Medicare Expansion: A Preliminary Analysis of Hospital Financial Impacts

Jeff Goldsmith, Jeff Leibach, and Kurt Eicher

Though the 2020 Presidential election is still 20 months distant, it seems likely that the expansion of the 60 million-person Medicare program may be the pivot point of health policy debate. This paper takes a cautious first look at the impact of various Medicare expansion scenarios on the finances of a hypothetical medium sized multi-hospital system. The extent of Medicare expansion directly correlates to financial stress on hospitals and will place a premium on their having coherent revenue and expense control strategies. 

Navigant evaluated the impact of three different policy scenarios, each with two variations, on a hypothetical medium-sized health system. The three policy scenarios are: 1.) Voluntary Medicare buy in after age 50; 2.) Medicare as a public option; and 3.) Medicare as a single-payer (excluding Medicaid). We have simulated the impact of these Medicare expansion scenarios of the financial performance of a hypothetical, medium-sized, regional, nonprofit multihospital system, “Excelsior Health System.” Excelsior operates 1,000 beds across five hospitals, has annual combined patient revenues of about $1.2 billion, and a current operating margin of 2.3%. Its commercial insurance contracts pay about 200% of Medicare rates, and represent approximately 25% of patient volume by charges.

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