Rising healthcare costs are piling up for voters ahead of the midterm elections, and constituents are looking to elected officials for relief. Insurance premiums are skyrocketing, and out-of-pocket costs for doctor visits and prescription drugs are rising at similar rates, pointing to an affordability crisis that demands policy solutions. 

As Charles Sauer, president of the Market Institute, writes in his op-ed in InsideSources, there’s a bipartisan fix on the table for members of Congress that can make an immediate impact if signed into law. Congress can lower costs for Medicare patients by removing Medicare incentives that encourage hospitals to consolidate and drive up patient costs.

“Simple economics tells us this continued consolidation means fewer choices and higher prices for patients. One way to immediately combat cost-driving hospital consolidation is to pass “site-neutral” payment policies that would require equal Medicare reimbursement rates for hospitals and independent providers. The Same Care, Lower Cost Act, a bill gaining traction in Congress now, would establish site neutral payments, curbing the Medicare overpayments that are spurring out-of-control hospital consolidation.”

Here’s how Medicare incentivizes consolidation: Under current policy, Medicare reimburses hospitals and their outpatient departments – off-campus facilities that a hospital owns like an imaging center – more than independent doctors. This reimbursement includes separate fees for physicians and the facility. Hospitals see this double-dipping as an investment opportunity, and they can cash in on higher reimbursement rates when they buy independent doctors' offices with the same operating costs. 

The Centers for Medicare & Medicaid Services’ rationale for the reimbursement difference is that hospitals provide higher-quality care than independent physicians. Sauer pushes back on that idea: “But studies tell a different story – that higher-priced care does not necessarily mean higher quality care. Many studies also show independent doctors provide equally high quality care for lower prices than large hospitals.”

This double reimbursement puts pressure on Medicare. Experts estimate that the Medicare Hospital Insurance Trust Fund will become insolvent by 2033. Site-neutral payments in Medicare may buy the trust fund some time until legislators determine a longer-term solution. But beyond Medicare, site-neutrality benefits patients with private insurance, too. 

“Patients with private insurance would also benefit from site-neutral payments, as private insurers like Aetna and BlueCross BlueShield often set their prices based on Medicare reimbursement rates. A Niskanen Center study expects that private insurers’ cost-sharing and premiums would decrease by between $135 billion and $466 billion over 10 years under site neutrality, enough to give every American on private insurance between $600 and $1,500.”

Implementing site-neutral reimbursement rates in Medicare is a common-sense policy solution that policymakers of both parties can agree on. Solutions like the Same Care, Lower Cost Act in Congress would help on the legislative side. While Congress considers reforms, the White House is taking similar action on site-neutrality.

“The Centers for Medicare and Medicaid Services’s 2027 proposed rule for Medicare’s hospital outpatient payments includes new site-neutral reforms for imaging services like MRIs. These are meaningful savings for services that can cost up to ten times the price at a hospital compared to an independent radiologist.”

American patients are asking for solutions to healthcare affordability, and implementing site-neutrality in Medicare is a strong, bipartisan solution that would noticeably lower costs. Passing the Same Care, Lower Cost Act would enshrine these site-neutral rates in federal law to lower premiums, save Medicare money, and slow hospital consolidation.

You can read the full op-ed in InsideSources here. 

‍