House Bill 1004 could bring relief to Hoosiers coping with high hospital costs. (Getty Images)
Indiana’s legislature has spent a solid five years attempting to control the exploding effect of hospital monopolies on Indiana’s economy. This work has been transparent, deliberate, and deeply informed by close attention to data and analysis. It has been as solid a piece of legislating as I’ve seen.
In response, Indiana’s hospital monopolists have thumbed their nose at efforts to control prices. A quick survey of the past five years is shocking. In 2020, when the General Assembly first started addressing this problem, Hoosiers paid 13.8% more, per person, for hospital care than the average American. In 2021 that rose to 16.1%, in 2022 to 23.9% and in 2023, our most recent data, to a whopping 24.4%.
In only five years, hospital monopolists have more than doubled the ‘monopoly penalty’ Hoosiers pay.
To put this in context, the extra amount Hoosiers pay to hospitals each year relative to other Americans is about 90% of our total per capita property tax burden. Worse still, the ‘monopoly penalty’ Hoosiers pay for hospital care over the past five years is growing exponentially faster than property taxes over the same period.
To their credit, the Hoosier legislature has passed several pieces of legislation requiring more transparency, eliminating some of the anti-competitive practices, such as ‘Do Not Compete Clauses,’ and commissioned two very large studies of monopoly pricing.
Indiana hospital prices 8th-highest in nation, study finds, but hospitals dismiss analysis
These research teams at the Petris Center at UC Berkeley found what every previous independent analysis found: Indiana has a hospital monopoly problem. Indeed, the only studies anywhere in the past decade that conclude Indiana doesn’t have a monopoly problem were paid for by IU Health or the Indiana Hospital Association. A weird coincidence no doubt.
So, after five years of careful analysis, the Indiana legislature seems poised this year to tighten the rules concerning hospital monopolies. House Bill 1004 does something commendable, common sense and straightforward.
Its language says simply that if a hospital behaves like a not for profit firm, then it gets to keep its not for profit status and the huge tax savings it gets from doing so. But, if a hospital acts like a for-profit firm, it would lose its tax protections and pay taxes like every other business.
The mechanism for doing this is simply that if a hospital charges more than 300% of the Medicare allowable rate for any service, it loses not for profit status for at least 90 days.
It shouldn’t have come to this. There are only five major monopoly hospital systems in the state. The dozens of independent hospitals in the state have been exempt from this, and most other anti-monopoly legislation. Indeed, some of the biggest victims of hospital monopolies have been rural communities and small town hospitals.
Complicating factors
But, the Indiana Hospital Association has forced small hospitals to toe the line. It was a strong bit of lobbyist work, but it has seriously shortchanged Hoosiers. This approach has made government response more likely and more vigorous than it would have been if these monopolies had quietly kept prices down. Independent hospitals need their own association that isn’t beholden to five large monopoly systems.
The biggest difficulty confronting the monopoly problem are almost certain changes to Medicaid. Indiana seems poised to trim hundreds of thousands of Hoosiers from the Medicaid rolls. My estimate is that this is roughly 4.5% of total hospital revenue per year.
Of course, this won’t hurt the big hospital systems — their annual profits are four or five times larger than the Medicaid cuts. It will stress independent hospitals, especially in more rural regions. These are places that usually face tighter budgets, typically act like not-for-profit systems and have a much higher share of Medicaid recipients.
Legislators should consider this, and allocate much of the additional revenue from monopoly hospital systems to pay Medicaid costs. That additional tax revenue could even be earmarked to support independent hospitals across the state — particularly those that keep obstetric and emergency services in non-metropolitan counties.
The time has come to end the monopoly penalty Hoosiers pay, now more than $1,015 per capita each year. It is also time for independent hospitals to side with Hoosiers.
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