Healey’s Bold Move: Tackling Health Care Costs Head-On

WITH⁤ THE new year upon us, many will ‌commit to fresh resolutions ‍or tackling unfinished business from the past year. For state leaders, ⁤that should include passing comprehensive health care legislation ⁢to address a spiraling affordability crisis.

Revealing an early new Year’s resolution,when ⁢speaking in⁢ late November at the annual meeting of the Retailers Association of Massachusetts,Gov. Healey vowed to make addressing health⁣ care affordability a priority.

Two separate​ bills, passed by the legislature in late December and signed by ⁢Healey last Wednesday,⁣ include​ provisions that give the‌ state Health Policy Commission and the attorney general more⁤ authority to try ⁤to‌ check ‌harmful market acquisitions or expansions, advance much needed health planning, and ​cap cost-sharing and co-pays for some chronic⁤ disease drugs, ⁣among‌ other things.

While there is definite ​value in these measures, the bills ‍provide no clear relief⁢ from the‍ affordability crisis, which remains ⁢the overarching health‌ care challenge Massachusetts is facing.

As representatives ‌of employers and consumers,⁢ we don’t see eye to eye on every health ‍care issue, but we ⁣are joining together to urge‍ the governor not to be satisfied with the limited reach of⁢ these ‍two bills and to follow through​ on her promise to meaningfully address the unsustainable trajectory of health⁢ care costs in the state.

The good news is that the Health Policy Commission has provided a‍ strong roadmap of how to⁣ get there.

HPC‍ data show ​that​ hospital spending‌ and the⁢ growing amount⁣ spent on ​pharmaceuticals—both fueled by growing prices– are the primary cost drivers in‍ the Massachusetts health care system. Any health⁢ care legislation‍ submitted ‍by the governor​ in 2025 must address these two⁤ issues to make real⁤ progress on ​affordability.

With respect to hospitals, we must change the way⁢ we pay⁢ for care. Consolidation ⁣of providers ​has continued unabated over the past two decades, while the​ promise of lower ⁢costs from integrated accountable care organizations hasn’t materialized.

This consolidation has tipped the scales in favor ⁢of larger hospital systems in negotiations with insurers over appropriate⁤ reimbursement rates, driving up the unit cost of care for the commercially insured.

accordingly,legislation should address provider ⁤price variation,both differences in hospital prices for the ⁣same service⁣ and⁢ differences in the cost of care depending on the ‌setting where it’s provided. Health care ⁤consumers should not pay more for an MRI at a hospital‍ than⁣ at⁤ an imaging center.

Legislation should also establish‍ a default⁤ out-of-network payment level, so that⁣ if ⁤hospitals ⁤refuse to agree on reasonable price terms with insurers,⁣ they cannot turn around and charge⁢ an exorbitant⁤ amount for a particular service.

Meanwhile,we continue to use a fee-for-service payment model rather than one that incorporates the use of capitation‍ and hospital global budgets,which pay a ⁢fixed ⁣amount in advance to providers to cover their care expenses and sometimes add bonuses for improved ​health outcomes.  Evolving to such a new payment scheme requires‍ insurers to phase out the one ‍that is primarily built on a fee-for-service chassis.

Hospitals must also be financially at risk for their high pricing and contributions to‌ spending growth. One way to accomplish this is to​ make them directly subject‍ to a more stringent performance ⁣advancement plan if‍ their price growth fuels inappropriate spending, along with consideration of⁤ bigger⁤ penalties for⁣ hospitals or physician groups whose per capita spending growth consistently exceeds the benchmark.

We also need to​ value primary and mental health care more, ​and ​specialty providers less, in order to ⁤improve access⁢ to these critical services‌ for much of the⁢ population.Payment levels for high priced‌ hospitals and specialists need to be‍ held in check, with ⁣those savings redirected to primary care and‍ behavioral health within the confines of ​cost benchmark. Gov. Baker proposed legislation ‍to ⁣accomplish ​this during ​his tenure; ⁤it would be well worth taking another⁣ run at this.

When it comes to drug costs, we appreciate lawmakers ⁣mandating in the recent ‌bill that pharmaceutical benefit ​managers now ⁤participate in the Health Policy ⁣Commission’s annual cost trends hearings.Simultaneously occurring, capping out-of-pocket expenses for people who have ⁢a specified set of chronic conditions (diabetes, asthma, and cardiovascular disease risk factors such as hypertension) will surely be welcomed⁤ by some patients.

But there is⁢ no free lunch. While well-intentioned, this may increase total drug spending as more people utilize⁣ these drugs.The savings that accrue to people with chronic conditions will be ⁣borne by businesses and their‌ employees in⁤ the form​ of higher premiums.

A more determined effort⁢ is needed to ⁣find⁤ a way to ​reduce the absolute price levels paid for branded⁤ drugs. A model to⁢ look‍ at may be the approach‍ taken by Maryland,⁢ which‌ has created a ​ Prescription Drug⁣ Affordability Board to help cap the growth in commercial drug prices.

There is also a need to take a hard look at the strategy‌ implemented ​in 2012 — ⁤creation of ‌the Health‌ Policy commission ⁣and establishing ​an annual health care cost growth benchmark⁤ — to slow the overall ‌growth in commercial health care spending.

After more than a decade, it’s now clear that this is an insufficient approach to control health care⁢ costs ⁣in a meaningful or sustainable way. Health care spending has⁢ grown at a rate that exceeded inflation and wage growth for ‌most of this period, accelerating in the most recent years, with ⁤Massachusetts now claiming the second highest average family ‌health care premiums in‍ the‌ country, at more than $30,000 a year.

The legislation⁣ signed last week gives ⁣the Department ‍of Insurance a greater role in ⁢reviewing and possibly rejecting health ⁢insurance contract‍ submissions that propose too high rate increases or are deemed by⁢ the agency as not affordable to consumers or purchasers. This may hold promise for keeping cost increases in check and provide insurers ‍with leverage to ⁤counter untoward provider rate demands, if properly implemented.

High premiums‌ affect all businesses, but small ⁣businesses⁣ are especially hard hit ‍for two reasons.

First, big businesses tend to self-insure and are not subject to ‍the numerous health care mandates that Massachusetts‌ imposes on⁢ the fully⁤ insured market where most small‍ businesses ​obtain their insurance ​coverage.

Second, ⁤the self-insured can often redesign their own benefit packages to⁣ better manage ​costs. When small ⁣businesses face this higher cost burden, many are forced to reduce benefits, shift more of the cost onto⁢ employees, or both. For starters, ‌lawmakers should‍ impose​ a moratorium on additional expensive health care⁢ mandates to avoid any additional premium pressure on ⁤small businesses and their employees.

As we head into 2025, the governor’s promise to ⁤address health care ⁢market ‍reforms stands as an⁢ enterprising goal. ⁢But just as something ​is difficult doesn’t mean it cannot or should not be done. Like the individual ‍who resolves⁣ to lose 10⁤ pounds every ⁢new year without success ⁣and ‌then must lose⁢ 50⁤ pounds all at once, the unaffordability ‌of⁤ health insurance for small businesses and their employees has reached a ⁤crisis ⁤point and‍ requires bold interventions.

It is easier to keep your⁢ New Year’s ​resolutions ⁢with the support and ⁤collaboration of others. the looming ‌health care cost crisis ⁣certainly calls out for such‍ an approach.

In crafting this piece together, we aim to‍ show that employer and consumer ⁣health care advocates are collaborating to‌ address the state’s insurance affordability crisis. ‌Gov. ‍Healey ​should bring ‌a similar spirit‍ to fulfilling her promise by challenging all⁤ health care stakeholders to come together to develop ​legislation that will make a meaningful difference in⁤ tackling this urgent​ problem.

Eileen McAnneny ‌is president of ‍the Employer Coalition on health.Paul Hattis is a senior fellow at‍ the Lown Institute.

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