Wednesday, May 09, 2012

Vying bills in the MA Legislature

All eyes in Massachusetts are on the dueling bills produced by the House of Representatives and the Senate with regard to health care cost control and related matters.  As usual, WBUR's CommonHealth blog is on the case and offers a good summary of the differences.  A previous column described the House bill in more detail.

The Legislature faces some tough balancing acts here in Massachusetts, where one in six jobs is in the health care sector, and where the state is viewed as a cauldron of innovation in medical research.  There is always a push and a pull between government intervention and market-based solutions.  John McDonough, former state representative and former head of Health Care for All, recognized these pressures in a recent blog post, and urged the Legislature to expand efforts in prevention, wellness, and public health, some of the underlying factors of cost increases in the health arena.  It looks like the Senate took him up on that proposition.

After action by both branches, the bills will move to conference committee to iron out the differences.  The Governor will certainly sign whatever product is produced, as just too much work has been done on this for him to veto the bill -- even though both bills are substantially different from the approaches he first laid out months ago.

As an uninvolved observer, I see evidence of more behind-the-scenes influence by the Attorney General in the House version.  Her office has been relentless in pointing out that a major driver of costs in the state's health care environment is the lack of an effective marketplace, where the presence of size-based and geography-based monopolies has resulted in huge disparities in payment rates from insurers.  She has offered rigorous and data-driven reports that document this pattern.  The House bill explicitly attacks this, knowing that the sector participants cannot and will not solve it.

After all, this is the elephant in the room that the dominant provider group and the dominant insurer hope would be ignored.  They have engaged in a persistent campaign of misstating the obvious and hoping that the Legislature would take a bye on the issue, with the former even spending money on ad campaigns to offer the appearance of progress, while spending hundreds of millions that will ensure decades of higher fixed costs.

The insurer offers an unproven hope that a change in rate design will undo its actions.  We can't blame it for wanting to shift risk to providers.  After all, as an insurance company, it surely understands risk and how to assign it to other entities.  But for the state to adopt as gospel an unproven economic theory is clearly premature. That should especially be the case in that this company's actions over time have reduced its credibility:  First, it overpaid the early adopters of global payments. Secondly, at least in one major instance, its global payment contract was retroactive. If the purpose of global payments is to give a price signal to providers for how they’re going to behave, how can that effectively be done after the fact, when the medical services have already been provided? Finally, and most egregiously, it recently gave higher than average rate increases to the dominant provider group in the state; notwithstanding the fact that this provider group already had rates that were substantially above average.

At a time like this, it is worth heeding the words of Dr. Robert Galvin, warning us to be wary of the potential for further market concentration that can result from a change in payment methodologies that depends for its success on reducing customer choice.  It is also time to recognize that the participants in the health care sector cannot and will not solve the structural problems of market power on their own.

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