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Health Care Cost Bill a Measured Step toward Addressing Crisis

Posted by Rick Lord on Jul 31, 2012 10:28:00 AM

A compromise health care cost containment bill approved on Beacon Hill this week takes a measured first step toward slowing the runaway health insurance premiums that have impeded job creation and economic growth for a decade.

Health care costsHouse and Senate negotiators reached agreement yesterday on legislation that would limit the increase in medical spending in Massachusetts to a level equal to overall economic growth from 2013 until 2017. The spending growth target would drop to 0.5 percentage points below gross state product from 2018-2022 before returning to the economic growth benchmark in 2023 and beyond.

A state commission will have the authority to soften the cost control objective if circumstances warrant. The Massachusetts economy has been growing at 3.7 percent annually in recent years, while medical spending rose at between 6 and 7 percent prior to the economic downturn.

The legislation largely affirms changes already taking place in the health care market - paying doctors for outcomes instead of procedures, steering patients to doctors who provide good care at reasonable prices, and coordinating care to keep patients healthy and out of the hospital. The bill also provides changes sought by employers in the formula for calculating fair share assessments under the 2006 health reform law.

AIM supported a more aggressive cost-control target of two percentage points below economic growth and continues to believe that lawmakers are missing a unique opportunity to reduce costs in an industry where experts believe one-third of all spending is waste. The association nevertheless commends the Legislature and Governor Deval Patrick for moving forward with cost-control sequel to the landmark 2006 reform.

“Controlling the cost of health care and health insurance remains the single most important issue for Massachusetts employers and citizens who now pay $15,864 per year to insure a family through a health maintenance organization and $6,000 to insure an individual,” said Kristen Lepore, Vice President of Government Affairs at AIM.

“AIM will continue to monitor the marketplace to ensure that employers and workers are able to afford the world-class medical care available here in the commonwealth. Improved efficiency within the health-care industry would leave extra money to devote to other important public and private priorities such as education, infrastructure, food, shelter, and retirement savings.”

Both the Senate and House of Representatives are due to debate the compromise bill today as lawmakers race against the clock to complete business before the end of formal sessions at midnight.

The key elements of the bill include:

  • Tiering discounts - Increases the mandated discount for tiered and select networks from 12 to 14 percent.
  • Wellness Tax Credit -Establishes a wellness tax credit for businesses that implement recognized workplace wellness programs. The credit is equal to 25 percent of the costs of the program up to $10,000 per fiscal year.
  • Fair Share Assessment Changes - Raises the threshold from 11 to 21 employees and adds a provision that employees who have insurance from other sources will not be included in calculation (changes effective July 1, 2013). An improved appeals process for the fair-share assessment is included in a separate jobs bill also scheduled for debate today.
  • Assessments - Creates $225 million in assessments over four years, including $30 million for electronic health records, $60 million for a prevention and wellness trust and $135 for distressed hospitals).
  • Health Policy Commission – Establishes an entity under the secretary of Administration and Finance to implement the bill and enforce the benchmark. An 11-member board that includes one purchaser of health care will govern the commission.
  • Provider Market Power - The new commission would be required to conduct a “cost and market impact review’’ of certain providers, including those that do not meet the state’s spending benchmarks. If the review finds that the provider has dominant market share and has “materially higher’’ prices and total medical ¬expenses than competitors, then the administration must refer the case to Attorney General Martha Coakley’s office.
  • Customer Information - Establishes new transparency tools to help consumers make health care purchasing decisions based on comparative cost and quality, including the establishment of a consumer health information website with transparent prices and shared-decision making online tools.
  • Establishes a certification process for accountable care organizations or “ACOs” – health care provider systems dedicated to cost growth reduction, quality improvement and patient protection. These ACOs would receive a contracting preference in state health programs.

Passage of the cost control bill will not change the fact that the Massachusetts health cost crisis will ultimately be solved by employers working through the evolving private health-care marketplace. AIM recently launched a multi-year educational initiative for employers seeking to make themselves informed consumers of health insurance and their employees informed consumers of health care.

Topics: Massachusetts Legislature, Health Care Costs, Issues

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