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Can cost shifting continue in a price competitive environment?
J Zwanziger1, G A Melnick, A Bamezai
1Department of Community and Preventive Medicine, University of Rochester, USA. zwanzige@prevmed.rochester.edu
Health Economics
|May 3, 2000
Summary
Hospitals facing reduced Medicare and Medicaid payments increased prices for privately insured patients, particularly in response to Medicare cuts. Market competition and ownership influenced this cost-shifting behavior.
Area of Science:
- Health Economics
- Hospital Management
- Public Policy
Background:
- Medicare and Medicaid are reducing hospital payments, raising concerns about cost-shifting to privately insured individuals.
- Theoretical models offer unclear predictions on whether hospitals will shift costs to private payers.
Purpose of the Study:
- To extend theoretical models of hospital behavior regarding cost-shifting.
- To empirically test hospital responses to reimbursement changes using California data.
Main Methods:
- Analysis of California hospital data from 1983-1991 during a period of intense price competition.
- Econometric testing of hospital price adjustments in response to Medicare and Medicaid payment changes.
Main Results:
- Hospitals significantly increased prices to private payers following reductions in Medicare rates.
- Responses to changes in Medicaid reimbursement were smaller and generally insignificant.
- Hospital ownership and market competitiveness influenced cost-shifting, but no significant temporal changes were observed.
Conclusions:
- Hospital behavior demonstrates a clear cost-shifting response to Medicare payment reductions.
- The findings suggest a need for broader models of hospital behavior that incorporate local market dynamics.
- Medicaid payment changes had a limited impact on hospital pricing strategies for private payers.
