Health Plans and Health Care Costs

When the CEOs of two competing health plans write an op-ed together, we know that something important is cooking. Especially if they propose more regulation!

In their recent editorial “How to Control Healthcare Costs,” James Roosevelt, CEO of Tufts Health Plan, and Charlie Baker, CEO of Harvard Pilgrim Health Care, issue an important challenge. The president of the Massachusetts Senate had called for a public hearing on any proposed rate increases over 7%. In response, Roosevelt and Baker went further, and recommended “that the state’s health plans be required to participate in an annual public hearing on healthcare costs – no matter what their rate increases are – to outline the factors contributing to any changes in premiums…”

But with strings attached.

In the 1990s the U.S. asked health plans, which can be thought of as purchasing agents for the insured population, to control health care costs. They did, by managing care. But providers and patients fought back, and they largely stopped. Not surprisingly, costs are again rising rapidly.

Health plans sit in the middle of the key participants in the health care system. Enrollees need care when they are ill. Providers need to be paid. Pharmaceutical and device manufacturers want to sell their products. Employers, government, and individual enrollees, worry about the premiums they pay.

The public tends to think of health plans as bean counters with deep pockets and an insatiable thirst for profit, even in states like Massachusetts where the major plans are not-for-profit. This is where the Roosevelt/Baker proposal comes in. They want health plans brought to the table to account for their costs, but not to be in the hot seat alone: “Health insurance premiums are driven by healthcare costs, so it is important that hospitals, health centers, physician practices, and pharmacies participate in the hearings to explain the factors contributing to their rising costs…”

Our society did not accept health plan-driven management of care. Except for Kaiser Permanente and a small number of other prepaid group practices, our political process has squelched that approach. Roosevelt and Baker's proposal keep health plans in a central cost containing role, but as spotlights, not managers. Their hope is that a combination of transparency about costs on the part of all key players and public/political scrutiny will accomplish what we did not allow managed care to do.

I am skeptical about how far their proposal will go. The momentum of our health system is difficult to interrupt. Their hope is that democratic process will do what health plan management of care could not sustain. This is a good direction to go in.

(A more extended version of their proposal can be obtained from the Massachusetts Association of Health Plans.)