Advice To The Next President: Health Care Cost Containment

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As anyone following the 2012 election knows, Massachusetts has served as a model for the expansion of health care coverage nationally. The Bay State's 2006 universal health care law (sometimes called “Romneycare”) was famously the prototype for the Affordable Care Act (a.k.a. “Obamacare”).

Now, Massachusetts could become the standard bearer for how to get costs under control. In August of this year, state lawmakers passed landmark legislation aimed at containing rising health care costs.

In a discussion held just days before Tuesday's election, four veteran observers of and participants in Massachusetts' ongoing efforts to provide universal health care access at affordable prices — David Seltz, James Roosevelt Jr., Regina Herzlinger and Stephen D'Amato — offered their advice to the next president.

David Seltz is a special adviser on health care cost containment to Gov. Deval Patrick. Previously, Seltz worked as senior health care policy adviser to Massachusetts Senate President Therese Murray. The views expressed here are his own.

Since the 1970s, U.S. health care costs have grown 2-3 times faster than the economy as a whole. We now pay almost twice as much for health care as the rest of the industrialized world, and our health outcomes are no better. In fact, by many measures, they're worse. Health care costs have grown so much that the next president could effectively solve much of our federal deficit crisis by getting health care costs under control.

Health care costs have grown so much that the next president could effectively solve much of our federal deficit crisis by getting health care costs under control.

Massachusetts' new health care reform law — the most ambitious statewide effort in the nation to contain health care costs — went into effect on Nov. 5. It places a global cap on the growth of health care costs. For the next five years, the goal is to cap the growth of health care costs to at the percentage of growth in the state's economy, projected to be 3.6 percent in 2013. From 2018-2022, the annual growth in health care costs is targeted at 0.5 percent less than the growth of the state's economy.

The new law uses an "all of the above" approach to wring costs out of health care without compromising quality. It reforms payment and delivery systems to make them more efficient. It expands the primary care workforce. It increases scrutiny of insurance rates and of price variations caused by providers that dominate their regional health care market. And perhaps most importantly, it invests in wellness and prevention programs that have the greatest potential to reduce costs in the long-term.

There's no magic solution to rising health care costs. But by guaranteeing near-universal access to health care and by working on many fronts to limit costs across the board, Massachusetts provides a model that the next president and Congress can use to solve the nation's health care cost problems.

James Roosevelt, Jr. is president and CEO of Tufts Health Plan and chairman of the board of the Massachusetts Association of Health Plans.

At Tufts Health Plan, over one-third of our business is already done through global payments that reward providers for keeping patients healthy. With extensive prevention and wellness provisions in the plan for our own employees, last year we effectively had no increase in costs. The changes we've begun making in Massachusetts are working.

The Affordable Care Act does not go far enough on cost containment.

Massachusetts has long had one of the finest health care systems in the country. For the last six years, we've found ways to guarantee health care access to virtually all our citizens. More recently, we've begun to control costs to the point where Massachusetts health insurance premium costs have dropped from first — to ninth in the nation.

As President Obama implements the remaining provisions of the Affordable Care Act (ACA), he'll have to continue to address rising health care costs. The ACA makes a good start but it does not, in my judgment, go far enough to control costs. Based on our experience here in Massachusetts we know that it takes time, hard work, and perseverance to deliver high quality care at affordable prices – but, we’ve learned that it can be done.

Regina Herzlinger is the Nancy R. McPherson professor of business administration at the Harvard Business School and has been called the "godmother of consumer-driven health care."

President Obama should make transparency his priority.

Right now, you can get more and better information about the quality and price of a container of yogurt than you can about the quality of a surgeon's work compared to his or her peers — or the price of a medical test or procedure.

Transparency in health care leads to better outcomes at lower costs.

When consumers have access to reliable information about price and quality, their choices lead to lower prices and better quality. We see this for example with Lasik eye surgery. Because it's optional, consumers are spending their own money. Because they're spending their own money, they care about quality and price. As a result, in recent years the quality of Lasik has improved, while the cost has decreased by about 30 percent.

The powers-that-be in the health care industry oppose transparency. (So do the powers-that-be in almost any industry. Nobody particularly likes to be evaluated and held publicly accountable.) But we have evidence from numerous studies — both in the United States and elsewhere — that transparency in health care leads to better outcomes at lower costs.

During the Great Depression, despite near-universal opposition from the business community, President Franklin D. Roosevelt created the Securities and Exchange Commission. The SEC's record as a regulator is debatable, but its record of requiring transparency about corporate finances is not. To this day, the U.S. has the safest and most efficient capital markets in the world because of the SEC's transparency mandates.

Measuring health care costs and outcomes may be more difficult than calculating dietary information for a container of yogurt, but that's no reason not to do it.

Stephen D'Amato is a health care advisor to the Massachusetts inspector general and a former director of the State Rating Bureau of the Massachusetts Division of Insurance. He co drafted the Workers’ Compensation Reform Act of 1991.

Why settle for cost containment that merely slows the rate of growth of health care costs? I'd encourage the next president to aim higher – to try to achieve cost reduction.

In 1991, workers’ compensation insurance rates in Massachusetts were 92 percent higher than they were just four years earlier. Then the insurers requested an additional 46 percent increase. In the ensuing uproar (and with the strong support of the business community) then-Gov. Bill Weld and the state legislature passed a comprehensive set of reforms aimed at freezing the rates for one year and reducing them over time.

Why settle for containment? The president should aim higher –- he should try to achieve cost reduction.

Today, workers’ comp rates in Massachusetts are 67 percent lower than they were 20 years ago. That's because we changed the system by rewarding employers who adopted return to work and safety programs, streamlined the resolution of claims and established a funding mechanism to help employers hire innovative cost control firms. The statewide business community played a crucial role in mobilizing political support for those reforms – and the national business community could play a similar role.

Finally, investing in wellness and prevention programs is the key to unlocking the door to health care savings. It's much cheaper to pay for smoking cessation programs than it is to treat lung cancer and other smoking-related illnesses. Effective weight loss programs and nutrition education initiatives cost far less than treating diabetes. Subsidized exercise programs can generate significant savings in cardiac care.

I'm not suggesting that we should expect health care costs to drop by two-thirds in the next two decades. But given that the United States has by far the most expensive health care system in the world, I am suggesting that by eliminating waste and inefficiency, we could achieve huge reductions in our health care spending and dramatic improvements in the health and productivity of our workforce.


  • WATCH video of these lectures — plus a Q & A with David Seltz, James Roosevelt Jr., Regina Herzlinger and Steve D'Amato — here.

This program aired on November 8, 2012. The audio for this program is not available.