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Report about Public Option Signals Problems; Threats to Patient Access to Care and Massive Hospital Funding Cuts

March 12, 2019

Two national hospital groups have released a new report that considers the implications of a policy proposal to make a public health insurance plan fully available on the health exchanges beginning in 2024. The report speaks to the impact on patient access to health care, and hospitals’ and health systems’ ability to deliver quality care in their communities.

The American Hospital Association and the Federation of American Hospitals sponsored the report, prepared by KNG Health Consulting. The authors say that under a legislative proposal that offers a public health insurance plan on the health insurance exchanges, hospitals would experience a $774 billion reduction in payments between 2024 and 2033. Overall, this would amount to a 10 percent reduction in hospital payments.

Under the “Medicare-X Choice” proposal, hospitals would be reimbursed at Medicare rates, which, along with Medicaid, has historically reimbursed providers at less than the cost of delivering services. During 2017, combined Medicare and Medicaid underpayments totaled $76.8 billion.

The report says that the employer-sponsored health insurance market, which covers more than 150 million Americans, also would face disruptions, far out-weighing any modest benefits. KNG Health Consulting anticipates only a modest drop in the number of uninsured, compared to the 9 million who would gain coverage through expansion of the existing public/private coverage framework.  

Federal lawmakers are beginning the process of vetting different concepts and proposals to address coverage. Options have ranged from the concept of a single-payer health care system, or various versions of a “public health care option”, to targeted polices that would stabilize and improve the ACA.

As reported in a recent HAP Daily, progressive leaders within the Democrat Caucus in the U.S. House have introduced a “Medicare for All” plan that would transition all Americans into a government-run, single-payer, universal Medicare program over two years, eliminating private insurance.

The “Medicare for All” Act of 2019, H.R. 1384, would:

  • Shift tens of millions of Americans from private coverage to Medicare-­like public coverage
  • Jeopardize access to care
  • Destabilize commercial insurance markets
  • Destabilize hospital finances

H.R. 1384 would create challenges for many hospitals already struggling with financial stability, many of which are absorbing more than $200 billion in Medicare cuts, to continue caring for patients under new public plans.

HAP looks forward to engaging with the Pennsylvania Congressional Delegation to inform policy conversations about expanding access to coverage and care as different legislative models are explored and stakeholders have greater clarity on the expected impact.

If you have questions, contact Laura Stevens Kent, HAP’s vice president, federal legislative advocacy, or Jeff Bechtel, HAP’s senior vice president, health economics and policy.

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