Introduction to Rural Hospitals’ Concerns
Rural hospital leaders are questioning whether they can continue to afford to do business with Medicare Advantage companies, and some say the only way to maintain services and protect patients is to end their contracts with the private insurers.
Medicare Advantage plans pay hospitals lower rates than traditional Medicare, said Jason Merkley, CEO of Brookings Health System in South Dakota. Merkley worried the losses would spark staff layoffs and cuts to patient services. So last year, Brookings Health dropped all four contracts it had with major Medicare Advantage companies.
Concerns and Issues with Medicare Advantage
Merkley and other rural hospital operators in recent years have enumerated a long list of concerns about the publicly funded, privately run health plans. In addition to the reimbursement issue, their complaints include payment delays and a resistance to authorizing patient care. But rural hospitals abandoning their Medicare Advantage contracts can leave local patients without nearby in-network providers or force them to scramble to switch coverage.
Understanding Medicare and Medicare Advantage
Medicare is the main federal health insurance program for people 65 or older. Participants can enroll in traditional, government-run Medicare or in a Medicare Advantage plan run by a private insurance company. In 2024, 56% of urban Medicare recipients were enrolled in a private plan, according to a report by the Medicare Payment Advisory Commission, a federal agency that advises Congress. While just 47% of rural recipients enrolled in a private plan, Medicare Advantage has expanded more quickly in rural areas.
Financial Implications for Rural Hospitals
In recent years, average Medicare Advantage reimbursements to rural hospitals were about 90% of what traditional Medicare paid, according to a new report from the American Hospital Association. And traditional Medicare already pays hospitals much less than private plans, according to a recent study by Rand Corp., a research nonprofit. Carrie Cochran-McClain, chief policy officer at the National Rural Health Association, said Medicare Advantage is particularly challenging for small rural facilities designated critical access hospitals. Traditional Medicare pays such hospitals extra, but the private insurance companies aren’t required to do so.
Impact on Patients and Rural Communities
Nearly 200 rural hospitals have ended inpatient services or shuttered since 2005. Mehmet Oz — doctor, former talk show host, and newly confirmed head of the Centers for Medicare & Medicaid Services — has promoted and worked for the private Medicare industry and called for “Medicare Advantage for all.” But during his recent confirmation hearing, he called for more oversight as he acknowledged bipartisan concerns about the plans’ cost to taxpayers and their effect on patients. Cochran-McClain said some Republican lawmakers want to address these issues while supporting Medicare Advantage.
Benefits and Drawbacks of Medicare Advantage
Medicare Advantage plans can offer lower premiums and out-of-pocket costs for some participants. Nearly all offer extra benefits, such as vision, hearing, and dental coverage. Many also offer perks, such as gym memberships, nutrition services, and allowances for over-the-counter health supplies. But a recent study in the Health Services Research journal found that rural patients on private plans struggled to access and afford care more often than rural enrollees on traditional Medicare and urban participants in both kinds of plans.
Efforts to Address Concerns and Find Solutions
Susan Reilly, a spokesperson for the Better Medicare Alliance, said a recent report published by her group, which promotes Medicare Advantage, found that private plans are more affordable than traditional Medicare for rural beneficiaries. That analysis was conducted by an outside firm and based on a government survey of Medicare recipients. Reilly also pointed to a study in The American Journal of Managed Care that found the growth of private plans in rural areas from 2008-2019 was associated with increased financial stability for hospitals and a reduced risk of closure. Merkley said that’s not what he’s seeing on the ground in rural South Dakota.
Conclusion
Rural hospitals are facing significant challenges in their dealings with Medicare Advantage companies, from lower reimbursement rates to administrative burdens. While Medicare Advantage plans offer benefits and perks for some patients, they can also limit access to care and increase costs for rural patients. Efforts to address these concerns and find solutions are underway, including policy changes and advocacy for fairer reimbursement rates. Ultimately, the goal is to ensure that rural hospitals can continue to provide quality care to their patients while remaining financially sustainable.
FAQs
Q: What is Medicare Advantage, and how does it differ from traditional Medicare?
A: Medicare Advantage is a type of health insurance plan that is offered by private companies approved by Medicare. It differs from traditional Medicare in that it often has lower premiums and out-of-pocket costs, but may also have more limited provider networks and require referrals and prior authorization for certain services.
Q: Why are rural hospitals concerned about Medicare Advantage contracts?
A: Rural hospitals are concerned about Medicare Advantage contracts because they often pay lower rates than traditional Medicare, which can lead to financial losses and reduced services for patients.
Q: What are the potential consequences for patients if rural hospitals drop their Medicare Advantage contracts?
A: If rural hospitals drop their Medicare Advantage contracts, patients may face higher prices or have to travel to in-network facilities, which can be hours away in rural areas.
Q: Are there any efforts underway to address the concerns of rural hospitals and patients?
A: Yes, there are efforts underway to address the concerns of rural hospitals and patients, including policy changes and advocacy for fairer reimbursement rates and streamlined prior authorization processes.
