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Medicare-X public option will cause $800B in cuts for hospitals, report says

A new report from two national hospital representatives says a specific Medicare public option plan could lead to nearly $800 billion in cuts for the hospital industry.

The report, released March 12 by the American Hospital Association and the Federation of American Hospitals, takes on the Medicare-X Choice Act, a Medicare public option plan introduced in 2017 by Sen. Michael Bennet, D-Colo., and Sen. Tim Kaine, D-Va.

While certain "Medicare-for-all" plans would eliminate the private and employer insurance market, Medicare-X would allow all individuals to purchase health coverage through Medicare but keep other market options, such as personal and employer-sponsored insurance, available. If passed, the plan would be phased in between 2020 and 2024, beginning in regions with few or no insurance providers.

The report claims that the legislation will lead to a $1.2 trillion reduction in healthcare spending, but says the cuts will disproportionately affect hospitals compared to other sectors of the healthcare industry. Between 2024 and 2033 — the 10-year period after full implementation of Medicare-X — hospitals would see a cut of $774 billion, about two-thirds of the total projected cost-cutting, according to the report.

The estimated payment cuts would result from the legislation's plan to pay for all services covered by the public Medicare option according to Medicare payment rates, which the report says can be lower than hospitals' actual cost of care.

KNG Health Consulting, a health economics and policy consulting company, conducted the research for the American Hospital Association and the Federation of American Hospitals. The latter's president and CEO, Chip Kahn, told reporters that the payment reductions "frankly dwarf anything Congress has done up to this point ... in previous legislation."

In a joint statement emailed to S&P Global Market Intelligence, Bennet and Kaine fired back, saying the goal of the legislation is to provide families with healthcare not "line the pockets of hospital executives." The senators added that the hospital industry's critiques are misplaced.

"It shows completely misplaced priorities for these groups to attack our commonsense proposal to expand health care at a time when President Trump has proposed slashing health care programs that are critical to their patients," the senators said in the statement.

The report also highlights that the uninsured rate would drop by 5.5 million by 2024, nearly 4 million less than if the Affordable Care Act were fully implemented.

Both hospital groups have criticized government-run healthcare ideas such as Medicare-for-all, claiming that such programs would be too disruptive to the current system.

The Medicare-X bill is sitting with the U.S. Senate Committee on Finance.