Gov. Patrick mum on health luxury tax, says AG has tools to address market power

Gov. Deval Patrick delivered a wide-ranging speech on health care cost containment efforts in Massachusetts but failed to take a clear position on what could become one of the more controversial points of disagreement between the House and Senate: a hospital luxury tax.

Asked whether he could weigh in on the House’s plan to tax high cost providers and redistribute that money to financially strapped community hospitals, Patrick joked, “Could I, or would I?”

He went on to suggest that the luxury tax might be unnecessary because he mistakenly believed the assessment would be targeted to pay for a new oversight agency which he said he was “unconvinced” was needed.

Asked again about the luxury tax after the speech to the Greater Boston Chamber of Commerce, Patrick said, “I’m going to reserve judgment until the final bill, but I expressed my concern about that inside.”

Attorney General Martha Coakley has identified price variation unconnected to quality of care as a major cost driver of health care inflation, suggesting that the market clout and brand names of more prestigious institutions allow them to charge more for services priced at lower rates by other providers.

“I said there’s more than one way to skin a cat. The idea of excess of market power is something that I and many, many others have expressed concern about and the attorney general has tools right now which their office can use and I assume they will,” Patrick told reporters after his speech.

An aide to Coakley did not have an immediate response to Patrick’s claims, saying he would look into the matter.

House Health Care Financing Chairman Rep. Steven Walsh told the News Service Tuesday afternoon that the luxury tax was one way the House bill proposed to address market power discrepancies.

“I think we took the position that market power needed to be addressed in the bill and we did that, but we tried to take the approach that this is more about quality. This isn’t just about money,” Walsh said. “It’s about quality and we want to make sure we are quantifying our health centers that are the best in the world.”

Walsh repeated his hope that prices charged by providers will result in the tax never being assessed.

The Senate, which began debate on its cost containment bill Tuesday, did not include a tax on high-cost hospitals, opting instead for a special commission to determine acceptable and unacceptable factors contributing to price variation.

“It might force those folks that are higher cost to make decisions that aren’t well thought out,” Sen. Richard Moore, the co-chair of the Health Care Financing Committee, said of the House penalties.

The idea of a luxury tax, which one lobbyist compared to the model used in Major League Baseball to help small market teams remain competitive, remains a point of contention between lawmakers and industry stakeholders.

Lynn Nicholas, president of the Massachusetts Hospital Association, said her organization was “opposed on principle” to the idea of “robbing Peter to pay Paul.” Before a walking to a meeting with House Speaker Robert DeLeo on Tuesday afternoon, she told the News Service that price variations need to be better understood, and suggested the concentration of teaching hospitals in Boston was a viable explanation for disparities.

Lora Pelligrini, the president of the Massachusetts Association of Health Plans, however, said market power must be addressed in any final bill if the state is to be successful in reducing health care costs.

“We need to ensure that no longer will providers be able to drive high prices solely based on who they are or their geographic isolation, but that prices are based on quality,” said Pelligrini, who used the baseball analogy.

Pelligrini, a former aide to Patrick who the governor jokingly told to “brighten up” during the question and answer session, said her board has not taken a vote to endorse the luxury tax concept, but said the final bill needs to be more explicit than the Senate’s on a solution to pricing variations.

Asked about the governor’s suggestion that Coakley already has the tools to address the problem, Pelligrini said, “We’ll talk to the governor about that another time.”

Patrick used his speech to the Chamber on Tuesday to stake out some ground on the competing House and Senate proposals, agreeing that it could be useful to benchmark health costs against overall state economic growth.

Nicholas said that providers are in agreement that spending should be brought in line with overall economic growth, but said she was “very concerned about dipping below the level of the economy.”

“We believe we can do that. We just need a reasonable glide path,” Nicholas said.

Walsh praised the governor’s commitment to reaching a final solution on cost controls this session, and said he is encouraged by the amount of overlap in the House and Senate bills on general principles.

The Lynn Democrat told the News Service he believed the health care industry could reduce its cost growth to that of the overall economy without resorting to massive layoffs, which has been warned, and said he believed the governor’s concerns about adding bureaucracy could be addressed.

“He said he thought the right model was the Connector model which is great news because we modeled our division almost identical to the Connector and we use an existing entity, the Division of Health Care Finance and Policy, so I see no reason why the governor wouldn’t be supportive of that when he looks at the specifics,” Walsh said.

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