Short Takes On News & Events

Md. Blues Chief Blasts Plan To Shift Hospital Costs To Insurers

By Jay Hancock

September 27th, 2012, 5:55 AM

Negotiations to avert a breakdown in Maryland’s unique system of regulating hospital prices have deteriorated into a stalemate between the state’s largest insurer and the Maryland Hospital Association. CareFirst BlueCross BlueShield CEO Chet Burrell, speaking out for the first time about the talks, blames hospitals for their proposal to shift hundreds of millions in costs to CareFirst and other private insurers in an attempt to control rising Medicare spending.

“Not only were we high cost already,” said Burrell, referring to Maryland private-sector medical costs, “now you say, ‘Let’s shift costs to the private sector from the public sector and make it worse’? Is that what constitutes sound public policy? We have said cost shifting is not a path to go down.”

Maryland is the only state that sets hospital prices for all payers, including the federal Medicare program for seniors and the disabled. It’s allowed to do so only so long as Medicare costs per hospital admission rise no faster over time in Maryland than in the rest of the country. Because Maryland is close to breaking this speed limit for its Medicare “waiver,” medical providers and federal and state policymakers have been talking all summer about a redesign.

The idea is for the Department of Health and Human Services to use its regulatory authority to change the rules. HHS officials have urged Maryland to think big, using its system to install new cost controls not just for all payers but for all providers, including physicians and drug vendors.

But the federal agency especially wants to rein in hospital Medicare spending. To address its concerns the hospital association has proposed giving Medicare and Medicaid sharp discounts while raising hospital rates for commercial insurers by 7 percent over three years — beyond normal health care inflation.

Once phased in, the plan would increase charges for companies such as CareFirst and their customers by about $350 million a year and boost their price for a typical hospital admission by $900.

Critics call the proposal a tax on consumers and employers that bails out hospitals from the obligation to control their own costs. Carmela Coyle, the hospital association’s CEO, previously told Kaiser Health News that commercial insurers pay a far lower portion of hospital costs in Maryland than in the rest of the country, and that’s it’s time for them to share more of the burden. Absorbing big Medicare cuts without offsets from private payers would jeopardize hospitals’ financial health and hinder them from implementing reforms in the 2010 health act, she said.

CareFirst’s Burrell singled out hospitals as “the single biggest driver” of recent cost pressure. “They are responding in a sense appropriately to the incentives that they are given” to increase patient volume, he said. “This isn’t malevolent. This isn’t inefficient just to be inefficient. They are rationally responding to the incentives that they have. If any of us were in their place we would do the same. The question then becomes, can you change the incentives?”

The hospital association did not respond to a request for comment.

Participants in the negotiations, which involve CareFirst, HHS, Coyle, Maryland Health Secretary Dr. Joshua Sharfstein, Maryland Health Services Cost Review Commission Chairman John Colmers and MedChi, Maryland’s medical society, had talked about striking a deal by mid-September. The prospects of a Romney White House, which might not be sympathetic to Maryland’s regulation-heavy approach to addressing costs, had spurred everybody to eye a November deadline at the latest.

Even that may be elusive.

“There’s effort being applied” to reach a compromise, Burrell said. “Maybe it’s often darkest before the dawn. I don’t want to convey that I think it’s hopeless, but I wouldn’t want to convey that there’s been a huge amount of progress.”

8 Responses to “Md. Blues Chief Blasts Plan To Shift Hospital Costs To Insurers”

  1. oncdoc says:

    $700B drained from Medicare through PPACA with big cuts starting in 2013!
    Estimated 400K jobs to be lost from American hospitals.
    All the govt can do is give more “quality” mandates and now a hotline to report “adverse events”
    Insurance Cos are going to get sick of the cost shifting and open their own non-govt facilities

  2. Randy k. says:

    ONCDOC, did you just get that out of the Tea Party spin cycle? So, what about the $700 billion that Paul Ryan takes out of Medicare and adds to the defense budget? According to Romney, he says he’s running for President and not Ryan. Romney says he doesn’t agree with Ryan on taking $700 billion out of Medicare and says he’s not gonna do it. Maybe you should do your homework. You could avoid embarrassing yourself, huh?

  3. WellRead29 says:

    Haven’t seen a single survey of the privately insured in Maryland asking them what they think of having to pay even MORE premiums so that Medicaid and Medicare can continue to buy services for the government insured BELOW COST.

    Milliman says around $95B is shifted from the government patient to the privately insured ALREADY because the government doesn’t cover their costs, just keeps adding more people to their insurance pool without adding more money.

    What say we ask the taxpayer what he thinks about this new “stealth tax”?


  4. oncdoc says:

    Randy K, Read Beckers Hosp Review(online) from 9/26. That is where I got it , not the Tea Party spin cycle! I didn’t say anything about the election or that Romney/Ryan have a better plan. Im not even a Republican, but think the PPACA was a bad idea because it fails to address the #1 issue with healthcare which is out of control Medicare spending.
    All reform efforts should have been focused on fixing Medicare, whatever it takes and the rest left for later. IMO, increasing health insurance premiums are in large part related to cost shifting from govt programs as discussed in the above article and draining the Medicare program will only worsen that, again as above. They need to focus on lowering Medicare utilization which will require lower pt expectations including tort reform rather than across the board cuts which will only serve to but providers out of business and encourage more cost shifting.
    All of this cost shifting will lead to the development of non-govt hospitals and clinics

  5. terry otto says:

    ONCDOC; Isn’t that a trade journal for the hospital lobby in Washington DC? Didn’t the hospital lobby sign off on Obamacare and agree to significant cuts in return for Medicaid expansion and a future of individually mandated patients?

  6. Patrick r. says:

    Fact is, the healthcare industry wrote the PPACA and members of Congress just watched and listened. The lobby groups in the smoke filled room in Washington DC were there representing hospitals, doctors, insurance companies, medical device companies and big pharma. Every one of these groups signed on the dotted line and swore to uphold the promises they made in return for a future of windfall profits. That included hospitals. Hospitals are now renegging on their promise. They are getting itchy and impatient. They aren’t happy waiting for the entire law to roll out. Anyone that says differently is a liar! Hospitals do not have an enemy in the PPACA. The two worst enemies of hospitals is the Republican members of the Congress and Tea Party governors. Republican want to repeal the PPACA and the Tea Party governors are refusing to implement the Medicaid expansion. Nobody was happier than the hospital lobby and the other lobby groups when the Supreme Court ruled to uphold the PPACA. Why? Because the deal in the smoke filled room was upheld which kept the future windfall profits on track. Hospitals need to stop crying and have a little patience. The deal is still rolling out and payday is just around the corner!

  7. randy huffmeister says:

    For all of those slightly anxious folks that are using a very clouded crystal ball to prognosticate how the PPACA will end civilization as we know it, maybe you should watch this…