AGAINST A BACKDROP of economic uncertainty and lingering inflation, Massachusetts residents are sounding the alarm on health care affordability. According to another recent statewide survey, the cost of health care remains a top concern, only behind the overall cost of living.
Through a new coalition, the Employer Coalition on Health, businesses are collaborating to make health care more affordable. Local employers are bearing the brunt of steep health care prices, yet their voice has been subdued as of late. As prices and cost growth trends continue to rise, employers must be part of the ongoing policy debate on Beacon Hill to shape decisions that impact rising prices and their ability to operate.
As such, the coalition urges lawmakers to address three key priorities to help reduce health care costs for employers.
First, new policies must reduce, not increase, the cost of health care. Proposals to impose provider reimbursement rate floors without a corresponding rate ceiling that will increase healthcare inflation should not be adopted.
Instead, lawmakers should reduce the financial burden borne by many community hospitals that the government shifts to commercially insured and private health insurance purchasers from Medicaid and Medicare. These underpayments result in commercially insured employers and individuals making up the shortfall.
With the number of people covered by public insurance growing – MassHealth covers about 2 million people, or 30 percent of the Massachusetts population – so too have the cross-subsidies borne by employers, employees, and taxpayers. Given our aging population and the shrinkage of our small group health insurance market, these cross subsidies by the private market will likely grow larger without intervention. Higher Medicaid reimbursement rates to providers could alleviate this cost-shift burden.
Second, the Health Policy Commission, the agency created to gather data and hold health stakeholders accountable to the annual health care cost benchmark trends, needs more tools to be effective. Prohibitions against conflicts of interest should be maintained and commissioners should not be compensated. The commission needs a dedicated business purchaser seat to ensure the employer viewpoint is adequately represented.
If health care stakeholders exceed the annual cost benchmarks, the Health Policy Commission needs more tools for accountability, including the ability to increase financial penalties for noncompliance. The commission also needs broader authority to collect comprehensive data on all players in the health care market, including pharmaceutical companies and pharmacy benefit managers. Increased transparency will provide better insight into where the more than $71 billion in Massachusetts annual health care expenditures is going.
Finally, the state has a responsibility to keep the commercial health insurance market viable. Provider consolidation has decreased competition and weakened the ability of health insurers to negotiate reasonable reimbursement rates, leading to unaffordable prices for employers and employees. The shrinking small group market, which covers 50 percent fewer lives than a few short years ago, is proof that we are at a crisis point.
The most recent Division of Insurance public hearing on the merged market rates for 2025 reveals alarming utilization increases and a fast-growing pharmaceutical spend. Without exception, each plan indicated that without the ability to manage costs through prior authorizations, step-therapies, and other actions, the trend would be significantly higher as more biologics, orphan drugs, and gene therapies come on the market and the demand for the weight loss drugs skyrockets. Recent calls for elimination of prior authorization and other cost management tools must be rejected as ill-advised if the state is serious about reining in health care costs.
The state must ensure that we are paying for value and not fostering unwarranted utilization and higher cost through further vertical integration, where hospitals own physician groups, outpatient facilities, laboratories, and pharmacies.
As Steward Health Care’s financial crisis makes clear, improved state oversight will ensure financial soundness for all health care entities by subjecting them to robust reporting and financial analysis. This includes private equity investments.
To be sure, we can all play a part in lowering health care costs. Encouraging people to live healthier lives, having a more robust public health system, innovating health care delivery, promoting patient-centered care, and utilizing cost-cutting technology are just a few examples.
Employer engagement is critical to advancing these goals. Employers were vital to enactment of Massachusetts’ landmark health care reform law in 2006, and can be once again by tackling the critical health care issue of our time – affordability.
This challenge is enormous, but the time is now for employers to mobilize our collective efforts to shape the policy debate and obtain better health care at a lower cost.
Eileen McAnneny is president of the Employer Coalition on Health. Jon Hurst is president of the Retailers Association of Massachusetts.
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