After over a year of hearings and discussions, the House and Senate have both released global health care cost control bills. The Senate will debate its bill next week.
The highest level institutions in Boston – government, business, major hospitals and insurers – are all deeply engaged in the conversation about the options, either directly or through their associations and lobbyists. Not that the little guy is out of mind in the conversation – consumer advocates have been very involved — but the central battle is about how to allocate resources at the highest level.
Private employers, like state and local governments, feel annually the pressure of rising health care costs. Health care costs are approaching 40% of the state budget. MassHealth, the state’s program for the poor, covers roughly 1 in 5 residents.
Major hospitals and many other providers have done relatively well through the recession but foresee tough times as a result of federal budget cutting. In turn, insurers feel squeezed between hospital pressure to keep rates up and business and government pressure to cut premiums.
Most legislators have appropriate respect for the complexity of the sector. There is broad consensus that no state agency can run or tightly regulate the health care sector, which employs roughly 1 in 6 people in the state.
Both draft bills would create a new independent authority with power, not to regulate, but to set overall targets for total medical spending in the state. All major providers would be locked into a reporting framework that allows both an evaluation of statewide costs and an evaluation of their contributions to cost growth.
The Senate version requires providers whose costs are growing too rapidly to file a confidential improvement plan and pursue that plan in good faith. The basic reporting burden itself is so potentially onerous that most providers will work hard to shape their behavior to avoid the burden of engaging in a performance plan. The House goes further and assesses penalties to higher cost institutions.
Both bills use the gross state product as a benchmark, but the Senate version allows growth slightly above GSP growth (0% to 1% above in different periods), while the House goes slightly below. Both bills would mean a dramatic reduction from the long term historical trend which has been several points above GSP growth.
There is no real consensus among economists as to what target is fair and reasonable. Certainly, health care costs are crowding out other economic goods and, certainly, there is waste in the system. At the same time, medical and life sciences innovation are driving employment in the state and often improving lives.
One’s reaction to the targets depends on which side of the table one is sitting and on which part of one’s health care experience one chooses to think about. I can think of the doctor who, as a cure to my heartburn, offered me a choice between gastric surgery or a lifetime of medication with potential side-effects – I chose instead to try not to overeat so often. Or, I can think of the doctors who diagnosed the potentially fatal brain tumor I had in 2001 and the medical imaging technology that allowed them to locate it and remove it in a swift and safe surgical procedure.
I have been arguing for an aggressive target, but the final compromise number will certainly fall somewhere in the narrow range between the House and the Senate. I do believe that, whichever number we pick, and with or without actual penalties, the legislation will go a long way to controlling health care costs. The transparency that the new agency creates will exert a lot of pressure for change.
There are many other good concepts in the lengthy Senate bill, which runs to 5080 lines of text – addressing issues like medical malpractice reform, information technology, certification of accountable care organizations, etc.
The fundamental problem not squarely addressed in the current drafts is the special burden carried by middle class individuals (and small businesses) who are not eligible for subsidized care but have to buy their own care in the market place at high cost. The systemic cost controls in the bill may prevent that burden from increasing, but will not relieve it. Several existing statutes are designed to offer some relief, but we need to do more to strengthen the bargaining position of unaffiliated individuals in the market place. It appears that we will need to address these issues early in the next session, to respond to federal law changes.
For more detail, see resources at this link.