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The moment has probably passed for Alaska health care reform. The future is here.

  • Author: Charles Wohlforth
    | Opinion
  • Updated: March 25
  • Published March 25

The primary reason Alaska's health care costs are higher than the rest of the country is because doctors and hospitals here charge more. So why not pass a law that reduces what they charge?

One state senator has proposed a law something like that. She hasn't made much progress, but I doubt any of the other current political efforts have as much chance of working.

The extreme cost of health care has devoured Alaska's wealth, contributed to its economic malaise and crippled government's ability to address other problems. Public outrage erupted two years ago as Alaskans shared their stories about how health costs were distorting their lives.

And then not much happened.

The political path of least resistance is to do nothing and avoid antagonizing the doctors and facility owners who control one of the largest segments of the economy, and the only one that is growing — even if much of that growth is parasitic to the rest of the economy.

Besides, these issues are complex. Some key state leaders don't understand even the basics.

But Sen. Cathy Giessel, R-Anchorage, stepped up with a bill that went straight at the issue by reducing what insurance companies have to pay to out-of-network providers.

Insurance companies contract with networks of doctors, bargaining for discounts. They push patients to use those doctors by paying lower reimbursement for out-of-network doctors. The desire to keep the patients is doctors' incentive to negotiate contract discounts.

In U.S. health care, the difference between in-network and out-of-network reimbursement drives competition. It is the leverage for insurance companies to shop on our behalf.

But in Alaska, it doesn't work that way. Insurance companies must pay at the 80th percentile of what providers in the market receive generally. Since so many providers hold monopolies here, they can largely set that price.

Under Alaska's system, prices rose and many specialists stayed out of network or negotiated scant discounts for coming in.

Giessel's bill sought to put more pressure on providers to negotiate. Its original version would have replaced the 80th percentile rule with a government-set minimum payment, 200 percent of what Medicare pays.

According to figures from a recent insurance-company funded report, that would cut some specialist payments by more than half and would cut primary care doctors by about a third.

I asked Giessel about the tension of advancing a bill that would could take money from doctors. She is an advanced nurse practitioner and her affluent Hillside district contains the big homes of many doctors.

"Yes, I have physicians and specialists who live in my district," she said. "But I have real families as well."

She added, "I can't continue to support these high-cost specialists who have the glorious buildings all around Anchorage."

But she wasn't immune to pressure. After introducing the bill, doctors convinced her to increase the floor for out-of-network payments to 300 percent of Medicare, approximately what primary care doctors get now, but still a reduction for specialists.

Giessel admitted even the watered-down version won't pass. It hasn't made it through a single committee. She hopes to work on it over the summer.

Would Giessel's approach work? Maybe.

The University of Alaska's Institute of Social and Economic Research will soon release a $31,000 study on the 80th percentile rule, providing the first objective look at how much of a problem it really is. The work by economist Mouhcine Guettabi is paid for by the state's Office of Management and Budget.

Without that kind of evidence, Guettabi said, we don't really know the impact of the change.

The lack of hard information has crippled Alaska's health reform efforts.

Much more time has been spent on panel discussions and meetings than designing evidence-based solutions. For the price of a couple hip replacement surgeries, all this debate could have been based on fact rather than opinion.

"I've given up on whether or not there is any serious interest in doing work in this area. You and I have had conversation about this for two and a half years. How much work has been done by anybody?" Guettabi said. "I am no longer engaged."

Many initiatives are continuing. I could tell you about them. But then I would have to kill you — with boredom.

Suffice it to say, there are incremental efforts afoot to fix problems around the edges of the system, but nothing likely to transform it in the way needed. That would require sharp-edged political power acting decisively over the objections of a wealthy special interest.

Such an event is extremely rare. It can only happen quickly, before entrenched interests exert their overwhelming inertia. Maybe such a change could have happened, but now the moment has passed.

But if the political process is unpromising, people working in the market are making their own progress. Anchorage's municipality and school district contracted for their own primary care clinic with Vera Whole Health.

Public attention alone — the shame factor — has tamed some doctor and hospital increases. The next time we see health care cost statistics, I expect the angle of increase will have abated.

Some self-insured entities that don't have to follow the state's 80th percentile regulation have abandoned it. The University of Alaska, some other large employers, and the Alaska Public Education Health Trust—managed by teachers—have changed the market on their own.

Rhonda Prowell-Kitter, the trust's CFO, limited out-of-network reimbursements to 125 percent of Medicare (less than half the minimum in Giessel's bill). All but one specialist category then came in-network.

"Once they began seeing the payments at 125, the phones started ringing. Providers said, 'Wait a minute, my patients are leaving,'" Prowell-Kitter said.

She said doctors threatened they would leave Alaska if their payments went down. But Prowell-Kitter asked where they would go—doctors everywhere else are paid less.

Sometimes progress is easier than you expect.

The main fact we need to know has been established: the primary cause of Alaska's uniquely high health care costs is doctor and hospital charges. State government could pass a law to control that, but it won't. So we'll muddle through.

The views expressed here are the writer's and are not necessarily endorsed by the Anchorage Daily News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)adn.com. Send submissions shorter than 200 words to letters@adn.com or click here to submit via any web browser.

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