Center for Studying Health System Change

Providing Insights that Contribute to Better Health Policy

Search:     
 

Insurance Coverage & Costs Access to Care Quality & Care Delivery Health Care Markets Employers/Consumers Health Plans Hospitals Physicians Issue Briefs Data Bulletins Research Briefs Policy Analyses Community Reports Journal Articles Other Publications Surveys Site Visits Design and Methods Data Files


Contrary to Cost-Shift Theory, Lower Medicare Hospital Payment Rates for Inpatient Care Lead to Lower Private Payment Rates

May 2013
Health Affairs, Vol. 32, No. 5
Chapin White

Many policy makers believe that when Medicare constrains its payment rates for hospital inpatient care, private insurers end up paying higher rates as a result. I tested this “cost-shifting” theory using a unique new data set that combines MarketScan private claims data with Medicare hospital cost reports. Contrary to the theory, I found that hospital markets with relatively slow growth in Medicare inpatient hospital payment rates also had relatively slow growth in private hospital payment rates during 1995–2009. Using regression analyses, I found that a 10 percent reduction in Medicare payment rates led to an estimated reduction in private payment rates of 3 percent or 8 percent, depending on the statistical model used. These payment rate spillovers may reflect an effort by hospitals to rein in their operating costs in the face of lower Medicare payment rates. Alternatively, hospitals facing cuts in Medicare payment rates may also cut the payment rates they seek from private payers to attract more privately insured patients. My findings indicate that repealing cuts in Medicare payment rates would not slow the growth in spending on hospital care by private insurers and would in fact be likely to accelerate the growth in private insurers’ costs and premiums.

Access to this article is available at the Health Affairs Web site. (Free access until May 7, 2014.)

 

 

 


 

Back to Top
 
Site Last Updated: 9/15/2014             Privacy Policy
The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.