OBA: Government must get a better handle on health care costs

Statement by Andrew Simons, member of the OBA shadow board for health and OBA candidate for Constituency 17, Pembroke Central

As I have canvassed from Angle St to North Shore, I have heard two complaints about healthcare.

Folks who are working say that rising health insurance deductions cut deep into their pay check. People who have lost jobs explain the tough choices they make between: high H.I.P. premiums, rent, food, and child care. Many people take a chance and skip payments; an un-lucky accident or health problem, could saddle them with a $20,000 hospital bill, ruining them financially.

They ask me: "Why do I pay so much, and why have premiums gone up so quickly?"

A large part of the answer is high fees charged for hospital services in Bermuda. The National Health Accounts released last week show that the Bermuda Hospitals Board accounted for 43% of total health expenditure in Bermuda, and two-thirds of the increase since 2009.

What is the relationship between government and the hospital?

Every year, the hospital proposes a fee schedule, a price list as it were, to the Bermuda Health Council and the Minister of Health. Every service or combination of services at the hospital has a price. The Ministry and the hospital can negotiate these prices. However, once the Minister approves the fee schedule, insurance companies, private (like Argus and BFM) and public (like H.I.P. and G.E.H.I.), must pay in accordance to the schedule. In some cases the charge for the same treatment, in the hospital, has more than doubled in just a few years.

So what?

The effect on private insurance companies is straightforward. When insurance companies pay higher claims they charge higher premiums, which affect everybody.

The effect on government coffers is more significant than higher premiums. The government-run insurance operations also pay higher claims, so they must either increase their premiums to pay to those claims or run deficits, which the taxpayer ultimately funds. Note that the recently released financial results for G.E.H.I., H.I.P., and Futurecare, show mounting losses.

In addition, the higher fees charged at the hospital erode the ability of taxpayers to continue subsidising health care for the young, old and indigent; these subsidies have been in place for more than 40 years. In 2011, higher fees pushed the cost of these subsidies to $150.2M[1], an amount greater than what government provides to support tourism [$35]; public transportation [$23M]; financial assistance [$37M]; child & family services [$20M]; youth, sport, & recreation [$12M]; the Bermuda Housing Corporation [$7M]; and the fire service [$14M], combined.

Conclusion

The government must get a better handle on health care costs in Bermuda. It is not enough for the hospital to continue to raise prices in order to balance the books. Higher prices at the hospital hit the average person in many ways:

The average person pays more for health insurance

Government, as an employer, must pay more for its share of health insurance premiums

Government must cover the cost of deficits incurred G.E.H.I., H.I.P., and Futurecare

Government must pay more for the youth, aged, and indigent subsidies.

All of these increased government expenditures raise government borrowing needs and reduce its ability to provide other social services.

Also with us this morning is Mr. Andrew Simons, a member of the OBA’s shadow board for health and OBA candidate for Constituency 17, Pembroke Central.

This morning we’d like to focus on the just released National Health Accounts report for the year ending 2011.

The report painted a very disturbing picture of soaring health care costs that are already pushing family and personal budgets to the breaking point.

The Health Minister is on record saying health care costs are rising at an unsustainable pace, and we agree.

Where we differ with the Minister is on his statements in the National Health Plan and elsewhere that private sector and overseas care are the major causes for these rising costs.

The National Health Accounts show without question that the Government itself is the largest driver of our skyrocketing costs.

From 2009 to 2011, spending by the Ministry of Health and the Bermuda Hospitals Board rose 26% compared to a rise in private sector spending of just 8%.

In other words, Government health costs rose at a pace three times greater than those in the private sector.

When we look more closely at the 2009-2011 figures, we see the hospitals accounting for approximately two thirds of the increase in Bermuda’s total health care spending.[1]

I have two points to make about the health cost picture presented in the National Health Accounts:

Bermuda cannot hope to have a constructive discussion about the cost of health care if the Government can’t acknowledge where the problem lies which, clearly, is in areas of spending directly under its control.

Bermuda cannot hope to have a constructive discussion about its health care costs if stakeholders are not given all relevant information needed to have that discussion. In this instance, we are without the financial statements from the Bermuda Hospitals Board, which latest figures show is responsible for 43% of Bermuda’s health costs.  

Why are they important? Because they can show in detail areas within hospital operations that are driving up costs so shockingly.

The last released BHB statements was for the financial year ending 2009/10.

This is unacceptable.

The Bermuda Hospitals Board Act 1970 requires audited reports to be released to the Minister within six months after the end of the Financial Year. It also requires a report on operations of the Board during that year.

We are now 10 months on from the latest date the Minister should have received the report and statements for 2009/10  and still at this time the Minister, as he or she is required under the Act, has not tabled copies of the Report.

My colleagues in the House of Assembly have been asking for the release of this report for months, and we’ve received nothing from the Government but stalling.

We were told in April the report was at the printers and then earlier this month that they were still gathering information.

This does not bode well – Government apparently withholding information that is essential for the best understanding of a situation that has such serious implications for people’s health care and the financial strength of the Island.

The Bermuda Hospitals Board is one of the largest operations funded by the Government, this year receiving $142.5 million.

That’s more than any other Ministry in Government.

In our opinion it is totally unacceptable that the public has not been able to see how the BHB is spending the people’s money.

*****

In 2010, the hospital made a profit of $18.3M, and they made roughly the same profit in 2011 – a figure we extracted from the National Health Accounts released by the Minister last week.

Over the past decade, it would seem that the Bermuda hospital business model has changed from a community-based, not-for-profit institution to a for-profit model. There is nothing wrong with the hospital making a small profit, but the increase has come from increasing fees rather than increasing efficiency.

An appendectomy, for example, cost $2000 in 2008 before the introduction of the Chargemaster billing methodology in 2009. On April 1st 2009 that cost went to $6000.

Here is another example: a normal delivery of a baby was $2000 before Chargemaster, but went to $3000 after.

One final example, anesthesiologists saw fees increase from $25 per unit to $125 per unit.  

These are the kinds of cost pressures facing Bermudians entering the hospital today and an indication of unsustainable pressures that continue to build within the system.

So why have hospital costs been going up at such a staggering rate?

We have illustrated one reason in the Chargemaster billing system introduced in 2009. The Government said this change would be “cost neutral,” but once the plan took effect, hospital in-patient fees went up by roughly 30 percent.

Another reason is the potential for over-utilization and abuse within the system since insurers must pay whatever fees the hospital charges.

What is remarkable is the Minister of Health saying the new National Health Plan will be the answer to reining in costs. But in the National Health Plan hospital costs get barely a footnote.

Imagine designing a new healthcare system for Bermuda that does not deal with what accounts for 43 percent of Bermuda’s healthcare costs.

This, to us, is being neither realistic nor sensible.

The National Health Plan calls for government to take over and administer a much higher portion of the Island’s healthcare—for example, proposed changes would require all Bermudians to have a basic healthcare plan insured and administered through government. And yet it’s clear that Government’s overall healthcare costs are rising much faster than private-sector costs, and they’re much less efficient in administering them.

When it comes to controlling healthcare costs, the government clearly needs to get its own house in order before making dramatic changes to our overall healthcare system.