If you're like most people with health insurance, you've seen your premiums go up substantially. A new report points to part of the reason in New Hampshire.
Over the past four years, hospitals have pushed a greater share of their costs on their patients who have private insurance.
At the same time, hospitals and insurance companies are making more money.
New Hampshire Public Radio's Kerry Grens reports.
If you walked into a hospital four years ago and got a procedure done that cost the hospital 100 dollars, insurance companies would pay the hospital—on average—123 three dollars.
Today, keeping everything the same, the cost to the insurance company is 138 dollars.
That’s according to a new report by the New Hampshire Center for Public Policy Studies.
Hall: Part of that is because there is more cost shifting than there was four years ago.
Doug Hall, the report’s author, says hospitals shift higher costs onto privately insured patients because Medicare and Medicaid don’t pay them enough.
Hall: There’s a significant chunk of change that is having to be picked up in insurance premiums because Medicare isn’t paying.
The theory is that if government programs like Medicare and Medicaid don’t cover what it costs the hospital to provide a service, the hospital makes up the difference from the private sector.
The total shortfall in New Hampshire, according to Hall, was 300 million dollars in 2004.
He says Medicare—the federal health insurance program for people over sixty five—is the main culprit—chiefly because so many patients use it.
Medicaid—the state and federal program for the poor—pays far less for hospital services, but accounts for such a small fraction of hospital work.
And people without insurance, who don’t pay their hospital bills, represent an even smaller slice of the problem.
Hall: The public I think views most of cost shifting as coming from the uninsured, people who are not paying their bill, charity care. Well the fact of the matter is there is more of it coming from Medicare, and a good portion, but not as much, coming from Medicaid, the state program, as is coming from the uninsured.
Hall calculates that Medicare gives hospitals in New Hampshire eighty four cents on every dollar spent on caring for patients.
Nationally, the Medicare Payment Advisory Commission reported that Medicare paid hospitals ninety seven cents on every dollar spent.
Kathy Bizarro from New Hampshire Hospital Association says the discrepancy can be explained by what services the hospitals provide.
Bizarro: We do not have any burns units in New Hampshire. So if someone needs a burn unit they have to go to Boston. And a burn patient typically has a lot of costs associated with them so they probably would get a larger type of reimbursement for that type of case.
According to the Medicare Commission, payments to hospitals dropped one and a half percent from 2003 to 2004.
But Hall’s report finds that is not the only reason private insurance is carrying a heavier load.
Hall: Part of it also is due to the fact that the hospitals, which had lower overall margins four years ago, have increased their margins. And totally independent of cost shifting if you increase your margin then everybody is going to have to pay a slightly larger percentage of your cost.
Twenty four of the twenty six hospitals in New Hampshire are non profits.
But they can still have a surplus.
And the average surplus for all the hospitals is the highest it has been in a decade.
In 2004 the total surplus reached 131 million dollars.
Those extra revenues can be used as a cushion against the financial ups and downs that come from year to year.
They can also be spent to provide new community programs.
Elliot Hospital’s CEO Doug Dean says his hospital uses the surplus for all this plus better diagnostics like MRIs and PET scanning.
Dean: All of the money that remains after we pay our expenses is reinvested in advancing Elliot’s technological capabilities, programs, and services for the benefit of this community.
Some people suggest hospitals should use their surplus revenue to cut payments for people with private insurance.
In essence, to reduce cost shifting.
But Mike Hill, president of New Hampshire Hospital Association, says that won’t necessarily reduce insurance premiums.
Hill: Increasing discounts, for example, to third party payers that are just going to make larger profits and likely send that money to Indianapolis or some other headquarters for their company. It isn’t necessarily true that any savings is going to accrue for people who pay premiums.
In other words, it’s not just hospitals that are generating surpluses, the insurance companies are too.
Last year, the state’s smaller insurance companies—Cigna and Harvard Pilgrim—had profits of eight and six million dollars, respectively.
The state’s largest insurance company—Anthem Blue Cross Blue Shield of New Hampshire—made nearly 50 dollars—double what it did the year before.
Doug Hall’s report estimates what this means to the person actually paying the bill.
After he calculates insurance company profits and administrative expenses, that 100 procedure turns into a 162 dollar charge to the person paying the premium.
SOQ
