How to control healthcare costs
THE HEALTHCARE reform law has done a great job of expanding access to healthcare, and Massachusetts is well on its way to meeting the goal of ensuring healthcare coverage for every resident. Over 200,000 individuals who were uninsured at the beginning of this year have health insurance today.
A major challenge to ensuring that every resident continues to have access to coverage is the rising cost of healthcare. Rising costs threaten the state's ability to continue providing coverage to low-income individuals and squeeze businesses. For those of modest incomes, the requirement that they must purchase health insurance makes rising healthcare costs particularly burdensome.
Experts estimate that healthcare spending in Massachusetts rose from $46.5 billion annually in 2002 to $62.1 billion annually in 2006. That's a 33 percent increase in just four years. Understanding what's driving healthcare costs is the first step toward controlling them.
Senate President Therese Murray has proposed an interesting idea to provide more information on what is driving healthcare costs, calling for a public hearing on any premium increases above 7 percent in any given year.
The Senate president is right; we need to have a broad discussion on what's driving healthcare costs. On Monday, we and several other health plan leaders will be announcing the following:
Public hearings on cost drivers. To shine a spotlight on underlying healthcare costs and to provide a full representation of the entire market, we recommend that the state's health plans be required to participate in an annual public hearing on healthcare costs - no matter what their rate increases are - to outline the factors contributing to any changes in premiums, including their projected medical expenses due to provider reimbursement rates, patient utilization, administrative costs, capital investments, and efforts to reduce the rate of growth. Health insurance premiums are driven by healthcare costs, so it is important that hospitals, health centers, physician practices, and pharmacies participate in these hearings to explain the factors contributing to their rising costs, including greater utilization of technology, increases in consumer demand, and higher reimbursement rates.
Public reporting of healthcare revenues and expenses. Consumers and employers have every right to know where their premium dollars go. While this information is reported to the state, it is not easy to find. Beginning this week, our health plans and several others will voluntarily disclose in a consumer-friendly format their financial data, including total revenues, administrative costs, and surpluses and reserve levels, along with what they pay for medical costs for their insured members. Hospitals should also make publicly available data disclosing total inpatient and outpatient service revenue, total patient expenses, total capital expenses, total administrative expenses, surplus revenue, and endowment levels at a similar level of detail to that being released by health plans. While much of this data is currently filed with various state entities, it is important that hospital leaders come together to disclose this information in a format that is more easily understandable and more accessible to the public than it is today.
A public forum to find solutions. Making better use of existing healthcare resources and keeping healthcare affordable will require the participation of everyone in healthcare, not just one or two groups working alone. We don't pretend to have all the answers and believe it is important that our partners in the healthcare community - hospitals, physician groups, community health centers, consumer organizations, employers, and state policy makers - work with us to convene a series of forums to identify and outline additional measures that control healthcare costs while maintaining or improving quality of care.
Murray has started a debate that should lead to an analysis about healthcare costs and should start by everyone having to answer the question, "Why are your costs going up and what are you going to do about it?" The future of the state's healthcare reform - and the people depending on it - is at stake.
James Roosevelt Jr. is president and CEO of Tufts Health Plan and chairman of the Massachusetts Association of Health Plans. Charles D. Baker is president and CEO of Harvard Pilgrim Health Care and is past-chairman of the Massachusetts Association of Health Plan. 