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Cost-shifting in Hospitals

By Rich Umbdenstock
March 26, 2015

Earlier this week the New York Times ran a column about hospitals cost shifting to private insurers. Here is the reality for hospitals.

Cost shifts have been a fact of hospital financial survival for decades. Currently Medicare pays 88 cents for every dollar of care provided while Medicaid pays 90 cents for each dollar of care, creating a $51 billion shortfall to hospitals. Private insurers currently pay $1.43 for every dollar of care provided to close that gap.  In 1999, for example, Medicare paid dollar for dollar and Medicaid paid 96 cents on the dollar.  That year private payers paid $1.15 for each dollar of care.

The data show – as this chart illustrates – how private payment is a mirror image of public payment over time and that the cost shift occurs.  Hospitals must make up for shortfalls through a combination of approaches and cost shifting is among them.

Topic: Access and Coverage
Tags: Medicare, Medicaid, access, uncompensated care

Richard J. Umbdenstock became president and chief executive officer of the American Hospital Association (AHA) on January 1, 2007. Previously, he was the elected AHA Board Chair in 2006. The AHA leads, represents and serves more than 5,000 member hospitals, health systems and other health care organizations, and 43,000 individual members.



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