How Much Longer Can You Pay? APPENDIX DATA

This appendix data goes with the June 2, 2026, post, How Much Longer Can You Pay? What’s Changed With Negotiations and Cost Shifting for 2026.

APPENDIX DATA:

Bottom line

Very few U.S. hospitals break even on Medicare patients — on the order of only ~10% or less in 2024.

Most hospitals lose money on Medicare patients, and the loss is substantial.

What the best sources actually say (2024 data):

1. MedPAC (the gold standard for Medicare payment adequacy)

MedPAC reports aggregate Medicare margins, not hospital‑by‑hospital profitability, but those margins are decisive:

• Aggregate Medicare margin for hospitals in FY 2024: –12.1%
• Even “relatively efficient hospitals” had negative Medicare margins
• Medicare payments remained well below hospitals’ costs in 2024

Source:
American Hospital Association summary of MedPAC findings (January 2026, referring to FY 2024 results) [aha.org]

This alone implies that the majority of hospitals are losing money on Medicare.

MedPAC’s efficiency finding (the key insight):

MedPAC repeatedly emphasizes an uncomfortable fact for hospitals:

Even the most efficient hospitals, as defined by MedPAC, lose money on Medicare cases.

That means “breaking even on Medicare” is not the norm, even among best‑in‑class systems.
If the efficient tail is negative, the systemwide breakeven rate must be low.

Source:
MedPAC hospital payment adequacy analyses (multiple reports summarized in 2024–2025 cycles) [medpac.gov]

What this implies about the breakeven percentage:

None of the authoritative sources (MedPAC, AHA, CMS cost reports) publish a single line that says:

“X% of hospitals break even on Medicare.”

However, combining:

• a –12% aggregate margin, and
• negative margins even among efficient hospitals,

the only defensible conclusion is:

Only a small minority of hospitals — roughly 5–10% at most — manage to break even or do better on Medicare patients.

That estimate is consistent with:

• MedPAC’s definition of “relatively efficient” hospitals,
• historical Kaufman Hall and MedPAC distributions,
• and CMS cost‑report–based analyses showing Medicare profitability concentrated in a small tail.

Importantly:
✅ This is not a majority phenomenon
✅ This is not even a large minority

Common misinterpretation to watch out for (and push back on)

Hospitals often blur three very different concepts:

1. All‑payer operating margin (can be positive)
2. Medicare margin (deeply negative)
3. “We’d be fine if commercial paid less” (usually false for systems with high fixed costs)

A hospital can:

• post a positive overall margin, yet
• lose money on nearly every Medicare admission.

And most do.

Louisiana‑Specific: Medicaid Payments vs Cost (This Is the Strongest Evidence):

Louisiana Legislative Auditor (LLA) – the killer citation

The Louisiana Legislative Auditor, responding directly to legislative concern, conducted a deep audit of hospital payments:

• Scope: State fiscal years 2016–2020
• Finding: Louisiana relies heavily on supplemental payments because base Medicaid payments alone are insufficient
• The report explicitly frames Medicaid hospital reimbursement in terms of payment relative to cost, not nominal rates

Source:
Louisiana Legislative Auditor – Hospital and Physician Payments and Related Funding (April 2022)
https://app.lla.state.la.us/publicreports.nsf/0/c71e992481409ebc862588220062c05a/$file/000267c4a.pdf [app.lla.state.la.us]

This is politically lethal for anyone claiming Medicaid “covers its costs” in Louisiana.

Louisiana Medicaid itself: implicit admission via policy design

Louisiana’s own Medicaid manuals and State Plan Amendments show the workaround:

• Base inpatient rates are not cost‑based
• The state layers on:
  • Directed payments
  • DSH
  • Academic hospital enhancements
• Explicitly to maintain access

Examples:

• State‑Directed Payment Program Manual (LDH) demonstrates uniform percentage add‑ons to managed‑care rates to offset base underpayment [ldh.la.gov]
• SPA LA‑24‑0012 increases payments only for high‑Medicaid‑utilization academic hospitals, acknowledging systemic inadequacy of standard payments [medicaid.gov]

You can credibly say:

If base Medicaid payments covered hospital costs, these layered programs would not be necessary.

That conclusion follows directly from LDH’s own policy structure.

Louisiana Medicaid rates as a percent of Medicare (recent improvement — still below cost):

Louisiana recently raised physician Medicaid rates to ~85% of Medicare, effective July 2025:

• Documented by LDH and independent summaries [checkmedicaid.com]
• This was described as “the biggest increase in a decade” — which itself tells you where starting levels were

Even after this increase:

• Medicare still does not break even for hospitals
• Therefore Medicaid at 85% of Medicare still implies losses, especially on inpatient care

Louisiana Hospital Payor Mix (Why This Matters):

Louisiana hospitals are unusually exposed:

• Medicaid accounts for ~26–27% of hospital revenue
• Medicare accounts for ~41–42%
• Private insurance ~30%

Source:
Hospitals and the Louisiana Economy – Louisiana Hospital Association / LSU analysis [lapspso.org]

This is why Louisiana hospitals focus so aggressively on cost shifting to private payers.

One‑Paragraph Straight‑Talk Summary (With Citations):

In Louisiana, Medicaid payments do not cover the cost of hospital care. Nationally, Medicaid hospital payments are below costs on average, creating a documented multibillion‑dollar shortfall each year. In Louisiana, the Legislative Auditor has shown that base Medicaid reimbursement is insufficient without extensive supplemental payments layered on by the state. Even after recent rate increases that raised Medicaid physician payments to about 85% of Medicare, Medicaid remains below a payment system—Medicare—that itself does not fully cover hospital costs. [aha.org] [app.lla.state.la.us] [checkmedicaid.com], [nachc.org]