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Kennedy's Dream Came True, But Healthcare Cost Troubles Remain

Joe Cantlupe, for HealthLeaders Media, March 24, 2010

Months ago, when healthcare reform was still only a mere possibility, I picked up a copy of Ted Kennedy's True Compass, the autobiography of the controversial Massachusetts senator, in which he detailed his passion for sailing—and working toward healthcare reform.

Kennedy, the late Massachusetts senator, had embarked on that crusade after a 1964 plane crash left him with debilitating injuries and a long convalescence. Like his presidential ambitions, Kennedy's journey to overhaul the healthcare system fell short. He died last August, months before his dream of landmark legislation became a reality this weekend.

If Kennedy were still alive during the Senate debates, I bet he would have taken the occasion to mention what was going on in his home state, where the Massachusetts Division of Health Care Finance and Policy was conducting hearings a few weeks ago about exorbitant insurance rate hikes.

The session was overshadowed by the goings on at the White House and Congress, but the Massachusetts issue may have been a true compass, in itself, laying the groundwork for what is going on nationally in healthcare. Massachusetts was one of the first to dip its toes into the waters of healthcare reform.

Massachusetts is still grappling with high insurance rate hikes, and that's what is going to happen in the rest of the country despite the healthcare legislative victories for the Obama Administration over the weekend.

Rate hikes get people's attention. And it was no different during the Massachusetts hearing, when one of the most remarkable statements was made early on by Eric H. Schultz, president and CEO of Harvard Pilgrim Health Care. Schultz said that some physicians and hospitals in Massachusetts are paid upward of 300% to 400% higher for some services compared to others.

"The variations in overall reimbursement to hospitals can also be as high as 300%, but the difference when comparing facility inpatient rates or outpatient rates can be as much as 300 to 400%," Schultz said in a written statement. "The difference in rates between the lowest reimbursed physicians and the highest can be as much as 300% for the same services. Some physician and hospital networks are paid well in excess of 200% of Medicare."

The hearing appeared to reaffirm much of what Massachusetts Attorney General Martha Coakley has emphasized in her health marketplace investigation. "Increasing reimbursement rates demanded by providers for medical services, and the trend toward providing care in more expensive settings are the primary drivers of increasing healthcare costs, increases that are reflected in premiums," she said.

The politics of providing care is a part of the problem, both in Massachusetts and across the nation. "Political leverage affects prices that Medicare pays," said Nancy Kane, professor of management and associate dean of educational programs at the Harvard School of Public Health, referring to the national picture and a proponent of payment reform. "Much of the long-term increase in healthcare costs is attributed to new technologies, some of which add great value and others of which are of dubious value. Unfortunately, it is often not obvious which technologies fall into which category," she said.

Testimony was elicited by Massachusetts officials that focused on problem healthcare cost areas, such as questionable administrative expenses among insurers; too costly physician groups, specialty departments in hospitals, and radiology imaging centers; increased specialty drugs, and too many duplicative services within the same geographic area in what was sometimes dubbed a "medical arms" race. These were about healthcare rationales for increases described in Massachusetts, but could have been said about any place across the country.

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