States have begun tackling an issue that has vexed employers, individuals and governments at all levels for years: trying to control the rapidly rising cost of health care. Maine has an especially difficult task because it ranks fifth among the states for per-capita health care costs, according to 2009 federal statistics.
“We are a very rural state, we are the oldest state in the nation, and older people have higher per-capita health care costs. And we don’t have a lot of competition in our health care markets,” said Mitchell Stein, public policy director for Maine-based Consumers for Affordable Health Care.
Maine’s health care costs averaged $8,521 per person in 2009, the most recent year for which statistics are available from the Centers for Medicare and Medicaid Services.
Some states, including Maine, are devising models to control health care costs that ultimately will determine whether President Obama’s Affordable Care Act can make good on its name.
Millions of people will soon gain eligibility for health insurance under the federal law, adding pressure on the system. States, insurers and medical groups are experimenting with various programs to contain costs without undermining care.
The Affordable Care Act is expected to extend coverage to many of the roughly 50 million Americans who now lack insurance by expanding Medicaid, the state-federal health care program for low-income people, and requiring most others to buy insurance or pay fines.
Maine received $33 million in federal money for a three-year “state innovation” grant to cut down on red tape and improve efficiency and service in Medicare, Medicaid and the private health care market.
The grant aims to reduce waiting room times, improve access to primary care and urgent care centers, and better coordinate doctors, patients and insurance companies, according to the Maine Department of Health and Human Services’ website.
The grant, which runs from 2013-15, will also help the state devise payment models to increase incentives for doctors to spend more time with patients.
While the innovation grant will help, Stein said, working at cross purposes is the state’s failure to approve Medicaid expansion.
While Democrats pushed for covering more people with an expanded Medicaid program, Gov. Paul LePage – like many Republican governors who oppose the Affordable Care Act – vetoed attempts this year to do so. The federal government would have paid for 100 percent of the expansion for the first three years, and 90 percent in subsequent years.
The Affordable Care Act was passed in 2010 with the assumption that states would expand Medicaid. But the U.S. Supreme Court ruled in 2012 that states could opt out of the Medicaid expansion, and Maine decided to forgo expansion.
Stein said that if the state had expanded Medicaid, more low-income residents would have had health insurance and gotten more cost-effective medical care, such as primary care rather than costly emergency room visits.
He said the state faces hard-to-change challenges – such as its age and rural character – that will make reducing health care costs difficult.
The lack of major urban centers in Maine exacerbates per-capita health care costs, Stein said. While many states have large swaths of open land with few people, they also have cities with much larger populations than Maine’s, Stein said. Competition in the health care industry in big cities limits costs in those states, Stein said.
Controlling health care costs, experts said, will be a focus for many years to come.
“Look at any of the long-term projections for the federal budget or for state budgets,” Alan Weil, executive director of the National Academy for State Health Policy, told The Associated Press. “If we don’t bring down health care costs, we’re either going to be paying a whole lot more in taxes or we’re going to stop spending money on other things we care about.”
U.S. health care spending reached $2.7 trillion in 2011, an average of $8,700 per person, according to the Centers for Medicare and Medicaid Services. The agency says those numbers are climbing and predicts that spending will reach $14,000 per person by 2021.
The higher costs mean higher insurance premiums for businesses, which are passing on more of those expenses to their employees, and for individuals, who are paying more in out-of-pocket costs.
The recession provided what is expected to be a temporary reprieve, with health care costs growing at 3.9 percent annually from 2009 to 2011, the slowest rate since the government began keeping track in 1960, according to data from the Centers for Medicare and Medicaid Services. Over the preceding 18 years, per-capita health care costs grew an average of 6.5 percent a year.
Despite the recent slowdown, health care costs continue growing faster than both wages and the economy as a whole, accounting for an ever-larger share of spending for employers and workers. It now accounts for nearly 18 percent of U.S. economic activity, up from 5 percent in 1960.
Annual premiums for employer-sponsored family coverage jumped nearly 4 percent this year, and single coverage rose almost 5 percent, according to a report released last week by the nonprofit Kaiser Family Foundation. The foundation expects prices will begin rising faster as the economy improves.
Economists say soaring health care costs are driven primarily by industry consolidation and expensive new medical technologies and prescription drugs.
The Affordable Care Act’s cost-containment section reduces Medicare reimbursements to providers and requires commercial insurance companies to issue refunds if more than 20 percent of their revenue goes to profits, salaries and overhead. Hospitals will face penalties when patients develop conditions while in their care.
The federal law also promotes “accountable care organizations” within Medicare, which are responsible for improving coordination to reduce wasteful spending.
But much of the experimentation on reducing costs is driven by state governments and businesses.
Oregon has tried to tackle rising costs by focusing on Medicaid, which serves 550,000 people in the state and is expected to grow by 200,000 under the Affordable Care Act.
Gov. John Kitzhaber last year led a new model of delivering services under Medicaid. His initiative led to a state law that created “coordinated care organizations,” which attempt to integrate mental, physical and dental care as they improve the way chronic conditions are managed. These organizations are required to manage their costs within a fixed rate of growth.
In New Jersey, hospitals have reported success with a Medicare program that paid doctors who saved money for hospitals. Officials said it contributed to lower costs and shorter hospital stays without increasing mortality or readmission rates because doctors began considering the costs of their orders.
The experiment, known as “gainsharing,” is expanding this year to more hospitals, including some outside New Jersey.
In Massachusetts, the first state to enact comprehensive health care reforms, lawmakers last year supported a goal of restraining the rise in health care costs to a level no greater than the state’s overall growth rate. To accomplish that, legislators passed a multi-tiered state law that expands the role of physician assistants and nurse practitioners to act as primary care providers, making it easier for patients to access care outside the emergency room.
The law also requires providers to disclose more information to consumers about costs and quality, and allows the state to review proposed consolidations to assess the effect on those factors.
There are substantial challenges to copying such experiments nationally. Adopting a technology system to keep medical records electronically, for example, entails substantial upfront costs, as does hiring staff to coordinate patient care. At the same time, providers have to be careful to avoid skimping on needed care to save money.
Most of the experiments are too new to produce reliable data about their success, but health policy experts warn that the rapid rise in costs is unsustainable.
“It has to end eventually,” said Larry Levitt, senior vice president of the Kaiser Family Foundation, “because we can’t have an economy driven entirely by health care.”
Joe Lawlor can be contacted at 791-6376 or at: