The Health Care Price Index rose by 2.2 percent from March 2017 to March 2018, the largest price increase since January 2012, according to independent research firm Altarum.
We’re not surprised. All consumers are feeling the pinch of higher healthcare costs since the Affordable Care Act passed, whether it’s higher premiums or higher deductibles.
A closer look at the numbers, however, reveals something more – this rapid increase was driven in large part by hospital spending.
According to Altarum:
Driving overall price acceleration is high hospital price growth of 3.7%, barely down from 3.8% in February—a more than 8-year high. This was driven by continuing high hospital price growth for Medicare (4.6%)—the highest Medicare rate since November 2009.
It’s hard to know exactly what’s causing this increase — we’ve written about hospital abuses in the past, as well as how Obamacare has driven hospitals to consolidate, also increasing prices for consumers. Altarum suggests it might also “be hospitals driving harder negotiations.” However, rarely do we see numbers so clearly illustrating how rising hospital prices hurt all consumers, not just those stuck with a $937 bill for a 29 minute emergency room visit for a one-year old.
In part because of our health care system, in which patients don’t make direct decisions about their health care costs, hospitals are often able to charge outrageous fees for simple services or products. Unnecessary tests, x-rays, overnight stays – these are all some of the ways hospitals are driving up costs for patients. In fact, Vox found that spending on emergency room fees rose by more than $3 billion since Obamacare passed through 2015, an 89 percent increase.
But climbing hospital spending is actually driving up costs across the entire healthcare system, according to Altarum. Altarum notes that factors that should in fact reduce national healthcare spending, such as the decline in total coverage were negated by the stark rise in hospital spending. In fact, hospital spending now represents 32 percent of national health spending, an astounding $1.16 trillion.
Consumers should be worried, but they should also be holding hospitals accountable for these abuses. We need greater transparency in hospital pricing and greater accountability when hospitals abuse their position as care givers. This will create incentives for hospitals to improve care and compete with other hospitals for business, letting the market take hold and bring down prices.
When individuals, not third parties, control their healthcare spending and can fully see the charges for their treatment, they can more readily push back on the kinds of abuses that hospitals continue to perpetrate with impunity. But, in a system in which insurers, PBMs and other actors obfuscate the true cost of care, it is easy to turn a blind eye or for hospitals to get away with absurd prices. Ultimately, consumers pay for these costs in the form of higher premiums as insurers must charge more to keep up with higher costs, driving a never-ending cycle of price increases.
