Cost-Shifting: Government vs. the Uninsured

An important study by the actuarial firm, Milliman finds that Medicare underpays hospitals by $34.8 billion and physicians by $14.1 billion, while Medicaid underpays hospitals by $16.2 billion and physicians by $23.7 billion. These amounts are made up for by commercial payers, resulting in 18% greater costs for private carriers for hospital services and 12% for physician services.

Milliman does not separate out the uninsured self pay population from those covered by other government programs, but if one-half of the loss is from the uninsured, we are looking at approximately $6 billion, one-fifth of the loss from Medicare and Medicaid!

Yet the issue of uncompensated care for the uninsured is one of the primary drivers of the current push for mandatory coverage and health reform. It has been called a "hidden tax" that we all pay for, and is seen as justification for a massive reordering of the entire health care system. But hardly any attention is paid to underpayment by public programs, a problem that is perhaps five times greater!

And you wonder why public policy so often goes astray.

Comments (7)

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  1. Joe S. says:

    Excellent point. And think how much more cost shifting there will be if (ala Obama) 100 million more people are paying Medicare rates.

  2. Ken says:

    Also amazing that the hospitals make such a big deal about uncompensated care, but are much less vocal about Medicare and Medicaid underpayment.

  3. Bruce says:

    I agree that the private payers pay more. But not everyone thinks that Medicare pays too little. Pat Rooney argued (in the book reviewed at this site somewhere) that what Medicare pays is what it costs an efficiently run hospital to provide the care.

  4. Bart says:

    …what Medicare pays is what it costs an efficiently run hospital…

    I could believe that it pays the marginal costs, leaving the rest of us to pick up the fixed costs. Otherwise nobody would accept Medicare patients.

  5. Jahn says:

    Sorry, I'm not following the math. How do you get from the first paragraph to the second? How is half the loss 6 billion? For that matter why is the full loss 12 billion? Why is the loss not the total of the four numbers in the first paragraph (34.8+14.1+16.2+23.7=88.8 billion)? How do the percentages of greater cost in the first paragraph come in to play? Where does the 1/5 come from? If somebody could clarify, I'd really appreciate it. Related: "It's not the uninsured, stupid!" Michael Canon, CATO institute "Don't blame the uninsured" John R. Graham, Pacific Research Institute

  6. Lisa says:

    My scientific impression: What a piece of crap that supposedly passes for a study! Look at who paid the supposedly respected Milliman firm for this study. The conclusions could have been predicted a la Karnac… head to closed report cover!

  7. AtheistConservative says:

    “Look at who paid the supposedly respected Milliman firm ”

    I’ve never understood this reaction. Well, that’s a lie – I understand it. It’s what your type trots out whenever the facts disagree with you. Those facts can’t be real! Someone I disagree with PAID for them to be published!

    By your logic, any argument for government-run health care that uses numbers provided by the government cannot be accepted.

    Either show proof that their numbers are wrong, or just accept reality. I know it’s tough for left-wingers, but give it a try. It’s refreshing.