The COVID-19 pandemic has put pressure on hospitals and health care capacity to treat nearly 1.5 million people in the United States with COVID-19. The influx brought on by the pandemic comes at a time when hospital expenses are at an all-time high after a decade of steep increases.
Our team analyzed American Hospital Association (AHA) data via Kaiser Family Foundation to see the expense increase across the country and which states have seen the largest increases in hospital expenses from 2009 to 2018. The AHA data reflects hospital expenses per day to facilitate inpatient care. These expenses are total costs to provide health care and are not reflective of actual charges or reimbursement for care provided ?— essentially, the total expense hospitals incur to care for patients per day. Those expenses have increased 36% across the country from 2009 to 2018.
- North Dakota, Wyoming and Wisconsin saw the highest increases in hospital expenses per visit.
- North Dakota, Connecticut and Oregon have the highest hospital expenses per visit in America
- Nearly 10% of Americans are uninsured, leaving $35 billion dollars in uncompensated health care annually.
- Hospital debt increased from $617 million in 2015 to $56 billion in 2018.
- The complex American health insurance system leaves a total of 8% of health care costs going towards administrative costs. Other developed countries spend 1% to 3% on administrative costs.
- The average hospital expense for an inpatient visit costs $2,335 ?— 36% higher than a decade ago.
The cost of doing business for hospitals has seen a sharp increase in many states over the last decade due to many economic factors. However, the primary cause of expense increases is the complex American health insurance system. People who can't get health insurance, people who have limited health insurance coverage and the administration of health insurance amount to the majority of healthcare costs and ultimately, increased expenses.
Costs of Uninsured Healthcare
It's estimated that 8% to 10% of Americans do not have health insurance. With or without health insurance, everyone still receives health care, regardless. When people with health insurance receive health care, it's the insurance companies that reimburse hospitals. When people without health insurance receive health care, hospitals incur the debts of unpaid health care. Those debts from unpaid health care account for $35 billion annually. When hospitals incur this debt, the business solution is to increase the cost of service to compensate for losses. As debt mounts, costs increase, which is primarily why we're seeing hospital expenses per patient increase at such high rates.
Hospital debts become increasingly burdensome for rural hospitals to remain operational. Debts and slim operational margins are causing rural hospitals to close at higher rates. From 2008 to 2010, there were 19 rural hospital closures. From 2017 to 2019, that number more than doubled to 42. Already in 2020, there have been 12 rural hospital closures in less than half a year. Rural hospitals struggle not only with uninsured patients but also with those with high deductible health insurance plans that are more common in rural areas. With annual health insurance deductibles of $3,000 up to $10,000, that leaves most of the provided health care in the pockets of patients. These high deductibles result in unpaid debts further incurred by rural hospitals. That's likely why we see states with low population density and more rural areas like North Dakota, Wyoming, and Idaho with the highest increases in hospital expenses. For rural hospitals to survive, their operational costs have to be extremely high to compensate for higher levels of loss.
One of the less talked about reasons for hospital expense increases are the administrative resources that consume 8% of all health care costs. Administrative costs can be considered the human resources and technology used to process health care services, such as administrative services from hospitals to insurance companies and government-provided insurance, as well as to patients.
The reason administrative costs are so high is that the United States has a very complex insurance system that is far from a uniform system other developed countries use. Our 8% administrative costs compare to 1% to 3% in other developed countries that have universal health care systems. These other countries have low administrative costs because their health care systems are more uniform and aren't as complex as the United States. When we have hundreds of health insurance companies, and both federal and state-run health insurance programs, things become more complex. These complexities make it necessary to increase administrative resources and ultimately administrative costs.
Over the last decade, each state, with the exception of Alaska and Maryland, has experienced an increase in hospital expenses. The rate of increase varies by state, but the reasons for increased expenses are likely similar. Our complex health insurance system in the United States leaves us in tremendous debt, and hospitals must continue to increase health care costs to offset the losses incurred by health insurance deficiencies.
|Rank||Location||2009 Average||2018 Average||Rate Change|
We analyzed American Hospital Association data via Kaiser Family Foundation on hospital expenses per visit in each state from 2009 to 2018. We compared hospital expense averages in each state over a 10-year period to see which states have seen the largest increases in hospital expenses. Final rankings are based on states that saw the largest percentage increases in hospital expenses per visit.
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