Austin Frakt argues that the Affordable Care Act’s investment in Affordable Care Organizations (ACO) — which proponents believe would help improve care coordination — could increase the market power of hospitals and doctors and empower them to negotiate higher reimbursement rates with insurers and other payers. Increased market clout could translate into health care costs, as insurers would be forced to pay higher rates to keep well known providers in their networks and would then transfer those increases to beneficiaries in the form of higher premiums.

To understand the problem of provider consolidation you need to look no further than Massachusetts, where insurance companies are paying some hospitals “significantly more than others for providing similar care,” even though the higher paid hospitals are not producing better outcomes. The “highest paid hospitals had more market clout, some because of their brand names,” a state report concluded.

So what can be done to reduce provider consolidation? Frakt suggests all-payer rate setting:

An all payer rate setting system would allow associations of insurers to negotiate with each provider for a single price for each service it offers. In contrast, the way it works now is that each insurer (or third-party administrator of self-insured employers) negotiates with each provider separately. Thus, today, prices vary by insurer for the same service at a single hospital. Under an all payer system, insurers would pay one price, jointly negotiated.

By allowing insurers to, essentially, collude for the purposes of price negotiation, their individual degrees of market power are combined. It’s a bit like collective bargaining in labor. Or think of it as bulk purchasing on steroids. In economics-speak, they have monopoly power. This should drive price lower.

Indeed, according to a Commonwealth Fund/Modern Healthcare Health Care Opinion Leaders Survey from October 2010, a majority of experts actually “favor either all-payer payment rate setting or a single system of payment negotiation on behalf of all payers.” The strategy was popular in the 1970s and 1980s, when at least 30 states used all-payer rate setting to contain health care spending. Lawmakers established rate boards that considered “the differences in labor markets and how much a hospital pays in wages; the amount of charity care the hospital does; and whether it treats a large number of severely ill patients” and set rates accordingly.

By setting prices at the actual cost of delivering services, lawmakers hoped to reduce wasteful spending and spur efficiency — while freeing hospitals from the uncertainly of annual rate negotiations with insurers. And it worked. At least, a little. One study found that from 1982 through 1986, “all-payer ratesetting reduced hospital expenditures by 16.3 percent in Massachusetts, 15.4 percent in Maryland, 6.3 percent in New York, and 1.9 percent in New Jersey, compared with the national average.” Other studies disagreed and during the conservative revolution of the 1980s, most states abandoned the practice in the hopes that managed competition could deliver lower rates. Today, Maryland is the only state that continues to maintain an all-payer rate setting system, but the strategy is also used in France, the Netherlands, Japan, Australia and Germany.

As Maggie Mahar notes, “a review of the Maryland plan published in a recent issue of Health Affairs reports that, since 1976, state regulation of hospital rates has saved $40 billion. Had a similar system been in place over the same period of time for all states, savings would have totaled $1.8 trillion or more.” The Maryland system is “widely regarded as having created a market in which payments are predictable, transparent, and fair, and in which profits have not suffered as a result,” Mahar argues. “Providers are protected from having to negotiate rates with payers; payers, meanwhile, are shielded from the high markups attached to hospitals services in other states; and patient access to hospital care is protected.”

Regulators in Massachusetts have also been eying all-payer rate setting as a way to control health costs. A RAND study of 12 options for reducing health care spending in the state ranked traditional hospital all-payer rate setting as the second most likely tool for changing the trajectory of health care growth, but concluded that “there were no ‘silver bullets’ that, alone, would reduce the rate of growth in health spending to that of GDP.” The report found that, “at a maximum, hospital rate setting could reduce health spending in Massachusetts by nearly 4 percent between 2010 and 2020.” RAND warns however, that providers could try to undermine rate setting by unbundling certain services, increasing admissions or length of stay.

Frakt writes that he doesn’t know if all-payer rate setting is in our future, and I tend to agree. Given the process of implementing the Affordable Care Act, however, lawmakers are years away from considering or applying this apparently popular method of cost control on a federal level, but if they do, at least some insurers may be on board. During the health care reform debate, it was rumored that the insurers would have accepted the public option if the law adopted a rate scheme under which all payers would reimburse providers at the same price for the same service.

On Tuesday, during an appearance on the Today show, Mitt Romney tried to highlight the differences between the health care law he signed in Massachusetts and the Affordable Care Act by claiming that the text of his health care reform legislation was shorter. “My bill was 70 pages. [Obama's] is over 2,000. He’s doing a lot of stuff that’s devastating to the health care system in this country. He’s wrong,” Romney said.

But now, the Washington Post’s Glenn Kessler has discovered that it’s actually Romney who is in the wrong, since he’s using some funny math to make the page comparison:

Michael Cannon, director of health policy at the Cato Institute, gave us a copy of a consolidated version of the two bills. In other words, this is what the law would have looked like if it had been written in the usual way. This version clocks in at just 907 pages.

Cannon is a critic of both laws and thinks that page length of a bill can be a telling indicator, showing a “potential for mischief.” But he estimated that the section of the national law that directly compares to Romney’s law is only about 200 pages of the 907-page version.

Okay, 200 pages is still more than 70, right? Not necessarily. When Romney signed the bill, the Boston Globe reported that it was 145 pages long. There’s not much difference between 200 and 145 pages. Perhaps Romney is now using double-sided paper?

Romeny’s camp dismisses all this and tells Kessler, “Our view is that President Obama’s health care law vastly increases the size, reach and power of the federal government, and this is borne out by the sheer volume of legislative language contained within its thousands of pages.” Be that as it may, but the reality is that Romney’s coverage provisions are almost identical to those in the Affordable Care Act. And if Obama’s law is longer, it’s because it has to deal with the entire country — as opposed to a single state — and because it actually tries to control health care spending, something Romney avoided in his 2006 legislation.

On Tuesday, the Huffington Post’s Amanda Terkel reported about a Medicare messaging memo distributed to freshman Republicans in Congress by FreedomWorks, the astroturf tea party group headed by Dick Armey. FreedomWorks urges members to “dispel the myth that if we leave Medicare alone it will stay the same. It won’t. By reforming them we are saving and strengthening these programs for the current and future generations.” “Communicate that Democrats do not have a plan of their own. Hold up a blank piece of paper as a powerful image of their do-nothing approach,” FreedomWorks advised.

This morning during an appearance on Fox News, Sen. Marco Rubio (R-FL) followed the messaging points to a T, fear mongering about Medicare’s imminent demise and claiming that Democrats don’t have a plan to “save” the program:

RUBIO: And unfortunately, Washington is full of people that have no alternative plan. If you’re sincere about saving Medicare, don’t just go around criticizing the Ryan plan, offer your own plan. And right now, nobody in Washington has a plan — it’s the only plan out there that saves Medicare, that doesn’t hurt seniors currently on the plan, and that doesn’t hurt economic growth by raising taxes. If Democrats have a better way to do it, if President Obama has a better way to do it, they should offer it. What are they waiting for?

Watch it:

Stories about Medicare’s impending demise have been greatly exaggerated. As HealthBeat’s Maggie Mahar points out, according to the trustees, by 2024 — the so-called doomsday conservatives are now quoting — the Hospital Insurance (HI) won’t be exhausted. “It will be ‘insolvent’ which simply means that dedicated revenues will not be sufficient to pay all of its bills. But in 2024, as the Trustees make clear, the hospital fund will still be able to meet ’90 percent’ of its commitments. In the years that follow, the Trustees project that the shortfall will slowly widen and then contract, so that in 2085, it will be able to meet 88 percent of its obligations.” As Mahar notes, pundits have long warned of Medicare’s demise:

JULY 2, 1969: “The Medicare hospital trust fund faces bankruptcy by 1976 and taxes must either be raised or benefits reduced the senate finance committee was told today.” [Chicago Tribune]

APRIL 1, 1986: “The Medicare hospital insurance program faces bankruptcy by 1996, two years earlier than projected last year.” [Washington Post]

JANUARY 20, 1985: In the last few years, when it appeared that the Medicare trust fund would run out of money in 1987-89… But the need seemed less urgent after the Congressional Budget Office issued new estimates last September indicating that the Medicare trust fund would not go bankrupt until 1994. [New York Times]

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On Wednesday, pro-choice activists in Kansas demanded an apology from a state lawmaker who compared purchasing supplemental abortion coverage to keeping a spare tire in the car. State Rep. Pete DeGraaf (R) made the comments May 13 during “a debate shortly before the House approved a bill banning private insurers from offering abortion coverage as part of their general health plans.” The bill has since been signed into law by Gov. Sam Brownback (R):

During that House debate, Rep. Barbara Bollier, a Mission Hills Republican who supports abortion rights, questioned whether women would buy abortion-only policies long before they have crisis pregnancies or are rape victims.

DeGraaf told her: “We do need to plan ahead, don’t we, in life?”

Bollier asked him, “And so women need to plan ahead for issues that they have no control over with a pregnancy?”

DeGraaf then drew groans of protest from some House members when he responded, “I have a spare tire on my car.”

“I also have life insurance,” he added. “I have a lot of things that I plan ahead for.”

At yesterday’s press conference, Kari Ann Rinker, Kansas state coordinator for the National Organization for Women, stood next to three spare tires, as she asked DeGraaf to apologize for his comments. “These remarks, once again, portray Kansas as a state that could care less about insulting and denigrating its very citizens. I would like him to formally apologize,” she said.

Multiple states have adopted legislation prohibiting insurers from offering abortion coverage except in cases of rape, incest, or health of the mother. But the prospect that a woman would have to “plan” ahead for an unanticipated event is both discriminatory against women and a gross misunderstanding of the procedure. One Oklahoma lawmaker, who voted against a similar bill in that state, pointed out it’s unfair to require women to purchase special abortion coverage in advance because “a medically necessary termination of pregnancy is something that no family plans for or anticipates.”