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Low reimbursements from public health insurance programs, such as Medicare and Medicaid, have prompted hospitals to shift costs to automobile insurance companies – raising auto injury claim costs and forcing auto insurers to more closely scrutinize and negotiate hospital bills prior to payment.A new study from the Insurance Research Council (IRC) estimates that for bodily injury (BI) liability claims in 38 tort and add-on states, cost shifting in 2007 resulted in $1.2 billion in excess hospital charges.However, the study says, the full impact of hospital cost shifting, including that occurring in other insurance coverages and in other states, is likely much greater.To explore the relationship between key health system features and auto injury hospital costs, IRC developed a statistical model of average hospital charges for auto injury claims in different states. Key predictors of average hospital charges confirmed by the model are the percentage of a state’s population without health insurance coverage and the percentage of the population covered by Medicaid.To estimate excess hospital charges due to hospital cost shifting, IRC compared average hospital charges for BI liability claims in Maryland with average charges in 38 other tort and add-on states. In the 1970s, Maryland received a waiver from the federal government allowing it to regulate hospital reimbursement rates for all purchasers of hospital services. As a result, virtually all hospital cost shifting in the state was eliminated.In all instances, IRC found that average hospital charges for auto injury claims in Maryland were substantially lower than hospital charges in most other states.IRC also found that the costs of expensive diagnostic procedures performed in Maryland hospitals were much lower than in other states but were more similar to costs in other states when the procedures were performed outside a hospital. The study, Hospital Cost Shifting and Auto Injury Insurance Claims, is based on data from more than 42,000 auto injury claims representing 58 percent of the private passenger auto insurance market.