Senate President's Health Cost Bill Good, but Doesn't Go Far Enough

Posted by Eileen McAnneny on Apr 15, 2010 3:53:00 PM

When AIM offered comments on Governor Patrick's proposal to tackle health-care costs for small businesses, we made clear that "any solution must involve both insurers and providers."  The solution AIM proposed included measures to address insurance premiums and the underlying medical costs embedded in those rates. We said that "the time is now for offering some relief and we cannot let the fact that the solutions are hard to implement or disruptive of the status quo be an excuse for not forging ahead to resolve the health care cost conundrum."

Judged against those criteria, Senate President Therese Murray's proposal this week to control small-business health costs is good as far as it goes, but it doesn't go nearly far enough.

The Senate president's proposal focuses almost exclusively on health insurance.  Many  provisions within her initiative were part of AIM's proposal and we think they make a lot of sense.  We support, for example, the requirement that 90 cents of every insurance premium dollar be spent on medical care.  Limiting open enrollment in the merged market to once a year to prevent people from "gaming" the system by purchasing insurance, getting their care and then dropping coverage until they go back for a follow-up, will wring some cost from the system and should be pursued.  We applaud the Senate president for tackling these issues.

But President Murray's proposal falls short in addressing the underlying reason that health insurance premiums are skyrocketing - disparate reimbursement rates among health-care providers.

The Attorney General's office recently found that the cost of health is largely attributable to the variation in rates that certain hospitals and physician groups are able to charge relative to their peers.  The report states:

"price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the populations being served, (3) the extent to which a provider is responsible for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or medical facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities . . . Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers." 

AIM proposed temporarily tying provider reimbursement rates to a percentage above Medicare for a portion or all of the merged market and capping the amount of profit insurers can make on this product.  It's an imperfect solution, but it does address the rate disparity among providers in a meaningful way.  The Senate president proposed allowing providers to make a voluntary contribution to a fund that will be used to reduce insurance costs for small businesses.  If $100 million is raised - a rather ambitious goal given the precarious finances of most community hospitals - it would lower premiums by 2.5 percent for one year.

The plan is not a solution. It is a Band-Aid on a cut that is hemorrhaging. Taking the metaphors a step further, it is as if we all agree that a diabetic patient's leg must be amputated, but we pick the wrong leg to amputate.  Massachusetts policymakers have a unique opportunity to address cost in meaningful way and in a manner. The solution must address costs in a way that neither puts the insurance companies out of business nor holds the providers harmless.

Topics: Health Care Reform, AIM, Health Insurance, Health Care

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