After many months of work, the House and the Senate have now both unveiled plans to contain the cost of health care in Massachusetts. The Senate legislation is mostly a worthwhile effort; despite a number of laudable provisions, the House bill is marred by regulatory overreach. But both have important areas of common ground that should help keep care affordable — as long as both chambers are willing to compromise and scale back.
Unveiled in a way that seemed designed to upstage the Senate, the House plan has created considerable unease, particularly among providers. It would create a new, quasi-independent authority, the Division of Health Care Cost and Quality, and vest it with broad power to set health care standards, investigate rates charged by hospitals or physician groups, and demand corrective action when it deems those rates unjustified. It could also assess a so-called luxury tax when providers’ rates are more than 20 percent above the statewide average.
The Senate bill, introduced Wednesday, rejects much of the House’s more coercive approach in favor of milder, more market-based remedies, along with partnerships to develop best practices. Still, the Senate, too, would create a new authority to oversee spending.
With lawmakers set to leave formal session on July 31, the legislation could become entangled in end-of-session horse-trading or brinksmanship. That would be a shame, since the House and the Senate agree, or nearly agree, on a number of smart, constructive concepts. Those include helping patients make cost-conscious health care decisions via timely information and financial incentives; encouraging wellness programs; expanding roles for physician assistants and nurse practitioners; strengthening consumer protections; promoting administrative simplification, standard forms, and more versatile electronic medical records; and requiring a cooling-off period, while allowing (non-court-admissible) apologies to discourage malpractice suits.
The House would require all providers to move away from fee-for-service care and toward a set payment for the treatment of each patient’s condition; the Senate would try to lead the way by having state-funded health care programs make that transition.
The House also wants to promote more coherent treatment by having a medical care-management “home” for everyone, and to experiment with “smart tiering,” which could see pricier hospitals compete with lower-cost institutions on a procedure-by-procedure basis.
If the Legislature took these moderate provisions, it would have a very solid foundation. But the House in particular goes much further; its plan includes a problematic, blunt-instrument regulatory thrust. The luxury tax, for example, leaves much to the judgment of the new quasi-independent authority, which would assess whether a price premium of 20 percent above the state average was justified by quality or uniqueness.
The legislation would also set a medium-range target of keeping health care cost increases to half a percent less than the state’s rate of economic growth. Any hospital whose charges were found to be driving costs beyond that range would be scrutinized; among other remedies, the authority could require that institution to develop and implement an agency-approved corrective plan. The authority could also require that payers and providers renegotiate contracts.
The Senate legislation sets a less strict cost-containment target and has a more collaborative version of the corrective plans. Significantly, it doesn’t allow the canceling of payer-provider contracts or a penalty tax on more expensive providers.
Because price caps, whether declared or de facto, are clumsy solutions that often distort the market and bring about unforeseen consequences, the House scheme is worrisome.
The health care market is already changing. As Michael Widmer, president of the Massachusetts Taxpayers Foundation, notes, the state is making “dramatic progress” in transforming its health care system and slowing the growth in costs.
It was the soaring cost of insurance for small businesses that sounded the call to arms on cost containment. Hospitals and insurers ignored that problem for too long. But since Governor Patrick focused their attention by rejecting a number of premium increases, the market has moved in encouraging fashion. For small businesses who will renew their coverage in the third quarter of this year, average annual premiums will increase by less than 1 percent.
That doesn’t mean the problem is solved. But it does argue against the broad regulatory regime the House envisions.
On Tuesday, Representative Steven Walsh, House chairman of the joint committee on health care financing, signaled he’s not necessarily locked in on those provisions. “Now that we have put out a bill, we will listen to concerns as we try to improve our initial product,” he said.
That, at least, is encouraging. The best course forward would be for the House to jettison its heavier-handed approach, for the two branches to rethink whether a new authority is really needed — Governor Patrick didn’t think so — and for both to focus on reinforcing the market-driven cost-curbing trends already underway.