Hospital Cost Shifting and Care for the Uninsured

Abstract

Prologue: One of the most vexing challenges facing the U.S. health care system today is how to care for people who lack health insurance, a population that now numbers about thirty million people. As a variety of cost-control schemes take hold, hospitals may become ever more vulnerable financially to treat the uninsured without compensation. With the implementation of Medicare's prospective payment system, many analysts believed that hospitals would compensate for government reductions in revenue by increasing their charges to privately insured patients. The following article by Jack Hadley and Judith Feder, codirectors of the Center for Health Policy Studies at Georgetown University, counters that commonly held view. The article suggests that hospitals do not increase their markups from privately insured patients when revenues are squeezed. Instead, they reduce personnel, postpone pay increases, and limit charity care. While the data gathered for this study do not reflect the effects of the DRG system, the findings do show that markups are not the safety valve for hospitals facing financial pressure. Hadley and Feder, both prominent social scientists who have pursued health policy both together and separately for more than ten years (together at the Urban Institute and at the National Center for Health Services Research), delineate some changes in public policy that they feel would help remedy the impact of hospital cutbacks on the uninsured. The authors do not contend that their solutions are panaceas, but they are convinced that several of the current proposals are an improvement over the status quo.