As health care costs surge, regulator seeks new set of 'benchmarks' to limit rise

What is the point of setting a ceiling on health care costs in Connecticut when hospitals, doctors and insurers seem determined to blow through the roof?

That was the issue under discussion Monday at a day-long hearing on the state's "benchmark" efforts to control health-care price hikes at the Office of Health Strategy meeting at the Capitol.

Gov. Ned Lamont set up the benchmark program in 2020, describing it as "a way to keep the health care system accountable for providing affordable health care to the residents of Connecticut."

Underlying Monday's discussion was the wide gap between the state's aim to limit health care cost increases and the actual results: The benchmark cost increase set for 2023 was 2.9%, but the actual rise in costs came in at 7.9%.

The state Office of Health Strategy, which runs the benchmark program, blamed the gap on higher drug costs and outpatient hospital care, including a surge in visits to emergency rooms. Earlier this month, state regulators proposed a 2.8% cost growth benchmark for each of the next five years, with Monday's hearing part of public comment on the plans.

"The cost growth benchmark program helps health care spending be less of a black box and more transparent," said Alex Reger, director of the benchmark program at the state Office of Health Strategy.

Patients ration medicine as drug costs surge

Keeping health care costs under control is a matter of life and death for many Connecticut residents, said Kristen Whitney Daniels of Shelton, a disability advocate who spoke at the hearing.

When the cost of the insulin she needs hit $2,400 a month, Daniels was forced to make a choice: "Forego my food, my rent, my gas, or forego my insulin." After months of scrimping and rationing her insulin, Daniels found a program to cover the cost of her medication, and later formed a nonprofit to help other patients.

"I'm not unique, and these stories are not outliers," Daniels said. "Everyone I know has stories about how they've been negatively impacted by the health care system."

Using data from insurers and reports by research groups like Rand, the organizers of Monday's hearing spotlighted trends in health care in Connecticut, including a sharp spike in costs for medical expenses covered by Medicare, which rose 13.7% from 2022 to 2023.

Doctor criticizes hospital system consolidation

A doctor who works for an independent practice also called out the consolidation of major health systems in the state, which he said buy up physician practices and outpatient centers then steer patients to the location that results in the most profit.

Dr. Dinesh Kapur, a hematologist with a practice on the Backus Hospital campus in Norwich, said the same infusion provided by his practice costs three times more at the hospital practice 100 yards away.

His office has a team of doctors and high-level clinicians who can help in case of an emergency like an allergy -- the hospital infusion center calls 911 and the patient is taken by ambulance to the ER on the other side of the building.

"This is how we are raising the cost of health care," Kapur said. "It is not as much about quality of care as much it is to do with the profit center."

In addition to higher medical costs, soaring increases in drug prices are driving up expenses for both employees and employers, said Sheri Lee, associate vice president for operations and human resources at the University of Saint Joseph.

The school's health plan, which covers 260 workers at its West Hartford campus, saw a 10% increase in costs every year for the past three years, Lee said. Drug costs for some employees have doubled in the last year alone, she added. The surge in health care costs has strained the university's budget and forced it to raise prices.

"It's a ripple effect when we have to increase our operating costs, because then it rolls to the students, who were already overburdened with their student loans," Lee said. "It's becoming cost prohibitive for employers and employees."

Hospitals and insurers push back on benchmarks

Two health care industry representatives expressed blunt skepticism about the benchmarking process, highlighting larger structural issues in health care beyond the control of state regulators.

Setting a benchmark for future cost increases for health insurance costs may draw low-ball bidders into the marketplace that won't remain solvent in the long run, said Susan Halpin, executive director of the Connecticut Association of Health Plans.

"2.8% may be a great target, but if it doesn't reflect the prevailing health care costs and the things that may be out of a payer's control, then it's going to have the opposite effect of what you want it to have in terms of the impact on the market," Halpin said.

Halpin said more insurers may exit the Connecticut market due to the only action the state has taken so far related to benchmarking: Proposing a rate review process for individual and small group policies. The bill passed earlier this month and was signed into law by the governor on Wednesday.

"It's having a punitive and potentially chilling effect on a marketplace that you want competition," Halpin said of state efforts. "The hospitals, the pharmaceutical manufacturers ... are not being held to that same standard."

Many hospitals for their part are struggling to stay afloat due to low Medicaid reimbursements and surging expenses, said Paul Kidwell, senior vice president for policy at the Connecticut Hospital Association.

"The proposed (benchmarks) do not address the persistent structural issues of the program, or account for real-world pressures facing Connecticut hospitals, or attempt to rectify issues that have frequently been brought forward in the process," Kidwell said.

"There continues to be virtually no avenue for modifications to the benchmark that consider other economic factors that routinely affect the cost of care," Kidwell added, citing the impact of inflation, tariffs, supply chain constraints and workforce shortages on the hospital industry.

Even with its shortcomings, the benchmark process could be improved with better data and reporting, Kidwell said.

"We remain optimistic that with appropriate and significant changes, the benchmark program could be a meaningful tool for the state," Kidwell said.