Less competition cited as reason for dramatic health cost increases

January 9, 2015
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For decades employers in West Michigan have enjoyed lower costs for health care than peers anywhere in Michigan and generally across the United States. The economy of that fact has often been cited by employers as a reason to enter the West Michigan market and to keep businesses in the region.

That is changing, and at an alarming rate, according to a study just released by Grand Valley State University economics researchers from the Seidman College of Business and health education Provost Jean Nagelkerk. Report co-author and economics professor Paul Isely told the Business Journal hospital expenses showed a 108 percent increase over the last 10 years — 78 percent faster than cities of like size and in Detroit.

Those increases are not linked to length of hospital stays, rate of admissions or changes in demographics. “We’re a little less healthy (as a region) but not by those measures,” Isely said.

Isely also noted since the study covered 2014 and just seven months of the Affordable Care Act, it is not an impact on that pricing or costs.

Note, too, the Business Journal reported Nov. 7 on grbj.com that the American Medical Association ranked Michigan the third least competitive state in the commercial health insurance market. AMA President Dr. Robert Wah told the Business Journal, “The dominant market power of big health insurers increases the risk of anti-competitive behavior that harms patients and physicians and presents a significant barrier to the market success of small insurance rivals.”

Isely said new technologies and specializations were not the trigger cited in the 2015 health check forecast, either. “One thing that did stand out to us was that our level of competition has changed more here than in most of the other locations. The amount of competition dropped a lot compared to the other side of the state and in the comparison cities. Competition went from being below a trigger point for anti-trust issues to being above a trigger point for anti-trust issues.”

Answering questions from the Business Journal during the WGVU PBS affiliate West Michigan Week show, Isely noted, “Less competition puts less pressure on keeping prices low.”

Isely said consolidation of medical services is occurring around the country, not just in this region, but West Michigan reflects “almost double the level of non-competition as the east side of the state.”

The study measures facility and worker expenses and total expenses, expenditures of fees for service, Blue Book standards and other categories. “In all measures we’re seeing more upward pricing than the east side,” Isely said.

The top health concerns generally in populations across the state include heart, high cholesterol and diabetes, and costs for care in West Michigan showed significant spikes for those. Isely also noted West Michigan showed an increase in unhealthy behavior “but not big enough to see this amount of change in prices.”

Given the previous level of involvement by business toward efforts to reduce or maintain health care costs in this region, the Business Journal suggests the GVSU report is the biggest wakeup call business owners have received in decades. The twin bombs of quickly increasing health care prices in the least competitive health insurance market also will affect choices by employees being recruited to the region. Business can’t afford continuation of these “trends.”

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