June 1, 2006 3:44PM

Cost‐​Shifting in Health Care?

Today’s New York Times reports on a new study that claims that low payments from Medicare and Medicaid lead providers to shift costs to private payers.

Sounds plausible, but economists are skeptical. Michael Morrissey argues that cost‐​shifting can only occur under limited circumstances (usually, when government has restricted competition among providers), and that what’s actually happening is that providers are price discriminating. 

It may sound like an unimportant difference, but here’s the rub. If Morrissey is right, then increasing Medicare and Medicaid payments should increase the prices that providers charge private payers. 

Is that what the Blues want?