One major sticking point in the ongoing health care reform debate has been over the so-called “public option,” a proposed government-sponsored health care plan.  The primary point of contention came among the Democratic party itself as liberal Democrats wanted a “robust” public option, while more moderate Democrats, largely concerned over costs, were  more interested in a weaker public option.

This disagreement has stalled progress in the Senate for weeks, but after several behind-the-scenes negotiations, Senate Majority Leader Harry Reid (D-NV) announced a tentative agreement among Democrats this week moving the issue forward.

At issue, however, are early reports that the proposal will contain a major expansion of the Medicare program in exchange for either a weaker public option, or no public option at all.  The Medicare expansion would allow citizens aged 55 or older to buy into the Medicare program (versus the current age of 65 or older) which would add millions of Americans to the program.

IHA takes issue with this proposal as the Medicare program does not pay hospitals and other health care providers 100 percent of the actual cost of care.  In other words, if a patient on Medicare receives $1000 worth of health care, Medicare reimburses the hospital between $300-$600.  Though Medicare payment rates vary from state to state, compounding this issue is that Iowa receives some of the lowest Medicare reimbursements in the nation.  IHA data shows that in the most recent fiscal year, Iowa hospitals lost more than $100 million due to Medicare shortfalls.

What’s more, the Senate is also proposing a massive expansion in eligibility to the Medicaid program which reimburses Iowa hospitals even less than Medicare with an estimated $200 million shortfall that increases annually.

By adding millions of Americans to these programs that do not pay the full cost of care would be extremely damaging to Iowa hospitals as the shortfalls would increase dramatically.

IHA opposes the expansion absent Congress acting to correct the historical imbalance of payments among hospitals.  IHA has proposed language to correct this imbalance and Iowa Senator Harkin, a leader in Senate negotiations, should fight to make sure Iowa hospitals are not further disenfranchised by this expansion.

The full proposal will be released after being “scored” for costs by the Congressional Budget Office expected in the coming days.