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Lot’s of interesting numbers. Pretty complex topic. Does Medicare adjust their reimbursement prices by a state’s cost of living (i.e., do they expect hospital costs to be less in Indiana then elsewhere)? Does the average Hoosier’s heath (e.g., smoking, weight) complicate and make hospital care more difficult here for each specific procedure (more expensive)? Are the insured making up for the unpaid costs generated by the uninsured, particularly those on Medicare.
My understanding from my medical friends is that Medicare pays way less than the cost of delivering services. Until the cost of delivering services decreases, trying to cap the prices will only result in less services being provided. As far as I can tell, costs for hospitals, particularly nursing, are not going down. This should not simply land in the lap of the hospitals. (I’m not employed in the industry).
Answers:
– does Medicare adjust reimbursement for cost of living – yes, thru a wage index formula.
– yes, they expect costs to be lower in a low cost of living state
– does the health of an average Hoosier make care more expensive – yes – however, the presence of comorbidities results in a higher Medicare reimbursement.
– are the insured making up for the cost of uninsured – yes – however, bad debts in Indiana are relatively modest. Medicare reimburses for its bad debts.
– to address the high cost of healthcare in Indiana, you must start with the hospitals. Then look at nursing homes, especially the Medicare UPL program that has been terribly abused by many county-owned hospitals. Then, look at physician compensation, especially those employed by hospitals.
I suggest that all hospital executives have their compensation tied to the competitiveness of their pricing (measured by the % of Medicare). For example, if Hospital A has pricing at the 50th percentile, then it’s executives would be paid at the 50% percentile. As Hospital pricing exceeds the 50th percentile, executive compensation would be reduced ratably; as Hospital pricing falls below the 50th percentile, executive compensation would be increased ratably. This is the only incentive that hospital executives understand.
doesn’t work for university-associated hospitals that can shuttle salaries through the university
I suspect that all of this is a the natural outgrown of having a health care industry as opposed to having a health care system. You can’t treat it like a free market system, because in order to have a free market the buyer and the seller have to be able to some understanding and in the healthcare industry there is no way to achieve the transparency needed.
Most industrial countries have gone to a single payer system and they realize that it is better for the country as a whole to keep the population healthy and productive.
On top of that, Indiana has no certificate of need and hospitals are all out trying to look like luxury hotels so that can continue to compete for those inflated reimbursements from private insurers.
Having worked in the public policy arena for more than three decades, it is always alleged that the challenge is “complicated” and that the status quo is nearly always the best that can be achieved for reasons that are also “complicated.”
The solution to attaining meaningful pricing reform in medical care begins first and foremost with pricing transparency. A state law can and should require that every health care provider – be it a private physician, an urgent care center, or a hospital – publish the prices charged to patients for each of their services, from the price of an aspirin to the price of a heart bypass operations. These entities already have that data, in real time, as they are required to provide it to private insurers as well as to the federal government for Medicaid and Medicare reimbursements.
The second step in pricing reform is to put the patient – not the purchaser of the insurance – in charge of their medical decision-making by incentivizing the use of medical services. This can be accomplished by adopting another state law that employers provide health savings account insurance coverage to their employees. Under this model, the total annual cost of the employee’s health insurance policy is paid by the employee with funds provided by the employer. Whatever the employer does not spend rolls over to the next year and may be saved for future medical expenses or can be used by the employee for discretionary purchases that are not tied to health care.
As it stands now, the typical employee doesn’t know what the costs are of their medical care beyond their out-of-pocket $10 co-pay d he or she doesn’t have an incentive to shop for the better deal because there is nothing in it for them.
Beware the special interests (aka the health care “industry” which includes providers and insurers) who say it’s too complicated an issue. It is not.
If private insurance for employees is such a huge giant burden for business, you’d think the business world would be pushing really really hard for a national healthcare system. Oh but then their miserable employees wouldn’t stay just for insurance coverage. I get it. Send the spokespeople out to complain and moan! Make it sound / actually be incredibly complicated! God forbid we create a humane work-life balance instead of profits!