8.27.19 / Updates

Headlines Warn Of Threats To Hospitals Under New Government Insurance Systems

WASHINGTON – While some 2020 hopefuls and lawmakers continue to push for new government insurance systems like Medicare for all, Medicare buy-in and the public option, the threats these systems represent to America’s hospitals and patients are making headlines.  As Kaiser Health News and NPR reporthospital closures can have “profound social, emotional and medical consequences.” 

In the early 2020 caucus state of Nevada, a column in the Las Vegas Review-Journal notes that “hospitals lose money on Medicare patients … according to a nationwide study from the nonprofit Rand Corporation.  But if more people were on Medicare, those losses could be unsustainable.  An industry group estimates that more than 50 percent of rural hospitals would face a high risk of closure if a public option were in place.”

In a story headlined “Rural Hospitals Say ‘Medicare For All’ Would End Up ‘Closing Our Doors,’” WBUR public radio in Massachusetts reports that Medicare for all “would force more rural hospitals to close, according to hospital administrators from Texas to Maine.”  Rural administrators warn that Medicare for all “will only make the problem worse” for already at-risk hospitals.  “If you’re talking about Medicare for All and turning every one of our patients into a Medicare patient, we’d probably end up closing our doors eventually,” warned Peter Wright of Central Maine Healthcare.

In Colorado, Estes Park Hospital “would be forced to shut down in less than a year if the U.S. adopted a ‘Medicare for All’ system,” according to the hospital’s CFO Tim Cashman.  Cashman warned that if Medicare for all “were to become a reality most of your rural hospitals will disappear because by definition, if you lose money for everything you do, then it won’t take long to run out of money … All of our commercial patients will go away, everybody will be on Medicare and I won’t be able to keep the doors open because I won’t be bringing in enough money to pay for my staff.”

And Virginia Public Radio reports that “[a]s many as 10 rural hospitals in Virginia could close if the federal government starts offering a public option health plan – the kind of public option that’s now being talked about on the campaign trail by former Vice President Joe Biden and others.  That’s the conclusion of the Partnership for America’s Health Future.  Lauren Crawford Shaver is the executive director of the partnership, and she says the lower reimbursement rates from the government plan would put a squeeze on rural hospitals.  ‘Those communities are already typically underserved and do not have access to all of the newest and most advanced medical treatment or physicians and specialists,’ Crawford Shaver says. ‘They are going to have to even travel further to get the care that they need and will have fewer options in getting that.’”

new study by Navigant Consulting, Inc. finds that the public option could put more than 1,000 rural U.S. hospitals in 46 states “at high risk of closure,” and a separate study released by Navigant in March found that the public option could cause increased financial stress, force hospitals to limit the care they provide, drive significant “layoffs” and “potentially force the closure of essential hospitals.”

Meanwhile, The Wall Street Journal editorial board points out the irony of Senator Bernie Sanders’ (I-VT) recent claims that he would help “the [same] hospitals he’d bankrupt with his Medicare-for-All bill.”

The best estimates are that Medicare and Medicaid pay hospitals on average about 87% to 90% of the actual cost of care, often lower in high-cost areas like New York City.  Hospitals then shift costs onto private insurers, which tend to pay more than 140% of costs, according to data from the American Hospital Association.  The Centers for Medicare and Medicaid Services reported earlier this year that “more than two-thirds of hospitals are losing money on Medicare inpatient services,” according to the latest data.  Hospitals start sinking when they can’t attract enough privately insured customers to make up the difference … The point of Medicare for All is to eliminate private insurance and reimburse hospitals for all services at Medicare rates … The Journal of the American Medical Association this year published estimates of what Medicare rates would mean: $151 billion a year in lost revenue for community hospitals.  “Hospitals currently operating at costs substantially above Medicare payment rates,” the authors note, “may have limited ability to reduce their costs quickly.”

The New York Times reported recently that experts are growing increasingly concerned about the “violent upheaval” a Medicare for all system would cause hospitals: “Some hospitals, especially struggling rural centers, would close virtually overnight, according to policy experts.  Others, they say, would try to offset the steep cuts by laying off hundreds of thousands of workers and abandoning lower-paying services like mental health.”

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