Bill Weld and I didn’t agree on much, but he did something in his first term as Massachusetts governor that should be required reading for anybody involved in the current debate over how to control health costs in the Commonwealth.
Campaigning for the governorship in 1990, he got an earful, as I had, from employers all over the state who complained about skyrocketing increases in the cost of workers’ compensation, a substantial portion of which represents health costs.
Weld didn’t fool around. He told his insurance regulators that he wanted workers’ compensation rates frozen and changes made in the system that would get the problem under control. They responded, and so did the workers’ compensation insurance industry that it regulated. The result: Instead of the 46 percent rate increase that insurers were demanding, rates were frozen in 1992, and over the past 20 years they have fallen by a staggering 67 percent cumulatively.
Of course, there was a key ingredient in what Weld did. Workers’ compensation insurance premiums were and are tightly regulated by the state insurance division, and the business community in Massachusetts wouldn’t have it any other way. There is little talk about letting “the market” get workers’ compensation and its health costs under control. Workers’ compensation insurers can’t raise their premiums a nickel without the approval of the Commonwealth.
One of the most puzzling things about the current debate over how to control health costs is that nobody seems to want to look to Weld’s workers’ compensation reform efforts as a model. Instead, we are told that fee-for-service medicine is the real culprit, and that only a huge upheaval in the health care industry involving the creation of “accountable care organizations” and “global payments” will do the job.
Expecting ACOs and global payments to get health costs under control is a pipe dream. We have already tried them once, except back then we called them HMOs and capitation. They didn’t work then, and they won’t work now.
And the problem is not fee-for-service. Every advanced industrial nation in the world except the United States provides comprehensive health insurance for its people, and most of those countries pay their physicians on a fee-for-service basis. So how come they are paying half what we are paying for health care with health outcomes that are a lot better than ours?
The answer is clear. They don’t indulge themselves in the notion that the market works in health care. Instead, they regulate costs either directly or through their insurance system, and they keep their insurance systems simple. They are comprehensive and easily understood, in contrast to the US system with its dozens of different insurance “products,” widely differing contract language and codes. The US system is a nightmare for doctors and hospitals, with billions in administrative costs.
We could save those billions and make life for our doctors and hospitals a lot simpler by standardizing insurance policies and billing codes, and we could then require all insurers in the Commonwealth to create a central clearinghouse to which doctors and hospitals could send their bills once a month and get paid. The savings would be enormous, and it wouldn’t affect the quality of health care one iota. In fact, it would improve it.
While the Legislature has been working hard on cost control legislation, most of this can be done by the State Division of Insurance without new legislation, and that effort should begin now. We should set a goal of at least a 10 percent reduction in costs and premiums over the next three years, just the way Weld demanded a freeze in worker’s compensation rates in 1991.
Lately, we are being told that some of the new approaches to the problem are working, and that health cost increases have slowed down in the Commonwealth. Of course, the same thing is happening in the rest of the country, and it has nothing to do with “payment reform.” Because of the recession, people aren’t getting the care they need, and cost increases have moderated, but as the economy comes back, costs will almost certainly rise sharply again unless we act now.
So let’s take a page out of a conservative Republican’s playbook who understood how the health care market works — or, more accurately, doesn’t work. Let’s use the very successful workers’ compensation reform process that he designed 20 years ago as a model for how to control health care costs — thoughtfully, sensibly and effectively.
Former Massachusetts Governor Michael Dukakis is a professor at Northeastern University.