Where Does North Dakota Health Insurance Money Go?

Where does the money go?

In general, approximately 40 cents on every health insurance premium dollar is paid to hospitals and other health care facilities, 30 cents to doctors and other health care professionals, 15 cents for prescriptions drugs and 15 cents for insurance company administrative expenses and reserve funds. Reserve funds refer to dollars saved and invested by the insurance company to help make sure the company has suffcient money on hand to pay claims as they arise in the future.

Individuals

In 2000, on average, individual health insurance consumers in North Dakota paid $1,744.00 per year for their health coverage. It is estimated that within fve years, the cost of health care coverage will average nearly 25 percent of wages. In addition, it is estimated that national health expenditures are expected to nearly double over the next 10 years.

Hospitals

Increases in hospital costs have been attributed to greater usage of hospital services and slightly higher prices resulting from infation. Over the years, there has been no appreciable growth in hospital in-patient stays, but the number and frequency of health care services provided by those hospitals continue to increase.

Physicians and other health care professionals

Increases in this area have been associated with more offce visits and increased use of imaging procedures. An additional factor that may be contributing to the increase is consumer demand for more loosely managed health care plans that give patients greater fexibility. A more localized cause for the increase is the shortage of certain health care providers in North Dakota, such as nurses. Such shortages may result in higher expenditures being required to recruit and retain providers.

Prescription drugs

Growth in spending on prescription drugs exceeds that of other major cost components. In addition, spending rose more quickly for drugs than for any other health service. Many factors are cited as reasons for this increase. The list includes: higher prices for existing drugs, disproportionately higher prices for new drugs that are advertised prolifcally, and last, people are just using more drugs. Drug advertising is seen as the engine of consumer demand and the internet is producing a much savvier consumer, who is demanding the latest and greatest.

Medicare

Another factor that may be contributing to the increase in health care costs in North Dakota is the decline in Medicare reimbursements. Reimbursements were cut by 5.4% in 2002, were slated to be cut by another 4.4% in 2003, and were expected to be around reduced another 4.2% in 2004.5 Additionally, North Dakota generally is funded at lower levels than other states, even though the costs of health care delivery are oftentimes higher here than elsewhere. These cuts place greater pressure on hospitals to increase revenues using other sources, such as increasing health care charges for non-Medicare patients.