Single-payer health care could cost some hospitals

by Bill Hammond |  | The Buffalo News

By Bill Hammond and Chris Pope

The debate about a proposed single-payer health plan for New York State has mostly focused on its potential cost. But far less attention has been paid to the radical impact it may have on hospitals and physicians across the state.

To fill in the blanks, a forthcoming report by the Manhattan Institute and the Empire Center explores how different single-payer reimbursement methodologies would affect hospital revenues. It finds that such systems would dramatically change the financial outlook for many institutions – with some of the state’s best-regarded hospitals paying an especially heavy price.

Currently, hospitals collect their revenue from dozens of health plans, each of which pays different amounts. Hospitals with reputations for the highest quality or dominant market positions can both attract more privately insured patients and command higher rates. This is how flagships such as New York-Presbyterian and Memorial Sloan Kettering Cancer Center can afford top-notch personnel and cutting-edge equipment.

Under single-payer, by contrast, all patients would become entitled to exactly the same coverage. This would likely therefore result in a radical redistribution of resources. Hospitals currently serving poorer patients would generally gain revenue, while hospitals currently serving wealthier, better-insured patients would generally see their revenue diminished.

To estimate the likely impact, our study assumed that a state-run reimbursement system would resemble Medicare rates – which are designed to account for variation in the cost of delivering equivalent medical services across the state.

In one scenario, we assumed hospitals would charge all patients at current Medicare levels, as proposed by Sen. Bernie Sanders’ Medicare for All bill. Under this method, 77 percent of the state’s hospitals would lose money and 23 percent would gain. Overall statewide hospital funding would be slashed by 17 percent, or $10 billion per year.

In Western New York, Niagara Falls Memorial Medical Center and Mount St. Mary’s Hospital would gain about $114 million each. But losses would hit Roswell Park Comprehensive Cancer Center ($61 million), Kaleida Health ($59 million) and Erie County Medical Center ($52 million).

Under a second scenario, we assumed the state would boost Medicare rates enough to keep total hospital funding level. Under this method, two-thirds of hospitals would come out ahead. But one-third of hospitals would still be worse off. In Western New York, losers in this second scenario would include BryLin Hospital (a cut of $2.3 million or 15 percent) and Jones Memorial Hospital in Wellsville ($2.1 million or 6 percent).

In either scenario, hospitals taking the largest losses would face significant layoffs, diminished quality of care and the possibility of closing completely.

Bill Hammond is the health policy director at the Empire Center for Public Policy, and Chris Pope is a senior fellow at the Manhattan Institute, fiscally conservative think tanks.