High Level Conflict about Health Care Costs

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.

Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.

23 replies on “High Level Conflict about Health Care Costs”

  1. I think the both bills are a huge step in the right direction. I think the actual target is probably less important than it seems. First, as Will points out, both targets are well below the historic levels of growth. Second, with this new reporting structure we will ahem significantly more transparency. That increase in information will no doubt lead to new bills and perhaps re-jiggering of the target. having said that, I am disappointed that neither bills addresses preventative care and wellness projects to the extent I would have liked. perhaps that too will be addressed in a subsequent bill. this is, i am sure, going to be a long and incremental process of figuring out what works and then fixing something else.

  2. “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.” “The Senate version requires providers whose costs are growing too rapidly to file a confidential improvement plan and pursue that plan in good faith.”

    Those two aspects of the draft bills indicate to me that the bills are unlikely to result in significant cost savings.

    However, Senator Jamie Eldridge’s single payer amendment to S. 2260 would result in significant cost savings. A report by economics professor Gerald Friedman of the University of Massachusetts at Amherst estimates a reduction of 15% in health care costs in Massachusetts as a result of single payer health insurance implementation. Professor Friedman’s report is available at:
    http://masscare.org/ma-single-payer-bill/briefing-on-medicare-for-all-massachusetts-bill/

    In addition, Harvard economics professor William Hsaio gave a presentation at the MA statehouse November 11, 2011 on the advantages and disadvantages of single payer. Professor Hsaio is the architect of the single payer health insurance system implemented in Taiwan in the 1980s. He also assisted in developing the single payer plan that is scheduled to be implemented in Vermont in the coming years. I can email you a copy of professor Hsaio’s presentation if you’re interested in the assessment by one of the leading healthcare economists.

    Since the goal of S. 2260 is to improve health care quality and reduce costs, Senator Eldridge’s amendment should be non controversial. It only takes effect if the implementation of single payer is shown to save costs.

    Senator Brownsberger, will you be voting in favor of the single payer amendment to S. 2260?

  3. I have read that a huge chunk of the health care dollar is spent on people in the last few months of life, often on “heroic” treatments that the patients would reject were they able to do so. How can this be addressed? By encouraging the use of the health care proxy? By training physicians in how to talk to terminally ill patients and their families about end-of-life issues?

    1. isabelleonard makes a good point. So, where is the emphasis on hospice / palliative care? The Hospice & Palliative Care Federation of Massachusetts, for example, is a teensy organization with almost no budget. Why? A small investment in this one area could save many times as much in the long run (full disclosure: I have done consulting work for HPCFM in the past). I’m sure there are other ‘non medical’ organizations and resources in the state that are living ‘second class’ status just because the state is so much ‘run’ by the medical industry.

    2. Hi Isabel,

      These are good issues to be concerned about. I do believe that many people would choose different care approaches if they had more time to discuss them with their physician.

      It may be possible that legislation could help on these issues, but they are not part of the present package.

      /w.

  4. I agree that the single payer solution being proposed by Sen. Eldridge is a much more substantive health cost cutting measure and will lead to greater savings through efficienct billing and payment.

  5. Norman Daoust’s post (above) outlines clearly what is omitted in
    Senator Brownsberger’s otherwise thoughtful statements on this issue.
    The non-controversial truth is that a state-wide publicly financed health insurance
    system (a single payer system) would contain costs sustainably. It would also provide
    what the Health Care Reform law of 2006 has never come close to providing: universal access to health care.
    Before he became a Senator, Brownsberger was a supporter of single payer. His conspicuous silence on the issue now says a lot about the influence of private corporations and monied political donors at the level of state legislature.

    1. Someone once said that “The medical industry essentially runs [the Commonwealth of] Massachusetts.” It certainly ‘owns’ the federal government, if you look at the watered down legislation now popularly called ‘Obamacare.’

      You want to see real reform? What if more people to take the dare and cancel their insurance, then refuse to pay the penalty. We’d see some action then! Time to pull the rug out from under this thing! Walk into doctors offices and hospitals and demand to see the billing schedules, rates of infection and walk out if they keep their secrets. They use fear to manipulate the public and have us on the run because too many of us buy into it. Where is our backbone? When will it be time to stand up and revolt? If we don’t do something truly radical, then they will continue to walk all over us for the foreseeable future.

  6. OK, I have no insurance. No, I don’t pay any penalty, legally (thank goodness!) because insurance is officially “unaffordable” for me, according to the state’s own charts. As someone who is known as ‘self pay’ I must directly confront the absurdities of the current system. When I go to visit a doctor, nobody can tell me what it will cost. “We don’t have a code” says the billing department. “I don’t know what the rates are” says the doctor who sees me. Often, I’ve been billed for things months later that I was never told about while at the clinic. Other times, at other practices, I’ve been treated well, and even given special pricing as a self pay person.
    So the system is generally unmanaged and seriously out of control. Will this legislation change that? I have serious doubts. I guess it’s better than doing nothing. But the basic ‘fee for service’ model we have in place works against the basic interests of the patient, so the industry will probably find its way around the regulations and we’ll have to start over again.
    As for single payer, the problem is, again, what do you ‘cover’ and what do you not? Who gets to decide? What if I find something healing that the medical industry, famous for pushing pills for everything, calls quackery? I’m talking about Osteopathic manipulation, for example, performed by doctors who have been to medical school, just like MDs, but not covered by today’s insurance companies!! So, I see the fight going on even if there is single payer, because of the rampant bigotry and corruption in the system that will keep trying to force me to use their products, no matter who is paying for it. What about hospice, as I mentioned in a reply to a post, above? Will single payer cover that?

  7. I suspect that the only way we will ever get control of health care costs (from the point of view of the state) is to just do it — to stop financing these increases by setting
    a cap, indexing it to inflation, and sticking to it. But I understand that we are a long long way from there now.

  8. I join with supporters of Sen. Eldridge’s single payer amendment to S.2260, and in asking Sen. Brownsberger to vote for it and promote it. What is mainly broken about health care systems in the US is the market element. Health care has to make a profit for the biggest and already most wealthy providers and insurers. But health care is not a commodity to be traded in the marketplace. It is a human right. It means life or death.

    As for end-of-life planning, I find that Sarah Palin and her “death panels” succeeded in spreading real fear. Older people say, “My end-of-life care is a private matter for me. I don’t want government involved in it.” Trying to explain that the issue is only whether Medicare will pay for them to talk with their own doctor about it does no good. They don’t believe me. It just shows how the GOP has found that extreme, ridiculous claims like “death panels” really have an effect toward “breaking the power of Big Government”.

  9. Back to single-payer health insurance and how to get a majority of votes for it:
    Would it be possible for researchers to calculate, at several different income levels, (based on Canada’s experience perhaps, or France’s) how much it would actually cost an individual in taxes, compared to what they/their employer are now paying for premiums, co-pays, non-covered medications etc. and setting aside to cover care beyond lifetime limits? People are so interested in saving some bucks that they will typically look beyond a lot of other considerations.

    1. Economists can certainly make estimates of this, but different economists will make different estimates. That’s why I don’t think the transition to single payer can be made automatic based on estimates.

  10. I agree that legislation to cap medical spending is a reasonable option given the complexity/cultural challenges of transitioning to single payer.

    Given that caps are reasonable and necessary in our market-based system, one of my big concerns is that the large players in the system will need more incentive to to spend money on innovations to improve asthma treatment outcomes, rather than lowering nursing care ratios, for example.

    I also share Will’s concern about the cost-shifting on insurance premium charges that loads middle class and self-insured families with the brunt of cost increases. Large employers have the clout to negotiate lower premiums, which is fine, but insurers have not been passing that expense to the self-payers. Caps will help, but self-payers will not necessarily benefit.

    Don Berwick’s approach to offering better medical service delivery has been successful in improving efficiency and cost at institutions around the country, without sacrificing quality of care. I am looking forward to creative options along this line from health systems. An obvious example is providing urgent care settings that dramatically reduce the use of ERs for non-emergent care.

    I laud the legislative initiatives promoting preventive care at community health centers, and grants for companies to add wellness programs for employees. But the Prevention and Wellness Trust Fund should be a pilot program to measure what DOES work with specific populations. “Prevention” for young families in urban areas requires different inputs than preventing employee groups from becoming too heavy. There have been many disconnected attempts to offer prevention/wellness programs that don’t help us move forward because the outcomes were not well reported. Perhaps making additional funding contingent on meeting objectives is better than simply removing sunset provisions.

    1. Thank you, Sue.

      Your points about cost-effectiveness are well-taken.

      I think the non-sunset is clean and simple and I plan to support it, but I agree we need to keep an eye on how the money is used.

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