2014 Elsevier Inc. All rights reserved. Cost shifting exists when a provider raises prices for one set of buyers because it has lowered prices for some other buyer. In theory, cost shifting can take place only if providers have unexploited market power. The empirical evidence on the extent of cost shifting is mixed. Taken as a whole, the evidence does not support the claims that cost shifting is a large and pervasive feature of the US health-care markets. At most, one can argue that perhaps one-fifth of Medicare payment reductions have been passed on to private payers. The majority of the rigorous studies, however, have found no evidence of cost shifting.
