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  • Cost Shifting on the Increase under Obamacare

    In a recent article in Health Affairs, health economist James Robinson reveals that in areas where hospitals consolidate and enjoy a larger market share, providers are more likely to charge higher prices, as low competition gives them a monopoly in delivering patient care in the region.

    The lack of competition allows hospitals and other providers to raise the sticker price for the privately insured as reimbursements from Medicare and Medicaid fall. Economists call this “cost shifting,” when a lower payment from one group is made up for by a higher payment from another group. The study finds that the growing trend in hospital consolidation is to charge private payers more to make up for public payers’ lower reimbursement levels.

    Obamacare will cause this cost shifting to become more pronounced, thus raising premiums for the privately insured. As Jordan Rau of the Health Affairs blog notes, the trend toward hospital consolidation “may have been accelerated by the new health law.” One example is the provision regarding Accountable Care Organizations (ACOs). While the idea behind ACOs is to encourage doctors and hospitals to partner up in caring for patients and share financial risk to facilitate better coordinated care, they may instead create an unfair competitive advantage for larger organizations that would put small and mid-sized practices at a particular disadvantage. The consequences of imposing these bureaucratically approved, complex organizations would be reduced competition, less provider accountability, less choice for patients, and greater cost shifting onto private payers.

    Furthermore, Obamacare makes drastic cuts to Medicare provider payment rates, which—if they occur as written into law—would pay providers of inpatient care half that of private payers and 80 percent of Medicaid by the end of this decade. These cuts will almost surely be passed on to private payers in the form of higher premiums. In addition, Obamacare’s failure to address the scheduled reduction in Medicare physician payments would lead the program to pay doctors 60 percent of what private payers pay starting next year.

    But that’s not all. As Medicare Actuary Richard Foster has noted, if payment rates are cut that low, many health care providers that cater exclusively to Medicare patients will go out of business. Seniors will have a tremendously difficult time finding a provider that will accept Medicare, just as Medicaid beneficiaries currently face huge obstacles to receiving care.

    Obamacare not only makes care less affordable for those still in the private market, but it also will make care harder to find for seniors on Medicare.

    Daniel Graulich is currently 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]

    21 Responses to Cost Shifting on the Increase under Obamacare

    1. Joan says:

      The situation is really more complicated then your presentation suggests. Hospitals can currently "cost shift" and will be able to do so under ACA legislation until 2014 when their reimbursements will be subject to "analysis" and cuts.(under Medicacare hospital reimbursements for imaging, for example are currently nearly 10xs those of free standing imaging centers) Private practice physicians have had their remuneration cut systemically by Medicare since the early 1990s and in the mid 1990s have had contractual reimbursements by private insurers tied to (declining) Medicare rates. Under GHW Bush physicians/physician IPAs were prohibited by the FTC from negotiating contractually with private insurers except based upon ( declining) Medicare rates.

    2. Jeff, Illinois says:

      First off . . This is the Heritage Foundation . . and as such should not be consistently using a pajorative labeleling for the Affordable Healthcare Act. Our nation as a whole has a constitution. That constitution provides the written description for the framework of how our government shall operate. Within that structure we elect officials. The nation has spoken and with a majority vote elected Barack Obama as our president and a majority democratic Senate and previously a Democratic majority in the House of Representatives. Then healthcare was reformed . . proposed and voted on . . called the Affordable Healthcare Act. Like any new plan . . it may take some time to get all the kinks out . . but in time the populace will mostly think it's beneficial . . as have the populace of other nations who have government framed health coverage. Most people find Social Security and Medicare and Unemployment Insurance to be enormously beneficial and again that will be the case with the healthcare reform. I think it's inappropriate to keep banging the drum that the reform and our president are somehow evil . . in regards to this issue.

      • Bobbie says:

        Don't put words in our mouths, Jeff. We don't want the government to interfere in our personal health. We didn't suggest a new plan spreading our personal health care information that was once private between doctor and patient, now including government of many people we don't know? Government that will be the government doctors right hand man of influence. Little to do with the betterment of health. You must be a government doctor waiting for employment? Government can protect us as their job description defines, from government's enemies and when there is a pandemic or whatever, but it won't work towards peoples individual health care. That's ridiculous and legislates personal behavior! The costs far exceed any good measure about it if there is any. They shoved it down our throats on purpose. Because it can't be trusted and so far hasn't shown any reason.

        People just can't interpret the constitution anyway they want, especially when they vow to uphold it! How pompous is that?? and if government would leave alone where they once did, government wouldn't cost so much freedom and liberties using hard earned money of the innocent. Learn to pull up your own pants, Jeff. At your own expense!

        • Jeff, Illinois says:

          I get YOU don't like the healthcare reform . . but most will once it's fully implemented!

        • Lynn says:

          If you truly "don't want govt. to interfere in your personal health" you may consider supporting options which allow you to take some financial responsibility for your own health care. In spite of the phony "cost shifting" argument physicians (not hospitals) are locked into reimbursement rates which do not cover their overhead by highly profitable private insurance and Medicare (by law physicians can only negotiate with private insurers based upon Medicare rates). This will ultimately lead to the collapse of the system due to folks who "want to preserve "their free Medicare ride to the detriment of the enslaved providers.

          • Bobbie says:

            We won't be able to afford our personal health care and be obligated to pay for those that get it free. Obamacare is already costing twice as much for our health care!!!!!

            free health care- AFFORDABLE HEALTH CARE ACT??- is overrated and extremely expensive!! It's FRAUD!

            gosh "if I truly don't want government to interfere in my personal health?" we never asked them to interfere in the first place!! All of a sudden it's a crisis not to have a piece of paper for personal health care??!! It's our personal private BUSINESS!! EVERYONE should have enough sense to PROTECT themselves AGAINST GOVERNMENT CONTROL of your PERSONAL NOW SOCIAL, HEALTH CARE!

    3. Jeff, Illinois says:

      Part 2

      The reform will be in place and we should look to strenghthen it, by constructively offering modifications . . This is another tired topic of this website . . mostly to just continue to demonize our president. Again Obama was elected by a majority in our nation . . and needs our support and prayers. He has an almost impossible task of leading our nation with so many complex issues.

      • ADT says:

        I strongly disagree with the suggestion we need ObamaCare! First, Americans should not be forced into buying something they do not want; second, there's the death panels who will decide who gets care and who doesn't; third, there is an attempt to regulate the Doctor's income and ad-infinitum! This totally despicable plan is unacceptable in America's economy and I hope the suits in place now will render ObamaCare unconstitutional!

      • Bobbie says:

        Yeah, Jeff. Complex issues he created by overreach.

        • Jeff, Illinois says:

          Bobbie . . please do something more than watch FAUX News . . .!

          • Bobbie says:

            Jeff, why can't you respect the fact that government is a costly, dangerous, needless third wheel? Why insist they come between you and doctor? Too bad you see this as faux news. You must have always been cradled at someone elses expense, eh? Personal responsibility is freedom and the way it WAS in America. People in control of their own individual health. Imagine that!

    4. Pingback: Must Know Headlines — ExposeTheMedia.com

    5. Joan says:

      The Heritage Foundation is not ready for any serious discussion of the national health care dilemma which would include a serious discussion of the historical roots of the problem pre and post medicare including the role of the insurance industry, the shamelful anti-trust regulations as they are imposed upon physicians alone and the continuation of exotic untested theoretical ivy league economic ideation (RVUs, HMOs, ACOs) embraced by the government with appalling unanticipated results.(Mainly exponentially increasing costs). If you guys are really for free markets, release physicians from anti-trust regulations and let them negotiate with insureres on a more even footing.

    6. Allen says:

      First off, Obama was NOT elected by a majority. He was elected by Acorn thugs, the "Chicago Machine" of union bosses, criminals who should have never been allowed to vote, dead voters–all documented–and other other voter fraud tactics. He is the most inexperienced, inept president this country has ever put into office. He leads from behind and voted "present" hundreds of times as Senator. He's controlled by ultra liberals who destroyed California. Second, the CBO barely scored Obamacare solvent–even after he ripped off billions from Medicare using smoke and mirrors tactics. Third, Obamacare was forced down our throats. Nobody read the 2,400-page bill, which was passed using tricks, bribes, concessions and who knows what else. Fourth, all the unions and big corporations that supported Obama are getting waivers–a huge majority of which are being granted to businesses in Nancy Pilosi's district. So, once again, it's the middle class taxpayers who get stuck with a bill no one really read, understands or wants. Fifth, the bill itself is packed with billions in auto-funding mechanisms that are buried deep inside it to prevent any real cuts to it by the Republican-led House. Sixth, if the Supreme court upholds Obamacare's insane ability to force us to buy insurance, then it can force us to buy veggies, electronic cigarettes, tiny 3-wheeled cars and who knows what else. Seventh, If Obama really wanted to reduce costs and improve medical care, he would go after the trial lawyers with real change. He would also allow people to buy insurance across state lines and end the monopolies that big insurers desperately try to preserve.

    7. Pingback: Cost Shifting on the Increase under Obamacare – Heritage.org (blog) « Articles « Tea Party Courier

    8. Bobbie says:

      Jeff, is faux news a pejorative for fox news? cute… took awhile, tv is rarely watched in our home. Uses too much electricity and we rather NEED to eat…

    9. Marc says:

      I am a conservative but get a little tired of the Big Business, Big Insurance talking points our leaders spit out. For some reason conservatives have a hard time believing big business / insurance would use underhanded tricks to increase their profits. My family of 4 has had BC insurance for 15 years, at first we paid $250 per month and had a $250 deductible. Last year the cost had risen to $700 per month with $5,000 deductible per person yet the physician payment rates remained the same over the last 15 years. Just ask any doctor is he gets paid more per visit today compared to 10 years ago. This cost shifting argument is total BS and only comes from the uniformed mind. Physicians can charge whatever they want BUT the insurance companies adjust the fee to their allowable rate.

      • tod says:

        Joan and Marc are spot on. It is a complete fallacy that there has been a free-market in medicine since the inception of Medicare in 1965 and exacerbated by Medicaid. Nearly every problem and the insane increases in medical insurance are a result of gov't price controls and 3rd party payor arrangements. The myth of "cost shifting" has been rebuked by groups like Docs4patientcare.org. Physicians do not and cannot "cost shift". Marc is right. As an MD, medi. insur. premiums have skyrocketed over the past decade, yet my compensation is down 30% over the same time period. Where do those premium dollars go? Free patients to become consumers again with HSAs and low premium catastrophic policies so they control their HC dollars. Allw MDs/hospitals to compete by eliminating arbitrary, ill-conceived anti-trust laws and get the feds out of healthcare.

    10. Conservative says:

      Marc-I have the same situation in regards to my health plan and the costs however, my employer also offers an HSA so there's money being put aside for medical expenses like the rather high deductible. This is a system that has worked for us and I think people are foolish to not take advantage of HSA's.

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