Tuesday, October 18, 2011

The big lie

There is a wonderful expression in politics, "If you say something often enough, it becomes the truth."  Of course, it doesn't really become the truth.  A lie retold is still a lie.  But, you can succeed in diverting political attention, especially in today's news environment, when reporters are not given enough time and bandwidth to really explore issues.

Take today's New York Times story about Massachusetts health care costs by Abby Goodnough and Kevin Sack.  The thesis is that the introduction of capititated, or global payments, will offset cost increases resulting from universal health care access.  The reporters give credence to the premise, even though there is not empirical support for the conclusion.  Indeed, such support as exists in Massachusetts suggests that the manner in which global payments were introduced resulted in higher, rather than lower, costs.  The story also fails to discuss consumer concerns about such plans, which would limit choice.

But then, the reporters retell the big lie, the one that suggests that concerns about the cost trends of the dominant provider group have been alleviated by a recently signed contract.  Ready?  Here you go:

Under market and political pressure, Partners also agreed to renegotiate its contract with Blue Cross Blue Shield and accept lower reimbursements, which is expected to save $240 million over three years. ... Blue Cross Blue Shield of Massachusetts said payments to Partners would increase at about 2 percent a year rather than the previously anticipated 5 percent to 6 percent.

Let's deconstruct this.  First of all, the PHS contract had one year to run, not three years.  Whatever rate renegotiation they accepted for the last year of the contract, they would have been smoking something to think that they would have received 5 to 6 percent going forward.  Also, as previously mentioned here, the base on which they get their "about 2 percent" increase is substantially above the market.  Other hospitals that were at or below market rates also received rate increases in the "about 2 percent range" -- starting one or two years ago.  Indeed, with other, non-dominant hospitals, BCBS started those negotiations by offering negative or zero change in rates.  Partners, then, didn't give up anything going forward.  It was permitted to keep its huge bolus of embedded, above-market rates.

Oh, and what's this "about 2 percent," anyway?  Remember that it was reported as "between 2 and 3" percent?  This week, it's been rounded down to 2 percent.  At this rate, in a month, they will describe it as "practically zero."

One thing the reporters get right is this:  "The politically powerful hospitals clearly hope to persuade lawmakers that price controls are not needed."

Likewise, the insurance company, it appears.  Whether it is fear of government regulation or a desire to go along to get along, a tremendous opportunity to truly control costs has been squandered.

But you will never see that story.  The big lie persists.  Welcome to the spin cycle.


Vanessa said...

From Facebook: In Health Administration class at Regis College, we have learned of the negotiation power of large conglomerates. Don't you think that this will get worse with trends like steward and partners coming out with exclusive health insurance plans to keep their workers and patients in their own systems?

Anonymous said...

I'm not disputing you, I'm just curious as to why you say: "...they would have been smoking something to think that they would have received 5 to 6 percent going forward."

Paul Levy said...

No one in this environment has been getting rate increases like that.

Anonymous said...

That special interests are good at perpetrating 'big lies' goes without saying - but this comment is about the media. Although they often distort things and we love to hate them, they are really our only collective defense against big lies by both private interests and government (think Woodward and Bernstein).
In addition, there is apparently evidence that the public is beginning to prefer these 'sound bites' of news rather than thorough analysis.
Absent the sort of news analysis and editorial support for such exhibited by the likes of Woodward and Bernstein, the bad guys will win.

nonlocal MD

Anonymous said...

It's kind of surprising to me that everyone thinks a 2-3% increase is heroic when it's given to Partners. Aren't they the ones that the WBUR CommonWealth blog showed the internal Partners documents that explicitly detailed that they have more than 40% margins on commercial insurers like Blue Cross? Why would you need to give a system with those kind of margins another 5-6% ever?? How is reducing them to 2-3%, (essentially inflation), tough love? If you give them inflation and allow them to keep their 40% margins forever, isn't that the real gift that keeps on giving?