Published in the Current
Healthcare costs are so high that one of Greater Portland’s major hospitals is considering dropping its private insurance coverage and setting up its own in-house insurance plan for employees.
Medical service and insurance costs are heading up, primarily because of rising demand for and increasing costs of healthcare, decreasing state and federal payments for Medicaid and Medicare and public demands that all levels of medical services be available everywhere.
Eileen Skinner, president and CEO of Mercy Health System of Maine, which runs Mercy Hospital and other facilities, including a Westbrook primary care center, said her company is considering saving money by self-insuring its staff. Mercy Hospital’s staff already has voted to up health insurance premiums for most of the staff, to keep premiums constant for the lowest-paid employees.
And it’s not alone in looking for ways to deal with the rising costs of care.
“We are struggling, like all hospitals in the state and in the country for that matter,” said Vincent Conti, president and CEO of Maine Medical Center, which has facilities in Scarborough and Portland.
Pressure is coming from a wide range of sources, including rising costs of technology, skyrocketing health insurance, government bioterrorism initiatives and the falling stock market, which is gutting non-profit endowments nationwide.
Medical technology continues to advance, making saving lives more expensive, though more effective. “All this wonderful technology doesn’t come at no price,” Conti said.
Staffing shortages have driven many medical jobs’ salaries higher, too. Nurses, pharmacy technicians and radiology technicians are among those who are seeing wages rise because of hospitals’ competition for employees.
An aging Maine population means more demand on services. With more and more people on Medicare and Medicaid, hospitals are feeling the pinch from state and federal budget cuts. “We get paid less than it costs us” to provide services, Conti said.
For every dollar the hospital bills Medicare and Medicaid – together 70 percent of the hospital’s patients – Maine Med only receives 80 cents. At Mercy, 57 percent of patients are on either Medicare or Medicaid. The difference has to be made up by charging more to people who have private insurance. “We’ve got to make money on that,” Conti said.
They also have to make enough from private payers to cover the costs of government-mandated bioterror initiatives. “Bioterrorism is a national security issue, and one would think that the cost of it should be borne by the general population,” said Mercy’s Skinner.
Higher premiums
This is where insurance companies come in. When HMOs came to Maine, they cut prices to attract customers. Their revenues were not enough to cover their costs, but by attracting more plan members the insurance companies were able to fill the gap temporarily.
Most left the state rather than face increased regulation and declining profits. Now that only Anthem is left, premiums are rising. “Premiums have gone up because health insurance companies are catching up,” Conti said.
Instead of charging discounted rates, they are trying to recoup their costs entirely from premiums, putting businesses and individuals in a financial crunch. The hospitals’ rising charges to private insurers only make that crunch worse.
Because the hospitals are raising prices to make up for shortfalls in government payments, they are effectively “taxing the people who walk through the front doors of the hospital” – the sick and the injured, Conti said.
To limit the impact, Maine Med is trying to cut costs where possible. It works with other hospitals to purchase services and devices in bulk, to keep costs as low as they can. Conti warns against cutting back in services and research.
Changing the system
Skinner, who came to Mercy a year ago from Louisiana, said the system needs to be changed.
“Conceptually, health insurance has become a pre-payment,” Skinner said. The only way people or employers can buy health coverage is to purchase a total plan, rather than the services that are needed at the moment. Employers who can’t afford a complete package don’t buy any coverage for their workers, and people who don’t need medical care now don’t pay for it either.
That leaves large numbers of people uninsured because the initial price point is too high. If there was a way to lower the entry price, many more people would have access to some care, Skinner said.
Each person should have a medical spending account, to which an employer could contribute, without having to shell out the full cost of total insurance. The state could put in some money to help poor people, and individuals could contribute to their own accounts. People who wanted more coverage could then buy a high-deductible insurance plan.
The improved access would reduce long-term costs, though initially more people than ever before would seek medical care they had postponed for lack of funding.
“When you insure a group of underinsured people, the utilization gets very high,” Skinner said. But that only lasts a short time. If, on the other hand, the structure remains the way it is, many people will only seek medical care when it becomes an emergency, at high costs to insurers and hospitals.
Doctors and nurses in emergency rooms are often stuck with an ethical dilemma. When faced with an uninsured person needing care, they either sign the hospital up to lose money or they turn away someone who is sick or injured.
“It’s not really fair for these people to make health care policy decisions on the spot,” Skinner said.
Planning medical services
Some of the long-term thinking could come from planning healthcare facilities intelligently, Conti said.
Though it may at first seem counterintuitive, putting a full range of medical services in every town would still not be the best thing to do.
“The distribution of (services) needs to be clinically appropriate,” Conti said. There is a balance that must be struck between geographic proximity to healthcare, and the cost and quality of that care.
When medical centers are more widely spread across an area, the staff at each location gets less practice, meaning lower quality care for its patients. And each center needs to purchase a certain basic amount of equipment to have on hand, increasing the overhead costs to pass on to patients.
Conti said some services should be widely available, such as first aid and delivering babies. Those will be used enough even in thinly populated areas to keep medical staff at the top of their games.
More specialized services like heart surgery, which is used less frequently than emergency care, should be in centralized facilities for a wider area, Conti said.
Choosing the locations for those centralized facilities should be based on medical needs, but often becomes a political discussion, Conti said. And requiring heart patients from all across Maine to come to Portland is not convenient, but ensures the best quality of care and the best price, Conti said.