Oregon Moves To Control Skyrocketing Health Care Costs

Oregon is taking its first steps to build a regulatory system it hopes will curb the incessant, rapid rise in health care costs.

Under a new state law, a committee will work on coming up with a system to document health care costs that rise beyond a state-set cap and how to pressure the culprits - be they specific hospitals, health insurance companies or others - to dampen their cost growth.

That should especially benefit the more than 2 million state residents who are on commercial health insurance plans who have seen their premiums soar in recent years, the state says.

Health authorities in the past have tried a variety of tactics to curb the growth of health care costs. But the task has proven a bit like “squeezing a balloon” or playing “Whack-a-Mole,” said Jeremy Vandehey, director of health policy and analytics for the Oregon Health Authority.

Clamp down on needless expensive emergency room visits, and hospital costs bulge mysteriously in other areas. Crimp some drug prices and others skyrocket. Restrict the growth of government spending on Medicare and Medicaid, and fees charged by health care providers to commercial insurers surge.

The result isn’t pretty. The health care system in the United States spends more than twice as much per person than do the systems in many other developed countries. Yet U.S. life expectancies are shorter.

So Oregon lawmakers earlier this year overwhelmingly passed Senate Bill 889.

The law directs the Oregon Health Authority to come up with a way to measure overall health care spending in the state, set a cap on how much it can grow per year and clamp down on health care entities that exceed the growth rate without reasonable justification. The law also directs the state to come up with ways to use state programs or its authority -- ranging from health insurance for government and school district employees to insurance rate regulation --  to enforce the growth curb. 

Under SB 889, the state can require an entity that exceeds the percentage cap to write a “performance improvement plan.” Vandehey said the public stigma on health care entities identified as having costs that were rising unreasonably fast might be a deterrent.

SB 889 sets up a committee to develop details about how the Health Care Cost Growth Benchmark program would run.

Gov. Kate Brown this week appointed the 18 members on the committee. The chairman is Jack Friedman, former CEO of the Providence Health Plans insurance system. Members include Kathryn Correia, president and CEO of the Legacy Health hospital system; Angela Dowling, president of Regence BlueCross BlueShield of Oregon, and Dr. Kevin Ewanchyna, vice president and chief medical officer of Samaritan Health Services and president of the Oregon Medical Association. He will serve as vice-chairman.

The first meeting is set for Nov. 13. The group will meet monthly and send a plan to the Oregon Health Policy Board, which oversees the Oregon Health Authority, by next summer. The plan would head to the Legislature next fall.

Oregon’s approach will likely largely replicate the system in Massachusetts, Vandehey said. There, according to news accounts, spending on health care in 2018 – for hospitals, insurers, government health plans and the like – increased a total of 3.1 percent, the state cap. However, costs for many patients and consumers rose more than double that because employers shifted more and more health plan costs on to employees and their families, the state’s annual report found.

That’s been a trend in Oregon too, Vandehey said.

“Costs just continue to be shifted to families and employees,” he said.

With the data to be gathered by the SB 889 program “we’ll be able to shine a light on that and have a conversation on that,” he said.

Because they control the purse strings, the state and the federal government are able to control the rise in spending on Medicaid for low-income residents and Medicare for the elderly. In Oregon, those programs insure 1.7 million of the state’s 4.2 million residents.

The main trouble lies elsewhere: with the 2.1 million Oregonians insured with commercial plans through their employers.

 “The challenge is really the commercial market,” said Vandehey.

Hospital systems, medical clinics and other providers desperately need revenue from people who are commercially insured through their employer because Medicaid and Medicare reimbursement isn’t enough to cover the actual cost of providing care to the poor and the elderly, providers say.

Vandehey said people insured through the commercial market will benefit the most from the new state program.

In theory, the program should reduce the rate of increase of total spending on health care, and that should ultimately translate into slower increases in commercial health insurance premiums.

But the new committee, and, ultimately state lawmakers, will face plenty of tricky decisions.

The cost-control program would set an annual cost-growth figure reflecting inflation, wage increases and the like. It would gather spending data from health care insurers – commercial and government – that would show how much was being paid to health care providers, both from the insurers and in out-of-pocket expenses paid by consumers, Vandehey said. The state would also gather information from major hospital systems on their spending. The new program would examine whether insurers and large health care providers were keeping under the state cap.

But insurers and hospitals are only part of the health care provider matrix. There are also large groups of primary care doctors, surgical specialists, anesthesiologists, women’s health care specialists and imaging and radiology specialists, to name a few. A big slice of health care dollars goes to these practices. It’s undetermined just how deep into the health care infrastructure the state would delve to ferret out where costs are rising rapidly.

For organizations clocking in over the growth target, “we go sit down and engage in one-on-one discussions to identify why,” Vandehey said. The state would apply a “reasonableness test” to why a provider’s costs were rising above the set rate, he said.

Through insurance data, the new program could identify how employers were shifting ever more health care costs on to employees and their families in the form of higher shares of premiums, plus higher co-pays and the like. Here too, it is unclear how deep the program would dig. Would it identify which industries or even individual employers were most aggressively shifting costs onto workers? That’s unknown.

To implement that program, the health authority is seeking $2 million per biennium to pay for eight full-time-equivalent workers.

Vandehey said studies show that price increases for medical services – such as  visits to providers, outpatient surgeries, lab tests, drug prices, for example – are driving half of the overall rise in health care costs, with an aging population and the demand for more services accounting for the other half.

“We know we’ve got a price problem,” he said.

What’s driving up prices? “We don’t have a good systematic way of knowing where all the dollars are going right now,” he said.

Many aspects of the health care system are likely sucking up ever more dollars each year: Salaries and benefits for doctors, other medical professionals and administrative staff; profits for for-profit insurance companies, clinics and hospitals; money put into capital reserves for nonprofit hospitals and insurers; drug company profits; equipment purchases and facilities construction.

“Setting cost growth targets is now the starting point” for controlling all that spending, Vandehey said.

You can reach Christian Wihtol at [email protected].



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