If Connecticut wants to make healthcare more affordable, we need to talk about all healthcare spending in our state, not just what consumers pay for commercial health insurance and hospital care. And we have to consider smarter, more innovative ways to spend those healthcare dollars for everyone’s benefit.
Let’s begin with an examination of the facts. Hospitals are working incredibly hard to provide the care patients need, when they need it, in a location that is convenient to them. But the headwinds are extraordinary – out-of-control operating cost inflation, sicker patients, workforce shortages, and anemic reimbursement from Medicaid. These challenges will reach crisis proportions as a result of recent blunt-force policy proposals that would cut billions of dollars from hospitals and reduce access for those most in need.
We must correct some misinformation. Some have dismissed alarming new data on the financial strain hospitals face, citing 2021 as a “good year” for hospitals. Were it not for the emergency federal funding provided to hospitals in 2020 and 2021, the heroic response and public protection provided by hospitals and their courageous caregivers at the pandemic’s height would have been impossible. Without federal relief, most of Connecticut’s hospitals would not have survived 2020.
The federal funding is gone now and hospitals are facing more than $164 million in operating losses and an additional $370 million in non-operating losses, making 2022 the worst year since the pandemic began. The losses are substantially larger, more than $700 million in 2022, when you look at hospitals as part of the systems they are building to provide accessible and effective primary and preventive care along with a broad continuum of services and advanced infrastructure to better manage population health, improve outcomes, and reduce the cost of care.
These system losses include more than $500 million in non-operating losses, which depend almost entirely on the performance of Wall Street. Some have argued that hospitals should base their budgets on what they expect the market to return; however, as any investor knows, markets are hard to predict. It would be irresponsible for a household or business to base its budget on projected market returns – and gravely so for a care provider on whom the public’s health depends.
Now is not the time to destabilize hospitals working to address health disparities worsened by the pandemic, care for sicker patients, and mitigate a critical workforce shortage.
We appreciate that Governor Lamont recognizes we have among the nation’s best and most innovative hospitals. There’s a cost to running these great hospitals, but not a cost that is particularly high relative to other northeastern states. In fact, spending on hospital care in Connecticut is about 13% lower per person than in neighboring Massachusetts.
Where neighboring states are ahead of us is in the use of federal Medicaid dollars to support the cost of healthcare delivery. Connecticut has a long history of underinvesting in its Medicaid program. In 2022, Connecticut spent 27% less than other northeast states on Medicaid as a percent of state expenditures. By consistently underspending on Medicaid relative to its peers, Connecticut left more than $7.5 billion in federal matching revenue on the table over the last 6 years.
That’s federal revenue that could have been brought into Connecticut and reduced pressure on commercial health insurance premium prices and rapidly rising co-pays and deductibles that are a growing burden to consumers. Instead, the state’s consistent Medicaid underpayment functions as a hidden tax on employers and their employees, as commercial health insurance ends up subsidizing hospital services to make up for nearly $1 billion in Medicaid-related losses.
Connecticut’s underfunding of Medicaid is not only leading to a cost shift that drives up what employers that sponsor an employee health plan and consumers pay for healthcare but it is also depriving people who are medically underserved of access to needed care and social supports, which are major contributors to health disparities. Very little of what Connecticut does today is focused on the prevention of chronic diseases like diabetes and high blood pressure, which are estimated to account for 90% of healthcare expenditures, a burden that is expected to grow in the coming decade.
Together we can reform the Medicaid program to make a difference in everyone’s lives, strengthen the care delivery system, and address social drivers of health – like access to nutritious food, employment, and affordable housing – to produce better, more equitable health outcomes, and mitigate the growing cost shift to those with commercial insurance.
Connecticut hospitals deliver exceptional care for everyone who walks through their doors, regardless of their ability to pay. Instead of pursuing risky, short-sighted policies that would restrict access or destabilize healthcare delivery, Connecticut should focus on reimagining Medicaid to drive improved access and health outcomes for all. Hospitals are prepared to join with community partners and the administration to pursue bold, long-term strategies to build a healthier Connecticut; a task that requires everyone to be part of the solution.
