Agenda: When Public Payment Declines, Does Cost-Shifting Occur? Hospital and Physician Responses

Sponsored by The Robert Wood Johnson Foundation under its Changes in Health Care Financing and Organization (HCFO) initiative and conducted by AcademyHealth
November 13, 2002 - Wyndham Washington, Washington, D.C.

8:30 - 9:00 a.m.
Registration and Continental Breakfast

9:00 - 9:15 a.m.
Welcome and Purpose of Meeting

Presenters:

Anne K. Gauthier
Director, HCFO Initiative
Vice-President
AcademyHealth

Robert A. Berenson, M.D.
Senior Consultant
AcademyHealth

9:15 - 11:15 a.m.
Economic Theory and Research Evidence: What Do They Say?

Moderator: Anne K. Gauthier

Presenters:
Paul B. Ginsburg, Ph.D.
Center for Studying Health System Change

Allen Dobson, Ph.D.
The Lewin Group

Stuart Guterman
Center for Medicare and Medicaid Services

Respondents:
Michael A. Morrisey, Ph.D.
University of Alabama at Birmingham

Thomas G. McGuire, Ph.D.
Harvard Medical School

When public payers reduce payments, do hospitals and physicians compensate by increasing costs (or service volume) for private payers? Analyses using data from at least 10 years ago reveal mixed results. Economic theory suggests cost shifting does not occur, but experience suggests otherwise. The opening paper will provide a framework for the remainder of the day. The subsequent presentations will extend this discussion by presenting current evidence and thinking about cost shifting in the context of Medicare and Medicaid, the two major public payers. The panelists, who have made important contributions to the cost-shifting literature, will comment on the presentations.

11:15 - 11:30 a.m.
Break

11:30 - 1:00 p.m.
Bringing Practice to Policy: Effects of Reductions in Public Payments

Moderator: Jason S. Lee, Ph.D., AcademyHealth

Panelists:
Richard H. Showalter, Jr.
Dartmouth-Hitchcock Medical Center

Donald Fisher, Ph.D.
American Medical Group Association

Joan B. Trauner, Ph.D.
Independent Consultant

Deborah I. Chang
Maryland Department of Health and Mental Hygiene

This session will provide insights into the perspectives of major stakeholders in the cost shifting debate. Panelists will describe their experiences of the dynamics that occur when public payments decline. They will address such questions as:

• How have hospitals reacted in the marketplace to Medicare payment reductions enacted in BBA 97? How do these responses vary by market characteristics?
• What is the response of physicians to the 5.4% cut enacted this year in the Medicare fee schedule? If they can cost shift, under what circumstances have physicians been able to increase private payer payments as a result of declining public payment? To what extent might physicians refuse to treat Medicare patients following public payment cuts? Is Medicare in danger of becoming a second-rate payer in relationship to other payers?
• Are the effects of cuts in Medicare reimbursement rates for physicians amplified because private insurers shadow price the Medicare fee schedule?
• Is the cost shifting dynamic the same or different for Medicare and Medicaid?
• How are Medicaid payments affected by the payment policies of Medicare and private payers? What options do states have?

1:00 - 2:00 p.m.
Lunch

2:00 - 4:00 p.m.
The Policymaker's Perspective: How Has Current Policy Developed and How Can the Past Inform the Future?

Moderator: Robert A. Berenson, M.D.

Panelists:
Stuart H. Altman, Ph.D.
Brandeis University

Robert D. Reischauer, Ph.D.
The Urban Institute

Charles N. (Chip) Kahn III
Federation of American Hospitals

Nancy-Ann DeParle, J.D.
JP Morgan

In this session, policymakers will reflect on how past public payment policy decisions have played out in the private market.

• How might these decisions guide the future? What is the role of the Federal government in relation to hospital and physician responses to the decline in public payments?
• Should Medicare payment policy include subsidies to private payers if they experience cost-shifting? Or, at a time of dramatically escalating cost pressures on all payers, should the Federal government focus only on cost containment strategies for federal health care programs, regardless of their private sector effects?
• If cost-shifting occurs, is it an important driver toward consolidation in the hospital and physician markets? If so, what are the antitrust implications?

4:00 - 4:30 p.m.
Conference Summary, Closing Comments and Conference Evaluation

Presenters:
Robert A. Berenson, M.D.

Anne K. Gauthier

4:30 p.m.
Adjourn
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• Overview [1]
• Presentation Slides [2]
• Agenda
• Goal Statement [3]
• Kaiser Webcast  [4]