WITH THE new year upon us, many will commit to fresh resolutions or tackling unfinished business from the past year. For state leaders, that should include passing complete health care legislation to address a spiraling affordability crisis.
Revealing an early New Year’s resolution, when speaking in late November at the annual meeting of the Retailers Association of Massachusetts, Gov. Healey vowed to make addressing health care affordability a priority.
Two separate bills, passed by the legislature in late december and signed by Healey last Wednesday, include provisions that give the state Health Policy Commission and the attorney general more authority to try to check harmful market acquisitions or expansions, advance much needed health planning, and cap cost-sharing and co-pays for some chronic disease drugs, among other things.
While there is definite value in these measures, the bills provide no clear relief from the affordability crisis, which remains the overarching health care challenge Massachusetts is facing.
as representatives of employers and consumers, we don’t see eye to eye on every health care issue, but we are joining together to urge the governor not to be satisfied with the limited reach of these two bills and to follow through on her promise to meaningfully address the unsustainable trajectory of health care costs in the state.
The good news is that the Health Policy Commission has provided a strong roadmap of how to get there.
HPC data show that hospital spending and the growing amount spent on pharmaceuticals—both fueled by growing prices– are the primary cost drivers in the Massachusetts health care system. Any health care legislation submitted by the governor in 2025 must address these two issues to make real progress on affordability.
With respect to hospitals, we must change the way we pay for care. Consolidation of providers has continued unabated over the past two decades, while the promise of lower costs from integrated accountable care organizations hasn’t materialized.
this consolidation has tipped the scales in favor of larger hospital systems in negotiations with insurers over appropriate reimbursement rates, driving up the unit cost of care for the commercially insured.
Accordingly, legislation should address provider price variation, both differences in hospital prices for the same service and differences in the cost of care depending on the setting where it’s provided. Health care consumers should not pay more for an MRI at a hospital than at an imaging centre.
Legislation should also establish a default out-of-network payment level, so that if hospitals refuse to agree on reasonable price terms with insurers, they cannot turn around and charge an exorbitant amount for a particular service.
Meanwhile, we continue to use a fee-for-service payment model rather than one that incorporates the use of capitation and hospital global budgets, which pay a fixed amount in advance to providers to cover their care expenses and sometimes add bonuses for improved health outcomes. Evolving to such a new payment scheme requires insurers to phase out the one that is primarily built on a fee-for-service chassis.
Hospitals must also be financially at risk for their high pricing and contributions to spending growth.One way to accomplish this is to make them directly subject to a more stringent performance improvement plan if their price growth fuels inappropriate spending, along with consideration of bigger penalties for hospitals or physician groups whose per capita spending growth consistently exceeds the benchmark.
We also need to value primary and mental health care more, and specialty providers less, in order to improve access to these critical services for much of the population. Payment levels for high priced hospitals and specialists need to be held in check, with those savings redirected to primary care and behavioral health within the confines of cost benchmark. Gov.baker proposed legislation to accomplish this during his tenure; it would be well worth taking another run at this.
When it comes to drug costs, we appreciate lawmakers mandating in the recent bill that pharmaceutical benefit managers now participate in the Health Policy Commission’s annual cost trends hearings. Meanwhile, capping out-of-pocket expenses for people who have a specified set of chronic conditions (diabetes, asthma, and cardiovascular disease risk factors such as hypertension) will surely be welcomed by some patients.
But there is no free lunch. While well-intentioned, this may increase total drug spending as more people utilize these drugs. The savings that accrue to people with chronic conditions will be borne by businesses and their employees in the form of higher premiums.
A more resolute effort is needed to find a way to reduce the absolute price levels paid for branded drugs. A model to look at may be the approach taken by Maryland, which has created a prescription Drug Affordability Board to help cap the growth in commercial drug prices.
There is also a need to take a hard look at the strategy implemented in 2012 — creation of the Health Policy Commission and establishing an annual health care cost growth benchmark — to slow the overall growth in commercial health care spending.
After more than a decade, it’s now clear that this is an insufficient approach to control health care costs in a meaningful or enduring way. Health care spending has grown at a rate that exceeded inflation and wage growth for most of this period, accelerating in the most recent years, with Massachusetts now claiming the second highest average family health care premiums in the country, at more than $30,000 a year.
The legislation signed last week gives the Department of Insurance a greater role in reviewing and possibly rejecting health insurance contract submissions that propose too high rate increases or are deemed by the agency as not affordable to consumers or purchasers. This may hold promise for keeping cost increases in check and provide insurers with leverage to counter untoward provider rate demands, if properly implemented.
High premiums affect all businesses, but small businesses are especially hard hit for two reasons.
First,big businesses tend to self-insure and are not subject to the numerous health care mandates that Massachusetts imposes on the fully insured market where most small businesses obtain their insurance coverage.
Second, the self-insured can often redesign their own benefit packages to better manage costs. When small businesses face this higher cost burden, many are forced to reduce benefits, shift more of the cost onto employees, or both. For starters,lawmakers should impose a moratorium on additional expensive health care mandates to avoid any additional premium pressure on small businesses and their employees.
As we head into 2025, the governor’s promise to address health care market reforms stands as an ambitious goal. But just as something is challenging doesn’t mean it cannot or should not be done. Like the individual who resolves to lose 10 pounds every new year without success and then must lose 50 pounds all at once, the unaffordability of health insurance for small businesses and their employees has reached a crisis point and requires bold interventions.
It is indeed easier to keep your New Year’s resolutions with the support and collaboration of others. The looming health care cost crisis certainly calls out for such an approach.
In crafting this piece together, we aim to show that employer and consumer health care advocates are collaborating to address the state’s insurance affordability crisis. Gov. Healey should bring a similar spirit to fulfilling her promise by challenging all health care stakeholders to come together to develop legislation that will make a meaningful difference in tackling this urgent problem.
Eileen McAnneny is president of the Employer Coalition on Health. Paul Hattis is a senior fellow at the Lown Institute.
