Recorded presentation

Rick Mayes, PhD, Department of Political Science, University of Richmond, 28 Westhampton Way, University of Richmond, Richmond, VA 23173, 804-289-8529, bmayes@richmond.edu and Jason S. Lee, PhD, NORC, National Organization for Research at Chicago, 1350 Connecticut Avenue, Suite 500 NW, Washington, DC 20036.

OVERVIEW: Based in large part on a recent invitational meeting sponsored by the Robert Wood Johnson Foundation, this paper examines: (1) the background and political debate over cost shifting, which is the phenomenon in which changes in administered prices of one health care payer (e.g., Medicare) lead to compensating changes in prices charged to other payers (e.g., private insurers, employers) for the same care; (2) the politics that stem from hospitals’ unique position in our country’s health care system as risk-bearing institutions that are heavily dependent on federal revenue; and (3) how cost shifting both affects and is affected by Medicare.

METHOD & DATA: (1) A quantitative analysis (Pearson’s correlation) of hospital payment-to-cost ratios for Medicare, Medicaid, and private payers (1980-2000), based on Medicare cost report data and the American Hospital Association’s Annual Survey of Hospital Costs. The paper also includes (2) a qualitative analysis of how and why policymakers use this data to annually adjust Medicare’s payment rates, based on personal interviews with senior government health care officials and representatives of the hospital industry.

CONCLUSIONS: We find that policymakers manipulate Medicare’s administered price system in response to both hospitals’ use of revenue-enhancing accounting techniques and larger federal budget pressures. We also find that policymakers have a general idea of what Medicare ought to pay for, but they continually debate the extent to which Medicare should subsidize graduate medical education, Medicaid, and charity care provided by hospitals that serve a disproportionate share of poor persons. Invariably, how much Medicare pays providers in any given year is not primarily an analytical but rather a political decision, based on how much the government can afford and which parts of the health care system politically “push” the hardest and most effectively. The paper concludes that cost shifting is becoming an increasingly important issue for individuals, because they have born a disproportionate share of the dramatic increase in health care costs that have occurred in recent years.

Learning Objectives:

• To identify some of the leading factors that influence Congress' annual adjustment of Medicare payment policy and how medical providers (particularly teaching hospitals) respond to changes in reimbursement by public health insurance programs.

Keywords: Access to Care, Hospitals

Presenting author's disclosure statement:
I do not have any significant financial interest/arrangement or affiliation with any organization/institution whose products or services are being discussed in this session.

Recorded presentation