Health Care: Are Hospitals Really Losing Money On Medicare?

Do health care providers really lose money on Medicare patients?

Hospitals are whining that Medicare patients cause them to lose money due to the poor reimbursement. As Steven Brill says, this is probably a hollow cop-out both in theory and in practice.

To break it down, compares hospital pricing with hotel pricing. It’s about supply and demand. A Caribbean resort can charge more in the winter due to increased demand, and less in the summer. Itemizing the annual costs in comparison with monthly revenues, it’s going to look like the resort “loses money” on its off-peak clients. Medicare patients represent the hotel’s off-peak season. In other words, hospitals can choose to charge what they want based on consumer base, or demand.

There are a lot of fixed costs involved with running a hospital. You might as well use an MRI machine after the money you put into it. The power it takes to run it may be cost-prohibitive, but you won’t be using it all the time.

The resort would not be losing any money in its off-peak seasons unless it charged that price all year, and even then there is still a profit. Off-peak prices are available because the hotel owner doesn’t need the higher profit after the peak season.

Let’s also look at airline seat prices. After you paid upwards of $500 for a plane ticket, you don’t want to waste the money by not actually being on that flight. However, the plane wouldn’t be losing any fuel efficiency if you didn’t buy the ticket.

With ObamaCare, tax payers are being charged for hospital costs whether they use the benefits or not. So if you never go to the hospital, you are losing the money, but the hospital gets the benefits just the same.

How do you feel about hospitals claiming they lose money on Medicare patients?