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Cost shifting to private payers

A new report published in Health Affairs provides an excellent history of cost-shifting, gives an excellent analogy and and quantifies its impact on private payers.
Cost shifting occurs when providers, typically hospitals, recoup lost revenue resulting from underpayments by some patients by charging other patients more. The article provides an excellent statistical summary of the issue, noting that private payers reimburse at a rate that is around 122% of costs, while Medicare is about 95% and Medicaid even lower.
Of course, the uninsured are at the bottom, with reimbursement rates at about 5% of charges.
While I have a couple minor arguments with the article’s authors, the overall message is quite clear – those of us with private health insurance are subsidizing the care for those covered under governmental programs or with no coverage at all. Yes, Virginia, we do have universal access, we just don’t have universal insurance.
This gives the lie to statements to the effect that we as a nation can’t afford universal coverage. In fact, we do have it, and pay for it via these hidden taxes.
Taxes that are quite inefficient, that are inappropriately targeted, and that penalize employers who offer health insurance (at rates their employees can afford) at the expense of those who do not. This is leading some states (Maryland is the most prominent) to try to force employers to offer health insurance at affordable costs. This is an effort on their part to get some employers’ workers off the Medicaid rolls.
What does this mean for you?
As uninsurance and underinsurance increases, so will these hidden taxes, further adding to the burden placed on employers and covered employees.

Joe Paduda is the principal of Health Strategy Associates



A national consulting firm specializing in managed care for workers’ compensation, group health and auto, and health care cost containment. We serve insurers, employers and health care providers.



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