By Thomas M. Cassidy
As a former senior investigator for the New York State Attorney General’s Office who spent twenty years investigating health fraud, I was truly annoyed when I discovered how hospitals are paid, and not paid, by insurers and individuals.
Keep in mind that hospitals are required by federal law to provide emergency care and stabilize all patients regardless of a patient’s ability to pay. As a result, hospitals provide more than $40 billion a year in unpaid care for patients who can’t afford to pay their hospital bill. When patients don’t pay for their hospital care, those costs are shifted to health insurers who are charged higher rates by hospitals to make up for the losses from non-paying patients.
However, uncompensated hospital care is not shared equally by private and government health insurers. According to a study by the Rand Corporation, private plans pay hospitals 241% more than Medicare for the same service. This amounts to a sneaky tax on the 216 million Americans covered by private insurance plans.
American taxpayers fund all or part of government health insurers such as Medicare and Medicaid. Yet, the American Hospital Association reports that hospitals received payments of only 82 cents for every dollar that was spent on Medicare patients in 2022. I get it. Medicare negotiates rates for more than 60 million people, and they squeeze every drop of leverage out of hospital administrators.
But wait, why are American workers being forced to pay higher premiums for their private health insurance when they are also funding the government plans? Whoa, wait a minute! That would be like selling a car for $50,000, but if you were a stockholder in the company the same car would cost more than $100,000. It sounds ridiculous, because it is. Especially, when a commonsense solution is within reach.
Simplify hospital reimbursement rates by having Medicare negotiate the same rate for all private and government insurers as a volume purchaser for 330 million Americans. By negotiating fair and reasonable reimbursement rates with just one insurer, hospitals would save money by reducing the number of administrators and consultants that are needed to negotiate with numerous private and government health insurers year after year.
Hospitals throughout the United States are in dire economic straits due to workforce shortages, inflation, cyber-attacks, unfunded government mandates and oppressive bureaucratic regulations. For example, the American Hospital Association reported in September 2024, “Recent data from Strata Decision Technology show that administrative costs now account for more than 40% of total expenses hospitals incur in delivering care to patients.”
A Medicare, “one-size-fits-all,” hospital reimbursement program would streamline administrative costs, save taxpayer money, reduce health insurance premiums and ensure that America’s hospitals remain best in class.
Thomas M. Cassidy, an economist, is the author and creator of the independent feature film, Manhattan South, which is in development. (ktpgproductions.com)
