California Gov. Arnold Schwarzenegger has proposed setting up a universal health coverage system, arguing that caring for the uninsured has prompted health care providers to shift the burden to private payers as a type of "hidden tax."
Citing a study by the New America Foundation, Schwarzenegger argues that private payers are handing over 6 to 11 percent more in order to cover the cost of caring for those without health insurance.
Not so, counters economist Daniel Kessler. The higher premiums are being driven by the decreased funding for public insurance programs such as MediCal and Medicare, not by the cost of caring for the uninsured.
In a recent paper, titled "Cost Shifting in California Hospitals: What Is the Effect on Private Payers?" Kessler, a professor of economics, law, and policy, concludes that the impact on private insurance premiums is much less significant than critics are arguing.
"At least for hospital care in California, the costs of caring for the uninsured or indigent patients do not impose a heavy burden on private health care costs," Kessler says. "However, the burden of uncovered Medicare and MediCal costs is substantial."
Health care costs for those without insurance led to a 1.4 percent increase in private premiums, compared to a whopping 10.8 percent escalation due to uncovered costs of MediCal and Medicare, Kessler writes.
"Assessing the extent to which doctors and hospitals cost shift is an important policy issue," Kessler writes. "State health policy reforms that seek to cover the currently uninsured are unlikely to lead to significant reductions in private insurance premiums, at least due to decreases in cost shifting. In contrast, increases in public program reimbursement rates could have an economically important impact on premiums."
The study was based on hospital data from the California Office of Statewide Health Planning and Development from 2000 to 2005.
It was commissioned by the California Foundation for Commerce and Education, a private, nonprofit organization affiliated with the California Chamber of Commerce.