Which Hospitals Could Be Financially Affected by a Public Option?

Current health reform policy proposals include the introduction of a public option health insurance plan that would compete with private health insurance plans. In these proposals, public option plans would reimburse for medical services at rates far lower than rates paid by private plans and would be comparable with those paid by traditional Medicare. In this brief, we use hospital discharge data to identify hospitals that had a greater share of total charges paid by private insurance coverage and therefore could be most financially affected by a public option that sets off a reduction in private payment rates. We find major teaching hospitals, nongovernmental nonprofit hospitals, and hospitals in metropolitan areas had significantly higher private payer charges as a share of total charges. Private payers accounted for just 17 percent of all charges in rural hospitals. Hospitals with the greatest share of private payers treated significantly more children and non-Hispanic Asian patients. Conversely, hospitals with the lowest share of charges to private payers admitted significantly more elderly patients, Hispanic patients, Native American patients, and uninsured patients. Though a public option plan is intended to improve coverage affordability for the nonelderly beyond the accomplishments of the Affordable Care Act, proposals must account for potential trade-offs such as the disrupted delivery of hospital services.