Now what happens?
We finally have a new health care cost-control law this week — after 17 numbing months of talking, lobbying, and debating. The fact that the Legislature passed a 350-page compromise bill just 24 hours after it was hatched — a measure that purports to influence one of the most important cylinders in the state’s economic engine for the next 15 years — should make you shudder.
But the outcome wasn’t bad, as far as I can tell. How much it will really help control health care costs remains to be seen — forget the $200 billion of savings and other imaginary figures legislators make up. But the new law will certainly have some real impact on the growth of medical expenses.
The most important element of the legislation is a cap on rising expenses benchmarked to the growth of the state’s economy, which will translate into a limit of roughly 3.5 percent most years. Providers that cannot manage to stay under the cap will have to come up with plans to improve or possibly pay fines.
In practice, I expect this will become a more flexible and modestly higher limit. Hospitals and other providers have increased their charges by about twice the cap rate in recent years. Many of them are going to flunk the new cost test, and enforcement may focus on the worst offenders.
A fixed-cost cap that applies equally to all providers was a necessary element of reform. But it is a blunt tool, sure to lead to unfair disparities. Poorer hospitals with weak market power already charge less, and a fixed cap based on percentages will make the gap on what they’re paid even wider. State officials will need to find a way to work around that.
The new cost-control law also encourages medical providers to organize into so-called accountable care organizations that are paid on a flat budget, rather than based on fees for individual tests and procedures. In fact, large parts of the state’s health care establishment are already moving toward that new model of care and payment.
Those care organizations will deliver a better product for most of us over time. They will offer more financial incentives for providers to help us stay healthy, rather than simply treat us when we develop medical problems.
But that’s not the same thing as establishing a less expensive way to deliver health care. The limited evidence from accountable care experiments elsewhere is mixed. In Massachusetts, it’s easy to predict that some will save money while others will not. No one really knows how that mix of results will play out.
One last major point of interest in the new law: A one-time assessment of $225 million on insurers and some providers — mainly Partners HealthCare System — to help poorer medical providers serve patients better.
Special assessments to benefit struggling hospitals aren’t new. They help repair some of the financial damage inflicted by the most troubling medical customers of all: state officials who manage the Medicaid system in Massachusetts. The state has a long history of paying hospitals Medicaid rates below the actual cost of care, a situation that only gets worse in tough economic times. Providers that treat large numbers of Medicaid patients bear the brunt of the financial damage.
The state’s original landmark health care reform law came with a promise to improve Medicaid reimbursements that never happened. Now the one-time assessment will fill at least a part of that financial hole, though no one in government would ever describe its purpose that way.
The cost-control law is not perfect, but it doesn’t need to solve such a big problem in a single shot. There will be more reform laws in our future, chances to fix missed problems or unintended consequences. Perhaps government regulators will need a bigger stick to enforce cost limits.
Market forces are also at work and may have an even greater impact on how health care providers work and what they charge. Insurance products that expose patients to the higher costs of more expensive providers and show them where quality care is available for less will make a difference.
People have been complaining about expensive medical care for years. Many have tried to solve it without much success. Our new legislation is a good start to the latest chapter in a very old story.