A current hot topic in the news is whether the United States should change its healthcare to a single-payer system or “Medicare for All.” The Congressional Budget Office (CBO) compiled a report on the primary features that would be involved in establishing a single-payer system, choices policymakers would face, and the trade-offs that option would present.
The report does not address all of the issues that would occur with the design, implementation, transition and budgeting of a single-payer system. However, there is one glaring issue that would significantly impact the healthcare system and (most specifically) healthcare providers.
The reimbursement rates to providers by private insurance are currently 200-350% higher than the reimbursement rates from Medicare. In our current system, private insurance subsidizes Medicare. Thus, single-payer or “Medicare for All” would not work in its current form. If rates were cut to Medicare levels, the margins on hospitals would go from +9% to -7%. (Source: CBO Report)
Hospitals and healthcare providers could not provide their current level of care with such a drastic reduction in revenue. Today, private physicians, hospitals, and other healthcare establishments rely on the higher reimbursement rates provided by private insurance in order to function. None of the current proposals to give “Medicare for All” appear to address this issue.