Unpaid care hikes private insurance premiums by billions

Privately insured Americans pay at least hundreds of dollars more in premiums each year to help cover the cost of caring for the nearly 46 million uninsured people in the U.S, according to a new report commissioned by the health advocacy group Families USA.

Some hospitals, physician group practices and other health professionals are able to recoup some costs of caring for the uninsured by negotiating higher payment rates from private insurers, a phenomenon known as cost-shifting. Hospitals and others provided $116 billion worth of care to the nation's uninsured in 2008, including $42.7 billion that wasn't paid for by the government or the uninsured patients, according to the report. "Hidden Health Tax: Americans Pay A Premium," released May 28, was based on an analysis by actuarial consultants Milliman Inc. (link).

Shifting this $42.7 billion in costs to private insurers added an average of $1,017 to families' annual premiums, which totaled about $13,275 in 2008, the report concluded. Individuals paid $368 more in premiums because of cost-shifting, for an average yearly cost of $4,803 in 2008. "Unless and until health coverage is expanded, businesses and insured families will continue to be hit hard in the pocketbook by a large hidden health tax," said Families USA Executive Director Ron Pollack.

Public hospitals shifted 3% to 4% of their uncompensated care costs to private insurers in 2006, said Larry Gage, president of the National Assn. of Public Hospitals and Health Systems, which represents about 130 hospitals. "We do cost-shift wherever we can," Gage said.

Senate Finance Committee Chair Max Baucus (D, Mont.) and other lawmakers have cited cost-shifting as one key reason to adopt health system reform that would cover as many of the 45.7 million uninsured as possible. Pollack said offering health insurance to all of the nation's uninsured would not immediately end cost-shifting and lower insurance premiums, but it would start that process.

Another cost-shifting report reached a more conservative estimate. A study commissioned by the Kaiser Family Foundation projected that there was $57.4 billion of uncompensated care in 2008, including $35 billion by hospitals, $14.6 billion by community facilities and $7.8 billion by private, office-based physicians. The Families USA report did not offer similar detail. The Kaiser report was published Aug. 25, 2008, in an online edition of Health Affairs (link).

The Kaiser report concluded that hospitals and physicians would only be able to shift $14.1 billion of those costs to private insurance in 2008. That report accounted for certain government payments to help care for the uninsured, such as Medicare payments to hospitals that serve large low-income populations. The Families USA analysis did not take those payments into account because the group said they are designed to support the cost of caring for Medicare patients. The Kaiser report also assumed that hospitals and physicians would absorb some of the uncompensated care costs by lowering their profit margins.

A co-author of the Families USA report agreed that not all physician practices can negotiate higher private insurance fees. "Our impression ... is that nonspecialist physician practices are less able to shift costs," said Kathleen Stoll, the organization's director of health policy. She added that hospitals appear to be able to cost-shift more than physicians can.

No matter the figure, cost-shifting occurs, according to Robert Moffit, PhD, director of the Center for Health Policy Studies at the Heritage Foundation, a conservative think tank based in Washington, D.C. "Substantively, what they're saying is correct," Moffit said. However, the size of the shift varies widely from state to state, he said.