Semro column: A healthy proposal for state legislators
Here’s something for state legislators to think about before the 2020 General Assembly. If health-care costs are a problem, and if health-care costs need to be better managed, it might be a good idea to start with what health care, itself, actually costs.
It’s not just about finding different ways of paying for it.
The rising cost of health care and prescription drugs are the two biggest drivers of health insurance premium increases. Health-care reforms that only target the cost of coverage generally have a limited shelf life.
As health-care costs continually increase, reforms that try to make coverage more affordable through larger risk pools, subsidies, limited benefit plans and out-of-state purchasing, often find themselves and their benefits overtaken by those costs.
I worry that future health-care reform, regardless of which party sponsors it, might end up following this same, all-too-familiar path.
In my last column, I compared some average charges across different Colorado hospitals for the same outpatient procedures, treating conditions with minimal or no complications. These were average charges reported by the hospitals in their chargemasters, which now have to be made public.
In one example, the average charge for the same or similar procedure with no complications varied by $109,000 depending upon which hospital performed it. In another example, the average charge for the same procedure code without major complications varied by over $250,000.
Normal child delivery without complications in one West Slope hospital costs over twice as much as another hospital in Denver.
In the same month that those chargemasters were made public, the Colorado Healthcare Affordability and Sustainability Enterprise Board (CHASE), released its January 2019 Cost Shift Analysis Report.
The report concluded that between 2009 and 2017, Colorado hospitals could have generated $11.5 billion in savings for health care consumers if they had been more successful at controlling costs and if they had lowered their margins.
In that same time period, according to the report, state hospital costs grew by 58.7 percent. CHASE identified this “rapid cost growth” as a “major contributing factor” to a cost shift that impacted Colorado consumers across the state. Cost shifting is when a provider charges one payer more than another for the same procedure or treatment in order to minimize losses or maintain margins.
Representatives of the Colorado Hospital Association (CHA) claim that cost shifting is the result of lower Medicare and Medicaid reimbursement rates, which they say cover only 69 percent of a hospital’s costs.
But the CHASE report concluded that actual cost growth trends and margins “contributed more to cost shifting and hospital over-compensation” than “Medicaid or Medicare under-compensation.” It says that from 2014 through 2017, commercial insurance payments have consistently been almost $1 billion higher than losses from other lower reimbursement payer types.
In addition, Colorado hospital operating costs are 14 percent higher than the national average and “hospitals could have passed on significant savings to commercial consumers had they matched national cost benchmarks.”
Not surprisingly, they conclude that “rising hospital costs and margins have contributed to rising insurance premiums” for commercial insurance carriers and their policyholders.
The report also advocates for “more transparent reporting practices and hospital/payer data.”
All of this leads to the two suggestions that I have for state lawmakers.
The first is legislation that requires all state hospitals to report their average charges for all MS-DRG (Medicare Severity — Diagnosis Related Group) codes for all procedures and treatments for conditions with no or minimal complications. This reporting should also include average charges for CPT (Current Procedural Terminology) codes for the most commonly used tests (e.g. blood tests, MRIs, CT-Scans, etc.).
Average charges for these codes must be calculated for each hospital using the same charges and methodology. Individual reports would be combined into a single annual report by the Colorado Department of Health Care Policy and Financing (HCPF) with assistance from the CHA. That data would be made public.
The audience for this report wouldn’t be consumers, since it won’t reflect actual patient costs. It’s for hospitals and other providers, state regulators and lawmakers. The purpose of the report would be to identify comparable average hospital charges across the state in order to review and analyze baseline rates and price variations. This would be a critical starting point for state reforms and business strategies that could effectively manage rising costs without negatively impacting providers.
The second suggestion is legislation requiring HCPF and the CHA to analyze hospital operating costs, overhead, and community benefit investment as a percentage of total operating revenue in order to find strategies that bring those measures closer to national and state averages.
Unless future reform focuses on actual medical and health care costs we may still be talking about how unaffordable health care is 20 years from now and why all those reforms that were supposed to fix things, really didn’t.
Bob Semro of Glenwood Springs is a former health policy analyst for the Bell Policy Center, and a legislative and senior advocate. His column appears monthly in the Post Independent and at postindependent.com