A health care finance executive believes the U.S. health care system is on a path toward separate and unequal care.
Multi-care Chief Financial Officer James Lee said the math that held the system together for decades was starting to fall apart for good during an interview last week at HFMA Annual Conference in National Harbor, Maryland. Multicare operates 13 hospitals and more than 300 healthcare facilities in the Pacific Northwest, primarily in Washington state.
“If you go back to 1997, when the Balanced Budget Act was passed in Congress almost 30 years ago, Medicare began paying health care organizations below their costs. Fast forward to now, and we’re paid about 80 percent of our costs — that’s for Medicare. For Medicaid, depending on the state, we’re paid between 50 and 70 percent of our costs. Basically, our government doesn’t believe that health organizations should be paid fairly,” he noted.
No other government contractor operates under these terms – no defense company, construction company or IT vendor is paid less than what it charges, Lee stressed. But hospitals do, and the rest of the market has spent decades closing that gap, he explained.
Hospitals have historically compensated for government underpayment by charging commercial health plans more, but Lee noted that employers are increasingly unwilling to fund that.
Research shows that U.S. products are no longer globally competitive, in part because health care costs are baked into their prices, he added. Because U.S. companies must price expensive health benefits into the price of their products, they are losing ground to their foreign competitors.
Lee said these cost pressures are pushing suppliers to a breaking point.
“I think this is a fundamental problem. If this continues, I suspect we’re going to end up creating a two-tier system: one for commercial payers and those who can afford to pay out of pocket, and a different system for Medicare and Medicaid patients,” he said.
He foresees a future in which health systems “start to create some sort of priority” for patients with commercial coverage, meaning that patients covered by CMS will have to wait longer for care.
Lee said for-profit payers have little incentive to change this trajectory. For payers, leaving an unprofitable market may be as simple as a quarterly decision, but providers don’t have that choice.
“Multicare has been around for 140 years, and guess what? We’re not going anywhere. Even though these national payers can come to Washington and leave Washington, we can’t – Washington is our home,” Lee said.
It’s getting harder and harder to make the numbers work, but walking away is not an option.
Photo: Crezalyn Nerona Uratsuji, Getty Images
