When a medical bill arrives, it often raises more questions than answers. Healthcare costs are rising, and Michiganders deserve a clear explanation of what is driving them – and what is being done about it.
Hospitals across Michigan share a commitment to keeping communities healthy by reducing costs and maintaining access to care. But hospitals do not operate in isolation. They absorb costs from across the healthcare industry, and several major factors are contributing to the upward pressure that patients and providers alike are feeling.
What’s driving costs up?
Prescription drug prices are the fastest-growing expense for hospitals, with growth outpacing labor and service costs. At the same time, patients are older and sicker than ever – the average length of stay for the most severe patients has increased by 22% since 2019, reflecting the complexity of care being delivered.
Government cuts are also a significant factor. Reductions to Medicaid reimbursement and enrollment will slash more than $6.5 billion from hospitals through 2032 and increase uncompensated care. Uncompensated care is services provided by a hospital that the patient does not have coverage for and cannot be reimbursed. On the insurance side, the elimination of enhanced premium tax credits has caused costs to increase by an average of 20% on the individual marketplace for Michigan residents.
Labor represents the largest share of hospital expenses – 60 cents of every dollar hospitals spend goes to the skilled clinicians and support staff who provide care. Inflation and workforce shortages have driven unprecedented increases in labor costs in recent years.
Where Michigan stands
Despite these pressures, Michigan hospitals are among the most cost-conscious in the country. Michigan ranks third in the nation for the lowest hospital prices relative to Medicare, according to RAND Corporation research. 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 services to lower costs and improve access, especially in rural areas. Innovations in clinical practice allow hospitals to offer care in the most cost-effective settings, while investments in primary care help reduce avoidable emergency visits.
Hospitals are actively working with lawmakers and business partners to identify policy solutions that can lower costs for patients. Key areas of focus include:
- Lowering prescription drug prices by cracking down on Pharmacy Benefit Managers and expanding access to lower-cost generic options.
- Reducing administrative waste by enforcing prompt pay from insurers and eliminating unnecessary red tape.
- Increasing insurance options to address Michigan’s status as having the highest average employer-sponsored premiums in the Midwest.
- Making Michigan healthier through preventative care investments, Food as Medicine programs and state-based health savings accounts.
Michigan hospitals are part of the solution. Understanding the full picture of what drives healthcare costs is the first step toward making meaningful change.
