Cost Shifting In Health Care Essay
Cost Shifting and Uncompensated Care in Health Care
Cost shifting has been and continues to be a problem for many hospitals and insurance companies. In broad terms cost shifting is defined as hospitals making up their losses they obtain from treatment of uninsured patients by charging higher prices and implementing higher costs towards privately insured patients. This approach in tittles claims of large rates that in return drive health care premiums to a peak cost. The continuing debate on cost shifting has brought stakeholders to provide an approach towards health care policy makers to understand that cost shifting can be both at large and inevitable in providing cost effective health care. The cause of cost shifting can be seen from many hospitals due to uncompensated care. In terms, uncompensated care is the care provided by the hospital for which the cost of treatment was not received neither from the patient or the insurer. This type of financial assistance reimburses funds or reduces costs, which can have an effect on the hospitals bad debt (Kim et al., 2009). …show more content…
A recent analysis on the Medicare cost reports indicated that uncompensated care identifies for at most 10% of hospital costs in the US.
To understand further, the breakdown of uncompensated care costs between private not-for-profit hospitals (4.8%) shows a slight difference than for for-profit hospitals (4.2%) (Frakt, 2014). Despite the benefits of cash flow, which is another concern for not-for-profit and for-profit hospitals as the excess cash flow for not-for-profit hospital goes towards charity and community care, where as for-profit hospitals use cash flow towards investments and paying back stock holders dividends instead of providing higher levels of uncompensated care. This effect causes health care to focus on cost shifting form means of balanced profit for the losses acquired from charitable financial
assistance. The current assumption on cost shifting on the amount of payments that are provided by public relatively decreases, hospitals there for will gear towards raising private prices. In result, insurer’s premiums for health care will continue to raise making health care purchasing increasingly more difficult for the public and firms (Baicker & Goldman, 2011). In an empirical literature review, Frakt (2011) found that cost shifting is at a low rate compared towards public payers’ shortfalls which are assisted by cost cutting. The process of cost cutting is response towards Medicare payments shortfalls; as operations of hospitals are publicly and privately consistent in insured patients, cost cutting can have a spillover effect which can cause lower private prices (Frakt, 2014).
Cost sharing has currently both publicly and privately has drifted down, but amongst consumers that are whiling to purchase insurance on their own have seen significant higher levels of cost sharing compared to individuals that obtained insurance through an employer. While the publicly insured individuals have gained a much lower level of cost sharing (Baicker & Goldman, 2011). The effect of cost sharing can have an influence towards the prices patients face towards the charge of health care services which may affect the consumption of balancing or substituting services. The effect of cost sharing not only affects services directly by change in price; it also affects single good services.
According to Baicker & Goldman (2011) an example of cost sharing effect in their literature review was that of increase in pharmaceuticals prices which in return causes surgical alternatives more attractive to patients; or that of rising prices of physician visits may make it less likely that patients receive a prescription.
Cost shifting has been and continues to be a problem for many hospitals and insurance companies. In broad terms cost shifting is defined as hospitals making up their losses they obtain from treatment of uninsured patients by charging higher prices and implementing higher costs towards privately insured patients. This approach in tittles claims of large rates that in return drive health care premiums to a peak cost. The continuing debate on cost shifting has brought stakeholders to provide an approach towards health care policy makers to understand that cost shifting can be both at large and inevitable in providing cost effective health care. The cause of cost shifting can be seen from many hospitals due to uncompensated care. In terms, uncompensated care is the care provided by the hospital for which the cost of treatment was not received neither from the patient or the insurer. This type of financial assistance reimburses funds or reduces costs, which can have an effect on the hospitals bad debt (Kim et al., 2009). …show more content…
A recent analysis on the Medicare cost reports indicated that uncompensated care identifies for at most 10% of hospital costs in the US.
To understand further, the breakdown of uncompensated care costs between private not-for-profit hospitals (4.8%) shows a slight difference than for for-profit hospitals (4.2%) (Frakt, 2014). Despite the benefits of cash flow, which is another concern for not-for-profit and for-profit hospitals as the excess cash flow for not-for-profit hospital goes towards charity and community care, where as for-profit hospitals use cash flow towards investments and paying back stock holders dividends instead of providing higher levels of uncompensated care. This effect causes health care to focus on cost shifting form means of balanced profit for the losses acquired from charitable financial
assistance. The current assumption on cost shifting on the amount of payments that are provided by public relatively decreases, hospitals there for will gear towards raising private prices. In result, insurer’s premiums for health care will continue to raise making health care purchasing increasingly more difficult for the public and firms (Baicker & Goldman, 2011). In an empirical literature review, Frakt (2011) found that cost shifting is at a low rate compared towards public payers’ shortfalls which are assisted by cost cutting. The process of cost cutting is response towards Medicare payments shortfalls; as operations of hospitals are publicly and privately consistent in insured patients, cost cutting can have a spillover effect which can cause lower private prices (Frakt, 2014).
Cost sharing has currently both publicly and privately has drifted down, but amongst consumers that are whiling to purchase insurance on their own have seen significant higher levels of cost sharing compared to individuals that obtained insurance through an employer. While the publicly insured individuals have gained a much lower level of cost sharing (Baicker & Goldman, 2011). The effect of cost sharing can have an influence towards the prices patients face towards the charge of health care services which may affect the consumption of balancing or substituting services. The effect of cost sharing not only affects services directly by change in price; it also affects single good services.
According to Baicker & Goldman (2011) an example of cost sharing effect in their literature review was that of increase in pharmaceuticals prices which in return causes surgical alternatives more attractive to patients; or that of rising prices of physician visits may make it less likely that patients receive a prescription.