Here is one of my occasional updates on the Massachusetts scene, for people looking for hints as to the kind of issues that might arise nationally as health care reform is implemented.
I have written several times about the ongoing saga between the state administration and the health care insurers in the state concerning premiums for small businesses and individuals. Over the last several weeks, several insurers have reached settlements with the Division of Insurance. At least one has not and has prevailed at the appeals board because the rates forced upon it by the state were not actuarially sound. Where settlements have been was reached, they were not based on actuarial principles: They was based on a desire to get past this impasse and provide some stability to customers.
Here's a quote from one company official:
Blue Cross spokesman Jay McQuaide said the organization agreed to accept “less-than-adequate rates’’ — which he said are too low to cover its costs — to resolve the uncertainty for customers.
The disturbing aspect that remains is a lack of understanding by some state officials of the issue. There appears to be a presumption that hospitals and doctors are somehow taking advantage of the situation to raise their costs. But that is at variance with what hospitals are actually doing and facing.
Here, for example, we see one hospital facing huge losses and another one laying off staff in the face of financial pressures.
There are sophisticated observers of the scene, however, who continue to offer thoughtful views. Here is an op-ed in today's Boston Globe by Robert Pozen entitled "A bitter health care pill." An excerpt:
[T]he perfect is often the enemy of the good in health care. Instead of taking a decade to move from fee-for-service to a capitation system, the state should implement two relatively significant cost-saving measures: Reduce the number of mandatory coverage items and charge higher copayments for using the highest-cost providers.
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As far as mandates go, an in vitro fertilization coverage mandate amounts to price supports for IVF clinics - without mandates, the price would no doubt drop like a rock due to competition for this elective service. I say this despite being a former IVF patient.
nonlocal MD
To Posner's two measures, might I add a third?
Health insurers and employers should reclassify those health care providers with the highest fees for service (e.g., Partners) as out-of-network and thus require higher monthly premium payments for consumers (employees) who wish to use them as their preferred provider.
This is a much bigger issue than Posner's higher co-pay measure. If consumers (i.e., employees) realized that sticking with their favorite doctor comes at a higher cost -- i.e., 50% higher monthly premiums -- I am willing to bet that most of them would simply switch doctors. I would.
The question is: how could the Commonwealth push or require health insurers to implement this practice?
It seems that one solution in your state would be to encourage the insurance industry to do what seems to be happening already in other markets, which is to offer a lower cost plan to employees that excludes the more expensive providers in the network. I understand that these insurance policies can be 20% cheaper in price as opposed to those offering carte blanche to all providers.
Insurance companies need to do more to encourage consumers of health care to seek the best value. They have the ability to design policies that can do this with higher co-pays and deductibles for more expensive providers without proven improved quality for the added dollars. Maybe they need a little nudging to do this rather than simply acting as a pass through middle man. If their is no downward cost pressure on the insurer to lower costs then we can never hope to gain control of runaway health care premiums that are threatening the solvency of Massachusetts and will eventually threaten that of our nation.
There is a very interesting and informative article in the most recent (August) issue of Health Affairs where Thomas Zeltner, Switzerland’s former health minister, discusses the Swiss healthcare system in considerable detail.
The relevant part to this discussion is that there are 84 insurance companies in Switzerland, a small country of 7.8 million people. The top six insurers account for 80% of the market. They negotiate with doctors, hospitals and other providers as a group so, in a given canton, all insurers pay the same rates to providers for a given service, test or procedure. Rates vary among the 26 cantons based on medical input costs and other factors. A portion, not specified, of the cost of operating hospitals is paid by general tax revenues.
With the recent requirement for hospitals in Massachusetts to use a uniform approach to calculating their costs, the state might move toward an all payer system for hospitals sooner rather than later. In the meantime, Mr. Pozen’s two suggestions make perfect sense, though I think the co-pay differentials between more and less expensive providers need to be larger than he suggests.
Making Health Insurance Mandatory for all the Citizens was a good move, But the Government should have involved Hospitals & Insurers in the Decision making process.
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