Healthcare battleground?

Governor Patrick has taken a strange turn in the gubernatorial race, attacking Charlie Baker on health care costs. Patrick's website touts that he "call[ed] out" Baker for "opposing limits on rising health care costs." Patrick blamed rising health care premiums for "choking job creation in our state" and therefore asserted that Baker (and Tim Cahill) are no on the side of small business. The web posting dinged Baker for being CEO of Harvard Pilgrim at a time of rising premiums (which Patrick sites as having grown 131% in the last ten year, and for opposing Patrick's plan to give the Commissioner of Insurance the power to cap premiums.

Baker's team responded in an email saying Baker remains "proud of his record as the head of Harvard Pilgrim Health Care" and noting HPHC "has been the number one health plan in the country for member satisfaction five years in a row." Baker reiterated his past support for "transparency in health care pricing." Baker dismissed Patrick's attack as "last-minute, election year proposals and frantic attempts to avoid his record of increased spending, tax hikes and mismanagement during our fiscal crisis."

Patrick's late populism is transparent and disingenuous. Anyone who believes that health insurance premiums can be capped without health care coverage being reduced is deluding themselves. This is simple logic. I refer to the cost of identifying a condition and treating it, including all professional fees, device expenses, etc. as "real health care prices." If real health care prices are increasing, premiums must increase as well. If premiums are not allowed to rise, insurers will find that they are or are threatened with paying health providers more than they are receiving from patients. That will leave two options: 1) decrease coverage (meaning that while your premiums are lower, you're out of pocket in the case you need care is higher) or 2) cease operating. If you consider proposals at various levels to require health insurers to provide specific coverage minimums, option 1 may not be an option, leaving only option 2.

In short - capping premiums is a non-starter from a purely economic standpoint. It is hollow, a Potemkin village trying to fool voters into thinking they will save money, when in fact that will never happen.

The central questions are why real health care prices are rising and what we can do to stop it. Why prices are rising is the more interesting question. As pointed out in an article several months ago (that will be posted when found), increased health care costs do not come out of the blue. Health care is vastly different than it was a decade ago, let alone forty or fifty years ago. Gene therapies that were science fiction now actually happen, saving and improving lives. Procedures that were once exotic are now routine -- transplants, in vitro fertilization, etc. New and transformative medical devices, including methods of re-growing organs from a donor's own reverse-engineered stem cells, are in the works. But all of these things cost money. Sure, a few stitches probably shouldn't cost much more today than it did ten years ago (adjusted for inflation), but if the new coverage menu includes, for instance, a pace maker, and that pace maker wasn't on the menu twenty years ago, then you have to expect to pay a little extra for the comfort you're getting that you'll get the pace maker if you need it. Add up all the new things that you might get if you need it, and that could be thousands of incremental cost increases. The relevant analysis of health care costs is how the costs of procedures that have existed for an extended period have changed, and to an extent how much better a new procedure is than the procedure it replaced, and how much the cost has changed.

In light of these observations, the question how to stop health care cost increases appears inappropriate. The better question -- and the one many market-oriented commentators have been asking -- is how to unpackage health care insurance. Insurance providers are currently required to provide certain coverage to everyone they cover, even if the purchaser could not ever possibly use that benefit. If insurance premiums have risen due in large part due to covering additional procedures, the best way to reduce premiums is to reduce the procedures covered. One obvious reform would be to allow consumers to purchase and insurance providers to sell a la carte coverage, picking and choosing those coverages the consumer wants to pay for (perhaps with a minimum coverage for catastrophic injuries and conditions). This maximizes consumer choice, while simultaneously reducing consumer expense by taking away those incremental increases for coverages the consumer doesn't want.

Baker's statements on this issue ought to be very simple -- Patrick attacks Baker for leading an insurance provider while health care prices rose. So what? For five years running Baker's customers, as a whole, have been the most satisfied in the country. They think they're getting what they pay for. End of conversation.