North Carolina is the most expensive state in the nation for health care, according to a highly cited claim made by Forbes magazine, at least. But how true are those claims about costs?
Not very, according to a new analysis that challenges both the methodology and conclusions of the Forbes ranking. The reality, researchers from Ascendient Healthcare say, is much more nuanced.
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But Forbes did get something right about health care costs — just not exactly what they set out to prove. In doing so, the publication revealed an under-researched issue in North Carolina health care policy.
Dubious methodology to judge costs
Which state has the most expensive health care? The answer depends on how you measure “expensive.”
That’s where things get complex. And those complexities have important implications.
The Forbes ranking relies on a weighting system devised by the authors of the study. The system puts 85% of the weight on what folks with employee-sponsored health insurance pay in premiums and deductibles each year.
Here’s one problem: less than half of North Carolinians have employee-sponsored health care.
“Somebody made some determination about the relative importance of each of these elements to be able to spit out an overall metric,” Brad Wright, former UNC Sheps Center researcher who now works at University of South Carolina, told Carolina Public Press.
“Without seeing a justification for how they did that, that’s concerning. If you gave me the same data set and I just changed those weight percentages, I’d get a different answer, and would be writing a different story.”
Forbes’s method addresses insurance shopping concerns rather than health care system performance, according to Dawn Carter, a North Carolina health care consultant who co-wrote the Ascendient analysis of health care costs in the state.
The methodology results in some interesting aberrations. Some of the least-expensive states for health care, according to Forbes, are Hawaii, California, and Massachusetts.
“Those cheapest states are states I don’t think of as being least expensive in anything,” State Treasurer Brad Briner told CPP. “Once you see that, you have to ask yourself the questions: What is the methodology here? What is the ulterior motive here?”
Briner’s skepticism of the Forbes costs ranking is a break from his predecessor.
Former State Treasurer Dale Folwell, a Republican like Briner, frequently cited North Carolina’s ranking to argue against North Carolina’s Certificate of Need laws, which regulate hospital construction.
The politicization of the Forbes data shows how powerful — and potentially arbitrary — statistics can be.
“The issue, of course, is that every data set is filtered through whatever lens the authors choose: pro-insurance, pro-state regulations, etc.,” UNC law professor Joan Krause told CPP.
Forbes defended its approach when CPP pressed about the methodology.
Forbes Advisor Editor Michelle Megna wrote: “We felt access and outcomes were most important, so gave them the most weight in our scoring.”
Other ways to measure health care costs
Ascendient’s chosen data points paint a very different picture.
“When I saw those headlines, I just thought: ‘Wait a minute. This is just not this is not consistent with what I know to be true,’” Carter told CPP.
“Let’s check their data and understand where this is coming from. And then let’s check back with the other data points that we are more familiar with.”
A common way of measuring health care costs, according to Carter, is to aggregate all health care spending — think hospitals, nursing homes, doctors — within the state and divide by total population.
Using this method, which accounts for people on all kinds of health care plans, North Carolina has the 10th-lowest health care costs in the nation.
North Carolina health care spending per capita comes out at $8,917 annually, while nationally, the average is $10,191.
Another way to rank costs is to measure hospital prices, since hospitals tend to be the most expensive option for health care. According to Ascendient, North Carolina had the 13th-lowest net price per inpatient discharge nationally.
Plus, when one looks at total insurance premiums rather than employee contributions, North Carolina drops from second to 45th-most expensive, according to Wright.
But all this does not mean that Forbes didn’t point out something true.
What Forbes got right
What Forbes proved is this: more than in any other state, NC employers shift higher portions of insurance costs onto employees.
This is a real data point, proven out by Forbes.
“There’s two different things going on here. One is ‘How much does health care cost?,’ and then the other is ‘Who pays?’” Treasurer Briner said.
“If the question is: ‘Who pays?,’ that is a very different discussion. In North Carolina, we have made the choice to have the individual pay more than the companies. In Massachusetts, for example, they’ve had the state pay a lot more than the individual.”
Though this doesn’t necessarily equate to NC’s overall health care costs being the highest, it is a salient point.
North Carolina employees contributed $1,806 for single coverage, the 14th-highest in the nation, while employers paid $5,937, the 10th-lowest.
If the issue is cost-shifting rather than expensive health care delivery, the potential policy solutions are different.
“If you don’t really look at what your data point is and what it’s measuring, then you’re going to look for policy solutions that don’t fix the root cause of the problem,” Carter said. “To generalize that one correct data point to make a claim about health care costs doesn’t paint a clear picture.”
But why do North Carolina employers do this? The answer isn’t entirely clear, even to experts who study the state’s health care system.
Carter guesses it might have something to do with North Carolina’s “business-friendly” stance.
Briner views it as a necessary balance to the low taxes and low cost-of-living North Carolina provides to its residents.
More research is needed to understand why companies shift more insurance costs onto their employees in North Carolina than in any other state. It is likely a combination of state policy decisions, labor market dynamics and regulatory choices.
Once that is understood, the real conversation begins.
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