Why Does the Cost of Health Insurance Keep Rising???
One Major Reason is "Cost Shifting"
September 16, 1992
Cost shifting is the practice of transferring excess medical costs from individuals who don't pay the full cost of their care (such as Medicare and Medicaid recipients) to the private pay patients.
Last year, the Washington Post reported that Congress will cut $15 billion over the next five years from previously projected Medicare payments in an effort to trim the federal budget deficit. Carol McCarthy, president of the American Hospital Association, said Medicare pays 6% less than the actual costs incurred. If this occurs, the cost shifting tab of $17.1 billion will increase, (According to BNA, Daily Report for Executives, 12/20/91).
Experts say that the real problem isn't that Medicare pays too little, but that hospitals aren't controlling costs. For example, 325,000 of the nation's 930,000 hospital beds on average are empty every day. The result of these problems is cost shifting.
The New York Times in 1991, provided the following example based on actual cost shifting at the Stanford Medical Center in California:
Bill for Cesarean Section
(Stanford's Cost - $7,000)
| Patient Type | Amount Billed |
| Uninsured | $4,000 |
| Medicaid | $5,500 |
| Underinsured | $6,500 |
| Fully Insured | $12,000 |
The $5,000 lost from treating the Medicaid and underinsured patient is shifted to the fully insured patient.
Bill for Triple Heart Bypass
(Stanford's Cost - $39,000)
| Patient Type | Amount Billed |
| Medicaid | $10,710 |
| Underinsured | $27,160 |
| Fully Insured | $80,000 |
The $40,000+ lost from treating Medicaid and Medicare patients is shifted to the fully insured patient. Americans pay what amounts to a HIDDEN TAX when hospitals and doctors shift their revenue shortfalls to private-pay patients. As much as 30% of your hospital bill is a result of cost shifting. That's the price we all pay either directly or indirectly.