07-U4-T1-T2 Financial Models Of Reimbursement And Effects On Patients And Healthcare Providers

Cost Shifting and Managed Care
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Cost Shifting and Managed Care
Topic 1: Cost Shifting
Cost shifting is a process where healthcare institutions charge patients who are insured a higher price compared to what uninsured patients are charged for the same services or procedures. There are a number of healthcare policies that use cost shifting, with policymakers arguing that this strategy is large and inevitable. First, health care providers use cost shifting in such a way that patients with health insurance end up paying for losses incurred when hospitals treat patients who do not have insurance (Coughlin, et al, 2014). This implies that a patient who relies on Medicare will be charged less compared to the one who has a private insurance.
There are several benefits of cost shifting. First, healthcare institutions are able to recover losses from services provided to uninsured patients. Second, patients are able to access quality care offered to insured patients despite the lack of enough resources to pay for health insurance. Furthermore, price discrimination, which is closely related to cost shifting, can be applied based on market power, implying that patients are charged for services provided depending on the ability to pay (Frakt, 2015). Lastly, cost shifting enables hospitals to increase premiums for wealthy neighborhoods and subsidize services for low-income areas, thus promoting the implementation of free universal health care system.
The Affordable Care Act (ACA) can decrease cost shifting within hospitals since, under ACA, the substantial amount of money that is paid to private health insurers will drastically reduce and thus prevent the prevalence of cost shifting. Moreover, ACA increases the number of insured patients under Medicare and Medicaid and this prevents hospitals from charging differently for services provided (Dranove, Garthwaite & Ody, 2017). Lastly, before implementation of ACA, the health care institution had to cater for the cost of services offered to uninsured patients. Since ACA has drastically reduced the number of uninsured patients, this has resulted in a decline in the amount of uncompensated care and cost shifting.
Topic 2: Managed Care
Managed care refers to systems and approaches that are utilized in the mana...