Share

Topics: Obamacare

Obamacare adds to financial strain on smaller hospitals

By |
Beltway Confidential,Philip Klein,Obamacare,Health Care,Medicare and Medicaid,Analysis

More than any other providers of health services, the Medicare cuts put in place by President Obama’s health care law are likely to hurt smaller, community hospitals, which are already facing financial difficulties.

An Associated Press report explores the trend of neighborhood hospitals closing in New York City. “Since 2000, 19 hospitals across the city have closed due to financial pressures, and nos. 20 and 21 are underway,” according to the report.

Among other causes, the article notes that, “Revenue from government health programs like Medicaid has gotten smaller.”

It goes on to report that, “Starting on Oct. 1, many U.S. hospitals will see reimbursement rates decline because of provisions of the Affordable Care Act.”

Kenneth Raske, the president and CEO of the Greater New York Hospital Association, told the AP that Obamacare, “could literally be the final nail in the coffin, not just in New York but in other institutions around the country…” unless the insurance expansions in the law make up for lost revenue.

The potential failure of the community hospitals has been one of the consequences of Obamacare that actuaries at the Centers of Medicare and Medicaid Services have been warning about since the passage of the law in 2010.

Paul Spitalnic, the acting chief actuary of the Centers for Medicare and Medicaid Services, wrote in May that assuming the Obamacare cuts go into effect, “the prices paid by Medicare for health services are very likely to fall increasingly short of the costs of providing these services.”

He continued: “Medicare prices would be considerably below the current relative level of Medicaid prices, which have already led to access problems for Medicaid enrollees, and far below the levels paid by private health insurance. Well before that point, Congress would have to intervene to prevent the withdrawal of providers from the Medicare market and the severe problems with beneficiary access to care that would result.”

As a supporter of a free market for health care, I’d be the last to argue that government should prop up inefficiently run hospitals. But I do think this is worth highlighting for several reasons.

To start, Obama and his allies have repeatedly insisted that his health care law cuts payments to hospitals and other providers, not Medicare benefits. But if those cuts prompt more hospitals to go broke or pull out of Medicare, it will inevitably translate into reduced access for Medicare participants.

This reality means that the real debate over Medicare isn’t between conservatives who want to gut it and Democrats who will protect it, but rather, a debate over how best to extract savings from the program and what to do with those savings. Should lawmakers transition Medicare to a program in which money flows through individuals and costs are controlled through increased choice and competition, or should the government change the payment structure to providers to encourage them to adopt certain policies aimed at reducing costs? Should any savings be used to put the nation’s debt on a sustainable long-term course, or used to finance a new entitlement?

This raises another important issue. The health care law relies on the Medicare cuts to help offset the cost of trillions in new spending. If the prospect of more hospital closures pressures Congress into undoing those cuts, then the cost of Medicare would jump by 50 percent over a 75-year period, according to the Medicare trustees. The Government Accountability Office estimated in April that if the health care law’s Medicare cuts do not get implemented, instead of reducing the deficit, the law would actually add $6.2 trillion to the nation’s long-term deficits.

View article comments Leave a comment