“It’s remarkable how they’ve managed to perpetuate the narrative of “losing” money on Medicare. Have to hand it to their PR/marketing departments & lobbying arms for pulling that off.” – Dave Chase
SOURCE: Committee for a Responsible Federal Budget
Hospitals often point to “cost-shifting” to justify charging higher commercial rates, claiming that Medicare rates are not sufficient to cover their costs.
There has been substantial, consistent research on this issue and as noted in a recent analysis by the Medicare Payment Advisory Commission (MedPAC), there is little to no evidence to suggest that cost shifting is a driving factor in hospital fees.
Instead, “research suggests that hospitals engage in traditional price discrimination in areas where they have the market power to negotiate higher rates charged to insurers.”
Contrary to the cost-shifting theory, one study found that lower Medicare rates led to lower commercial rates: a ten percent reduction in Medicare rates led to a reduction in commercial rates of between 3 and 8 percent.
Furthermore, hospitals with relatively slow growth in Medicare rates also had relatively slow growth in commercial rates.
Other research shows that higher payment rates are often associated with higher hospital costs because these hospitals are under less financial pressure to constrain costs (and in these cases, because their unconstrained costs are higher, Medicare rates may be below costs). Research also shows the converse — hospitals under significant financial pressure do constrain costs.
SOURCE: Committee for a Responsible Federal Budget
If Hospitals Lose Money On Medicare Why Do They Take It?
