Big businesses, which beat on their employees to be more cost-conscious, efficient, and productive, may need to take a page out of their own books if they hope to better control the soaring health care costs that they’re also shoving off onto their workers.
That’s a key takeaway from new research by the independent, nonprofit RAND Corporation into prices paid in 25 states to 70 hospital systems by job-provided health insurers in 2017. They provide coverage for most Americans, more than 180 million of us, and RAND found that private employer-sponsored health plans paid hospitals on average twice or even three times as much as Uncle Sam did through the Medicare program for the same services at the same hospitals.
Hospitals bellyache about tight-fisted Medicare prices that Uncle Sam can negotiate due to big dollars and huge number of patients covered under its senior health care plan. Although hospitals call the government-negotiated prices too low and an unfair benchmark, they provide realistic insights into hospitals’ bottom-line charges in what is one of the biggest areas of Americans’ health care costs. As RAND researcher Christopher Whaley told Modern Healthcare, an industry-covering news organization:
“If you ask hospitals, they will pretty commonly say that ‘Our prices are high because we lose money on Medicaid patients and barely break even on Medicare.’ But if you kind of look at the data, that story doesn’t hold up that well empirically. Sometimes hospitals that can charge higher prices [do so] because of market clout, reputation or must-have status.”
Translation: Hospitals charge whatever they can with patients, insurers, and businesses that will pay the demanded price. They can do so, almost spit-balling their charges like the corner mechanic, partly because they operate in private, cutting deals that rarely get disclosed. As the New York Times described this:
Because rates are normally a closely held secret between insurers and hospitals, the RAND study reveals a startling first glimpse of how much — and how steep a price — a broad swath of hospitals are charging private insurers. The lack of transparency, coupled with public outrage over rising hospital bills, has spurred calls for disclosure of the rates negotiated. This is the first time [that] pricing information on a large group of individual hospitals has been made public.
As the Kaiser Health News service reported, the RAND study showed that businesses can push back some on hospital prices, ultimately benefiting their workers with potentially lower charges for medical services, as well as reduced premium and out-of-pocket costs — critical with so many of them now carrying high-deductible coverage. KHN noted that:
In Indiana, private health plans paid on average more than three times what Medicare did. In Michigan, the most efficient of the states studied, the factor is closer to 1.5 — the result, the study authors said, of uniquely strong negotiating of the powerful UAW union, historically made up of autoworkers.
Still, as the RAND researchers emphasized — as did the many news articles on their study — significant factors constrain employers and insurers, if they wanted to and were aggressive about it, from arm-twisting hospitals to lower their prices: Hospitals have consolidated and become big in many markets, slashing competition and putting them in control of prices, including because many now run doctor practices and free-standing urgent care, emergency, and surgical centers. When hospital systems become giant and dominant, they can be near impossible to bully on prices.
And though businesses may talk a good game, it’s not clear how aggressively they advocate for themselves and their worker when it comes to health care costs, particularly because other investigators have found, for example, that they rely too much on insurers and their brokers to handle complex and unpleasant negotiations in this area. Further, as the New York Times reported, it is a folly of sorts to think that insurers would try to wring costs out of the health care system:
Unlike Medicare, which sets the price it will pay for a type of care, insurers often try to negotiate discounts with hospitals over charges, especially for outpatient services, said Chapin White, an adjunct senior policy researcher at RAND and one of the authors of the study. [But the] insurers don’t have a strong incentive to demand the lowest prices because many, working for employers that are self-insured, are ‘literally spending someone else’s money,’ he said. Insurers are also frequently paid based on how much the employer spends; they take in more revenue when the employer spends more. Insurers say they are motivated to keep hospital prices low and point to the battles they sometimes have over whether a high-priced system will be in their networks.
In my practice, I see not only the harms that patients suffer while seeking medical services, but also their struggles to access and afford safe, efficient, and excellent medical care. This has become a greater ordeal with the skyrocketing cost, complexity, and uncertainty of treatments and prescription medications, too many of which prove to be dangerous drugs. Too many of us are barely coping with crushing medical bills. Like it or not, health insurance is a keystone to Americans’ well-being, offering them at least some shot at sharing the burden of catastrophic injury or illness and reducing the chance of their suffering medical bankruptcy. It is not, however, the alpha and omega of what we all need to protect our health, finances, and loved ones.
It is unacceptable, still, that political partisans have persisted for almost a decade now in attacking public options that have provided health coverage for tens of millions of poor and middle-class Americans, whether by slashing at the Affordable Care Act, Medicaid, or Medicare. The attacks have been counter factual and cruel in their relentlessness. They also threaten both to: embolden employers, even while shifting higher costs on the backs of their workers, to slash their health protections for the preponderance of Americans who get health insurance at work; and to paper over rising access and affordability problems with job-related health coverages, issues that are causing financial duress and health challenges to patients who defer or forego needed drugs of treatments.
So, let’s see: Hospitals aren’t acting with zeal to safeguard our health and our dollars, nor are insurers, employers, or many politicians. This is important for us to know and remember as we face the 2020 presidential vote.