Sense and Sensibility

The Federal Health Care That’s Already on the Fritz

Since the beginning of the 21st century, health insurance premiums for families have soared 96 percent in Connecticut.

That’s more than seven times faster than income.

Every year the amount of money Medicare, the federal insurance program for seniors, pays doctors and hospitals also jumps [--] but not nearly so high. In a good year, Medicare increases its reimbursements to hospitals and doctors a meager 1.1 percent. That’s bad, but Medicaid [--] the federal and state program that provides health care for the poor and disabled, is even worse.

While Medicare only reimburses about 93 percent of what it costs to perform health services to health providers, Medicaid reimburses hospitals at anywhere from 60 to 72 cents for every dollar of health care. If you’re a hospital or doctor whose patient base is primarily Medicare or Medicaid patients, you’re behind before you start.

And if you’re in neither one of these programs, you are making up the difference.

Every year, Connecticut hospitals lose about $206 million because Medicare doesn’t pay them enough. With Medicaid, in which the state sets the reimbursement rates, it’s worse. Connecticut hospitals as a whole lose $300 million a year due to Medicaid under-reimbursement, says the Connecticut Hospital Association. Hospitals and physicians that provide service to large numbers of Medicaid patients are hemorrhaging money. Hospitals actually lost more money treating patients with Medicaid than they did treating the uninsured in 2007, the CHA reports. And if you’re a hospital with a hefty proportion of Medicaid patients [--] like Saint Mary’s Hospital in Waterbury, which, at 14 percent Medicaid payments, has the second highest number in the state [--] every day is a struggle to make up the difference.

“We start out every year with over a $15 million deficit,” said Chad W. Wable, president and CEO of Saint Mary’s Hospital. “We are in a very distressed urban area and we serve the lion’s share of Medicaid patients.”

 This is one of the main reasons hospitals [--] and many doctors [--] are hanging on by their latex gloves. And it is also one of the main reasons you are paying more for your health insurance every year.

That’s because the shortfall between what the federal and state governments reimburse hospitals and doctors and what it costs to treat those patients is made up by [--] you guessed it [--] insured Americans. Since 2001, the average cost of an annual health care premium for family coverage has nearly doubled, from $1,800 to $3,300, according to the Deloitte consulting firm. Co-pays have also soared, such that the percentage of the average American household’s income that goes to health care has jumped 12 percent in eight years.

In the industry, it’s known as the “cost shift.”

“The problem is that the government’s not paying its fair share,” said Mickey Herbert, CEO of ConnectiCare. “All of that loss gets cost shifted back to us and we have to pass it on to our members.” Herbert said hospitals often will open their books to demonstrate the loss they incur from Medicare/Medicaid payments. “For every single Medicare patient that goes into the hospital, the hospital ends up losing 10 cents on the dollar,” Herbert said. “The hospitals say, we can’t absorb this, so we need to charge you 120 percent of what Medicaid pay. And we say, we’ll pay you the 120 percent because we understand that you’re not getting what you need from the federal government.”

William S. Gedge, senior vice president of Yale New Haven Health Services, confirmed the shift. “Is your commercial insurance paying more? Absolutely,” he said. “We have to shift that other 40 percent” that the hospital loses in Medicaid payments “to those who have insurance.”

To be fair, low government reimbursements are not the only reason for soaring health-care costs. Insurance companies make tidy profits and have shareholders to answer to. Medical malpractice rates scuttle the honest practice of medicine and increase costs. But, says John Tobin, Waterbury Hospital President and CEO, cost-shifting is also factor. “We try to negotiate better-than-cost rates from the commercial insurers and then have it all come out even,” he said. About 60 percent of the patients Waterbury Hospital treats are Medicaid or Medicare patients, Tobin said. Medicaid patients make up 11 percent of the hospital’s patients. That’s a shortfall of $12.5 million just from Medicaid payments that don’t meet the hospital’s cost. At Saint Mary’s Hospital, that figure is $12 million.

If you are doing your arithmetic, you may have noticed that the average taxpayer is shouldering an unwieldy burden of the health care system. First, by paying taxes that support government insurance programs that don’t meet the cost of services. Second, by paying more in premiums to help health care providers make up the cost the government doesn’t pay. And finally, by paying more in co-payments. It’s a system that could make you sick. If you don’t go broke first.

Contact: TraceyOSh@traceyosh.com