Maine has some of the highest health care costs in the nation and these costs are crowding out opportunities for economic growth.
Every year, to cover higher hospital and health care costs, Mainers end up paying more out of their paychecks for health insurance. These increased costs also place a greater financial burden on employers who pay the majority of their employees’ health insurance premiums. This often forces employers to make difficult choices, such as layoffs, slower wage growth or employee benefit reductions.
Mainers and employers need relief, and fast.
The primary driver of health care costs is what health systems demand to be paid for care – and those prices are much higher for people covered through their employer or individual health plans. A study by the Rand Corporation this spring showed that these individuals paid Maine hospitals 2½ times more than what Medicare paid for the same services at the same facilities.
Why the price disparity? Hospitals have long claimed it’s because they are underpaid for care delivered to Medicare and Medicaid patients. In testimony on the supplemental budget before the Maine Legislature earlier this year, Katie Fullam Harris of MaineHealth said: “This (cost-shifting) gap places a significant burden on commercial and private payors, as we are forced to cost shift onto those sources to maintain access for all patients. Thus, we are very supportive of the proposal to update MaineCare’s hospital rates, as well as the goal of doing so in alignment with cost, quality and value.”
Hospitals now have the ability to reduce that burden. In the supplemental budget, the state recently provided for an increase in Medicaid payments to Maine hospitals by approximately $60 million per year. With this additional investment from the state, I ask hospitals receiving an increase to reduce the health care cost burden for consumers and employers by a corresponding amount.
If the cost of hospital care continues to rise unchecked, Mainers will continue to pay more and more for health care through higher premiums and higher out-of-pocket costs, which erodes their potential wage increases and overall income. Employers will have higher costs, which impacts their bottom line and their ability to grow and create jobs – and that has ripple effects on the local economy.
A recent Wall Street Journal article highlighted the fact that when hospital prices go up, local economies take a hit. The article noted research linking hospital price increases with elevated unemployment. The workers most likely to be impacted were lower- and middle-income individuals earning $20,000 to $100,000 a year. Those layoffs led to reduced income tax revenue for municipalities, and states increased unemployment insurance costs.
We all want to keep health care affordable and accessible. In the state’s announcement of the increase to reimbursement, Steve Michaud, the president of the Maine Hospital Association, said: “Drawing down additional federal Medicaid dollars helps hospitals and their caregivers, eases the burden of escalating costs on Mainers and businesses who are paying for care, and helps the Maine economy at the same time.” We agree that reducing the cost burden on insured consumers and employers will help to strengthen the state’s economy.
Health plans are required to pass along savings to members if the amount of money paid in claims is below a certain threshold relative to premiums, but hospitals are not required to lower their prices if they receive an influx of funds from other sources. That doesn’t mean they shouldn’t. On behalf of Maine health care consumers and employers, I urge the leaders of every hospital and health system receiving this additional $60 million from the state to commit to passing along the savings to Mainers covered by employer-sponsored and individual health plans. It’s the right thing to do, and the health of Maine’s economy depends on it.
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