The Impact of Medicare Cost Shifting

It’s a pet theory of mine that employer sponsored health insurance problems can be traced back to Medicare’s adoption of the prospective pricing system back in 1983. I therefore find it interesting that a Milliman principal and consulting actuary Will Fox testified about Medicare and Medicaid price shifting to employer sponsored coverage at a September 16 hearing before the House Energy and Commerce Health Subcommittee. A copy of Mr. Fox’s presentation is here.

Among the findings, which are based on West Coast studies, are the following:
  • Hospitals make 15.9% from Private Insurers to make up losses on Medicare and Medicaid.
  • Cost shifting recently increased private health insurance premiums by 12.2% in California.
  • Cost shifting grows each year.
Medicare cost shifting impacts FEHB plans just like private insurance.