This month, the Indiana General Assembly reconvenes for the next legislative session. One issue businesses and individual Hoosiers alike think should be a priority is lowering the cost of health care.
Since before the pandemic, the Indiana Manufacturers Association has been calling on the legislature to enact policies to help lower these costs. Those discussions have largely been put on hold as the health care system dealt with the challenges of the pandemic. But now, as employers are faced with another year of ever increasing and unsustainable health care expenditures, the time has come for Indiana policymakers to act.
The burden of health care spending falls primarily on businesses in Indiana, where approximately 60% of Hoosiers receive health care coverage as an employee benefit. And a big share of that spending is at Indiana hospitals – over 40% of the total. While many health plans have shifted costs to employees through higher deductibles and copays, between 70% and 90% of the cost of covering Indiana workers and their families falls on businesses.
The current state of Indiana when it comes to the cost of health care is particularly bad. Indiana has long ranked poorly compared to other states on many health measures like obesity and smoking, which increases usage and drives up costs. Indiana’s health care and insurance markets are dominated by a few large players that limit the ability of market forces to lower prices.
Unlike manufacturing, where increased volume and consolidation leads to efficiency and economies of scale, the opposite occurs in healthcare. A recent study commissioned by the General Assembly showed that hospital consolidation drove up costs as high as 18% for consumers in the newly absorbed market.
But where Indiana stands out most poorly is on the metric that matters most – the price of care, particularly in hospitals or hospital-owned facilities. We now have the fourth version of the Employers’ Forum of Indiana, RAND Corporation, study of data from more than 4,100 hospitals. Price of care, which RAND measures as a percentage of what Medicare reimburses for the same service, shows that on average Indiana hospitals are reimbursed by payers at nearly 300% of Medicare, which is the 7th highest in the US.
The health care providers/spenders who are invested in the current system point to information that Indiana’s health care premiums are consistent with our neighboring states. And while few health care premium payers would find much comfort in the argument that effectively says “don’t worry, we are just as bad as everywhere else,” this data only looks at a small (less than 20%) portion of the insurance market.
Most Hoosiers, and the overwhelming majority of the 550,000+ manufacturing workers in the state receive health benefits as part of a self-insured plan, meaning the cost of coverage hits the bottom line of businesses directly. High prices for hospital care take dollars away from hiring and investment.
As state legislators reconvene for another session of the General Assembly, reducing the cost of health care should be a top priority and reducing prices at Indiana’s hospitals would be the most impactful action to achieve that goal. This is a complex issue and will require a lot of consideration by stakeholders. The IMA is ready for that discussion.