For municipal government buffs and for the record, here is a discussion of a technical issue that we voted on as an amendment to the recent supplementary/deficiency budget. The issue is insurer reimbursements to municipalities for ambulance service.
One of the critical services that municipalities provide in our system of government is emergency response — that includes police, fire and ambulance. In many Massachusetts communities, fire and ambulance services are both provided by firefighters. Ambulance services include basic life support on scene, advanced life support and transportation to hospitals. They also include transportation from hospitals to other facilities, although this kind of transportation, which is not part of emergency response, is typically provided by private companies. Private companies may help municipalities provide ambulance emergency response — under a contract for routine service or for backup when municipal units are already tied up.
Ambulance rates are set by municipalities and vary widely across the state. The actual cost of providing ambulance service does vary widely according to geography and population density. Ambulance teams need to be based close to the population they serve, because delay can mean death or brain damage. So, in lower density areas, ambulance teams will be idle more of the time than in urban areas, which implies that rates per ride will have to be higher to cover costs.
Rates vary also because of cost-allocation decisions. The costs of ambulance service blend in with other costs — 911 and firefighter payroll and fire station capital costs. Different municipalities may be more or less aggressive in allocating shared overhead into their ambulance rates. As in hospital billing, there is no right way to allocate shared overhead to particular services.
Similarly, the ambulance rates that the municipality sets will affect the service bids that they receive if they seek private company assistance in serving calls from their town. If the municipality sets rates below the level at which the private company can make money, the municipality will have to pay the ambulance company a retainer fee using taxpayer funds.
As a commonwealth, we are putting huge pressure on insurers and health care providers to cut costs. One of the ways that insurers cut costs is by making agreements with health care providers to provide a locked-in set of patients in return for lower rates. The insurers have been pushing ambulance companies to agree to lower rates and resent the power of municipalities to set rates as local authorities.
As a way to pressure ambulance companies and municipalities, some insurers (notably Blue Cross) have taken to sending payments for ambulance rides to the people they insure instead of to the ambulance company or the municipality providing the ambulance ride. That puts the provider in the position of having to chase the consumer for the reimbursement.
The House has repeatedly passed language that would force insurers to make their payments directly to the ambulance providers — private companies and municipalities. The insurers have been willing to accept this language, but only if coupled with the creation of a rate setting process that would put ceilings on the rates that municipalities could charge for ambulance rides. Essentially, the Secretary of Health and Human Services would set the ceilings based on recommendations from an advisory board. The advisory board would be fairly balanced between municipal representatives and insurers. The question is whether one wants the Secretary of HHS putting ceilings on municipal rates.
I can understand the logic behind this proposal. Proposition 2.5, which limits property tax rates, is a precedent for limiting the power of municipalities to set the costs of services. On the other hand, given that local rate setters — mostly boards of selectmen — do have some political accountability, I feel more comfortable leaving the authority in their hands. Any Secretary of HHS is likely to be so oriented to health care cost-control, that they may set the rates at unrealistically low levels. If the rates are too low, service will deteriorate.
In this opinion, I differ from the Boston Globe editorial board which is of the opinion that “insurers are better equipped to balance prices with performance” and local officials should not be assumed to understand the “intricacies of providing health care.” Much of the true cost of providing ambulance care is not intricate — it is the cost of forward basing emergency response resources that are necessarily idle much of the time. With their responsibility for fire and police, these are costs that municipalities do understand better than insurers.
While the municipal view has prevailed in the House, the insurer view prevailed in the Senate yesterday where the insurer’s language was adopted on a 12-23 vote. The issue now goes go a budget conference committee where precedent suggests it will that the issue will be dropped as too controversial to resolve without delaying the time sensitive budget.