The provider cost shifting argument is one often made in the context of proposals to reduce provider payments from a subset of insurers. In this instance there is a twist that makes that argument less applicable. PFFS plans typically don’t negotiate provider rates and simply pay providers the FFS Medicare rates. If PFFS plans are paid less (or exit the market) that won’t affect provider rates. More generally, MA plans pay providers at or below FFS Medicare rates. To the extent that the MA program shrinks in terms of number of enrollees due to lower payments, that’s good for providers.

What about the marginal case where an MA plan doesn’t exit the market but some of its competitors do. It is possible that in this case it has the additional market power to extract greater concessions from providers in the form of lower fees. If providers can really shift costs to other insurers (that they can do this is not a foregone conclusion–it is debatable), then you’re point has some merit. But I think this is a second- or third-order effect. The primary effect of reduced MA payments is lower health spending because those extra MA payments are going toward increased insurer profits and extra benefits that beneficiaries would not otherwise have. If those profits and/or those extra benefits (and the extra utilization they induce) go away that’s a savings. (Some of the utilization induced by those extra benefits will occur anyway, but far less.)

One cannot simply wave the “cost shifting” flag in all instances of payment reductions. And, as I said, it is possible there is little or no real cost shifting possible. For the economics argument on this point, see the 2001 Health Affairs paper by Richard Frank “Prescription Drug Prices: Why Do Some Pay More Than Others Do?“