Doctors, hospitals take up arms against Democrats' health care changes

The debate over various "Medicare for All" plans has gripped the presidential primary contest.
Image: Medicare for All
Supporters of 'Medicare for All' are trying to squeeze cost reductions out of the health care industry, but physicians and hospitals could get pricked by lower payments. Mike Ellis / for NBC News

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By Benjy Sarlin

WASHINGTON — Across months of debates, stump speeches, TV appearances and position papers, the face of everything wrong with the U.S. health care industry for Democratic candidates has mostly come down to two groups: private insurers and pharmaceutical companies.

But in focusing on those industries, candidates may be leaving supporters unprepared for the fight it would take to pass "Medicare for All" or create a public insurance option. In fact, Democratic proposals already face opposition from well-funded groups representing doctors, specialists and hospitals, many of which would be asked to accept major revenue cuts to finance expanded coverage.

While Democrats are comfortable attacking bureaucrats, chief executives and Big Pharma, public campaigns to block legislation are likely to include more sympathetic figures from voters' communities like Dr. Asim Shah, executive vice chairman and professor of psychiatry at Baylor College of Medicine.

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Nov. 7, 201905:59

Shah, who oversees about 90 staff members at a trauma center in Houston and is known locally for his work treating survivors of Hurricane Harvey, co-wrote an op-ed in The Houston Chronicle last month warning of "the perils of dismantling the existing structures and moving directly to a government-run plan."

Shah told NBC News that he's not ideologically opposed to a government-led approach but that he's concerned with a simple reality: Medicare pays providers less than private insurance, and almost every 2020 Democratic plan looks to bring down soaring costs by tying more coverage to Medicare.

"Their reimbursement rates are not high," he said. "That's the reason some are scared."

The gap is especially large at hospitals, where an analysis by Rand Health Care found that private insurers pay more than twice as much on average for similar care.

The "Medicare for All" plan put forth by Sen. Elizabeth Warren of Massachusetts, a Democratic presidential candidate, anticipates lowering health care spending by trillions of dollars by moving physicians to Medicare rates, reimbursing hospitals at an average of 110 percent of Medicare rates and instituting reforms that would cap the growth of health care costs moving forward.

Single-payer advocates argue that doing away with private insurance would reduce administrative burdens for doctors and hospitals, meaning they would be able to treat more patients for less. The United States is a major outlier among developed countries when it comes to its high health care costs, and some outside analyses of "Medicare for All" proposals suggest that they could produce significant savings by negotiating lower prices and cutting overhead.

Donald Berwick, who oversaw Medicare and Medicaid under President Barack Obama and consulted on Warren's plan, said her reimbursement rates were calculated to cover current operating margins for hospitals but would make it harder for them to bargain for higher rates in the future.

"It's definitely stringent, and it would really require hospitals to look very carefully inside for efficiencies, but they should be doing that, anyway," Berwick said.

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Rival approaches short of the "Medicare for All" proposals by Warren and Sen. Bernie Sanders of Vermont, another Democratic presidential candidate, would also require new savings from health care providers.

Many candidates are proposing a public insurance option that would pay some variation on Medicare rates in part to pressure private insurers to compete with lower premiums and spur providers to lower their prices. South Bend, Ind., Mayor Pete Buttigieg has proposed limiting how much hospitals could charge private insurers relative to Medicare.

In a preview of the fight, Congress is struggling to advance legislation to address the sometimes shockingly high and confusing out-of-network hospital bills that patients receive — a much less daunting issue with bipartisan interest, including from the White House — amid an onslaught of outside spending.

A new group called Doctor Patient Unity popped up in July and spent over $28 million on ads opposing it through the summer, more than Warren's presidential campaign raised in the last quarter. Its funders were initially unclear, but The New York Times revealed that they were private-equity companies invested in health care.

Industry groups opposing "Medicare for All" are making the case that they need higher private insurance rates to make up for lower government rates and that customers would suffer from any reductions. The American Hospital Association decried Warren's proposal, arguing that "hospitals are already paid far less than the cost of caring for Medicare patients" and that further cuts "could threaten access to care and hospitals' survival."

Partnership for America's Health Care Future, an umbrella group of health care trade groups that oppose single-payer health care or a public option, has commissioned outside studies raising concerns about the impact of lower reimbursement rates on hospitals struggling with revenue.

"If you assume and put all the population onto Medicare under current reimbursement rates or create a public option that shifts people to current reimbursement rates, you would find the current system we have today in our hospitals would not be able to continue to function," Lauren Crawford Shaver, the group's executive director, said in an interview.

The crucial fight has been almost entirely overshadowed in the 2020 contest by arguments over replacing existing private insurance with a government plan. To the extent that health care providers have come up, they've often been cast as heroes held back by the existing system.

"People don't like their private insurance companies. They like their doctors and hospitals," Sanders said during the first Democratic debate. "We will substantially lower the cost of health care in this country because we will stop the greed of the insurance companies and the drug companies."

A rare exception came in the same debate, when former Rep. John Delaney of Maryland, a former health care executive, warned that single-payer plans would lead to hospital closings or reductions in staff.

"They're going to move everyone to a government payment system and then realize they'll have to raise rates," Delaney told NBC News. "We could have a lower-cost health care system, but it would probably come with limitations on access and limitations on quality."

Celinda Lake, a Democratic pollster, said that voters are receptive to the notion that segments of the industry are gouging customers but that candidates need to be careful in framing the debate.

"People have mixed views about hospitals. It depends on how they get positioned," she said. "If you say 'the for-profit health care industry,' that's a negative frame that can include hospitals and specialists. If it's your family doctor, that's pretty problematic."

The debate over Medicare payments is more complicated than a simple across-the-board cut. The new system could also boost compensation for many doctors and hospitals, creating winners and losers and a scramble of industry lobbying to be on the right side of the equation.

Hospitals with many patients who are uninsured or on Medicaid, which pays lower rates than Medicare, could benefit from the change. Warren's plan proposes raising Medicare payments for primary care doctors and cutting them for specialists, who some health care experts argue have too much leverage in price negotiations.

The American Medical Association, or AMA, the top industry lobbying group for doctors, opposes "Medicare for All," but its members are closely divided on the issue, and they nearly voted to change their position in August. The AMA withdrew from Partnership for America's Health Care Future shortly afterward.

"Nobody is soaking the doctors or the hospitals," said Dr. Steffie Woolhandler, co-founder of Physicians for a National Health Care Program, which advocates for a single-payer system. "It doesn't mean you won't get people who feel they would be less profitable and make less money under the new system."

Grumbling by individual industry players could potentially be solved by raising rates or backing off proposed reforms.

Under Obama, for example, Democrats held off on aggressive changes to drug companies in the Affordable Care Act and instead cut a deal to neutralize one major industry threat while imposing bigger changes on others. Legislators in Washington state created a public insurance option this year but set its reimbursement rates at 160 percent of Medicare, only a modest drop from private insurance, to address concerns from health care providers.

But finding a politically and technically workable way to finance the more expansive "Medicare for All" is difficult. Backing off on cost-cutting measures could raise the price tag by trillions of dollars, making it hard to appease any one group with a quick fix.

"Warren saying everyone has to take a hit is probably the right thing," Dr. Stephen Klasko, chief executive of Jefferson Health, a prominent health system in Pennsylvania and New Jersey, told NBC News. "How the public accepts it, how it gets done and what it does for the country hasn't been articulated yet."