The Cost-Shift Payment ‘Hydraulic’: Foundation, History, And Implications

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Abstract
The cost-shift payment “hydraulic” is an integral component of the fragmented U.S. health care financing system. If private payers’ acceptance of the cost-shifting burden were to erode, our system of health care financing could become unstable. This is especially true for the hospital industry. In this paper we provide a series of examples of cost shifting and a historical profile of the cost shift in the hospital industry since 1980, noting that cost-shifting pressures seem to fluctuate over time and across health care markets. Cost shifting need not be dollar per dollar, as hospitals can absorb some degree of cost-shifting pressure through increased efficiency and decreases in service provision.
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