Medicare Cuts Shift Burden onto Healthcare Providers, Not Insurers

When Medicare cuts rates or slows increases, healthcare providers do not shift that burden onto others, a new study has found.

At least that’s the headline, but what the study really shows is that Medicare reimbursement rates drive all reimbursements to healthcare providers across the board.

A new study sponsored by the National Institute for Health Care Reform found that when the growth of Medicare reimbursement rates slows, so, too, do the reimbursements from private insurers.

The backers of the study heralded the results as proof that slowing Medicare growth, a major facet of healthcare reform, does not shift costs onto private insurers and therefore onto consumers. But digging deeper into the data instead proves that some cost-shifting does occur, but proportionate to Medicare reimbursement growth.

“The payment rate data showed a large and growing gap between private and Medicare payment rates,” writes the study’s author, Chapin White, a senior health researcher at the Center for Studying Health System Change. That gap is growing. In 1995 the difference between Medicare reimbursement rates and private insurance rates was 45 percent. By 2009 the gap was up to 57 percent.

What White did find was that when the growth of Medicare reimbursement rates slowed there was a correlation in the growth in private insurance reimbursement rates. The “myth” that’s White study has exploded is that when Medicare growth slows, private insurers make up the difference.

This “myth” is in truth a fallacy, one that healthcare providers have always known. Providers do not drive healthcare costs, Medicare does.

“The Affordable Care Act permanently slowed the growth in Medicare hospital payment rates, producing large savings for the federal government,” White writes in his conclusion. “One criticism of those rate cuts is that private insurers will get stuck with the tab. My results indicate the opposite.”

While White’s study is good news for taxpayers, good news for the federal government, and good news for insurers, it is bad news for providers and demonstrates that the only “cost shifting” that is occurring when Medicare reimbursement rates are cut or slowed is on healthcare providers.