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Request a DemoHoosiers are paying more for hospital care. Here’s how lawmakers want to solve the problem.
Update, May 16, 2023: Gov. Eric Holcomb has signed three Republican priority bills aimed at reducing health care costs. Read about the final versions of the bills here.
The Gist
Multiple studies show Indiana has relatively high health care costs — both when it comes to hospital costs and insurance premiums, which can mean that a large chunk of the money Hoosiers earn goes toward health care.
Both House and Senate Republicans have made lowering those costs a priority this legislative session after sending a warning letter to hospitals last year asking them to address the high costs themselves. Plans include a proposal from House Republicans to impose fines on hospitals with high prices.
Lawmakers’ proposals are likely to be met with intense pushback from hospitals.
What’s happening?
Health insurance is less affordable in Indiana based on workers’ average annual pay than the U.S. as a whole, a report from the Nicholas C. Petris Center found. On average, premiums for an individual were 14.1% of a workers’ annual average pay in Indiana, compared to 11.2% in the U.S. as a whole in 2020.
Right now, the average employer-sponsored premium is $7,319 for a single person per year in Indiana. While that’s only $170 higher than the national average, individual premiums would need to decrease by more than $1,500 per year in order to match the U.S.’s premium cost in terms of affordability. In short: Hoosiers are paying too much on monthly premiums, based on what they make.
Likewise, there is a larger gap between what Medicare pays for hospital services compared to what commercial insurance pays in Indiana than in all but six states, according to a study from the RAND Corporation, signaling a high-cost problem for Hoosiers when it comes to hospital care.
A study from Harvard University professors arrived at a similar finding: Hospitals in Indiana, of all the states, would lose the second highest percentage of their revenue if commercial rates matched Medicare rates, based on 2017 numbers.
Health care expenditures per capita in 2020 in Indiana were higher than that of the U.S., according to a separate Petris Center report commissioned by the Legislative Services Agency. That statistic matters in a state with a reputation as a low-cost-of-living state with average pay that is significantly lower than that of the U.S.
The Indiana Hospital Association (IHA) said some critics have become hyper-focused on only a small portion of the picture in a “deliberate misrepresentation to advance their agenda.”
“Hospital prices may be relatively higher, [but] they’re not nearly as high as some of our critics say,” said Brian Tabor, president of the IHA.
For example, Indiana is below the U.S. rate for health care expenditures per enrollee when looking just at those that are privately insured, according to the Legislative Services Agency’s Petris Center report.
So why are prices high?
A variety of factors impact health care costs, making it challenging to pinpoint just one silver bullet.
Hoosiers for Affordable Healthcare largely blame the insurance and hospital markets in Indiana, both of which are considered highly concentrated. Indiana’s health care system is dominated by six major hospital systems, and the top insurer in the market— Anthem
Blue Cross Blue Shield of Indiana, has an average market share of 44.9% across Indiana’s metropolitan statistical areas.
“Prices are high in Indiana, because they can be,” said Matt Bell, a lobbyist for Hoosiers for Affordable Healthcare, “because there has not been significant push from the employer community to demand lower prices, because our hospitals are more consolidated than in other states and that has driven prices as we’ve consolidated, because our insurance market is dominated by one large player.”
In its two reports, the Petris Center found that hospital mergers led to a 10.6% increase in the prices for inpatient admission at the merging hospital in Indiana, and each additional insurer in Indiana was associated with a 3.3% decrease in insurance premiums.
Likewise, from 2010 to 2018, the share of primary care physicians who were integrated with a hospital in Indiana increased from 33% to 60%, which drove up costs slightly, too.
Tabor emphasized that hospital systems aren’t forcing hospitals or physicians to join the larger system; they’re making the choice on their own.
“In almost all cases that I’m aware of, the conversations are initiated by these community hospitals that have been meeting with their board and have realized that they can’t recruit physicians, they can’t get the negotiating rates with equipment, supplies, other things like that,” Tabor said. “Joining a system is a way to keep the hospital open, and in some cases provide more services in the community.”
Hospitals and insurance companies point the finger at each other for contributing to at least part of the price increases.
“The biggest thing that we face from the insurance side, especially in our negotiations in reimbursement rates, is the consolidation of the hospital market, and the fact that you’ve now got basically five or six big systems that seemingly on a yearly basis are gobbling up the rest of the industry,” said Marty Wood, president of the Insurance Institute of Indiana. “So their bargaining power is enhanced tremendously each year as they grow their market share.”
Meanwhile, IHA in part blames insurance companies for higher health costs, and say the industry could be more transparent by sharing what dictates how much insurance companies charge.
IHA also argues that investing in improving Hoosiers’ health, such as the large public health investment proposed by Gov. Eric Holcomb, would help reduce costs.
Here are the bills House and Senate Republican leadership are pushing to try to address the problem:
This bill would require health care providers to charge for services based on where the service is actually provided. Currently, health providers can charge more for a procedure if it’s performed at a hospital-owned clinic — as if it were being performed at a hospital — rather than an independent clinic. Drafted by Valparaiso Republican Sen. Ed Charbonneau, this bill would end that practice.
Legislators killed a similar proposal in 2020 after hundreds of health care providers gathered at the Statehouse in protest and IHA warned the consequences could be catastrophic for hospitals.
“I say this without exaggeration … It would close hospitals,” Tabor said last week. “It would force some to consolidate.”
Senate Bill 7 aims to increase competition, allowing more doctors to work where they choose in the state. The bill would prohibit noncompete clauses between physicians and their employers, which can limit doctors’ ability to continue to work in the region if they leave an employer, and also bans physicians from receiving an incentive for referring a patient to another doctor in the same network.
“In certain parts of Indiana, large hospital networks have used these noncompete clauses to control the local market for physicians, hurting competition and driving up patient costs,” said Sen. Justin Busch, the Republican from Fort Wayne who is carrying the bill.
Tabor argued that lawmakers already struck a good balance in restricting noncompetes when they passed a bill on the topic in 2020.
This bill from Charbonneau requires pharmacy benefit managers, the powerful intermediaries who negotiate drug prices between drugmakers and insurers, to pass on discounts to patients purchasing the medicine. Historically, pharmacy benefit managers have been able to keep the savings for themselves.
Wood, of the Insurance Institute of Indiana, warned the proposal could increase the cost for health care plan consumers who don’t purchase those drugs.
Under House Bill 1003, an employer would receive a tax credit for adopting a health reimbursement arrangement instead of a typical health insurance plan.
The legislation, carried by Warsaw Republican Rep. Craig Snow, also attempts to level the playing field between insurance providers, prohibiting hospitals from giving an insurance company a discount that's more than 10% less than the price given to other insurance providers. IHA warns this could take away the ability of hospitals to negotiate.
The final provision of the bill actually should provide relief to hospitals, limiting when prior authorization can be sought which may cut down on administrative costs. Those in the insurance industry say this provision could actually increase health care costs.
House Bill 1004 is arguably the most hard-hitting bill of the bunch, in that it directly penalizes hospitals.
If most nonprofit hospitals charge Hoosiers with employer-sponsored health insurance more than 260% of the Medicare reimbursement rate for services, the hospital would be financially penalized under this bill, carried by Carmel Republican Rep. Donna Schaibley. This wouldn’t apply to county-owned hospitals.
“I think it sends a really strong message that the Legislature wants to see lower prices, and I think it’s a very direct way to say, ‘You have a period of three years to lower your prices and if not, you’re going to pay for that,’” Bell said. “I think that’s bold.”
In an effort to increase competition, the bill includes a tax credit for physicians who have an ownership stake in their own practice. The legislation also appears to limit the types of physicians hospitals can employ.
Like Senate Bill 6, this bill also requires health care providers to charge for services based on where the service is actually provided; and similar to Senate Bill 7, it prohibits nonprofit hospitals from entering into physician noncompete agreements.
The IHA has numerous concerns with the bill, including the use of the Medicare reimbursement rate to determine penalties, since that rate could shift.
“We’re going to have to work with all the stakeholders,” House Speaker Todd Huston said when presenting the pair of House bills that aim to decrease health care costs. “But we’ll never lose sight of who we’re really working for, and our priorities are to lower costs for Hoosier patients and Hoosier employers.”
What’s next?
It’s still early in the process, which means the legislation could change dramatically. So far, none of the bills have been scheduled for a committee hearing yet, with roughly a month until the deadline.
Contact Kaitlin Lange on Twitter @kaitlin_lange or email her at [email protected].
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Header image: Members of the Indiana General Assembly clap in response to legislative changes proposed during the 2023 State of the State Address on Jan. 10, 2023, at the Indiana Statehouse. (Credit: Ronni Moore)
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Here’s how to vote in Indiana’s primary election
Thousands of Hoosier voters will head to the polls Tuesday, May 7, for Indiana’s primary election. This year’s ballot includes a competitive contest for governor, as well as dozens of state and federal legislative races and a few school referenda. The primary will decide which candidates will represent their respective parties in the Nov. 5 …
$15B in 72 hours: ‘Our economy is on fire,’ says Commerce chief
A banner week for investment within Indiana has capped off the state’s biggest financial quarter in recent history, as three major companies agreed to deals estimated to bring in billions of dollars.
The state has long advertised itself as business-friendly, and its chief executive appeared thrilled by the week’s news.
“This is about $15 billion in about 72 hours,” Gov. Eric Holcomb told reporters on Friday. “This used to take four years to achieve.”
One announced project, an $11 billion Amazon Web Services data center in north-central Indiana, is the biggest single investment in the state’s history.
Google also broke ground on a $2 billion data center near Fort Wayne, while Toyota announced a $1.4 billion investment in its Princeton plant.
“Our economy is on fire,” Secretary of Commerce David Rosenberg said.
His agency, the Indiana Economic Development Corp., negotiated the deals. The state is offering millions of dollars in tax incentives in order to create some 1,500 new jobs.
“These industries bring generational change for families, putting more money in their pockets and allowing them the opportunity to have a better quality of life on their own,” Rosenberg said.
The projects
Amazon’s new data center will be built near New Carlisle. It’s expected to bring in at least 1,000 new jobs in the artificial intelligence and cloud storage sectors. No timetable for completion of the project was given.
According to Amazon, the company has invested $21.5 billion in Indiana since 2010, creating 26,000 full- and part-time jobs.
Google’s new data center will hire up to 200 new workers, the tech giant said, “in the coming years.”
Toyota will build a new assembly line that will assemble battery-operated SUVs by the end of 2025. It expects to add up to 340 new jobs to the plant, which Toyota said now employs more than 7,500.
The company has spent $8 billion on the Princeton plant since breaking ground in 1996, Toyota said.
The new projects’ figures represent early estimates and could change as they move forward.
Incentives aren’t the only factor
Rosenberg praised the Indiana General Assembly for passing legislation that allows the state to offer sales tax exemptions as a lure for new businesses. Both Amazon and Google will receive such boosts, and the Amazon project could receive up to $100 million in additional credits based on various incentives.
But Rosenberg stressed tax breaks are only part of the equation as the state looks to compete internationally.
“We don’t have to have the highest offer because we bring the university partners, the state and local governments, utilities — everyone around the table to make sure that company has what they need,” he said.
The Google project, for example, includes partnerships with Ivy Tech Community College on a new job training program and Indiana Michigan Power to bring clean energy resources to the local grid.
Recruiting new industries
Rosenberg said tech recruitment has been a particular focus for the IEDC, as Indiana is looking to provide an “ecosystem” for these companies to thrive off one another. The state’s semiconductor facilities will provide the materials needed for these new data centers, he noted.
Recruiting new business takes anywhere between six months to several years. Zoning, road construction, utilities and more need to be worked out ahead of time.
The IEDC has been on a hot streak, Rosenberg said. During the agency’s first 11 years, it secured just under $50 billion in new projects. It has now pulled in more than $71 billion since the beginning of 2022.
In the first four months of 2024, $20.68 billion has been pledged to projects in Indiana — the most for a quarter since IEDC’s founding in 2005.
‘Strong partners for the Indiana economy’
“The key is that these investments represent long-lasting and continued commitment to being strong partners for the Indiana economy,” said Andrew Butters, an associate professor of business economics and public policy at Indiana University’s Kelley School of Business.
Large companies came out of the pandemic looking to reorient their supply chains, Butters said, and some states have reaped the benefits of projects that might have previously moved overseas.
Indiana has been able to compete by selling its location, workforce, labor force participation in addition to offering incentives, Butters said.
“I would not be shocked to see more of these as the state attempts to transition toward more high-tech and high-skill industries,” Butters said.
Contact Rory Appleton on X at @roryehappleton or email him at [email protected].
6 races to watch in the Indiana primary election
The first openly competitive contest for the Republican gubernatorial nomination in a generation will end with Tuesday’s primary election, as will crowded races for several open congressional seats.
The primary won’t officially decide any political race — only the Nov. 5 general election can do that. But Republicans hold major advantages in statewide and many district-level contests, and who secures which nominations will go a long way toward deciding who may lead the state in the years to come.
>> Related: How does voting by political party work in Indiana?
Here are six key primary contests to watch on election night.
Governor
The race to be Indiana’s next chief executive has been perhaps the most noteworthy of the election cycle, with six Republicans bringing a variety of experience and outsider credentials to the competition.
Sen. Mike Braun has led in the polls from day one, including running up a 34 percentage-point lead in an April State Affairs/Howey Politics Indiana survey.
The other five candidates are: Lt. Gov. Suzanne Crouch, former Attorney General Curtis Hill, Indianapolis mom Jamie Reitenour and two former state secretaries of commerce in Brad Chambers and Eric Doden.
The winner of Tuesday’s Republican primary will face Democrat and former state Superintendent of Public Instruction Jennifer McCormick, who will advance for her party unopposed.
Republican candidates spent tens of millions of dollars in an attempt to stand out in their crowded pack. The primary race also featured four televised debates, including a chaotic final display on April 24.
U.S. Senate
Two Democrats are vying for the chance to replace Braun in the U.S. Senate: Former state Rep. Marc Carmichael and Valerie McCray, a clinical psychologist.
Carmichael has outspent McCray in the race by a margin of nearly $63,000 to $15,000.
Both are attempting to become the state’s first Democratic senator since Joe Donnelly’s election in 2012.
Rep. Jim Banks is running unopposed in the Republican primary.
3rd Congressional District
Banks’ entry into the Senate race leaves his seat in Congress open, and a bevy of Republicans are seeking to replace him: Grant Bucher, Wendy Davis, Mike Felker, Jon Kenworthy, Tim Smith, Marlin A. Stutzman, Eric Whalen and Andy Zay.
State Affairs has identified Stutzman, a former congressman; Smith, a self-funding former Fort Wayne mayoral candidate; and Davis, a former Allen County judge, as candidates to watch in the crowded race.
Kiley Adolph and Phil Goss are running against one another in the Democratic primary.
5th Congressional District
After initially deciding against another run, Republican Rep. Victoria Spartz reversed course to seek re-election in 2024.
Eight other Republicans are running against Spartz: Raju Chinthala, Max Engling, Chuck Goodrich, Mark Hurt, Patrick Malayter, Matthew Peiffer, L.D. Powell and Larry L. Savage Jr.
Goodrich, a member of the Indiana House of Representatives, has spent more than $2 million on TV ads as he seeks to unseat Spartz, according to AdImpact.
Two Democrats, Ryan Pfenninger and Deborah A. Pickett, are on the ballot.
6th Congressional District
Seven Republicans are attempting to replace retiring Rep. Greg Pence: Jamison E. Carrier, Darin Childress, Bill Frazier, John Jacob, state Sen. Jeff Raatz, Jefferson Shreve and state Rep. Mike Speedy.
Shreve, who ran unsuccessfully for Indianapolis mayor in 2023, has spent nearly $4 million — predominantly through TV advertising — in his bid.
Cynthia Wirth, whom Pence defeated by 35 percentage points in 2022, is running unopposed in the Democratic primary.
8th Congressional District
Republican Rep. Larry Bucshon is also retiring, and a dozen candidates in both parties are seeking to fill his seat.
On the Republican side, former Rep. John Hostettler, state Sen. Mark Messmer, former President Donald Trump White House staff member Dominick Kavanaugh and frequent Bucshon primary challenger Richard Moss are each making a push.
Fellow Republicans Jim Case, Jeremy Heath, Luke Misner and Kristi Risk are also running but trail the above pack in campaign spending.
Four Democrats are also seeking a nomination: Erik Hurt, Peter FH Priest II, Edward Upton Sein and Michael Talarzyk.
Contact Rory Appleton on X at @roryehappleton or email him at [email protected].
State Republicans keep spending to protect House incumbents in primary
House Speaker Todd Huston expressed confidence Tuesday that Republican House members will prevail over challengers in next week’s primary. Nineteen of the 63 House Republicans seeking reelection this year are facing primary races. Those challenges have been lower-key than two years ago when about two dozen candidates seized on COVID-19 discontent and other issues in …