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REPORT: A Medicare Public Option Puts Majority of Rural Hospitals at Risk

August 07, 2019 | FAH Policy Blog Team

Category: Research, Rural

What would a Medicare public option do to rural hospitals? A new study released today says more than half could be at high risk of closure if a Medicare public option becomes a reality.

The study, released by Navigant, shows that a Medicare public option could put as many as 55% of rural hospitals – or 1,037 hospitals in 46 states – at high risk of closure.  Beyond those hospitals at greater risk for closure, the study demonstrates that all rural hospitals would face increased risk from the public option, noting that rural hospitals may have to eliminate critical services harming access to care.

Patients and rural Americans not only rely on hospitals to provide invaluable care when and where they need it, these hospitals often are the largest or second-largest employer in their communities.

According to Navigant, these are the three main findings of their study:

  1. Revenue loss to rural hospitals is projected to be 2.3% under a Medicare public option if only the uninsured and current individual market participants shift to the public option, placing an estimated 28% of rural hospitals at high risk of closure (Scenario 1).
  2. If employers shift between 25% and 50% of their covered workers from commercial coverage to a Medicare public option, hospital revenues are projected to drop between 8% and 14% and cause an estimated 51% to 55% to face high risk of closure, with an additional 39% to 41% facing moderate risk (Scenarios 2 & 3).
  3. To keep hospitals whole from the financial consequences of any of these scenarios, Medicare would have to increase hospital payment levels for a public option between 40% and 60% above present Medicare rates, costing between $4 billion and $25 billion annually (depending on the severity of the employer shift).

For the full Navigant report, THE POTENTIAL IMPACT OF A MEDICARE PUBLIC OPTION ON U.S. RURAL HOSPITALS AND COMMUNITIES: A SCENARIO ANALYSIS, click here.

To learn more about how essential rural hospitals are to their communities click here.

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