Question

How has the increase in competition in the hospital sector affected the ability to shift costs?

Answer 1

We will see an explanation to the above question in two parts - 1. What is cost-shifting? 2. How has increase in competition affected cost shifting in the hospital sector?

1. What is Cost Shifting?

Cost shifting is a term used in health economics where the shifting of burden takes place. This happens because one individual or group pays less for a service while another individual or group overpays for it. This can be seen in US Medicare where they underpay for services resulting in private insurers overpaying.

2. How has increase in competition affected cost shifting in the hospital sector?

One of the primary reasons for cost shifting going down in hospitals is the rising competition among them. This rise in competition is in turn limiting the hospital's ability to raise prices. This increased competition also squeezes the profits of hospitals which results in a reduction in the amount of charitable care (services to non-paying patients) they can provide.