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A Ringside Seat on Rising Health Care Costs

health care costAs a Health Policy Commissioner, I had the opportunity to participate in a two-day public hearing organized by the Massachusetts Health Policy Commission (HPC) in collaboration with the Office of the Attorney General and the Center for Health Information and Analysis.

Attendees included the Governor of the State of Massachusetts, Charlie Baker, the Attorney General, representatives from The Urban Institute, Harvard Business School, CEOs of major health care providers and medical professionals (See list of attendees at the end of this post). Although the Commission’s focus was the cost of health care in Massachusetts, several presentations addressed national issues.

Underscoring the interest in this issue, public engagement was strong with more than 400 people attending and another 2,700 watching online.

Before sharing my takeaways from the meeting – let me put the issue into some context by sharing the conclusions of a paper titled, U.S. Health Care from a Global Perspective, written by David Squires and Chloe Anderson of the Commonwealth Fund.

They make for sobering reading. You may need to be sitting down or at least check your assumptions at the door.

U.S. health care expenditures significantly exceed 13 other affluent countries (no surprise), but regardless of spending levels, we:

  • Visit hospitals less frequently,
  • Use more technology (such as MRI’s),
  • Have lower life expectancies,
  • Experience more chronic diseases, and
  • Are more likely to die from heart disease.

 

There is some good news. Mortality rates from cancer are declining faster than other countries.

I would have hoped for more given the U.S. spent 17.1% of GDP on health care in 2013, approximately 50% more than the second place nation, France, even though we use the system less. And, by-the-way, we are paying 50% more for prescription drugs.

To summarize the report’s findings in a health care nutshell, we use the system less; make greater use of the latest in technology; generate poorer results; and pay more than other affluent nations.

Not good.

The HPC hearing set out to highlight the problem of costs and explore potential solutions.

Among the topics discussed was pricing transparency – an issue I have detailed in previous posts.

Most reasonable people would think this should help drive down costs and improve overall care; unfortunately, current transparency laws have had little to no effect on quality or costs.

Here’s an example of the reason why: Two MRI facilities are located practically within shouting distance, but one facility charges exponentially more for the same exact test.  The result?  Doctors and patients continuously select the higher-priced provider.

In what other sector of the economy does that happen?

So, why doesn’t transparency work when 20% of patients are in high-deductible plans, and a little homework could save thousands of dollars in out-of-pocket costs?

The answer appears to be that the health care industry is coming up short when it comes to making the cost of procedures easily available to patients. Just try to get comparative prices for common surgeries, and you’ll see how hard it is to get a simple answer to a simple question.

Commissioner Dr. David Cutler, Professor of Applied Economics at Harvard University, reminded panelists that they were required by law to provide patients with pricing for services.  In response, a health care provider and insurer started finger pointing.

Dr. Robert Berenson of the Urban Institute highlighted the variability of pricing between providers and the impact of competition, noting:

  • Based on claims in 13 U.S. markets, the highest-priced hospital was paid 60% more than the lowest for inpatient services, and more than 100% higher for outpatient services
  • Competition improves quality
  • Hospital consolidations are increasing prices and may be reducing quality and efficiency

 

It is clear that states with transparency laws will need to be far more aggressive if they are to ensure compliance. And, regulators must look very closely at industry partnerships and mergers for their impact on competition.

Pharmaceutical firms were the focus of considerable attention at the hearing. It appears to me that they have taken advantage of patent laws, limited competition, and little to no pricing transparency in an effort to boost profits and shareholder value.

It doesn’t help that the FDA has been historically slow in approving new generic versions of popular drugs to offer patients an alternative. (As a matter of fact, Governor Baker questioned the need for the FDA to take up to four years to approve generic versions of drugs that have been on the market for years.)

Prescription drug prices are the largest driver of health care inflation – taming these cost increases really matters. Right now the industry seems to be pushing the envelope as far as possible.  The national press and Congress have strongly chastised individual companies, but we have yet to see any real change in pricing policies.

During a panel discussion on drug prices, I noted that it appeared to me that drug manufacturers were essentially begging to get slammed by Congress. In response to a question, “Have pharma companies internally discussed the possibility of federal pricing regulations?,” the pharma representative said, “yes,” and left it at that.

If health care costs continue to grow at an annual rate of three to four times U.S. inflation, working Americans will continue to see higher health care premiums. Likewise, retirees will feel the impact when it comes to Medicare, supplemental insurance and co-pays.

The reduction in disposable income for millions of Americans may have significant economic consequences. Massachusetts and other states across the country clearly recognize the significance of this issue and are introducing new pricing models and policies in an effort to control runaway costs.

We are at a tipping point. All elected officials need to mobilize and take action to address one of the most important issues facing Americans: access to quality health care at a reasonable price.

Following are some of the contributors who participated in the hearing:

Name      Title  Affiliation
Charlie Baker Governor State of Massachusetts
Maura Healey  Attorney General State of Massachusetts
Stanley Rosenberg Senate President State of Massachusetts
Dr. Robert Berenson Institute Fellow The Urban Institute
Lauren Taylor Health Policy Mgt. Harvard Business School
Lisa Joldersma VP Policy & Research PhRMA
Brian Rosman Director of Policy Health Care For All
Dr. Steven Strongwater CEO   Atrius Health
Andrew Dreyfus CEO Blue Cross Blue Shield of Mass.
Eric Schultz CEO Harvard Pilgrim Health Care
Dr. Rick Weisblatt Chief of Innovation Harvard Pilgrim Health Care
Dr. Howard Grant CEO Lahey Health
Thomas Croswell CEO Tufts Health Plan
Kate Walsh CEO Boston Medical Center
Manny Lopes CEO E. Boston Neighborhood Health
Dr. Gregg Meyer Chief Clinical Officer Partners HealthCare System
Dr. Elsie Taveras Chief of Pediatrics Mass. General Hospital
Dr. Deborah Schrag Chief, Surgical Oncology Dana Farber Cancer Institute
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