Massachusetts has been cited as a model for the nation health care reform with its 2006 bill mandating health insurance for all.
The initial intention of the bill has been realized – 98 percent of state residents are now covered. But experts say exploding medical costs are driving up insurance rates, threatening not only the gains in coverage, but the state’s economic welfare as well.
Insurance premiums are taking a bigger bite out of individual, state and municipal budgets. From 2001 to 2009, the median monthly premium for individual insurance plans rose from $251 to $442. A recent study by the Boston Foundation found health care costs for school districts have grown faster than state spending on education. From 2000-2007 health care costs in school budgets increased by $1 billion, while state aid increased by $700,000.
Cutting those costs will be a priority in the next legislative season on Beacon Hill. What may be decided could bring large-scale changes to the way patients are cared for and how doctors and hospitals are paid.
The Legislature began addressing the issue in 2008 when it created a special commission to study alternative payment models and asked the attorney general’s office to produce a report on health care cost trends.
The findings of these studies and the actions of the Legislature could keep Massachusetts in the forefront of national debate on health care. New initiatives here could influence how the rest of the country deals with the issue.
The following is a primer on two of the major ideas for addressing the problem.
IDEA: Global Payment System
The majority of health insurance plans use the fee-for-service model, which compensates providers for individual treatments such as doctor’s visits and CT scans. The Special Commission on the Health Care Payment System found that the model’s high-profit margins provide financial incentives for unnecessary treatments and procedures.
Global payment systems pay providers a pre-determined sum for each patient’s medical costs, placing responsibility on doctors and hospitals to stay within the budget. Insurers assess an individuals’ potential health risk, and supplement that payment with rewards for quality care.
The commission recommends the development of Accountable Care Organizations that would coordinate patient care and be responsible for staying within the budget. ACO models will differ, but each organization of hospitals, physicians, and other non-clinician providers will be accountable for all or most of a patient’s care.
There is evidence such a plan would work. Prof. Gerard Anderson of Johns Hopkins University conducted a study of Medicare programs that found global payment systems reduced re-admissions to hospitals and preventable hospitalizations by 25 percent. The study did not look at quality of care.
“All the unnecessary hospitalizations are expensive. We waste literally billions of dollars,” he said. “A better delivery system could save lots of money.”
The commission found that 20 percent of private insurance physician payments in Massachusetts are made under the system. Several major insurers have a global payment plan, including Tufts Health Plan and Blue Cross Blue Shield of Massachusetts (BCBSMA).
BCBSMA’s program is the Alternative Quality Contract, a voluntary five-year agreement signed by physician groups with a goal of decreasing costs by half within the five-year period and making health care trends more predictable.
According to press spokesperson Jenna McPhee, initial data found that all providers who signed up in 2009 met their budget. BCBSMA expects a more comprehensive review in February.
In December, the Beth Israel Deaconess Physician Organization (BIDPO), an independent physician network affiliated with Beth Israel Deaconness Medical Center, became the largest physician group to sign the contract. The organization includes approximately 1,800 physicians; the agreement covers more than 75,000 BCBSMA members.
The Massachusetts Medical Society says the main drawback to global payment plans is the difficulty of fast, wide-spread adoption. In August, MMS President Alice Coombs, released a statement warning about the complexity shifting to global payments.
“While some elements of our health care system might move to a global payment system in a relatively short time frame the vast majority of physicians and hospitals will find any transition to be fraught with significant technical, logistical and clinical challenges,” she said in her statement.
The medical society recommends multiple compensation systems, including “limited pilot studies that utilize global payment system,” according to its website.
IDEA: Cost Transparency
“We need easy access to the true price of our office visits, hospitalizations, and diagnostic tests,” wrote Dr. Michael F. Collins, chancellor of the University of Massachusetts Medical School in the Worcester Telegram & Gazette. “If we can find out the price of a hotel room or a cross-country flight with a few clicks of the mouse, we can lift the veil currently covering the price tag attached to health care.”
There are two separate issues with the lack of transparency in health care costs. A lack of cost information makes it hard for policy makers and insurance companies to understand the health care economy. Consumers have a hard time finding and comparing costs of individual treatments at various hospitals.
The Massachusetts Division of Health Care Finance and Policy is creating the All-Payer Claims Database (APCD), a robust cost and quality database for consumers, employers, insurers, and government.
Beginning in January, all payers in the state will be required to submit data from the last three years for medical, dental, and pharmacy claims. In February, they will be required to update the information monthly.
The APCD will streamline administrative costs by providing claims data to other agencies, such as the Health Care Quality and Cost Council and the Group Insurance Commission, which now collect comparable data.
Six other states, including Maine, Vermont and New Hampshire, have similar databases, but Massachusetts will have the most complete data set, according to DHCFP Commissioner David Morales.
“First and foremost, I think it’s important for policymakers and employers to understand the market of health care,” Morales said. “It’s important to make available more public information.”
The attorney general’s report also found prices for medical care vary greatly within similar demographic zones. The higher prices didn’t correlate with higher quality care. The differences, the report said, are associated with “market leverage” – the ability of a provider or insurer to influence negotiations.
The report found differences between the highest and lowest paid providers in an area sometimes exceeded 200 percent.
At this year’s annual conference of the Massachusetts Association of Health Plans, Attorney General Martha Coakley said that increased cost transparency is the best way to begin resolving the issue.
Consumers can now get a glimpse at the range of costs. The website My Health Care Options (http://hcqcc.hcf.state.ma.us/) has a search engine that allows consumers to make side-by-side comparison of treatment costs at different hospitals within a geographic zone.
The first annual report on the website’s data by the DHCFP found significant cost differences between hospitals. A CT scan of the chest ranges from $350 to $1,300, and a mammogram costs between $75 and $250.
The site, run by the Health Care Cost and Quality Council, a semi-independent state agency created in 2006, also allows health care consumers to compare prices against the state average.
While a CAT scan might have a straightforward price, it would be more difficult to assess the cost and quality of a complex surgery. Cost transparency is seen as a stepping stone rather than a solution. Whether transparency lowers costs will be determined by how the information is used.