Nov 20, 2020 in Health

Cost Sharing

Topic Analysis

The topic analysis in this paper is based on the article Hospitals Respond to Medicare Payment Shortfalls by Both Shifting Costs and Cutting Them Based on Market Concentration written by James Robinson. The article focuses on assessing the position of both MedPAC and cost-shift in line with cost sharing in the financing of the Affordable Care Act. Different opinions have been shared on the manner, in which medical providers are supposed to finance healthcare in the fairest way possible that favors both the public and private insurers within the country. The current paper focuses on the analysis of the topic of cost sharing as pointed out in Robinsons article.


The article highlights that Medicare is the national social insurance program that facilitates the access of individuals to affordable healthcare. Medicare has the responsibility of financing hospitals with the aim of subsidizing the prices issued to publicly insured patients. Etheredge (2007) asserts that Medicare derives its finances from the diverse sources such as payroll taxes and premiums paid by enrollees to the program. However, payment rates to hospitals have been low over the years, and this has led to negative profit margins in most clinics. The majority of hospitals experience shortage of the finances supplied to them by Medicare, and have gone ahead to overcharge private insurers with the aim of making up for the losses incurred. This is indicative of the unbalanced nature of cost sharing in the provision of effective healthcare to the citizens, as private insurance companies tend to bear the largest part of these costs. Hospitals management believes that it would be easier to operate more effectively if they charge private insurers high prices to take care of patients covered by the limited Medicare finances.

However, the article highlights the view that cost sharing has raised two significant perspectives that cannot be ignored in the decision making relating to the matter. One of these crucial perspectives on cost sharing emanates from the Medical Payment Advisory Commission (MedPAC). Notably, the MedPAC standpoint takes a conservative approach to the Medicares financing of hospitals. MedPAC stands on reiterating that the payments should be slowed down to reduce hospital expenses to ensure that they are not shifted from public payers to the private ones. Goodell and Swartz (2010) opined that this strategy avoids unfairness in the course of cost sharing as both public and private payers bear only the accrued costs instead of being required to pay more by their hospitals. MedPACs perspective on cost sharing also highlights the view that private insurers should work together with Medicare so they are not charged high prices by hospitals to take advantage of them.

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Another significant perspective of cost sharing that has been highlighted in the article is the cost-shift perspective. This approach emphasizes the view that Medicare must increase the payments to hospitals to avoid a scenario, where clinics have to overcharge private insurers in the course of covering for the losses incurred. Robinson (2011) affirmed that this would also be instrumental in guaranteeing that private insurers reduce the level of premiums by shifting it to individuals and employers. Therefore, this could boost cost sharing in the healthcare sector by ensuring that all participants pay only a fair share for healthcare instead of over-burdening one particular side. Notably, the cost-shift perspective tries to establish a fair ground for cost sharing between the public sector and the private sector. The approach to cost sharing is vital in promoting the operational efficiency of hospitals in terms of positive profit margins and access to better facilities to deliver healthcare.

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The aspect of effective cost sharing is successfully brought out in the article, as the author emphasizes that hospitals should be able to cover respective costs. Cost coverage may be done by using a mix of revenue from assessable and potential sources. Cost shifting has been utilized in a broader perspective by assuming that hospitals have not employed bargain advantages when making negotiations with private insurers. The idea implies that clinics charge private insurers premium prices because of the high degree of market power they have. The charged amounts are not determined by prices and rates in the market. The prices are likely to rise because of technology, governmental regulations, and tort-liability. Therefore, hospitals do not increase prices on their own but are forced to do so because of the factors they cannot control. On the other hand, the MedPAC perspective reiterates the view that the cause of high prices charged by hospitals is motivated by enormous operating costs and negative profit margins in most healthcare businesses. According to Baicker and Goldman (2011), hospitals in concentrated markets are likely to charge private insurers high prices because of their bargaining power. Such hospitals also believe that the network of insurance providers cannot lock them out. The achievement of a balanced cost-sharing framework faces numerous challenges as presented by the discussion of these two perspectives. The article emphasizes the view that cost sharing may be challenged by the nature of the market, hence leading to difficulties in determining the appropriate financing from Medicare. The ability of hospitals to pursue revenue enhancement over costs will depend on the competition in the local market.

In conclusion, this paper focused on the analysis of the cost sharing aspect as highlighted in Robinsons article. Most hospitals charge private insurers higher prices because of the low levels of financing that they receive from Medicare. It is crucial to ensure that both the public and private sector bear the fair costs of healthcare. The article emphasizes that Medicare should take into consideration both MediPAC and the cost sharing perspectives. This would be effective in guaranteeing that every party plays a key role in covering the costs of healthcare in the country.


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