Gov. Jared Polis is pulling every lever to save people money on health care, one of his signature promises to win office last year.
“We’re taking good ideas from the left, the right, the center from far-out space, anything we can do to save people money on health care,” the governor said.
The power of Polis, however, is about to be tested by the political forces of hospitals and insurance companies at the state Capitol. After the next session begins Jan. 8, lawmakers are expected to hammer out a public-private insurance program that could drastically cut the cost of health care costs in Colorado.
Polis has made big promises about cutting sky-high costs, even creating an Office of Saving People Money on Health Care, and putting his lieutenant governor in charge of it. The goal is a better price on an insurance policy or a visit to the hospital or pharmacy.
While profits soar in the health care industry, those getting rich say the governor’s quest to untangle a national knot could easily unravel.
Coloradans pay some of the highest premiums and hospital bills in the country, according to an analysis by the state Division of Insurance. They’re the highest in Colorado’s high country and far-flung rural communities.
The latest stop on the “roadmap” Polis rolled out last spring is the public option insurance program, a public-private partnership to bring a lower-cost competitor into counties in Colorado where there might be only one insurer.
House Bill 1004, signed into law in May, instructed the state Department of Health Care Policy and Financing and the Division of Insurance to come up with a report on how it would work, which was delivered last month.
Families and individuals could purchase the plan on or off the state exchange, Connect for Health Colorado. The option also takes on hospital pricing, while promising to shelter the finances of struggling rural hospitals and clinics.
The option also is supposed to curb high deductibles so people will be more likely to avail themselves of preventive care.
Leading voices in the state’s health care industry, some of whom helped work on the report, were reserved but skeptical, with some officials characterizing it as a Band-Aid where surgery is needed.
With hundreds of millions of dollars at stake, plenty of skeptics question a Colorado go-it-alone attempt to solve a national quagmire.
They’re losing money on Medicaid and Medicare, they say, so any rates anchored by what the government pays is a losing deal. That point, however, is highly suspect coming from hospitals and insurers — Denver-area hospitals alone had profits that topped $2 billion last year, up from $1.7 billion the year before, as membership in Colorado HMOs grew 9% last year.
There’s room for skepticism in numbers. Questions have surfaced about another Polis cost-cutter, the “reinsurance” program to move high-risk, high-cost customers out of the general pool of insured.
The Legislature passed House Bill 1168 last spring, and the federal government approved Colorado’s “reinsurance” program in July.
This month it looks as though that special pool might cost $185 million more in the next state budget, according to reporting by John Ingold of the Colorado Sun.
Separately, Polis pushed for universal full-day kindergarten, and more realistic costs have soared to $40 million above the $175 million projections, according to a state Department of Education report this summer.
Now, a paid family leave insurance bill proposed by Democrats — that even Polis has been skeptical of — is coming in at a higher cost than expected.
The Democrats can’t afford for the public option to be another budget-buster headed into an election year, even if their majorities seem safe.
Doing the math
Politicos and bean counters alike have questioned whether the governor’s savings are real math or political math, in which dollars are moved and numbers are crunched to make a proposal look like better policy than it is.
“It’s real math,” Kim Bimestefer, Health Care Policy and Financing’s executive director and a former corporate insurance executive, said outside a forum in Loveland last month.
The state and individual Coloradans spend more on health care than any other state, according to HCP. That includes being eighth-highest on prices, second-highest in construction spending, second-highest in profits and fourth-worst on efficiency in hospital administration, the agency says.
If the state keeps doing business at it has, the high prices will continue, Bimestefer said.
Obamacare promised a lot, too. What came out the other side of the Democratic president’s hopeful vision was a system that insured 15.2 million more people. During Obama’s eight years in office, however, average insurance premiums rose 43% and corporate profits soared by 57%.
The illness of the nation’s health care costs are serious and myriad, and neither Congress nor the White House is making headway for political reasons.
“We can’t fix them all in the state,” said Polis, a former congressman. “But as the laboratories of democracy, states absolutely can innovate. And Colorado can go from one of the higher-cost states to one of the lower-cost states for businesses and individuals, and that’s very much what we hope to accomplish.”
Bimestefer said the Polis plan puts small businesses and individuals first and improves the current system, rather than a more progressive, government-run program.
“We could have said let Medicaid take over the world,” she said. “There are a lot of politicians at the national level saying ‘single payer.’ … We said, ‘The private sector is strong. That’s where we’re going to invest.’ ”
Nonetheless, the Department of Insurance is drafting a rule that would give the state more authority on setting prices.
Bimestefer said the Medicaid and Medicare rates are too low, but some providers are billing eight and nine times the rate.
“We’re out of line with the rest of the country, and we’re trying to get the prices (down) in our state over a period of time thoughtfully and appropriately in collaboration with our hospitals in a way that helps rural areas thrive,” she said.
Those arguing hospitals and doctors will go broke under the Polis plan are peddling a false narrative, Bimestefer said.
“There is no boogeyman,” she said. “There aren’t going to be job losses.”
She said the state has to safeguard and encourage small, rural clinics and independent hospitals, which tend to charge less. If not, they will close or become part of big companies that tend to charge more.
Carriers could take a haircut on their revenue, with reasonable exceptions, under the Polis plan.
The state will push them to reform their lucrative relationships with pharmaceutical companies. Insurers now approve high-cost drugs instead of cheaper alternatives because of discounts and incentives from pharmaceutical companies. Most often, however, those rebates wind up in the pockets of shareholders, while the costs for the drugs land on the backs of consumers.
“We said all that money (for discounts) has to be passed through to the consumers and employers,” Bimestefer said. “‘You can’t keep it, middlemen.’ That’s reasonable.”
Bimestefer said the public option is critical in the 22 counties served by one insurer.
“It’s not OK for insurers to work only where it’s most profitable for them,” she said.
Amanda Massey, executive director of the Colorado Association of Health Plans, said there are reasons why insurers aren’t in those 22 counties.
“When the threat that you might have to go sell your product in a new market that you’ve specifically chosen not to be in is on the table, it feels risky,” she said.
“I think that’s where the insurance companies are right now, trying to understand what this is going to look like, what authority the commissioner has to compel us and where would there be opportunities for incentives for us to serve some of those areas.”
Warily they go along
The proposed public option is in its early stages, but Polis promises 9% to 18% savings for those who use it, estimated to be about 7% of Coloradans.
It won’t be ready for the marketplace before 2022.
Margo Karsten, president and CEO of Northern Colorado Banner Health, said she sees the good intent in what the government is doing, but it’s not as simple as it sounds.
Take the governor’s reinsurance program.
“The health care systems in Colorado are picking up about $40 million” of the cost, she projected. “We need time to figure out what that’s going to do to our margins.”
Banner cut its administrative costs in half without a corresponding decline in premiums, Karsten said.
“It cannot be on the hospitals alone,” she said. “It needs to be in partnership with our insurers and engagement with the individuals to incentivize healthy behaviors.”
Tom Renell, the senior vice president for financial policy for the Colorado Hospital Association, noted the state passed a hospital pricing transparency law this year, and, in November, President Donald Trump announced a federal plan to do the same.
Neither have had time to work before the Polis administration began reaching for price caps and forced participation, critics point out.
Renell agreed that the association saw much of its input in the final report on the public option, “but it continues to miss the mark,” adding, “There’s clearly more work to be done here.”
The funny thing about money is that you can’t really create or destroy it. You just move it from one place to another, economists will tell you.
That’s the core truth behind health care reform.
Chris Brown, the director of policy and research for the business-focused Common Sense Policy Roundtable, has researched the Polis proposals. The business-focused Roundtable released a report on a potential public option and concluded it would have a profound impact on the state’s health care industry — a major employer and taxpayer — and not a positive one.
The report also was skeptical of the state’s ability to protect rural health care when “providers and practitioners are neither adequately incentivized, nor motivated to serve patients under public assistance programs because of significantly lower reimbursement rates for services.”
Brown said he’s skeptical of any approach that relies on caps first to fix a system with many flaws.
“It’s focusing on the prices rather than what’s driving those costs,” Brown said.
It’s no different than rent control, he said.
“You benefit a few at the expense of many, without addressing the full economic impacts that occur in a community,” Brown said. “Using price controls and rent controls leads to huge unintended consequences, and this is sort of the route we see in the state option.”
Karsten, the Banner Health executive, said the reality is people don’t get turned away, whether they can pay. The cost for those bills don’t go away when the uninsured patient can’t pay. They charge more where they can to help make up the difference.
“Cost-shifting means we have to pay our bills,” Karsten said.
In the meantime, she said she is freezing hiring and holding off on new investments and spending more on ancillary services.
“If this state option is implemented, absolutely we’re going to cost shift, and absolutely it’s going to impact our employment and employees,” she said. “We don’t know what it will do to attract physicians into our communities.”
Eating the dream
Colorado hospitals hiked prices by 76% in seven years to enjoy some of the largest profits in the country, the Denver Post reported last year. The industry is dominated by supposed nonprofits, which account for about three-quarters of the facilities in Colorado.
The average Colorado family is spending about 18% of its income on health care, whereas residents of other industrialized nations spend about 10%.
“That would be wonderful if we had better outcomes, but we don’t,” Polis said. “Our life span is in the middle of the pack, and most health indicators we’re in the middle of the pack.
“We simply pay more for the same or for less.”
Bob Smith is executive director of the Colorado Business Group on Health, an advocacy organization demanding change in how health care is handled and whose members are as disparate as Jeffco Public Schools, Delta Dental and the U.S. Olympic Committee in Colorado Springs.
He said health care costs are eating the American dream, with salary increases swallowed up quickly by increased cost for premiums and doctor’s bills. Teachers in Colorado are paying up to a quarter of their income on family health care coverage, he said.
Meanwhile nonprofit hospitals — about 3 out of 4 in Colorado — are incentivized to invest in infrastructure they don’t really need, just to offload revenue.
“By conservative estimates, we waste more on health care in this country than we spend on public education,” he said.
Smith said “price sensitivity,” as caps are characterized by Colorado reformists, will force hospitals “to function more like other businesses operate.”
But, he said that’s not as easy as it sounds.
“Having spent 38 years in hospitals, I can tell you one of the toughest problems in health care is figuring out how you put a monetary value on an invaluable service,” he said.
There’s also upper-level politics at play. Besides keeping a Polis campaign promise, health care is an issue Democrats think they can win on, though they’ve tried and failed many times before.
The day after Polis gave a big speech on the subject in Loveland last month, his reelection campaign sent out a fundraising email promising 20% savings, thanks to his work.
“My boss is on fire,” Bimestfer said. “You’ve heard him.”