News & Events

The state’s great health care standoff

By Scot Lehigh  |  April 9, 2010

UNEASE IS in the saddle in the state’s health care sector, and chaos looms on the horizon.

Exasperated with spiking small business health care costs, Governor Patrick has declared his determination to regulate health insurance rates — and rejected most proposed premium increases. In reaction, the health insurance carriers have gone to court to battle the governor, and several have balked at enrolling new customers.

Everyone is awaiting the next big political development. And here it is: Senate President Therese Murray will step into the breach when she speaks to the Greater Boston Chamber of Commerce Wednesday, unveiling a proposal she hopes will resolve the great health care standoff.

“It is an alternative to get through the chaos we are in and to try to bring costs down for small business while we work on — and I mean work on and produce — a long-term solution,’’ Murray told me. Although she declined to discuss the details, Murray’s clear aim is to give stakeholders alarmed by Patrick’s approach something to rally around.

“The governor gave them a shot across the bow, and I don’t think that’s a bad thing, but it has become very chaotic,’’ she said. Certainly anxiety runs deep about the high-stakes confrontation.

“It’s a high-risk move by the administration,’’ said Michael Widmer, president of the Massachusetts Taxpayers Foundation. “Rate caps don’t deal with the underlying causes of medical inflation, but they are creating havoc in the health care sector, the state’s number one employer, and undercutting the extraordinary coalition of stakeholders that has been critical to the success of the state’s landmark health reform law.’’

Although his aides deny it, Patrick’s action is widely seen as driven at least in part by election-year considerations. His likely Republican opponent will be Charlie Baker, who in one former incarnation was the CEO of Harvard Pilgrim Health Care and, in another, helped lead the Weld administration’s effort to deregulate hospital pricing. Given the energetic use Patrick’s political team has made of the governor’s gambit, it’s obvious his camp wants to position Baker as the face of the health insurers, while Patrick runs as the champion of small businesses and individuals.

The original idea behind deregulation, says health care expert and former state legislator John McDonough, was that rather than having the state regulate hospital prices, the health insurance companies would strike tough deals with the providers. That arrangement, he notes, simply isn’t working anymore. But that doesn’t mean our health insurance companies, which are nonprofits, are ill-intentioned or greedy or even primarily responsible for cost increases. (Full disclosure: My wife works for Tufts Health Plan.) “We have the highest quality, best health care plans in the nation by a mile,’’ said McDonough.

What’s more, going after the payers by capping insurance rate increases won’t solve the larger problem. Consider: about 90 cents of a premium dollar goes for medical, rather than insurer, expenses. Further, a well-regarded recent report by Attorney General Martha Coakley identified big and powerful hospitals as a main driver of health care costs.

So Patrick’s approach is a bit like banging on TV screen because you don’t like the DVD that’s playing.

Barbara Anthony, Patrick’s undersecretary of consumer affairs and business regulation, stresses that the governor has also asked the Legislature for authority to regulate hospital rates. The market isn’t working well in health care, she says — and she’s right. But even if Patrick gets that authority, price caps are a dubious solution. In general, they don’t solve a problem so much as relocate it, causing disruptions elsewhere in the system.

In the long run, the state needs to change the payment system to move providers toward more cost-conscious care.

And in the short run? Murray makes it clear her alternative will require sacrifices from all of the health care-sector stakeholders. “Everybody has to come together to make this work,’’ she said. “Everybody has to come to the table.’’

If they didn’t understand that at the start of the year, health care leaders no doubt do by now. That’s why all eyes will be on Murray when she takes the podium Wednesday.

Scot Lehigh can be reached at