Cost-Shifting a Symptom of a Broken Health Care System

The Register Guard (Eugene, OR), September 19, 2010 | Go to article overview

Cost-Shifting a Symptom of a Broken Health Care System


Byline: Roger Hite For The Register-Guard

Bob Welch's article in the Sept. 12 Register-Guard describing the financial crisis facing local ambulance services underscores one of the biggest challenges of restructuring health care financing. Cost-shifting must be eliminated. It is a double tax on every health care consumer, and it allows the government to effectively avoid paying its fair share of health care costs.

Welch did an excellent job of researching and reporting the issues - illustrated by the shocking $1,630 invoice a woman named Leslie Comar received for simply transporting her insulin-dependent son from Autzen Stadium a mile and a half to the hospital via ambulance.

Few of us, fortunately, receive Comar's ambulance bill. But make no mistake - like Comar, most of us are double-taxed by a hidden cost-shift when we pay our private health insurance bills.

It is no exaggeration to say that the $800 health care bill we pay for my wife's private insurance could be reduced by at least $150 each month if it were not for cost-shifting. That's an additional tax of $1,800 each year - slightly more than the single tax levied on Comar through her ambulance experience.

Forty years ago the government paid health care providers on a cost-plus basis for all services provided to people covered by the Medicare entitlement program. At that time, health care costs amounted to less than 6 percent of the gross domestic product.

A cost-plus reimbursement system has a hazard, illustrated by the spocryphal story of a hospital administrator who was considering buying a new $1 million CAT scanner. He asked his controller whether such a piece of equipment was covered under the cost-plus Medicare reimbursement rules. If it was, 50 percent of the cost would be paid by the government, because half the hospital's patients were covered by Medicare. The controller verified that it was covered.

"Good," the administrator said. "Let's buy two!"

Sadly, all health care reimbursement systems will be vulnerable to being gamed by folks determined to maximize their benefits and to serve different agendas. The most ubiquitous game over the years has been the strategy of cost-shifting.

I do not advocate a return to cost-plus financing of health care - it had its share of problems that contributed to waste and inefficiencies in health care. I do believe, though, that as we move toward deploying an effective national health care system we will need to return to some modified form of uniform payment not based on market leverage, volume purchase discounts, or artificial price structures created by government panels.

I hope that as we deploy health care reform legislation and create quasi-private insurance purchasing cooperatives, we do not create another insurance option upon which to unload government shortfalls. …

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Cost-Shifting a Symptom of a Broken Health Care System
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