The Massachusetts Senate passes a health care cost control bill

Rachel Zimmerman has the story, the end of which includes many of the details. Here’s the bottom line:

The approved bill, for the first time in the nation, establishes a statewide health care cost growth goal for the health care industry equal to the projected growth of the state’s gross state product (GSP) plus .5 percent from 2012 to 2015 and equal to the state’s GSP beginning in 2016.

This change will result in an estimated $150 billion in savings over the next 15 years which will be passed on to businesses, municipalities and residents of the Commonwealth who are struggling with increasing premiums and other health care costs.

Some comments:

  • The savings estimate is likely optimistic, as I’ve already explained.
  • The House bill’s growth cap is based on per capita potential GSP (PGSP, adjusting for economic conditions) and the Senate bill uses something similar, “the long-term average projected percentage change in the per capita state’s gross state product, excluding business cycles.”
  • The theory behind the spending growth cap is very different from the House’s, which increases the cap from growth in per capita potential GSP minus 0.5 to per capita PGSP plus one as of 2027. The concept behind the House bill is that after 15 years of sub-PGSP growth, much of the waste in the system will be wrung out. At that point, it is not unreasonable for health care to grow more rapidly than overall PGSP, at least sometimes. It is rather unreasonable (and undesirable) to insist that health care grow at PGSP every year. Why should it? That’s what the Senate bill does, as of 2016.

The full text of the Senate bill is here.


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