By Robert Weisman and Kay Lazar
The Boston Globe
January 25, 2011
Harvard Pilgrim Health Care and Tufts Health Plan are close to signing a memorandum of understanding that would combine their operations in four New England states and make them a stronger competitor to the market leader, Blue Cross Blue Shield of Massachusetts, in their home state. (Update: the memorandum of understanding was signed today.)
Consumer advocates said it is unclear how the insurers’ subscribers might be affected by the union, which would leave Massachusetts with only two major health companies.
“There has been tremendous value in having three strong locally based health plans in terms of choices for consumers,” said Nancy C. Turnbull, associate dean at the Harvard School of Public Health and a former deputy insurance commissioner. “But on the other hand, this could create a consolidated plan that could create a stronger competitor to Blue Cross and it could create a plan that has stronger leverage than either of them individually in negotiating with providers.”
Partly in reaction to the pressure to switch from fee-for-service to global payments, several Massachusetts hospitals have combined operations, while others say they are seeking buyers.
Comment:
By Don McCanne, MD
Choice. Wasn’t that the clarion call during the campaign for health care reform? We could have our choice of keeping the health plan we have, or choosing from a market of plans in the health insurance exchanges. Since Massachusetts had a head start in establishing the model of reform selected for the nation, let’s see what choice has meant to them.
Has health plan competition in the marketplace kept Massachusetts’ health care costs under control? No. They have the highest health care costs in the nation, and costs continue to rise.
Well that didn’t work. So now Massachusetts has begun the process of reducing the competition to two major health plans. That creates an oligopoly, which suppresses competition. Out with the market theory that competition reduces prices. In with the market theory that concentration provides the health plans with leverage to extract greater price concessions from the providers of health care. Of course, choice is a casualty of concentrated markets.
How do the providers fight back? Hospitals are already merging, in an effort to establish market dominance. Physicians are evaluating the concept of accountable care organizations (ACOs) as called for in the Patient Protection and Affordable care Act. Although the intent of the law is that ACOs would control costs (after all, they’re supposed to be accountable), physicians and their health provider partners will certainly use them to leverage their end of price negotiations (i.e., fight for higher prices, not lower).
Fundamental to competition is that when you have winners, you must have losers. That might be appropriate in sporting events, but it is an ethical breach to establish a health care financing system that automatically moves a significant portion of our health care providers into the column of losers. We need a financing system that makes patients winners by providing them access to a health care delivery system that strives for optimal care through cooperation, rather than competition.
That is partly what a single payer system is all about. Using global budgeting and negotiation, the public administrator works with the providers – all providers – to pay legitimate costs and provide fair margins.
Under such a system, competition becomes moot. Eliminating private health plans obviously eliminates health plan competition. If consolidation of health providers improves efficiency, quality and access, then there is no reason to be concerned about a lack of competition there either. Even without consolidation, appropriately compensated providers still can fully engage themselves in serving their patients, unencumbered with the distraction of having to compete.
