FAH Hospital Policy Blog

Perspectives on health policy affecting America's hospitals and the patients we serve.

FAH Policy Blog Team

New Report Outlines Negative Impact of Medicare Public Option Proposal on Hospitals and Patients

August 9, 2019 Update: The American Hospital Association (AHA) and the Federation of American Hospitals (FAH) have updated this report.  The updated findings, which reflect current legislative specifications, can be found here.  

The American Hospital Association (AHA) and the Federation of American Hospitals (FAH) today released a new report that details the impact that a Medicare public option proposal could have on the ability of hospitals and health systems to continue to provide access to high-quality care to their patients and communities. The study finds that such a proposal, which would create a government-run Medicare-like health plan on the individual exchange, could have a significant impact on patient access to care. It would create the largest ever cut to hospitals – nearly $800 billion – and be particularly disruptive to the employer-sponsored health insurance market. The study further finds these significant disruptions would result in only a modest drop in the number of uninsured compared to how many people would gain coverage through expanding the existing coverage framework. The report was prepared by KNG Health Consulting on behalf of the AHA and FAH.

“This buy-in to a Medicare-like public option may fit on a bumper sticker, but it is no solution for health care coverage. 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. “Moreover, this study highlights the disruption proposals like this would have on the private coverage Americans are satisfied with today.”

“It is not practical to disrupt coverage provided through employer-sponsored plans that already cover more than 150 million Americans. America’s hospitals and health systems remain committed to working together with policymakers to help expand coverage and reduce costs for all Americans. However, a ‘Medicare for All’ approach would impede, not advance, our shared goals,” said Tom Nickels, AHA executive vice president.

The analysis specifically examined the Medicare-X Choice Act, a proposal which would compound the stresses already faced by many of the nation’s hospitals. Providers would be reimbursed at Medicare rates under this proposal. Public programs such as Medicare and Medicaid historically reimburse providers at less than the cost of delivering services. In 2017, combined Medicare and Medicaid underpayments totaled $76.8 billion. The dramatic shift of tens of millions of Americans from private coverage to Medicare-like public coverage would destabilize commercial insurance markets and hospital finances alike, jeopardizing access to care.

Specifically, the findings in the report show that the proposal could:

  • Result in only a modest drop in the number of uninsured compared to the 9 million Americans that would gain insurance by taking advantage of the existing public/private coverage framework.
  • Lead to a significant disruption to the employer-sponsored insurance market, which provides coverage to more than 150 million Americans.
  • Lead to a cut of nearly $800 billion for hospital-based services over a 10-year period from 2024-2033, while utilization (and therefore, costs) will grow as a result of increased coverage.
  • Impact the ability of providers, many of which are already absorbing more than $200 billion in Medicare cuts, to continue to care for patients under new public plans.
  • Stifle hospitals’ ability to keep pace with new life-sustaining advances in medicine, to continue to invest in new payment and delivery models and to manage rapidly escalating drug prices.
  • Continue to put pressure on other commercial plan rates, further undermining coverage for Americans not on Medicare, as well as other unintended consequences.

A copy of the executive summary and full analysis can be found here.