After more than a decade, Colorado patients may finally be getting the transparency they’re entitled to.
In 2009, Colorado created the Hospital Provider Fee in order to fund Medicaid expansion under Obamacare. House Bill 09-1293 created the fee, and created the cash fund bearing its name, in which money raised by the fee is deposited.
But hospitals were forced by the law to help in hiding the fee from patients.
Now, that may change. Senator Jerry Sonnenberg is sponsoring Senate Bill 22-038 that would allow a hospital to show the fee as a line item. If this legislation passes, hospitals would, for the first time, be free to choose transparency for its patients when it comes to the Hospital Provider Fee. It’s a move that the Independence Institute has long supported, and this bill couldn’t come at a better time.
No doubt critics will present this as an attempt to increase patient costs, and pass along a charge to patients for the first time. In fact, because the money can’t come from nowhere, it’ll mean being honest with patients for the first time since the fee’s creation.
Later, in Senate Bill 17-267, the fee was moved from the state’s General Fund into the Colorado Healthcare Affordability And Sustainability Enterprise. This allows the enterprise board to raise the fee as desired or needed without going back to the legislature.
In the first year the fee was effective, it brought in around $300 million. By fiscal year 2019-2020, that number was over $1 billion. Part of the increase was to cover increased administrative costs. SB-267 limited those costs to 3% of overall expenditures, but they can still grow with the enterprise. As of the enterprise’s most recent annual report, overall administrative costs were over $89 million, and the enterprise employed 82 full-time state staffers.
Included in the original legislation was a provision that, “A hospital shall not include any amount of the healthcare affordability and sustainability fee as a separate line item in its billing statements.” While the bill itself was clear about where the money was coming from and where it was going, the actual source of the money – patients in hospitals – was required by law to remain hidden on a day-to-day basis. There would be no reminder to those who pay for their own insurance that they were paying an additional $100 a day to subsidize Medicaid expansion and raise revenue for the state.
Under the Sonnenberg bill, not only will the fees show up on patients’ bills, it will also become clear just how much patients at some hospitals subsidize patients at others. According to a 2016 Independence Institute study by Linda Gorman, hospitals such as Sky Ridge and Centura’s Littleton paid millions more than they received in return, with Denver Health receiving roughly five times the amount it paid in these fees.
On a hospital’s books, the Provider Fee shows up as an additional variable cost, since it’s assessed per-patient. They have a couple of options on how to deal with it. They can simply eat the cost by taking it out of the pockets of investors, including pensions and retirement funds. .
Alternatively, hospitals can mitigate the effect by cutting costs elsewhere. This might mean administrative costs, but it also might mean cuts in service, care, prescriptions—potentially translating into worse service and longer wait times. If Covid has shown anything, it’s that rural Colorado’s health care already operates very close to the margins. Leave it to a bill named “Sustainability of Rural Colorado” to make things even worse.
Finally, hospitals can wrap the cost of the fee up into a general increase in prices, not tied to any one specific service or treatment. This is called cost accounting, and it already affects how medicines, services, treatments are priced – it’s why we have $25 aspirin in emergency rooms.
It’s one thing to impose a fee on Colorado’s hospital patients, something else again to hide it from them. People have a right to see the costs of their hospital stays, and they have a right to know how that money is being used.
Joshua Sharf is a senior fellow in fiscal policy at the Independence Institute, a free market think tank in Denver.
