But If You Wanted To…

We are in a series exploring the idea of a single-payer healthcare system.  Click here to find the prior posts.

Eliminate all profits in healthcare, that is, there is a pretty easy way to do it.

Just convert everyone and everything to ‘Medicare for All,’ the most common and straightforward single-payer idea.

You know, it wouldn’t be too terribly hard.  We already have CMS, so the bureaucracy administrative organization is in place, complete with a logo and a website and everything.  And while we’d have to do a little work to figure out how to pay the pediatricians (no biggie…they already work for next to nothing, so they won’t be too demanding), we already have the fee schedules and rates in place.

Ah, those Medicare reimbursement rates.

We can easily gather plenty of anecdotes to know that Medicare generally pays physicians less than commercial payers, but it is actually harder than you think to nail down exactly how much less.  Variation is all over the place by market and specialty, but several studies that have attempted to divine the deep secrets peg the national average somewhere in the 20-30% range.  That is, Medicare typically pays about that much less than commercial payers for the same service.

A little math says that if a practice has a 65% commercial payer mix, dropping all commercial plans to Medicare rates would be about a 16% hit to the bottom line. Ouch.

But as most practices are pass-through entities to the physician owners, that is really not a ‘loss of profit’ but an ‘income adjustment.’  It is always just an ‘adjustment’ when it is someone else’s income, isn’t it?

Hospitals make for a cleaner analysis and the issue there is worse.  For our facility friends, the range at which commercial payers are higher than Medicare varies a lot, but most frequently it is about 175%.  Drop hospital payments to Medicare rates across the board and you better have a big stack of ‘going out of business’ signs ready.

Don’t even think about ‘Medicaid for all.’  Those rates are typically 35% below Medicare.

So, anyone who touts ‘Medicare for all’ as a workable single-payer solution is a simpleton or they better have a really long list of modifications behind that progressive flag-waving or we’d have a melt-down of Biblical proportions. 

Next week, we’ll look at one such idea starting to make the rounds among the single-payer crowd.


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Tim Coan, ALN’s CEO, writes an insightful and witty blog three times a week about a variety of topics relevant to independent physician practices.

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