By NextBestFitBuild a capital allowance into rates
Each payment includes a capital component; hospitals decide how to invest it.
Draft decision:RejectedConfidence: medium · not yet reviewed
Separate capital budget chosen.
Review ledgerHow this path connects
This path
Build a capital allowance into rates
Concrete changes if chosen
What would actually have to change in law, agencies, payment rules, or systems.
- Add a capital component to provider rates
Effects
Each effect has its own page: the evidence, the case that it is or isn't a real cost, and whom it affects.
What it fixes
- Under-investment in equipment and facilities
Including a capital component in payments lets hospitals decide how to invest, preserving flexibility and avoiding a central approval bottleneck.
What it creates or worsens
- Racial, income, and geographic disparities
Funding capital through hospital payments leaves richer systems able to out-invest poorer ones.
- Low-value care and overtreatment
Letting hospitals invest capital components of payments can fund duplicate equipment or facilities.
10 paths soften this
Evidence-based coverage decisionsLow-value care and overtreatmentChosenFeedback and clinician nudgesLow-value care and overtreatmentChosenModest copays with an income-based annual capUnderinsurance: covered, but can't afford to use itRejectedValue-based cost sharingUnderinsurance: covered, but can't afford to use itRejectedGlobal budgets for hospitalsU.S. prices are far higher than in other countriesChosenNo-fault compensation for medical injuryMalpractice system: slow, costly, and drives defensive medicineChosenNational health record and patient IDRecords don't follow patientsChosenSeparate public capital budget, planned regionallyUnder-investment in equipment and facilitiesChosenAccept somewhat slower adoptionSlower access to new drugs and technologyRejectedOnly flat, small charges on a few servicesCopays keep billing systems alive and still deter poorer patientsRejected
Who's affected
Who gains
- People with ongoing or specialist care needs
- Under-investment in equipment and facilities: Underinvestment in diagnostic equipment leaves them waiting for tests.
- Health care executives
- Under-investment in equipment and facilities: Including a capital component in payments lets hospitals decide how to invest, preserving flexibility and avoiding a central approval bottleneck.
- Hospitals, clinics, and care organizations
- Racial, income, and geographic disparities: They can select better-paying patients over those with lower-paying coverage.
- Low-value care and overtreatment: Per-service payments reward additional low-value care.
- Drug and device makers
- Low-value care and overtreatment: They sell devices and tests used in low-value care.
Who loses
- Taxpayers and public budgets
- Under-investment in equipment and facilities: Restrained capital investment limits spending in the short term.
- Low-value care and overtreatment: They pay for tests and treatments with little benefit.
- Black, Hispanic, and Native communities
- Racial, income, and geographic disparities: Access and outcomes differ by race, income, and location.
- Rural residents
- Racial, income, and geographic disparities: Access and outcomes differ by race, income, and location.
- Low- and middle-income households
- Racial, income, and geographic disparities: Access and outcomes differ by race, income, and location.
- Hospitals, clinics, and care organizations
- Racial, income, and geographic disparities: Funding capital through hospital payments leaves richer systems able to out-invest poorer ones.
- People with ongoing or specialist care needs
- Low-value care and overtreatment: Low-benefit tests and treatments expose them to harm.
- Health insurers, brokers, and their shareholders
- Low-value care and overtreatment: They pay for tests and treatments with little benefit.
Where it has been tried
- U.S. Medicare inpatient payments: Include a capital add-on.
- Germany: States are supposed to fund capital but under-fund it, so hospitals shift operating money to capital.
- U.S. Medicare: Medicare's FY 2025 inpatient capital prospective-payment calculation uses a national capital standard federal base rate of $512.14, subject to applicable payment adjustments.