Hospital regulators urge cheaper plans


February 04, 1993|By Patricia Meisol | Patricia Meisol,Staff Writer

The cost of treating the uninsured at Maryland hospitals last year jumped by the largest amount in 12 years, prompting economists who run the state's hospital regulatory system to call for more affordable health insurance.

But profits statewide jumped 85 percent last year after the system approved higher rates to pay for the expected increase in the number of people unable to pay for medical care.

The bill for the uninsured -- $394 million -- grew 28 percent, according to figures released yesterday by the Health Services Cost Review Commission, which sets hospital rates in Maryland.

Nearly one of every 10 dollars charged by Maryland hospitals last year went to pay for the care of people without health insurance.

"Health insurance reform is critically needed in this state. We need to devise a way to establish affordable insurance coverage for as many Marylanders as possible," said John M. Colmers, executive director of the cost review commission. "It is something as a state we can do."

Mr. Colmers, speaking for the commission, suggested that the state consider a return to the 1970s "community-rated" insurance plans in which all policyholders paid the same for insurance regardless of their health.

He said the commission is volunteering to try its hand at devising a community-rated system in the same way it devised a hospital rating system under broad guidelines in the early 1970s. The uninsured accounted for 9.25 percent of hospital operating costs last year, up from 8.1 percent in 1991. The growth was largely due to a cutoff of state medical assistance programs, according to the report. When that happened in 1991, the commission increased hospital rates an average of 2 percent, or $70 million, which was one reason that hospitals were able to continue reporting profits.

The number of nonelderly Marylanders without health insurance grew 44 percent from 1988 to 1991, according to a report last month by the Employee Benefit Research Institute in Washington. It said 642,000 Marylanders lacked insurance, representing 15.5 percent of the population. The figures were for the period before 1991 when the state programs were reduced.

Despite this, Maryland hospital rates remained significantly lower than the national average, according to an annual report released yesterday by the Health Services Cost Review Commission.

Maryland's regulatory system builds charity care into the rates for each hospital to ensure that hospitals don't turn away the poor for lack of payment.

Under the system, hospitals become more profitable as they become more efficient. One result is that the cost of a hospital stay increased by less than half the national rate last year. Maryland has outperformed the nation when it comes to cost control for the 17th successive year.

The average cost of a hospital stay in Maryland rose 3.77 percent in 1992, compared with 8.1 percent nationally. This "saved" the state $157 million -- the extra money it might have paid if costs had risen at the national average, according to yesterday's report.

OC A Maryland hospital stay is currently 14 percent beneath the na

tional average.

Maryland is the only state in which hospital costs are regulated by a state agency. Other states use the federal government's payment schedule.

"We are saving the government money," said Charles O. Fisher Sr., chairman of the cost review commission.

Maryland hospital operating profits rose 266 percent last year to $81 million.

Net profits, which include income or losses from endowments and other sources, as well as operating costs, rose 85 percent. This represented 2.5 percent of total hospital revenues, below the 3.5 percent level viewed by the commission as an indicator of financial health. Revenues last year rose 10 percent, to $3.6 billion.

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