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A New Government-Run Plan Would Impose Significant Financial Losses on California Hospitals
Date:7/16/2009

scenarios, acute care hospitals in California would face significantly higher losses if patients switched to a government-run plan and the costs incurred for uncompensated care were unchanged. For example, some hospitals in California would face losses of more than 30 percent if all patients switched to a government-run plan that paid Medicare rates.

Government-run plan would exacerbate cost-shifting

Government programs, such as Medicare and Medicaid, currently underpay providers for services. In California, Medicare reimbursements only cover approximately 83 percent of hospital costs, and Medi-Cal only covers 81 percent. Those shortfalls get passed through the health care system, and consumers and employers end up paying higher premiums as a result. According to a study by Milliman, Inc., an average family of four is paying $1,500 -- or an additional 10 percent -- on their premiums to offset the under-reimbursements from government programs. As more people move to a government-run plan, there would be fewer people with private coverage to offset these costs, causing premiums to increase even further. This would ultimately lead to a "death spiral", resulting in everyone moving to the new government-run plan.

AHIP used the California OSHPD data, a unique source of publicly available information on hospital finances, to examine the financial impact a government-run plan would have on hospitals in the state if patients with private coverage moved to a government-run plan. Similar data are not widely available in other states across the country. To view the full report, visit http://www.ahipresearch.org/OSHPDanalysisWP.html.

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SOURCE America's Health Insurance Plans
Copyright©2009 PR Newswire.
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