Healthcare Affordability

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Affordability  

Hospitals share a commitment to keep their communities healthy by reducing costs and maintaining access to care. 

Why Are Healthcare Costs Increasing?  

There are a variety of factors influencing rising healthcare costs. Hospitals absorb many of these rising costs from other areas of the industry. Below are several of the leading cost drivers. 

• Prescription drugs are the fastest growing expense for hospitals, with growth outpacing labor and service costs.  

• People are older and sicker, as evidenced by the fact that the average length-of-stay for the most severe patients has increased by 22% since 2019.  

• Government cuts to Medicaid reimbursement and reductions in enrollment will slash more than $6.5 billion from hospitals through 2032 and increase uncompensated care.  

• Elimination of enhanced premium tax credits has caused insurance costs to increase on average by 20% on the individual marketplace for Michigan residents.  

• Labor dominates the overall share of expenses, as hospitals need skilled clinicians and support staff to provide the best patient care experience. Inflation and workforce shortages have led to unprecedented increases in labor costs in recent years.  

How Are Michigan Hospitals Operating in This Environment? 

Rising costs and cuts to federal funding are creating a more difficult environment for hospitals nationwide and in Michigan. Michigan hospitals are mindful of these challenges, with the following items illustrating how hospitals are operating in this environment.  

1. Michigan is one of the most affordable states for hospital pricing, ranking third in the country for the lowest hospital prices relative to Medicare. 

1. Collectively, Michigan hospitals provided $208 million in financial assistance and wrote off an additional $461 million in bad debt in fiscal year 2023.  

1. Every hospital in Michigan now offers or works with telehealth to lower costs and make healthcare more accessible, especially in rural areas.  

1. Innovations in clinical practice allow hospitals to offer services in the most cost-effective settings that uphold safety and quality standards while maintaining access to services in their communities.  

1. Hospitals invest in primary care and patient engagement to reduce avoidable emergency visits and hospitalizations.  

What Needs to Be Done? 

 There are a variety of potential solutions that can have a meaningful impact on patients and their out-of-pocket costs. Hospitals are actively engaged with lawmakers in a nonpartisan fashion to identify and advocate on policy that can implement these solutions. Hospitals are also willing partners with the business community and other stakeholders in this work.