Health Care Needs a New Pot of Money

COMMENTARY

The United States has the worst-performing health care system despite spending the most on health care among nine other high-income nations. Americans, especially in rural communities, have lower life expectancy, higher prevalence of chronic disease, dismal maternal mortality outcomes, significant mental health challenges, and growing obesity rates. 

The health of Americans is declining, but we can reverse the downward trajectory if we are willing to think outside the box. It may be time for policymakers — and the health care industry — to embrace a previously untapped revenue stream hiding in plain sight: cannabis taxation.

While changing the course of health care is a key priority for the Trump administration via the Make America Healthy Again initiative, health care continues to grapple with reimbursement cuts to Medicare, Medicaid, hospitals, physicians and more.

The result: a health care system that is focused more on surviving than innovating.

This is not just a health issue. It is a national security issue. Health care is a critical component of America’s emergency response and public safety infrastructure. Yet in Washington, health care is too often treated like a budgetary piggy bank — raided to offset spending elsewhere under the pretense of fiscal responsibility. Innovation is demanded, but any attempt to fund it is met with the caveat that it must be paid for by cuts within the system. 

The underlying truth? The tit-for-tat budget neutrality mantra only exists because there has been no new funding source for health care in decades. That needs to change. 

With the Department of Health and Human Services and the Drug Enforcement Administration proposing rescheduling cannabis from Schedule I to Schedule III due to its accepted medicinal benefits outweighing its abuse potential and level of physical or psychological dependence, a new door may be opening. Legalization at the federal level could unlock billions in tax revenue — and for once those dollars could be directed where they are truly needed: back into the health care system.

States have already realized the fiscal benefits that accompany cannabis legalization. As of February 2025, 39 states, the District of Columbia and three territories have legalized medicinal cannabis. Over the past decade, state-level legalization has generated more than $20 billion in tax revenue from adult-use cannabis sales. In 2023 alone, states collected over $4 billion in cannabis taxes, with Missouri, for example, bringing in over $240 million in tax revenue last year, tripling initial projections.

A $44 billion market today, the legal cannabis market is estimated to grow at a compound annual growth rate of 11.5% to $76 billion in 2030, with the potential to grow to $200 billion annually by 2035. 

Additional states will continue to legalize cannabis, reaping the fiscal benefits while the federal government continues to miss a key opportunity. If taxed appropriately, the federal government could finally have a durable, growth-oriented funding stream to stabilize the health care sector. And while cannabis legalization has documented medicinal benefits, data also demonstrates that legalization results in increased costs to the health care system. 

In Canada, legalization resulted in an increase in cannabis-induced psychosis hospitalizations. In the U.S., Premier Inc. evaluated over 6.7 million incidents of cannabis-related hospitalizations (based on ICD-10 codes) over nine years from all 50 states and Washington, D.C., to study the impact of legalization on hospital visits. 

In this study, a statistically significant 51.4% increase in cannabis-related hospital outpatient visits was observed following recreational cannabis legalization. This study also concluded that the legalization of medicinal cannabis was associated with a 14% increase in cannabis-related hospital outpatient visits, although this association was not statistically significant. Lastly, the data shows a statistically significant increasing trend in hospital outpatient visits over time following medicinal cannabis legalization.

Cannabis also correlates with increased alcohol and tobacco use, particularly among younger populations — comorbidities amplifying pressure on the system. And yet, despite similar impacts, taxes on alcohol and tobacco rarely support health care spending. Alcohol tax revenue typically flows to infrastructure, but alcohol use disorder is estimated to cost the health care industry $27 billion annually. Tobacco taxes often go to education, but tobacco use disorder is estimated to cost the health care industry $168 billion annually. And unlike cannabis, neither alcohol nor tobacco has medicinal benefits. 

Cannabis offers an opportunity to break that pattern. Federal lawmakers should leverage cannabis tax revenue specifically for health care investment. Doing so could reduce the need for annual budgetary battles over Medicare cuts, give providers breathing room to plan for the long term, and accelerate our transition to a more efficient, wellness-based system.

While a bolus of cash into the health care ecosystem can help thwart payment cuts and provide some much-needed stability, it alone is not enough to sustain the future of health care. A period of stability will allow providers to move from a survival mindset to one of transformation, allowing us to double-down on value-based care, eliminate waste and administrative burden, leverage technology to bring health care into the 21st century, and reverse the chronic illness burden in America. 

Regardless of whether it is this idea or the next, the reality is that health care still needs a novel funding source. Cannabis may not be a panacea, but it could be part of the cure. Washington must start thinking beyond the zero-sum game of internal cuts and instead look outward for innovative, long-term solutions. Sometimes upfront investments are necessary to save money and improve outcomes in the long run. Otherwise, we jeopardize the critical infrastructure that Americans depend on and threaten our national security. 

Soumi Saha, PharmD, JD, is senior vice president of Government Affairs at Premier Inc. Saha is responsible for developing and implementing Premier’s advocacy strategy to lead the transformation to high-quality, cost-effective health care and resilient supply chains. She leverages her unique background to ensure the perspective of health care providers is represented in Washington, D.C. Saha can be found on LinkedIn.