Dart board with dart that missed the target representing claims that aren't true

Fact Check: Should Hospitals Get the Blame for High Insurance Bills?

April 24, 2019 / Jared Polis

Colorado Gov. Jared Polis’ administration issued a report that singles out Colorado hospitals as the cause of skyrocketing health insurance costs.

CLAIM #1: Cost increases at Colorado hospitals are excessive and rising faster than the national average.

FACT: To make this claim, the report from the Polis administration dismisses a host of data within the report showing exactly the opposite – that hospital spending in Colorado is lower than the national average while also delivering higher quality care. Then, the report puts forward an alternative theory using limited numbers that the Polis administration admits “cannot ensure accuracy or year-over-year consistency.”

For example, the report notes that by one measure, Colorado spends 15 percent less per hospital patient than the national average, while still providing higher quality care, according to the Centers for Medicare and Medicaid Services (CMS).

The report also notes, by a different measure, that Colorado hospital spending is 23 percent less than the national average – even though our state spends more than the national average on private insurance.

But the Polis administration states these metrics as “misleading” and instead presents its own set of numbers. But, as noted above, the authors of the report concede those numbers come from a non-public analysis and “cannot ensure accuracy or year-over-year consistency.”

Using the non-public numbers, the Polis administration claims that hospital costs in Colorado increased 58.7 percent from 2009 to 2017, well above the national average. Therefore, the report concludes that hospitals should be cutting their own budgets to give more money to health insurance companies.

There is reason to question the accuracy of these numbers and the conclusions that go with them. For example, a review of the Kaiser Family Foundation’s data Colorado hospital expenses per inpatient day climbed 35 percent from 2009 to 2017 – an increase, to be sure, but far less than the level claimed by the Polis administration.

CLAIM #2: Rising hospital costs are to blame for rising health insurance costs.

FACT:  Hospital costs have increased because hospitals in Colorado are committed to providing high quality care to a rapidly growing population while dealing with a constantly shifting regulatory landscape at the federal and the state level.

But hospitals cannot be blamed for what we have seen in the private health insurance market in recent years. From 2009 to 2017, average insurance deductibles for individual policies surged by more than 1,700 percent to $1,951 per year, according to Colorado’s Division of Insurance (DOI). Over the same period, average deductibles for family policies jumped 99 percent to $3,721 per year.

This means Colorado families are paying thousands of dollars more out-of-pocket for healthcare on top of higher insurance premiums, which increased more than 40 percent on average for both individuals and families from 2009 to 2017. The average individual premium now stands at $6,456 per year and the average family premium is $19,339 per year, according to data from the DOI.

Reversing this trend, which is forcing Coloradans to pay more for insurance that covers less, requires the involvement of every part of the healthcare system. Singling out hospitals won’t provide relief to individuals and families who are struggling with the high cost of health insurance.

CLAIM #3: New hospital construction “effectively increase health care costs.”  

FACT:  The Colorado hospital industry is not overbuilding. Construction projects in the hospital sector are driven by rapid population growth in Colorado. From 2009 to 2017, Colorado’s population grew by more than 630,000. Over the same period, the state’s ratio of hospital beds to residents actually fell, from 2.1 to 1.9 beds per 1,000 residents. Put another way, as Colorado’s population increased by 13 percent, the relative number of hospital beds fell by almost 10 percent.

As the Colorado Hospital Association (CHA) has explained, officials are actively managing round-the-clock availability of treatment facilities when they are needed with the efficient use of these facilities. As the CHA noted in a recent report:

“Even if a hospital is only at full capacity during a flu outbreak or other mass casualty event, it must always be ready for that volume. For example, Castle Rock Adventist Hospital has an average occupancy rate around 60 percent but also had 14 days at capacity. If it were to reduce its number of beds to increase its average occupancy rate, it would not be able to handle its full case load on some days.”

In the same report, hospital officials made it clear they are open to finding cost savings within their own operations and the broader healthcare system to ease the pressure of rising deductibles, premiums and other costs on Colorado families and businesses. A new approach to preventing unnecessary emergency-room visits could save $570 million per year, for example, if there was “a united effort across the system” to ensure these patients get earlier and more cost-effective treatment in a different setting.

Claim Source: Colorado Department of Health Care Policy and Financing