Would Medicare for All really force hospitals to shutter? The devil is in the details

A right-wing talking point about one universal healthcare proposal is not quite what it seems

Published July 28, 2019 2:00PM (EDT)

 (Getty/Jim Watson)
(Getty/Jim Watson)

The Democrats vying to take on President Donald Trump in 2020 have been vocal about their beliefs that the nation's health care system is a mess and they want to fix it. Some want to eliminate private insurance in favor of a single-payer system, while others have served up more moderate proposals that would build more gradually on the public-private model of coverage that is currently in place.

The debate over these plans — as well as their designs, details and overall impact on the nation's health care industry — is expected to shake up the contours of the race to clinch the Democratic Party's presidential nomination. (To some extent, it already has.)

The most-discussed policy proposal for revamping the U.S. health care system — Medicare for All — has revealed a stark policy divide among the nearly two dozen Democrats striving to deny Trump a second term in the White House.

Some current Medicare for All plans, including those from Sen. Bernie Sanders, I-Vt., and Rep. Pramila Jayapal, D-Wash., would effectively abolish private insurance and transition the country to a single-payer health care system in which almost all individuals would be covered by Medicare, the federal insurance program that now primarily serves roughly 44 million people age 65 and older and some with disabilities.

The measures, which seek to eliminate premiums, co-payments and deductibles, proposes covering virtually all health expenses and reducing rates to Medicare levels — roughly 40% lower than those currently paid by private insurers, according to various estimates from researchers. Democratic presidential candidates like Sens. Kirsten Gillibrand of New York, Kamala Harris of California, Cory Booker of New Jersey and Elizabeth Warren of Massachusetts have all signed on as co-sponsors of Sanders' bill in the Senate.

Critics of the Medicare for All have argued that using Medicare reimbursement rates to pay providers would force hospitals to shut down. In April, The New York Times published an article titled: "Hospitals Stand to Lose Billions Under 'Medicare for All,'" while The Washington Free Beacon published a piece in June with the headline: "Medicare For All Could Shutter Hospitals." Earlier this month, a story in The Washington Post asked: "Would Medicare-for-all mean hospitals for none?" while Reason argued that "many hospitals would be forced to close — especially in poor, rural areas" under Medicare for All.

There is currently not enough evidence to support that claim, and experts Salon spoke with indicated that the possible effects of Medicare for All on hospitals would vary. They said that while some hospitals might take a big financial hit under a single-payer system, others might make more money.

"Figuring out how much it actually costs a hospital or practice to deliver care is notoriously difficult, so it's not always clear exactly what effect some of these payment changes would have," said Dr. Dhruv Khullar, a physician and assistant professor of health care policy at Weill Cornell Medicine, and director of policy dissemination at the Physicians Foundation Center for the Study of Physician Practice and Leadership.

"I think arguing that expansions of Medicare would lead to mass hospital closures is probably overstating the case, but I do think changes to reimbursement rates would mean many hospitals would have to change how they do business — which, depending on the hospital, could be a good thing or a bad thing," Khullar told Salon.

Khullar said changes to reimbursement rates depend on the payer mix and cost structure of individual hospitals. For rural hospitals who serve high levels of uninsured and Medicaid patients, Medicare rates could actually result in a big pay bump, since Medicare rates are about 20% higher than Medicaid and there would be no more uncompensated care. On the other hand, hospitals in urban areas, especially those that currently serve higher percentages of privately insured patients, would probably take a financial hit.

Some experts, however, have argued that some hospitals should make less money. They stated that U.S. health care spending is significantly higher than that of other developed countries and that the country's sky-high price tags for health care services need to be addressed. Additionally, research suggests that hospitals, especially those with great market power, are among the key drivers of rising health care costs for private insurance because they're able to negotiate much higher costs for care.

Erin Fuse Brown, a law professor at Georgia State University and co-author of "Health Law: Cases, Materials and Problems," told Salon that the ultimate effects of Medicare expansion would rely on several variables.

"Even if the role of Medicare is expanded in this country — whether it becomes the default single-payer for everyone or whether it's an option for more people to buy into — what isn't clear is whether or not the Medicare rate that is being paid today is the same rate that would be paid under a Medicare for All proposal," she explained.

As of this writing, the reimbursement rate under Medicare for All remains a big unknown. However, Fuse Brown speculated that figure might be calculated by noting some of the components that the Medicare system currently takes into account to calculate payments for hospitals (geographical variation, wage differentials and varying overhead costs in different markets across the country.)

"It's not as though the Medicare system pays the same flat rate across the board for everything," she said. "It starts with the same base rate for any given procedure and then factors in some adjustments."

Fuse Brown said it's likely that a Medicare for All proposal would use a similar methodology to calculate reimbursement rates.

Dhruv also said it's not clear that Medicare rates would stay where they are today under Medicare for All, and suggested legislative negotiations could cause the Medicare rate to increase under Medicare for All in an effort to account for lost hospital revenue.

Dhruv and Fuse Brown both pointed out that, despite its prominence in campaign literature, what precisely Medicare for All means varies among the presidential hopefuls who claim to support it.

Health care reform was a prominent issue in the 2008 election cycle, and the passage of the Affordable Care Act (ACA, also known as "Obamacare") in 2010 brought sweeping changes to the nation's health system. The number of uninsured Americans fell dramatically since the law passed, dropping from 48.6 million people in 2010 to 29.7 million in 2018. Studies have found that the ACA caused fewer people to struggle with medical bills; fewer people to avoid or delay treatment because of cost; and made medical debt decline overall.

Still, health insurance in the U.S. remains one of the most expensive in the world, and coverage remains increasingly out of reach for millions of Americans. The health care system is still difficult to navigate, meaning many consumers to struggle to get the care they need in a timely fashion, make sense of medical bills, and understand insurance plans filled with abstruse cost calculations and bureaucratic jargon. The U.S. also remains an outlier among developed countries by not having universal health insurance.

"Part of the goal of Medicare for All, or any single-payer plan, is to rationalize the way we pay for health care so there aren't 30 different prices for the same service," Fuse Brown explained. "In some ways, that's how you save money. That's how you control costs. It's baked into the system."

She added that a system like Medicare for All would likely maximize patient value by stressing value-based care and reward all providers equally — instead of just those in urban areas.

For now, she said Medicare for All remains a "rhetorical argument about a broader vision and less about the details."

"There are a lot of details to be worked out, and I don't think any of the candidates really have all of those details worked out yet — nor should they at this point," Fuse Brown said, adding that for now, "the devil is in the details."

Dhruv, meanwhile, pointed out that Medicare is extremely popular among the majority of Americans who are enrolled in the program. In fact, Medicare's popularity has remained relatively high since its inception in 1965.

Nevertheless, questions about various Democratic health care proposals that would expand its role remain.

"The question is whether a large-scale expansion would have disruptive effects on the health system that outweigh the greater financial security that many patients would enjoy," he said. "Right now, there are too many unknown variables in terms of what a Medicare expansion would actually look like to say for sure how it would affect quality, cost, and access. The details really do matter."

By Shira Tarlo

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