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  • Side Effects: Obamacare Shifts Costs to the Privately Insured

    President Obama promised to address the growing costs in health care with passage of his “reform” bill.  But instead of reducing costs, Obamacare will succeed only at shifting the burden to taxpayers and the privately insured.  Americans with private health insurance will indirectly subsidize care received by those reliant on Medicare and Medicaid. It is for this reason that for many Americans, Obamacare will actually cause medical costs to rise.  Some reform, right.

    A recent study by PricewaterhouseCoopers predicts that the rate of growth in medical costs will slow to 9.0% in 2011, down from 9.5% in 2010. However, this good news is tempered by the complexity of the responsible factors, a combination of inflators and deflators. Medical costs will decrease as consumers of health care make more responsible decisions, due to greater use of consumer-driven health plans, as generic drugs gain more market share, and as government subsidies for COBRA, enacted as part of the stimulus, expire.

    On the flip side, costs will grow due to consolidation of health care providers, mandated investment in electronic health record systems, and cost-shifting on the part of health care providers from Medicare patients to privately insured patients.

    It is the last of these, cost shift, which will be most worrisome under Obamacare.  As the PwC study highlight, “cost-shifting was identified as the number one reason for the medical trend pushing higher in 2011.” Cost-shifting occurs when hospitals and doctors receive reimbursement rates from Medicare and Medicaid that are lower than the cost of providing care. To break even, doctors compensate for these unpaid costs by increasing how much they charge other patients.

    This effect is only going to get worse under Obamacare, which will make drastic cuts to Medicare payments for hospitals and other care providers.  And though Congress just passed a temporary “doc fix” to keep painful cuts to Medicare doctors from going into effect, after the short-term “fix” expires, docs can expect to fight again to ward off reductions, this time of 26.2 percent of current reimbursement.

    Then there’s the expansion of Medicaid, which pays providers even less than Medicare.  Obamacare extends this low-quality, poorly-functioning entitlement to an additional 40 percent of its current enrollment.

    Remember, more enrollees and lower payments in government programs directly translate to higher costs for everyone else.  Care providers will be left with a choice, shift costs to private payers, or go out of business. Medicare’s Chief Actuary predicts that fifteen percent of hospitals that serve Medicare patients could face going out of business because of reimbursement cuts.

    Obamacare increases inflation of medical costs for private payers by expanding government programs and reducing payment rates.  Just another reason for Americans to wonder if perhaps they would’ve been better off without the president’s vision of health care reform.

    Joshua Wade is a member of the Young Leaders Program at the Heritage Foundation. For more information on interning at Heritage, please visit: http://www.heritage.org/about/departments/ylp.cfm

    Posted in Obamacare [slideshow_deploy]

    10 Responses to Side Effects: Obamacare Shifts Costs to the Privately Insured

    1. Trea Graham says:

      This article is so "right on" but, sadly, as the ranks of the uninformed and those being added in great number to the list of those "on the dole" grow, the clarity and correctness of this article become mired in a sea of muck. When 40 some % of those questioned do not even know why we celebrate July 4, how can we expect those folks o understand the flim-flamery of the President and his appointed people in positions to authority? There is a hidden agenda here that is being obscured on purpose by the Obama Administration. God help us all – go to the polls in November!

    2. Dennis Georgai says:

      Socialized medicine at its best, rationing for all. Is this what we want for our family and the future of this country?????? I do not think it is.

    3. Phyllis, Georgia says:

      My mom is an invalid in a nursing home. She worked hard to have enough money to pay her way. She is on a feeding tube and can't talk. I got a letter today telling me the government had lowered medicaid coverage and the private pay people would have to pay for it. So mom has to pick up the check for the ones that don't pay. I cried when I went into her room. I could hardly look at her. I guess it is a blessing she doesn't know anything.

      This is sooooo unfair! Don't work and don't save and and don't own anything and you'll be fine when you are older!

    4. Pingback: Must Know Headlines 7.7.2010 — ExposeTheMedia.com

    5. Drew Page, IL says:

      This is what the government has always done when it comes to health care. Just look at Medicare. Every year since Medicare became available, the government has increased the deductibles for Part A and Part B. Many years ago the government came up with a reimbursement scheme to doctors called "Diagnostic Related Groups" or DRGs. These DRGs determined how much doctors and hospitals would be paid on the basis of a patient's diagnosis. Under Medicare doctors received 20% to 30% less than their usual and customary charges that health insurance companies would pay. Hospitals were reimbursed based on a set number of days that HCFA (the government's Health Care Finance Authority) determined to be sufficient for a given diagnosis. If a hospital confinement lasted longer than approved by HCFA, the hospital had to absorb the additional cost.

      Faced with annual increasing Medicare deductibles and insufficient Medicare reimbursements, hospitals and doctors became adept at cost shifting. These providers would calculate how much they lost by treating Medicare patients and prorate that lost revenue onto the bills of non-Medicare patients. Over the years, both state and federal governments have mandated that health plans cover more and more procedures, more providers and expand eligibility for benefits. The government is well aware of this and yet continues to villify the insurance industry for the higher prices they must charge to cover these government mandates.

      Of course the government will shift costs to the privately insured, right up to the time when there is no longer private health insurance in existence. without insurance companies to blame, the government can then blame the "greedy" doctors and hospitals and set the stage for government takeover of the health care providers.

    6. Bill says:

      And yet, the government (state and federal) will fight tooth and nail to prevent these higher costs being passed on to the end customer. They think they can repeal basic laws of economics.

    7. Drew Page, IL says:

      Bill — State and federal governments are NOT going to fight tooth and nail to keep higher insurance costs from being passed on to the customer. The State and Federal will blame insurance companies for passing along increased prices of health care, and like lemmings, a segment of the American public will buy into this nonsense.

      It has been, and continues to be, these same State and Federal governments that have annually mandated broader and broader coverage of health insurance policies and expansion of eligibility under health insurance plans. Recently, under the terms of the health care reform act, health plans are now required to cover dependent "children" beyond the age of 19 (23 if full-time students) to age 26, regardless of student status. Will the hospitals and doctors and pharmacies not charge for their services or treatment of these "children" between 19 and 26? Of course they will and the insurance companies who pay these claims will charge higher premiums to cover the additional costs. If "children" between the ages of 19 and 26 are still living with their parents, who continue to feed them, should the grocery stores not charge for the food you buy to feed them?

      Hidden within the 2,000 pages of legislation called the "Stimulus" bill, there is a provision that requires all health insurance plans to cover both inpatient and outpatient treatment of mental and nervous conditions the same as any other illness. Previously, such conditions were covered on a very limited basis; the number of days of hospital confinement for such conditions were typically limited to 30 days per calendar year and reimbursements were limited to 50% of charges; outpatient reimbursements were limited to 50% of charges, not to exceed a flat dollar amount ranging from $50 to $100 per visit and the number of visits were generally limited to 30 per calendar year. I will not argue the merits of this mandate, pro or con, I merely point out that it was the government that forced this change and there will be an increase in claims insurance companies must pay to provide this coverage and that cost will be passed along to everyone who buys health insurance.

      I can understand this. What I can't abide is the hypocrisy of the government demonizing health insurance companies as "greedy" when they charge more to cover the cost of these government mandates and the mob mentality that mindlessly follows the government's lead.

    8. Realist says:

      Entitlements such as Medicare will more than bankrupt our country, as they're not even included in our $13 trillion dollar national debt figure as the final line here helps clarify:


      What will happen when the U.S. economy can no longer function under such rapidly growing debt? Won't the following site become increasingly relevant?


    9. Pingback: One Hundred Days Later: The Best Way Forward with Obamacare is to End It | Step Down Obama

    10. patricia says:

      About HC, my husband and I were in Toronto in April (09) of last year. When we went through we were listening to the CBC(Canadian Broadcasting System). Hospitals were asked to "not perform" necessary heart surgeries, bypasses, coronaries, ALL cardiac functions for one year. Why? because they did not have the money…this is exactly the "bill of goods" O. is trying to sell us. HC is a form of tax and has little to do with health…it is a "virtual" bill that can be used for anything he wants because it quadruples easily…and WILL!!

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