Seattle's Economic and Budget Woes Threaten Health Coverage Expansions

Hospitals and DoctorsCompete for Profitable Specialty Services as Costs Rise Rapidly

News Release
March 21, 2003

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ASHINGTON, D.C.— Seattle’s struggling economy and rapidly rising health care costs, coupled with a state budget deficit, threaten to unravel recent gains in health insurance coverage, according to a new Community Report released today by HSC.

The current Seattle health care market stands in stark contrast to two years ago when Washington’s generous public insurance programs were expanding and employers offered rich health benefits to attract and retain workers in a tight labor market.

"The reversal of fortune in Seattle is striking, and the combined effect of rising unemployment, declining real wages, rising health costs and budget shortfalls is straining the health care safety net," said Cara S. Lesser, M.P.P. director of site visits for HSC, a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation.

Rising costs have spurred employers and health plans to increase consumer cost sharing and consider new benefit designs, including tiered-provider networks and consumer-driven products. At the same time, physician groups and hospital systems have accelerated expansion into profitable specialty and ancillary services, raising questions about how health care costs can be contained. Other key findings of the report, Economic Downturn and State Budget Woes Overshadow Seattle Health Care Market, which is available by clicking here, include:

• Concerns about access to care, especially for the uninsured and other vulnerable groups, have grown as providers reduce charity care and limit Medicaid and Medicare patients
• Relationships between health plans and Seattle’s hospital systems and large medical groups have remained tense as all strive to remain profitable amid rapidly rising costs.
• Competition for profitable services has increased as physicians add ancillary services such as laboratory and imaging to their practices, while hospitals have focused on specialty care such as cardiac and neonatal intensive care services.

Seattle is one of 12 communities across the country tracked intensively by HSC researchers through site visits and surveys. The new report is based on an October 2002 site visit and interviews with more than 85 Seattle health care leaders, representing health plans, employers, hospitals, physicians and policy makers.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely insights on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.