It’s been two weeks since Associated Industries of Massachusetts (AIM) touched off by a firestorm by demanding on behalf of Massachusetts employers that the health-care system reduce the growth of medical spending within three years to two percentage points below the growth in the overall state economy.
The association set a clear and aggressive objective because we believe it is the only way to end the run-up in health insurance costs that has depressed economic expansion and job growth for more than a decade. It is also the only way to solve an impending crisis that could leave Massachusetts with a world-class heath care system that no one can afford.
Amid all the mind-numbing complexity and statistics of the health care debate, there is really only one that matters: the average cost paid by employers and workers to insure a single Massachusetts family though a health maintenance organization now stands at $15,864, according to the 2012 AIM Benefits Survey. The cost to insure an individual is $6,000.
Separate studies show that health insurance premiums have increased by approximately 50 percent in Massachusetts since 2003. Health care costs mean real money to real people and employers.
That’s why a staggering 97 percent of AIM-member employers cite the rising cost of health insurance as the one economic issue that keeps them up at night. I heard the human side of rising health care costs last week when I discussed the issue on WBUR’s Radio Boston program and a caller named Bob from Millis reported that the premiums he pays to insure his family had surged from $1,600 per month to $2,300 per month in three years.
“I now pay more than my mortgage for my health insurance,” he said.
The pro-employer position staked out by AIM has produced plenty of questions. Here are some answers:
- AIM is not advocating a reduction in health-care costs, only a reduction in the rate of growth of those costs.
- Reducing the growth of health costs below overall economic growth will not reduce the quality of health care in an industry where experts such as Harvard professor David Cutler and former U.S. Medicare and Medicaid Administrator Donald Berwick agree that at least a third of all care is unnecessary – delivered in the wrong setting; marked by a lack of coordination; provided with an inadequate emphasis on prevention; harmed by medical errors; burdened with rules and fraud; or just plain excessive.
- The Boston Foundation estimates that $21 billion of medical spending each year in Massachusetts is wasteful.
- Massachusetts spends the most per capita in the country on health care. Even after taking into account that wages in the state are higher than average and that Massachusetts attracts a large amount of health care research funding, spending is still 15 percent above the national average.
- Health care costs are consuming an increasing portion of household budgets – 15.88 percent in 2009 versus 14.47 percent in 1999. Sixty-two percent of all personal bankruptcies in the U.S. are caused by medical expenses.
- Doctors, hospitals and other health-care providers argue that reductions in medical spending will harm a sector that represents 13 percent of the gross state product in Massachusetts. Fair enough. But why should the employers and citizens who make up the other 87 percent of the state economy overpay to support the 13 percent?
- AIM does not support government price controls or other regulatory steps to force health-care spending to the goal of two points below gross state product in three years. The appropriate role of government should be to establish cost-reduction targets. The market should be given the chance to correct itself within three years. If the market fails, then it may be appropriate for the state to initiate action to get the market back on track. The nature of that action will ultimately depend upon the progress of market changes and the specific factors that may prevent us from reaching the goal. It’s far too early to guess what the role of government might be in 2015.
- AIM is not asking the health-care industry to do anything that employers in other industries that face global competition have been doing for decades. A Massachusetts manufacturing company, distributor or professional services firm with 30 percent waste would be a dead company walking amid relentless international competition.
- Health care costs erode the ability of government to serve the citizens of Massachusetts. Health spending represents 41 percent of the Massachusetts budget compared to 23 percent in 2000. That means fewer dollars available for schools, public safety and transportation.
- The responsibility for lowering the growth of health care costs rests as much with employers and individuals as with providers and insurance companies. Considering that almost 78 percent of insured Massachusetts residents receive their health insurance coverage through an employer, companies need to re-think the way they purchase and manage health insurance. How? By purchasing tiered and limited network insurance products that reward outcomes instead of medical procedures, by instituting measurable wellness programs and by helping employees to become knowledgeable consumers of health care.
Some critics in the past two weeks have suggested that AIM and Massachusetts employers have established an economic-growth-minus-two-percentage-points goal they know the sprawling Bay State health care system will fail to achieve. The opposite is true. AIM has established the goal precisely because we are confident that the market forces now reshaping health care from Boston to the Berkshires will be all the medicine we need to remove the dangerous affordability bubble now separating medical care from those who need it.
Massachusetts created a landmark health care reform in 2006 based upon a remarkable sense of shared responsibility among employers, doctors, hospitals, insurers, lawmakers and consumers to expand the number of citizens covered by health insurance. AIM and its thousands of employer members did not shrink from the challenge and implemented a complex new model for measuring the health insurance coverage they provided to their employees.
All of the players in 2006 understood that the same shared responsibility would eventually be brought to bear on the more pressing problem of controlling health care costs. The moment for that shared responsibility has come. Everyone in the health care system – from the people who deliver it to the companies that insure it to the employers and citizens who pay for it – must come together again, this time to preserve the world-class health care system in Massachusetts while ensuring the ability of consumers to pay for it.
Massachusetts led the nation in 2006. There is no reason we should not do so again.