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Legislature Kicks Off Effort to Control Health Costs

Posted by Kristen Lepore on May 4, 2012 3:43:00 PM

The Massachusetts Legislature began its long-awaited effort to resolve the health-care cost crisis this afternoon as House leaders proposed reducing the growth of medical spending slightly below the growth of the overall state economy in three years.

DeLeoHouse Speaker Robert A. DeLeo outlined a measure that establishes a goal of slowing health spending increases to half a percentage point below economic growth in three years. DeLeo said the measure will generate $160 billion in savings for the Massachusetts economy during the next 15 years.

The House proposal would generate the savings by reforms ranging from paying doctors for outcomes instead of procedures to closing the imbalance between low-cost and high-cost medical providers to providing interoperable electronic medical records by 2017. Employers with 50 covered employees would pay $75,000 less in health insurance premiums than they would if current cost trends continued, according to DeLeo.

Associated Industries of Massachusetts has set a far more aggressive cost-control target, calling upon the health care industry to reduce the growth of medical spending to two points below overall state economic growth. The aggressive target is attainable for an industry where experts 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.

Richard C. Lord, President and Chief Executive Officer of AIM, said employers are gratified that the House has begun the debate over health cost control and look forward to making the case for meaningful cost reduction.

“AIM supports lowering the growth of health spending two percentage points below overall economic growth because in a state where consumers pay among the highest insurance premiums in the country, it’s a goal we cannot afford not to meet,” Lord said.

“We look forward to working with the Legislature and Governor Patrick on a reform that will allow Massachusetts to maintain a world-class health care system that people can actually afford.”

DeLeo and Representative Steven Walsh, House Chair of the Committee on Health Care Financing, said House leaders will collect feedback on the bill for several weeks and likely consider the bill in early June. The Massachusetts Senate is scheduled to unveil its own health cost control bill next week.

The flurry of activity on Beacon Hill comes 14 months after Governor Deval Patrick submitted health cost control legislation to lawmakers. The administration in the meantime has used its regulatory authority to restrict health insurance premium increases to small employers, most recently approving a rate increase averaging just 1.2 percent for the third quarter.

Passage of a health cost control measure would again thrust Massachusetts into the forefront of national efforts to restructure the financial underpinnings of the health care system. The commonwealth passed what remains the only state-level health care reform law in 2006 in an effort to expand access to medical care and bring everyone into the health insurance system.
A staggering 97 percent of AIM member employers cite the rising cost of health insurance as the one issue that keeps them awake at night. 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.

“The medical care industry is broken,” Harvard economist David Cutler said at a briefing with DeLeo. Cutler said the bill is designed to foster change in an industry that “cost too much and delivers too little.”

A study released last week by MIT economist Jonathan Gruber estimated that lowering the annual growth of health insurance premiums to 2 percent in Massachusetts would increase the take-home pay of every Bay State worker by $9,200 over the next eight years. The study also finds that employers could save up to $34 billion on insurance premiums during the same period while preserving an additional $4.1 billion to be spent on jobs and expansion.

Topics: Massachusetts Legislature, Health Care Costs, Issues

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