Health care spending continues to outpace inflation, driven by prices

EVERETT — Health care spending is a complicated puzzle, and getting more complicated every year.

Consumers might pay insurance premiums, co-pays and deductibles. As a patient, they might not notice the price paid by their insurance company for a routine mammogram screening has increased, because they pay nothing at the visit.

But the insurance company raises their premiums to cover the increasing prices billed by providers.

And that same person might not notice the steady pace of health insurance premium increases — because their employer has been picking up a larger share of that tab, holding the employee’s share flat. But the employer notices, and maybe slows down or stops wage increases.

The average premium for employer-sponsored health coverage for a single person in Washington increased 52% from 2010 to 2020, nearly twice the rate of general inflation, according to federal data. That $7,571 is the total premium, divided between employer and employee.

Overall spending on health care services in Washington state increased on average 6.7% per year from 1995-2014, according to state analysis.

The state Legislature created the Health Care Cost Transparency Board in 2020 in an attempt to get more transparency from health care providers and insurers on spending and why it is growing so rapidly. That bill had support across party lines and among diverse interest groups.

Health care spending is a combination of the prices paid for services and drugs, as well as “utilization” — or how much patients use those services and drugs.

The board established a “health care cost growth benchmark,” a cap on the annual percentage growth in spending on medical care and private health insurance.

State lawmakers are now considering House Bill 1508, which would give the Health Care Cost Transparency Board the authority to levy fines against providers and insurance carriers who consistently exceed the growth benchmark without “reasonable justification.” Those fines would begin July 1, 2025.

Rep. Nicole Macri, D-Seattle, and the primary sponsor in the House, said in a public hearing: “Health care is now 20% of the state budget. We are one of, if not the largest purchasers of health care in the state of Washington. And so we have a particular interest in managing those costs.”

The Health Care Authority, which staffs the board, backs the bill. Mich’l Needham, chief policy officer for the authority, said it supports greater capacity to monitor cost increases and tools to lower cost growth. In the next year the board will dive into the two areas of the biggest and fastest growth: hospital and pharmacy spending.

But the bill this year does not have the same level of support as the legislation in 2020, as various interest groups debate if and how to add accountability to transparency. It needs to be acted on by Wednesday.

This is the only legislation still alive in this session that focuses on the big picture of consumers and health care affordability, according to Sam Hatzenbeler, senior health policy associate at the Economic Opportunity Institute (EOI).

“EOI has worked really hard to advocate for premium subsidies. And we know those are critical for supporting especially lower and middle income patients and consumers,” Hatzenbeler said. “But if we are not really addressing that other side — which is the prices that providers are charging — we just really aren’t going to be able to move the needle on spending.”

She cited Urban Institute data that 5% of Washingtonians have medical debt in collections. And more than half of Washington residents delayed or avoided health care altogether in the past year because of costs, according to an Altarum survey.

At the same time that prices for care and premiums are hitting consumers hard, some health care provider groups who oppose the legislation note their own financial difficulties with inflation in supplies and labor.

Now is not a good time to penalize health care providers for rapid growth in their costs, they argue. The Washington State Hospital Association said in a recent media briefing that hospitals statewide faced $2.1 billion in financial operating losses in 2022.

Providence St. Joseph Health, the parent of Providence Regional Medical Center Everett and Swedish Edmonds, lost $1.4 billion from financial operations in 2022, across seven states. It lost another $1 billion on its investment portfolio.

The Washington State Medical Association’s survey of physician practices found that some had already made cuts to patient service and access. Over half said they are not confident that they can maintain existing care should current financial trends continue.

Dr. Mika Sinanan, a recently retired surgeon and currently on an advisory committee to the transparency board, testified on behalf of the medical association against the House bill. He said if providers are pressured to lower overall spending with current inflation, they might delay care for non-urgent procedures. Fewer services means lower spending.

“The analysis doesn’t allow us, given the complexity of health care, a way to say we’re going to reduce care in this area and reduce services in this area. But we’re going to preserve quality, safety and access,” Sinanan said in an interview. “But if they start putting in punitive measures, those are the things that are going to get harmed. The easiest thing to do is to say we are just not going to offer, we’re going to delay care for all hernia patients, for example.”

Jennifer Ziegler, with the Association of Washington Health Care Plans, testified that too many of the drivers of health care spending, such as overall inflation and policy changes, are outside of the control of insurers.

Gary Strannigan, vice president of congressional and legislative affairs at Premera Blue Cross, said it’s too early for a transition from a transparency board to a regulatory board. Premera wants to see providers and health plans represented on the actual board, not just advisory committees, he added.

“Our role as health plans is to try and apply downward pressure on health rates,” Strannigan said, adding that Premera works hard to agree on “reasonable” contracts with providers. “Health care affordability has become, we think, the most pressing issue in health care,” he said.

Sen. June Robinson, D-Everett, sponsored the Senate version of House Bill 1508. She’s also vice chair of the Senate Health and Long Term Care Committee where a public hearing on the bill was held March 17.

Though she acknowledged the Health Care Cost Transparency Board is in its formative stages, Robinson disagreed with critics who think it is premature to grant it the power to impose financial penalties.

“For me, the benefit of the bill is it points out the cost transparency board doesn’t have a way to hold people accountable,” she said.

Herald reporter Jerry Cornfield contributed to this story.

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Joy Borkholder is the health and wellness reporter for The Daily Herald. Her work is supported by the Health Reporting Initiative, which is sponsored in part by Premera Blue Cross. The Daily Herald maintains editorial control over content produced through this initiative.

Joy Borkholder: 425-339-3430; joy.borkholder@heraldnet.com; Twitter: @jlbinvestigates.