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Benjamin Day and Peter Hiam

The state’s single-payer solution

By Benjamin Day and Peter Hiam
Globe Correspondents / March 29, 2010

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NOW THAT Congress has passed a national health reform bill that will not fully kick in until 2014, attention will focus again on this state’s effort to make a success of near-universal coverage.

Governor Patrick and the Legislature are moving forward with plans to control health care costs here. They are the highest in the nation and crippling state, municipal, business, and household budgets. The effort is desperately needed, but the proposals under consideration will not work because they don’t go far enough.

We know because we’ve already tried them in Massachusetts. Overwhelming evidence suggests that nothing will work short of adopting a “single payer’’ system — under which all residents are covered by a public, comprehensive plan — or regulating the private health insurance system under a uniform set of rules and an effective budget that allows public control over the resources allocated to the health care industry.

Patrick has proposed regulating the rates that hospitals can charge for services, as well as scrutinizing health care premium hikes for small businesses. This was essentially the state’s policy from 1975 to 1991, when the Massachusetts Rate Setting Commission set rates for the state’s purchase of health care services and products, placed budget constraints on hospitals, and gave the Division of Insurance the power to deny premium increases in some cases. Two legislative task forces have recently recommended paying providers on an annual per patient basis (capitation) instead of per service (fee-for-service) to control costs. This was a hallmark of early managed care — the practice legislators hoped would control costs when they abandoned rate setting during the 1990s, but which generated significant backlash from doctors and patients. Rate setting was neither bad nor completely ineffective when we had it, but neither rate setting nor capitation addressed the root causes of our rising health care costs, and both allowed costs to continue climbing at unsustainable rates.

The United States spends almost twice as much per person on health care as any other country in the world, and yet has some of the worst health outcomes of all developed nations. This means we spend a lot on care that does not contribute to better care, and there is extraordinary room for cost control that does not reduce access to or quality of care. However, we often pursue cost control strategies that are not based on evidence, and are designed to limit political opposition from the health care industry, for which our high costs are its high income. These efforts either don’t work at all, or don’t work on a scale that will have a noticeable impact on a system with double-digit premium inflation.

To a large extent, our high spending is due to a fragmented system where providers deal with hundreds of different insurers, all with different rules. This drives up administrative costs in the system, and means we lack what other jurisdictions have to effectively control costs: the ability to budget the health care system and publicly plan the allocation of limited resources to the communities and areas of care that need them most. This is why only nations with uniform payment systems and an extraordinary level of public oversight have been able to “bend the cost curve’’ without hurting health outcomes.

Effective cost control has proven to be politically impossible, particularly in Massachusetts. However, another failed attempt at cost control is unaffordable for the state, our municipalities, businesses, and households. If Patrick and the Legislature hope to avoid joining the company of their predecessors, they must do more than rehash the state’s cost control programs of the last 30 years.

Benjamin Day is the executive director of Mass-Care: The Massachusetts Campaign for Single Payer Health Care. Peter Hiam was chairman of the Rate Setting Commission from 1978 to 1982 and commissioner of insurance for Massachusetts from 1983 to 1987.

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