyzed hospital ownership and the role of government spending on health outcomes for low-income patients in The Quarterly Journal of Economics in 2000.

Hospitals, including neighboring ones, shed unprofitable Medicaid patients more out of necessity than avarice, Duggan says. There are multiple ways that hospitals trim their volume of Medicaid patients. For example, they might not contract with states to serve patients covered by the program or they might cut back on care that low-income patients tend to seek more than others.

Red vs blue states: A counterintuitive finding

A better understanding of the effects of hospital privatizations on patient care is critical for policymakers, whose views on the right amount of government control appear to vary widely.

According to the study, some of the country’s most conservative states have the largest share of government-owned hospital beds, while more liberal states have among the lowest. State or local governments control 44 percent of hospital beds in Alabama, for example. In Pennsylvania, they control just 4 percent.

Those stark differences defy conventional wisdom, Duggan notes. Blue (more liberal) states tend to support a bigger role for government in providing services, while red states advocate for minimal public involvement.

“You might think that government’s role in hospital care would be larger in blue states, but it turns out to be much bigger in red states,” Duggan says. “Knowing that there’s tremendous variation across states further highlights the importance of understanding the consequences of hospital privatization and figuring out what is the appropriate amount of public control.”

There’s a lot more to investigate, the researchers say.

The effects on wages for hospital staff and a close examination of types of care — like psychiatry or obstetrics — are ripe for future research, Duggan says. “If you’re a nurse in a privatized hospital, do your wages go up less than if the hospital had remained under public control?” says Duggan, who plans next to start answering some of these questions by looking closely at specific state experiences with hospital privatizations.

Asia Health Policy Program Director Karen Eggleston and colleagues examine China’s progress in enhancing financial protection under its social health insurance to achieve universal health coverage.

In 2009, China launched comprehensive health system reforms to address challenges such as increasing rates of non-communicable diseases and population aging, problems with health financing and healthcare delivery, and overall growing health expectations of its people. Promoting universal health coverage by building a social health insurance system was a central pillar of the reforms.

After a decade of system reforms, has the Chinese government made good on its commitment to bolster universal health coverage? In a new article published in a BMJ collection, a team of four co-authors including Karen Eggleston, APARC’s deputy director and director of the Asia Health Policy Program, evaluates China’s progress towards enhancing financial protection of social health insurance and identifies the main gaps that need to be filled to achieve universal health coverage. Their article is part of a special BMJ collection with Peking University that marks the tenth anniversary of China’s health system reforms by analyzing their accomplishments and challenges ahead.

The 2009 reforms aimed to cover the entire Chinese population with one of three (since 2012 one of two) basic social health schemes. To provide added financial protection to patients with critical illnesses, catastrophic medical insurance was initially launched in 2012 and implemented nationally in 2015. Eggleston and her co-authors determine that the expansion of health insurance has had several major successes. First, it improved access to and use of healthcare. In 2011, China achieved near-universal health insurance coverage, with more than 95% of the Chinese population covered by health insurance. Moreover, the annual inpatient hospital admission rate increased from 3.6% in 2003 to 17.6% in 2017, and admission rates for outpatient services were much higher than the global average.

Second, the expansion of health insurance coverage reduced the share of out-of-pocket heath expenses in total health expenditure, thus raising the level of financial protection. Third, catastrophic medical insurance was also effective in supplementing the basic social health insurance schemes and provided extra financial protection to a range of vulnerable groups. By 2017, more than a billion people in China were covered by such insurance.

However, much remains to be done. Out-of-pocket health expenditures remain fairly high and are one of the main reasons for catastrophic health expenses and low financial protection in China, which disproportionately affect deprived populations. Catastrophic medical insurance currently does not target underprivileged people, while medical aid is relatively small in scale and covers only a minority of patients with catastrophic health expenses.

Eggleston and her colleagues conclude that the Chinese government should focus on underprivileged populations within the current insurance system and enhance their financial protection as an important element of targeted poverty alleviation. Such targeting, the researchers emphasize, requires a clear and integrated policy encompassing the basic social health insurance schemes, catastrophic medical insurance, medical aid, and improved healthcare efficiency.

People who are acquainted with the work of Shorenstein APARC’s Asia Health Policy Program (AHPP) may be aware of the Innovation for Healthy Aging collaborative research project led by APARC Deputy Director and AHPP Director Karen Eggleston. This project, which identifies and analyzes productive public-private partnerships advancing healthy aging solutions in East Asia and other regions, encompasses an upcoming volume, co-authored by Eggleston with Harvard University professors Richard Zeckhauser and John Donohue, about public and private roles in governance of multiple sectors in China and the United States, including health care and elderly care. This volume, however, is not the first collaboration between Eggleston and Zeckhauser.

Zeckhauser, the Frank P. Ramsey Professor of Political Economy at Harvard University’s Kennedy School, is known for his many policy investigations that explore ways to promote the health of human beings, to help markets work more effectively, and to foster informed and appropriate choices by individuals and government agencies. In 2006, Eggleston and Zeckhauser co-wrote a paper about antibiotic resistance as a global threat, an issue that has since received much attention as it has become a critical public health and public policy challenge. Zeckhauser was a pioneer in framing antibiotic resistance as a global threat.

On October 20, 2018, Eggleston was among some 150 colleagues, students, and friends who participated in a special symposium at the Kennedy School to celebrate Zeckhauser’s 50th anniversary of teaching and research, and to anticipate what the next 50 years might bring in the multiple fields he has influenced throughout his long career.

Eggleston joined the first of two panels in that symposium, where she spoke about Zeckhauser’s impact on health policy and about what academics and policymakers should be tackling next on the path to addressing the global threat of antibiotic resistance.

The panel was moderated by Harvard Professor Edward Glaeser. In addition to Eggleston, it included Jeffrey Liebman, Daniel Schrag, and Cass Sunstein.

A video recording of the panel is made available by the Kennedy School. Listen to Eggleston’s remarks (beginning at the 8:42 and 36:20 time marks):