Government Shutdown Hurts Doctors, Health Insurers Benefit From Disruption

While federal agencies are frozen, insurers face less oversight, delay payments to doctors and tighten their grip on the health care system.

Much of the reporting about the ongoing government shutdown focuses on the millions of Americans who are in danger of losing their health insurance if Congress lets health insurance subsidies expire. However, the shutdown itself is having negative effects on the health care system. The longer it goes on, the more it puts physicians and other health care providers in a precarious financial situation.

The shutdown is in its 16th day because Republicans and Democrats are still at odds over whether Congress should extend federal subsidies that make health insurance affordable for people who are not eligible for employer-sponsored coverage or Medicare or Medicaid. The subsidies, which Congress authorized during the pandemic, are scheduled to expire at the end of the year. Without them, premiums will skyrocket – in many cases doubling – and millions of Americans will be forced into the ranks of the uninsured.

Private health insurers, of course, continue to operate during the Washington standstill – and with even more impunity than usual. That’s because shutdowns also freeze the oversight mechanism designed to regulate insurers. Regulatory agencies like the Centers for Medicare & Medicaid Services, the Department of Labor, the Federal Trade Commission and Health and Human Services’ Office of Inspector General all have to scale back their enforcement efforts.

When that happens, the playing field tilts even further toward insurers, who already dominate nearly every aspect of American health care. During shutdowns, the watchdogs go silent, but the wolves keep hunting.

Meanwhile, insurers’ claim denials, prior authorization delays and network restrictions will continue – and unchecked by federal agencies. Insurers are continuing to collect premiums and dictate care, even as they slow-walk or deny payment to physicians who already delivered that care. Just as they did during the pandemic when they reported record profits, insurers face no disruption to their business model, only new opportunities to delay paying claims. Physicians, however, face cash-flow disruptions and administrative nightmares.

This imbalance exposes just how dependent the U.S. health care system has become on private insurers, who even during more normal times in Washington operate beyond sufficient oversight. And that is largely because the regulatory agencies have been under-resourced and under-staffed for years, regardless of which party is in power.

Health care providers bear the brunt of bureaucratic uncertainty, while insurers can actually benefit from the disruption. Specifically, shutdowns slow Medicare and Medicaid claims processing, but insurers don’t extend relief or expedite payments during shutdowns. Doctors must try to maintain their operations and practice as usual, but physician groups still have to pay staff, rent, utilities, etc. to keep their doors open, often relying on lines of credit during times like these. For many independent and physician-owned practices, those financing costs are the difference between staying open and closing their doors. (That’s why access to capital is so important for physician practices. They need to be able to endure political chaos like we are witnessing now.) But insurers are able to continue business as usual: create care-delaying red tape and also delay payments to providers. During a shutdown, the impacts of those hassles and payment delays are amplified.

Bottom line, even in the best of times physicians struggle to avoid delaying care to their patients. But each government failure ultimately lands on the backs of frontline physicians. Insurers win twice: they face less oversight and pay out less, while the doctors who keep the system functioning are left holding the bag.

Every shutdown, delay, or lapse in funding adds new uncertainty, particularly for small or physician-owned practices that don’t have insurer-level cash reserves. It’s a vivid reminder that Washington’s dysfunction doesn’t hurt everyone equally. It rewards the most powerful players in health care while pushing doctors, and their patients, closer to the breaking point.