Past time to get serious about health care costs

Legislature must rein in spiraling spending

LAST SEPTEMBER, Pioneer observed that Massachusetts had dodged a federal bullet when the US Senate failed by one vote to repeal the Affordable Care Act. Had they succeeded, the Commonwealth stood to lose billions of federal health care dollars. The near-miss experience should have prodded the Legislature and the governor to bring rampant health care cost inflation under control.

Today, Massachusetts has the nation’s highest commercial healthcare costs, and Medicaid accounts for over 40 percent of the state budget.

In November, the Massachusetts Senate passed a health care reform bill that included actions to expand access and, over time, contain costs. For example, the bill would have boosted providers’ use of telemedicine, increased access to dental care (especially for Medicaid enrollees) by creating a new dental therapist position, and required insurers to offer shared savings to the patients who chose lower cost/high-value providers. We hope such provisions are retained in the final version of the Legislature’s health care bill.

Unfortunately, the bill also sets a rate floor of about 90 percent of the average price of a medical service for payments to community hospitals. There was no ceiling on rates to wealthier, non-community, hospitals beyond finger wagging that, in the absence of restraint, hefty fines might be levied.

More recently, the Massachusetts House passed its own version of health reform. House members did not even pretend that its bill would contain costs. They get an “A” grade for honesty.

The House bill raises payments to community hospitals, which serve a disproportionate share of Medicaid populations, through assessments on large providers, insurers and even the new cost-effective competitors that have emerged in the health care marketplace, such as urgent care centers and limited service clinics, known as Minute Clinics. Under the bill, insurers would be assessed $247.5 million; certain large hospitals would pay a total of $90 million; and there would be an assessment of almost 9 percent on the amount Minute Clinics charge commercial insurers.

Let’s be clear: There is nothing inherently wrong in boosting community hospitals, but the unintended cost of this effort will be higher prices charged by already well-heeled hospitals. There is no ceiling on such provider prices, merely a threat to turn such scofflaws over to the Health Policy Commission to justify their increases. Higher prices will be passed on to insurers, who will in turn charge higher premiums to businesses and individuals.

The legislation would hurt emerging forms of lower-cost health care services, such as urgent care centers and limited service clinics. The House contradicts the Senate’s attempt to expand access and, in doing so, gives a good smack to new competitors, which, by the way, charge a lot less than hospital emergency rooms.

Last year, the governor introduced a series of Medicaid reforms tied to new business assessments that aimed to pay for rising Medicaid enrollments. The Legislature passed the assessments, but omitted the reforms. We have not heard a word since—from the Senate, the House or the governor.

Cost control, and especially cost control related to Medicaid, is a thorny issue. That said, the issue of health care cost inflation is real and getting worse. Simply imposing assessments (ahem, taxes) is not a solution. The new assessments are ultimately paid by consumers.

Meet the Author

Jim Stergios

Executive Director, Pioneer Institute
Meet the Author

Barbara Anthony

Senior Fellow, Pioneer Institute
It is well past time, especially in a state that prides itself as a leader in health care, to come up with a plan that will save money without sacrificing necessary care.

Jim Stergios is executive director and Barbara Anthony is senior fellow at Pioneer Institute, a Boston-based think tank.