Answer

Cost Shifting in Medicare

Introduction

Cost shifting often happens whenever extra charges are made to an insured patient, that are higher than those made to an uninsured patient by a given healthcare provider for a similar service or procedure in hospital. In most healthcare units, the insured patients often compensate for any financial loss made during provision of medical services to the uninsured party.

Health care policies that use cost shifting.

The first policy that employs cost shifting is highly charging of all private payers to cater for any shortfalls made during public payments (Iuga et al, 2014). However, this policy is still debatable even though there are several theoretical and empirical literature studies that have been made towards the same.

Market power and profit maximization entails negotiations by private payers concerning certain payments made by providers through use of their powers to selectively contract the available contracting networks. This is steered upon with an aim of gaining a more negotiation power. In this case, Medicaid is considered the prototypical public payer despite all Medicaid programs having the same characteristics (Iuga et al, 2014). In this policy, the cost shifting theory puts more focus on health care providers who deal with both private and public patients.

Basing on the policy of utility maximization, hospitals often maximize on all available resources for charitable purposes to reduce room for cost shifting. This can be guided by set missions and stakeholder influence especially those with varying objectives. All non-profit hospitals are expected to charge profit maximizing prices to some of their payers because a good percentage of hospitals in community hospitals are considered to be nonprofit public institutions.

Benefits of cost shifting

• Cost shifting establishes high transparency in the healthcare cost and saving programs for both employers and employees.
• It outlines all shared savings among the members to limit chances of cost shifting to the employees’ units (Horwitz et al, 2013)
• Cost shifting further reduces all burdens that result from cost sharing through expansion of the ACA’s free preventive services benefits
• It also allows millions of people to benefit from the slow down health care spending initiatives.

How Affordable Care Act decreases cost shifting within hospitals

Affordable Care Act enhances care cutting related practices through application of various mechanisms like introduction of financial penalties to cater for hospital readmissions (Edwards et al, 2014). This is an incentive that regulates the number of patients in a hospital since it keeps most of the out, and facilitates rewarding of providers assigned to diverting patients to other outpatient clinics.

The ACA also offers direct premium discounts to its participating employees. However, this is derailed by the fact that most health disorders are as a result of genetic malfunctions, choice of lifestyle or other economic factors, impacting the poor disproportionately.

The Accountable Care Organization payment model compensates for all incurred costs by integrated group of providers on a highly capitated basis for the entire care steered to a given population (Edwards et al, 2014). It also allows shifting of new health reforms to encourage integration and increase of the market power of providers. Private prices often increase whenever the market power of plans is either held constant or weakened at some point, regardless of whether changes are made in public payments.