Blue Cross and Blue Shield of Vermont premiums to increase

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(Host) According to a new state report, individuals with private insurance coverage will have to pay almost $200 million in additional health care costs because Medicaid and Medicare are not paying the full cost of their services.

Blue Cross and Blue Shield of Vermont, the state’s largest private insurer, says the cost shift will boost premiums next year.

VPR’s Bob Kinzel reports:

(Kinzel) The practice of shifting costs from Medicaid and Medicare to private health insurers is not new. But the scope of the shift has dramatically increased in the past few years.

Since 2001, the Medicaid cost shift has grown from roughly $21 million to nearly $90 million this year.

And the Medicare cost shift has virtually tripled from $26 million to almost $67 million. Bad debt and free care account for another $40 million.

Michael Davis is the director of the state’s Health Care Cost Containment Division.

(Davis) “So for example, Medicaid is shifting some of its costs by not fully reimbursing the hospitals for their costs. So they shift some of that pricing to commercial insurers in order to make up for the lost revenue. Medicaid is among the lowest reimburser on a dollar for dollar basis.”

(Kinzel) Davis says it’s clear that private insurance premiums would be lower without the cost shift. But he says it won’t be easy to eliminate the practice because it would require a lot of new revenue. Davis says many politicians are reluctant to support this step.

(Davis) “All things being equal, if you could reduce the costs shift to the commercial insurance payers, health insurance premiums would go down for those that purchase those insurances. However, in order for that to happen, somebody’s got to pay more taxes or there has to be another revenue source that fills the Medicaid or Medicare shortfalls.”

(Kinzel) Blue Cross Blue Shield spokesperson Leigh Tofferi says his company has been concerned about the growing cost shift for some time because of its impact on premiums.

(Tofferi) “We factor a number of things into our rates. A big factor in those rates is the higher costs that we have to pay for services to make up for what government sponsored programs aren’t paying.”

(Kinzel) Tofferi thinks it’s fair to look at the cost shift as a hidden tax.

(Tofferi) “If the services those people are getting aren’t being paid for fully, then private payers have to pay that difference. Then I guess you could logically come to the conclusion that it’s a government tax on private payers.”

(Kinzel) Tofferi expects Blue Cross to announce its new rates in several weeks. He says it’s not clear at this time how large an increase the company will be seeking.

For Vermont Public Radio I’m Bob Kinzel in Montpelier

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