Although it’s been over a year since Governor Patrick filed legislation aimed at controlling health care costs, the joint legislative panel working on the issue has yet to make its own proposal. That’s not because the Committee on Health Care Financing has dropped the ball. Instead, the delay speaks both to the complexity of health care policy and to the rapid change in the health care sector over the last two years.
Here’s the irony: By waging a regulatory battle with insurers over premium increases, Patrick delivered a cost consciousness wake-up call; developments since then argue for a wait-and-see approach for the near future. Consider: About 1 in 5 state residents is now treated under an acountable-care arrangement, in which hospitals and doctors accept a set payment for taking care of patients, rather than charge on a fee-for-service basis. The first of six planned small business purchasing cooperatives recently announced a limited network health care plan that could save its members at least 20 percent. New or renegotiated contracts between insurers and top-tier hospitals have kept yearly provider rate increases to 2 to 3 percent. Health insurance premium increases for 2012 are running in the range of 1 to 4 percent.
Some caution that this is merely a recession-related lull, not a long-term trend. Still, the most prudent course for the Legislature is to leave the state’s regulatory wrench in the toolbox and focus on hastening changes already underway. To keep up the pressure, the Legislature should plan to reassess the situation in two years — and decide then whether more dramatic intervention is needed.
Such an approach would mean rebuffing those who favor aggressive government intervention now. The governor, for example, wants authority to reject insurance premium increases based on hospital and doctor rates. House Majority Leader Ronald Mariano hopes to cut payments to hospitals whose rates are in the top fifth and increase them for those in the bottom fifth. Attorney General Martha Coakley favors requiring that hospital rates be within 15 percent of the average by 2015 and within 10 percent by 2017. A special commission has called for an independent panel empowered to decide whether hospital prices are justified.
All those schemes raise serious issues. No matter how well-intentioned, it’s highly dubious that outside players could determine the “right” hospital rates or prices. That’s particularly true when it comes to teaching and research institutions.
When regulators set prices below actual cost, it forces cost shifting or causes shortages or requires further government action to control the inputs that put upward pressure on those prices. So, whenever practical, it’s best to focus not on overriding the market but ensuring that it works efficiently.
So how can state government do that? By promoting accountable care, furthering transparency, highlighting effective practices, increasing consumer knowledge and incentives, and encouraging more competition among providers and between insurers.
Specifically, health care consumers should find it simple to ascertain what their out-of-pocket treatment costs would be at various hospitals, and how much they could save by using a less expensive provider. To enhance overall competition, that information should be public and available in a way that allows for easy apples-to-apples comparisons.
The move toward global payments is a salutary one, but the entire system also needs to reduce unnecessary tests and procedures. Between the US Preventive Services Task Force, the Patient-Centered Outcomes Research Institute, and the Institute for Healthcare Improvement, there’s an increasing body of information about which tests are integral to quality care and which are of dubious value.
Curbing the impulse for defensive medicine may also require malpractice reform, perhaps by creating a legal presumption against malpractice judgments for physicians who follow treatment based on best practices.
One innovative idea the health-care committee is exploring is “smart tiering,” which would enable competition among providers based on procedures rather than having to commit to one institution. Thus, more expensive hospitals could cut prices in order to compete on specific services with less expensive hospitals.
The health care sector is critical to the Massachusetts economy. An approach that builds on the successes of the last few years and relies on the cost-curbing forces of consumer choice and competition is the wisest way forward right now.