Cost Shifting In Reverse?

holyBy William Rusteberg

Some providers exclaim “we have to pass our losses from Medicare, Medicaid, and uninsured patients to the private sector to stay in business. Otherwise, we would go broke!”  This cost shifting  excuse has been the Holy Grail for 30 years now. And no one has ever really questioned it.

Almost any hospital administrator  (or any other medical provider) you ask will say they lose money on Medicare patients. So why  then do most providers accept Medicare? They don’t have to. They are not required to. The fact is, efficient hospitals earn a profit from Medicare.  After all, Medicare calculates on a cost plus reimbursement basis.

And, if it is true that providers  lose money on Medicare reimbursement rates, why then do they sometimes accept rates below Medicare through managed care contracts?

Here is an example: $2,300 = $1,500 cash price = $572 Medicaid reimbursement = $497 Medicare reimbursement = $400 XYZ Insurance Company reimbursement. These are actual pricing through a provider  (who asked to remain anonymous) for an  out-patient MRI.

“That’s right Uncle Herrmann, the provider’s billed charge is $2,300 ( a meaningless number no one ever pays) yet  accepts differing amounts depending on the payer. In this example, an insurance company has negotiated a rate that is less than Medicare.”

It seems that health care prices are much like airplane tickets. Next time you fly, ask those around you how much they paid.  You may be surprised that not all paid the same. Some paid more, some paid less. If you find that you are subsidizing your seat companion’s ticket, make sure he or she thanks you. The lesson here is, don’t get upset, get informed.  You will be better prepared to negotiate a savings the next time you travel. The same applies to health care financing.

A fellow revolutionary said today “you say cost shifting was caused by the government with the introduction of Medicare in 1966. But who really cost shifted? Wasn’t it the payers seeking increased revenue? The notion that the government caused cost shifting is misplaced and unfair! In fact Bill, we have documented that some providers accept less than Medicare.”

So it must be agreed that cost shifting has occurred. But was it shifted to the taxpayers, or private payers? You decide.