Barnidge: The Reasons Why Your Health Care Insurance Keeps Costing More
Individual policyholders were livid last year when Anthem Blue
Cross California proposed a 39 percent rate increase on health
State regulators eventually trimmed the figure to 14 percent, but inasmuch as that was nearly 10 times the rate of inflation, few customers were in a mood to celebrate. The villain was different, but the reaction familiar, last month when Blue Shield proposed a 59 percent hike. That increase awaits review by state Insurance Commissioner Dave Jones, but customers have little reason to expect a happy ending. They may as well get angry now.
There’s some satisfaction in barking at insurers. Wolves enjoy baying at the moon. And insurance companies traditionally have done a fine job of gouging customers whenever possible. But the root of our health care dilemma runs far deeper than that. The driving factor behind costlier insurance rates is simple: Costs for services are increasing. “Over the last two years in California, in the individual market, the rates we paid to hospitals have increased by almost 20 percent,” said Mike Johnson, a spokesman for Blue Shield. “On the heels of that is drug companies, at 19 percent.”
Before you dismiss this as corporate doublespeak, note that Blue
Shield of California is a not-for-profit organization. About 80
percent of every premium goes to health care costs, 20 percent to
administration and commissions.
Johnson said insurance payouts go something like this: one-half for hospitals, one-third for doctors and the remainder for prescription drugs. So the question of the moment: Why are hospitals commanding such a large wedge of the insurance pie?
For answers, we turned to Paul Swenson, executive vice president of administration for John Muir Health. He blamed shortages in skilled workers, especially nurses, for escalating payroll costs. Unlike most of us, it seems, nurses still command wage increases on a regular basis. He cited changing rules that mandate increased staffing. Where three staffers might have been adequate for a procedure in the past, state regulations now mandate four.
But the biggest single factor in driving up costs to insurance
companies — and, in turn, their policyholders — is a curious
practice that he describes as “cost-shifting.” Of all the people
treated at John Muir Hospitals, only about 40 percent have
commercial insurance such as Blue Cross or Blue Shield. The
majority of patients are covered by Medicare or Medi-Cal, or they
are charity cases. Included among those are emergency room
visitors who don’t pay their bills. Costs that can be assigned to
Medicare or Medi-Cal are fixed. Charity patients pay nothing. So
the rising expenses encountered by hospitals are assigned to
commercial insurers, who — guess what? — pass them along to
customers. You were worried about socialism in health care?
Quit worrying. It’s already here.
“If our underlying costs go up 5 percent,” said Swenson, “Blue Shield might expect its costs to go up 5 percent, too — except that 60 percent of our customers don’t pay any of that increase. So we shift the increase to Blue Shield (and other commercial insurers). “Medicare underpays, Medi-Cal underpays, charities underpay. It’s a dynamic we have worked with for a while.” That a typical hospital visit costs far more than in the past, however, is a product of more than just rising expenses.
“There are tests and technology that weren’t in existence five years ago that now have become the standard of care,” Swenson said. Advanced imaging technologies — computed tomography (CT scans), magnetic resonance imaging (MRIs) and positron emission tomography (PETs) — come at considerable cost. Sometimes the expense is justified, many times it is not. But every procedure drives up costs assigned to insurers.
Swenson acknowledged that “defensive” medicine — procedures ordered by doctors as defense against malpractice lawsuits – contribute to this phenomenon, but patients often are guilty of demanding procedures that are not needed. “Let’s say someone sprained their knee and they tell their doctor they want an MRI,” Swenson said. “The doctor says, ‘Just rest it a bit. Let’s do some stretches and see what happens in a couple weeks.’ The patient says, ‘No, my friend had an MRI, and I want an MRI.’ It’s a challenge for that doctor to disagree with his patient.” The cost of health care just went up.
“We do more and more stuff, and we’re encouraged to do it,” Swenson said, “but at some point, we as a society need to decide not to do as much, because we’re not clear that it helps. But that’s defined as rationing, and we as Americans don’t like that.” Of course, we don’t like increased insurance rates, either. And we don’t like universal coverage. We are a lot better at not liking things than we are at fixing them.
Author: Tom Barnidge Contra Costa Times columnist