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News of the Day ... In Perspective


Cost shifting from Medicare/Medicaid adds billions to medical bills

In 2004, hospitals in Washington State charged private payers $738 million more—14.3% of their revenue—to compensate for Medicare and Medicaid underpayments, according to a study by Milliman Inc. commissioned by Premara Blue Cross. In addition, doctors shifted $620 million, or 12%.

A similar study in California found that health plans and consumers paid $4.5 billion in added hospital charges to compensate for Medicare and Medicaid underpayments. This study did not look at physicians’ charges.

Unpaid bills for the uninsured, amounting to some $45 billion per year, are said to add 8.5% to the cost of health insurance.

“This is a serious national problem, and it is only going to get much worse,” said Helen Darling, president of the National Business Group on Health (Milt Freudenheim, NY Times 6/1/06).

“In 2004, this hidden tax cost Washington employers an average of $902 per family health insurance contract—13% of all commercial hospital and physician costs,” stated a Premara press release, which is linked to the full Milliman report.

Linda Gorman of the Independence Institute in Colorado notes difficulties in interpreting the report, which specifically states that “non-operating, tax, and other operating revenue and expense are not included.” Apparently, DSH [disproportionate share] payments or other state aid is not also included. Moreover, she adds, the Washington state auditor found about $1 billion in improper Medicaid payments by state government.

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