Can cost shifting continue in a price competitive environment?

Abstract:

:Both Medicare and Medicaid are reducing payments to hospitals, and there is widespread concern that hospitals may respond by increasing prices to privately insured patients. Theoretical models of hospital behaviour have ambiguous predictions as to whether, and under what circumstances, hospitals will shift costs to private payers. This paper extends previous theoretical models and then tests empirically using data from California for the 1983-1991 period, a time of increasingly intense price competition. Hospitals did increase their prices to private payers in response to reductions in Medicare rates; they had far smaller and generally insignificant responses to changes in Medicaid reimbursement. Hospital ownership and the competitiveness of the hospital market both affected this behaviour, but there was no significant change over time. The results suggest the need to broaden our models of hospital behaviour to 'embed' them in their local markets.

journal_name

Health Econ

journal_title

Health economics

authors

Zwanziger J,Melnick GA,Bamezai A

doi

10.1002/(sici)1099-1050(200004)9:3<211::aid-hec508

keywords:

subject

Has Abstract

pub_date

2000-04-01 00:00:00

pages

211-26

issue

3

eissn

1057-9230

issn

1099-1050

pii

10.1002/(SICI)1099-1050(200004)9:3<211::AID-HEC508

journal_volume

9

pub_type

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