Hospital Prices, Market Structure and Cost Shifting
Date: June 6th, 2012
Senate Bill 392 required the New Hampshire Insurance Department (NHID) to hold public hearings regarding an insurance company’s petition to increase the base rate for health insurance coverage. In response to that requirement, the NHID solicited input regarding the factors that affect health insurance costs in the state. This report has been developed in response to two specific questions: How does the mix of public (Medicare and Medicaid) and private payers affect private insurance payments through the phenomenon of cost-shifting? And what other factors might explain the observed variation in payments in the health care system?
Rather than focusing on aggregate health care costs, our analyses try to understand variation in how much hospitals are paid for a basket of services, adjusted for the underlying complexity of the patients being served in a given hospital, and the prevailing wages in the area. Using this approach means that we will not assess variation in the levels of utilization – the number of services provided – but rather the payment for a given service.
Using the most recent data available, this analysis assesses the extent to which quality of care, the sickness or complexity of the population served, payer mix (Medicare or Medicaid’s share of overall business), differences in hospital costs, and underlying market competition best explain the observed differences in the prices paid by health insurance companies to hospitals. As costshifting is a critical part of the New Hampshire debate regarding price variation across the state, this analysis also addresses this topic and the factors that may explain cost-shifting.