Here are some provocative comments from the Congressional Budget Office on the often-repeated health insurance industry claim that relatively low Medicare and Medicaid payment rates to providers result in high payment rates by private health insurers. From the CBO analysis released today on the likely impact of reform legislation on commercial healthcare premiums:
The fact that private insurers pay providers higher rates, on average, than Medicare and Medicaid is not evidence that cost shifting occurs. For cost shifting to occur, a decline in the rates paid by some payers would have to lead to an increase in the rates paid by others; thus, for cost shifting from reductions in rates paid by Medicare to occur, providers would have to have initially been charging private insurers lower rates than they could have. Well-designed studies have found that a relatively small share of the changes in payment rates for government programs is passed on to private payment rates, and the impact of changes in uncompensated care is likely to be similar. Overall, therefore, CBO’s assessment is that the legislation would have minimal effects on private-sector premiums via cost shifting.
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