Catalyst for Payment Reform

Whatever we’re doing, it’s not working: The Case for State Policy Intervention in Health Care, as told through a parable about toddlers and swimming lessons

Whatever we’re doing, it’s not working: The Case for State Policy Intervention in Health Care, as told through a parable about toddlers and swimming lessons

When my younger daughter Dylan was three, she emphatically declared that she hated swimming lessons. Unfortunately for her, she has a mother (me) who believes with equal conviction that learning to swim is a safety issue and therefore non-negotiable.  Thus, Dylan and I were at an impasse, except that one of us (me) believed that she could convince the other (Dylan) to relent through a combination of authority and influence (and also bribery). One afternoon at our local pool, I found myself pleading, cajoling, promising sweets and screen time (and threatening their removal), if Dylan would just allow me to help her into her bathing suit.  “You don’t even have to go in the water!” I lied.  Dylan didn’t buy it and was expressing her mistrust in a 9-alarm screaming toddler melt-down. It was at that moment that another woman – likely old enough to have grown children of her own – paused and offered the following counsel: whatever you’re trying to do, she said, it isn’t working.

Dylan, age three, clearly apprehensive about being in water.

I tell this story not just to evoke sympathy from parents who have encountered similar and unsolicited advice from strangers, but also because it reminds me of the state of health care: whatever it is we’re doing, it’s not working.  Prices keep rising, health care providers keep merging, quality falters, disparities widen.  Entrepreneurs promise disruption, health plans promise innovation, everyone points fingers but nothing moves the needle.  I hate to drag you on another walk through the garden of grim statistics, but in case anyone feels bullish about the outlook for health care this year, here are some stats to dampen your optimism:

Rising labor and supply costs caused hospital overhead to increase by 15 percent in 2022; meanwhile, insurance carriers underestimated service demand, incurring $1.3 billion losses in large group markets.  Both sectors’ efforts to recoup their losses will result in higher costs for health care purchasers – analysts predict that premiums will rise by 6.5 percent in 2023.  Some purchasers may try to pass this inflation on to their plan participants, but already nearly one-third of American households lacks sufficient savings to pay the average deductible for the average employer-sponsored plan.   As of 2019, over 23 million Americans carry significant medical debt – and of those with medical debt, 26 percent owe more than $5000.  When the medical-industrial complex passes the buck, purchasers and their plan participants end up holding the bag.

It’s time we admit that health care doesn’t adhere to the laws of economics, and well-meaning market-based interventions (price transparency, consumer-driven health plans, innovative care delivery models, even provider payment reform) cannot exert enough pressure to right this capsized ship. At this level of dysfunction, we need a more powerful force to referee the marketplace and level the playing field.  We need government intervention – specifically, state government intervention.  

Unlike the federal government, states can tailor policy to the specific needs, conditions, and mores of their constituents; they can launch smaller-scale experiments that would be impractical or impossible to pass nationally; and they can use their own purchasing power to command lower prices, new payment models, and higher standards of care.  Innovation springs from state laboratories across the country, from the first reference-based pricing program in Montana, to the first full-scale episode-based payment program from Tenncare (Tennessee Medicaid), to the health care coverage model that inspired the Affordable Care Act out of Massachusetts.

But also, a single policy won’t cut it.  Health care is a four trillion dollar industry, comprising 20 percent of the nation’s GDP and 14 percent of its labor market.  Plenty of entities within the health care ecosystem profit from the status quo and will do all they can to find loopholes and workarounds to preserve it.  Moreover, most policy interventions require data infrastructure, oversight and enforcement lest they become purely symbolic.  We need suites or menus of policies, working in tandem to erect infrastructure, close loopholes, and guard against externalities. 

To this end, last year CPR convened an expert panel of health care economists, academics, administrators, and other policy luminaries, to help identify menus of state-based policy options to place downward pressure on commercial prices and rebalance market power.   The menus address common scenarios and objectives states may face or wish to pursue: constraining or punishing anticompetitive behavior; preserving competition; empowering health purchasers, regulating prices, or pursuing policies that are least likely to incur political backlash.   

Of course, CPR will continue to champion and highlight market-based innovation, but we need both a belt and a pair of suspenders.  So this year, in addition to the vibrant health plan user group meetings, tools, resources and research CPR produces every year, we’re publishing action briefs, hosting webinars, and broadcasting our message to an audience of policymakers, advocates and everyone who purchases and uses health care.

To some, turning to policy solutions may feel like an annoying, unwanted intrusion.  But the hard reality is that we have tried everything else, and none of the tools in our arsenal proved powerful enough to effect a meaningful, sustainable impact.  And unlike the unhelpful woman at the pool, who pointed out the obvious and then went on her merry way, CPR stands alongside health care purchasers to fight for new and innovative solutions to improve the value of health care.  

Dylan eventually learned to swim, but not through the force of my will against hers.  She taught herself two summers later by swimming back and forth across the shallow steps of my father-in-law’s pool.  Now she’s 13 and about to join the junior swim team (not an outcome I would have predicted 10 years ago).  I don’t mean to suggest that health care will fix itself if left alone and given enough time (wouldn’t that be nice!); the point is that when we find ourselves like Sisyphus pushing the same boulder up the same dang mountain only to have it come crashing down upon our heads, it means it’s time to try something different.

Download the report Combinations of State-Based Health Care Policies to Constrain Commercial Prices and Rebalance Market Power here.

Dylan, age 13, an accomplished swimmer who will hopefully forgive me for using photos of her in this blog post.

CPR’s Director of Projects and Research, Julianne McGarry, MPP, wrote this blog post.

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