Post by unlawflcombatnt on Sept 12, 2009 2:17:56 GMT -6
Health Insurance Companies continue to perpetuate the fairy tale about "cost-shfting"—the notion that the cost of uncompensated care for the uninsured is "shifted" onto the backs of insurance companies and their enrollees. This is an outright lie, and a whopper at that.
It's very important to realize just how big a lie this is, considering how frequently it's regurgitated in the health care reform debate.
Hospitals and doctors negotiate with insurers on reimbursement (and obviously with insurers having the upper hand in almost all cases). In the end, agreed upon reimbursement rates are determined. Uninsured patients seen in the hospital or in private offices have NO effect whatsoever on how much hospitals and doctors are paid by insurance companies. The reimbursement rates have already been determined. Hospitals and doctors negotiate the best rates they can get, regardless of how much their costs are—including the costs of uncompensated care. If hospitals & doctors don't get a high enough reimbursement rate from an insurer, they won't accept the insurance. But again, the cost to an insurer of paying for medical care of its enrollees has nothing to do with the losses that hospitals and doctors incur from providing uncompensated care. Those costs are born entirely by the providers, not insurers.
In some cases, a hospital that is known to provide a lot of uncompensated care will get a grant from the government to compensate them for some of those costs. But here again, this has nothing to do with what insurance companies pay out for their insured patients.
This can be seen as a simple supply & demand situation. The insurance companies have a demand for doctors & hospitals. Doctors & hospitals furnish the supply of medical care. Insurance companies pay the lowest price possible to meet their demand. Doctors & hospitals negotiate for the highest reimbursement they can get. Uncompensated costs for doctors or hospitals have no role in this process. In theory, doctors & hospitals could try to use their uncompensated costs as a reason for higher reimbursement. In reality, insurance companies completely ignore it. Their only concern is how little health care providers will accept as reimbursement for their services, regardless of any reasons they give. By the same token, providers negotiate for the highest reimbursement they can get, regardless of what their costs are.
Whether a doctor provides $50 or $5,000 per month of uncompensated care, the insurer will reimburse the same, prior-negotiated amount for their covered enrollees. The doctors own business finances have 0 effect on what the insurer will pay. Whether a doctor has $0 or $5,000 of uncompensated costs, the doctor has the same value to the insurer.
Some might claim the doctor would hold out for more, if he had higher costs. Not true. The cost of covering the insurance company's patients is unaffected by the cost to the doctor of the uncompensated care for other patients. They're completely separate pools.
There is one way, however, that uncompensated care might seemingly raise insurance company costs. If enough doctors or doctors' groups were put out of business by losses from providing uncompensated care, then it would theoretically reduce the supply of private office doctors available to insurance companies.
But the key word is "seemingly." It does not work that way in actual practice. The newly unemployed doctors increase the supply of doctors available for salaried work and group work—since few doctors are willing to quit practicing, nor can they actually afford to quit practicing. (Student Loan Debt is not bankrupt-able, and many doctors owe well over $200K.) As such, doctors seek group practice work, or even HMO work. Since these groups and HMOs often contract with the same insurance companies the involved physician previously contracted with, there's no net change in the "supply" of medical care available, and thus no upward pressure on "prices" (i.e., physician reimbursement rates).
In summary, the notion that everyone with insurance pays more because of the cost of uncompensated care for the uninsured is preposterous. It's just one more outrageous lie told by the health insurance industry.
It's very important to realize just how big a lie this is, considering how frequently it's regurgitated in the health care reform debate.
Hospitals and doctors negotiate with insurers on reimbursement (and obviously with insurers having the upper hand in almost all cases). In the end, agreed upon reimbursement rates are determined. Uninsured patients seen in the hospital or in private offices have NO effect whatsoever on how much hospitals and doctors are paid by insurance companies. The reimbursement rates have already been determined. Hospitals and doctors negotiate the best rates they can get, regardless of how much their costs are—including the costs of uncompensated care. If hospitals & doctors don't get a high enough reimbursement rate from an insurer, they won't accept the insurance. But again, the cost to an insurer of paying for medical care of its enrollees has nothing to do with the losses that hospitals and doctors incur from providing uncompensated care. Those costs are born entirely by the providers, not insurers.
In some cases, a hospital that is known to provide a lot of uncompensated care will get a grant from the government to compensate them for some of those costs. But here again, this has nothing to do with what insurance companies pay out for their insured patients.
This can be seen as a simple supply & demand situation. The insurance companies have a demand for doctors & hospitals. Doctors & hospitals furnish the supply of medical care. Insurance companies pay the lowest price possible to meet their demand. Doctors & hospitals negotiate for the highest reimbursement they can get. Uncompensated costs for doctors or hospitals have no role in this process. In theory, doctors & hospitals could try to use their uncompensated costs as a reason for higher reimbursement. In reality, insurance companies completely ignore it. Their only concern is how little health care providers will accept as reimbursement for their services, regardless of any reasons they give. By the same token, providers negotiate for the highest reimbursement they can get, regardless of what their costs are.
Whether a doctor provides $50 or $5,000 per month of uncompensated care, the insurer will reimburse the same, prior-negotiated amount for their covered enrollees. The doctors own business finances have 0 effect on what the insurer will pay. Whether a doctor has $0 or $5,000 of uncompensated costs, the doctor has the same value to the insurer.
Some might claim the doctor would hold out for more, if he had higher costs. Not true. The cost of covering the insurance company's patients is unaffected by the cost to the doctor of the uncompensated care for other patients. They're completely separate pools.
There is one way, however, that uncompensated care might seemingly raise insurance company costs. If enough doctors or doctors' groups were put out of business by losses from providing uncompensated care, then it would theoretically reduce the supply of private office doctors available to insurance companies.
But the key word is "seemingly." It does not work that way in actual practice. The newly unemployed doctors increase the supply of doctors available for salaried work and group work—since few doctors are willing to quit practicing, nor can they actually afford to quit practicing. (Student Loan Debt is not bankrupt-able, and many doctors owe well over $200K.) As such, doctors seek group practice work, or even HMO work. Since these groups and HMOs often contract with the same insurance companies the involved physician previously contracted with, there's no net change in the "supply" of medical care available, and thus no upward pressure on "prices" (i.e., physician reimbursement rates).
In summary, the notion that everyone with insurance pays more because of the cost of uncompensated care for the uninsured is preposterous. It's just one more outrageous lie told by the health insurance industry.