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Title: How Medicare increased hospital costs

Original CoS Document (slug): [[https://conventionofstates.com/medicare-one-payor-system-1|medicare-one-payor-system-1]]

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Created: 2019-08-21 20:03:21

Updated: 2019-10-17 23:00:00

Published: 2019-10-10 10:17:32

Converted: 2025-04-14T21:04:11.927081750


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My professional experience with Medicare began in 1970 when working for a CPA firm. I took an immediate liking to auditing hospitals and nursing homes.

Included with the audit and financial statements was the annual Medicare cost report. At the time, it was simple and no more than a dozen pages.

Medicare paid the "cost" for hospital inpatients. In Arkansas Medicare patients were often 50% of the patient load. This translates to the hospitals receiving "cost" for 50% of their patients.

So, how is a hospital supposed to make a profit?

The answer: increased charges to insurance and private pay patients.

From the start of the Medicare program, hospital charges were increased in all hospitals in order to have income to continue operations.

The first Medicare report was in 1966, and I was able to look at one in a client’s file.  I made a very simple calculation: total hospital cost divided by total inpatient days = cost per patient day. I then multiplied that by Medicare patients treated to find the total Medicare reimbursement.

Since 1966 Medicare reimbursement rules have changed to reduce cost. This is to reduce the amount Medicare must pay the hospital.

Some of the cost reductions I remember were for televisions and elevator music. These were considered "not directly related to patient care" and therefore had to be deducted from patient cost.

There were many more cost reductions for similar items. Some were just as ridiculous as the televisions and elevator music.

Every time cost was disallowed, hospital charges had to be increased for all patients to cover the loss for Medicare patients.

Today the Medicare cost report has grown to be very thick and complicated.

Increases in hospital charges are mostly due to the Medicare program, despite what you may have heard. Some members of Congress have proposed a single-payer healthcare system, which will only lead to disaster.

A Convention of States is the solution to out-of-control red tape and costs.

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