By Bill Hammond and Chris Pope
The debate about a proposed single-payer health plan for New York has mostly focused on what it would cost (between $92 billion and $226 billion per year, according to various projections) and where the money would come from (massive, unprecedented tax hikes).
Less discussed, but just as important, is how single-payer would compensate providers — doctors, nurses, hospitals, pharmacies, etc. At stake is not only the quality of care for 20 million New Yorkers, but also the fate of a fifth of the economy and the livelihoods of 1.2 million health workers.
Disconcertingly, the single-payer bill pending in the state Legislature, the New York Health Act, says almost nothing about reimbursement — other than a vague promise that fees will be “reasonably related to the cost of efficiently providing the health care service.” To fill in the blanks, our forthcoming report explores how single-payer reimbursement methodologies would affect hospital revenues.
It finds that such systems would dramatically change the financial outlook for many institutions — both for the better and the worse — with some of state’s best-known and best-regarded hospitals paying an especially heavy price.
Hospitals now collect their revenue from dozens of health plans, each of which pays different amounts. The fees from Medicare and Medicaid are generally lower and determined by government officials, while fees from private insurers are generally higher and subject to negotiation.
Under this system, hospitals with reputations for top quality or dominant market positions can attract more privately-insured patients and command higher rates. This is how flagships such as New York-Presbyterian and Memorial Sloan Kettering can afford top-notch personnel and cutting-edge equipment.
Under single-payer, by contrast, patients in all walks of life would be covered by the same plan, at the same level of reimbursement. This would likely therefore radically redistribute resources: Hospitals now serving poorer patients with government-funded coverage would generally gain revenue, while ones now serving wealthier, better-insured patients would generally see their revenue diminished.
To approximate this shift, our study assumed a state-run system would resemble Medicare rates — which are designed to account for variation in the cost of delivering services across the state. Drawing from financial reports for 2015, we estimated how a switch to a Medicare-based reimbursement system would affect hospital revenues.
In one scenario, we assumed hospitals would be reimbursed for all patients at current Medicare levels. (This is how Sen. Bernie Sanders’ “Medicare for All” bill would work.) The result: 77 percent of the state’s hospitals would lose money; 23 percent would gain. Overall statewide hospital funding would be slashed by 17 percent, or $10 billion a year.
In New York City, the city-owned Lincoln Medical Center would see a revenue boost of $122 million, but New York-Presbyterian and NYU Langone, two of the state’s best-regarded hospitals, would lose about $730 million each.
In a second scenario, we assumed the state would boost Medicare rates enough to keep total hospital funding level — a spending-neutral variation on Medicare for All. The result: Two-thirds of hospitals come out ahead. But a third of hospitals would still be worse off, including 22 institutions that would lose more than 15 percent of revenue.
In New York City, losers in this scenario include NYU Langone ($537 million), Kings County ($339 million) and the Hospital for Special Surgery ($284 million).
In either scenario, hospitals taking the largest losses would face significant layoffs, reduced quality of care and the possibility of closing completely.
Lawmakers could try to cushion these cuts by sending extra money to the hardest-hit providers. But that would raise costs by billions, atop already-mammoth tax hikes.
These gains and losses are approximations based on hypotheticals. But they highlight a very real fact: By its nature, single-payer would redistribute resources in wrenching ways.
Single-payer wouldn’t just flatten reimbursement, but flatten quality — which would be good for some hospitals but bad for others. Could New York’s best hospitals maintain their high standards of quality? Could the state continue to recruit and retain the best doctors?
These are questions that state lawmakers must think through before they take such a giant and costly gamble with New Yorkers’ health care.
Bill Hammond is the health policy director at the Empire Center for Public Policy. Chris Pope is a Manhattan Institute senior fellow.