Cost-Shifting and the Uninsured

You don’t “fix” the problem of medical cost-shifting by expanding it.

Today the Rocky Mountain News published a Speakout by Linda Gorman and me about health policy. Following are some excerpts:

SPEAKOUT: A very costly health-care solution
By Linda Gorman and Ari Armstrong
Wednesday, January 30, 2008

… In fact, the commission’s recommendations likely will shift more costs onto those who already have insurance. Along with the individual mandate, the commission recommends large subsidies for those whom the commission considers too poor to purchase the insurance it says they should have. … The commission would also increase cost-shifting by forcing many more people into Medicaid. …

A Jan. 8 article from The Denver Post claims that “Coloradans who have insurance spend an extra $950 each year to cover the costs of those who show up at the hospital without insurance.”

The article attributes the number to state Rep. Anne McGihon, who said that the figure comes from Partnership for a Healthy Colorado. Partnership for a Healthy Colorado, in turn, says it got the figure from Families USA, which published a paper in 2005. That paper’s estimates were unable to accurately predict the percentage of uninsured residents in Colorado. The paper also grossly overestimated at least some costs of uncompensated care.

The Lewin Group, the modeling firm hired by the commission to collect information about Colorado, reported [that]… uncompensated costs [for the uninsured], the ones that are not paid by any identifiable source, total $239 million. …

To “fix” the problem of $239 million in cost-shifting, the commission proposes to increase health spending in Colorado by more than $3 billion, funded with an income tax increase of $800 million to $1.8 billion, new taxes on various politically incorrect types of food and drink, and an increase in the cigarette tax. …

Linda Gorman, a senior fellow with the Independence Institute, serves on the Blue Ribbon Commission for Health Care Reform. Ari Armstrong writes for

Read the entire article.

Partnership for a Healthy Colorado claims, “The cost of doing nothing about health care reform is currently $934 a year in increased premiums for Colorado families, and $355 for Colorado individuals.” Yet, as the article notes, Lewin’s numbers suggest (in our words) “a maximum likely cost-shift of about $85 per insured individual per year” (see page 20 of Lewin’s document). Yet, whatever the exact figure, the main point is that the Commission’s reforms would dramatically expand cost-shifting, not reduce it.