A challenging two-step: cutting costs and covering the uninsured

Introduction

A valid criticism of the Affordable Care Act is that it doesn’t do enough to control health care costs. While there are a number of the law’s provisions that should help — such as the requirement that Medicare reduce payments to hospitals that have a high rate of readmissions — the major focus of the ACA was reducing the number of uninsured Americans by establishing new guidelines for how health insurance companies operate.

That was the same focus of the bill former governor Mitt Romney signed into law in Massachusetts in 2006, which is why there are so many similarities between “Romneycare” and “Obamacare.” Both, for example, sought to increase coverage by expanding Medicaid for low-income individuals and families, by prohibiting insurers from using health status when pricing policies, and by offering tax credits to help moderate income people buy insurance. Both also include an “individual mandate” — a requirement that most folks must enroll in a health plan or pay a penalty.

Lawmakers in both Massachusetts and Washington came to the conclusion that expanding coverage and attacking health care costs could not be done in a single piece of legislation. Bill and Hillary Clinton tried unsuccessfully to do it in the early 1990s. What happened then was that all of health care’s special interests — insurers, doctors, hospitals, drug companies and medical device makers — teamed up to kill the Clinton plan.

The lesson learned: sweeping reform was not politically feasible because of the political power of the entrenched special interests. Reform would have to be at least a two-step process, with the first step being to reduce the number of uninsured.

Both Romney and Obama adopted what was essentially a divide and begin-to-conquer strategy. Both were able to get their reform bills passed in large part by deferring action on addressing what my former insurance industry colleagues refer to as the “true drivers of health care costs.”

The problem is that the current political environment in Washington makes it unlikely that more reforms can be enacted anytime soon. As long as Republicans remained determined to gut the Affordable Care Act, Democrats won’t give them an opening by even allowing amendments to the law. And trying to find bipartisan support for any new proposals to reduce health care costs would be a fool’s errand.

But all is not lost. Progress can be made to control health care costs. And once again, Massachusetts might be able to lead the way, although a few other states are also setting their sights on ways to rein in medical spending.

But first, the bad news.

A report released last week by the Massachusetts’ Health Policy Commission said health care costs are higher in the Bay State than anywhere else and that more than one-third of what residents spend may be wasteful.

The good news: Massachusetts lawmakers at least had the foresight in 2012 to establish the Commission and to try to get a handle on costs. The law set targets for spending growth and establishes penalties on health care providers that exceed them.

Last week’s report found some relatively low-hanging fruit that could be picked to reduce spending. Among those steps: reducing unnecessary hospital readmissions and visits to the emergency room when a visit to a clinic or a primary care physician would be more effective.

The report also suggests improvements that could be undertaken to achieve the commission’s goals, ranging from making the cost and quality of care more transparent to changing how providers are paid to reward more efficient care.

As happened when Romneycare was passed in 2006, the eyes of policymakers in other states will be on Massachusetts in the coming years to see how the state’s cost-control efforts turn out.

On the heels of the Massachusetts report came another one last week suggesting actions all states should consider to reduce health care spending. That work, by the bipartisan State Health Care Cost Containment Commission (organized by the University of Virginia’s Miller Center) examines how the governors and legislators “can transform the current health-care system into one that is more integrated, coordinated, patient-centered and cost-effective.”

In the coming weeks, I will be looking at what the states are actually doing to begin implementing the commission’s recommendations. I’ll start with Massachusetts, where numerous promising efforts already are underway.

If we finally can figure out how to reduce health care spending, it will be in the state capitals and private sector where the work just might get done, not Washington.