The Division of Health Care Finance and Policy (DHCFP) has contributed to the public dialogue on reforming the healthcare system by aggregating and reporting a great deal of data in its two most recent reports, which deal with health insurance premium trends and price variation among healthcare providers. The Division clearly exerted a great deal of time and effort to produce these reports and I look forward to a fully examining them along with the MHA staff.
But there are significant issues with some of the conclusions being drawn from these reports. No one, particularly hospitals, is arguing against the urgent need to do something about escalating healthcare premiums. But I am deeply concerned that a well-intentioned effort to "do something" about this problem could lead to over-simplification of this extremely complicated situation and result in innovation-killing restrictions on hospitals and other healthcare providers.
The Governor often cautions against the notion that the complexity of the healthcare system should stop leaders from taking action. He makes a fair point. But it's equally true that it would be a grave mistake to ignore or underestimate what is in reality an amazingly complex system. Concern with complexity leads to inaction, while underestimating it leads to wrong action. The correct path runs between the two poles and the dramatic changes and improvements that hospitals and others are undertaking across the healthcare system proves the point.
Although the DHCFP reports use the most recently available data, it's important to note that this information may not reflect hospitals' current reality. The report about provider payments is also based on just 32% of private insurance inpatient payments to hospitals. This use of potentially outdated information and reliance on such a small subset of payments places limitations on what conclusions can be drawn. Simply put, some of the most controversial issues raised in the reports will actually require additional data and analysis to validate or disprove them.
The report on healthcare price variation also aims to shed light on the consequences of the state’s chronic underpayment to hospitals for the cost of caring for patients in public programs such as MassHealth, but it unfortunately misses the mark. Neither providers nor insurers have stated that government underpayment is the sole driver of escalating premiums, only that it is a significant contributor.
The Division's report also inaccurately states that there is no evidence that higher private payer prices are needed to compensate for losses incurred by servicing Medicaid patients. The Division comes to this false conclusion through its finding that hospitals with the largest share of public payer revenue do not have the highest private sector payments. Each hospital in the commonwealth is different, and unfortunately many of our hospitals that provide care to large numbers of patients covered under public programs do not have the ability to shift the government's underpayment burdens to the private sector due to their market circumstances, such as having a very small proportion of private sector patients. Many hospitals are forced to make do with these losses and this affects hospital employment, facility investment, and services. Many other hospitals have greater opportunities to shift a portion of the burden to private insurance payers, which results in a significant impact upon private premiums.
Furthermore, the report's Medicaid analysis is based on fiscal year 2009 payment rates. While those rates reflect the first year of Medicaid rate cuts implemented by the Patrick administration, more followed in fiscal years 2010 and 2011. And still more cuts are planned for fiscal year 2012. Hospitals also incur additional financial losses related to care for low-income patients due to significant funding shortfalls in the commonwealth's Health Safety Net program. Hospitals alone are responsible for paying for the shortfall, which totaled $70 million in fiscal year 2010 and which we estimate will approach $120 million in fiscal year 2011.
The Division's report on insurance premium trends does point out that medical claim increases are declining, which should have a positive impact on the price of premiums. This trend was substantiated by a report that MHA produced last year that demonstrated hospitals' projected expense trend for FY'09 and FY'10 was "bent" by approximately $3.1 billion. [Our report also noted that at the same time that hospitals were pulling costs out of the system, payments to hospitals for services in those two years were more than $2.4 billion lower than they would have been had earlier cost trends continued.]
MHA and its members encourage informing the public about the about the cost of providing high quality care to Massachusetts patients. But just as there is no single "silver bullet" to conquer costs, neither is there one member of the healthcare community that is single-handedly responsible for causing costs to increase. All stakeholders - hospitals, other healthcare providers, insurers, the business sector, consumers and government -play an important role in mitigating the costs of healthcare. MHA will continue to work with the Patrick Administration, state legislators and other healthcare leaders to take on these difficult issues.