Jun 17, 2021 - Health

States don't want to tackle high hospital costs

Data: Center on Health Insurance Reforms report; Chart: Axios Visuals
Data: Center on Health Insurance Reforms report; Chart: Axios Visuals

If anyone's incentivized to drive down hospital costs, it's state employee health plans. But that's often not where they're focused, per a new study by Georgetown's Center on Health Insurance Reforms.

Why it matters: Hospital prices are cited most frequently by state plans as their top cost driver, but they're more likely to target other forms of health care spending when it comes to curbing costs.

The big picture: State employee health plans are often the largest employer purchasing insurance in their state, so in theory, should have significant clout when negotiating prices.

  • But plan administrators say it's hard to go after these prices because of a lack of competition between hospitals, hospitals' political clout, and employee pressure to keep broad provider networks.
  • Among the top five cost containment measures reported by states, only one — using "centers of excellence" — could potentially impact hospital pricing.
  • Many plans "focus instead on constraining enrollees’ use of health care services through deductibles and other benefit design strategies," per the report.

Yes, but: There are some states attempting to reign in hospital and physician prices.

  • For example, ten states reported using measures to steer employees toward lower-cost providers, 14 have directly negotiated with providers, and 7 states have or are pursuing initiatives that would set rates or use reference prices.
  • Montana's state employee health plan has pegged hospital prices to Medicare rates and saved the state $47.8 million over three years.
Go deeper