Cost Of State-Subsidized Health Care Holds Steady

The state's health coverage law is getting a much-needed shot in the arm. The cost of state subsidized coverage is coming in lower than expected because health plans that provide this coverage have agreed to hold rates flat next year.

The savings are critical to keeping the law affordable for individuals and the state. But tamping down rates in one part of the insurance market may push rates up for residents who buy private health plans.

WBUR's Martha Bebinger has more.

A zero-percent increase in health insurance rates sounds like an oxymoron. But health plans that provide coverage through the state's subsidized health insurance program, Commonwealth Care, have submitted bids that would essentially hold rates flat for contracts that begin July 1st.

PATRICK HOLLAND: I think the plans have had more time to go back and revisit their provider contracts and potentially get a better deal.

Patrick Holland, the Connector Authority's CFO, negotiated these lower cost contracts with five health plans that offer free and subsidized coverage. In addition to holding down payments to doctors and hospitals, Holland, says the health plans are also getting better at managing the cost of these newly insured residents, many of whom have chronic diseases.

HOLLAND: All these plans have been putting together good, robust programs around specific disease states, you know, classic care management and I think that's starting to bear some fruit.

RICK LORD: For the Commonwealth that means health care reform in 2010 should remain affordable.

As a member of the Connector board, Rick Lord is relieved to see the cost of Commonwealth Care under control. But Lord is also the CEO at Associated Industries of Massachusetts, where the rising cost of health coverage is a big issue.

LORD: Small employers are still seeing increases in the 8-10% range. In this environment, those are difficult for employers to afford.

And the success of controlling health insurance costs for the state and residents in government programs might rebound in rising health insurance rates for residents with Blue Cross, Harvard Pilgrim or one of the other major private insurers.

It's a pattern called cost shifting. Hospitals and some physicians lose money caring for patients on Medicaid and make up the difference by boosting charges for patients with private health insurance. At a Connector board meeting yesterday director Jon Kingsdale said these new Commonwealth Care rates, which are up for a vote next month, may well trigger another round of shifting costs.

JON KINGSDALE: Until we have, and I'll just go out on a limb here, an all-payer system of some sort, we're going to continue to see more cost shifting. So it's even possible that our good results create more of a burden for some other rate payers.

In the all-payer system that Kingsdale mentions, all hospitals would receive roughly the same payment from both public and private health plans, for, say, removing a patient's appendix. A special commission is considering this model for Massachusetts.

But for now, the gap between what hospitals and doctors receive from public and private insurance plans is growing. The state's Medicaid program, which covers more than a million residents, also expects to hold programs costs flat next year. But Massachusetts' Medicaid director, Tom Dehner, argues:

TOM DEHNER: That dynamic is oversold. The problem is less about what the public sector payers are paying and more about certain hospital systems with market leverage that are able to use it to their advantage.

That's using their leverage to demand higher payments that then drive up health insurance premiums. It's not something Commonwealth Care members will have to worry much about next year. Individual premiums, based on these new contracts, have not been set yet.

But members, like Helena Fruscio, an artist in Pittsfield, can expect to pay just a dollar more or less than her current $39-a-month premium.

HELENA FRUSCIO: I am shocked actually, I'm so glad. I would be in quite rough shape if I had to pay more than this. I think it's so affordable and important to single individuals like me and also a lot of families that I know.

The total cost for Commonwealth Care may well still rise above the $880 million in Governor Patrick's proposed budget if the economy continues to slide. That number is based on adding about 10,000 more members than are currently enrolled. Some of those new members will likely enroll in insurance provided, for the first time, through Caritas Christi.

The Catholic hospital chain is partnering with a for-profit insurance firm to increase patient volume by offering health coverage.