The latest hospital cost shifting claims (Colorado edition)

From a January 24 article by John Ingold in The Colorado Sun:

“We believe that the cost shift occurs because Medicare and Medicaid pay 69 cents on the dollar for our costs,” said Julie Lonborg, [a] spokeswoman [for the Colorado Hospital Association].


the cost shift has grown over the past nine years, according to the state report. In 2009, Medicare and Medicaid in Colorado paid 78 cents and 54 cents, respectively, for every $1 worth of care their patients received. Privately insured patients paid $1.55 for every $1 worth of care

By the way if the reason for higher private payments is lower public payments, then what would you predict for hospital margins? Maybe you’d think they’d be close to zero. For what reason would the be higher if you believe that only cost shifting explains the public-private price gap? Or, at least maybe you’d think they’d hold steady. But, Colorado

hospital margins — the money left over after payments are taken in and expenses are paid — increased from $417 million to $1.2 billion [between 2009 and 2017].

The consistent way to explain all of this is pretty simple. (Whispers, “Market power.” Mumbles, “Price discrimination.”) There are several other weird explanations for increasing hospital margins in the article. None of them make sense to me.

The Aspen Times ran a related AP article on February 3.

“One conclusion could be that the benefits of Medicaid expansions and the ACA (have) not been passed onto commercial insurance, employers or commercial consumers,” the report states.

This is a rather devastating argument against cost shifting. If the reason private payments go up is because of public payment shortfalls, then when public programs pay more, shouldn’t private payments go down (at least relative to the counterfactual trend)? In all my years of focus on cost shifting,* I cannot recall a single example of a premium reduction dividend due to (as in, caused by) higher public payments. (If you know of one, let me know.)

I have not read the state report (titled “Cost Shift Analysis Report“). The Colorado Hospital Association has also recently released a report (titled “Health Care Costs and Hospitals: Drivers and Opportunities“). I have not read it either, but a word search reveals that it includes this:

Another possible factor suggested by external research (such as the most recent CHASE Cost Report) is the volume of cost shifting, as areas with very low Medicaid reimbursement rates may need to charge proportionally more of their private insurers—a cost that the insurers likely pass directly onto the patients.

I would be happy to discuss cost shifting with anyone involved in the Colorado debate (or that of any state, for that matter).

* If you’re new to the blog, we have a cost shifting tag, under which you will find everything I’ve ever done on the topic.


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