Strong Public Plan Means Heavy Cuts to Hospitals
Posted October 26th, 2009 at 5:52pm in Health Care 
Print This Post
Behind closed doors, the House and Senate leaders are trying to cobble together very different and complex provisions of their respective bills.
A key issue is the impact of the public plan, a government run health plan intended to compete against private health plans. In the House version of the bill (H.R. 3200), payment to doctors and hospitals will be pegged to Medicare rates. Specifically, the bill calls for payment for medical services to be set at Medicare payment levels with a 5 percent increase for only certain physicians.
In the aftermath of the debate on physician payment updates, much of the media focus has been on the impact on doctors. But what is often overlooked is that while doctors could lose income, there are many areas of the country where the expansion of Medicare payment for hospitals would cause many hospitals to go broke.
If millions of Americans are moved from private insurance to public coverage, with the introduction of a Medicare-like public plan and a massive Medicaid expansion, once reform is fully implemented annual reimbursements to hospitals could be reduced by $63.7 billion. Overall, if reform were to include a “strong” public option available to individuals and employers of all sizes, hospitals could see their total net income fall by $61.9 billion, which would essentially eliminate hospitals’ yearly margins. Although many hospitals would see their profits dry up, the effects would be even more pronounced in certain states.
The Maine Example. Hospitals in Maine, for example, could see their net annual income fall by $694.4 million, with hospital total margins dropping to negative 12.1 percent. This loss in hospital income in Maine would be greater than total hospital margins and it would be overwhelmingly attributable to the creation of a new Medicare-based public plan.
Today, Medicare hospital payments in Maine are 54 percent of the private payments in the state. So, the fact is this: if Congress’s health reform plan tries to expand coverage in a way that heavily relies on insufficient below-market payment levels, like the rates used in the Medicare and Medicaid programs, it would hurt—not help—most hospitals. Of course, this radically increased reliance on Medicare style administrative pricing could ultimately compromise the broad access to high-quality care that most Americans currently enjoy.
For further information on the impact of the public plan on doctors and hospitals, see http://www.heritage.org/research/healthcare/upload/lewin_public_plan_national_all.pdf
Author: 
6 Responses to “Strong Public Plan Means Heavy Cuts to Hospitals”
worldbfree4me, Texas on October 26th, 2009 at 5:52pm said:
A subliminal message to the Senators of Maine eh?? Well, according to Senator Reid, every State in the Union including Maine would have an opton to opt out of the so called public option, so no worries there.
Bobbie Jay on October 26th, 2009 at 5:52pm said:
Get the government out. We the people, do not want them or their unfair competition and incompetent work ethics, paid by forced obligation of taxpayers.
TerryP, Nebraska on October 26th, 2009 at 5:52pm said:
You will be able to opt-out of getting any of the “potential” benefits but I doubt very much if you will be able to opt out of any of the taxes, fees, and other costs. They need the money from someone to pay for everything they want done, and from whom better then the people from the states that don’t agree with them.
Elisa S on October 26th, 2009 at 5:52pm said:
The American public is not aware about the massive cost shifting of hospitals to balance payer mix to stay profitable. Most patients on Medicare are unaware that hospitals are incurring massive losses with denial of payment for under 30 day re-admission rates. This issue is especially problematic for hospitals with large patient populations of older persons with multiple chronic conditions on Medicare. Non-payment of services to local hospitals by the government negatively impacts the entire community. Hospitals will go out of business and then where will Americans go for medical services?
Freedom of Speech TX on October 26th, 2009 at 5:52pm said:
TerryP Nebraska.
The most important point!!
No matter what they say, they will find a way to bring down every states who opt out.
The states who “opt out” will be on a sort of enemies list for not playing ball.
No one should think for a moment there is any way to opt out. There is no opting out in a socialist state.
Dr.George Lanier Savannah Ga on October 26th, 2009 at 5:52pm said:
Wit so many false statements and half truths by this President and the Demovratic Party, and a few Republicans who have believed that they can vote to pass this monster failure, they need to listen to their potential voters in the 2010 election, it will be one big throwing out those who go against public opinion.