Crunch Time in Massachusetts for Cost Containment and ACOs

The time has come for Massachusetts to walk the talk of health care reform.

We've done a good job with the easier part - increasing access to health insurance. (98 percent of the Massachusetts population is insured.) Now we have to make sure that our citizens have access to high quality care at an affordable cost.

Two years ago a state commission proposed an end to fee-for-service reimbursement and recommended a system of global payments to accountable care organizations. But since then the health care cost problem has gotten progressively worse, and the commission's recommendations are sitting on the shelf.

If the commission report was the first shoe to drop, participants in health care are now expecting shoe number two. In his swearing in ceremnony yesterday, Governor Patrick made health costs a top priority for his second term. Here are the brief, optimistic comments he made in the inaugural address:

I know we can have more accessible and more affordable health care for ourselves and our families. But it will take transparency among clinicians and health insurers, a system of care that makes more use of community settings, simplified administrative systems, and government stewardship for the whole for the good of the whole.

It will take more than optimism to change the cost trend. Health care spending, which was 21 percent of the state budget in 2000, is now 37 percent, and rising (see here for details). There's no way to get a grip on the trend without making tough choices. Among the tough questions that must be faced, four are arguably most important:

1. Municipal employees: According to the President of the Massachusetts Mayors Association "without the passage of real reform by the governor and Legislature, health insurance increases will bankrupt cities and towns. For most cities and towns, annual increases in health insurance costs swallow up any increase in revenue we can generate." Cities and towns want the same flexibility the state has, through its Group Insurance Commission, to set important elements of insurance plan design, without union approval. Unions, understandably, don't like the idea. Legislators are reluctant to oppose public worker unions. Property owners are reluctant to pay higher property taxes and see town services going down at the same time. Something has to give!
   
   
2. Medicaid managed care: There are three ways to curtail Medicaid costs - (1) reduce eligibility (which increases the uninsured), (2) slash payments across the board (which reduces provider willingness to participate in the program, or (3) use managed care techniques that have been well-developed by the state's not-for-profit managed care programs (clearly the best of the three alternatives). Harriet Stanley, co-chair of the Legislature Committee on Health Care Financing recognizes that “We now have to begin messing with Medicaid" but warns that while "Everybody says it...no one is willing to be the bad guy and do something about it.’’
   
   
3. Prices: The way health care costs show up for the insured population is through their health insurance premium (plus the deductibles, copayments and coinsurance that are often part of the plan). From that perspective, health care cost inflation looks like insurance inflation. But there's a growing awareness in Massachusetts that the not for profit plans that insure the majority of the state population are paying out 90 percent of the money they receive to providers of care. Insurance premium inflation reflects provider price inflation. Massachusetts is proud of its largely not for profit health system, and health institutions are major employers in the state. To some extent, making health care more affordable will mean income loss for current employees and reduced opportunity for potential employees. Making health care more affordable for those who purchase it will come at a cost to some of those who provide it.
   
   
4. Public perception: Insofar as Accountable Care Organizations provide more coordinated care with true accountability for their performance, quality will improve. I practiced for 35 years with what was essentially an ACO, and I, along with my family, have received our own care from the organization. Health services research showed that outcomes in not for profit HMOs was as good as or better than care in the "free choice" system. But as a body politic we rebel against any constraint on our free choice. Arcane research won't change our reflexive values. We'll only change if we're persuaded - by the medical community, and by trusted leaders.

Massachusetts has demonstrated that a population can be (almost) fully insured without resorting to the "un American," "socialist" forms of tax financed methods that Canada, the UK, an most of the industrialized world have applied effectively. But it hasn't shown that our mixture of private and public institutions can function without cancerous destruction of the economy. That question will be put to the test in Massachusetts in the next few years.