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U.S. hospitals provide large amounts of low-value care and devote inordinate resources to administration, while some hospitals leverage market power to realize large profits. Meanwhile, many rural and safety net hospitals are financially distressed. The coexistence of waste and want suggests that U.S. hospital financing is neither efficient nor equitable. We model the economic consequences of adopting the mode of hospital payment used in Canada and the U.S. Veterans Health Administration and proposed in the leading congressional single-payer Medicare-for-All bill: global budgeting. Our models assume increased utilization due to expanded and upgraded coverage; gradual reductions in administrative costs from simplified payment; and the elimination of hospital profits, with hospital capital expenditures funded by explicit grants rather than from profits or borrowing. We estimate that non-federal hospital operating budgets will total $17.2 trillion between 2021 and 2030 under current law versus $14.7 trillion under single-payer with global budgeting. This difference reflects $520 billion in foregone profits and $1,984 billion in reduced expenditures on hospital administration; expenditures on clinical operating budgets, however, would be higher than under current law, funded out of profits.

For the last four decades, policymakers have attempted to control the United States's high health care costs by reducing patients’ demandfor care (e.g., by imposing managed-care restrictions or high costs on patients at the time of use). Yet studies based mostly on data from the public Medicare program, which covers mostly elderly Americans, suggest that supply(e.g., number of physicians or hospital beds) rather than demand drives aggregate service use and, hence, costs. Using variation between U.S. states in per enrollee Medicare spending versus per capita spending of all other (non-Medicare) individuals, we find that greater supply boosts costs for the entire population. Furthermore, we find that factors that suppress demand in the non-Medicare population do reduce non-Medicare health care spending, but simultaneously increase Medicare spending. This suggests that for a given supply of medical resources, suppressing demand for one group of patients may produce a compensatory increase in provision of care to those whose demand has not been suppressed. Health planning to assure adequate medical resources where they are needed while preventing excess supply where it is duplicative and wasteful is likely a more effective cost control strategy than the imposition of managed-care restrictions or imposing higher costs onto patients seeking care.