Paying for Hospitals' Community Service

U.S. hospitals incur costs of $25-$50 billion annually in providing "community service," primarily in the form of health professions education and standby costs. They also provide approximately $30 billion in uncompensated care. Historically, such "community service" costs have been subsidized explicitly by Medicare and implicitly in the prices paid by private payers. The sustainability of that system is highly uncertain. With a growing number of uninsured patients, allocating nonreimbursable costs to paying customers can create a "death spiral," in which fewer paying customers bear a larger proportion of such costs. The obvious solutions to this problem all have serious limitations.