Hospital prices are driving high health care costs, taking a bite out of union members’ contracts and family and public budgets. New York City’s building and janitorial workers’ union, SEIU 32BJ, is using its bargaining power, organizing smarts, and industry knowledge to address the problem.
Through serious investment in organizing and its industry-wide strategy, SEIU 32BJ has brought in 100,000 new members since 2000. The union represents workers in residential apartment buildings, security, food services, and airports, the bulk of whom are immigrants. Because the union made health care a strike issue in every round of bargaining, 32BJ members have remained part of the 5% of American workers who have 100% employer-paid health insurance with a no-cost-sharing model.
SEIU 32BJ pays for members’ medical care through a self-insured Taft-Hartley fund, which pools together contributions from over 5,000 employers, won through bargaining, to pay members’ medical claims directly. The Taft-Hartley Act of 1947, notorious for curbing industrial action by banning secondary boycotts and closed union shops, also mandated the structure of union funds that pool together contributions from multiple employers and are jointly governed by representatives of the union and management. In practice, at 32BJ Health Fund, trustees pursue a joint mission to provide quality benefits without seeking to make profit off services. Retaining oversight through this structure instead of outsourcing all aspects of healthcare to a third-party insurer has allowed for greater control over policy options.
Despite 32BJ’s impressive healthcare coverage, the cost of healthcare is skyrocketing in the United States. Trying to keep up hurts every union at the bargaining table. SEIU 32BJ estimates that 40 cents of every new dollar won from the employer at the bargaining table is now going to maintain current health care coverage, instead of towards wage increases for workers.
Hospital prices drive costs
What’s going on? To the surprise of some, hospital prices are the number one driver of rising health care costs. Hospital prices, for the sake of this analysis, refer to the dollar amount hospitals themselves charge for a set of services, which can be different from the actual expenses required to provide the service (labor, supplies, etc.) or the amount paid by the patient (a copay, deductible, or coinsurance for a medical procedure). These prices, far from reflecting the actual costs of services, too often are increasing as a result of decisions made by management of large private hospital systems. This reality is often not obvious to the public, and even to labor unions or employers.
Analysis by Health Fund staff has led to stunning revelations about the increasing cost of care. The 32BJ Health Fund is in a somewhat unique position given that during negotiations it has insisted on having access to all its participants’ claims data and has prioritized subsequent analysis of hospital pricing trends. The fund pays and accesses the total hospital bill, even if, for example, a member would only pay a $100 copay for a visit. The trends are concerning. Prices for medical services vary dramatically among hospitals and are increasing sharply. The average aggregate cost of a colonoscopy in New York City, for example, can range from $2,185-$10,368 depending on the hospital. And between 2016 and 2019 alone in New York City, the prices paid by the 32BJ Health Fund for hospital procedures increased by 21%.
What explains increasing hospital prices?
One factor in skyrocketing prices is the rise of hospital monopolies with the ability to set and increase rates. A recent report released by 32BJ Health Fund titled “High Hospital Prices: Unsustainable and Unjustified” summarizes the evidence: higher hospital prices do not correlate with higher quality care. The report also debunks hospitals’ frequent claim that prices must be higher to offset lower rates paid by Medicare and Medicaid. In reality, the most expensive hospital systems often have the fewest Medicare and Medicaid patients. Instead, high prices and cost variation across hospital systems point to artificial price setting, especially when we look at Medicare prices that are federally set and are considered a fair benchmark of what a service should cost. In New York City, for instance, private hospital systems charged the 32BJ Health Fund 316% over the cost of Medicare rates for the same procedures.
Hospitals are taking tax dollars
Union members aren’t alone in experiencing these high costs. A failure to challenge hospital pricing has significant impacts on taxpayers and public budgets. Surprisingly, state and city governments – who are among the largest purchasers of healthcare on behalf of their public service employees—do not pay publicly set rates like Medicare or Medicaid for the healthcare they purchase for thousands of workers. Instead, they pay healthcare prices set by hospitals. When hospitals charge state and local governments more for their services, increasing taxpayer dollars are going straight to hospital systems. According to an analysis by the 32BJ Health Fund, if New York City’s healthcare cost utilization and expenditure breakdown matched the 32BJ Health Fund’s, then the City of New York may be paying over $2 billion a year more than what Medicare rates would be for the same hospital services. Reining in hospital prices would free up billions of public dollars to re-invest in wages, affordable housing and community-based services that are desperately needed.
When we design the plan
For the last decade, the 32BJ Health Fund has worked to reduce healthcare costs by getting involved in health plan design. Launched in 2020, the 32BJ Health Fund’s maternal health program was created in response to poor maternal health outcomes, especially for women of color, who made up a majority of those accessing the program. In partnership with hospital systems willing to participate, the Fund designed its own maternal health program. Using data-driven and customized Request for Information (RFI), the Health Fund designed a program with eight providers in the New York area that required providers to hit high standards of care, while also reducing the overall cost to the fund. Today, a member only pays a $40 copay for prenatal, birth, and postnatal care. The success of the 32BJ Health Fund maternal health program is an excellent example of what can happen when members’ care is prioritized.
Restrictive terms used by hospital contracts can put innovative and accessible programs like the 32BJ Health Fund maternity program at risk. For instance, when 32BJ’s Health Fund’s third-party administrator was in negotiations with New York Presbyterian Hospital––where the average aggregate cost of a C-section is approximately $45,000––NYP refused to sign a contract that would allow the maternity program to exist in its current form.
Instead of allowing these restrictive contracts to reshape its innovative programs, the 32BJ Health Fund took an unprecedented step and removed NYP from its network in January 2022.
Taking on hospital prices – together
The experience with NYP demonstrated that one fund alone does not have the economic leverage to pressure hospital systems to agree to lower prices. And since then, 32BJ has turned to building collective power and legislative pressure. 32BJ worked with union and elected allies to introduce the Hospital Equity & Affordability Law (HEAL); an amended version of the law passed the NY State legislature in June 2022. The new law ensures payors access to comprehensive pricing data. It also limits backroom deals between large hospitals and insurers to create artificially high prices. While a good first step, additional regulation is necessary to truly challenge contract terms that favor large hospital systems.
With that in mind, 32BJ turned to coalition-building to build collective power. The Coalition for Affordable Hospitals is bringing together labor unions in the New York City area, including AFSCME District Council 37, the New York Public Employees Federation (PEF), United Federation of Teachers (UFT), Professional Staff Congress-CUNY, as well as patient rights groups like PatientsRightsAdvocate.org and the New York State Council of Churches to take on hospital pricing and affordability. Their strategy is the following: push for legislative change, build grassroots pressure and leverage the collective buying power of thousands of union members to take on hospital pricing directly.
Being visible and taking collective action has been an important component of increasing worker engagement and building public support. In February 2022, workers across dozens of unions participating in the Coalition publicly delivered thousands of petition signatures to the New York Presbyterian hospital administration, demanding they negotiate fair hospital prices. 32BJ also began connecting the issue to their residential contract fight, which included months of member education about the driving factors of rising hospital prices. In April 2022, 32BJ building service workers were ready when management tried to force healthcare premium sharing on them, using the rising cost of healthcare as justification. As part of a build-up to a strike vote, thousands of 32BJ residential members “stickered up” with a clear message: they were ready to fight for healthcare and strike if necessary. They ultimately succeeded in warding off the introduction of premium sharing. 32BJ estimates that if healthcare costs had only increased at the rate of inflation from 2014 to 2023, an additional $5,000 in annual wages would have been available for each union member. By connecting the issue of high hospital prices to wages and bargaining, the coalition continues to organize to build pressure from the ground up and galvanize workers to take action.
The research, mobilizing and coalition building that has been led by 32BJ on the issue of high hospital prices demonstrates what a union can do with power and resources at its disposal. However, in the long term, there is no question that city and state intervention are necessary to challenge the power and profits hospitals systems have.
It’s a difficult tension: in the absence of national or state political will to remove profit entirely from healthcare, what should be done? The truth is, any conversation about access to health care, whether it be Medicare for All or expanding insurance coverage, will have to include lowering the cost of care. If we’re not able to get the prices or hospital market power in check, Medicare for All will struggle with the same kinds of affordability and premium increases that employer-sponsored insurance does.
One policy option would be for unions to form a group purchasing network and negotiate hospital prices together, instead of separately, to win fair hospital pricing. Similar to the principle of collective bargaining, unions joining together and bargaining for reductions in hospital prices on behalf of thousands of workers has the potential to generate billions of dollars in savings. This option could create a powerful counterweight to the market power of large hospital systems.
Another policy solution could be to push for the introduction of rate-setting. Only currently in place in Maryland, rate-setting would allow state governments to set the maximum prices hospital systems can charge insurers for specific medical procedures. This option would directly limit hospitals’ ability to increase profit by overcharging and could reduce health care costs dramatically. Another avenue would be to challenge hospitals’ charitable status and implement more robust standards for hospitals to retain their non-profit tax-exempt status.
The policy solutions are many, but the core of the fight is that no one group is big enough to take on high hospital prices alone. As large purchasers of healthcare, unions can and should be at the forefront of confronting the current system. Reining in hospital prices is a step to transforming the American healthcare system and ensuring access for all.
Featured image: Courtesy of SEIU 32BJ. The launch rally for the Coalition for Affordable Hospitals.