• Someone is wrong in Massachusetts

    I’m sorry, but both of the following things can’t be true.

    1. About the House version of the Massachusetts health care cost control bill, Rep. Steve Walsh said that the plan would save $160 billion over 15 years.
    2. About the Senate version, Senate leaders said their plan would save at least $150 billion in savings over the next 15 years.

    So, they have nearly identical savings estimates. (I don’t know how either was computed.) I think at least one of them must be wrong. The reason? The bills have very different rate growth caps.

    1. The House would cap per capita state health care spending at potential GSP per capita for the next several years and then cap it at PGDP less half a percentage point until 2027. (See section 46 of the bill.)
    2. The Senate bill would, from 2012 to 2015, “cap projected growth of health care spending equal to the gross state product plus half a percent. From 2016 to 2026, the goal is to keep health care cost growth equal to the projected growth in the gross state product.” (That’s from the Boston Globe.)*

    These growth caps are so different I don’t see how the two bills could lead to nearly the same savings. It seems like the House bill must save much more — not just $10B more over 15 years — than the Senate one. Someone is wrong in Massachusetts. Perhaps with more information I will come to discover that it is me!

    UPDATE: A trusted source wishing to remain anonymous says the Senate bill would save $124B through 2025. I cannot personally verify this figure.

    * I have not seen the text of the Senate bill so I cannot say whether it actually specifies the target in terms of per capita potential GSP, which would make it more comparable to the House bill.


    • The bigger issue is that both the house and senate “savings estimates” assume the state can squeeze from 16% (based on the CMS All Payers database) to 25% (based on DHCFP June 2011 Healthcare Expenditure Trends report) from total state healthcare spending. Or the house and senate savings estimates assume ridiculously high growth rates into the future absent no action, from which they then claim “savings” (If it’s the latter, they must be assuming the Patient Protection and Affordable Care Act has none of its promised effects.)

      Even more interesting, as many as a third of us in Massachusetts are already capitated. So if the savings come from switching from fee for service to capitation, the savings have to come out of the other 70% or so. Not to mention that well over half of us are not even directly affected by the proposed law because we are either on Medicare or self-insured (see Section 6A of PatrickCare or lines 1619-1623 of DeLeoCare; I haven’t looked at MurrayCare yet so not sure how ishehandles this issue)

      Which is a long winded way of saying there’s a reason an astute observer of the situation like yourself does not “know how either (savings estimate) was computed.”

      • If I’m reading the June 2011 DHCFP Healthcare Expenditures Trends report correctly, it looks like total spending was about $36B in 2008. If you assume the $150B over 15 years MA reform would save is spread equally over those years, it’s $10B/year. Since 10/36 is 28%, I assume your 25% estimate was computed roughly like this. Am I right?

        In any case, this is not the right way to do it. Independent of what the savings level is — and I have no good reason to believe $150B is right — one should expect greater savings in later years relative to early years. And health care costs grow over time, even if that growth is capped somehow. So, in percentage terms, I don’t think we’re talking 25%.

        So what are we talking? There’s no good way to answer that without specifics about the assumptions that go into these calculations. I am not privy to those.

        Don’t read this as a rejection of your points. I just don’t think 25% is right, for the reasons I suggested.

        • Yes, that was how I calculated it but I wasn’t even that sophisticated about it.

          That’s why I added the rest of the paragraph:

          “Or the house and senate savings estimates assume ridiculously high growth rates into the future absent no action, from which they then claim “savings” (If it’s the latter, they must be assuming the Patient Protection and Affordable Care Act has none of its promised effects.)”

          I agree that the $160 billion estimate is almost certainly not a straightline estimate. Instead if you do a little what-if in Excel it appears DeLeo and Walsh are estimating that Massachusetts total healthcare costs will increase 7% a year if the state does nothing (even factoring in the promised benefits of PPACA) but that — if their proposal is passed — it will cut about 10% annually from the otherwise status quo totals the first five years, 15% annually the second five years and 20% annually the third five years. But given that you can’t cut that amount from the third of us that are already capitated you have to take more from everyone else on a percentage basis.

          Squeezing that kind of money out of Massachusetts healthcare spending seems unrealistic.

          • Given this is in the domain of politics, I think you can view it as an opening bid. The Senate already came back with something obviously less ambitious.