By Rick Lord
You’ll excuse Massachusetts employers for being cynical as they watch the healthcare debate in Washington unfold while they struggle to manage the crushing financial burden of providing good medical insurance to their employees.
The truth is that federal health-care reform, whatever its final structure, will do little to moderate the accelerating premium increases that employers and workers alike now face. Trumpcare, like Obamacare and Romneycare before it, primarily aimed to extend coverage rather than addressing the underlying drivers making health insurance more expensive for companies.
That’s why employers — a results-driven group if ever there was one — want to know how the nation is going to solve the cost problem so that business owners don’t get knots in their stomachs every time they receive their insurance-premium renewals.
The good news is that Massachusetts is beginning to identify some answers. And there appears to be enough common ground and political will on the issue to pursue some solutions.
New research conducted by the Massachusetts Health Policy Commission suggests that Massachusetts employers, insurers, and policymakers could reduce total healthcare expenditures anywhere from $279 million per year to $794 million per year, or 0.5% to 1.3%, by making seven improvements to the health-care system:
• Reduce by 5% to 10% the number of cases treated at teaching hospitals that would be more appropriately treated at community hospitals. Savings: $43 million to $86 million.
• Reduce the 2015 hospital readmission rate from 15.8% (78,000 readmissions) to a range of 13% to 15%. Savings: $61 million to $245 million.
• More than 900,000 emergency-room visits during 2015 were considered avoidable. Shift 5% to 10% of those avoidable visits to lower-cost settings. Savings: $12 million to $24 million.
• Redirect 5% to 21% of the patients who currently leave hospitals to go to institutional rehabilitation facilities into home care. Savings: $46.6 million to $186 million.
• Provide incentives for consumers to choose high-value primary-care providers.
• Increase the use of alternative payment methods. The Commonwealth wants to increase the percentage of HMO participants covered by alternative payment methods from 58.5% in 2015 to 80% this year. Savings: $23 million to $68 million.
• Cut the growth rate of spending on prescription drugs from 5.0% in 2016 to 3.6% to 4.3%. Savings: $57 million to $113 million.
The Health Policy Commission is considering one major proposal that would encourage these improvements. The proposal would tighten the state’s benchmark for healthcare spending growth from 3.6% to 3.1% annually. Associated Industries of Massachusetts (AIM) supports the measure.
The spending-growth benchmark, established as part of the health-cost-control law of 2012, is a critical component for understanding year-over-year increases in healthcare spending. AIM has always favored an aggressive goal; the organization joined with the Greater Boston Interfaith Organization in 2012 to support setting the healthcare-cost-growth benchmark at two percentage points below the growth in the state’s economy.
The association ultimately supported the establishment of a 3.6% benchmark because we recognized the vital importance of creating a standard to measure cost-containment efforts. But we have not yet seen sufficient progress. Massachusetts has exceeded the 3.6% benchmark in two of the past three measurement periods. Total healthcare expenditures grew by 4.2% from 2013 to 2014, and by 4.1% from 2014 to 2015.
These unsustainable cost increases are occurring in an industry where experts agree that at least one-third of all care is unnecessary — delivered in the wrong setting, marked by a lack of coordination, provided with an inadequate emphasis on prevention, harmed by medical errors, burdened with rules and fraud, or just plain excessive.
AIM remains committed to pursuing the seven solutions outlined by the Health Policy Commission as a method of addressing the health-insurance premium crisis facing employers. It’s an approach that is sure to pay more immediate dividends than anything that will come out of Washington.
Rick Lord is president and CEO of Associated Industries of Massachusetts.