New health care bureaucracy threatens access for Minnesota’s most vulnerable patients
Democrats in the Minnesota House and Senate are quietly working to build a powerful new government bureaucracy to set and enforce limits on the cost of health care at hospitals and clinics costs across the state. Everyone agrees health care costs too much, but empowering the government to strong arm lower costs will inevitably lead to other problems.
The hard truth is that any blunt mandate to lower health care costs will likely come at the expense of the most vulnerable patients. This includes people with expensive chronic conditions, the disabled and the elderly. That’s simply because these are the high-cost patients. Targeting the cost of their care will offer the path of least resistance to meet the government cost control mandate.
New bureaucracy would enforce health care spending “growth targets”
Both the House and the Senate have buried a powerful new government bureaucracy to control health care costs within each of their respective 600 plus-page omnibus health care finance bills.
The House (HF2930) and the Senate (SF2995) versions follow a very similar approach. Each would appoint members to a governing body, called the Health Care Affordability Commission in the House and the Health Care Affordability Board in the Senate. This governing body must set annual health care spending “growth targets” for the state. These spending growth targets are better understood as spending caps because they effectively set a cap on the growth in health care costs for each health care entity in the state.
Any health care entity that exceeds this spending growth target will be subject to escalating enforcement measures. This starts with a “naming and shaming” strategy which publicly identifies each entity that violates the target. Any entity in violation may then be required to develop and implement a performance improvement plan. A failure to cooperate with this process in good faith will subject the health care entity to a $500,000 civil penalty.
Because any determination of a violation would carry substantial consequences for a health care entity, the process depends on accurate and timely data to justify any determination. Therefore, the new bureaucracy is charged with building out a massive data analytics capability. This will not only be a huge undertaking for the state, but also impose a substantial administrative burden on every health care entity that must submit data.
Little evidence growth targets work
Across the country, there is very little experience with state efforts to set similar growth targets. While nine states have adopted similar commissions to set growth targets, only Massachusetts has any depth of experience. Moreover, only three states—California, Oregon, and Massachusetts—impose financial penalties. While not directly comparable, Maryland’s all-payer global budgeting system also offers some history to inform policy makers. However, that is the extent of state experience with this enormous undertaking.
Looking to the one state with experience, health care spending exceeded benchmarks in four of Massachusetts’ initial seven years prior to COVID. Over this same time-period from 2012 to 2019, according to federal Nation Health Expenditure data, the overall rate of health spending did grow a bit more slowly in Massachusetts compared to nationally. However, overall spending in Massachusetts grew faster than neighboring states in New England. This experience does not provide any basis to believe a growth target will work in Minnesota.
Threatens access and quality for the most vulnerable patients
While there is no strong basis to believe a growth target will control spending, it still threatens to reduce access to quality care for Minnesota’s most vulnerable patients. Whether or not it controls health care spending, a growth target will still influence provider practice patterns. Moreover, if it does succeed, this success will depend on changing practice patterns. The populations most likely impacted by a change in practice patterns will be the most vulnerable patients. Because they are the highest cost patients, they will offer the quickest and most efficient path to reduce costs. Unfortunately, any change in practice patterns to meet growth targets will likely depend on reducing access or quality for these vulnerable patients.
There are various levers providers can use to control health spending. Providers can lower prices, reduce utilization, lower quality, shift to a lower cost mix of services, and increase efficiency. Among these options, reducing utilization is probably the easiest and quickest approach. Ideally, this would involve reducing the use of unnecessary or low value services. However, efforts to manage utilization can often lead to denials of beneficial care. Though providers may have the best intentions, it’s not hard to imagine how increased government compulsion to lower spending could lead to overly aggressive utilization management which undermines access to beneficial care.
This possibility is why some members of the Health Affairs Council on Health Care Spending and Value issued a minority report in opposition to spending growth targets. Specifically, they explained:
[T]here is no evidence that limiting spending growth will not harm patients by limiting access to new technology or cutting wages and employment in the health care sector.
The threat of lower wages and employment also implicates the quality lever available to providers. Indeed, there’s a strong possibility providers will be compelled to reduce their labor expenses to meet growth targets. This will clearly impact quality for every patient.
No guardrails against threats to access and quality
When setting and enforcing the growth targets, the legislation directs the new bureaucracy to account for a several factors that, if ignored, might lead to negative outcomes for various entities and populations. These factors include the health status of the patient mix, competitive wages, collective bargaining, workforce stability, social determinants of health, quality performance measures, communities impacted by health disparities, and rural communities.
While some may argue that accounting for these factors will protect vulnerable patients and populations, there are no concrete guardrails or other mechanisms to ensure people remain protected. Instead, the legislation basically directs the new bureaucracy to keep this stuff in mind. Even with the best intentions, a new bureaucracy will never adequately account for all the negative consequences that can flow from this type of government control over the health care economy.
Legislature should focus on collecting and reporting more data
There are positive elements to the proposal. The state should devote more resources to collecting, reporting, and analyzing health care data. The Health Economics Program at the Minnesota Department of Health conducts important research and analysis that helps us better understand Minnesota’s health care sector. However, this work can and should be strengthened.
A new board or commission operating under the Legislative Coordinating Commission tasked with enhancing transparency, monitoring market trends, and offering recommendations would help complement the work being done at the Department of Health. This board could function more like the Medicare Payment Advisory Commission (MedPAC) and Medicaid and CHIP Payment and Access Commission (MACPAC). Both of these commissions offer Congress and the public important resources to help guide future policy making.
Growth targets risk de facto rationing
Establishing a new bureaucracy with the authority to set and enforce growth targets looks a lot like the deeply unpopular Independent Payment Advisory Board (IPAB) that Congress enacted with the Affordable Care Act. The IPAB would have been a 15-member board established to create recommendations to cut Medicare spending if spending exceeded certain growth targets. If Congress failed to take action, the IPAB recommendations would take effect. While the ACA specifically restricted the IPAB from making recommendations that would ration care, there were still substantial concerns that any recommended spending cuts would nonetheless encourage providers to limit services and lead to de facto rationing.
Setting an enforceable spending growth target threatens the same sort of de facto rationing. If providers cannot reduce spending by delivering care more efficiently to meet the growth target, they will need to resort to limiting the care they deliver. This sort of rationing will, of course, be deeply unpopular.
There are better opportunities to control health costs which do not pose the same risk to vulnerable patients. Instead of enforcing a government cap on spending growth, lawmakers should instead focus on better harnessing competition to control costs. Price transparency offers the most promising and bipartisan opportunity to bring real, value enhancing competition to the health care sector. Fortunately, the omnibus health care finance bills include several policies to increase price transparency across the health care sector. This is where effective cost control begins.