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Health Payment Reform Can Bring Big Savings For Employers, Report Finds

Projected impact of growth scenarios on total employer savings on employer-sponsored health insurance. From "Benefits of Slower Health Care Cost Growth for Massachusetts Employees and Employers" by Jonathan Gruber and Ian Perry. (Courtesy)
Projected impact of growth scenarios on total employer savings on employer-sponsored health insurance. From "Benefits of Slower Health Care Cost Growth for Massachusetts Employees and Employers" by Jonathan Gruber and Ian Perry. (Courtesy)

WBUR's Martha Bebinger reports that under new health payment reform (read cost-containment) plans currently underway in the state legislature, employers could save between $8 and $35 billion over nine years, according to a new analysis by MIT economist Jonathan Gruber.

That translates into direct financial benefits for workers, writes Bebinger:

Gruber says there’s a direct trade off between health care costs and wages. When premiums go up, wages don’t rise as quickly.

“What we’re saying here, by that same logic, is if we can control health care costs workers get more,” Gruber said.

In what Gruber calls a modest proposal, health care costs would increase 5 percent per year, just one point less than the expected 6 percent increase. The savings for employers would be $8 billion over nine years.

Under a more aggressive approach, health care costs would still rise, but only 2 percent per year. Employers would save almost $35 billion or about $1,000 per worker, per year.

“There are large dollars at stake here, from even fairly modest reductions in health care spending growth,” Gruber said. “Now I’m not saying those reductions are going to be easy to get, but the point is that there is large savings to be had here if we can control health care costs.”

Rachel Solem owns two inns in Cambridge and employs 37 people. She says if under these plans she must limit where her employees can get care or hike their co-pays and deductibles, then the savings aren’t so appealing.

“Keeping the cost of premiums down, that’s great. It’s a wonderful idea,” Solem said, “but how is that going to happen? I want to know the reasons and I want to know what kinds of choices we’re going to be having to make to keep those costs down.”

The timing of the report isn't coincidental. The backstory is here:

Which comes back to the reason this report, funded by the Blue Cross Blue Cross Shield Foundation, is important now. The House and Senate are both expected to release bills in the next few weeks that will establish a target for cutting health care costs. Some employers, including Stowe, are pushing for an aggressive target, but other employers in the state’s health care sector are holding up a big flashing “caution” sign.

“We go too fast, we will all live to regret it,” said Lynn Nicholas, president of the Massachusetts Hospital Association. Nicholas doesn’t know how many jobs hospitals might have to cut if health care spending grows at a lower rate.

“But we do know that as hospitals have taken billions of dollars out of their expenses over the last couple of years, most of that has come in labor,” Nicholas said. “That’s where the pinch will be felt most of all.”

This program aired on April 26, 2012. The audio for this program is not available.

Rachel Zimmerman Twitter Health Reporter
Rachel Zimmerman previously reported on health and the intersection of health and business for Bostonomix.

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