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Legislature hopes for a good idea to solve the health cost crisis. And not much else.

  • Author: Charles Wohlforth
    | Opinion
  • Updated: April 15, 2017
  • Published April 14, 2017

The Alaska Legislature has made no concrete progress on addressing the health care cost crisis this year. Even the bills that didn't pass would only have nibbled around the edges of the problem.

Health care in Alaska costs more than anywhere else and is rising faster than in any other state. The medical industry continues to expand while the rest of the Alaska economy is shrinking.

Alaskans are leaving because of the cost of health care. Businesses are losing competitiveness and governments cutting services as medical costs eat up ever more of their revenues.

But state leaders are still looking for ideas to address the problem. The problem is fundamental.

Our health care system relies on competition to control prices, but we don't have competition. Anchorage is the only community large enough to have multiple facilities and specialists, but even here the power to set prices is largely in the hands of providers with monopolistic market control.

The Anchorage Assembly passed an ordinance in February requiring providers to give non-binding cost estimates to patients, allowing them to potentially shop around. But shopping around only works if there is more than one game in town — or if you are willing to leave the state for treatment, as is increasingly done.

The state House passed a bill requiring medical providers to post the cost of their most common procedures. The Senate didn't act on the bill and probably won't this year, said its sponsor, Ivy Spohnholz, D-Anchorage.

She conceded that the measure, even if passed, would not reduce medical costs. But she called price transparency a foundation for other improvements.

Sen. David Wilson, R-Wasilla, photographed on January 20, 2017. (Marc Lester / Alaska Dispatch News)

Sen. David Wilson, R-Wasilla, sponsored a bill to repeal Alaska's Certificate of Need law, which requires hospitals to receive regulatory approval to build or expand.

The federal government pushed states to pass Certificate of Need laws in the 1970s based on the idea that excessive investment in facilities was driving health care cost increases. But study showed the laws didn't work and may have increased costs by limiting competition.

The Federal Trade Commission and U.S. Department of Justice Antitrust Division issued a joint statement Wednesday endorsing Wilson's bill and providing extensive research to support it. But Alaska hospitals like protection from competition and opposed it. The bill never made it out of its first committee.

The repeal might be justified, but it's not a solution. We are simply too small and too dispersed and the system is too broken for competition to work.

For example, hospitals pay for complex cases and non-paying patients with money earned from simpler procedures where they can charge insurers much more than services cost. Doctors compete by doing those lucrative procedures in their own offices and pocketing the profit. But that drives up the total cost of the system, because the hospitals still have to serve the complex cases and non-paying patients.

The best hope for answers is a study the Legislature mandated last year to look at starting a Health Care Authority.

Sheldon Fisher, commissioner of the Alaska Department of Administration, testifies at a Senate hearing Wednesday. (Nathaniel Herz / Alaska Dispatch News)

Commissioner of Administration Sheldon Fisher told the public policy group Commonwealth North on Friday about his hope that an authority could combine the buying power of the state government, school districts and local governments to force providers to lower their fees.

But the study is due in June and he still doesn't know how that could work.

If the authority sets a fee structure lower than providers want, as Medicaid and Medicare do, then providers might shift those costs to insurance companies representing private companies and individuals, as they do with the federal programs.

On the other hand, Fisher said, if the authority moves all government employees to a narrow network of providers, akin to a managed care organization, as I have suggested, that could put other providers out of business.

Maybe that's OK. Businesses that charge too much do go out of business. But Fisher pointed out that having the government pick winners, perhaps based on small differences, seems unfair.

A third option would have the state increase competition by opening its own clinics. The Anchorage School District announced in February it would open a self-funded clinic for non-union employees to receive primary care, health coaching and prescriptions.

That idea would increase competition, especially if government entities let private parties in on their cut-rate services. But primary care is already the most competitive part of the medical system. Without government also buying a hospital and specialist practices, the biggest part of the problem would not be addressed.

Whatever they come up with, we need Fisher's team to think big, be assertive and include the private sector in its thinking. He said they will do that.

The state has made some good moves. The reinsurance program created last year to save the Affordable Care Act marketplace from collapse has been hailed as a model around the country.

But that program just added more money to the system, which the state is now requesting the federal government to compensate. It did not address cost.

Rep. Jonathan Kreiss-Tomkins, D-Sitka, meets with reporters in March. (Nathaniel Herz / Alaska Dispatch News)

I asked Rep. Jonathan Kreiss-Tomkins, D-Sitka, why the Legislature hasn't done more. He seems to understand the magnitude of the problem for Alaskans, which some others don't.

Kreiss-Tomkins said he is hoping for big ideas from the Health Care Authority study. With the Legislature focused on solving the fiscal gap, we couldn't hope for much more this year.

And he politely turned my criticism back on me. Legislators and the public don't understand the problem because the media has done little to explain it, he said.

I accept that. The quiet on this issue is extraordinary given the fundamental damage it is doing to our economy and future. It is almost as if we've acquiesced because the topic is difficult to understand.

Kreiss-Tomkins said school officials from his district recently told him their premiums had increased 23 percent. He didn't know what to tell them.

"The system is so opaque and broken," he said. "For the school district, it's like the health care god keeps throwing thunderbolts at them. I guess all you can do is pray."

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