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Posted May 28 2010 3:28am
The current political debate in Massachusetts about rising health care costs and insurance company premiums is a striking case of denial. The most thorough evaluation of the underlying causes of inflation was presented by the state's Attorney General this past winter . She found that the long-standing and current disparities in pricing in the Massachusetts market contribute mightily to the growth in health care costs and insurance premiums in the state. As noted in this Boston Globe story, her staff put in thousands of hours studying the issue
The report, the result of legislation that directed Coakley to investigate why medical costs are rising so rapidly, is based on tens of thousands of contracts and other documents subpoenaed from insurers and providers and depositions from more than 30 key health care executives.

In light of the AG's conclusions, you would think that policymakers would be spending their time to design measures to reduce the disparities in reimbursement rates. But, as noted below , the policies being ordered by the Administration and the actions being taken by the insurers tend to do just the opposite.

In this kind of situation, where does one find the leadership to deal with these problems? The insurers have been willing or forced participants in creating the current situation. Can we expect them to change their stripes and take firm action against dominant providers?

During the hearings on these matters held by the state's Division of Health Care Finance, the witness from Blue Cross Blue Shield said that even his company, the largest in the state, did not have the market power to offset that of the dominant provider group and individual hospitals with special geographical advantages. That such was the case with smaller insurers was demonstrated years ago when Partners Health Care forced Tufts Health Plan to bend, but whether the same would apply to the dominant insurer remains an untested proposition.

We certainly cannot expect those providers who have benefited from higher rates to voluntarily accept cuts that would take them to the statewide average in a timely fashion. For one thing, their cost structures have been built on the expectation of greater revenues.

I believe the leadership has to come from the business community, those firms whose payments of insurance premiums -- or whose self-insurance arrangements -- validate the current reimbursement patterns. Their goal has to be to support market shifts to higher value providers. The business community needs to demand that the state government use its existing authority to expand upon the AG's work and present a clear picture of the current situation.

The "moral outrage" that would support value-driven market shifts will not come until the state chooses to publish actual rates paid to hospitals for commonly used services, and until the state also publishes clinical outcome data in a clear and up-to-date manner. Once these numbers are seen, employers and individual subscribers will discover that they are paying way too much to certain providers for services than can be delivered just as well by lower priced providers.

Once this information is freely available, the market will respond, with employers demanding and offering tiered products that more people would find acceptable. Consumers would then turn to providers who offer greater value, just like they do in other service industries.

For reasons I do not understand, neither the Administration nor the insurers have endorsed this kind of transparency, much less implemented it. Instead of being honest brokers in a transition to a more value-based health care system, they remain in steadfast denial of the AG's well researched and thoughtful conclusions.

Over the coming weeks, we should measure parties' commitment to change by the degree to which they advocate and adopt the kind of transparency that exists in virtually every other segment of the economy. If they do not, we will have to assume that they are motivated instead by self-protection of their owned perceived political and economic interests.
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