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Posting date: October 8, 2003 Copyright © 2003 by Project HOPE
Can Hospitals And Physicians Shift The Effects Of Cuts In Medicare Reimbursement To Private Payers?
1 Paul Ginsburg, an economist, is president of the Center for Studying Health System Change in Washington, D.C.
*Corresponding author.
Leaders of health insurance companies, hospital systems, and physician organizations believe that when Medicare and Medicaid reduce payment rates to hospitals or physicians, these providers respond by raising prices to private insurers to offset a portion of the loss in revenue. This would mean that payment reductions in public programs contribute to increasing premiums for private insurance. But on both theoretical and empirical grounds, economists have been skeptical about the existence of this "cost shifting." I show that more realistic models of the behavior of hospitals and physicians than exist in basic economics texts provide a conceptual basis for cost shifting. Key Words: Medicare, Health Spending, Hospitals, Consumer Issues, Physicians
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