Uncompensated Care and Cost Shifting - Essay Example

This paper explains the relationship between uncompensated care and cost shifting. In addition, it gives a discussion on why providers now have limited ability to shift costs. Uncompensated care In the health care sector, uncompensated care entails a situation in which patients after receiving any form of treatment in the hospital, fail to pay their medical bills either through insurance or through cash. Their incapability lies with the fact that they do not have cash or health insurance that can meet their medical expenses (Robinson, 2011).

In some instances, uncompensated care can be termed as either a hospital’s charity care or bad debt. In charity care, hospital management allocates finances, which will meet the expenses of the patients who are unable to pay their bills. However, a hospital suffers bad debt, if its charity care is not enough to pay up a patient’s bills. Uncompensated care also includes the financial lose experienced by hospitals because of lower payments received from the insured. There are situations in which Medicare and Medicaid brings about uncompensated care due to their depreciating health payments to hospitals.

Additionally, uncompensated care charges are calculated by adding a hospital’s bad debt to charity care charges (American Hospitals Association, 2010). Cost shifting In the health care sector, cost shifting entails the act of a health care giver charging an insured patient a higher amount than the normally expected cost of treatment. This is geared towards compensating for the financial loss that was experienced by the hospital, when another patient failed to pay bills because he or she did not have health insurance or cash.

Cost shifting is based on the principle of, transferring the costs of a patient who is unable to pay his or her bills, to a patient who is capable of paying, which is indicated by the patient’s insured status. In essence, insured patients are overcharged to pay up for patients who are undercharged (Health and Human Service Commission, 2008). Relationship between uncompensated care and cost shifting Health care providers react by cost shifting after experiencing uncompensated care. The providers resort to cost shifting as a sole means of paying the debt that arose due to uncompensated care.

In essence, uncompensated care relates to cost shifting in that the latter pay ups for the losses brought about by the former. Health care providers are obligated to provide healthcare to both the uninsured and the insured. However, the providers lose financially and risk going out of business when the uninsured do not pay their bills (Health and Human Service Commission, 2008). This result in the providers executing the scheme of cost shifting in which they charge the insured patients a higher amount compared to the normal charges.

Ultimately, the relation between uncompensated care and cost shifting is solidified, with the need of health care providers, to provide healthcare to the uninsured and at the same time stay in business. Contrarily, uncompensated care turns out to be a burden to patients with health insurance coverage after the cost has been shifted. This is evident when patients with insurance are subjected to higher charges, which might, as well be termed as an “unseen health tax” (Gruber & Rodriguez, 2007).

Limited ability in shifting costs The principles and policies behind Obamacare have