Michael Dukakis's health care memo

8/9/2019 Michael Dukakis's health care memo

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HEALTH COST CONTROL IN MASSACHUSETTS

Health costs in the Commonwealth have been climbing at an alarming rate for the past

several years. After what appeared to be a period of stability in the late 1990s, they have

been regularly rising at double or triple the general rate of inflation. Particularly now

when the Commonwealth has adopted an ambitious new plan to insure virtually everyonein the Commonwealth, those kinds of increases are simply not sustainable. The latest

reports tell us that we are now facing another ten percent increase in costs this coming

year.

A bewildering array of proposals have been made to try to stabilize the situation over the

past several years. In fact, it seems as if we have a new proposal just about every year.

First, it was managed competition and managed care. Then it was co-pays and

deductibles, including tiered deductibles for prescription drugs. Then it was something its

proponents call consumer driven health care, a euphemism for high deductible policies.

Then it was electronic records. More recently, we have been told that pay for

performance and a medical home are the answers.

Regrettably, there is no evidence that any of these ideas, however well intentioned, will

have a significant impact on health costs, at least in the short run. And it should be

unmistakably clear by this time that market forces dont work in health care. In fact, it is

highly questionable that we would want a competitive market in health care, even if it

worked. Creative destruction may be a great thing for the market place. It would be a

disaster in health care.

In short, it is time for the Commonwealth to recognize the facts and get serious about

intelligent and thoughtful regulation of health costs and the capital investments that often

drive them. That means two fundamental thingsfirst, regulation of health insurance

premiums by the state insurance commissioner, authority she already has, and, second, a

return to a strong and effective determination of need program which, until the Patrick

administration took over, had been virtually abandoned by the State Department of

Public Health.

1. Insurance premium regulationTwenty years ago the Commonwealth was one of a number of states that

regulated hospital charges in a detailed and highly complex way. It abandoned that

system for an unregulated marketplace in 1993, and the results have for the most part

been a disaster. Even that system, however, did not have an impact on the other elements

in the health cost control equation.

The easiest and least bureaucratic way to control overall health costs is by using

the authority the state insurance commissioner already has to regulate premiumsa

regulatory approach that recognizes and rewards necessary primary care as well as in-

patient services and reduces the need for expensive tertiary care. Nor is this a radical

departure from what she already does in at least one related field. Workers compensation


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premiums are reviewed and approved by the Commissioner and have been for years.

Over forty percent of those premiums represent health care costs. In short, working with

the State Rating Bureau, the Commissioner already has a mechanism in place which

could easily be applied to health costs generally.

It is true, of course, that a substantial number of employers in Massachusetts selfinsure. But these employers typically hire an insurer to handle their claims. Therefore,

any cost savings efforts like, for example, better provider reimbursement contracts

undertaken by insurers as a result of the regulation of premiums in the traditional

insurance market should also produce savings in the self-insured market.

We are under no illusions about what could be the reaction of some insurers and

providers to such a proposal. On the other hand, we have talked with enough hospital and

health care executives to know that they all understand how unacceptable the current

situation is for patients, providers and insurers alike. They should obviously be brought

into a consensus building process led by the governor and his top health care deputies,

but if insurance regulation is done in a thoughtful and well informed way, all will benefit,and we will finally do something about a situation that virtually everybody agrees is

neither acceptable nor sustainable.

2. Determination of needTwenty years ago the Commonwealth had a determination of need system that

had teeth and was effective despite numerous efforts to get around it through legislative

amendments. Unfortunately, beginning in the early 1990s, those efforts resumed, and

when the Weld administration began acquiescing in attempts to award certificates of need

by legislative action, the DON process was effectively dead. The result has been a virtual

orgy of hospital expansion and construction often unrelated to the Commonwealths

needs and designed primarily to capture market share, not serve the overall public good.

Recently, the Patrick administration took an important step back toward the kind

of DON system which we abandoned when it indicated that it would no longer allow

academic medical centers to invade the province of community hospitals with high cost

care. But nothing short of a full return to a robust, well informed and effective DON

system will make the kind of contribution to cost reduction and sensible health planning

that all of the other advanced industrialized nations use as a matter of course and that

helps them to keep their costs at one half or less of ourswith better health outcomes.

Moreover, a reinvigorated DON system should be working closely with the state

Health and Education Facilities Authority HEFA) to ensure that a thoughtful state and

regional capital expenditure plan adequately addresses the needs of the health system

going forward.

Such a system should also include the reestablishment of regional health planning

agencies that can review requests for DONs before they arrive at the state Public Health


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Council. Those planning agencies did very effective work in the 1970s and 1980s. They

are an important part of any sensible and effective DON process in the future.

3. Reestablishment of the Massachusetts Health Purchasers GroupIn 1993, with the strong leadership of key business leaders and the state groupinsurance commission, a state purchasers group of employers who insured collectively

over a million lives was created to exercise the kind of clout that only such an

organization can provide. For several years it did impressive work, and its annual

announcements of what kinds of increases it would accept and no more had a profound

effect on state health costs without in any way diminishing the states reputation for the

excellence of its health care.

For reasons that are not particularly clear, many of its members gradually seemed

to lose interest and faded from the scene. We need it back to backstop the proposed new

regulatory system and regularly appear before the insurance commissioner in hearings on

proposed rate increases. This is precisely what the business community does in ratehearings on workers compensation. There is no reason why it should not do the same

thing in its own as well as the public interest in rate hearings on proposed increases in

health insurance, so much of which it pays for.

We recognize that these proposals will require strong leadership from the Patrick

administration, the business, labor, and insurance communities, and health care providers

themselves. But the Commonwealth has no alternative. As it moves closer and closer to

universal health care, it finds itself threatened with intolerable spending pressures which

are not sustainable and which at the same time are robbing it of the resources it needs to

rebuild our badly fractured public infrastructure, educate our children, and do all of the

other things we expect of it.

The legislature has just approved legislation sponsored by the Senate President

that is an important step on the road to health cost control. That legislative effort should

now be combined with the effective use of the executive branchs existing authority to

regulate health insurance premiums and capital expansion of the health care system.

Working together, we can finally begin to get control of runaway health costs and ensure

the success of the Massachusetts health reform plan.

There is a reason other advanced industrialized nations seem to be able to provide

their citizens with quality health care at a cost less than one half what it costs us here in

the Commonwealth. They do not indulge themselves in nostrums about the market place

or competition, managed or otherwise. They regulate the overall cost of health care and

capital investments in their system. And they do so while insuring everybody with

outcomes far superior to ours.

It is time we took a leaf from their book by using our existing statutory authority

over health insurance premiums and capital investments. And we know how to do it. All

it requires is the will and the building of consensus which we are confident the new state


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administration can provide as it seeks to preserve the gains we have made under the new

system at a cost we can afford.

Documents

Michael Dukakis's health care memo