January 9, 2020 Rural Hospitals Would Be Better Off Under Medicare for All

Medicare for All Would Improve Financial Stability, End Uncompensated Care, Keep Hospitals Open

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America’s rural hospitals are financially struggling, facing low admission rates and under the frequent threat of closure. The current health care system has failed rural health care providers. Under Medicare for All, rural hospitals would experience much stronger financial stability and would be better able to serve the needs of America’s rural population.

UNCOMPENSATED CARE WOULD END

Since 2005, more than 160 rural hospitals in the U.S. have closed, and nearly a quarter are at risk of closing, mostly due to financial challenges under our for-profit health insurance system.

Around 51% of rural hospitals and about 45% of all hospitals serve a disproportionate share of patients who lack adequate coverage, and those hospitals are forced to take on the cost of that uncompensated care. Each year, these uncompensated costs continue to increase and place a heavier financial burden on these hospitals.

Under Medicare for All, no patient would show up to the emergency room without insurance, and, as a result, the incidence of uncompensated care would disappear.

Indeed, government-backed health insurance – Medicare and Medicaid – already serves as a financial lifeline for many rural hospitals.

The U.S. Government Accountability Office found that between 2013 and 2017, 83% of rural hospital closures occurred in states that rejected Medicaid expansion. A Health Affairs research article found similar results.

ADMINISTRATIVE COSTS WOULD BE REDUCED

Administrative costs eat up about a quarter of rural hospitals’ budgets, largely due to the processing of payments and other issues that arise from our fragmented multi-payer system. Under Medicare for All, small-staffed rural hospitals no longer would be burdened by the extensive time and paperwork required to deal with myriad private and public insurers and instead would have a streamlined billing process to just one payer: Medicare.

Overall, the U.S. health care system would save between $500 million and $600 million per year by streamlining billing under Medicare for All.

A FOCUS ON NEEDED CARE, NOT ADMISSION RATES

Under Medicare for All, rural hospitals no longer would face financial ruin due to low admission rates.

Under most private insurers, hospitals are paid on a fee-for-service basis, which hurts hospitals that don’t have a consistent flow of patients. Under Medicare for All, global budgeting would ensure that hospitals are paid based on the health needs of their community, as well as emergency and other funds.

This would provide reliable and adequate funding year after year that would ensure that rural hospitals would not shut their doors due to financial hardship as they do under the current system.

More information about Public Citizen’s work on Medicare for All is available here.

For more than 45 years, Public Citizen has called for legislation that would guarantee health care for all. To speak with a Medicare for All policy expert, or if you have questions about the fact sheet, please contact Mike Stankiewicz at mstankiewicz@citizen.org or (202) 588-7779.