When you get a medical bill, even if it’s itemized, it’s not always easy to tell what you’re paying for. While some things, such as anesthesia, an overnight hospital stay or medications are pretty clear, a lot of overhead costs go into your final bill. If hospitals and other providers could keep their costs down, conceivably, our costs as patients could be lower.
Here in Oregon, our elected officials have a history of trying to make things easier financially on patients. In 2019, the state passed a health care cost growth target program, the goal of which is to help “identify waste and inefficiency, address underlying costs in the health system, and provide new, better cost driver information that can help inform policy that will help reduce costs.”
This is accomplished primarily by asking health care entities to meet a target limit on spending increases – 3.4% annually. At this point, however, the 3.4% threshold is a soft target, without any enforcement until 2025 and without any financial penalties for failing to meet the target until 2027 — that is, if the program still exists in its current form.
House Bill 2045, a bill that Oregon lawmakers are currently considering, could radically change the rules. The legislation would create a blanket exemption to the target in the form of certain labor expenses from providers. Health care entities would not have to count their payroll outlays for a significant number of workers when determining whether they meet the state-mandated targets. This raises major concerns about the scope of the program and the ability of the target to effectively contain costs.
Labor costs are often the biggest expense for a health care system, according to the Oregon Association of Hospitals and Health Systems, which represents all of the state’s hospitals. Allowing providers to charge whatever they want to cover their labor costs – and not requiring justification for those expenses – hamstrings the efficacy of a program intended to contain costs.
The program already provides flexibility for entities to exceed the target as long as there’s a “reasonable basis” for it. But hospitals and other providers are asking for exceptions beyond a “reasonable basis” and ultimately, patients will cover those costs through higher premiums and/or medical bills. As recently published in a report from the state program, health care costs are increasing in Oregon, causing people to delay or not seek care, which can be detrimental or even deadly.
Proponents of HB 2045 stated on the House floor that the bill was not a “blanket” exemption, but that misrepresents the effect of the legislation. The bill itself states that “a provider shall not be accountable for cost growth resulting from the provider’s total compensation.” There is no time limit or other justification required for the exemption to be granted. What else is that, if not a blanket exemption?
This bill would set a dangerous precedent while we await the implementation of the cost growth target – one that allows providers to wriggle out of accountability measures. The target isn’t meant to punish hospitals for buying equipment or hiring the staff they need to operate and care for patients. It’s a tool designed to make providers think about how they can cut wasteful – not prudent – spending. Any argument to the contrary is disingenuous.
Oregonians need qualified and competent professionals to be on staff at their doctor’s office and hospitals. But saying labor costs are indemnified from any possibility of wasteful spending and removing any requirement to justify those costs is unrealistic.
Oregon’s legislators got it right the first time with the cost target program. It makes no sense to gut the program with HB 2045 before it even gets off the ground.
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