Saturday, December 06, 2014

It's a tax, whatever you call it

The Massachusetts Hospital Association is rightfully upset that that state's hospitals are being assessed to pay a growing amount from the state agency at the forefront of healthcare cost control efforts – the Center for Health Information and Analysis (CHIA).  CHIA has seen its budget increase 21% and 6% in the past two fiscal years (FY2014 and FY2015, respectively) and is currently funded almost entirely by the healthcare entities whose finances CHIA tracks as they attempt to meet the state’s healthcare cost benchmarks.

MHA notes:

Hospitals and ambulatory surgical centers (ASCs) are now funding 50% of CHIA’s annual budget, with “surcharge payers” (mainly health insurers) paying the other 50%. In the current fiscal year (FY2015), the tax on hospitals to fund the operation of CHIA is 16.5% higher than it was in FY14.  However, when one-time credits for unused prior year funding are taken into consideration, the expenses of the agency actually grew by 30%. 

In a letter to CHIA Executive Director Aron Boros, MHA wrote: “MHA believes that the work performed by CHIA is a valuable resource for the commonwealth and its mission should be supported. However the recent increase is unprecedented and also conflicts with the commonwealth’s goal to control growth of healthcare costs as this increase is assigned to healthcare entities subject to the state’s cost growth benchmark.”  MHA also noted that the budget of CHIA and its predecessor, the Division of Healthcare Finance and Policy (DHCFP), have grown at a rate significantly above the overall state budget increases over the past 10 years.

MHA explains further:

Chapter 224, which created CHIA out of the former DHCFP, mandates that hospitals/ASCs and health insurers pay at least 33% of CHIA’s expenses.  The other third was intended to be paid by state government and federal revenues Massachusetts receives.  But because of the changing role of the agency, CHIA no longer receives federal matching revenue it used previously for its 33% share. Yet the state’s general fund continues to receive the matching money, meaning, as MHA noted in its letter, “the commonwealth is now profiting from the transition of DHCFP to CHIA.”

CHIA is doing an excellent job: That's not the issue.  There is a long tradition of "creative revenue accounting" in the state Legislature. Even when a regulatory function is an important aspect of public protection, it's so much easier to hide a tax by assessing it on the regulated industry.  Here, as MHA points out, the hidden tax is in direct contradiction to the stated public policy objective of controlling health care costs.


Barry Carol said...

I think both the hospitals and the insurers will view any contributions to CHIA’s budget as just another cost of doing business that gets built into the price of their products and services. Of course, if hospitals, doctors and insurers were all more forthright when it comes to price and quality transparency, maybe there wouldn’t be as much need for CHIA in the first place.

Anonymous said...

Let's assume that hospitals lose money on an average Medicaid patient, break even on an average Medicare patient and make money on an average commercial patient with a plan like BCBS, HPHC or Tufts. The patients with these commercial plans continue to see their premiums and deductibles skyrocket while they are essentially keeping the hospitals in the black. Medicaid patients pay nothing and Medicare patients pay little out of pocket while the commercial patients see their monthly premiums and out of pocket costs soar. This does not even take into account that the people working and getting the commercial plans via their employers are also paying the taxes to cover Medicaid and Medicare. This does not seem fair that the people paying for everything have the highest premium and out of pocket costs. This is not sustainable to keep going after the commercial patients to cover the costs for everybody else. It should not come as a surprise if companies move away from providing insurance to their employees and instead provide them with some additional salary and tell them to find insurance in the state exchanges as the government keeps targeting the employers and employees to pay an ever higher burden to fund the system. The cost of CHIA is just another example of a cost being added to they system that will land on the backs of commercial patients in the form of higher premiums as this cost is passed on to the hospitals and insurers.

nonlocal MD said...

Being nonlocal I don't know much about CHIA, but it would seem that the metric of whether they are doing a good job would be moderation of MA's health care costs, and I don't think that has happened, has it?
Or is it that they are doing their job and the legislature is failing to implement the work. If so, then your state is wasting their budget and you may as well abolish them.

Anonymous said...

Shrink to Grow?

Is your premise that you want MGH and B&W to grow?

They are the highest cost providers for adult tertiary and quaternary care.

If they grow and more patients are referred there, that increases the total cost of health care in Massachusetts, which based on your past writings is not your goal.

The way to foster real competition is to make a compelling low cost network(s). Combining MGH or B&W with a BID, Tufts Med, Lahey or Steward does two bad things.

One it dilutes the price advantage of a BID, Tufts Med, Lahey, or Steward which is the factor that will drive down costs. Toyota and Honda, when they were relatively small, didn't become successful by merging with Ford or GM.

The second bad thing about a merger between MGH or B&W with one of the lower cost health systems, would do is mask a problem, namely MGH and B&W suck too much money out of the health care market.

Partners high cost is currently the focus of much attention. MGH & B&W costs are easy to contrast with other networks because they haven't merged with low cost health systems.

It prevents or makes difficult MGH and B&W growth. I think that is a good thing. [In contrast to your headline to this blog article.]

Even if MGH & B&W are separate, having more community hospitals affiliated with them, and patients ending up in their care will increase health costs.

What we need is low cost, high quality care. We already have the highest cost care in the country and therefore on the planet.

We need a true viable low cost network(s) that can compete with the high cost networks like Partners and proper incentives in the insurance market to make those high quality, low cost networks attractive.

Your suggestion, in my view, doesn't do that.