With the passage of the ‘big, beautiful bill,’ the interests of patients prevailed over one of the most powerful lobbies in Washington.
O n July 4, President Trump signed the One Big Beautiful Bill Act (OBBBA), extending tax cuts introduced by the 2017 Tax Cuts and Jobs Act that would have otherwise expired and reforming health and welfare programs. Supporters hail it as the dawn of a new economic boom. Critics call it fiscally reckless. However, the true significance of OBBBA lies not just in its contents but also in the precedent it sets.
For the first time in decades, the interests of patients prevailed over the entrenched power of health care special interests. That breakthrough, more than any budgetary line item, may be what defines the future of American health care.
The health care system in the United States has long combined excellence with dysfunction. We have access to top-tier doctors, cutting-edge hospitals, and innovative pharmaceutical products. And we pay dearly for them — an average of $14,570 per person annually. Health care now consumes nearly 18 percent of U.S. GDP. It may come as a surprise to many Americans that we pay more than double the average in other high-income countries and achieve worse results.
Consider treatable mortality: the rate of deaths that should be preventable with timely, effective health care treatment. With an age-adjusted rate of 109 deaths per 100,000 people, the United States ranks 27th out of 32 high-income countries in treatable mortality, according to the World Index of Health Care Innovation published by the Foundation for Research on Equal Opportunity. Switzerland, which spends one-third less per person than does the U.S., leads the index with a rate of just 43 deaths per 100,000.
The American health care system has been rigged to reward volume and cost, not value. Providers, insurers, and suppliers all benefit from the status quo. Patients, the one group with the most to gain from reform, are the least represented in policy debates. Hospitals, which in 2023 consumed 31 percent ($1.5 trillion) of all health care spending, wield the most influence. They are central to the current system, but they are also among the largest employers in many congressional districts. As a result, hospitals have successfully blocked nearly every legislative effort to reduce costs or expand alternatives to hospital care.
Until now.
The OBBBA chips away at the hospitals’ monopoly by limiting states’ use of Medicaid provider taxes — a long-standing gimmick that lets states inflate federal Medicaid payments. While called “taxes,” these levies are often refunded back to hospitals through higher Medicaid reimbursements, creating a circular money flow that disguises real spending and ultimately draws more funding from the federal government. Under the OBBBA, the cap on these provider taxes will gradually drop from 6 percent to 3.5 percent by 2031 in states that expanded Medicaid under the Affordable Care Act. The law also bars new provider taxes in any state, regardless of Medicaid expansion status. Hospitals lobbied hard against this change as well as the bill’s new work requirement for receiving Medicaid and requirements to verify eligibility, arguing that millions of poor people will lose health coverage. In truth, hospitals know that if states can no longer game the system to draw in federal funds, states will likely respond by cutting reimbursement rates rather than increasing state expenditures or kicking people off Medicaid.
Reforms targeted at such state financing gimmicks will save taxpayers an estimated $375 billion over a decade — not insignificant, though not nearly enough to cover the bill’s costs. Make no mistake: OBBBA leaves much to be desired when it comes to the nation’s overall fiscal health. It could add an estimated $3.3 trillion to the national debt over ten years. Interest costs could soon become the largest line item in the federal budget, especially if the Federal Reserve keeps rates high amid rising tariffs and economic uncertainty. But the bill’s real importance lies in breaking the perception that hospitals are politically untouchable. For once, policymakers chose patients and taxpayers over one of the most powerful lobbies in Washington. This is transformative.
The bill also creates a rare window of opportunity for more ambitious reforms. With the air of invincibility around hospitals now gone, lawmakers should pursue legislation that would drive down prices and increase competition. The Hospital Competition Act of 2020 — introduced by Senator Jim Banks (R., Ind.) when he was in the House of Representatives — would address hospital consolidation, a key driver of rising costs. The Fair Care Act of 2024 (FCA), introduced by Representative Bruce Westerman (R., Ark.), proposed a broad overhaul to improve affordability across hospitals, physician services, prescription drugs, and insurance markets. And the FCA is the only Republican health care bill that would achieve universal coverage, an outcome long supported by Democrats.
Taken together, these reforms could finally rein in government health care spending — the largest contributor to the nation’s federal deficits and debt — and reshape the system to prioritize value over volume. More importantly, they would move the nation closer to what Americans have long deserved: a health care system that delivers world-class care at a price families can afford.
For decades, real health care reform seemed impossible — not because better policy wasn’t available but because powerful interests blocked every path forward. The OBBBA didn’t fix the system, but it opened the door toward a solution. And that might be its most lasting achievement.