Contradictions in Massachusetts

I have written before about the strange things going on in the Massachusetts health care insurance market. For those from out of state, here are some quotes that will give you a sense of the contradictions in the public policy arena.

They are, respectively, from two stories that appeared on the same day in the Boston Globe: "Rate cap for insurer overturned" and "Officials give up cutting health perks."

(1) An insurance appeals board yesterday overturned the state’s cap on health premium increases for small business and individual customers covered by Harvard Pilgrim Health Care . . . [finding] that rate increases Harvard Pilgrim initially sought in April are reasonable given what it must pay to hospitals and doctors. That ruling trumped the Insurance Division’s earlier finding that the requested increases were excessive.

(2) The state’s public employee unions won a major victory this week when the Legislature abandoned efforts to allow cities and towns to trim generous health care benefits enjoyed by thousands of municipal employees, retirees, and elected officials.

You can read the rest and related stories, but what is most disturbing is that the spirit of cooperation and compromise that existed when Massachusetts approved its health care reform law in 2006 has broken down. Part of the reason is that commitments made at that time have not be delivered upon. For example, the state had promised to lift Medicaid payment rates to something closer to the cost of delivering that service. Once the economy sank and state budgets were stressed, that was not possible. This left providers needing to collect more of their income from private insurers.

Meanwhile, the underlying determinants of health care cost increases continued apace -- wages and salaries of health care workers, supplies and equipment, drug prices, increased utilization, the medical arms race, and unhealthy life styles. Certain providers received disproportionate payment increases based on their market power and used those excess revenues to gain market share. Collectively, the industry did little to reduce harm and improve quality and garner the cost savings that would be possible from that. Access to primary care did not improve, forcing patients to go to emergency rooms. Those primary care practices that do exist often functioned as triage way stations for patients to go see higher priced specialists. For those who thought payment reform (i.e., capitation) was the answer, little progress was made, in part because insurers have yet to see a market for the restricted networks (i.e., reduced consumer choice) that would facilitate that kind of pricing regime.

So, now we are in a situation in which everyone is blaming everyone for the problem. Truthfully, everyone is the problem, and so this is an accurate representation, but it is not a helpful approach. Deadlock is the result.

At times like this, people often look for a global solution to sort things out. That is a mistake. There is not a politically possible global solution. There are too many legitimate vested interests to pass a bill or adopt a regulation that shifts hundreds of millions of dollars of costs from one group to another. As seen in the two stories above, it will either be legally unacceptable or politically infeasible.

Instead, it is a time for incremental changes that are directionally appropriate. There are things that can garner majority support that will move the system towards a more sustainable level.

But to agree on those, the rhetoric needs to be toned down, both within the field and from the government. The demonization of any particular sector destroys the kind of trust that enables people of good will to invent solutions that create value for all.