A skilled nursing facility gets acquired by a private equity firm. Within a few years, Medicaid patients, the least profitable population, drop by roughly 7 percent. Mortality climbs by approximately 10 percent of the mean. These are not projections. They come from peer-reviewed research on PE acquisitions in healthcare, and they describe a system working exactly as designed.
The political debate frames this as a binary: market failure versus government failure. That framing is wrong, and it is doing real damage. The U.S. spends 18 percent of GDP on healthcare while ranking 69th globally in outcomes. Japan spends $4,100 per person and covers everyone. Some drugs cost 40 times more in America than in France. These gaps do not emerge from abstract market dynamics or regulatory incompetence. They emerge from specific choices made by specific people in the 1970s and 1980s to redesign healthcare as a vehicle for financial returns.
When the Safety Net Became the Investment Thesis
Private equity investment in healthcare grew from approximately $5 billion in 2000 to an estimated $104 billion in 2024. More than 40 percent of the country's emergency rooms are now managed by for-profit staffing companies owned by PE firms. The reason healthcare attracted this capital is not a market accident. Healthcare is recession-resistant. Third-party payers guarantee revenue. Society decided, correctly, that people cannot be turned away from emergency rooms. Those protections, designed to insulate patients, became the precise features that made healthcare attractive to investors seeking guaranteed returns.
The government failure argument deserves a fair hearing: Certificate of Need laws, which require regulatory approval before hospitals can expand capacity, increase overall healthcare spending by 3.1 percent and Medicare spending by 6.9 percent, according to research cited in a White House regulatory document from April 2026. That is a real inefficiency. But the evidence that deregulation serves patients rather than accelerating consolidation is thin. Removing CON laws in markets already dominated by PE-backed hospital systems does not restore competition. It removes the last friction before monopoly.
The 340B Program Is a Case Study in Designed Dysfunction
Consider the 340B drug purchasing program. Mega-consolidated hospital systems buy drugs at discounts of 50 percent or greater, then receive reimbursement well above that discounted cost. Studies document that these savings are often not passed to patients. The hospitals pocket the spread. This is not a market failure in the textbook sense. A government program created the arbitrage opportunity. Consolidation, which government antitrust enforcement permitted, determined who could exploit it. The patient got nothing.
Pharmaceutical companies collect 40 percent of their global revenue from 4 percent of the world's population. That ratio exists because the U.S. government, unlike every other wealthy government, does not negotiate drug prices at scale. That is a policy choice. It is reversible.
I will acknowledge the tension in my own position: government-set fee schedules require a government competent and insulated enough from industry lobbying to set them honestly. Japan's system works because its fee schedule negotiations are technically rigorous and politically disciplined. The U.S. track record on both counts is not encouraging. The 340B program is what happens when government creates a pricing mechanism without the discipline to enforce its intent.
But the answer to captured regulation is not deregulation into a market already structured for extraction. Japan's outcomes at Japan's price point are not a coincidence. Democratic price controls, applied to pharmaceuticals and hospital services, with genuine enforcement, are the only intervention the evidence actually supports. Congress should pass them. The industry will call it socialism. The data will call it Tuesday.
