Health insurers take heat over high prices, but are hospitals the real villains?

Polls show the suspect in the ambush murder of UnitedHealthcare CEO Brian Thompson may be emerging as a folk hero to college students.

Half of the 1,026 college students surveyed by Generation Lab had a favorable view of Luigi Mangione, the 26-year-old accused of gunning down Thompson outside a New York hotel in December. An additional 48 percent said Mangione's action was justified.

The statistics are in line with an Emerson College poll finding 41 percent of 18-to-29-year-olds thought the Thompson murder was acceptable. Nineteen percent had a neutral viewpoint.

Sen. Elizabeth Warren, D-Mass., seemed to empathize with Mangione's actions. "Violence is never the answer, but people can be pushed only so far," she said. Warren later backtracked and said murder wasn't justifiable.

While it's easy to blame health insurance companies for ballooning health costs, there are plenty of questions regarding the role hospitals play in raising prices.

The Centers for Medicare & Medicaid Services statistics show Americans spent $4.9 trillion on healthcare in 2023. More than half of that went to Hospital Care and Physician and Clinical Services.

Meanwhile, hospitals collected $205 billion in profits, according to Rice University economist Vivian Ho. By comparison, health insurance companies earned $25 billion.

Ho said the data suggest "hospitals are overcharging patients." She said people should be more angry at hospitals instead of insurance companies.

Ho co-authored an Oxford University Press study showing the hospital price index grew at a faster rate from 2006 to 2023 than insurance premiums or professional services. The study also suggested for-profit and nonprofit hospital profit margins were always greater than insurance company profit margins from 2011 to 2022.

With those increases in profits came accusations of bad behavior by hospital systems.

In 2021, a 72-year-old Ohio woman saw her $30 bill for steroid injections skyrocket to $1,394 after the hospital classified it as "operating room services."

The hospital said it was a bill classification change from an office-based setting to a hospital-based setting. In other words, the same treatment would have cost $1,300 less if given in an office across the street.

A Michigan woman reported a similar problem. She was charged more than $1,100 for a hospital facility fee despite going to the same clinic she had been visiting for the past five years. The hospital defended the charge saying they have to charge for appointments taking place "in provider-based clinics."

The billing increase is so bad that the federal government added pre-treatment approval requirements this year to tamp down on costs.

One problem could be the lack of independent physicians. The American Medical Association said last year that more than 50 percent of American physicians are hospital employees or contractors. It was 40 percent in 2012.

The federal government may play a role in the problem, too.

A Virginia obstetrician-gynecologist received 59 years in prison after, prosecutors said, he performed unnecessary surgeries on women between 2010 and 2019. Court documents said Javaid Perwaiz sterilized Medicaid patients "without consent forms signed 30 days in advance," as required by law. Other procedures included hysterectomies and "other invasive and irreversible surgeries."

Hospitals also benefited from federal COVID dollars, receiving about $84 billion from the Provider Relief Fund in 2020. About $2.6 billion in overpayments was expected to be repaid after an audit of Health Resources and Service Administration numbers. A Government Accountability Office report from 2023 said $1.356 billion of those overpayments had not been recovered. The GAO blamed HRSA officials for being too slow in establishing a timeframe for the repayments.

While major hospital systems said inflation and the pandemic caused financial strain, a 2023 JAMA Health Forum study found they're doing fine.

The study reported 75 percent of 4,423 hospitals had a positive net operating income in 2020 and 2021. Of those 3,337 hospitals that ended up in the black, 78 percent did it without COVID assistance. The authors also noted that 785 hospitals saw their financial situation go from negative to positive during that time.

Coming out of the pandemic, multiple hospital systems and insurance companies engaged in contract disputes over reimbursement rates.

While insurance companies were mostly blamed for the disputes, hospitals demanded higher reimbursement rates. Two high-profile disputes in Colorado and Nebraska involved hospitals allegedly demanding three times the rate of inflation from insurance companies. One insurance company president called the demands "abnormal" and said that employers and employees would suffer the consequences.

When the Thompson-led UnitedHealthcare negotiated with UNC Health in 2023, officials said, the hospital system wanted a $570 million increase in costs. UNC Health officials claimed UnitedHealthcare refused to negotiate. A multi-year deal was eventually reached.

Despite all the complaints about health insurance, the American Medical Association noted in 2022 that insurance spending accounted for 6 percent of healthcare spending.

Health insurance companies may not be the real villains.

Taylor Millard writes about politics and public policy for InsideSources.com.