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| Composition of Massachusetts Residents Newly Covered under Chapter 58 (as of 1/1/08) (Photo credit: Wikipedia) |
As debate rages on about implementation of the Affordable Care Act (ACA), national attention is once again focused on Massachusetts, which instituted a similar comprehensive health care reform package in 2006. After expanding health insurance
coverage to almost 98% of the state population, Massachusetts is now
struggling to control increasing health care costs that threaten the
continued viability of its reforms. This second phase of health care
reform presents entirely new challenges. Whereas expanding coverage has
popular appeal, cost control
does not. Whereas expanding coverage injects additional dollars into
the health care system, cost control does the opposite. Whereas
expanding coverage can be relatively simple, cost control is difficult.
Yet despite these obstacles, Massachusetts forges ahead, with a
combination of public and private efforts at payment reform on an
unprecedented scale.
Massachusetts
spent more than $61 billion on health care in 2009, a figure that
places it among the highest-spending states in the country.1 In the past 5 years, growth in health care spending has consistently exceeded economic growth,
resulting in challenges both for lawmakers dealing with a constrained
state budget and individuals required to purchase coverage privately. In
fiscal year 2012, health care will consume 54% of the state's budget,
up from 49% in fiscal year 2009, with the bulk going toward Mass Health
(Medicaid) and individual subsidies for purchasing health insurance. For
individuals, monthly premiums for a minimal (“bronze”) plan purchased
through the Commonwealth Choice connector (the state insurance exchange)
increased from about $175 in 2007 to $275 in 2012 (a 57% increase),
despite slowed growth in overall health care spending since the start of
the recession in 2008.
To address these concerns, Governor Deval Patrick
convened the Massachusetts Special Commission on the Health Care
Payment System, which voted unanimously in July 2009 to recommend that
the state transition from a fee-for-service to a global payment system
within 5 years. The commission also encouraged providers to band
together into accountable care organizations
(ACOs) — organizations of providers held jointly accountable for
spending and quality of care for a defined population of patients.
Meanwhile, the Health Care Quality and Cost Council, created by the 2006
coverage-expansion law, issued its Roadmap to Cost Containment in 2009; in it the council argued strongly for global payment and systemwide redesign to lower spending.2Recognizing that price and volume together account for spending, the Office of the Attorney General
and the Division of Health Care Finance and Policy embarked on a
landmark effort to document the substantial price variations in the
state — illustrating, in several influential reports, the role of
providers' market power in determining the prices charged to commercial insurers.3
These
activities culminated in a comprehensive payment and delivery reform
bill released by Governor Patrick in February 2011. The bill proposes
migrating into global payment arrangements most state employees and
Medicaid enrollees, groups that together include about 25% of
Massachusetts residents.4 It
also encourages but does not require providers to form ACOs — with the
state providing oversight of market power and price transparency — and
includes provisions for malpractice reform favored by physicians. The
bill also grants the commissioner of insurance the authority to strike
down increases in insurance premiums that result from excessive
increases in underlying provider-payment rates. The appropriateness of
increases in provider-payment rates will depend on how they compare with
growth in the Massachusetts gross state product (the state-level
equivalent of the national gross domestic product) and the growth of
total medical expenses in the providers' particular region. Combined
with global payment, this authority to indirectly regulate providers'
prices would be among the strongest policy tools available for cost
control. Since the bill's release, state legislators have been drafting
their own proposals, and both public and closed-door debates have
intensified. The legislative outcome remains unclear.
While
the state aggressively pursues its agenda, innovations in the private
sector have arguably taken the lead. Most notably, Blue Cross Blue
Shield of Massachusetts, the largest commercial insurer in
Massachusetts, launched the Alternative Quality Contract (AQC) — based
on global payment with shared savings and shared risk, as well as
pay-for-performance incentives — with seven provider organizations in
2009. Since then, the AQC has been extended to cover more than a dozen
provider organizations and more than 600,000 enrollees. Encouraged by
provider organizations and the AQC, Harvard Pilgrim Health Care and
Tufts Health Plan, the state's other major insurers, have also
negotiated global payment contracts with their provider networks, which
will probably push the number of enrollees in commercial insurance plans
that have global payment arrangements to more than 1 million.
Finally,
and perhaps most important, the Center for Medicare and Medicaid
Innovation launched its Pioneer ACO program in January 2012 with 32
advanced provider organizations around the country. Among them are 5
large organizations in eastern Massachusetts (Atrius Health, Beth Israel
Deaconess Physician Organization, Mount Auburn Cambridge Independent
Practice Association, Partners Healthcare, and Steward Health Care
System), which will together care for approximately 150,000 Medicare
beneficiaries (roughly 75% of Medicare beneficiaries in the Boston area)
under their Pioneer contracts. Additional provider organizations in the
state will probably join the Medicare Shared Savings ACO Program later
this year.
These
synergistic efforts by public and private payers have resulted in a
watershed moment in Massachusetts health care. By our estimates, if the
Group Insurance Commission, which purchases insurance for state
employees, and Medicaid follow Medicare and commercial payers into
global payment, substantially more than half of residents of eastern
Massachusetts would be cared for by providers working under risk-based
contracts. Primary care physicians will have the opportunity and
responsibility to steer resource utilization for their organizations,
and providers in all specialties will have strong incentives to better
coordinate care, improve quality, and intensify their focus on
patient-centered care. Referral patterns and the movements of patients
from one provider system to another will probably change considerably.
Similarly, with strong incentives to reduce spending, provider
organizations will probably take an active role in identifying and
discouraging the use of low-value services. Opportunities will be ripe
for designing incentives within organizations directed at individual
physicians as well as teams of providers.5
Yet
immense challenges loom. Because enrollees in preferred-provider
organizations and most employees of self-insured firms remain largely
outside of global payment arrangements, the fee-for-service system
retains a substantial role. With global payment expected to constrain
spending for a growing proportion of patients, undesirable spillover
effects, such as cost shifting onto the fee-for-service population, may
occur. At a macro level, Massachusetts relies heavily on
specialty-driven tertiary care delivery systems not only for its health
care but also for jobs and the education of thousands of
physicians-in-training each year. Indeed, health care is an engine of
the Massachusetts economy. A crucial question is whether lawmakers will
gain the stakeholder support needed to embrace cost control and tackle
the roots and drivers of Massachusetts health care spending, given that
unintended consequences for the labor market and the broader economy may
lie downstream.
No
matter the outcome, this wholesale Massachusetts experiment should
offer invaluable lessons for other state and federal cost-control
efforts, particularly as the ACA is implemented. One lesson is already
resoundingly clear: the growth of health care spending threatens the
sustainability of every other public service, from education, to public
health, to infrastructure, to defense. Indeed, health care spending is
the most important determinant of our growing national debt. In a
society of limited resources, the imperative for cost control now comes
from outside health care. Payment reform may well be a reasonable
beginning, but fundamental reform of the delivery system is needed if we
are to truly succeed.
Disclosure forms provided by the authors are available with the full text of this article at NEJM.org.
This article (10.1056/NEJMp1201261) was published on April 11, 2012, at NEJM.org.
SOURCE INFORMATION
From
the Department of Health Care Policy, Harvard Medical School (Z.S.,
B.E.L.); and the Division of General Medicine and Primary Care, Beth
Israel Deaconess Medical Center (B.E.L.) — both in Boston; and the
National Bureau of Economic Research, Cambridge, MA (Z.S.).
REFERENCES
- 1Centers for Medicare and Medicaid Services. National health expenditure accounts (httphttp://s://www.cms.gov/NationalHealthExpendData).
- 2Massachusetts Health Care Quality and Cost Council. Roadmap to cost containment. October 21, 2009 (http://www.mass.gov/hqcc).
- 3Examination of health care cost trends and cost drivers: report for annual public hearing, June 22, 2011. Boston: Office of Attorney General Martha Coakley (http://www.mass.gov/ago/docs/healthcare/2011-hcctd.pdf).
- 4An act improving the quality of health care and controlling costs by reforming health systems and payments. Boston: Commonwealth of Massachusetts, 2011 (http://www.mass.gov/governor/docs/legislation/paymentreformlegislation.pdf).
- 5Landon BE. Keeping score under a global payment system. N Engl J Med 2012;366:393-395
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