The Massachusetts Experiment Continues

  • The reform model instituted in2006 succeeded in expanding access.
  • With 90 cents of every health care dollar goes toward medical care, driving health insurance premiums.
  • In 2010, Gov. Deval Patrick implemented cost containment legislation to  encourage providers to coordinate care and accept “global payments” instead of fee-for-service, and “accountable care organizations,” integrated systems.
  • Initial results show that providers with market clout are still able to negotiate high payments, with consolidation of hospitals and doctors groups exacerbating the problem.

In Part 1, I presented the perspective of Massachussets Gov. Patrick  regarding legislation designed to bring the cost of care down by reforming the payment system by moving to “global payments.” Here are three other differing perspectives on controlling health care costs, featured by Kaiser Health News.

Prominent Voices #2: Physician

By Dr. Lynda M. Young, M.D., a pediatrician from Worcester, Mass., and president of the Massachusetts Medical Society, the state’s professional association of physicians.

For six years, my fellow physicians in Massachusetts have been working under a health reform law that, for better or worse, bears a strong resemblance to the national law that is two years old…The numbers are well known. Many more people are insured. While we struggle with a primary care physician shortage like the rest of the states, significantly more people, especially those in disadvantaged communities, have a regular health care provider.

We also continue to struggle with rising costs – which is not a new phenomenon. Massachusetts has been a high-cost state for a long time, and it has nothing to do with our health reform law. But with many more people in the system, it’s more important than ever to do something about it.

Upsurge in New Patients

But aside from the numbers, what has it been like to experience the Massachusetts health care system since 2006? At first, we saw an upsurge in new patients — people we had never seen before. We were concerned these new patients would overwhelm practices, especially those in urban areas, but it wasn’t as huge a problem as some feared. It was very helpful that the state promised to close the gap between Medicaidand commercial insurer rates, because most of these new patients were covered by Medicaid.

These new patients frequently presented with complex, chronic health conditions such as hypertension, and many hadn’t received the regular treatment they needed. So with these patients, we had some catching up to do, but this catch-up period didn’t last forever. To meet the new level of demand, many practices found it very helpful to hire physician assistants, nurse practitioners and other allied health professionals to help them improve the daily operations of the practice. Most patient visits require relatively simple interventions, while others are more complex. These health professionals can help physicians focus more of their time on the most complex and demanding visits.

Cost Conscious Consumers

Meanwhile, we initially thought that once everyone (or almost everyone) was insured, we would never have to talk about money with our patients again. In fact, these conversations are still happening, but they are of a different nature. More of our patients have high-deductible plans, high co-payments or limited network plans. These realities have prompted many of them to ask pointed questions about the cost of a procedure or a test, because they’re on the hook for more of the cost. This trend can go too far in the other direction, but it’s not always a bad conversation for a physician to have with a patient. These conversations often lead patients to ask about the effectiveness and value of our interventions. Fewer patients are now willing to accept a physician’s advice at face value. We often must provide evidence for why going to a different hospital, undergoing a simpler procedure, or getting a less expensive test, will produce the same or even better results.

Even if the Supreme Court overturns the federal health law, health care delivery in the United States will never be the same. Accountable care organizations are here to stay. Electronic health records won’t go away, and they will get better and better. Hospitals, physicians and other health care providers are working together more, and market consolidation is occurring under our feet. The Affordable Care Act merely hastened the process, and added momentum to the changes we’ve been seeing in Massachusetts, too.

Will our experiences in Massachusetts be the same as physicians in other states? Maybe not. Health care delivery can be a local phenomenon, so experiences are bound to vary. But for us in Massachusetts, we are keenly aware that while health reform still presents many challenges, its benefits are very tangible.

Prominent Voices #3: Hospital Care Provider

By Lynn Nicholas, president & CEO of the Massachusetts Hospital Association, Apr 12, 2012

s the country awaits the Supreme Court’s decision regarding the Affordable Care Act, we in Massachusetts can reflect on how much our state healthcare reform efforts have achieved.

We have the highest level of healthcare coverage in the country – more than 98 percent. Hospitals have taken billions of dollars out of their expense trend over the last three years. Public opinion surveys demonstrate that our reform efforts have broad public support. Employers continue to offer insurance even as we have expanded coverage for public programs. And when one compares the cost of health insurance premiums based on median household income, Massachusetts ranks as the 48th lowest state.

The challenge is to build on our success and make it sustainable over the long haul. We have to find ways to maintain our great access to care while improving both quality and efficiency. We also have to be concerned about the impact of reform on our economy as we struggle to climb out of the “great recession.” Healthcare is the economic engine of our state thanks to our hospitals, universities, and biomedical and life sciences industries. Fortunately in Massachusetts we have a history of key stakeholders finding ways to collaborate to reach the right balance, and have three suggestions for how to achieve these goals.

Better Coordinated Care

The first involves transforming the health care delivery system from a disjointed system reacting to illness into one that provides well-coordinated care and that is focused on keeping people healthy. The Massachusetts market is already shifting from a fee-for-service framework to one in which caregivers are organized to provide comprehensive patient care, and are rewarded for providing access, quality and efficiency. In such a system providers not only accept increased responsibility for care, they also accept financial risk that was once the responsibility of insurers. Recently the Boston Globe reported that more than 1.2 million people in the Bay State are now covered by such plans. And five of the 32 “Pioneer ACOs” the federal government awarded are now operating in Massachusetts. We are heading in the right direction, but it’s important that insurers continue to develop products that promote this transition, and for employers and consumers to support this trend as they decide which insurance products to purchase.

Share the Burden

The next suggestion is that we keep our eyes on lowering the total health care spending trend over several years. The health care spending trend is not the result of the actions (or inactions) of any single player. It’s affected by those who provide care, who design insurance coverage, who buy insurance and seek health care services, who control state and federal government health care programs, who produce medical technologies, and others. You can’t target just one participant in the system and hope to achieve sustainable success. Government should lead the way and set a goal to lower total health care spending by a reasonable amount in a reasonable time frame. That will motivate everyone to get involved, find solutions and achieve success.

Finally, the strategies we pursue also must harness the ability of the private market to innovate and adapt quickly. At the same time, the government should work to improve its own programs by ensuring transparency, measuring success and helping to shape decisions among stakeholders about what to do if success isn’t realized.

The Massachusetts legislature has found numerous ways to promote health care progress, from requiring small business purchasing pools to the creation of a critically important All Payer Claims Data Base, which will be a unique claims-based data source that will ultimately provide timely, valid and reliable data to help shape reform, improve quality and reduce cost. But government shouldn’t move to regulate provider rates — that would go too far.

Government is a Vital Stakeholder

State and federal governments already dictate more than half of the reimbursements that hospitals receive – and government substantially underpays for those hospital services. This is particularly problematic for hospitals that serve the financially needy and have little private insurance business. It is also a glaring weakness in the mental health care system.  Moreover, when government – whether state or federal – underpays, some of its costs are shifted to private payers and that leads to higher insurance premiums. Empowering government to rule over private market rates will make matters worse. The market is making substantial progress and it should be given a fair chance to work.  We are on the path to sustainable success. Maintaining a collaborative and balanced approach will keep us on that course.

Prominent Voices #4:  Payment Reformer

By Paul Williams, the payment reform policy coordinator for Health Care For All in Massachusetts.APR 12, 2012

Massachusetts is once again on the cusp of leading the United States in health care reform…Massachusetts leaders are working on a groundbreaking attempt to show the nation that almost universal health care can be achieved while also maximizing cost effectiveness and increasing the quality of care.

We at Health Care For All have organized a consumer-based coalition, called the Massachusetts Campaign for Better Care, focused on payment and delivery reform. The coalition formulated 10 principles expressing our priorities for patient-centered payment reform. These principles need to be embedded in any successful payment reform effort to ensure that as we lower the cost of our health care, patients experience higher quality and that the most vulnerable are protected.

Proposals, building on legislation filed in February 2011 by Gov. Deval Patrick, will seek to remake our health care system to reward value and quality, rather than volume and quantity. Re-orienting the way doctors, hospitals and other providers are paid can align incentives to promote patient-centered care that focuses on health and disease prevention, ultimately lowering health care costs.

In the upcoming debate, the Campaign for Better Care will advocate for a number of policies we believe are crucial to effective reform.

Address Special Needs

For starters, we believe that, in shifting payment methodologies away from the fee-for-service model, steps must be taken to address the particular requirements of those with special needs, people with disabilities and chronic illness, immigrants, the homeless, people with low and moderate income, seniors, and children. In order to avoid the pitfalls of capitated arrangements like those experienced in the 1990s, payment policies should take into account the higher costs incurred by patients who experience barriers to care due to socio-economic status, language and other social and cultural factors. To this end, we must develop and use risk adjustment factors to the rates being paid in order to protect patients with high medical utilization.

Consumer and Community Outreach

In addition, health care system reforms must be accompanied by a renewed commitment to funding public health and community-based prevention. Expanded investment in prevention and public health will lead to a reduction in overall health care costs.

Also, the patient needs to be a partner in their health care and must be given the proper tools to be engaged. Patients and providers should collaborate in care plans that provide patients with the necessary skills, confidence and knowledge. Programs like chronic disease self-management and shared decision-making have demonstrated that increased patient confidence and engagement improves care and lowers health care costs.

More Provider Accountability

Finally, our health care system is overly complex and fragmented. Tests get repeated, records go missing and no one is paid to look out for our overall health. We can achieve cost reduction and quality improvement by rewarding coordinated care. Providers with higher rates of preventable events, like preventable readmissions, inappropriate hospital admissions, or preventable complications, should face financial consequences.

Massachusetts is proud to have provided a template and test bed for reforms that became part of the Affordable Care Act. As the state is poised to continue down the health reform road, consumers will be active to make sure reforms lead to better, more affordable care.

Commentary: Health Insurance Isn’t the Problem

Unfortunately, up to now, most of the discussion on health care costs has focused on the insurers, whose profits account for perhaps 3% of the cost of rising health care (14% when you factor in administration and support), while the providers account for some 76%.It is important to remember that insurance is the basic principle behind risk management in any financial delivery system in any healthcare model.

If people were capable of paying for catastrophic services, they would, and there would be no need for insurance of any kind. If people could sock put away enough money to provide $ 1million to their beneficiaries at their death, they wouldn’t need to purchase life insurance. If they could afford to pay $1 million in liability for injuring another party in an accident, they wouldn’t need to purchase automobile insurance. And if people could afford the costs of healthcare for serious illnesses, they wouldn’t need health insurance either.

Insurance is part of the solution, and not the problem.  Managed care programs, for instance, place a great deal of emphasis keeping  costs down. Such programs typically include explicit standards for selecting providers, formal utilization review and quality improvement programs, an emphasis on preventive care; and financial incentives to encourage enrollees to use care efficiently. An example of how health insurers are keeping costs down is explained by a friend who writes:

I have insurance with a huge deductible, so i basically just pay for everything. The thing is though, if I did not have insurance, I would have to pay the “regular” rates instead of the “insurance negotiated” rates. “Regular” rates are much higher; on lab tests, it’s about double.

When insurance, as the most visible part of the picture, tends to take the brunt of the blame, this allows the real upstream drivers of cost to evade scrutiny. Recent political rhetoric about vouchers as a proposed solution for rising costs is an interesting study in how health insurers are falsely blamed for cost increases. The argument is that because insurers foot the bill, the consumer has no incentive to shop around for cheaper care, and that this is why costs are rising. Let’s examine this canard:

Vouchers Won’t Solve Our Health Care Cost Problem

Recently, politicians have been floating rather simplistic rhetoric about health care vouchers, as they often do in an election cycle. Vouchers are a go-to political strategy that are often recommended for education, housing and so forth. The concept is that introducing competition into healthcare will provide make patients more cost sensitive and that this will drive down care costs via the dynamics of the free market . Economists agree that vouchers won’t work in healthcare, and the public also senses that they are an unfair way to ration care. A Pew Research/National Journal poll conducted in September 2010 found that 69 percent of people over age 65 — Democrats and Republicans — oppose replacing Medicare with vouchers, which the Ryan Plan recommends.

Economic principles inform us that markets work best in circumstance where there are 1) a large number of buyers and sellers, 2) consumers have full information about the product, 3) the good or service is nearly identical across producers, 4) there are no barriers to entry or exit, and 5) the conditions are such that prices provide the correct signal to consumers and producers in order to encourage optimal behavior.

However, in health insurance markets, these conditions do not hold. While purchasers of health insurance are numerous, providers are much fewer in number. And in some case, as with pharmaceuticals, there may be only one or a very few suppliers of a particular drug. And, although regulation attempts to ensure that the alternative plans are transparent, easy to understand, and easy to compare, consumers have trouble comparison shopping for health care.

Consumers themselves are in no position to make informed decisions about health care, especially with the stress, worry, and need for instant decisions that an illness can present. If a doctor says you need a costly emergency procedure at 3 a.m. to save your life, will you be inclined to shop around for the best deal?”

A prime example of circumstances in which competition works is the automobile industry, where potential buyers test drive and then review car ratings from consumer reports. The individual can effectively compare the specifications, price and reliability of similarly desired models, with the guarantee that all products are standardized. Unfortunately, the consumer reports approach will not work for health care. Hospitals offer too large of a range of services with various complications and medical jargon. Today, it is exceedingly difficult to pick the right professionals outside one’s area of expertise. Being a good attorney does not mean you can pick a good hematologist. And hospital report cards can be misleading. For example, mortality rates cannot be considered a strong indication of medical performance unless patient age, “do not resuscitate” orders, and health complexity issues are taken into consideration. According to Blue Cottage Blog:

Health care services just follow a different set of rules. Coronary bypass surgery or limb amputations are huge decisions with irreversible consequences if the “wrong” purchase is made, which is much different than switching your internet provider. The risk of no trial runs, coupled with high emotion from the patient and sphere of influence, sometimes cloud best judgment.

The argument put forth by supporters of a voucher program are based on the fallacy that consumers don’t really care what they pay for health care. In fact, the statistics show clearly that, even though increasing numbers of American families are responsible for a greater share of their healthcare costs, provider costs still just continue to increase.


The report by Massachusetts Attorney General Martha Coakley, of what the six largest Massachusetts insurers paid providers in 2009, concluded that despite the global payment system, which puts doctors and hospitals on a budget, providers with market clout are still able to negotiate high payments.

“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 blamed the dysfunctional nature of the healthcare market, which allows for wide variety in providers’ negotiating leverage. She said that a shift to global payments without fundamental market changes “may not only fail to control cost, but may exacerbate market dysfunction.”

Translation into plain English: the institutions that own the hospitals and their suppliers are not being held accountable enough.  Hospitals and doctors groups are consolidating, and using their clout to squeeze the insurance companies for larger payments, passing off the financial
risk to the easiest and most highly regulated target – the insurance companies, while pushing back against attempts to scale back costs. What
incentive do they have to do so, healthcare being a fixed demand product?

Although the perspectives of the various stakeholders shown above represent different, often competing interests, the Massachusetts dialogue has at least brought them to the table, which is an important first step toward a more rigorous discussion.

Of course, there is room for improvement and innovation all around. And there is opportunity for profit and appropriate margins if well earned.  When insurance systems add 3% to the cost and providers 76%, it becomes fairly clear why everybody’s goes after the 3% and ignores the rest. It’s called market clout, and it originates in inefficient doctors groups and hospital corporations that are consolidating and setting prices,  pharmaceutical companies and medical supply companies. To achieve meaningful cost control, all parties must be brought to the table and the cards must be laid out for all to see.

Information above is partly 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.