Policy Documents

Cost Shifting in California Hospitals: What Is the Effect on Private Payers?

Daniel P. Kessler –
June 6, 2007

The extent to which health care providers cost shift -- increase the price or markup charged to one group of patients in response to a decrease in another group's price or markup -- has been the subject of extensive and long-standing policy debates. In practice, cost shifting means that purchasers of private health insurance effectively pay a "tax" in order to finance the care of patients who are uninsured or covered by public insurance programs such as Medicare or Medicaid.

Despite the importance of this issue, the existing literature on cost shifting has significant limitations. Only two studies investigate the extent of cost shifting from the uninsured, and these have fundamental weaknesses. No study has yet analyzed the most recent data from California hospitals, to investigate whether cost shifting in the State has intensified or moderated in the 2000s.