First, assume a ladder

A distinguished local health care economist was giving me a hard time about some of my statements about the Massachusetts health care market.  I had talked with him about the importance of removing disparities in the amount paid to the dominant provider group and other topics covered in this blog.  He said, "You're wrong.  I've been looking at this a long time.  Just get the pricing right, and it will get better.  Get rid of fee for service and move to global payments."

This reminded me of the old joke.  An engineer and an economist were walking through the forest when they fell into a deep pit in the ground.  It had vertical sides, and they could not climb out.

"This is hopeless," said the engineer.  "We'll never be able to get out.  No one knows we are here.  We will die before we are found."

"Not so," said the economist.  "There is no problem."

"What do you mean?  How could that be so?" replied the engineer.

"It's simple," said the economist.  "First, assume a ladder."

My economist colleague was doing the same thing.  He was assuming that market conditions exist in the state that will allow a different pricing regime to make a substantial difference in the pattern of health care cost increases.  There is no evidence for this proposition in a state with a dominant provider group and a dominant insurance company. 

Josh Archambault, Director of Healthcare Policy at the Pioneer Institute, has thought things through more clearly.  He says, of the legislation signed by the Governor today: 

Rather than provide financial incentives for individual patients to take charge of their own medical care, this legislation rearranges the system based on accountable care organizations (ACOs) and governmentally-imposed changes in payment methods.  Real-life evidence that these approaches contain costs is mixed at best; as a result, the law misses the mark by a long shot and will not lead to long-term, sustainable containment of health care costs.

The government will impose caps in healthcare cost increases, which will lead to further consolidation in the market--exacerbating one of the causes of the predicament we are in today. The law will also lock in place current inequalities of provider reimbursement levels, as everyone will grow at the same rate, but not everyone is starting from the same place. Then just to add salt to the wound, the government is ensuring that healthcare will cost us all a lot more, by adding hundreds of millions of dollars to the system through new surcharges, fees, and penalties. Make no mistake about it, these costs will be passed onto consumers.

By the time this is evident, the current governor and many current legislators will no longer be around to help dig the state out of its new hole.