Cost shifting taking its toll on insurers


EVPR-00017920-001A report released by the Insurance Research Council of 2007 said hospitals charge excessive prices on insurance claims from consumers for bodily harm and automobile insurance agencies have to shell out in Billions yearly. Hospitals receive low returns from Medicare schemes and this puts a burden on insurers.

Caroline Steinberg American Hospital Association, vice president said after analyzing recent events that this was indeed true. “This report highlights what hospitals have long known: Medicare and Medicaid pay less than the cost of caring for patients. When the government fails to pay its share of healthcare costs, it threatens the financial viability of hospitals, and places upward pressure on the rates paid by private insurers.” Caroline said.

The Insurance Research Council report 2007 stated that more than $1.2 billion was paid by insurance companies during that year because of hospital’s charging excess on claims. As insurers see that the impact of hospital cost shifting over a large period can be financially crippling, they now are more careful with the handling of hospital bills and charges for tests.

“The conventional wisdom is that hospitals aggressively seek to shift costs from public insurance programs to private payers such as auto insurance companies,” said Elizabeth Sprinkel. “With this study, we now have information on the magnitude of cost shifting and a better understanding of the need for supportive state laws and effective tools that will enable auto insurers to pay hospitals appropriately and help control auto injury claim costs.” Sprinkel, IRC’s vice president stated.

Cost shift is a result of losses hospitals face. Medicare and Medicaid are expected to pay 50% of the bills covered by the hospital. In 2008 hospitals were covered 90% of the costs and still were under a loss of $36 billion, Steinberg insisted.

Hospital Cost Shifting and Auto Injury Insurance Claims, a study by the IRC involved examining 42,000 auto injury claims. This study based on various factors shows that only those people who do not have insurance are the main reason for the high cost for hospitals and no for cost shifting and the prices insurers have to pay.

The IRC is still unaware of the effects of healthcare reform. “Healthcare legislation enacted by Congress last month underscores the complexity of this relationship,” she said. “It will take months, if not years, to understand the full impact of the reforms on hospital cost shifting and the auto insurance system.” Sprinkel said.