Controlling Health Care Costs in Massachusetts

An interesting an important drama about health care costs is coming soon to Massachusetts.

A bill proposed by Senate President Therese Murray that will require annual hearings about the drivers of the health care cost trend is making its way through the Massachusetts legislature. The Senate version would locate provider and insurer hearings in different venues – the Division of Health Care Finance and Policy for providers and the Division of Insurance for insurers.

On Friday, Bruce Bullen, COO of Harvard Pilgrim Health Care and formerly Massachusetts Medicaid Commissioner proposed that the Massachusetts Health Care Quality and Cost Council should conduct the hearings. The Council is part of the Massachusetts Health Care Reform process, charged with promoting transparency about quality and cost and containing the cost trend.

Bullen's proposal is sensible. Any serious effort to get a grip on costs must bring providers and insurers together. Providers structure care. Insurers structure payment. They need to work together. Otherwise we'll be stuck with the kind of finger-pointing that became so familiar in the 1990s.

A recent article by leaders of Partners HealthCare System, the largest provider organization in New England, on "Options for Slowing the Growth of Health Care Costs," correctly states that "the value obtained for health care expenditures must be enhanced." We know from the collapse of insurer-driven managed care, however, that value-enhancement must come from the provider community.

The first approach to cost containment the Partners leaders propose is payment reform - such as capitation and case rates. They recognize that all of these approaches "are potentially disruptive to providers whose businesses are based on fee-for-service payments." Effective payment reform will require providers and insurers at the same table - neither can make it work on their own.

Getting providers and insurers to work together is a necessary but not sufficient condition for cost containment. They will need to articulate and embrace a more communitarian ethic than has governed our thinking about health care to date. Insurers must be sensitive to the provider community's historical commitment to the well-being of individual patients. Providers must be sensitive to insurer responsibility for the care of insured populations, and for being stewards of the funds entrusted to them by employers and individuals.

In my posting on May 2 I described how, when I asked physicians “if you were the czar of your field and your orders were cheerfully followed, how much money could you save with no loss of quality?,” no one ever said less than 25%. Payment arrangements like capitation and case rates can facilitate this process, but only providers can make it happen.

There will be tremendous pushback against any interventions that cause economic pain. This is what drives our capitalistic economy and isn't peculiar to health care. Dealing with the pushback will require skillful political leadership. But unless we endorse an ethic of population health alongside of individual benefit we wont even be able to open the dialogue.