Connecticut, one of the last bastions of rate regulation, is following the lead of many other states by moving toward a system of managed competition and universal health insurance coverage.
In his State of the State address this month, Gov. Lowell P. Weicker Jr., a political independent, said Connecticut will deregulate hospital prices and attempt to provide universal access to healthcare by January 1997. Mr. Weicker called for the creation of a new Office of Health Care Access, which would submit a plan for healthcare reform.
The state inched toward deregulation last spring, when the governor signed a bill that suspended the hospital rate-setting system for one year (June 14, 1993, p. 26). However, the law imposed a ceiling on gross revenues generated by each of the state's 35 acute-care hospitals, prohibiting rises of more than 4.25%.
Mr. Weicker's basic goals are endorsed by the state's healthcare providers, payers and lawmakers.
Late last month, the Connecticut Hospital Association's board of trustees voted to support legislation that would encourage competition among "inte-grated delivery networks." Under the CHA's reform plan, such networks would receive a fixed, risk-adjusted capitated payment for services. The payments would be set by a new state authority. The plan also recommends insurance reforms and mandated employer coverage by 1996.
Also last month, the Legislative Program Review and Investigations Committee, a bipartisan committee of the state General Assembly, concluded that the state's current regulatory structure isn't effective. It recommended creating a single state agency that would allow providers to compete for business but also would oversee the allocation of healthcare resources.
Connecticut has controlled hospital rates under one method or another since 1973. In June 1989, lawmakers repealed a 3-year-old prospective payment system based on diagnosis-related groups and replaced it with a modified rate review system. Last year, the state shelved the rate-setting system and placed a cap on revenue increases.
According to an analysis by the Legislative Program Review and Investigations Committee, rate regulation has kept expenses per admission below the national average. Last year, hospital costs rose 6%, the CHA said. However, the rate-setting system has supported "widening disparities in charges" and excess capacity, the committee said.
Connecticut's supply of hospital beds, at 6.31 per 1,000 square miles, is more than four times the national average of 1.42, according to the committee's report. Only New Jersey, Massachusetts and Rhode Island have more beds per 1,000 square miles, the committee said.
Connecticut hospitals' average occupancy fell below optimum levels at 73.3%, according to 1992 data.
According to a study conducted last year for the state Commission of Hospitals and Health Care, Connecticut's acute-care requirements are expected to decline 10% by 1997 and 20% by 1002. The state will have 2,877 excess licensed beds and 883 excess staffed beds by 1997.