Study: Half of rural hospitals could close under Medicare public option

Aug. 12, 2019

Offering a government insurance program reimbursing at Medicare rates as a public option on the health insurance exchanges could place as many as 55 percent of rural hospitals, or 1,037 hospitals across 46 states, at high risk of closure, according to an analysis released by Navigant Consulting Inc and reported by the American Hospital Association.

The authors estimate that 28 percent of rural hospitals would be at high risk of closure if only uninsured and current individual market participants shifted to the public option, and that more than half of rural hospitals would face high risk of closure if employers shifted 25 percent to 55 percent of their covered workers from commercial coverage to the public option.

"To keep hospitals whole from the financial consequences of any of these scenarios, Medicare would have to increase hospital payment levels for a public option between 40 percent and 60 percent above present Medicare rates, costing between $4 billion and $25 billion annually (depending on the severity of the employer shift)," they said.

An earlier analysis from the same organization released in February indicated that as many as 64 percent of rural providers were at risk of closing die to financial troubles.

Looking at public data at that time, researchers reviewed the financial viability of and community value of 2,000-plus hospitals in rural communities across the country and discovered that 21 percent are at high risk of closing based on their total operating margin, days cash on hand, and debt-to-capitalization ratio.