People with private health insurance are being charged a “hidden tax” to help pay the medical bills of the uninsured, experts contend. Just how much Americans are being billed, however, is a key point of contention in Congress’ health care debate.
A new study by the liberal Families USA estimated that “tax” raises the price of an average insurance premium by 7.7%, or about $1,017 for a family policy and $368 for an individual policy.
“Unless and until health coverage is expanded, businesses and insured families will continue to be hit hard in the pocketbook by a large, hidden health tax,” said Ron Pollack, executive director of Families USA.
Sen. Max Baucus, D-Mont., chair of the Senate Finance Committee, cites a study that found similar figures for California in his health care reform white paper released earlier this year.
The uninsured raise insurance premiums through what is known as “cost shifting.” Hospitals and doctors try to recover the costs of treating the uninsured by charging private insurers more. That cost is passed along in premiums.
Argument For Nat’l Insurance
Baucus said that’s reason enough to mandate universal insurance.
“Requiring all Americans to have health insurance will help end the shifting of costs from the uninsured to the insured,” his white paper states.
Not everyone agrees the tax is so high. A Kaiser Family Foundation report puts the hidden tax much closer to 1%, about $133 for a family and $48 for an individual.
One difference is over how much uncompensated care exists. Families USA puts the number at about $43 billion, while KFF puts it at a much lower $14 billion.
Jack Hadley, a senior health services researcher at George Mason University and co-author of the KFF report, said that Families USA is not counting payments Medicare makes to hospitals that serve large numbers of low-income patients.
The Families USA study justified not including those payments because such “funds are intended to support the costs of Medicare patients, not the uninsured.”
Also at issue is exactly how much cost shifting occurs. Families USA estimates that the whole $43 billion of uncompensated care is cost shifted, while KFF suggests it is closer to $8 billion.
Hadley called the Families USA figure an “exaggeration.” About half of uncompensated care is provided by physicians “most of whom are already setting fees as high as the market will bear, and not higher because of treating the uninsured,” Hadley claimed.
The KFF report also questions whether most hospitals have sufficient market power to shift those costs onto private insurers.
Hospitals, however, have experienced a wave of consolidation, with an average of 58 hospital mergers a year from 1990-2003, according to Academy Health.
“The bargaining power of hospitals has increased significantly,” said Bruce Pyenson, a principal of Milliman Inc., which helped compile the Families USA study.
Some Blame The Gov’t
Other researchers contend government programs are largely to blame for cost shifting.
“Medicare and Medicaid do not reimburse providers adequately for care,” forcing health care providers to make up the difference by billing private insurers, said John R. Graham, director of health care studies at the conservative Pacific Research Institute.
“Families USA’s prescription to expand government health care to solve the problem of the uninsured is completely misdirected,” he said.
A recent study of California hospitals found that Medicare and Medicaid accounted for about 35% of cost shifting.
CEO Ron Williams of health insurer Aetna agrees that government cost shifting is a problem.
“Medicare is paying less to hospitals than what they need, and . .. Medicaid often pays less than what the health care system needs,” he said.
A supporter of the Families USA study, Williams added, “Extinguishing the uncompensated care component (of cost shifting) is extremely important.”
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