Editorial : Health care costs moving up
Published: March 18, 2010
The goal of the 2006 Massachusetts health care reform legislation, a bipartisan effort of the Romney administration and the overwhelmingly Democrat-controlled state legislature, was to be sure that health insurance coverage extended to as close to 100 percent of the state population as possible. And, it has.
The goal was not, the former governor acknowledges these days as he travels the country promoting his new book and perhaps a 2012 presidential candidacy, to lower or even control health care costs in Massachusetts. That important goal, he says, was the next thing to be tackled.
The Romney/Massachusetts reform plan resembles in some ways the plan that is about to be decided in Congress this week. If President Obama signs the national health reform legislation into law in the next week or so, it will not extend insurance coverage to 100 percent of the national population, although it will cover many millions of those who are now under-insured or altogether without health insurance. Neither is it likely to lower health care or health insurance costs.
And, although "bending the cost curve" downward, an expressed goal of the Obama administration, is important nationally, it is a matter of economic life or death in Massachusetts. But, it is not happening in Massachusetts. Indeed, the opposite is true.
Hospital costs in this state were 55 percent above the national average in 2007, according to the results of a study released Tuesday by Alan Sager and Deborah Socolar of the Boston University School of Public Health. A news story describing the report may be found in this morning's print newspaper and on mvtimes.com.
The researchers found that the per-person hospital cost in Massachusetts in 2007 was $3,015 compared to the U.S. average of $1,941. They calculated that about $7 billion would have been saved in Massachusetts, if the state had spent for health care at the average national rate.
Sager and Socolar do not blame the high health price tag on the state's 2006 health care reform law.
But, leaving aside hospital costs, which were the focus of the Sager/Socolar study, average health insurance premiums in Massachusetts are now highest in the nation. Since 2006, they've climbed at an annual rate of 30 percent in the individual market. For small businesses, premiums have risen at an average annual 5.8 rate. Per capita health spending in Massachusetts is now 27 percent higher than the national average. All this according to the state's own data.
"No single smoking gun explains the durable excess or the rebound [from decades earlier when Massachusetts hospital costs exceeded national costs by smaller margins]," the Sager/Socolar report concludes. "Many hospital, physician, payment, political, and other forces are at work."
Among these forces is terrific, state-of-the-art medical care at superb institutions. As the Wall Street Journal puts it, "Though some large hospital systems, especially in Boston, have the market power to drive prices higher, the state's own reports mainly show that the dominant reason health costs are rising is medical progress and technological innovation. Massachusetts health care, with its abundance of academic medical centers and high-quality specialists, is the envy of the world."
But these great hospitals are, many of them, highly compensated teaching hospitals. Indeed, even some smaller hospitals, including the Martha's Vineyard Hospital, because of its critical care access status, are paid at higher rates than institutions elsewhere. And then there's the nation's highest physician to population ratio, which we in Massachusetts enjoy.
What's to be done? The Patrick administration, beset budget-wise on all sides, proposes controls on insurance premiums and global payments for health services - in simple terms, one payment for soup-to-nuts treatment for a particular disease. The brute logic is that such payments will force hospitals, physician groups, and physicians to find efficiencies wherever they can squeeze them out.
You will judge for yourself whether that means that services and choice will inevitably be limited, and whether the health care system that is the "envy of the world" will remain such.
Sager and Socolar suggest a more calibrated - really, more rational - approach to discovering a solution: "We have long urged that more money to finance business as usual in health care is both unaffordable and unnecessary. Both free markets and regulations have failed, resulting in financial anarchy and higher health costs. Most past efforts to contain hospital costs have failed about as badly here as nationally. But there have been some successes. It will be helpful to recall the forces that squeezed the state's hospital excess to 30 percent in 1996."
In 1996, Massachusetts hospital spending, driven downward by managed care and other, similar efforts, was just 30 percent greater than the national average. It was a significant improvement, because in the mid-1970s, Massachusetts spending exceeded the national average by 52 percent. Call it progress if you must, but now the margin is even greater, and promising to grow.
