Study: Low Medicare, Medicaid Pay Drives Up Insurance Costs

Inadequate reimbursements from Medicare and Medi-Cal drive up the cost of health insurance more significantly than the cost of treating the uninsured, according to new research backed by the California Chamber of Commerce, the San Francisco Chronicle reports. Medi-Cal is California's Medicaid program.

The study was released by the California Foundation for Commerce and Education, the California Chamber of Commerce's think tank. Daniel Kessler of Stanford University's Graduate Business School and the Hoover Foundation authored the study.

The study found that low reimbursements from Medicare and Medi-Cal were the biggest contributing factor to higher private insurance premiums, estimating that the government reimbursements translate to a 10.8% increase in premiums for private health coverage.

The study goes on to state that hospitals' costs of providing health care to the uninsured translates to a 1.4% increase in health insurance premiums, significantly lower than the 6% to 11% increase estimated in a study by the New America Foundation that Gov. Arnold Schwarzenegger (R) has cited in pitching his health care reform plan. The New America Foundation study did not estimate the effect of Medicare and Medi-Cal premiums on private insurance costs.

The chamber study's estimate of the cost increase for private insurance from providing health care to the uninsured was described as "very out of the mainstream" by Peter Harbage, an author of the New America Foundation study.

Meanwhile, Ken Thorpe, a professor of health policy at Emory University, questioned whether the chamber study's findings are intended to undermine the economic argument for expanding health insurance coverage.

Loren Kaye, president of the chamber's think tank, attributed the differences in the studies' findings to methodology variations (Colliver, San Francisco Chronicle, 6/7).