Let Them Depend on Charity

Conservative economists writing in today’s Wall Street Journal dismiss the notion that the cost of providing medical care for the uninsured is eventually shifted onto those already insured. Citing an Urban Institute study that appeared in 2008 in Health Affairs, they claim the total cost shift is 1.7 percent at most, or $80 a year for the average plan. They also dismiss as flawed a Families USA study that found there was a significant rise in private insurance premiums to cover the cost of the uninsured.

How did the Democratic-controlled Congress that passed health care reform go wrong by accepting this premise?

Congress ignored the $40 billion to $50 billion that is spent annually by charitable organizations and federal, state and local governments to reimburse doctors and hospitals for the cost of caring for the uninsured. These payments, which amount to approximately three-fourths of the cost of such care, mitigate the extent of cost shifting and reduce the magnitude of the hidden tax on private insurance.

A few paragraphs later, they attack the health care reform law for relying on Medicaid to cover about half the uninsured who will receive coverage under the act:

Medicaid payments to doctors and hospitals are so low that the program creates a cost shift of its own. In fact, a long line of academic research shows that low rates of Medicaid reimbursement translate into higher prices for the privately insured.

So patients who pay nothing or almost nothing do not shift costs because the providers — doctors and hospitals, primarily — get mostly reimbursed for that care by charities and the government. Yet discounted payments through Medicaid are made whole by cost shifting to private plans.

Ask yourself these few questions to debunk this contradictory and transparent nonsense:

If hospitals reduce their charitable care expenses (a line item expense for every non-profit and for-profit hospital in the U.S.), will that not result in lower costs for everyone else? Or will they siphon off these reduced charitable expenses as increased profits?

If government payments for the disproportionate share program largely “make up” for the cost of uncompensated care (no cost shift), doesn’t expanding Medicaid to cover those uninsured simply result in reductions in those DSH payments — an intra-governmental transfer that doesn’t require cost shifting to make up for their inadequacy?

Okay, so much for ideologues masquerading as economists. There’s a far more profound reason for wanting to cover the uninsured than eliminating cost-shifting within the system.

People who show up for charitable care usually do so at a time when the cost of their care has become most expensive — long after  festering conditions have manifested themselves as acute crises that require emergency room care. Surely, covering the uninsured results in an increase in use of medical services on the front end as those who have gone without preventive and routine care seek out care. But in the long run, use of such services should result in a reduction of the overall health care costs.

Of course, that won’t be true if the routine preventive services delivered to the newly insured (and everyone else) are wasteful or not cost-effective — like prostate cancer screening for middle-aged men or routine CT scans for smokers before they get lung cancer.  But, alas, the Republicans on Capitol Hill are trying to eliminate our ability to figure out what constitutes the most effective and cost-effective forms of preventive and routine care, as Paul Krugman’s column in today’s New York Times points out.

As he points out, the conservatives who are now dominating the national discussion are plunging us deeper and deeper into an age of idiocy.

Merrill Goozner has been writing about economics and health care for many years. The former chief economics correspondent for the Chicago Tribune, Merrill has written for a long list of publications including the New York Times, The American Prospect and The Washington Post. His most recent book, “The $800 Million Dollar Pill – The Truth Behind the Cost of New Drugs ” (University of California Press, 2004) has won acclaim from critics for its treatment of the issues facing the health care system and the pharmaceutical industry in particular. You can read more pieces by Merrill at  GoozNews, where this post first appeared.