Boston Capital

A word of caution on Massachusetts health cost reform

I feel like I’m watching one of those basketball games that drags on forever before all the important action takes place in the last few seconds.

The governor and legislators have been working for more than 17 months on bills to control health care costs in Massachusetts. Now a legislative conference committee is running out of time to reconcile competing versions passed by the House and the Senate.

The idea of legislators attempting to fix any kind of market should come with caution flags. A government plan to influence one of the biggest segments of the state’s economy — a last-minute compromise hatched behind closed doors — makes me very nervous.


There are certainly elements of a plan everyone can agree upon. Greater transparency in the incredibly opaque world of medical costs has to be a good idea. The list of agreeable details goes on, but not for too long.

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Both House and Senate would cap increases in medical spending to the rate of growth of the state’s overall economy. That would probably mean an allowable growth rate between 3 percent and 4 percent, based on current conditions. A Massachusetts cap would be the first of its kind in the country.

But the House proposal comes with real regulatory muscle to constrain costs and enforce change. The Senate version is an exercise in government finesse. This is the heart of the legislative conflict.

Meanwhile, the political force behind the entire debate — sharply rising health insurance premiums — has lost steam recently. The pace of rising health costs slowed substantially since Governor Deval Patrick first pitched a cost-control proposal early last year.

Why? The bad economy surely accounts for a big part of that shift. People don’t use as many medical services in tough times, and that utilization rate may bounce back as the economy continues to recover.


Government pressure also had an impact. When Patrick leaned on insurers to rein in rate increases, hospitals took notice. Children’s Hospital and Partners Healthcare, which operates Massachusetts General and Brigham and Womens hospitals among others, both renegotiated insurance contracts lower — though I’d bet the house that had more to do with short-term political cover than any economic epiphany.

But insurers and health care providers have made structural changes and created new products that may have a real impact on medical costs going forward. Those change the way providers are paid — based more on quality of health than quantity of services — and try to nudge patients to less expensive facilities for routine care.

Blue Cross Blue Shield of Massachusetts has gotten results so far from a relatively new kind of contract that pays providers a fixed annual budgets for patient care — plus incentives for lower overall cost and high quality care.

All health insurers are offering tiered coverage plans that require patients to pay more if they choose expensive hospitals for routine care. Even more restrictive plans offer big premium savings for patients.

Those market-oriented strategies all make sense on paper. But I have no idea whether they will really work over time. Some smart people who have spent their careers working on this stuff don’t buy it. Even my own doctor thinks I’m nuts to apply market solutions to the economics of medicine.


But the burden of proof should be on government if it wants to aggressively regulate a market. Can it show that prices are out of control and the medical industry is unwilling or unable to fix it? That may turn out to be true, but it’s a harder case to make today.

This is why I’ve always preferred the Senate’s less aggressive approach to health care costs. It establishes ways to measure medical expenses and determine if they are climbing too fast. That’s a step in the right direction.

So what happens if costs really do start ramping up again? It would be a relatively easy step to go from passive financial tracking to regulation with teeth. More aggressive cost controls could become a two-step process, if they become necessary.

No health cost law is going to be perfect. The issues are big and complicated — almost certainly beyond the grasp of any single piece of legislation. But we have been passing a new health care reform law every two years, and more will surely follow. Cautious steps work best.

Steven Syre is a Globe columnist. He can be reached at