Site-neutral Medicare reform could slash billions in waste without cutting benefits—but hospitals are fighting to stop it
At a Glance
- Proposal standardizes Medicare payments across care sites
- Hospitals charge up to 3x more for same procedures
- Policy could save $150B and reduce premiums by $90B
- Critics say hospitals exploit a loophole for profit
- Lawmakers urged to redirect savings to rural care
Standardizing Medicare’s Broken Payment Model
A quiet but potentially seismic Medicare reform is gaining traction in Washington: site-neutral payments, a cost-cutting fix that would eliminate billing disparities between hospital outpatient departments and independent physician offices. Today, hospitals can charge two to three times more for the same service—simply by owning the facility where it’s performed.
One frequently cited example? An epidural steroid injection that costs $255 at a physician’s office can balloon to $740 when billed under a hospital outpatient department. Reform advocates say these inflated rates add billions in unnecessary costs, with no improvement in patient outcomes.
Watch CNBC’s explainer at Why Medicare Reform Could Save Billions.
Powerful Support—and Fierce Resistance
Though the reform has backing from tech leaders like Elon Musk and President Donald Trump, hospitals are sounding the alarm. Industry groups claim site-neutral payments would gut revenue by over $150 billion and threaten service access—especially in rural areas.
But reformers push back, saying hospitals have long exploited ownership structures to pad profits. Former Rep. Michael Burgess, M.D., argues in a Daily Caller op-ed that Medicare can be modernized without harming beneficiaries: “This is about eliminating fraud, waste, and inefficiencies—not cutting care.”
Billions in Savings Without Benefit Cuts
CBO estimates show site-neutral payment reforms could save more than $150 billion over a decade and reduce Medicare premiums and cost-sharing by over $90 billion. Proponents say this windfall could be redirected to support rural hospitals or underfunded care networks—addressing the very concerns hospital lobbyists raise.
Even hospital executives are beginning to acknowledge the system is flawed. At this year’s J.P. Morgan Healthcare Conference, Tampa General CEO John Couris said he “sees the validity in the critique,” hinting that change is inevitable.
Political Gridlock Still Looms
Despite bipartisan interest, Democrats have been accused of fearmongering, suggesting the policy equates to benefit cuts. But reformers argue that’s a mischaracterization: equalizing payments doesn’t touch coverage—it simply reins in excessive markups.
Meanwhile, Medicare faces a demographic reckoning. With the trust fund projected to run dry within the next decade, economists say site-neutral reform is a necessary—if overdue—measure to stabilize costs without trimming benefits.
Conclusion
As Congress weighs next steps, the message from reformers is clear: end price games, protect access, and redirect savings to those who need it. With bipartisan voices and mounting economic pressure, Medicare’s payment overhaul may finally be approaching a tipping point.
