I'm only playing on the third difficulty (lightly broiled?) but it seems as if I'm playing on the highest one, the shotgun dudes can effectively two shot me.

I think most players would agree that Blood's Cultists are some of the deadliest enemies you'll face across multiple difficulty settings. Their firearm attacks are hitscan-based, so there are no visible bullets or projectiles to dodge. Taking cover is a must when fighting them. Luring them to your position and blowing them away on sight is my usual tactic.

Without info regarding which version you're playing, it is hard to say. If it's just the DOS version of One Unit Whole Blood then yes, there's a difficulty glitch. This glitch is fixed in Fresh Supply, GDX and NBlood though.

https://blood-wiki.org/index.php/Bugs_in_Blood

There is a way to get around the bug in the DosBox version in this thread.