Let Them Depend On Charity

Merrill Goozner

First published 3/11/11 on Gooz News

Conservative economists writing in today’s Wall Street Journal dismiss the notion that the cost of providing medical care for the uninsured is eventually shifted onto those already insured. Citing an Urban Institute study that appeared in 2008 in Health Affairs, they claim the total cost shift is 1.7 percent at most, or $80 a year for the average plan. They also dismiss as flawed a Families USA study that found there was a significant rise in private insurance premiums to cover the cost of the uninsured.

How did the Democratic-controlled Congress that passed health care reform go wrong by accepting this premise?

Congress ignored the $40 billion to $50 billion that is spent annually by charitable organizations and federal, state and local governments to reimburse doctors and hospitals for the cost of caring for the uninsured. These payments, which amount to approximately three-fourths of the cost of such care, mitigate the extent of cost shifting and reduce the magnitude of the hidden tax on private insurance.

A few paragraphs later, they attack the health care reform law for relying on Medicaid to cover about half the uninsured who will receive coverage under the act:

Medicaid payments to doctors and hospitals are so low that the program creates a cost shift of its own. In fact, a long line of academic research shows that low rates of Medicaid reimbursement translate into higher prices for the privately insured.

So patients who pay nothing or almost nothing do not shift costs because the providers — doctors and hospitals, primarily — get mostly reimbursed for that care by charities and the government. Yet discounted payments through Medicaid are made whole by cost shifting to private plans.

Ask yourself these few questions to debunk this contradictory and transparent nonsense:

If hospitals reduce their charitable care expenses (a line item expense for every non-profit and for-profit hospital in the U.S.), will that not result in lower costs for everyone else? Or will they siphon off these reduced charitable expenses as increased profits?

If government payments for the disproportionate share program largely “make up” for the cost of uncompensated care (no cost shift), doesn’t expanding Medicaid to cover those uninsured simply result in reductions in those DSH payments — an intra-governmental transfer that doesn’t require cost shifting to make up for their inadequacy?

Okay, so much for ideologues masquerading as economists. There’s a far more profound reason for wanting to cover the uninsured than eliminating cost-shifting within the system.

People who show up for charitable care usually do so at a time when the cost of their care has become most expensive — long after  festering conditions have manifested themselves as acute crises that require emergency room care. Surely, covering the uninsured results in an increase in use of medical services on the front end as those who have gone without preventive and routine care seek out care. But in the long run, use of such services should result in a reduction of the overall health care costs.

Of course, that won’t be true if the routine preventive services delivered to the newly insured (and everyone else) are wasteful or not cost-effective — like prostate cancer screening for middle-aged men or routine CT scans for smokers before they get lung cancer.  But, alas, the Republicans on Capitol Hill are trying to eliminate our ability to figure out what constitutes the most effective and cost-effective forms of preventive and routine care, as Paul Krugman’s column in today’s New York Times points out.

As he points out, the conservatives who are now dominating the national discussion are plunging us deeper and deeper into an age of idiocy.

Merrill Goozner is an independent health care journalist, writing for mainstream publications. He also writes at Gooz News.

This entry was posted in Analytics, Benefits, Medical Management, Policy/Law/Regulation, Reform and tagged , , , . Bookmark the permalink.

One Response to Let Them Depend On Charity

  1. Steven Cosby says:

    “Surely, covering the uninsured results in an increase in use of medical services on the front end as those who have gone without preventive and routine care seek out care. But in the long run, use of such services should result in a reduction of the overall health care costs.”

    It is a given assumption in health policy that the uninsured consume about half the care that the insured do. Couple this given by the other given in health care policy that our current system is extremely wasteful, so much so that it is estimated that 50% of all care can be categorized as either waste or lifestyle related. Now, demand that all Americans are mandated to embrace our bloated wasteful comprehensive system through insurance, then acknowledge two things: one, that most uncompensated care comes from the hospital setting; two, that mandated insurance coverage and subsidized coverage that will be provided to millions is coverage far more comprehensive that the current scope of uncompensated care.
    Then understand that zero dollars were allocated in health care reform to our existing free clinics. Many which are well entrenched in their respective communities. However, $11 Billion were allocated for the creation of bureaucratic federally qualified community health centers. But zero dollars for the existing free clinics doing great work today in our communities.

    Consider all of the above, and you may begin to appreciate the conservative opposition to PPACA and the general out of control health care spending going on in our county.

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