Questions Surround Proposed 'Luxury Tax' On Pricey Hospitals

House leaders have laid out their long-discussed plan to control health care cost increases in Massachusetts. One provision touches on a controversial issue in health care today — the wide range in prices that different medical providers charge for the same service.

Rep. Steve Walsh, House chair of the Health Care Financing Committee, says this legislation would make hospitals who charge a higher price prove that they're providing a higher quality service.

"And if you don’t show that quality, but you continue to show a higher price, then there’s a mechanism to collect a surcharge on that for the distressed hospitals," Rep. Walsh said Friday.

Under the bill, hospitals that charge more than 20 percent above the median price without showing above-average quality would have to pay what some are calling a 10 percent "luxury tax."

The so-called tax would not go back to the patient who paid the unjustifiably higher price, but instead go to hospitals that treat more poor patients.

The so-called "luxury tax" would not go back to the patient who paid the higher price, but instead go to hospitals that treat more poor patients.

The luxury tax provision has the support of Harvard economist David Cutler. He stresses this would be a one-time transfer payment.

"What do you do when you have hospitals that are in a lot of trouble? They want to compete," Cutler said. "They want to be in this market, but they cannot. [We must] find a way to help them."

But what on the surface looks like taking from the rich and giving to the poor has not gotten such praise from some of the more expensive hospitals. Partners HealthCare, which owns premiere hospitals including Mass. General, says it needs to read the bill before commenting.

"If we’re talking about solving the problem, really solving the problem, then it’s not about one-time funding sources," said Tim Gens, a top executive at the Massachusetts Hospital Association.

Gens stresses that he hasn’t read through the bill yet either, and a lot of this is in the details. But he says this may not be the best way to help hospitals that treat a higher ratio of poor patients.

"The real problem is for those hospitals to be able to address their problems by actually increasing the payments from government programs such as Medicaid and Medicare," Gens said.

But increasing government expenditures for health care is not the point of the new House bill. It’s to lower the amount of money spent on health care.