Reimbursement scenarios for Medicare for All

July 30, 2019

Adding to the issue we discussed in our article in the June Review, Dr. Zirui Song from Harvard Medical School in JAMA Network offers this timely analysis of the impact of a Medicare for All transition on reimbursement under various assumptions.  While the analysis encompasses the potential physician reimbursement implication on a broad spectrum of care (office visits, diagnostic testing etc.), we will focus only on the subset devoted to common surgical procedures.  Importantly for OR managers and hospital executives, hospital payments currently reflect a similar range of payment ratios between Medicare and commercial payers, thus the current analysis should at least directionally apply to the impact on facility reimbursement.  The analysis delineates the current average commercial in and out-of-network payment as a percentage of Medicare and shows how that payment would compare to a theoretical Medicare for All reimbursement at 125% or 200% of current Medicare levels. Details are shown in a supplement to the article and demonstrate variable impact.  At 125% of Medicare an abscess drainage would yield 12% more in physician fees than current in-network commercial rates, while surgical reimbursement for cholecystectomy would be about 14% higher.  In a theoretical world of across the board 200% of Medicare reimbursement, surgical professional fees would exceed current average in-network rates by 28 to 80% for the four procedures analyzed. The author delineates some likely offset to reimbursement changes based upon historical experience.  For example, price reductions have resulted in either an increase in the volume of the service delivered, or an upcoding in procedure type or site of service.   

EHC NOTE: While uncertainty abounds in the details of what a possible Medicare for All implementation would look like; this article offers a data driven framework to quantify an impact which would be manageable from the perspective of surgical in-network professional fees.  Of course, as always the devil is in the details and potential reimbursement methodologies would be a topic of intense debate and lobbying. In almost any scenario, it is likely that a Medicare for All construct would offer a “sweetener” to keep the majority of hospitals and physicians relatively whole at the outset.  However, with an aging population and the associated inexorable march in utilization of healthcare services, if the government has 100% control of the market it would eventually be forced to ratchet down reimbursement across the board as budgets get strained to the breaking point. 

Although the initial impact may be manageable for hospitals and health systems, there would be outlier losers out of the gate in a Medicare for All transition.  Readers who are anesthesia providers can count themselves in the most exposed decile. With baseline in network rates in the 300 to 500% of Medicare range, a theoretical increase to even 200% of Medicare would leave a gaping revenue hole for anesthesia groups, with the implications as discussed in our article last month.  As we said last month, “there’s always a career in plumbing to consider.”   

As a side note, since out-of-network fees appear to be under increasing scrutiny and will likely have less of an impact going forward, we feel that the in-network comparison is most relevant.  This is not to say that individual surgeons who are currently in an out-of-network business model would not be disproportionately affected on a percentage basis, but they are likely to be dramatically affected – Medicare for All or not.