Health care costs too much. Everyone agrees. But no one seems to know what to do about it.
If Obamacare survives Supreme Court review and takes effect in 2014, it will go a long way toward reducing the number of people without insurance. But it leaves the problem of rising costs relatively untouched.
Obama’s plan is modeled on the Massachusetts law signed by then Governor Mitt Romney in 2006. When the state implemented that plan, it led the country in attacking the problem of uninsurance.
Massachusetts stands on the verge of leading again, this time in addressing high costs. Similar bills were introduced last week in each house of the state legislature to limit annual spending increases. Both would implement an aggressive new approach that is yet to be tested anywhere else.
Massachusetts perennially struggles with high health care costs, which run about 15 percent higher than the country overall. Its cost-of-living is high, and it serves as home to several expensive academic medical centers.
The 2006 reforms have drawn attention to the state’s health care cost problem, but they are not the cause. Per capita health care spending in Massachusetts has exceeded the national average for over 20 years. And the gap began growing several years before the reforms were enacted.
Both of the pending bills would peg annual growth in health care spending to the rate of increase in the state’s “gross state product” (GSD) (the state-level equivalent of the gross domestic product). If spending exceeds the cap, steps to reduce them would automatically take effect.
But the bills diverge in their aggressiveness. The House of Representatives proposal would cap health care spending at the GSP’s growth rate through 2015 and then limit it to half a percentage point below that rate for subsequent years. (Click here to see the House bill.) The Senate proposal starts at half a point above GSP growth through 2015 and then lowers it to the GSP rate. (Click here to see the Senate bill.)
If spending by a health care provider or insurance plan grows more than the prescribed rate, the House bill would empower a new state agency to require that payment contracts be renegotiated. It would also impose a luxury tax on especially expensive providers. The Senate bill would merely require providers and insurers to file confidential performance-improvement plans.
Both bills also encourage a shift away from fee-for-service reimbursement, which pays separately for each service that a provider renders, to global payments that cover bundles of services. But the Senate bill does this only for state-run plans, while the House version covers private insurance, as well.
If either bill, or a compromise between them, becomes law, it would a national first. No state has acted as aggressively to tackle health care costs. Nor has the federal government. Yet the need to find a solution to rising costs is increasingly urgent.
The Massachusetts 2006 health reform law succeeded in bringing down the state’s rate of uninsurance to the lowest in the nation. And it has served as a model for national reform.
A plan by Massachusetts for a new approach to controlling costs could lead the country yet again. Based on the state’s past success, it seems the perfect place to start.
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