Monday, July 5, 2010

Massachusetts and the Future of Health Reform

If Massachusetts predicts the future of U.S. health reform - and I believe it does - there's a wild ride ahead!

In April, Governor Deval Patrick, who faces a tough re-election campaign in November, dramatized his friendliness to small business and job creation by having his insurance commissioner turn down the rate proposals made by health insurers. An observer commented that as economic policy, this made as much sense as drawing a line in the sand to turn back the tide. Massachusetts insurers are largely not for profits that operate on a one percent margin. What drives the cost increases is the combination of provider and patient behavior.

Governor Patrick's Republican opponent is Charlie Baker, who did a brilliant job as CEO of Harvard Pilgrim Health Care for ten years. By blasting insurers Patrick was trying to apply shock therapy to runaway costs, but he presumably also hoped to tarnish one of Baker's main credentials.

That piece of politics was round one.

The insurers appealed, and two weeks ago the appeals unit in the Division of Insurance reversed the rate denial its own Commissioner had issued to Baker's former organization. It concluded that the rate increases were "actuarially sound" and reflected the actual trend of utilization and charges, a conclusion that everyone who knew anything about Massachusetts health care already shared.

Now Massachusetts is tiptoeing into new waters. Throughout the national health reform process insurers have been portrayed as greedy, profiteering villains. This is a harder line to take with the low margin, not for profit Massachusetts insurers. Last week a Boston Globe editorial blasted insurers for a new reason - not bargaining hard enough with providers!

I've never been part of the bargaining process, but my guess is that the criticism is correct. In the context of (a) the national backlash against managed care, (b) provider consolidation, which gives them more bargaining power, and (c) public demand for wide access, (d) insurers have been in a relatively weak bargaining position nationally.

Now the political system is starting to ask insurers to take a leadership role in solving runaway costs. This is a big shift from blaming them as cause of the problem.

This is a plausible strategy in Massachusetts. The major insurers are locally based not for profits. It's going to be a harder move to make in states where national for profits are dominant.

If I were advising Governor Patrick I would urge him to bring together insurers, major provider groups, the medical society, consumer representatives, economists, policy leaders, and the business community, and give them an "assignment" - to get the state on a trajectory to bringing health costs in the state to a specified, tolerable level. I'd have him convene the group himself and then turn leadership over to a respected, non-political, public figure.

Finger pointing is the commonest political move these days, but it won't get us anywhere in health care, a societal system we're all part of. We have to learn to manage the system. That will take change on everyone's part. If the Governor can launch this process he'll deserve re-election. If he limits himself to finger pointing and rhetoric he'll be looking for a new job on November 3.


Anonymous said...

This is a good summary of the events and timeline but it is colored with a couple of phrases that illustrate your bias (which is OK; it's your blog):
1. You say Gov. Patrick was being "friendly to small business" in April and only peripherally being political. The fact that he killed the self-employed and small business insurance market right at the point in time when we all had to sign up for April-June shows he had no concern at all for us. A reasonable business-oriented thing to do in March/April would have been to say his Insurance department was going to thorougly review the July-Sept rates. Instead for political reaons, it's starting all over again for the July-Sept rates even as Patrick loses within his own administration what he always knew was wrong. Again, the market for small business and self-employed healthcare insurance is screwed up and no meaningful review will have taken place because the governor could care less about small business.
2. Neither the governor or anyone else can "specify" healthcare costs. Only the market can. When the democrats finally succeed in imposing their single-payer system, those Americans that can afford better health care -- lie Patrick -- will simply migrate the way Arab sheiks and the prime minister of Newfoundland does now.

-- Dennis Byron

Jim Sabin said...

Hi Dennis

Thank you for your comment. Given that we have different perspectives, I'm especially glad you think my summary is OK.

Your suggestion of what would have been best for small business is one I hadn't thought of. It makes good sense, but it would have less political impact than the front-page actions in April, which supports your analysis of what was going on.

I agree that in the cockeyed health system we have in the U.S. there's no way to "specify" health costs, since there's no single budget that could do that. The closest we could come to learning to work within budgets at present is Medicare and Medicaid, and we haven't had the political will to do that yet. But as Massachusetts moves to a system of "accountable care organizations" we'll see organizations like Partners and Harvard Vanguard working with true budgets for the first time. My own view is that quality as well as value will improve when we do that.

I wonder whether you think my suggestion of convening a multi-stakeholder working group could help us get past political grandstanding and finger pointing.