Cost shifting at the lemonade stand

A couple of weeks ago, I gave a noontime talk on cost shifting at the University of Wisconsin School of Medicine and Public Health. You can watch the video here. (I recommend it at 1.5x normal speed.) You don’t have to watch too long to notice I use a lemonade stand to illustrate some cost shifting concepts.

I gave the same talk that morning in a Wisconsin state capitol briefing. Sadly, the video for the morning event failed. Too bad, because it was better than the noontime talk; I had more energy, and it included a response from Brian Potter of the Wisconsin Hospital Association.

Brian did not like my lemonade stand metaphor. He was quoted by Wisconsin Health News (no link available) as saying,

“Hospitals accept all payers or patients regardless of their ability to pay, which is different from a lemonade stand because you don’t have to sell lemonade to everybody,” Potter said. “Healthcare is a need whereas lemonade is an optional service. When you’re having a heart attack, your price sensitivity and your consumerism and things that happen in normal markets don’t necessarily happen in healthcare.”

I didn’t get an opportunity to respond to this. If I had, here’s what I would have said: First of all, a hospital is not obligated to participate in every payer’s network. Second, the entire point of my talk was that most empirical studies of hospitals don’t support cost shifting. (See also this post and that to which it links for that evidence.) As such, it hardly matters what metaphor I use. The conclusion is the same.

The point of the lemonade stand was to help a lay audience understand what cost shifting is and why most of the empirical studies don’t find it. Of course, all models are wrong, but some are useful. Judging from written feedback, most of the audience thought my hypothetical lemonade stand model was useful, even if Brian didn’t.


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