Indiana ranks seventh in the nation for hospital price disparities—ahead of California, New York, Connecticut and other larger states with higher costs of living—when it comes to what privately insured people pay for care compared to what Medicare would have paid for the same service.
A new study released Thursday by the Rand Corp. showed that Hoosiers covered by employer health plans paid Indiana hospitals nearly three times—or 292%—of what Medicare would have paid for the same procedures.
Indiana’s relative prices are higher than all four of its neighboring states—Michigan, Illinois, Ohio and Kentucky—the study said.
The issue looms large for Indiana, where employer-sponsored plans cover 53.3% of the population—higher than the nationwide figure of 49.6% and higher than all neighboring states but Illinois.
Medicare typically pays less than private health plans, and hospitals often count on privately insured patients for much of their revenue and profit.
But employer groups in recent years have begun to push back, saying they are unfairly charged a higher amount and thus shoulder much of the burden for the nation’s health care.
“Year after year, independent research using real insurance claims data demonstrates that hospital care in Indiana is incredibly expensive,” Gloria Sachdev, president and CEO of the Employers’ Forum of Indiana, in written remarks.
The latest study is almost sure to add pressure on policymakers to push hospitals to lower prices. Earlier this year, Indiana’s top legislative leaders told hospitals and health insurers to come up with a plan to lower the “out-of-control costs” of health care, saying prices in Indiana are well above the national average and need to come down.
“Absent a viable plan, we will be left with no choice but to pursue legislation to statutorily reduce prices,” said the letter, signed by House Speaker Todd Huston and Senate President Rodric Bray.
In response, several hospitals sent letters to Huston and Bray last month citing the complexity of the health system and showing little agreement over who is to blame for the cost of health care or how to fix the problem.
The RAND study analyzed claims data from employers, private insurers and 11 state all-payer-claims databases that included more than 4,000 hospitals and 4,000 additional ambulatory surgical centers across every state except Maryland. The latest study utilized claims data from 2018 to 2020.
South Carolina, West Virginia, Florida, Wisconsin, Wyoming and Minnesota were the only states with high disparities than Indiana in the study, with relative prices above 300% of Medicare.
Forty-three other states had lower hospital prices compared to Medicare, the study said.
Two years ago, the previous study, known as RAND 3.0, found that Indiana ranks sixth in the nation for hospital cost disparities, and that Hoosiers covered by employer health plans paid 304% of what Medicare would have paid.
“Unfortunately Rand 4.0 confirms that our hospital prices continue to be among the highest in the country, which is unnecessarily taking money out of the pockets of all Hoosiers,” said Al Hubbard, chairman of Hoosiers for Affordable Healthcare, a consumer organization.
He added: “We calculate the impact to be as much as $2,500 per family. This situation is especially egregious given that our cost of living is 9% less than the national average and our earnings are 12% below the national average. Needless to say, the other impact is to make our employers less competitive and less able to pay higher wages. It is time for hospitals to lower their prices at least to the national average, especially considering today’s high inflation, which is impacting all Hoosiers.”
But the Indiana Hospital Association said it was concerned that some of the data in the new Rand study is four years old, and does not reflect recent measures some hospitals have take to freeze or lower prices.
“But what’s more concerning about today’s conference is that the Employers’ Forum of Indiana and its partners like Hoosiers for Affordable Healthcare are connected by a web of national funding that points in one direction—government price setting,” IHA President Brian Tabor said in written remarks. “This was made clear by the keynote speaker just minutes into the conference. Instead of the price transparency and free market solutions that are working in Indiana, I fear these groups are coordinating to use outdated reports to push heavy-handed policies and state public options.”
Employers’ Forum has said its main goal is to improve transparency of hospital costs and prices, and to raise awareness about Indiana’s large disparities.
It is doing that by pressing for more consumer-friendly data sets and websites that allow employers and the public to compare prices and quality at hospitals.
Employers’ Forum on Thursday launched a new dashboard, Sagetransparency.com, that lets people study a ream of data that compares hospitals and states on prices, procedures and payers.
The dashboard, which is free and open to the public, uses data from the Centers for Medicare and Medicaid Services, Turquoise Health, Healthcare Bluebook and the National Academy for State Health Policy.
“Our state does not have enviable health outcomes, yet Indiana employers and health plans pay among the highest hospital fees anywhere in the country,” Sachdev said.
The study was funded by the Robert Wood Johnson Foundation and self-funded employers.