May 18, 2012 | 1:00 PM |

Deval Patrick On Health Reform: Not Persuaded Hospital ‘Luxury Tax’ Needed

FILED UNDER: Medicine/Science

Governor Deval Patrick addresses members of the Greater Boston Chamber of Commerce Tuesday (Photo courtesy of the Chamber)

Gov. Deval Patrick spoke on health reform today at MIT’s Sloan School of Management, and acknowledged with lovely candor afterward that he pretty much repeated what he’d said earlier this week at the Chamber of Commerce. But the moment offered a brief chance to try to clarify a bit further what WBUR’s Martha Bebinger wrote about yesterday: That the governor says that the attorney general already has the tools to address a problem that Martha described with excellent punch: “What to do about hospitals that charge three, four or five times more for an MRI (and hundreds of other services) with little or no difference in quality.”

I asked the governor today about such price disparities. Our conversation:

You’re talking about the differences between what some of the downtown medical centers and the community hospitals charge for similar — I would say similar and routine procedures. And that’s a concern. Now some of that is addressed by greater transparency and making sure that people know what the charges are.

On the hospital ‘luxury tax’: ‘I haven’t been persuaded yet that that’s something we need.’

Of course, I point out I had a hip replaced a few years ago and you could go online and see the difference between what the cost of that hip replacement would be at a community hospital or the downtown medical center where I had it done. but in either case my co-pay was 100 bucks; so –

no skin. [My reference to the annoying health-policy phrase that it is hard to control costs when patients have "no skin in the game" financially.]

No skin. So I think transparency is a part of the solution but we also have to think about how it is we encourage people to make more economic decisions.

What about the role of government?

I think there is a role of government. That’s all part of this soup we’re working on right now, right? What are the different elements…I don’t think we have to do it through price control. I know that’s a debate out there, but personally I don’t think we have to do it through price control. I don’t think we have to because we have so many well-intended participants in this market who get that we have to make this whole thing work.

Or the kind of surcharge in the House bill? [The House health reform bill proposes a 10% tax on hospitals whose prices are 20% above the median for services.]

You’re talking about the luxury thing — I think that’s what they call it, the luxury — I haven’t been persuaded yet that that’s something we need. Now, as I said at the Chamber and I’ll say it again, the Attorney General has tools to address market power, and I expect that she will use them.

End of conversation. Hmmm. I’m not sure Attorney General Martha Coakley, who has repeatedly called attention to the problem of hospitals charging higher prices because they have the market clout to get away with it, actually agrees that her tools suffice. Martha Bebinger posted a statement from Coakley’s office that included this:

While it is true that our office has law enforcement tools at our disposal, law enforcement is just one of many mechanisms that must be used to ensure a competitive marketplace. There are many actions that may not rise to the level of an anti-trust violation, for instance, but that still may not be in the best interest of a healthy market. We believe a better mechanism should be in place – one that better tracks data about market consolidation to identify problems early and then is able to act on that data short of involvement by law enforcement.”

  • Roger

    The market behaviors that have resulted in huge price disparities, are not necessarily related to violations of the Sherman Anti-Trust Act or 93A violations or anything that the MA Attorney General can take action on.  Brand, and geographic/access factors have played a huge role in prices spiraling at powerful systems and hospitals over the past decade. Governor Patrick’s attempt to chalk these price disparities up to inappropriate comparisons between community and academic providers is deeply disappointing and concerning. The detailed reporting put out by his staff and the AGO over the past 2 years, has made it clear that comparing LIKE hospitals and services still shows disparities where the “haves” enjoy prices that are 40%-80% higher than their similarly situated competitors. There are even 10-12 community hospitals that have prices that are far higher than some urban teaching hospitals.  A decade of those disparities have funded huge war chests that will now be used to finish off the lower priced competitors.  How does this reduce healthcare costs?  

    I can only guess that the Governor, a member of the President’s re-election committee, is more interested in checking the “contained healthcare costs” box and scoring points to serve his federal ambitions than he is in doing the right thing here in Massachusetts.  Of course, he’ll be long gone when the consequences hit all of us and his policies fall far short of his promises.

    • Reasonable?

      Roger, I agree with you analysis about the War Chest of established interest.
      But the established interests are cloaked by regulations that protect them from compeition.
      Measuring quality and cost is how the established interests can be uncloaked along with sensible deregulation.

      See today’s Daily Rounds post about vaccinations.  You can get vaccinated at Pharmacy in MA instead of going to a doctors office.  That saves consumers money and if the records are electronic and given to the state registry, quality doesn’t drop. There are myriad of other innovations that can cut costs, but each requires a little degulation and claiming of the alarms by vested interests.

  • Reasonable?

    I agree with the Govenor.  Cost control is a bitter pill and not necessarily a cure.
    I think it would be better to deregulate the insurance market to allow innovation in the insurance payment structure.

    Our health care system doesn’t seperate the cost of preventatable condidtions from unpredictable mishaps, yet we heave th data to make this distinction.

    There is not just skin missing in the game, but also flesh and bones.

    We know that pre-diabetes, obesity, and high cholesterol can largely be reversed with lifestyle changes, but there is no incentive expressed in the current insurance system for consumers to aggressively purpose a preventive strategy. 

    Instead relatively healthy and relatively unhealthy healthcare consumers alike are pooled together and chip into towards the esclating cost of chronic disease treatment that more often delays disese progression instead of curing or even reversing the condition.

    We are paying for the wrong kind of health care.

    Unfortunately the kind of the health care that is financially sustainable at the societal level, will not be compatible with with current margins of hospitals and insurers….even without cost controls.  Hospitals and insurers are logically fighting/lobbying to delay this inevitability.

    So the challenge is this: “How do we shrink and change this industry without inadvertently destroying it?”   I say change the incentives and let the market work.

    It’s likely that the June the rest of the country will join at the state level in tackling this problem, which is the capstone problem of this Ameican generation.