SHIFTY: A public forum hosted by The Green Mountain Care Board this week emphasized the role of cost-shifting in controlling health care costs.
By Bruce Parker | Vermont Watchdog
BURLINGTON, Vt. —A public forum hosted by the Green Mountain Care Board aimed to address the rising cost of health care in Vermont, but attendees said the board failed to examine root causes, such as the lack of competition and price transparency.
As the Green Mountain Care Board kicked off its “traveling board meeting” Thursday night, panelists devoted much of their allotted time to the role of cost-shifting in managing health-care costs.
“The cost shift is an economic situation in which one individual group or government payer underpays for services, resulting in another individual group or governmental payer overpaying for services,” Michael Del Trecco, vice president of finance for the Vermont Association of Hospitals and Health Systems, said from behind the microphone.
According to Trecco, underpaying occurs frequently with governmental payers, placing a strain on other members of the health-care system.
“The most notable area in Vermont where this occurs is with the governmental payers, Medicare and Medicaid. When Medicare and Medicaid underpay for services, the result is somebody else has to pick up that shortfall. And in most cases in Vermont, the private insurers pickup that shortfall.”
Medicaid’s payment shortfall amounts to $153 million annually, Trecco said, and that shortfall gets shifted from non-payers to commercial payers.
Al Gobeille, chair of the Green Mountain Care board, explained the cost-shift issue from the viewpoint of the hospitals.
“The way I explain cost shift to myself is this: If I see 3 percent inflation in costs on the expense side of my business, I have to figure out how I’m going to cover that to have my margin remain the same or break even.”
Gobelille said when Medicaid and Medicare payers don’t keep up with annual cost increases, hospitals ask private insurance companies to pay more.
Kevin Goddard, a vice president at Blue Cross Blue Shield of Vermont, explained the impact of non-payers on insurance rates.
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“If prices are increasing by 3 percent in any given year, and Medicaid and Medicare are paying less than that, and that’s the bulk of the population, then folks who aren’t in Medicaid and Medicare absorb the difference.”
Insurance firms absorb the difference by raising insurance rates and premiums. But as Goddard notes, insurers have to set rates without knowing the real costs of health care.
“The reason it’s complicated is because the process includes things we know and things we don’t know,” Goddard said. “And it turns out, as we develop rates, there are more things we don’t know than things we know. For the things you don’t know, you have to put in assumptions.”
While actuaries are trained to make correct assumptions, even small errors add up to big losses.
“Because we’re projecting on such large numbers, if we’re off by 1 percent, that’s $10 million dollars. If we’re off by 3 percent, that’s $30 million. These are huge numbers,” Goddard said.
But Paul Reiss, a Williston family practice physician who attended the meeting as an audience member, said the emphasis on cost-shifting failed to address why medical costs were rising in the first place. He called on the board and the insurance companies to hold hospitals accountable for failure to control costs.
“First, you look at your business and say where can I cut, where can I be more efficient, do I have to lay off staff — like any other business. Who’s holding providers accountable to be efficient?” he asked.
Reiss said price transparency was as another key problem, citing instances in which a $38 test at one hospital might cost $300 at another hospital — yet the public doesn’t know.
“Why are we so secretive? Why don’t we tell people these things? Let’s (allow) us as a population to buy our health care knowing what the costs are ahead of time,” he said. “We know what they are, but we make it so hard for our patients to know what they are.”
Amy Cooper, an advocate independent physician practices throughout Vermont, asked the board if it considered embracing low-cost medical practices such as urgent care centers and ambulatory surgery centers.
“One strategy that has worked elsewhere — and I don’t see us employing here — is introducing lower-cost settings of care into the system. …Urgent care centers and ambulatory surgery centers have reimbursement profiles and costs that, according to national studies, are much lower than performing these types of services in hospital-based settings.”
But for Peter Sterling, a panelist representing Vermont Campaign for Health Care Security, solutions to the rising cost of health care, whatever they may be, should not fall on the backs of the sick or indigent.
“Will cost sharing contribute to Act 48’s goals of high quality care and sustainable costs? No, because it’s likely to fall on the backs of the sickest and most vulnerable Vermonters,” he said. “Are we really achieving the policy goal that we want by asking poorer people and sicker people to pay more to access care to save the system some money.”
Contact Bruce Parker at email@example.com