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Cost of Care

Caring for Michiganders Every Day, Every Need

Hospitals share a commitment to keep their communities healthy by reducing costs and maintaining access to care. 

Why Are Healthcare Costs Increasing?  

There are a variety of factors influencing rising healthcare costs. Hospitals absorb many of these rising costs from other areas of the industry. Below are several of the leading cost drivers. 

  • Prescription drugs are the fastest-growing expense for hospitals, with growth outpacing labor and service costs.
  • People are older and sicker, as evidenced by the fact that the average length-of-stay for the most severe patients has increased by 22% since 2019. 
  • Government cuts to Medicaid reimbursement and reductions in enrollment will slash more than $6.5 billion from hospitals through 2032 and increase uncompensated care.
  • Elimination of enhanced premium tax credits has caused insurance costs to increase on average by 20% on the individual marketplace for Michigan residents.
  • Labor dominates the overall share of expenses, as hospitals need skilled clinicians and support staff to provide the best patient care experience. Inflation and workforce shortages have led to unprecedented increases in labor costs in recent years.

Where Hospital Spending Goes

60% Labor

18% Supplies

9% Drugs

6% Buildings & Equipment

5% Overhead & Claims Processing

2% IT

A U.S. one-dollar bill with translucent colored bars over it and a horizontal axis below showing percentages: 60%, 18%, 9%, 5%, and 2%. The bill’s details and serial number are partially visible, highlighting healthcare costs distribution.

How Are Michigan Hospitals Operating in This Environment? 

Rising costs and cuts to federal funding are creating a more difficult environment for hospitals nationwide and in Michigan. Michigan hospitals are mindful of these challenges, with the following items illustrating how hospitals are operating in this environment.  

  • Michigan is one of the most affordable states for hospital pricing, ranking third in the country for the lowest hospital prices relative to Medicare.
  • Collectively, Michigan hospitals provided $208 million in financial assistance and wrote off an additional $461 million in bad debt in fiscal year 2023.
  • Every hospital in Michigan now offers or works with telehealth to lower costs and make healthcare more accessible, especially in rural areas.
  • Innovations in clinical practice allow hospitals to offer services in the most cost-effective settings that uphold safety and quality standards while maintaining access to services in their communities.
  • Hospitals invest in primary care and patient engagement to reduce avoidable emergency visits and hospitalizations.
Commercial-Payer-bar-graph

What Needs to Be Done?

There are a variety of potential solutions that can have a meaningful impact on patients and their out-of-pocket costs. Hospitals are actively engaged with lawmakers in a nonpartisan fashion to identify and advocate on policy that can implement these solutions. Hospitals are also willing partners with the business community and other stakeholders in this work.  

A yellow warning triangle with a black border and a black exclamation mark in the center, signaling caution or alert about rising healthcare costs.

Continue State Government Support 

Michigan needs state government to support pro-business policies that reject government mandates, attract talent to Michigan and maintain existing state funding for hospitals and healthcare providers.

A pink piggy bank with a large crack down the middle and two dollar bills sticking out, symbolizing financial trouble or breaking the bank due to rising healthcare costs.

Reduce Administrative Waste 

Enforcing prompt pay from insurers, mandating payment for care after prior authorization is required, reducing red tape and eliminating frivolous lawsuits are all examples of waste within the system that can remove unnecessary costs.  

Two hands shaking in front of a large green dollar sign, symbolizing a financial agreement or partnership to manage healthcare costs.

Lower Drug Prices  

Ever-increasing drug prices are squeezing patients and providers. Allowing innovative state purchasing of drugs, cracking down on Pharmacy Benefit Managers, eliminating the single Preferred Drug List to increase access to lower-cost generic options and requiring drug companies to invest in Michigan are all ways to lower the overall cost of prescription drugs.  

A blue and purple umbrella with a red medical cross symbol in a white circle near the bottom right, representing protection from rising healthcare costs.

Increase Insurance Options  

Increasing options for businesses can help address Michigan having the highest average annual employer-sponsored premiums in the Midwest. Options include pursuing a state-back reinsurance pool and allowing association health plans.    

A red heart with a white electrocardiogram line across it and a blue medical cross symbol in a white circle on the lower right side, representing healthcare costs.

Make Michigan Healthier 

Improving the health of Michiganders by investing in primary care and supporting healthy lifestyle choices can help reduce the overall cost of living, lower out-of-pocket expenses and ease the financial burden on individuals and families. Ways to incentivize healthy behaviors include implementing state-based health savings accounts (HSAs) to complement federal HSAs, appropriately funding preventative health services and embracing Food as Medicine programs.