It’s an election year and candidates are hearing a lot of complaints about the high cost of healthcare. Understandably, policymakers want to do something. No one is more committed to lowering healthcare costs than consumers and advocates. We shoulder the burden of those costs in higher out-of-pocket payments, higher premiums, higher taxes and lost wages because employers have to pay more for premiums every year. Over the years, we have worked collaboratively with the state to lower healthcare costs, especially in Connecticut’s Medicaid program. But the state’s latest attempt to lower costs, the Office of Health Strategy’s Cost Cap, isn’t going to work and could cause serious harm. There are better, more effective ways to lower costs.
OHS is setting a cap on how much healthcare costs can grow starting next year. The cap levels were set this summer by a carefully chosen, small group convened by OHS without legislative or outside input. When costs rise above the very ambitious cap, OHS plans to enter confidential negotiations with high-spending plans and health systems and make a deal to lower costs.
It’s often said that change happens at the speed of trust. The Cost Cap and the process to implement it have undermined Connecticut’s already very low levels of trust in policymaking. Previous decisions by OHS to sell sensitive medical record access and to reduce access to primary care for 25,000 low-income New Haven area residents don’t inspire confidence. Anything developed in secret undermines trust and often causes unintended harm because it’s missing important input from the real world of affected communities.
Advocates are very concerned that cuts will focus on less-profitable, but essential services such as inpatient psychiatric care, primary care or emergency departments. This would meet the OHS goal of reducing costs while also raising profits for large health systems. But communities would lose critical services. It’s not clear that any of the savings from the cuts would ever come back to consumers.
Implementing the Cost Cap responsibly will be very costly. In 2015, the legislature’s non-partisan Office of Fiscal Analysis estimated that tracking and lowering health costs would cost $3.3 million. The budget for the Massachusetts Health Policy Commission that sets their Cost Cap is $8.5 million this year, not including data costs. As Connecticut’s state budget faces massive deficits, there are better uses for the money.
The Cost Cap isn’t necessary to lower healthcare costs. We already have a good deal of information about what it is driving up health costs – skyrocketing drug prices and healthcare consolidation. And we have the tools to control those costs. We just need the political will to use them.
Drug costs are growing faster in Connecticut than any other healthcare sector. Connecticut residents spend more on drugs per person than all but one other state and our rate of growth is higher than all but two other states. This year, the legislature recognized the deadly burden of rising insulin prices on people with diabetes and took the lead among states in limiting consumer costs for insulin. However, the bill didn’t lower the total price of insulin, which has tripled since 2009. It’s a start but we have to do much more.
In an inclusive process without costly consultants, in 2018 Connecticut’s Healthcare Cabinet developed recommendations for state policymakers to lower prescription drug costs responsibly. Options included monitoring drug prices and taking action to stop gouging, rewarding providers for helping consumers get the most from their medications, and requiring that savings negotiated with drug companies are passed onto consumers. Unfortunately, none of them has been adopted.
Other states are successfully monitoring and lowering unjustified drug price increases, including our neighbors New York and Massachusetts. The National Academy for State Health Policy (NASHP) recently released model legislation allowing states to fine manufacturers for price increases* that can’t be justified by new clinical evidence. The model law is drafted to comply with federal law and avoid a lawsuit. States can use those fines to fund financial assistance to the patients who paid the excessive prices. NASHP uses the annual Unsupported Price Increase Report by the independent nonprofit Institute for Clinical and Economic Review to identify which medication price increases are excessive. Last year’s report found that from 2017 to 2018 net price increases for just seven drugs cost the U.S. health system $5.1 billion. Humira price increases alone cost the system an extra $1.9 billion. The next report should be out in January.
Mergers are the other big driver of healthcare costs in Connecticut. Research by Zach Cooper, a member of OHS’ Cost Cap committee, finds higher healthcare prices in concentrated markets, nationally and in Connecticut. It makes sense, as hospitals and practices merge, there are fewer options for care, competition declines, and prices rise. According to the Health Care Cost Institute, Connecticut markets are very concentrated and getting worse over time.
Contrary to promises made at the time of merger approvals, there is no evidence of improved quality or access to care. In fact, there are plenty of examples of lost community access to critical services. When Windham Hospital merged with the larger Hartford HealthCare system, beds were cut 63% and critical services such as surgery and wound care moved to Hartford, requiring longer trips to access that care and to visit family members in the hospital. It would save Connecticut far more in the long term to support efficient community hospitals than to pay much higher prices for less care, farther away.
In May, dozens of employer/purchaser groups sent a letter to Congress calling for a moratorium on mergers to stabilize healthcare costs during and after the pandemic. Connecticut regulates healthcare provider mergers by requiring a Certificate of Need approval by OHS. Healthcare providers must get approval for “major changes in the healthcare landscape, including mergers.” However, in the last four years, of 74 CON application decisions, OHS has approved all but three.
Beyond halting more mergers, Connecticut needs to walk back consolidation. We can start by negotiating contracts with pre-merger units of large health systems, removing their ability to demand higher prices. We also need a plan to undo decades of mergers.
We have enough information on what is causing rising healthcare costs in Connecticut. We can act now with policy levers available to the state. OHS’ costly new Cost Cap project adds little to the debate. Secret negotiated plans that risk harm to Connecticut patients and communities is not the answer.
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