May 15, 2024
The Honorable Aaron Michlewitz
House Chair, Committee on Ways and Means
24 Beacon Street, Room 243
Boston, MA 02133
RE: H.4643 – An Act Enhancing the Market Review Process Dear Chairman
Dear Chairman Michlewitz:
On behalf of the Employer Coalition on Health (ECOH), a coalition of trade associations and employers concerned about the growing unaffordability of health care in Massachusetts, I write to offer our comments on H.4643 – An Act Enhancing the Market Review Process. While we appreciate and support lawmakers’ efforts to improve market oversight in light of Steward Healthcare’s financial woes by providing regulators with more authority, we urge you to make health care affordability a primary focus of your legislative efforts and not miss this opportunity to enact health care reforms that will address cost.
As you are aware, Massachusetts is suffering from its high-cost structure, losing many of our young residents to lower cost states that can offer them a more affordable lifestyle. High health care costs are among their top three concerns according to a recent Boston University study. Employers are also reeling from the effects of inflation; skyrocketing health care costs that far exceed the rate of inflation and wage growth compound these financial challenges and impede employers’ ability to hire additional workers or invest in their businesses.
ECOH applauds the House’s effort to identify and advance meaningful steps to improve the affordability of health care for Massachusetts families and employers or risk further erosion of our workforce and economic base. But as currently drafted, H.4643 misses important opportunities to meaningfully address health care cost drivers and risks exacerbating unsustainable trends in the Commonwealth. We outline below six concerns with the bill as drafted and offer suggested amendments to address them.
1. Provider Rate Floor Without a Rate Cap Ensures Health Care Costs Will Skyrocket
The most impactful provision in H.4643 concerns provider rates. As currently drafted, the language creates a rate floor with no corresponding rate ceiling on the highest paid providers, adding sizable new cost by effectively creating a “rising tide that lifts all boats.” While we support measures that will compress price variation, this approach accelerates rate inflation, fails to address price variation in a cost-effective way, and will result in higher costs for employers and consumers purchasing health insurance. Estimates indicate that this change could add more than $300 million in additional costs over the 12-year rate phase-in for this provision alone.
To make consequential progress on health care affordability, any changes to the method for determining provider rates must occur within the confines of the healthcare cost benchmark. To do otherwise renders the health care cost benchmark meaningless.
We urge that rate increases for low-paid providers be accompanied by a corresponding decrease in rates to the highest paid providers to offset the additional spending.
2. Composition of the Health Policy Commission Must Include Purchasers
The Health Policy Commission was created as part of Chapter 224 of the Acts of 2012, a law focused on reducing health care costs. It was the necessary follow-up to the landmark health care reform law of 2006 and a key component for winning employer support for the access expansion that Chapter 58 provided. The HPC was created as an independent state agency charged with monitoring health care spending growth in Massachusetts and providing datadriven policy recommendations regarding health care delivery and payment system reform. The HPC’s goal was and remains better health and better care – at a lower cost – for all residents across the Commonwealth.
The proposed changes in H4643 to the Health Policy Commission undermine its very purpose and diminish its effectiveness. The bill eliminates a dedicated purchaser seat, instead stacking the commission with health care providers and other stakeholders vested in the current delivery system. This dilutes focus on the very purpose of the HPC – affordability – while making it far less likely that the HPC will take bold action to address the health care cost drivers. We urge you to amend the composition of the HPC to have stronger representation for health care purchasers, particularly those purchasing in the fully insured commercial market.
Paying HPC commissioners and eliminating the conflict of interest provisions that currently govern the body are also problematic and we urge you to delete them from the final bill.
3. Strengthen the Annual Healthcare Cost Benchmark
H.4643 proposes several changes to the health care cost benchmark that are unnecessary and may be counterproductive. When the cost benchmark was first established, there was considerable debate about where it should be set initially. Employers strenuously advocated that the cost benchmark should be about lowering health care costs given the ample evidence that 30% of healthcare was unnecessary, inappropriate, or harmful. Providers prevailed and regulators made the benchmark a cost growth measure. Despite this more generous target, total medical expense (TME) has exceeded the benchmark for several years with little consequence for those who don’t adhere, calling into question the benchmark’s effectiveness and purpose.
The provisions in H.4643 add another layer of oversight with the creation of the Technical Advisory Committee. Despite statutory language requiring that the executive director ensure the committee reflects a diversity of expertise in health care providers, purchasers and consumer advocacy groups, none of the Committee’s 16 members’ seats are devoted to purchasers.
Purchasers will compete with experts in health care delivery, health care economics, health data analysis, clinical research and innovation in health care delivery for five of the seats. In contrast, MHA, MMS, MassBio and other stakeholders each have a designated seat. The Technical Advisory Committee can recommend increasing or decreasing the annual cost benchmark by one percent. Given the proposed composition, it is likely to favor increasing the annual cost benchmark, adding to overall healthcare cost growth.
We support providing the HPC with stronger tools for ensuring adherence to the annual health care cost benchmark. Having greater purchaser representation on the HPC will prompt action on the abundance of data indicating what the cost drivers in health care are – unit prices and overutilization, and the growth of the pharmacy spend.
4. The Proposed Affordability Standard is Impossible to Meet Given the Rate Provisions
ECOH is urging real and meaningful action on improving health care affordability, however, we oppose these provisions because it is at odds with the mandatory rate increases contained in this bill. Insurers will be put in the untenable position of having to pay higher rates to all providers while being subject to an affordability of insurance premiums standard, that at best is unattainable, or at worst actuarially unsound.
Instead, the state should be focusing its efforts on the cost drivers of health care – unit prices and pharmaceutical costs – as indicated by the HPC.
5. Creation of a new Department of Health Insurance is Unnecessary
Rather than create a new agency, the legislature should increase the effectiveness of the existing state agencies – by acting on HPC data and insights published annually.
Health Insurance is already heavily regulated, making the creation of another state oversight agency redundant and an unnecessary use of taxpayer dollars. As you know, federal and state law subject health insurers to close scrutiny, requiring that 90% of health insurance premiums be spent on the underlying cost of care or refund the difference to purchasers.
Finally, the volatility of tax revenue collections and the growing spending demands warrant fiscal caution. Moreover, funding this new agency through assessments on health insurers or providers, are passed on to employers in the form of higher premiums, and will add to the cost of care.
6. Pharmaceutical Costs are Not Addressed.
As the HPC has made clear for the past several years, a growing portion of the healthcare spend is devoted to pharmaceuticals. Yet pharmaceutical companies and pharmacy benefit managers are not subject to HPC’s oversight or required to participate in the annual health cost trend hearings. We support provisions to make the health care system more transparent, including subjecting non-hospital provider organizations to the same scrutiny to which providers and health insurers are held and urge you to add pharmaceutical companies and pharmaceutical benefit managers to the list of entities that must be accountable for their spending growth.
Thank you for the opportunity to provide comments. I look forward to collaborating with you on improving health care affordability for the residents of the Commonwealth.
Kind Regards,
Eileen McAnneny, Esq.