Medicare payment policy and the controversy over hospital cost shifting

This article examines (i) the background and debate over cost shifting; (ii) hospitals as business institutions that often shift the financial responsibility for their costs in the form of differential pricing; and (iii) how the cost-shifting debate affects and is affected by Medicare. The aim is to gain a better understanding of how changes in reimbursement by large government health insurance programmes affect hospital behaviour. The article argues that the controversy over cost shifting is becoming an increasingly important issue for hospitals in the US and their ability (or willingness) to provide uncompensated charity care. The issue has also become very important for workers and their dependants. This is because workers have shouldered the largest portion of the dramatic growth in healthcare costs that have occurred in the US in recent years, due in large part to increased cost shifting (or 'sharing of financial responsibility') from their employers. © 2004 Adis Data Information BV. All rights reserved.