Medicare Profitability

"What if, in 2016, the health insurance exchanges are operating and inflation is exceeding 6% a year? We envision large numbers of employers will consider exiting the business of providing traditional health benefits."

Keckley and his team are running with that assumption. They are predicting that by the end of the decade, about 65 million people will lose their traditional employer healthcare coverage.

If that happens, "the impact on the hospitals will be profound," he says.

Some number of that group will be uninsured. Another smaller group will be eligible for Medicaid, but the majority will end up in exchanges, he says.

"If states get slammed with large numbers of exchange enrollees, the exchanges will likely pay providers less," he says. "Our overly simplistic conclusion is that hospitals ought to be able to operate at Medicare rates or lower because you can't factor in a cross-subsidy in the future."

This article appears in the March 2012 issue of HealthLeaders magazine.