Cuts could hurt hospitals' bottom line

Resident nurse Jen Rutledge inserts an IV into the arm of Matt Shafer, 13, after he was admitted to the emergency room with a severe migrane at the Children's Hospital in Aurora, Colorado -- September 11, 2009


Steve Chiotakis: As part of our series "The Cure" this week, we've been looking at
some of the biggest stakeholders in the proposed health care overhaul. Today, we turn to hospitals. Part of the money to pay for health care reform is supposed to come from cuts in Medicare and Medicaid spending. Hospitals that treat large numbers of low-income patients say those cuts might hurt them the most. Joel Rose reports.

Joel Rose: It's a fairly quiet morning in the emergency room at Temple University Hospital in North Philadelphia.

Nurse: Nobody knows anything about the patient coming to us.

Temple is what's known as a safety net hospital. Roughly 80 percent of its patients are covered by Medicaid or Medicare. Because safety hospitals see so many low-income patients, they currently get extra funding from the government -- money that could dry up if proposed Medicare and Medicaid cuts become reality under health care reform, says Temple Hospital CEO Sandy Gomberg.

Sandy Gomberg: What makes this debate the toughest that we've faced in a really long time is that there is no easy consensus that's gonna make this work. There will be winners and there will be losers.

Gomberg says safety net hospitals like hers stand to lose more than most. The White House plans to trim $155 billion in Medicare and Medicaid payments to hospitals. That's supposed to help cover the cost of insuring nearly all Americans.

In theory, hospitals would win, because more patients could pay their bills. But the most vulnerable hospitals could lose, says Andrew Wigglesworth, a hospital consultant with TRG Associates.

Andrew Wigglesworth: Operating margins are razor thin. If there were cuts without the corresponding increases in terms of access and coverage, it would create a disaster.

That's what worries Temple's Sandy Gomberg. Many of her patients are undocumented immigrants or the working poor. Gomberg says they may have trouble finding affordable insurance even if Congress does pass a health care bill, and her hospital will still need to treat them. So without some additional money, Gomberg says she'd have no choice but to cut services and staff.

Gomberg: The waiting line's going to get longer. It'll be longer for people to get to specialists. It's going to be longer for people to wait to get in to see the doctor in the ER.

If that happens, Gomberg says her patients will be the real losers.

In Philadelphia, I'm Joel Rose for Marketplace.

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Those who oppose universal health care claim Medicare is "going broke", Medicare needs more money simply because Americans are living longer, and so require more years of care. Any private insurer would just charge more.

The "Medicare Advantage" programs are just a way for insurance companies to take patients away from Medicare, and they serve no purpose.

But ultimately additional taxes will be needed. Unfortunately every commentator, including Marketplace, refers to additional Medicare spending as a cost "increase" but neglects the savings from not having to buy private insurance, as though government spending is evil but private spending is virtuous and doesn't count as a cost. I hope you will compare the TOTAL cost of getting a year of health care through Medicare with private insurance and being uninsured, including premiums, taxes, co-pays, deductibles, out-of-pocket and the cost of health care that is denied.

I have been a physician for almost 30 years. Most of my colleagues oppose universal care not because it costs more (it doesn't) but because they don't want a dollar of their taxes to help people without money, whom they consider lazy and undeserving. Is essential health care a right or a privilege? If the latter, we should end Medicare and repeal EMTALA (the law that requires emergency departments to see indigents). If the former, we need universal health care. But if we continue to evade this fundamental question, we will never find a solution. It is futile to debate strategy when we have not chosen a goal.

Hospitals, docs, pharmaceutical companies, pharmacys and pharmacy benefit managers, medical products and services companies, employers and most of all medical insurance companies are compete to transfer costs to each other and eventually to patients. Modifying Medicare or Medicaid reimbursements results in more cost transfers. All these interest groups overcharge but trying to change one element albeit a large one reflects political expediency on the presidential and congressional levels not efficiency. With one exception, until the fundamental relationships between all components of the health care system are dealt with as interacting parts of a system there will only be more distortions not not overall improvement. The one exception is the medical insurance industry. It is pure overhead, and accounts for 29% of America's health care costs. Only the medical insurance industry needs medical insurance. Everyone else just needs medical and health care.

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