Better ways to control costs than ‘affordable health plan’

Shaken by ever-rising health care costs, businesses large and small are reacting.

The U.S. Chamber of Commerce said it plans to challenge the new federal health care reform law because of its cost to big companies, many of which are taking write downs from losing a tax deduction on prescription drugs. Small businesses are being socked with huge premium hikes and are worried about the individual mandate and fines for not offering employees insurance.

Here in Massachusetts, the focus on containing costs has been intense. The state’s Health Care Cost and Quality Council issued its Roadmap to Cost Containment last fall. The Special Commission on Payment Reform has recommended moving to global payments for providers.

In March, the Attorney General released its Examination of Health Care Cost Trends and Cost Drivers, pinpointing “market leverage” by hospitals and providers as a major cost driver. Also in March, the Division of Health Care Finance and Policy held three days of “health care cost trend hearings,” where public and private sector experts and executives of all kinds testified under oath.

Small businesses are getting special attention because of the economic impact they have on the state. (Close to 90 percent of Massachusetts employers have fewer than 11 full-time equivalent employees.) Among proposed remedies, Governor Deval Patrick has announced a multiple-step plan, and the Division of Insurance held public hearings across the state last month just for small businesses.

One month later, the Division turned down 235 of 274 proposed increases by insurers for small businesses and individuals, saying they were excessive and “unreasonable relative to the benefits provided.” Insurers followed by filing suit.

One legislative proposal, however, has drawn strong opposition from physicians.

Senate Bill 2170, filed by the Massachusetts Association of Health Plans, would create an Affordable Health Plan for businesses with fewer than 50 employees. While the bill may sound well-intentioned, it unfairly burdens physicians while having minimal meaningful requirements for insurers.

The bill – which would be repealed on Jan.1, 2013 by a separate measure pending in the House – has two major failings.

One is that it ties a physician’s license to practice medicine to participation in this plan. The purpose of licensing, in any profession, is to ensure competency and protection of the public. No law should require physicians to follow the dictates of a health plan or risk the loss of their license. Physicians have a right to renew their professional license, and this right cannot be taken except for cause and after due process.

The Board of Registration in Medicine should not be mandated to revoke any qualified physician’s license on the basis of a contractual relationship with any insurer. Even Medicare and Medicaid do not make participation a condition of licensure.

A second failing is the bill’s rate-setting provision, which requires providers to accept as payment 110 percent of Medicare rates for those covered by small business policies. Aside from basic concerns of rate setting by the state, this provision links payment to a broken formula and to a system the state does not control.

The basis for Medicare reimbursement has been the Sustainable Growth Rate (SGR) formula, created by Congress in 1997. Federal lawmakers have struggled for years to correct it. For eight years, the SGR has called for cuts in physician reimbursements, only to be reversed by last-minute fixes. It’s happening again this year.

For physicians, Medicare payments have been a losing proposition. Over those last eight years, reimbursement rates have been flat, but the cost of running a medical practice is up over 20 percent. Medicare typically pays less than private insurers, and that’s causing more physicians to give up their practices. This is particularly true in rural areas. Medicare reimbursements have become so troublesome that the Mayo Clinic, once praised by President Barack Obama as a national model for efficient health care delivery, stopped accepting Medicare patients in Arizona as of Jan. 1 in anticipation of the cut. The government pays too little, the clinic said.

Better approaches than Senate 2170 exist to provide relief and cost savings. A system of community ratings, where risk is shared by larger groups, is one. Attacking waste and fraud in Medicare and Medicaid and cutting insurers’ administrative overhead are others. Instituting liability reform, to reduce the expensive practice of defensive medicine, would have impact.

There’s one more reason to avoid this approach. The quality of health care depends on the providers who deliver that care. The physician workforce in Massachusetts has been under considerable stress for several years, experiencing shortages in many specialties, most notably primary care. Recruitment and retention of physicians have been difficult.

While many physician practices are small businesses themselves and are also affected by rising premiums, putting additional financial and administrative burdens, even if only “temporary,” on a workforce already stretched to the limit is a poor prescription for Massachusetts health care.

Mario Motta, M.D. is the 2009-2010 president of the Massachusetts Medical Society.