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Study: MT hospital prices for insured patients higher than many other states

Prices for insured patients 277 percent of Medicare
Posted: 11:56 AM, Aug 22, 2019
Updated: 2019-08-22 16:13:04-04
Study: MT hospital prices for insured patients higher than many other states

If you have private health insurance and go to the hospital in Montana, you’ll pay an average of 2.77 times what Medicare pays, says a new study by the Rand Corp. -- one of the highest markups of the 25 states in the study.

The study of hospital pricing for privately insured patients said in all 25 states, these patients paid an average of 2.4 times what the government-insurance plan Medicare pays, for the same procedures.

A state lawmaker who’s tried unsuccessfully to pass bills regulating hospitals and hospital prices in Montana told MTN News he’s not surprised by the study results.

Rep. Tom Woods, D-Bozeman, said he’s long felt that hospitals operate like virtual monopolies in Montana and charge patients too much.

“If the hospitals are interested in doing something about this, they can work with us, but I don’t see them wanting to change, because they are benefiting from the current system,” he said. “(The current system) is sucking money out of the economy very quickly, it’s driving prices up to atrocious levels.”

But hospitals say they’re just covering their costs, and not gouging patients.

Bob Olsen, senior vice president for the Montana Hospital Association (MHA), said hospitals’ overall revenue is usually within 2 percent of what they need to break even.

“If you had collections that were far and above your costs, you can make the argument that the charges are too high,” he told MTN News in a recent interview. “But when you look at the data, what you really see is that hospitals, by-and-large, are able to cover their costs.”

Private insurers often use Medicare payments as a benchmark, when setting what they’ll pay hospitals or other health-care providers.

Medicare, the government health insurance program for those 65 and older, sets the price it pays for health-care services, based on a variety of factors.

Insurers sometimes will contract to pay a multiple of Medicare, usually in a range of 1.5 times to three times as much. The contracts they arrange with health-care providers are considered “trade secrets” and aren’t made public.

However, the Rand Corp. study garnered its information from self-insured employers and other businesses that pay insurance bills, health-claims data bases and health plans that chose to participate.

MTN News asked the state’s largest private health insurer, Blue Cross and Blue Shield of Montana, whether it could or would negotiate a lower level of payment to hospitals than it had now.

Blue Cross spokesman John Doran wouldn’t answer that question directly, and instead said Blue Cross is working to lower health-care costs by something called “value-based pricing.”

Under this approach, a health insurer agrees to pay hospitals or groups of health-care providers a maximum amount of money for certain services to a finite set of patients. Providers must stay within that amount, and could get some additional payments if they hit certain “quality” benchmarks.

Doran said this approach is saving about $400 a year for each of the 100,000 Blue Cross Montana customers covered by effort.

“It’s changing the way that health care is being delivered,” he said in a recent interview. “We’re fundamentally changing (things) to re-engage people in a primary-care setting, which is a much more cost-effective model than going to the emergency room.

“So it’s not about limiting health-care services. It’s about funding the appropriate care at the right time, in the right place and for the right price.”

The MHA’s Olsen also said hospitals are emphasizing “healthy lifestyles” for Montanans, encouraging them to take preventive steps to improve and preserve their health, and avoid expensive procedures.

“Hospitals aren’t deaf to the struggles on health-care costs or for access,” he said. “I think that the hospitals are doing their part to make sure that where they can economize, or cut costs, they’re doing that.”

But one of the authors of the Rand study told MTN News that value-based pricing or similar efforts to re-design care are “distractions” from the simpler solution: Demanding lower prices from hospitals.

“Just seeking a lower price is a lot easier,” said Christopher Whaley.

In some states in the Rand study, insured patients paid average prices far lower than in Montana. In Michigan, they paid 156 percent of Medicare prices, and in Pennsylvania, 169 percent -- rather than Montana’s 277 percent.

Woods sponsored a bill this year that would have required Montana’s nonprofit hospitals to justify any price exceeding 250 percent of the Medicare payment. He said he wanted to set the limit at 150 percent, but decided to set the higher level as a compromise.

“We’re not talking about bankrupting hospitals,” he said. “We’re not talking about controlling their prices. What we’re talking about is trying to get them to stop screwing us.”

Hospitals lobbied against Woods’ bill, which made it to the House floor in late March, but failed on a vote that wasn’t even close: 66-34 against it. The opposition was bipartisan: 32 of Woods’ fellow House Democrats voted “no” and 34 Republicans did, too.

Woods said as the bill was being debated on the House floor, a hospital CEO was on the phone, speaking to one of his colleagues, asking him to vote against it.

“That’s powerful lobbying,” he said.

Olsen said no state is regulating what hospitals charge.

However, Maryland has been requiring private insurers to pay hospitals the same amount for the same procedure and also sets annual, global budgets for hospitals. It also recently extended this model to some other health-care providers.

Olsen said he didn’t know if MHA would oppose setting up this type of regulation in Montana, but noted that it’s a complex model that needs approval from the federal government and a substantial layer of state bureaucracy to maintain.

Olsen said health insurers in Montana and elsewhere are acting on their customers’ behalf, negotiating a price -- and, in return, the provider or hospital agrees to accept that price, with the understanding that they’ll get paid promptly.

“You don’t have a drawn-out process, typically, to get your payment, so there are benefits to both,” he said. “Insurers are trying to negotiate the best deal and, in turn, turn that into the best premium.”

Doran also insisted that Blue Cross is always trying to find the lowest price they can, and noted that Blue Cross premiums for those buying on the individual market have stabilized or declined in the past year or so.

“Insurers are doing everything possible to drive down the cost and get the lowest possible cost for our members,” he said. “And you can see it in the reduction of our premiums.”