Hospitals could sustain 10% cut under Medicare public option proposals: report

If the U.S. were to pursue a Medicare public option proposal, it could "decimate" insurance coverage as it looks today and result in a nearly 10% cut to U.S. hospitals, leaders from two top hospital organizations said in a call with reporters on Tuesday.

More than 36 million people would likely leave private coverage if a new government-run public option were to be rolled out, according to a report released by the American Hospital Association and the Federation of American Hospitals.

The study specifically looked at the potential effects of the Medicare-X Choice Act, a bill introduced in 2017 which would be less expansive than Medicare-for-All proposals introduced by some Democrats last month. The big problem: "Under Medicare X-Choice, the public plan would reimburse providers using Medicare rates, which are significantly less than commercial rates and, for hospitals, fall below the cost of providing care," the report said. 

"This ill-conceived program would undermine access to care and threaten the ability of providers and clinicians to meet the needs of their patients,” said FAH President and CEO Chip Kahn in a statement. “Moreover, this study highlights the disruption proposals like this would have on the private coverage Americans are satisfied with today.”

The report was prepared by KNG Health Consulting on behalf of the AHA and FAH.

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The study found that the proposal could harm the employer-sponsored health insurance market while only resulting in a modest drop in the overall number of uninsured.

“It is not practical to disrupt coverage provided through employer-sponsored plans that already cover more than 150 million Americans," said Tom Nickels, AHA executive vice president.

The study estimated:

  • Medicare-X Choice would result in a reduction of 5.5 million uninsured patients. In comparison, they said, a fully implemented ACA would result in a reduction of 9.1 million in the number of uninsured.
  • By 2024, approximately 174 million individuals will be insured through either an employer or the nongroup market and 29 million would be uninsured. Without any changes in policy, the number of individuals and nongroup would grow by 2.4 million and the uninsured would grow by 2.2 million. Under Medicare-X Choice, they estimate that public plan participation would be 40.7 million in 2024 and 42.3 million in 2033.
  • Total healthcare spending is expected to hit $1.3 trillion in 2024 among those with employer-sponsored coverage, nongroup coverage, or among those individuals who are uninsured, with projected growth to hit $1.9 trillion by 2033. Under Medicare-X Choice, spending would fall by $1.2 trillion over the same 10-year period.
  • Hospital-based services represent just under half of healthcare spending but would account for 67% of the projected reduction in total healthcare spending. Under Medicare-X Choice, payments to hospitals would be reduced by 10%, or $774 billion, between 2024 and 2033.