Ted Almon: Tough to control R.I. health costs

Ted Almon: Tough to control R.I. health costs

By Ted Almon

Gov. Gina Raimondo’s Working Group on Health Care Innovation is wrapping up its work before issuing its report on how Rhode Island might best control costs that have made health coverage unaffordable for far too many residents.

The working group — including many of our state’s foremost health policy experts along with executives of provider organizations, insurance carriers, business leaders and consumer advocates — followed a pre-conceived agenda and a compressed timeline. The report presents four rather straightforward recommendations, including a “spending cap” on total health-care costs modeled after legislation passed in Massachusetts several years ago.
Certainly, if you are trying to control a runaway expense, knowing how much you are spending is a good place to start, but even that isn’t simple. The Massachusetts law establishes a new government commission just to do the calculating. Then, since the process is retrospective, it isn’t clear what the state can do about overspending, other than to look at offending organizations with stern disapproval.

Massachusetts has decided on a semantic adjustment. It now calls it a spending target, rather than a cap. And the target really is a controlled rate of growth — hardly the solution overwrought consumers and small employers were hoping for.

Why is reform in general and cost containment in particular so difficult in health care? A new study analyzed by The New York Times (“The Experts Were Wrong About the Best Places for Better and Cheaper Health Care," Dec. 15) lends some important perspective. The short strokes are that, in designing many of the current savings strategies, policy experts who crafted the Affordable Care Act, or Obamacare, were looking mainly at Medicare data. It turns out that many areas with very low Medicare costs may have surprisingly high rates for commercial insurance. There appears to be no relation between high and low costs between the two markets, even in the same community.

As strange as this may seem at first, we really shouldn’t be that surprised. What we refer to as health care is a schizophrenic mix of two polar-opposite models. Commercial health insurance is a private competitive marketplace covering about half the people, while most others are in government-run social programs subject to strict rate setting and central planning. Trying to manage both within a single system may be impossible, since many of the incentives are in direct conflict.

Meanwhile, the “market” is convulsing with consolidation as both payers and providers scramble wildly to shore up their market power. Locally, we have seen the Care New England Network explore a merger with Southcoast Health System, but even that much larger entity will still be dwarfed by Partners Healthcare to our north and Yale New Haven to our west. Insurers are responding with mergers of unprecedented scale of their own.

In a free-market model, such consolidation works against the interests of consumers, and indeed the data now indicates that private premiums are higher in markets with limited hospital or insurer competition. On the other hand, larger organizations reduce administrative and programmatic duplication and achieve certain economies of scale. Competition among providers is also associated with less care coordination and increased utilization, which even rate setting cannot control.

Before climbing into our ideological bunkers for this battle, both sides would do well to read the report of the Working Group even though the picture it paints is limited in scope. To add perspective and context, the reform advocacy group HealthRIght has released a series of policy papers available at http://www.rihealthright.org/. They include a broad overview of the reform effort as well as deeper dives into access to care in Rhode Island and cost-containment strategies.

We may well disagree about the best course for health-care reform, but the time to justify inaction is past. More people have to get up to speed on this complex, even paradoxical problem, to inform the debate and move toward consensus and action.

Ted Almon is president and CEO of the Claflin Co., in Warwick, a distributor of medical equipment and supplies, and a member of the Working Group on Health Care Innovation.

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