Reforming Medicare resembles the old cliché about the weather: everyone (at least in DC) talks about it—but no one does anything about it. The reason everyone talks about it is because Medicare is one of the largest items in the federal budget. The reason no one does anything about it is because Medicare’s beneficiaries are senior citizens. Seniors have higher voting rates than any other age group. Politicians who suggest any changes to Medicare will be smeared by their political opponents as wanting to deprive seniors of health care. This attack will come even if the reforms in question will not deprive any senior of health care, and will actually stop some providers from gaming the system to increase their payments. Any politician willing to risk these attacks deserves praise from fiscal conservatives, seniors, and all those who want to see their Medicare taxes used in the most effective way possible.
One politician willing to challenge wasteful spending in Medicare is Louisiana Senator John Kennedy. Senator Kennedy has taken a step to restore fiscal sanity to Medicare with his Same Care, Lower Cost Act. This bill extends site neutral billing. Site neutral billing is a wonky term for the commonsense idea that Medicare should not provide different payments for the same procedure based on where it is performed. Hard as it to believe, Medicare pays more for certain procedures if they are done at a hospital rather than in a doctor’s office! The 2015 Bipartisan Budget Act mandated site neutral billing for some new facilities—leaving the loophole in place for most hospitals.
A June 2023 report from the Medicare Advisory Commission recommended that site neutral billing be used for 66 Medicare Billing Codes (also known. as ambulatory payment classifications or APCs). Kennedy’s bill not only realizes this recommendation, but also gives the Secretary of Health and Human Services the authority to make other APC’s eligible for site neutral billing. According to the Congressional Budget Office, expanding the use of site neutral billing could save Medicare as much as $157 billion over the next ten years. Other studies show that increased use of site neutral billing could save Medicare patients at least $94 billion, and as much as $134 billion in premiums and cost sharing payments over the next decade.
Site neutral billing also removes the profit incentive for hospitals to acquire private practices. The trend of hospitals buying up private practices and turning doctors into hospital employees who must conform to hospital rules is one of the leading threats to the private practice of medicine, one encouraged by foolish government actions like the failure to use site neutral billing. Site neutral billing may seem like a commonsense reform that no reasonable person could oppose, but unfortunately, lobbyists for big hospitals are conducting a disinformation campaign claiming that site the practice will lead to seniors being placed on long wait lists for treatment. This is the opposite of the truth: site neutral payments will make it easier for patients and providers to determine where the best place is for the patient to receive care without being pressured by profit-hungry administrators. Site neutral billing does not apply to treatments that must be performed in a hospital. In those cases, hospitals can seek higher reimbursements.
Absent significant action from Congress and the President, Medicare will consume 5.3% of GDP by 2053. If that were not enough cause to realize the urgency of the situation, the Medicare Trustees project predicts that Medicare will require at least $2 trillion in new federal revenue to cover this shortfall over the next decade. Implementing site neutral billing will not solve Medicare’s fiscal crisis, but it is a necessary first step and would set a precedent showing that Medicare savings need not limit access to care—or harm health care providers. Congress should take the first step toward putting Medicare on a sustainable path and removing federal policies that give hospitals an incentive to buy private practices by sending the Same Care, Lower Cost Act to President Trump’s desk by Labor Day.
