Maybe some good news for medical patients everywhere except in Dallas? This strange story was reported in the Dallas Morning News recently. The gist of the article is that a reduction in Medicare reimbursements usually results in a reduction of medical costs for everyone, even those not on Medicare. But for some reason this does not hold true for Dallas. Here are excerpts from the story:
Most hospitals cope with low Medicare payments by reducing costs rather than shifting higher charges to privately insured patients, according to a study released in the journal Health Affairs.
Author Chapin White, a senior researcher with the Washington-based Center for Studying Health System Change, based his findings on 15 years of payment data collected nationwide.
“When Medicare pushed down their prices, hospitals have had to kind of rein in their costs structure and operate more efficiently,” White said. “When hospitals tighten their belts, we end up with lower private prices as well.”
The findings did not hold true in the Dallas area, however. Low Medicare reimbursements — the federal insurance program for the elderly and disabled — didn’t hold the line on prices for privately insured patients, which went up an average of 4.5 percent a year.
“It seems like there’s something going on in that market where hospitals are doing an unusually good job of getting higher and higher prices from private insurers,” White said.
Hospital administrators in Dallas argue that high numbers of uninsured patients and low Medicare and Medicaid fees compel them to charge more to privately insured patients.
The shifting of these uncompensated costs to private payers adds more than $1,000 a year to the cost of a family health insurance policy, by some estimates.
During the years covered by White’s study, Dallas-area hospital administrators contended that Medicare reimbursements covered only about 80 percent of their costs. After considerable cost-cutting, Baylor Health Care System says it still gets back only 91 cents from Medicare for every dollar it spends on Medicare patients.
Steve Love, president and CEO of the Dallas-Fort Worth Hospital Council, said his members have responded to the latest curbs in Medicare payments by cutting costs and becoming more efficient. But he said the large number of uninsured patients left area hospitals no choice but to shift some of their costs to privately insured patients.
White examines one of the fundamentals of the hospital business: Should they charge more for those who can afford it to cover the costs of those who can’t? Or should they squeeze costs out of their operations and lower rates to bring in more customers?
The first option describes what happened in Dallas between 1995 and 2009. White’s research shows Dallas hospital costs increased on average 3.5 percent a year. Medicare reimbursements during that period went up 2.7 percent a year. Privately insured patient rates, meanwhile, increased 4.5 percent a year.
White found no evidence of cost-shifting in Chicago, Atlanta, St. Louis, Las Vegas and Manhattan, and it wasn’t evident in nationwide numbers, either.
The cost-shifting question is becoming more important. Under the Affordable Care Act and the latest round of federal budget cuts, Medicare reimbursements are being squeezed. When these laws were being debated, hospitals argued that reimbursements needed to increase to more closely match costs.
The Medicare Payments Advisory Commission, meanwhile, countered that the evidence shows increasing reimbursements increases hospital costs — the more hospitals are paid, the more they spend.
Curbing reimbursements, White contends, leads to lower costs and, more often than not, lower rates for privately insured patients.
When the increase in Medicare reimbursements slows down by 10 percent, he said, rates for the privately insured slow by 3 percent to 8 percent.
“Repealing the cuts in Medicare payment rates would not only increase federal spending but would also accelerate the growth in private insurers’ costs and premiums,” White concluded.