The Washington PostDemocracy Dies in Darkness

Would Medicare-for-all mean hospitals for none?

Democratic presidential hopefuls say Medicare-for-all would be less expensive than the current health-care system. But it's not that straightforward. (Video: The Washington Post)

“If you go to every hospital in this country and you ask them one question, which is, ‘How would it have been for you last year if every one of your bills were paid at the Medicare rate?’ Every single hospital administrator said they would close. And the Medicare-for-all bill requires payments to stay at current Medicare rates. So to some extent, we’re supporting a bill that will have every hospital closing.”

— Former congressman John Delaney, at a Democratic presidential candidate debate, Miami, June 26, 2019

In a crowded stage featuring many candidates who support Medicare-for-all, Delaney stood out with a doomsday prediction that it would force all hospitals to close.

Shifting the U.S. health-care industry to a single-payer system such as Medicare-for-all would be a huge endeavor, and it’s impossible to foresee every potential consequence. But we couldn’t find any expert or research study supporting the former Maryland congressman’s claim that Medicare-for-all would cause widespread hospital closures.

This is a good case study in how a snappy talking point can stray far from reality, especially when it comes to a complex policy issue such as health care. Let’s dig in.

The Facts

Nearly 29 million people, or 11 percent of those under age 65, lacked insurance in an average month in 2018, according to estimates from the Congressional Budget Office and the Joint Committee on Taxation. To bridge the gap, Sen. Bernie Sanders (I-Vt.) and many Democrats running for president say they would expand Medicare to cover the entire population, not just the elderly.

In a report from May, the CBO said “the transition toward a single-payer system could be complicated, challenging, and potentially disruptive.” Health-care spending accounts for one-sixth of U.S. gross domestic product, the CBO noted.

“Establishing a single-payer system in the United States would involve significant changes for all participants — individuals, providers, insurers, employers, and manufacturers of drugs and medical devices — because a single-payer system would differ from the current system in many ways, including sources and extent of coverage, provider payment rates, and methods of financing,” the CBO report says.

This chain has many links: from patients to doctors, drugmakers to hospitals. Each of these parties would be making decisions and adjustments affecting how a single-payer system would end up working in practice.

We asked health-care experts to game out what would happen if Sanders’s Medicare-for-all proposal became law. Their assessments varied, but all rejected Delaney’s claim that the Sanders bill “will have every hospital closing.” Some could close. Others might find themselves flush with new revenue. Some hospitals could take a financial hit, lay off staff, close a wing or two, but remain open. The government, meanwhile, could step in to control rates if needed.

“Medicare payments to health care providers are below the cost of providing care,” Delaney spokesman Will McDonald wrote in an email. The Centers for Medicare and Medicaid Services, he said, “has found that ‘more than two-thirds of hospitals are losing money on Medicare inpatient services,’ and according to the New York Times, Medicare pays hospitals ‘only 87 cents for every dollar of their costs.’ John has been asking this question at the rural hospitals he has visited over the course of the campaign, which also informs his statement.”

McDonald added: “Under the Sanders Medicare for All bill, the government is the only payer (aka ‘single-payer’). Asking hospitals and providers to operate at 13% below cost is not sustainable.”

The Sanders bill is vague on whether hospitals would be paid at Medicare rates and seems to leave those decisions to federal health officials, so it’s not a given that hospitals would be asked to operate at 13 percent below their cost.

Larry Levitt, executive vice president for health policy at the Kaiser Family Foundation, gave us this assessment:

While the Sanders bill is not specific about how much hospitals would get paid under Medicare-for-all, it’s a reasonable assumption that government-set prices would be less than what they get today from private insurers.
However, with universal coverage, hospitals would no longer have uncompensated care. It’s also quite possible that without deductibles and copays, the number of hospital admissions and outpatient visits could rise, boosting hospital revenues.
The net effect on revenues would vary substantially from hospital to hospital. Hospitals in high-income suburban areas with lots of privately-insured patients might lose, while hospitals in low-income communities with lots of uninsured patients could win.
It’s very likely that hospitals would face heightened cost pressure under Medicare-for-all, but it’s hard to envision an outcome where all or even many hospitals would actually shut their doors.

Christopher Pope, a health-care policy analyst at the Manhattan Institute, said Medicare-for-all may not spark widespread hospital closures but service quality would decline generally. Pope has argued that single-payer measures would not lower hospital costs.

A study by the American Hospital Association found average costs above Medicare rates at two-thirds of hospitals, Pope said. “Hospitals have the ability to cut costs,” he said. “But what they do to cut costs is to basically cut the two things that they have: staffing and capacity. They would cut staff. They would close wings. … You’d certainly find a degradation of service quality.”

“A fair estimate is all hospitals would suffer from a degradation of service, but to say they would all close takes the claim a little far,” Pope said.

Craig Garthwaite, a health-care policy expert in the Kellogg School of Management at Northwestern University, said “a change of this magnitude will alter the entire system — and not clearly in positive ways.” He said Delaney was on to something by highlighting the potential negatives, but his choice of words was problematic. “Clearly, Delaney’s statement is wrong,” Garthwaite said.

“The important point is that while all the hospitals won’t close, all of them would have to change their operations to deal with Medicare reimbursement,” Garthwaite said. “So while today Medicare enrollees are quite happy because they go to hospitals where high-quality [service] and amenities are supported by profits on private patients, that won’t be the case going forward. For there to be large savings, hospitals will need to change some of their operations — and this won’t simply be about becoming more ‘efficient.’ It will involve some differences in service provision.” Garthwaite added that “it is possible that some safety net hospitals would be aided” by the Medicare-for-all proposal.

Matthew Fiedler, a health-care analyst at the Brookings Institution, said “the United States would continue to have a robust hospital sector under a single payer system.”

"There is little question about that,” he wrote in an email. “That said, switching to Medicare rates systemwide would put hospitals under financial pressure. The Medicare Payment Advisory Commission estimated that, in 2017, Medicare paid about 9.9 percent less than hospitals’ average cost of treating Medicare patients.”

Fiedler said his view is that “the prices hospitals currently receive from private insurers are excessive and that there is room to reduce those prices without having untoward effects on patient care.”

“Hospitals’ cost structures are not set in stone, and they would change in response to implementation of a single payer system,” he said. “A harder question is how. In some cases, hospitals would find ways to cut out fat, while in other cases they might make changes that would negatively affect the quality of care. Additionally, facilities with relatively high costs might close, shifting more volume to more efficient facilities. In practice, some combination of these responses would occur, and any negative effects of cost cutting would need to be weighed against the benefits of lower health care prices.”

We raised many of the points from the experts quoted above to Delaney’s campaign, but they were unswayed.

McDonald, the Delaney spokesman, pointed to this passage in a New York Times article from April: “Some hospitals, especially struggling rural centers, would close virtually overnight, according to policy experts. Others, they say, would try to offset the steep cuts by laying off hundreds of thousands of workers and abandoning lower-paying services like mental health.”

McDonald also wrote that “18% of rural hospitals in state are already at risk of closure, indicating that the situation is dire even before major changes are implemented,” and he sent us an article from the Gazette in Cedar Rapids, Iowa, that discussed those findings.

When we inquired about the federal government possibly adjusting hospital payment rates, as the Sanders bill would allow, McDonald said: “Perhaps they could. But Medicare has been around and the rates that are in place are not adequate for many hospitals and that has not changed. And the Sanders bill states that the process will be the same. Moreover, it seems like assuming/waiting for future administrations to solve a major problem with the bill as written is a major issue.”

The Pinocchio Test

It’s one thing to claim before millions of television viewers that Medicare-for-all would be a heavy lift on a path of uncertainties, or that some hospitals could close, or that Medicare rates could drain revenue and lead hospitals to cut staff or services.

Those claims are far apart from the full-throttle hyperbole Delaney reached for in the debate. He said all hospitals would close. No health-care expert on any side of the issue backs him up. We raised several factual counterpoints to Delaney’s campaign officials, but they were unmoved.

This is a Four Pinocchio claim.

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Four Pinocchios
“If you go to every hospital in this country and you ask them one question, which is, ‘How would it have been for you last year if every one of your bills were paid at the Medicare rate?’ Every single hospital administrator said they would close. And the Medicare-for-all bill requires payments to stay at current Medicare rates. So to some extent, we’re supporting a bill that will have every hospital closing.”
in a Democratic presidential candidate debate
Wednesday, June 26, 2019