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Hospitals present a major roadblock to ‘Medicare for All’ push

Author: Washington Examiner - August 14, 2018 - Updated: August 30, 2018

About 178 million people currently have private coverage that they buy directly or get through a job. If everyone in this group were to have Medicare instead, then the amount hospitals’ recoup for caring for those patients would be lower than what private plans were paying.
(AP/Bill Clark – file)

By Kimberly Leonard | Washington Examiner

More and more Democrats are signing onto making the government the only payer of health-care services, but they’re about to face a considerable adversary in the hospital industry.

Hospitals tell the Washington Examiner that while they support “universal coverage,” in which everyone has some way to pay for medical care, they don’t want a state or federal government to be the only one funding it.

As the debate over what is known as “single payer” health care continues to take hold, they will become a more vocal part of the opposition.

During the past year, more politicians than ever have backed the Medicare for All Act, which would insure everyone in the U.S. through Medicare, the federal health care program that covers adults 65 and older and people with disabilities.

But the idea of the government ditching private insurers isn’t something hospitals welcome. They say it would force painful trade-offs: Either taxes go up, or doctors and hospitals face pay cuts, leading to closures, layoffs, and long lines for care.

“I’m disappointed any Democrats are going off on this tangent,” said Charles Kahn III, president of the Federation of American Hospitals, which represents investor-owned and managed community hospitals. “They should be focusing on the advances that were made under the Affordable Care Act.”

Hospitals are powerful opponents in the single-payer debate because they are the largest employer in many districts. Their lobbyists have been urging Congress to fix the Affordable Care Act, or Obamacare, by adding more federal funding.

They have also tried to encourage more states to expand Medicaid under Obamacare to cover individuals making $16,000 a year, something Colorado has done but 17 other states haven’t.

The debate over whether the U.S. should enter a single-payer system remains largely theoretical, given that Republicans control all branches of government and are staunchly opposed to the idea.

But the Medicare for All Act of 2017 (Senate Bill 1804) from Sen. Bernie Sanders, I-Vt., has gained the support of an unprecedented 15 Democratic senators and 123 House lawmakers.

The issue is playing out in governors’ races and is expected to be prominent during the 2020 presidential election.

Under the Sanders proposal, Medicare coverage would become more extensive than it is now. It would pay for emergency surgery, prescription drugs, mental health, dental, and eye care, all without co-pays. People would be placed into Medicare whether they are uninsured, on private plans, receiving coverage through a job, or on Medicaid.

This shift is expected to reduce overall health care spending. One study by the Mercatus Center at George Mason University predicted the reduction would be as much as $2 trillion from 2022 to 2031. That would come mostly through cutting payments that hospitals and other providers were getting from private insurance by 40 percent.

Democrats lambaste drug and insurance companies regularly for high costs, but it’s hospitals that make up the largest share of healthcare spending, at 32 percent, according to actuaries at the Centers for Medicare and Medicaid Services.

In comparison, prescription drugs make up 10 percent of spending while doctors make up 20 percent.

Gerard Anderson, professor of health policy and management at the Johns Hopkins Bloomberg School of Public Health, said hospitals would fight against proposals to make the government the sole payer for healthcare.

“Hospitals are going to look for their bottom line as they always have,” he said. “If they are going to be worse off, they are going to complain and they will argue that patient safety and patient access will decline.”

The fragmentation of the current system, whereby people in the U.S. are covered in different ways, generally benefits hospitals. They are able to charge private insurers more to make up for the gap left by the uninsured and government programs. Medicare pays roughly 80 percent of what private coverage pays, while Medicaid pays roughly 60 percent.

About 178 million people currently have private coverage that they buy directly or get through a job. If everyone in this group were to have Medicare instead, then the amount hospitals’ recoup for caring for those patients would be lower than what private plans were paying.

“For hospitals it would be devastating,” said Mary Grealy, president of the Healthcare Leadership Council, a coalition that includes hospitals, drug companies, and insurers. “Fiscally, it would be very difficult for hospitals to survive if the vast majority of their patients were on Medicare.”

Proponents of allowing the government to have a more extensive role in health care, and even to set prices, point out that waste is prevalent in the current system. Patients do receive unnecessary medical care, such as repeated tests, or surgeries that either don’t make them healthier or even make them worse.

A senior aide for Sanders noted that hospitals would recoup more funds for certain patients under Medicare than they do now. Hospitals receive little to care for the 30 million who are uninsured, and about 70 million people who have Medicaid now would receive the higher-paying Medicare instead.

Because the plan is also expected to reduce administrative and drug costs, hospitals would see savings in that area as well, the aide said.

“We wouldn’t just say, ‘We are cutting everyone’s rates and they need to deal with it,'” the aide said. “We would take a look at the system and see where to direct resources. There is some room in the system to bring down healthcare costs, and everyone is going to have to play a role in that.”

Several national hospital groups are mum about their positions on the Medicare for All Act. The 5,000-member American Hospital Association declined to be interviewed for this story and a spokeswoman said the organization was still reviewing the legislation. America’s Essential Hospitals, whose members care for vulnerable communities, also doesn’t have a formal stance.

But efforts to defeat single-payer systems at the state level, as well as past actions on similar legislation, offer clues into hospitals’ thinking.

The American Hospital Association and the Federation of American hospitals in 2016 came out strongly against a national “public option,” a proposal to allow people to buy government-run plans instead of private ones. Still, Democrats in the Senate in recent months have been backing this plan as an add-on to Obamacare.

Hospitals tend to spend less on lobbying than other health care groups, but they do team up with insurers, patient groups, and drug companies, to kill single-payer proposals. This happened not only in California but in Colorado, where voters overwhelmingly defeated a single-payer ballot measure in 2016.

Hospitals defeated another plan in California that would have allowed the state to set prices at Medicare rates. The California Hospital Association blasted the plan as a “recipe for disaster,” warning 175,000 jobs would be cut and $18 billion in revenues lost.

Carmela Coyle, CEO for the California Hospital Association, said lawmakers should focus on covering the remaining 3 million uninsured in the state, a historic low reached under Obamacare. About half are in the country illegally, and the other half don’t realize they qualify for Obamacare or Medicaid, Coyle said.

“We are very much supportive of universal coverage, but I think the challenge and the dangers of financing an enormous healthcare system through one source puts extraordinary pressure on that single source, whether federal or state government,” she said.

A poll from the Kaiser Family Foundation found that 53 percent of the public favors a single-payer system, but it isn’t clear that everyone understands that term to mean the same thing. Public perception appears malleable on the topic: Additional polling suggests that support falls off when people are faced with higher taxes or with the possibility of the government having more involvement in healthcare.

“It’s easy to talk about single payer and Medicare for all, and politically it’s attractive for some Americans, but when you actually analyze it in terms of the kind of patient-physician relationships that people are used to, and the hospital services available, they wouldn’t be sustainable in that model,” Kahn said.

And higher taxes may be on the table to have Medicare payments align more closely with those of private insurers, a politically difficult approach. According to the Mercatus Center analysis, the plan raises government spending by $32.6 trillion, an estimate that is in line with an earlier study by the left-leaning Urban Institute.

Sanders has not said how his bill would be financed, though he has released a paper suggesting several possibilities, including through taxes on households or employers.

Asked whether the hospital industry was gearing up for a fight against single payer, Grealy replied, “I would call it an educational campaign.”

“We take it seriously,” she said. “And we recognize if we want to make the case against single payer then we have to be honest about how we need to make improvements in our current private-based system.”

Washington Examiner

Washington Examiner