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Proposed Healthcare Merger a Charade?

Strengthening patient choices of hospitals and physicians through competition is imperative. Promoting cost and quality transparency so employers, consumers and policymakers have access to this meaningful information is equally important.

With this in mind, I wrote the following Op-Ed that was published by the Des Moines Register on September 14.

The proposed merger between two major Midwestern hospital systems, Sanford Health and UnityPoint Health, is deeply troublesome for two key reasons – cost and health outcomes.

For 20 years, I have researched employee benefits in Iowa, including healthcare costs paid by employers and their employees. Since 1999, Iowa employer premiums have skyrocketed by 240 percent (single) and 251 percent (family). Today’s annual Iowa family premium is about $20,000. In 10 years, assuming a five-year average increase of 7.6 percent and no benefit changes are made, the family premium growth could compound to $40,596 (see graphic below).

Over this same 20-year period, Iowa health plan deductibles have increased dramatically, with the average family deductible reaching almost $4,000, with no relief in sight.

Despite the elevated costs paid by Iowans, the level of care received is equally troublesome. The care Iowans receive for the egregious prices we pay suggests we are not receiving commensurate value. With a scarcity of patient information on Iowa health outcomes, we performed the first-of-its-kind study on Iowans’ experiences with the medical care they received – specifically regarding medical errors.

The results we found were stunning. One-fifth of randomly-surveyed Iowans in 2017 indicated they or someone close to them experienced a medical error while seeking care during the previous five years. Of those, 60 percent indicated the error had ‘serious health consequences’ while another 23 percent reported ‘minor health consequences.’ Iowans also incurred serious financial consequences, as a result.

On the surface, the Sanford-UnityPoint proposed merger is touted to be a win-win for these two regional non-profit giants and for the payers of care, including the patients covered in the respective markets. We’re led to believe that such mergers will broaden “access to care” and “increase efficiency” which will help “lower costs and improve care.” These symbiotic relationships generated by mergers may sound intuitive, even for those who regulate anticompetitive business practices, such as the Federal Trade Commission (FTC) and state attorneys general.

But the devil is in the details, and substantiated results of these details show a clearly different, and problematic story that must become public.

The proposed Sanford-UnityPoint merger would amass 76 hospitals, outpatient and long-term-care services across 26 states – employing 2,600 physicians and 83,000 staff. It would be among the top 15 largest nonprofit health systems in the U.S. and have more than $11 billion in combined operating revenue. In 2018, the combined operating income of both non-profit organizations was nearing $213 million.

Nationally, hospital and health system mergers and acquisitions have increased from 38 in 2003 to 115 in 2017. Hospitals account for nearly 33 percent of all healthcare spending – the largest portion of overall health expenditures in the U.S.  Studies have shown that consolidation is more about enhancing bargaining power that health providers have with payers, such as insurance companies and self-funded employers – and less about integration to reduce costs and provide better, safer care.

Provider consolidation serves as a ploy – leveraging its bargaining prowess with third-party payers to ensure favorable prices – resulting in hefty profits for additional acquisitions. Larger, more market-concentrated hospital systems eventually hold payors hostage by refusing to participate in the covered network of providers unless they receive favorable price increases.

Two renowned experts on this subject, Drs. Martin Gaynor and Robert Town, have frequently found that hospital mergers in concentrated markets result in significant price increases, most exceeding 20 percent. In Iowa, Sanford and UnityPoint would most likely seek to leverage a higher-fee reimbursement from private payers which would only increase the 10-year premium projection mentioned earlier. This behavior is detrimental to the well-being of most Iowans and those insured in other areas under this merger’s footprint.

Our antitrust policies must hold hospital market power in check. Attorney General Tom Miller has a long history of using anti-trust laws to protect Iowans – from fighting big tobacco to reigning in Google. Governor Kim Reynolds has made access to rural health care one of her central issues. Both Governor Reynolds and Attorney General Miller must review this merger to ensure that Iowans won’t pay more for less.

Without this, Iowans and others will continue to pay dearly by allowing this charade to continue.

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Rural Iowa Workers Outpace Urban Workers – But Not Favorably

I’m a sucker for playing with data, especially when it covers a relatively sizeable period of time. Over time, data usually tells a ‘story’ especially when drilling deeper. With the results of the latest 2019 Iowa Employer Benefits Study© now available, I tracked a few key cost comparisons as they relate to employees with single health coverage versus those with family coverage. More specifically, I found that Iowa workers employed by rural employers are paying higher healthcare costs – both in premiums and deductibles – compared to their urban counterparts.

Before concentrating on rural and urban data, I would like to share a few graphics comparing overall Iowa data from 2005 through 2019. This first graphic provides a comparison of how employee-only premiums have increased over 14 years of our study. Of note, this study was not performed in 2017.

Total Annual Spending – by Employee-Only Coverage

In 2005, the total annual premium for employee-only coverage was $3,708, of which the Iowa employer contributed $3,000 (or 81 percent of the total), and the employee pitched in $708 (19 percent of the total). In 2019, 15 years later, the total annual premium jumped by 89 percent to $7,020. The employer is now contributing $5,712 annually (up 90 percent), while the employee is chipping in $1,308 (up 174 percent).

Akin to the Ginsu knives commercial, there’s more. The deductibles purchased by Iowa employers increased from $750 in 2005 to $2,192 in 2019 – up 192 percent during that period. What is not covered on this graphic (please accept my apologies, Iowa-specific information is difficult to obtain) is the actual out-of-pocket money spent by Iowa employees for medical care each year.

Total Annual Spending – by Employee-Only Coverage

Total Annual Spending – by Family Coverage

Similar to the previous graphic on employee-only coverage, the family graphic that follows illustrates the continued ‘leakage’ from employee paychecks in the form of higher employee contributions and deductibles they are required to pay for covered services. However, in this graphic, I have included another layer of cost, thanks largely to Kaiser Family Foundation, that shows the national family out-of-pocket spending (based on employers with 1,000+ employees). Again, it would be very helpful to have Iowa-specific claims data, but I am forced to use national data as a replacement.

In 2005, the total annual premium for family coverage was $9,768, of which Iowa employers contributed $6,396 and the employee relinquished $3,372 through payroll deductions. In 2019, the total annual premium increased by almost $9,600 to $19,332 – an amount that would buy a 2019 Volkswagen Beetle. Additionally, family deductibles increased by 157 percent during that period, growing from $1,547 to $3,975.

Total Annual Spending – by Family Coverage

Employee-Only Coverage (Urban vs. Rural)

The next two graphics compare urban with rural employees, both employee-only and family coverages. Because studies from 2005 – 2011 did not breakout urban and rural data, the following graphics spans seven years (2012 – 2019).

In 2012, the total annual urban employee-only premium was $5,206, while the rural premium was $430 higher ($5,636). In 2019, the urban premium jumped by 29 percent to $6,723, while the rural premium increased by 32 percent to $7,413 – which is 10.3 percent higher than the average urban premium. Despite having a higher premium, the rural employee with single coverage has a higher deductible ($2,536) when compared to the average urban deductible ($1,888). Additionally, in 2019, the rural employee contributes $284 more annually for health coverage compared to urban employees.

Employee-Only Coverage (Urban vs. Rural)

Family Coverage (Urban vs. Rural)

Finally, the family premium for urban family employees jumped 60 percent from $11,980 in 2012 to $19,152 in 2019.  The rural family premium increased by 73 percent during this same period, and is now $402 higher than the average urban family premium. On average, rural employees contribute $812 more annually for health coverage compared to urban employees. As with employee-only deductibles, the average family deductible for rural employees ($4,370) is higher than the average urban deductible ($3,647).

Family Coverage (Urban vs. Rural)

In the final analysis, urban employees are more likely to pay less for their health coverage premiums, and when they seek medical care, will typically pay less out-of-pocket due to having lower deductibles and out-of-pocket maximums (not shown). This difference is also spelled out quite clearly when comparing the 2019 Lindex® scores between both groups – the urban employers scored a 78, while the rural employers scored four points less (74).

The Take-A-Way?

Without dispute, the cost of health insurance crowds out workers’ wages. The continuation of cost-shifting in healthcare deflates purchasing opportunities that workers and their families make elsewhere. On the surface, overall data found above can show trends happening for a particular population (see graphics one and two), yet when drilling down deeper with this same data, we find that other important – and disturbing –  issues are occurring (e.g. rural outcomes vs. urban outcomes).

Imagine what this data would show between selected industries, such as manufacturing vs. retail, or for-profit vs. non-profit. We did for 17 different Iowa sectors – it’s called the Lindex!

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Presidential Candidates: Take the Pledge to Serve ‘We the People’

This Op-Ed was published by the Des Moines Register on August 21.

I write this not as a Republican, nor as a Democrat – I’m politically agnostic. When it comes to addressing healthcare, a critical election issue, Iowa voters have the first crack at drilling down and asking presidential candidates for details on how costs will be meaningfully lowered, who will be covered, what will be covered, how it will be paid, and how higher-quality care will be delivered consistently to all populations.

The candidates we eventually elect must thoroughly analyze the details of their plans, including the possibility of unintended consequences that will invariably result. Acknowledging the pros and cons of the plan they support is both honest and crucial.

For presidential candidates to successfully make it out of Iowa and live to compete in future primaries and caucuses, Iowans must require each to articulate the specifics of their plan. Generic responses of supporting “Medicare for All” or “Single-Payer” does little to inform voters, other than allow candidates to merely checkoff one of many issues they support. In healthcare, the devil is definitely in the details.

During the Democratic debates this summer, many candidates singled out insurance and pharmaceutical companies as being responsible for the cost predicament we have across the nation. In fact, Sen. Bernie Sanders, (I-Vt), pledged to reject any donations over $200 from political action committees, lobbyists and executives of insurance and drug companies. Sen. Sanders called on other Democratic candidates to do the same.

Per Sanders’ pledge, “Candidates who are not willing to take that pledge should explain to the American people why those corporate interests and their donations are a good investment for the healthcare industry.”

This pledge, although well-intentioned, does not go far enough. The narrative that insurance companies and pharmaceutical manufacturers are the lone villains is grossly naïve because it excludes other major contributors to the cost problem – hospitals and physicians.

Healthcare prices in the U.S. are considerably higher when compared to other industrialized countries, and a large part of this comes from those providing this care. In fact, providers do not want their negotiated fees with private payers to be transparent, largely under the guise that once prices are publicly known, costs would go even higher because lower-paid providers may want better deals through higher prices. This is merely a convenient approach to keep prices opaque and largely unknown. This status quo only benefits the intended stakeholders, not most Americans.

According to MapLight, a nonpartisan research organization, the American Medical Association and the American Hospital Association are the fifth and sixth largest lobbying spenders over the past decade. In the first half of 2019, the AMA has spent $11.5 million on lobbying while the AHA has spent $10.2 million. The AHA amount is equal to the combined lobbying contributions of three large insurance organizations: America’s Health Insurance Plans, Blue Cross and Blue Shield Association and UnitedHealth Group. Since 2008, the AMA has spent almost $228 million in lobbying, while the AHA spent over $205 million.

Sen. Sanders and all candidates (congressional included) should pledge to avoid donations and other influential contributions from all key healthcare stakeholders, including the AMA and AHA. Candidates must distance themselves from external influences that undermine a system that needs to be designed for the people, not by special interests.

These three foundational healthcare cornerstones – cost, coverage and quality – are the overriding factors that should determine whether our reformed healthcare system is run solely by the government, as some “Medicare for All” proposals tout, or through public-private reforms that improve or replace the existing Affordable Care Act (ACA).

Candidates of all parties – do the right thing – rid yourselves of conflicts of interest and represent all Iowans and Americans.

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