Question

Discriminatory pricing for health care is discussed in our reading as well as ‘cost-shifting’ and ‘cross-subsidization’. Keeping these in mind, discuss what is meant by “Hospitals’ For-Profit Approach to Charitable Care” (Hammaker & Knadig, p. 161) and how middle-income families are being disproportionately burdened. (Include your References).

Answer 1

Hospitals for profits are investor-owned hospitals and is business driven.

Approach to charitable care are not for profit hospitals. Charity care is health care provided for free or at reduced prices to low-income patients. They are organized as a non-profit organization. They are funded by charity, religion or research/educational funds. They are service driven.

Similarity between profit and non-profit hospitals:

1. The biggest similarity between for profit and non-profit hospital is the environment and standard of care between them. After all, there are profit and non-profit hospitals among the best hospitals in the country today.
2. Both are held answerable for the quality of the care provided.
3. Both serve the needs of the community.

There are many differences between profit and non-profit hospital, some of which are:

1. Tax status: Non-profit hospitals are exempt from paying taxes. But for profit hospitals are liable to pay taxes.
2. Objective: One of the primary objectives for profit hospitals is to meet their financial targets and increase profitability. Non-profit hospitals don’t prioritize profitability and are more driven to serve the health care needs of the community they operate in.
3. Compensation package: Many for profit hospitals have incentive based pay as a part of their employee compensation package. The same is not case in non-profit hospitals. Also, non-profits also have volunteers who work at the hospital.
4. Funding: For profit hospitals obtain their capital from bank loans and investors. But non-profit hospitals receive their funding from government grants, donations and sponsorships.
5. Location: It is found that non-profit hospitals are found mostly in high-income neighborhoods where people have insurance. While, it is observed for profit hospitals are found in communities with high poverty.

There exists price discrimination in the health care sector. Here, wealthier patients are charged more so that poorer patients can be charged less.

Price discrimination implies cross subsidization. It is held that private insurers pay more because public programs pay less. Hospitals do not target profit maximization which leaves room for cost shifting. People who have medical insurance are charged more than those who don’t have insurance. This practice was found to be more profitable. So, efforts had been made to maintain it over the years.

It is found that middle-income families devote a greater share of their income towards healthcare expenses than high or low-income families. Medicare middle-income families face the bigger burden of healthcare spending. Healthcare spending is lower for low-income families as they are covered by Medicaid and Medicare. High-income families are found to devote a smaller share of their income to healthcare expenses. The burden is higher for middle-income families is due to the reason that their lower total spending budget. They earn too much to be eligible for government subsidized coverage.

I hope that was helpful :)