While the Affordable Care Act still requires people to buy health insurance, the Republican tax bill signed into law late last year zeroed out the penalty for failing to buy insurance. R.I. Health Insurance Commissioner Marie L. Ganim fears that change will result in higher premium costs for all due to having fewer younger, healthier people in the risk pool.
Ganim spoke during the second of two panels at the 2018 Spring Providence Business News Health Care Summit at the Providence Marriott Downtown on April 6. Discussion was dominated by such cost-of-care concerns, including the promised savings from mergers such as the CVS Health Corp.-Aetna Inc. deal and alternative payment models aimed at the heart of medical costs themselves.
Panelists were interested in fixing the underlying causes of cost, as well as repairing what some see as legislative sabotage to the ACA.
Al Charbonneau, executive director of the Rhode Island Business Group on Health, noted that much of the care provided by the ACA was made affordable through subsidies, not through direct management of the cost of medical services and supplies.
“I hope we come up with cost-effective solutions, because otherwise, we’ll simply be hiding the premium,” Charbonneau said. In 2006, he said, those premiums were 17 percent of median family income. In 2016, he said, they were 22 percent.
“I think not only is reform likely, I think it’s necessary,” said David Burnett, acting chief operating officer for Neighborhood Health Plan of Rhode Island, when asked his take on the prospect of further changes to the system.
In the case of mergers as a source of cost management, panelists were skeptical. A recent spate of proposed mergers of health care systems, such as Partners HealthCare’s acquisition of Care New England and pharmacy-benefits managers and insurers, including the CVS-Aetna proposed merger and Express Scripts Holding Co.’s merger with Cigna, have been billed as a means of cost control.
Dr. Martin Serota, chief medical officer of Northeast markets and health services at Prospect Medical Systems, said CVS Caremark, which already enjoys considerable market power, has yet to prove itself in reducing costs.
“They haven’t been very effective at reducing health care costs,” he said.
Serota said health-system mergers can also work against cost control by reducing competition among providers. He pointed to the example of California, where he said there were three providers competing in the northern part of the state, with 10 competitors in Southern California.
“The net result of that is the prices in Northern California are 30-40 percent higher than Southern California,” Serota said. “That’s strictly based on competition. There’s no improvement in quality in Northern California, there’s no improvement in access,” he said.
Ganim was also skeptical that merging hospital systems will reduce costs, pointing to a Feb. 4 study by Balit Health commissioned by the R.I. Office of Health Insurance Commissioner. The study showed CNE’s financial losses would likely inspire Partners to find ways to increase revenue, threatening the affordability of Rhode Island’s commercial health insurance premiums. She said such acquisitions aren’t proven methods of cost control.
“There is no evidence that this happens,” she said.
‘If you were to capitate primary care, a lot of waste would go right out the window.’
AL CHARBONNEAU, Rhode Island Business Group on Health executive director
Reducing low-value care, such as unnecessary testing, Charbonneau said, is a good area to hunt for cost savings. He noted separate reports by health policy journal Health Affairs and the Washington State Health Alliance that found $586 million in low-value care in Virginia and $282 million in Washington State, respectively.
“It’s a big, big-ticket item,” Charbonneau said.
Ganim agreed, but cautioned that once wasteful care is eliminated, medical care itself is still very expensive, and that is continuing to increase.
“The medical costs are [what they are] and unless you address this, you’re not going to affect premiums,” Ganim said.
Dr. Peter Hollmann, chief medical officer for Brown Medicine, concurred, saying the bulk of health care spending is on treatment that people need and that makes a difference in their lives.
Serota drew the conversation back to alternative payment methods mentioned in the beginning of the summit. Capitation, giving physicians a set amount of money for every patient they care for, is an effective cost-control method. “Capitation does work,” he said.
Charbonneau was also optimistic about capitation. “If you were to capitate primary care, a lot of waste would go right out the window,” he said.
Charbonneau also pushed for more information on how medical care is being paid for in the state, referencing Rhode Island’s All-Payer Claims Database, which some summit panelists said has yet to live up to its potential. The database provides some information but has yet to produce detailed yearly reports such as the ones Massachusetts enjoys from its system, Dr. Alan Kurose, president and CEO of Providence-based Coastal Medical Inc., pointed out during the day’s first panel.
“The way it was sold was that people would be able to use it to shop,” Charbonneau said.
