Editor's Note: The following is part of a class project originally initiated in the classroom of Ball State University professor Adam Kuban in fall 2021. Kuban continued the project this spring semester, challenging his students to find sustainability efforts in the Muncie area and pitch their ideas to Ron Wilkins, interim editor of The Star Press, Journal & Courier and Palladium-Item. This spring, stories related to health care will be featured.
In the U.S. health care industry, individuals with chronic diseases make up 86% of health care costs, according to a 2020 article published on the National Library of Medicine's website, and chronic disease is one of the main variables that increase health care utilization.
The more chronic diseases you have, the more money you are going to be spending on health care, according to an article in the Journal of the American Medical Association.
Conversely, insurance companies inherently want to avoid high-risk individuals who could potentially cost their company the most money, meaning that these "vital few" are the exact same group that health insurance agencies are attempting to avoid.
For individuals like export manager Pamela Stevens, this means being stuck between two complex industries that are both driven to extract a profit from their customers.
Stevens suffers from a combination of Raynaud's syndrome, polymyositis and scleroderma. Dealing with three separate autoimmune diseases on a daily basis, Stevens remains one of the "vital few" year after year.
“People are afraid to go to the doctor,” Stevens said. “It’s not patient care; it’s a business.”
In the state of Indiana, companies with fewer than 50 full-time employees are not required to provide health insurance. If you found yourself in this position without qualifying for company-provided insurance, you could face crippling medical debt.
Fortunately for Stevens, she qualifies for company-sponsored health insurance coverage.
Stevens explained that, with insurance, she still paid $2,224 out of pocket for her medications and $2,316 out of pocket in copays in 2023.
According to the National Institute of Health, the average amount spent on health care for patients with at least two chronic conditions in the United States is $4,385, and the expenditure increases by an average rate of 20.25% per additional chronic condition that a patient possesses.
Additionally, for the "vital few," the National Association for Chronic Disease notes that health care costs for those with chronic conditions are five times higher than those without such a condition.
The iron triangle of health care: Quality, access and cost
John Horowitz, interim department chair of economics at Ball State University, explains that the health care system can generally be broken down into a single concept: the iron triangle. Quality, access and cost are the three pillars of this notion with each one directly and indirectly affecting the other pillars.
“If you try to bring down costs, you might also be getting rid of a lot of access,” Horowitz said.
The idea of the health care system being broken down into this simple idea is simultaneously what makes the industry so complex.
In 1987, fellow economist Thomas Sowell posited a similar idea in his book, A Conflict of Visions: Ideological Origins of Political Struggles.
“There are no solutions,” Sowell wrote. “There are only trade-offs.”
This idea rings especially true for the health care industry.
“For example, take the case of Medicaid,” Horowitz said. “Medicaid tells doctors what they’re going to pay them, and Medicaid pays really low rates. What is the incentive to take Medicaid patients?”
A 2022 study from the RAND Corp. showcased a similar problem for Medicare patients, finding that Indiana residents who are not in Medicare-paid hospitals nearly quadruple the amount of money that Medicare beneficiaries paid for the same services.
Similarly, insurance companies are asking themselves the same question when faced with potentially high-risk customers.
“Hospitals make most of their money on a few patients,” Horowitz said. “Patients who — for the insurance companies — are the highest cost.”
Dawn Velasquez, fellow of the Society of Actuaries, affirmed the idea that insurance companies themselves are often used as scapegoats for larger issues within the healthcare industry.
"The whole system is broken,” Velasquez said. “Take pharmaceuticals, for example; they can basically charge whatever they want. My family can make it because we work for large corporations that offer good employee-sponsored health insurance plans, but what about people who don't?"
Stevens, whose father and brother are both doctors, shares a similar notion.
She explained that problems often arise when health care entity mergers push physicians out of their private institutions to work within their system.
“These conglomerates that are merging are forcing private physicians to join,” Stevens said. “Then these medical entities are charging an arm and a leg for procedures; some patients can’t afford to get the care they need. They want to push you out so they can get another bed available for someone right behind you.”
Mergers play a role
According to the American Medical Association, the percentage of physicians working in private institutions fell by 13% between 2012 and 2022.
Private physicians often join larger conglomerates to take advantage of economies of scale by merging for potential cost savings and to increase the likelihood of achieving higher reimbursement levels.
In a 2022 study conducted by UC Berkeley's Petris Center, researchers found that hospital mergers in Indiana were linked to a 10.6% increase in hospital prices for Hoosiers.
The Indiana legislature looked to tackle this issue early in its 2024 session with Senate Bill 9.
The bill, which was signed by Gov. Eric Holcomb on March 13 after approval in both houses, forces health care entity mergers that meet or exceed $10 million to notify the attorney general’s office 90 days before a deal can be settled to allow time for state regulators to review the deal and its potential impact.
The new law expands on recent progress made within the Hoosier state after 2023 House Bill 1004 was passed last year in an attempt to protect patients by providing an oversight taskforce to monitor patients' costs, as well as monitor Medicaid reimbursements in the state.
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