The taxpayer-funded Medicare program is in dire straits. According to a new report by the Board of Trustees for Medicare, the program’s hospital-insurance benefits system will run out of funds by 2031 absent significant reforms. Policymakers could shore up the struggling program by capping benefits or raising the retirement age to 67, but there’s widespread political resistance to back these (likely necessary) moves. A far-better first step would be to eliminate a bizarre loophole that results in higher payments to hospitals even if hospitals and independent doctor’s offices are performing the same exact service. Equalizing payments could save taxpayers billions of dollars while helping to keep doctor’s offices open across the country. It’s time for a new approach to Medicare reform.
Healthcare policymakers have long called for site-neutral payments to slash costs and increase efficiency in America’s treatment centers. In a 2022 report to Congress, the Medicare Payment Advisory Commission stated the obvious: “Medicare should base payment rates on the resources needed to treat patients in the most efficient setting. If the same service can be safely provided in different settings, a prudent purchaser should not pay more for that service in one setting than in another.” It makes little sense that taxpayers pay 141 percent more for the first hour of chemotherapy in a hospital than that same hour at a doctor’s office. Hospital outpatient departments can bill Medicare more than $1,000 for an echocardiogram, a service that costs taxpayers just $350 at a doctor’s office.
The system not only wastes taxpayer dollars but encourages consolidation in the medical sector. While there’s certainly nothing wrong with efficiency-minded mergers that make market sense, pulling the levers of government to make that happen can result in disaster. Because of administrative headaches and physician burnout, it’s becoming considerably harder for patients to find independent practices catering to their needs. According to a survey by the American Medical Association, 2020 was the first year “in which less than half (49.1 percent) of patient care physicians worked in a private practice—a practice that was wholly owned by physicians. This marks a drop of…11 percentage points since 2012.” Status-quo payment policies exacerbate this trend, harming patients in the process. Patients should have access to a mix of healthcare practices dictated by cost and quality of care, not the bizarre intricacies of government reimbursement rates and policies.
Both the Trump and Obama administrations have advocated for site-neutral payment reform, yet equalization is still elusive. One reason for this is large pushback from hospitals who argue that their disproportionately large regulatory costs (e.g., state licensure, Emergency Medical Treatment and Labor Act compliance) warrant higher reimbursements. Additionally, hospitals have made the case that their patients have more complex needs and benefit from integrated care that doctor’s offices simply cannot provide. These arguments, though, rely on a selective lens that ignores the benefits of “first-line” care outside the hospital.
Encouraging more procedures inside of the hospital means a higher likelihood of infections, even if performed at hospital outpatient departments. Clustering growing populations of sick individuals under the same roof facilitates the spread of deadly disease, including COVID-19 which still claims more than 1,000 lives in the U.S. per week. And, while there may be fewer rules specifically targeting doctor’s offices, independent practices still bear the brunt of an array of laws from the Health Insurance Portability and Accountability Act to the Stark Law to the False Claims Act. While hospitals get a $30 billion tax exemption for their troubles, doctor’s offices face high tax rates and have difficulty navigating through complicated tax rules.
Hospitals have a point that there are far too many regulations that increase costs across the healthcare system. But, continuing an arbitrary payment system only increases costs while complicating care for millions of patients. Site-neutral payment reform can improve the healthcare sector and deliver significant savings for taxpayers.
David Williams is the president of the Taxpayers Protection Alliance.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of the Daily Caller.