The 7% Solution…
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This morning Massachusetts Senate President Terry Murray gave a very comprehensive speech before the Greater Boston Chamber of Commerce on the state of the Massachusetts economy. She talked about a number of promising industries and opportunities — and didn’t rule out Casinos — but she also framed her talk around three “cost” areas — energy, health care and housing. Her speech overall covered an enormous amount of territory, but I’d like to focus on three of her comments about health care costs. First, she said she’s for so-called “Minute Clinics,” limited service clinics that could be located in pharmacies, local hospitals, or community health centers. “If done correctly, these clinics can increase access and reduce costs as part of the patient-care continuum.” Let’s hope others see this as clearly as she does.
She also said we need to do more to promote primary care. I agree. But I worry about how to do that in a world in which everyone wants direct access to a specialist, and Medicare — the largest payor — drives the reimbursement train toward more procedures and specialty care. Nonetheless, I’m for it, and this is worth further discussion.
She also said, and I quote, “In a market where we are requiring every citizen to purchase health insurance, there should be a public process to document the need for premium increases in excess of 7% in any given year.” Under normal circumstances, this kind of rate regulation should send a guy like me heading for the windows, but these are not normal times. This is also much easier to say than do — for a lot of reasons. But as someone who believes that more sunshine on the cost of health care is a prerequisite to doing anything to fix it, this may be a controversial idea whose time has come, and I give the Senate President credit for raising it.
There. I said it. Let’s hope this conversation continues — and goes someplace useful.
I think it might be useful to directly challenge doctors to offer their ideas (if they have any) for driving medical cost growth to a lower and more sustainable level. Doctors drive virtually all healthcare spending through hospital admissions, ordering tests, prescribing drugs, consulting with patients and doing procedures themselves. Unfortunately, they have a decades long history of opposing reforms that threaten their power, their independence or their income.
I think the Minute Clinics, for example, are an excellent idea. They can effectively increase the supply of primary care, an area where there is a shortage. So far, the AMA is trying to thwart the clinics because they don’t like the potential competition.
Price and quality transparency can help both patients and referring doctors make more cost-effective medical decisions. Doctors have opposed transparency because they don’t want to encourage competition and prefer to keep their patients in the dark about costs and the comparative effectiveness of alternative treatment approaches.
Doctors and hospitals could work together to offer package pricing for an entire episode of care for the numerous expensive surgical procedures that lend themselves to the concept. Historically, however, doctors and hospitals function more as adversaries in this context.
Less competent doctors are often protected by their peers rather than eased out of medical practice.
It’s hard to see how real reform that will meaningfully reduce medical cost growth can happen without leadership (or at least cooperation) from doctors. Historically, I think the medical profession was a huge part of the problem. That has to change, and the sooner the better.
Sorry, but rate regulation does not control costs. As a person who was intimately involved in rate regulation for years — of electricity, gas, and telephone companies — I know from experience that rate regulation generally creates a cost-plus environment for those companies subject to such supervision. This is because the legal framework for rate regulation makes it difficult for the regulator to second-guess costs incurred by the regulated entity. So, ironically, it is the high-cost, low-efficiency organizations who benefit relative to the low-cost, high-efficiency organizations.
Sen. Murray, by the way, was not proposing a return to that kind of reglation. Her thoughtful comments dealt with the causes of cost increases affecting the industry.
Healthcare is broken. Small business’s especially get hit, year after year with double digit percent increases. Everyone talks and talks, yet nothing gets done. Making it mandatory for every Mass resident to obtain and maintain coverage.. This is Heatlhcare Reform? Sounds more like a dictatorship to me. Ohh yes..the latest breakthrough was the HSA concept..from our leaders in Washington. Get on a “high” deductible plan and lower your costs. Are they for real? Of course the costs are lower…you have a high deductible… HSA’s are becoming more and more popular we hear….Why? Because people HAVE to go on them. They have no choice! It’s time we fix the system. Period.
How about this: require insurers that write business in the small/non-group market to disclose annually why their rates are increasing. for example, how much of the increase is driven by price (i.e., reimbursement rates to docs and hospitals) and how much is driven by utilization. Then, along these two dimensions, disclose how much of the increase goes to (1) doctors, (2) hospitals — inpatient vs. outpatient, (3) pharmaceuticals, and (4) plan administration/profit.
Given the less-than-stellar reputation of health insurers and how you get blamed for double-digit increases that are largely driven by provider demands for more money, I’m surprised you wouldn’t want to disclose this information voluntarily.
Barry – once again we agree on much of the issue. I strongly support Minute Clinics, and you hit it on the nose with your summation of the AMA’s opposition. I would also take your idea for doctor-led transparency a step further and include those in the medical technology, supply and pharmaceutical industries. Transparency on their parts would both assist and lend credence to provider efforts aimed at identifying areas where there is some ‘fat to trim’, so to speak. When you consider that direct to consumer marketing is making inroads into the joint replacement market, you start to get the feeling that the same cost explosion that occurred over the last decade and a half on the pharmaceutical side may start to become evident on the manufacturer side, as well.
Paul – I’m not sure I agree with your position that due to failure in other markets, regulation should be counted out in regards to health care. The uniqueness of the health care market, especially in this state, at least warrants the exploration of these kinds of measures. The examples you give are all industries that piece by piece moved in the other direction – towards de-regulation. The phone, electric and gas companies are hardly models of efficiency now, and where there are grey areas, or developing market segments (fiber optics, broadband-based telephone and cable services and alternative fuels to name a few), they rely upon regulation to set the table. To avoid the cost plus environment from developing in the instance of health care regulation, full spectrum transparency will need to be demanded from all areas of the health care field.
I don’t think that one area can lead the charge when it comes to transparency. It needs to be a cooperative effort, and I think the only means to reach that end may be the introduction of such wide sweeping regulations.
Oh dear. It sounds like Terry Murray has been talked over by the eager entrepreneurs of AAFP. As John Edwards has.
Emphasizing primary care may be a money-maker for GPs. But is it generally in the best interests of the patient? First, we need to distinguish between procedures and specialized knowledge. A pateint is more likely to benefit from more specialized knowledge, than from more procedures. Hence the value of specialized Nurse Practitioners.
Next, there’s the fundamental problem that in some systems it is in the best interests of the GP to keep the patient out of the hospital. But is this the same as keeping the patient in good health? That may be questioned. In a state as comfortable as may be? That state may be seen one way by the GP, another by the patient. Hence the value of robust competition.
I’m glad, at least, that Terry Murray supports the Minute Clinics.
Rate regulation may not control costs - and no one around here would know better than Paul Levy about that - but some kind of public exploration about what’s driving up the cost of health insurance might be worth having. As it stands now, plans can talk about what’s driving up their costs (see my “Drugs - Not the Cost Problem” blog), but we’re not very credible with the public. A public hearing - with testimony, questioning, and publicly issued reports - might be a better way of engaging the issue and creating consensus.
I give the Senator credit for seeking answers - and would look forward to participating in such a fact-finding process.
Tim - If I thought the plans, on their own, would be considered publicly credible reporters, I’d pursue your suggestion. In the end, I think our data needs to be vetted and blessed by an independent third party (like a state or federal agency) to be considered “believeable.”