When Women & Infants Hospital Chairman Benjamin P. Harris III gave his speech before the hospital’s annual meeting of the corporation last month, his exasperation was immediately evident. ”Looking back on 1999, it just about takes your breath away,” Harris said.
That about sums up the feelings of health care professionals nationwide, but particularly in Rhode Island, a state that has seen two of its largest health insurers, Harvard Pilgrim Health Care New England and Tufts Health Plan, announce in the past year that they planned to leave the state.
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It’s also the feeling of hospitals and health maintenance organizations, who are reeling from cuts that Congress made to Medicare with the 1997 Balanced Budget Act.
And it is certainly the sentiment of employers, who will see their premiums soar in the year 2000. In fact, employers’ cost of providing health insurance to employees will jump 7.5 percent in 2000 – and that is on top of the 7.3 percent hike that employers faced in 1999, according to a recent survey results released by William M. Mercer Inc., a New York consulting firm that conducts an annual survey of employer-sponsored health plans.
For hospitals and HMOs, the problems began to mount early on in 1999. Many New England hospitals rely on Medicare – the federal program that provides health insurance to persons 65 and older and to those with certain disabilities – for as much as half their income. But because of the cuts lawmakers made to the program in their effort to balance the budget, health care experts say, many hospitals have been forced to streamline their services and even cut staff.
”Being a hospital CEO in 1999 is probably the toughest job in America,” Richard J. Davidson, president of the American Hospital Association, told a group of health care professionals gathered at Brown University for a health policy symposium in November.
While Congress restored some of the moneys that were cut from Medicare by the Balanced Budget Act toward the end of its last session, officials such as Davidson say that more will be needed to solve the problems that now plague hospitals.
For HMOs, the cuts have forced them to be more tenacious in negotiating deals with hospitals on Medicare rates, experts say. The financial pressures of 1999, however, proved to be too much for Harvard and Tufts, which, in addition to Rhode Island, is also pulling out of New Hampshire and Maine.
Employers, meanwhile, can expect their premiums to rise between 10 percent and 18 percent in the next year, according to HealthCare Analytics, a Providence consulting firm. Many employers, however, are absorbing the hikes without passing the costs on to their employees. For example, only a fourth of the employers surveyed by William M. Mercer said they would increase their employee contributions or cost sharing, even though the survey results pointed out that, “employee contributions lagged will behind increases in plan costs” in 1999.
The rising cost of prescription drugs is part of reason behind the decision of health insurers to boost their premiums, said Mark Abate, a principal with William M. Mercer. In an Oct. 25 interview with Providence Business News, Donald H. Fowler, executive director of the Rhode Island Pharmacists Association, cited several reasons behind the rising cost of drugs. He cited the billions of dollars that drug companies spend on research and development, their use of television ads to promote their products, and also their use of “cost shifting.” Different groups pay different amounts for the same drugs, Fowler said. For example, groups such as the U.S. Veterans Administration and Native American groups pay different amounts for their drugs, he said.
