Massachusetts Does the Math

Six years ago Massachusetts implemented sweeping reforms that have succeeded in their purpose of expanding access to health care, and the Affordable Health Care Act is now applying this model on a national scale. Now, once again, Massachusetts is at the forefront of  reform with a new plan designed to lower escalating care costs.

Health insurance premiums are driven by health care costs.  Since 90 cents of every health care dollar goes toward medical care in Massachusetts, keeping care affordable means acting to lower upstream provider costs.

The Global Payments Experiment

Major stakeholders in Massachusetts — hospitals, insurers, doctors and consumer advocates — are debating the best ways to control rising health care costs and insurance premiums.  Kaiser Health News highlighted the perspectives of key stakeholders. I will provide the perspectives these prominent voices, starting with Gov. Deval Patrick.

Gov. Deval Patrick unveiled health care cost containment legislation designed to radically change how health care is paid for and provided over a year ago. The recommendation: instead of the prevalent fee-for-service system in which providers bill separately for each and every service they provide, the governor’s plan would encourage them to coordinate care and accept “global payments” — a set amount of money to tend to all of a patient’s needs.  The plan also calls for the formation of “accountable care organizations,” integrated systems that the federal health overhaul law also is promoting in the Medicare program.  Getting all stakeholders to agree has been difficult. Insurers are enthusiastic about containing the health care costs that help drive up premiums, but hospitals say they don’t control all the drivers of rising prices and should not be held responsible for all of the burden.  Consumer advocates want to ensure that the new payment and delivery system considers the special problems and costs of people with disabilities and chronic illness.

Prominent Voices: #1

“Like President Barack Obama’s Affordable Care Act, we took a hybrid approach, relying mainly on private insurance provided through the workplace, and added varying degrees of public subsidy depending on a person’s ability to afford private insurance. It’s working. Today, more than 98 percent of Massachusetts’ residents have health care coverage, including 99.8 percent of children. No other state in America can touch that. More companies offer their employees insurance today than before the bill was passed.

In addition, more than 90 percent of our residents have a primary care physician, and four out of five respondents to a recent survey have seen their primary care doctor in the last year. Emergency room visits for primary care are down, and spending on the uninsured and underinsured has dropped by nearly half. We’re healthier, too. For example, because of access to screenings, we’ve seen a 36 percent decrease in cervical cancer in women. All this while adding about 1 percent to state spending on health care.

Our next challenge is slowing the growth in health care premiums.  Spending on health care makes up 18 percent of all spending in the United States, and it is projected to reach 34 percent by 2040. As health spending continues to grow at this historic rate, it weakens our ability to compete and slows job growth. Two years ago, I directed the state’s insurance commissioner to disapprove excessive premium hikes. While an admittedly blunt tactic, and not in and of itself a long-term solution, it was a necessary step to galvanize the market to act.

Since then, hospitals and insurance carriers have reopened their contracts and cut rate increases, in some cases by more than half. We’ve created limited network health plans to give consumers opportunities to get great care in neighborhood settings at lower cost. Certain plans tailored for small businesses promise to be as much as 20 percent cheaper than current rates. We are also ending administrative duplication by requiring common codes and forms from insurers and providers. And, with the help of the Affordable Care Act, more providers are piloting medical home or accountable care models that manage wellness for the whole person, and promise to deliver better and more cost-effective care. These tactics are making a difference. In the last two years, average premium increases for small businesses and individuals have dropped from more than 16 percent to less than 2 percent today. Our focus now is on making these gains last.

There are a number of strategies we are pursuing, including putting an end to the “fee-for-service” model wherever practicable — to stop paying for the amount of care and start paying instead for the quality of care. We are working with our health care community to accelerate this transition to innovative, sustainable models in which incentives are realigned to reward integrated care that emphasizes wellness and lowers costs for everyone. Our goal is for integrated, cost-efficient caregiving to predominate throughout Massachusetts by 2015.

Initial Results

new report featured on Fierce Healthcare by Attorney General Martha Coakley, who conducted a yearlong review of what the six largest Massachusetts insurers paid providers in 2009, concludes that the global payment system, which puts doctors and hospitals on a budget, hasn’t saved money. In fact, the globally paid providers didn’t have less medical expenses than doctors paid the standard way, and some large doctor groups, such as Atrius Health and Mount Auburn Cambridge, were far more expensive than physicians paid under the traditional fee-for-service system. It appears that providers with market clout are still able to negotiate high payments, according to the report.

“Our investigation shows that a move to global payments is not the panacea to controlling costs without first addressing provider price disparities that are not related to the quality or complexity of the services being provided.” Coakley said, reports WBUR . But Coakley stopped short of calling global payment reform unwise, instead blaming the dysfunctional nature of the healthcare market, which allows for wide variety in providers’ negotiating leverage. Therefore, she said, a shift to global payments without fundamental market changes “may not only fail to control cost, but may exacerbate market dysfunction.”

Blue Cross took issue with Coakley’s report, saying that its alternative quality contract, which gives doctors a set amount each year to spend on each patient, “is achieving our twin goals to both improve the quality of patient care and reduce the historical rate of increase in healthcare costs.” The insurer said its plan is “a five-year strategy, not one year,” and Coakley’s report focused only on data from 2009, which was the first year it implemented the contract, according to the Boston Herald.

“Our goal was not just to limit the disparities, it was to reduce the trend,” Patrick Gilligan, Blue Cross senior vice president for health care services, told the Globe. “We do push harder on those providers who start high and ask them to come down over the life of the agreement.” But, he said, “there will be some providers who will have leverage. We are watching the consolidation [of hospitals and doctors groups]. We have concerns about that too. Market clout could be an issue even in a global payment environment.”


Part 2 explores other perspectives on the next wave of policy challenges from:

  • Physician: Massachusetts Hospital Association President Lynn Nicholas
  • Payment Reformer: Massachusetts’ Health Care For All’s Paul Williams
  • Hospital Care Provider: Massachusetts Medical Society’s Lynda Young

Information above is largely provided by Kaiser Health News at

Snap! principle of health care cost control:

All eyes on Massachusetts as stakeholders try to control the upstream drivers of health care costs.