Medicare Margins Continue to Drop

Axios Vitals recent story on hospitals’ Medicare margins seemed to cherry pick data from a March Medicare Payment Advisory Commission (MedPAC) report to Congress to imply that hospitals “lose money” on Medicare because they are allegedly inefficient. However, the story left out some very relevant details. That same report actually identifies a subset of hospitals MedPAC deems ‘relatively efficient’ because they do consistently well on cost and quality metrics.  Yet, the Commission also found that even for these hospitals, Medicare does not cover the cost of providing care. According to MedPAC’s own data, Medicare has not fully covered the costs of caring for patients since 2002. Additionally, Medicare margins over the past two decades have steadily declined. In 2016, MedPAC found the average hospital had an overall Medicare margin of negative 9.6 percent and the projection for 2018 shows a further decline to negative 11 percent.  The truth is that MedPAC shows that government programs underpay for hospital services, in 2016 that figure was $68.8 billion. And yet that same year hospitals also provided $38.3 billion in uncompensated care. These relevant facts would have painted a more accurate and clear picture of the financial realities hospitals face.

Tom Nickels, Executive Vice President American Hospital Association