Cost Shifting


Cost shifting refers to a policy by a health care provider toovercharge an insured individual more compared to those that areuninsured when delivering similar services. Individuals that pay fortheir own medical expenses or are insured by their employer areexamples of health care policies that employ cost shifting. Theseinclude insurance plans within the health insurance exchanges (HIX)(Milstead, 2013).

The benefits of cost shifting include reducing bad debts forhospitals and ensuring that health care providers do not sufferlosses. The difference amid the expected and actual cost in serving apatient insured under Medicare or Medicaid is rising (Milstead,2013). The health care provider expects lesser reimbursementwhen serving such a patient, because the programs are financed by thegovernment, which pays lower rates. As a result, hospitals opt toovercharge patients that pay for their own insurance, or thoseinsured under an employer package (Ginsburg, 2003). This is possibleby the latter paying more for the similar services. Notably,hospitals risk experiencing losses and incurring debts if they do notfind alternatives to paying for medical costs that the governmentdoes not fully reimburse. For instance, Medicare merely paysproviders on the basis of the original expense for assets. This isbelow the replacement expenses hospitals incur. Hence, the need toemploy cost shifting.

It is possible for the ACA to reduce the practice of cost shifting.Some strategies include increasing the eligibility of persons thatcan be insured under Medicaid or Medicare (Frakt, 2011). Consideringthat many of the new individuals enrolling in government insuranceprograms were formally covered under private plans. Therefore, morepeople can pay for hospital expenses under government subsidizedprograms, which reduces cost shifting.


Frakt, A. (2011). Hospital costshifting: Brief history and possible future. TheIncidental Economist.Retrieved from: shifting-brief-history-and-possible-future/

Ginsburg, P. B. (2003). Can hospitals and physicians shift theeffects of cuts in Medicare reimbursement to private payers? HealthAffairs, 22, 472-479.

Milstead, J. A. (2013).&nbspHealthpolicy and politics: A nurse`s guide.Burlington, MA: Jones &amp BartlettLearning.