By Charles M. Arlinghaus
From the print edition of the Union Leader

If Washington’s health care fiasco isn’t bad enough, Sen. Maggie Hassan wants to create a new state agency to set and control hospital prices and manage health care. The new Health Services Cost Review Commission is based on the belief that the secret to better, more cost efficient management is to create a new government agency.

Normally, grandiose schemes to take control of significant parts of the economy are introduced by backbenchers and receive only courtesy consideration. This new plan is different.

Sen. Maggie Hassan, the lead sponsor, is majority leader of state senate. Widely considered the Democratic successor to Gov. Lynch, she is sometimes called “the next governor.” When she wants to move legislation, it moves. This is more than a trial balloon.

The new bill, senate bill 505, would create a new Health Services Cost Review Commission to “review and approve or disapprove hospital rates and rate schedules.” The commission would include three full-time Cost Commissioners, an executive director and such staff as they deem necessary.

The commission itself will have the ability to determine how large it becomes. It is given its own authority to assess and collect a tax on hospital income – an “administrative assessment” on “net operating revenues.”

Commissions that control their own budgets and raise their own taxes don’t have a tendency to be small ones. The commission will have broad authority to require hospitals to unveil virtually any information about rates, payments, costs, and the way they do business.

More than just setting rates, the new bureaucracy will be required by law to “promote” new systems of payments and structures of care like medical homes or accountable care organizations.

When the regulator who approves your rates, has to pre-approve any rate changes, and has the power to terminate your license decides to promote something, it immediately becomes a good idea – yes sir, no sir, three bags full sir.

You don’t have to be psychic to see where this is heading. If the government is to set hospital rates and “promote new initiatives,” the next step is every other provider. If we set prices in a hospital, we should set prices in other medical offices. Not just tonsillectomies but also flu shots, doctor visits, fillings at the dentist. There’s no logical reason to draw the line based on the type of building the procedure is performed in.

“Promoting” new initiatives becomes important to help control all those costs whether the new initiative takes place in the hospital building or at the doctor’s office in the building next door.

To help control costs we could do what Washington wants to do. They want a Health Benefits Advisory Commission so the Health Choices Commissioner can approve which benefits can be offered. Remember the commission that decided we would all save a lot of money if women stopped having so many mammograms? They were “promoting” a new delivery system to manage costs.

Creating a new bureaucracy to set prices imposes the current failed state model but eliminates its safety valve. The state currently controls its own health care costs by setting prices for Medicaid. We don’t actually control costs, we merely ratchet down how much reimburse doctors, nurses and other providers. The system doesn’t collapse because those costs are shifted to non-Medicaid patients.

If the state sets rates for everyone, who makes up the difference?

Government management and control is not a traditional path for cost effectiveness and competition. When the patient has multiple choices and has exposure to the actual prices, health care costs don’t increase as dramatically.

One small example is laser vision surgery. In the last ten years the quality has improved significantly yet prices have declined. There are few third party payers in laser surgery. The guy with the eyes knows exactly what it cost him.

Sen. Hassan and the bill authors are right to want consumers to know how much various medical procedures cost. Creating a cost transparency website is a good idea.

However the rest of the bill is exactly the wrong approach. A large new bureaucracy that sets its own taxes and dictates prices does nothing to affect the economics of health care.

A Health Czar in Washington is a bad idea. Three Health Czars (“cost commissioners”) in Concord isn’t any better.