A new report by a casualty insurance industry think tank says hospitals are cost-shifting billions of dollars in overcharges to automobile insurance companies to offset low reimbursements from Medicare/Medicaid.
A spokeswoman for the American Hospital Association did not deny the allegation. "This report highlights what hospitals have long known: Medicare and Medicaid pay less than the cost of caring for patients," said Caroline Steinberg, AHA’s vice president for trends analysis for policy. "When the government fails to pay its share of healthcare costs, it threatens the financial viability of hospitals, and places upward pressure on the rates paid by private insurers."
The Insurance Research Council report said that in 2007 auto insurance companies paid more than $1.2 billion in excess hospital charges for bodily injury liability claims in 38 tort and add-on states. The full impact of hospital cost shifting, including that in other states, is likely much greater, and will likely prompt auto insurers to more closely scrutinize and negotiate hospital bills, the report said.
"The conventional wisdom is that hospitals aggressively seek to shift costs from public insurance programs to private payers such as auto insurance companies," said Elizabeth Sprinkel, senior vice president of the IRC, in a media release. "With this study, we now have information on the magnitude of cost shifting and a better understanding of the need for supportive state laws and effective tools that will enable auto insurers to pay hospitals appropriately and help control auto injury claim costs."
Steinberg suggested that cost shifting will be an issue as long as hospitals lose money on Medicare/Medicaid, which pay for more than 50% of the care provided by hospitals. In 2008, she said, Medicare/Medicaid payments averaged 90 cents for every dollar spent by hospitals, even as hospitals provided more than $36 billion in uncompensated care. More than half (53%) of hospitals received Medicare payments less than cost, and 56% of hospitals received Medicaid payments less than cost, Steinberg said.
The IRC study, Hospital Cost Shifting and Auto Injury Insurance Claims, studied more than 42,000 auto injury claims. Twenty-two insurers representing 58% of the private auto insurance market participated. The study collected detailed data on injury, medical treatment, claimed losses and total payments, claim handling techniques, and attorney involvement.
IRC found that key predictors of average hospital charges are the percentage of a state's population without health insurance, and the percentage of the population covered by Medicaid.
Sprinkel said the IRC has yet to determine the impact of healthcare reform. "Healthcare legislation enacted by Congress last month underscores the complexity of this relationship," she said. "It will take months, if not years, to understand the full impact of the reforms on hospital cost shifting and the auto insurance system."