March 18, 2019 | FAH Policy Blog Team
Category: Legislation, Medicare
Today, the consulting firm Navigant released a study showing that government-run health care proposals, like Medicare for All, would directly result in financial stress on hospitals. This comes on the heels of a study from FAH and AHA that found a Medicare public option could have a significant impact on patient access to care by leading to the largest ever cut to hospital funding – nearly $800 billion.
Navigant found that Medicare for All-style proposals could force hospitals to limit the care they provide, drive significant “layoffs” and “potentially force the closure of essential hospitals.” Navigant projected the impact on hospitals by using a hypothetical mid-sized regional hospital as the base for comparison. This sample hospital has 1,000 beds, a $1.2 billion annual revenue, and an operating margin of 2.3%.
Using that as a baseline, Navigant found that Medicare as a single-payer, also known as Medicare for All, has the most dramatic negative impact on hospitals, cutting operating margins to -22.1% and reducing revenues by approximately $330 million. The study found that a Medicare public option would cut the hospital’s revenues by approximately $157 million and reduce operating margins to -6.3%.
Additionally, Navigant asserted that continuing the status quo does not leave hospitals unharmed. The continued migration of baby boomers from the employer-based market into Medicare, along with other contributing factors, would also result in financial stress to hospitals. Navigant estimates that this would result in a reduction of $94 million in operating margin over a “period of years.”
MedPac reports hospital Medicare margins are already at a historic low of -11%. Navigant’s Jeff Leibach says any expansion of the program "would potentially accelerate those headwinds significantly.”
Navigant’s study comes just one week after FAH and AHA released a joint study that showed the devastating impact a Medicare public option proposal would have on hospitals and the health care system. FAH and AHA’s study found that the proposal would be the biggest cut to hospitals ever – an unprecedented $774 billion.
To see the full Navigant study click here. For FAH/AHA’s study click here.