Premera Report Spurs National Study, Highlights Dramatic Problem of Hidden Healthcare Tax

Business Wire, Dec 9, 2008

2006 Premera Study Found Similar Cost Impact in Washington State

MOUNTLAKE TERRACE, Wash. -- The "hidden tax" on privately insured families and employers created by underpayments for Medicare and Medicaid, first identified by a Washington state study funded by Premera Blue Cross, was given new attention today with the release of a new study detailing the sobering national impact.

The national healthcare cost shift study, performed by Milliman, Inc., was commissioned by the American Hospital Association, America's Health Insurance Plans, Blue Cross Blue Shield Association, and Premera Blue Cross. It is being released today.

According to Milliman's new research, $88.8 billion in government underpayments for Medicare and Medicaid are shifted to the private sector annually -- or about 15 percent of the costs of private insurance premiums.

According to the report, the average privately insured U.S. family of four pays $1,788 more each year for their health coverage to make up for government underfunding of Medicare and Medicaid services.

"The cost challenges facing privately insured families and employers are not limited to the rising cost of their own medical care," said Gubby Barlow, CEO of Premera. "Privately insured families and businesses are paying thousands of extra dollars each year to cover government program underpayments. Since commissioning the first study in Washington state more than two years ago, we have seen the impact of this 'hidden tax' continue to weigh on families and businesses. It is an even greater burden for families and businesses now struggling to cope with a difficult economic climate."

A number of regional business and healthcare leaders responded to the national follow-up study.

"This groundbreaking study shows just how much people in our state are asked to subsidize underpayments by Medicaid and Medicare," said Leo Greenawalt, President, Washington State Hospital Association. "We are concerned this gap could grow even wider as the state considers cuts to government health insurance programs to balance its budget. Any cuts will only increase the hidden tax on families and employers in our state."

"This study highlights nationally what many Washington business owners know all too well: Rising healthcare costs are one of the most significant business costs facing employers today," said Don C. Brunell, President, Association of Washington Business.

"Skyrocketing healthcare costs are adding to budget woes at all levels of government as tax revenues shrink and public costs expand. We urge President-elect Obama and Congress to address Medicaid and Medicare funding so that costs are not shifted to the struggling private sector."

"Premera broke new ground when it commissioned a comprehensive study on cost shifting back in 2006 looking at the impact of cost shifting on Washington state families," said Nancy Chockley, President and CEO, National Institute for Health Care Management Foundation. "This new national study is tremendously important as we look at ways to reform our healthcare system. The size and impact of this 'hidden tax' on employers and workers must be understood as we look for ways to improve our healthcare system and strengthen the Medicare and Medicaid programs in the face of tremendous budget shortfalls."

"Congress and the state Legislature must make appropriate funding of Medicare and Medicaid a priority," said Cynthia Markus, MD, President, Washington State Medical Association. "Our patients, as well as our medical practices, cannot sustain the burden of this hidden tax."

John Pickering, Principal and Consulting Actuary, Milliman, Inc., discussed the report's findings at a news conference held today at the National Press Club in Washington, D.C. Interested parties, including members of the media, can view a video of today's news conference at: http://www.bcbs.com/news/bluetvradio/cost-shift-study-2008/. The video will be available for one year.

About Premera Blue Cross

Our mission is to provide peace of mind to our members about their health-care coverage. We provide health care coverage and related services to more than 1.3 million people. Premera Blue Cross has operated in Washington since 1933, and Alaska since 1952. Premera Blue Cross is an independent licensee of the Blue Cross Blue Shield Association.

Premera Blue Cross is a member of a family of companies based in Mountlake Terrace, Washington, that provide health, life, vision, dental, and long-term care insurance, and other related services. In the J. D. Power 2007 National Health Insurance Plan Satisfaction Study, Premera Blue Cross ranked highest among health plans (regional and national companies) serving the western U.S. This year was the first time J. D. Power surveyed consumers about health plans.