The MHA testified before the Michigan House Insurance Committee June 11 on healthcare cost issues affecting hospitals and communities across the state.
Laura Appel, executive vice president, government relations & public policy, MHA and Elizabeth Kutter, senior director, government and political affairs, MHA, testified in front of the House Insurance Committee on hospital cost drivers and their impact on hospitals and patients. Kutter shared that Michigan’s hospitals are more than healthcare providers, serve as economic anchors, stewards of public health and major contributors to community investment. Additionally, Kutter shared data collected by the MHA that Michigan hospitals contributed more than $4.5 billion last year to funding community impact projects like mobile clinics, transportation and housing support, food pharmacies and behavioral health programs.
The testimony also highlighted that hospital expenses are rising nationwide, increasing 5.1 percent in 2024 and outpacing the overall inflation rate of 2.9 percent. These increases are largely driven by labor, prescription drug and supply costs.
Appel provided a detailed explanation on workforce and talent, prescription drugs and supplies as significant cost drivers for hospitals and patients seeking care. Data shared with the committee showed that healthcare is the largest private sector employer in the state, with hospitals employing 222,000 people who provide $10.7 billion a year in tax revenue, and that labor costs typically represent 56% of total expenses for hospitals. In addition, prescription drugs are constantly increasing for hospitals and of the $449 billion spent annually on prescription drugs in the United States, hospitals account for roughly 25 percent of the total. Appel made it clear that hospitals do not set the price of drugs but are subject to the whims of drug manufacturers. It was also shared that supply chain disruptions and inflation continue to affect hospitals’ ability to deliver care. National data shows that per-patient supply costs increased 18.5 percent from 2019 to 2022.
Lastly, Kutter and Appel provided an overview on hospital pricing and reimbursement from commercial insurance. According to the Rand Hospital Price Transparency Study, Michigan had the third lowest average commercial payments relative to Medicare in 2024 and is one of just five states with hospital payments averaging below 200% of Medicare prices. The presentation concluded with a call for working with the legislature to address administrative burdens that impact healthcare access and affordability, and focusing on solutions that keep Michigan a high-quality, lower-cost healthcare state.
Members with additional questions should contact Elizabeth Kutter at the MHA.