Making good on Governor Deval Patrick's promise to reject health insurance rate hikes deemed excessive, the state Division of Insurance this morning turned down 235 of 274 increases proposed by Massachusetts health insurers for small businesses and individuals.
Well, aside from the obvious political football aspect of all this, how do we get at why the rates are going up so much? Is it greedy insurers? Not really. It's the cost of care. You squeeze the balloon one place, it bulges someplace else.
That leads us to the continuing food-fight between the Gov and the former insurance exec Charlie Baker. Both accuse the other of doing nothing about costs in their respective capacities. In that case … why was Charlie Baker sitting on, and actively contributing to, the Governor's Health Care Quality and Cost Council? And I mean right from the beginning: Check the minutes from August 23, 2006 on up to 2009, when Baker resigned in order to run for Gov.
If the Patrick administration has done “nothing” about costs, then that means Baker's done “nothing” about costs.
Fortunately, this isn't true. The Governor signed an initial cost-control bill in 2008; and the Quality and Cost Council developed a “Roadmap for Cost Control”, which included recommendations for fundamentally reforming how we pay for medicine. (Global payments, Accountable Care Organizations, etc.) The implementation updates can be found on the HCQCC's site.
We didn't get into this mess overnight, and it isn't going to be solved overnight. The problems are big, structural, and stubborn.
So in the Governor's race, how about some new, fresh, awesome, ambitious ideas and implementation, rather than finger-pointing and backward-looking?
Just telling people they can’t raise premiums without doing anything to control costs is not sustainable in the long run. Until recently, (Thank you Gov. Patrick!) Massachusetts had a highly regulated system for Auto Insurance, which meant that many national carriers (State Farm, Geico, etc.) sold policies in every state except Massachusetts. It didn’t really do anything to lower premiums either, at least if my personal experience is any guide. I’m worried that in our rush to “do something” we might create a similar counterproductive mass with health insurance.
can leave the state. they’re all technically non-profits (which isn’t to say they aren’t profiting plenty, because being a “non-profit” isn’t what it used to be).
Don’t we constantly hear about insurers being more accountable to shareholders, which is why they refuse payment? Doesn’t that model make them for-profit?
in a not-for-profit corporation. It doesn’t mean they don’t make a ton of money. It just means that’s how the corporation is structured.
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p>Many health insurers elsewhere in the country are for-profit corporations, and therefore do have shareholders. Here in MA, however, the big ones are not-for-profits.
I’ve seen the paperwork for some of the charges that were going to be filed on my behalf with my health plan (who is also my employer) — for what’s known in the industry as durable equipment, for example — and it’s clear that costs are high because the providers know they’ll be paid; i.e., it’s whatever the (largely non-competitive) market will bear. The absence of any cost control has led to a situation where a small piece of molded rubber for a CPAP machine is billed to the insurer to the tune of $90, and a cervical traction device — probably manufactured for less than $200 — is billed at $700.
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p>Health insurers have insincerely claimed they are doing everything they can to control costs, but they have fought tooth and nail to defeat any of the mechanisms by which provider costs could be controlled; e.g., the negotiating power of single-payer or a federal public option. Insurers who compete with each other for members and who all want the same providers in their networks can’t then turn around and join forces to squeeze those providers for lower fees on services. That’s one of the structural problems Charley referred to.
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p>However, the state holding insurers accountable for keeping premiums under control at least creates a level playing field, and places some downward pressure on costs by making raising premiums less the path of least resistance compared to pressuring providers on fees. It’s been way too easy for health plans to raise premiums as a first resort, especially for existing customers, or restructure their offerings towards plans with higher deductibles and minimal coverage while appearing to hold the line on premium increases.
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p>What the private insurers won’t admit is that they might also derive some cost-control benefit from the large-pocket negotiating power of a public option, especially regarding pharmaceuticals, which — we’ve already discovered — can be sold (e.g., in Canada) for a fraction of what Big Pharma can get away with charging in the U.S. under the current system.
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p>That’s lurching down the path to telling the orthopedic surgeon, “hey, you can only make $100,000 salary,” or limiting a nurse’s compensation to $25,000.
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p>Were any of you adults during the Nixon, Ford, and Carter administrations? Wage and price controls were tried, and all they created were high prices AND shortages.
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p>Government, unless you’re Kim Il Jong, can’t “control” prices, no matter how many bills are passed and councils seated.
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p>The solution is to increase out-of-pocket spending, and let consumers see price lists BEFORE they spend that money. No amount of government oversight is EVER going to solve the increasing cost of health care. Only health-care consumer sovereignty will.
Nobody is limiting salaries explicitly. Government has limited or restricted prices on things for many years. Just ask NStar or how much they’d like to charge you for electricity. Your premise that this is wage-fixing is wrong, and your ignoring of other areas where government agencies set prices in some form or another suggests you haven’t given this the intellectual care it warrants.
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p>How would increasing out-of-pocket spending improve health outcomes? I can see how it would save money in the short term — people with limited means will “do without” despite that leading to much poorer health outcomes years down the road. As for your final claim, I completely disagree. I think there are areas where government oversight provides for a more efficient marketplace — things like drug regulations, for example.
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p>It’s pretty clear you’re simply making strong claims based on a world view and not at all on policy or theoretical analysis. You might be right, you might be wrong, but you sure as heck aren’t doing anything to make the case that you’re right.
HSA’s were are great way for a consumer to apply cost pressure. You get to save the money you don’t spend. They have now been changed to a maximum of $2,500.00.
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p>A friend of mine went un-insured for years – needed an operation and paid 50K out of his pocket for it. The operation didn’t fix the problem, he refused to pay the bill – the doctor did the operation again for free (with much grumbling) you know this doesn’t happen when BC/BS Harvard or the Government is paying the bill.
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p>BTW – the reason for health insurance being payed by an employer is because of wage and price controls during WWII. Employers couldn’t pay staff more, but they could offer better benefits.
I’m reasonably (not 100%, but more than 75%) certain that the HSA my wife had access to through her employer did not allow her to save the unused portion. Instead, I believe it reverted to the employer. At least, that’s how we read the plan documentation, and I’m pretty sure that’s how ADP (the plan administrator) explained it to us.
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p>I think your anecdote is just that — anecdotal. I doubt that very many providers will guarantee the results of their work. Medicine is still a very long way from appliance repair.
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p>Your explanation of the origin of employer-paid health insurance is accurate as far as it goes. It omits the reality that FDR actually wanted government-funded health care, and was unable to persuade the AMA (and, I believe, the GOP) to go along with it. His Social Security program was loudly declared to be “socialist” by his conservative opposition (they apparently added “ist” to the first word of the name). When government-sponsored single-payer health care is finally enacted, it will similarly become an inviolable third-rail of political reality — in my view, conservatives implicitly acknowledge this in their passionate opposition to it.
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p>More significantly, I remind of you of FDR’s radio address on the eve of the 1936 election:
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p>I hope that President Obama takes strength and courage from the example of political leadership that FDR offers.
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p>The claim that “free market forces” will somehow magically assure better economic outcomes — in health care, in banking and finance, in transportation — is a dangerously superstitious essentially religious canard.
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p>Just how bad must the economic catastrophe around us get before conservatives figure this out? I am reminded of the dispensations that provoked the Reformation. The Church’s answer, when the dispensation had been paid for and catastrophe nevertheless followed, was that either the supplicant hadn’t paid enough or was insufficiently fervent. This “free-market” mantra sounds like the same racket to me.
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p>Enough is enough.
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You don’t get the money back, but it doesn’t go to anyone else, either:
http://www.ustreas.gov/offices…
My daughter had a hairline fracture, it was misdiagnosed in the emergency room as a sprain after 6 hours. I got on the phone when BC/BS sent the bill and made sure they didn’t pay. Medicare, Medicaid or BC/BS would have also paid the bill. Individuals in the aggregate can have a huge effect on pricing.
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p>Generally the free market has won the argument, except for our great capacity for creating bubbles – be it CDSs or Beanie babies.
Tom, think your wife was in a Flexible Spending Account through her cafeteria plan at work. They have a “use it or lose it” feature.
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p>HSAs are a different animal introduced with EGTRRA which kind of operate like a “medical IRA”. With this concept would make sense for funds to accumulate year to year to anticipate unforeseen medical expenses.
Are you rejecting the idea that providing less money to an organization can make it more efficient? As in, “cut taxes, starve the beast and the waste will go away”?
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p>Given that health insurance companies are exempt from anti-trust laws, and the service they offer is often required for someone’s very survival, they sound like a virtual monopoly to me — and one without any price transparency, since it is impossible to figure out how much any service costs before consuming it. And everyone does it.
I might agree with you. Probably would agree with you.
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p>But what out-of-pocket expenses are you talking about raising? Deductibles and co-pays? Most people seem a bit perturbed about the money coming out of their pockets for healthcare already.
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p>And what price list are you going to look at before that bus hits you? Or you hit the bus? Not a lot of sovereignty when your comatose.
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p>Your’e right, there are some things that we ALL could do that would greatly help with the healthcare problem. Just dealing with heart disease, diabetes, and obesity would take a lot out of the system. MAYBE higher copays and reading a price list or two could get enough people doing the right thing to bring costs down.
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p>But a lot of those actions come well before they generate the healthcare costs. And we need to realign the whole system to more preventive community based healthcare; which those nice big teaching hospitals on Longwood, and your orthopod, might not like.
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p>So, rather than just let the insurers pass along higher costs (and adding their cut), we push back on that. Then they push back on the providers, and the providers push back on us.
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p>And we rip up our lawns to plant veggies, quit smoking, park the SUV’s and bike/walk more, get off our butts and exercise, drop the Western diet and adopt one of the many other healthier diets in the world, and all live longer at a lower cost. Just like everybody else in the industrialized world; you know, the ones were no amount of government oversight solved the healthcare cost problem.
Much like climate change, the zooming health care cost problem doesn’t have a single solution; rather it will require 100s of different attack angles, each nibbling a little bit.
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p>My hunch is that if each of these became widespread trends in America, we’d flatline health care costs right now, despite an aging population. I’d note that the government can help us toward nearly all of these decisions: stop subsidizing corn and the price of meat and corn syrup goes up, helping with heart disease. Keep raising cigarette taxes and funding cessation programs. Make sure every road project, no matter how small, includes all appropriate pedestrian, bicycle, and bus improvements, fund mass transit, increase the gas tax, and reduce/eliminate minimum parking space requirements in zoning.
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p>It’s worth noting that in most of these other industrialized nations, they’ve not embraced policies to encourage auto use, they’ve had high taxes on cigarettes and gasoline, and so forth.
In many suburban and exurban areas of Massachusetts, it is literally impossible to walk even short distances.
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p>In Newburyport, for example, a bus terminal is conveniently located at the interchange of Rt. 113 and I-93 — yet there are no sidewalks on the bridge across I-93! It is therefore impossible to safely walk from the dense suburban neighborhoods immediately west of I-93 to the bus terminal less than a half-mile away on the opposite side of the same highway.
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p>Similarly, there are long stretches of route 6 on the Cape lined by commercial developments where it is impossible to safely cross the busy highway. For example, the Sheraton Four Points on the eastern side of Route 6 in Eastham (and an easy walk from the seashore) is a short walk south of the “Box Lunch” and “Hole in One Donut Shop” on the opposite side of the same highway — yet there is no safe way to pick up morning coffee or a box lunch for a walk on the beach without driving.
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p>We are in the midst of a nationwide pandemic of obesity, especially among young people. The impact of this public health crisis plays a significant role in our exploding health care costs, yet we literally force sedentary behavior on huge portions of our population.
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p>It astonishes me that we have crafted a culture where we are forced to drive literally everywhere — and then pay for access to exercise facilities. With all due respect to the commercial suppliers of stair-climber and stationary bicycle machines, wouldn’t we all be better off if we simply walked to destinations within a half-mile or so and used actual stairs instead of elevators?
..regarding Newburyport. Actually it’s route 95, not 93; and there are sidewalks which provide access to the terminal area, from the west, on the bridge over route 95.
Canada, for example, has had great success “controlling” the costs of their medication by limiting just how much pharma companies can profit there. Instead of 100-200%… they get a much-more typical 10-15% max, which is why Canadian drugs cost roughly half there as they do here.
Did you actually read the report or are you deciding to post just on someone’s mention of the report?
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p>If you’ve followed the issue, the “fundamental” change is the move away from fee-for-service model and to a model that focuses on outcomes. No longer will doctors be paid for each and every test, but they’ll be paid to keep you healthy. Complicated to institute, sure, but it has nothing to do with price controls as you’ve mentioned.
and has been tried, with varying degrees of success, in Kaiser and Mayo environments. We tried it here in the mid-80s in central Mass. through a small plan called Memorial Health Plan that was offered through the then Medical Center of Central Massachusetts/Memorial system before the UMass merger. The problem with a capitated system is getting the formula right. The composition of patient panels should not disadvantage one physician over another, which is what was happening at that time. For example, the geriatricians, while capitated more per geriatric patient, actually fared rather poorly in the end based on their utilization. Regularly ol’ internists with large numbers of young and healthy patients fared better due to this patient population’s low utilization, but is that right? Fair? Do we really want to discourage physicians from providing care to the train wrecks among us? The formula was way too sensitive to spikes in utilization. And outcomes? Old people die. Outcomes can be just as problematic a metric as utilization.
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p>While the trend is swinging back to a capitated system, smarter people than the ones in Mayo, Kaiser and Massachusetts will have to figure out how to make it work. Massachusetts, particularly Central Massachusetts has the third highest penetration of managed care in the nation–and has for 20 years. We have lessons to teach here, but it remains to be seen whether those in charge will ask to be taught.
I think IHI has done some well-respected work in this area … but yes, you’re right: adjusting the payments for the risk of the clientele served is the key.
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p>Here’s the final report of the Roadmap to Cost Containment:
http://www.mass.gov/Ihqcc/docs…
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p>From page 12:
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p>So, they’re aware of the issue.
For example, you don’t think if BCBS is rejected its rate hikes, that it won’t go over to Partners and tell them, “sorry, guys, we can’t join in your shady activities this year, you’re going to have to freeze your prices this year or lose our costumers.”
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p>Or, how ’bout this: Harvard Pilgrim cut back on some of those $million+ salaries, and actually lay off an employee or two for once. (Charlie Baker loves to talk about how the “private sector” has been hit especially hard in these bad economic times, but that certainly doesn’t include his own health insurance industry.)
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p>I agree with you that the insurance companies aren’t completely to blame for rising costs — and the bulk of those rising costs are on different ends — but the insurance companies can fight much, much harder to keep the costs down on those ends, instead of just being content to pass on the increases. Finally, the insurance industry can practice the same kind of benefits and pay cuts that they’ve been preaching to the rest of America for the past decade+, and shed some of those high-paid employees who’s soul sole purpose is to find and/or make up excuses to deny care.
I think this whole thing by the Governor is only the first step. It has to also be viewed in light of the AG’s and Division of Health Care Finance and Policy’s ongoing hearings on the cost of medical care.
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p>Sure over the long term you can’t just cap rates without another plan, but when you also dig into the reasons for the high cost providers, and the discrepancy between the cost that insurers pay providers for the same service, you can begin to understand the rate drivers… and then attack them.
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p>If you’ve followed any of these other hearings, you’ll see that the myth that only the Boston “teaching” hospitals are the expensive ones, simply isn’t true.
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p>If this is the only balloon of Patrick’s plan, it will never get off the ground… if it is one of a number, this may.
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p>I think he’s going with a something is better than nothing plan right now, and after 13 years of the latter, I’ll take it.
It’s not — and that is the key point. The bill he testified on a couple of weeks ago would, if enacted, give him similar authority over health care providers. In the great scheme of things, it’s not fair to cap insurance premiums but to do nothing about the insurers’ costs — but you have to start somewhere. It’s good political strategy to start with what he can do, thereby putting pressure on the system to make something happen.
I was just reading your post and wanted to say I agreed with you… until I realized I was then agreeing with myself!
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p>The bill the governor filed allows the DHCFP to look at contracts between insurers and providers… that is where you reeeealy will see sparks fly!
http://www.boston.com/news/loc…
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p>Appears that the small business community got stuck with the bill for MA Health Care Reform.
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p>Not sure that putting in election year grandstanding premium caps is solving the underlying problem outlined in the article, that individuals will “act in their economic self interest”/”game the system” (take your pick on how to characterize short-term premium hopping). Sobering for the recent Federal health care bill just passed. In effect, if you want to put in a mandate to buy (which does make sense), the penalty for not insuring has to be commensurate with the cost of health care premiums; otherwise you will see the actions happening on a nationwide scale.