Massachusetts tackles next phase of health care reform: controlling costs

Introduction

While lawmakers in Washington and state capitals continue to obsess about Obamacare — either how to make sure it is being implemented as Congress intended, or how to make sure it isn’t — Massachusetts legislators have focused their attention on the next phase of reform: health care costs.

Massachusetts is where the nation’s most sweeping reform bill was enacted in 2006 — when Mitt Romney was governor. But like the federal Affordable Care Act, the Bay State’s “Act Providing Access to Affordable, Quality Accountable Health Care” sought primarily to change the way health insurers do business and to reduce the number of uninsured residents.

The state has made good progress. Because low-income Bay Staters were among the first to buy subsidized coverage on the country’s first Obamacare-like exchange, and because insurers there could no longer discriminate based on gender or health status, the percentage of uninsured residents fell from 8.4 percent in 2006 to 3 percent last year. Another reason for that drop is the Obamacare-like requirement that most residents must get health insurance or pay a penalty.

But while bringing more people into coverage can help reduce health care spending — in part by enabling previously uninsured folks to get care in more appropriate settings than a hospital ER — neither Romneycare nor Obamacare went far enough.

Now, once again, Massachusetts lawmakers are leading the nation, or at least trying to. And this year, we’ll likely begin to see if a broad-based and far-reaching law that passed there in 2012 will ultimately be a model for the rest of the nation.

The official name of that Romneycare follow-up law — An Act Improving the Quality of Health Care and Reducing Costs Through Increased Transparency, Efficiency and Innovation — is cumbersome, but does a pretty good job of capturing its goals. Among the first initiatives to be undertaken as a result of the law: finding out just how much waste there is in the system — and why waste exists in the first place.

After a year of data collection and analysis, the state’s newly created Health Policy Commission estimated last month that between 21 percent and 39 percent of all health spending in Massachusetts in 2012 could be considered wasteful. The panel found, for example, that the average hospital readmission rate in Massachusetts was higher than the national rate for Medicare beneficiaries for many major conditions. The group also concluded that diagnostic tools were often being used far more than necessary. More than 20 percent of patients with uncomplicated lower back pain were getting imaging studies against established medical guidelines.

Lawmakers have given the commission responsibility for ongoing monitoring of health care utilization and costs, and for setting and enforcing a benchmark for annual health care cost growth. That benchmark will be tied to growth in the state’s economy.

Among the Commission’s areas of jurisdiction: mergers and acquisitions among health care providers. Hospitals nationwide have been consolidating, which has reduced competition in many markets. As a result of the 2012 law, health care providers in Massachusetts must give 60 days’ notice to the Commission before going forward with a planned merger or acquisition.

The ability of the panel to slow or halt consolidation already is being tested. A review of a proposed merger between Partners HealthCare, the state’s largest hospital and physician network, and a smaller Boston area hospital raised red flags. Regulators are pressuring Partners to drop its plans because of concerns that the merger will lead to higher costs. Partners is pushing back, contending the merger will save $27 million a year in health care costs.

The outcome undoubtedly will depend on how successful Partners’ lobbying and PR efforts are.

Another issue on which regulators can expect pushback from doctors and hospitals is how health care providers are paid. The 2012 law requires the Medicaid office and other state agencies to implement alternatives to the prevailing fee-for-service reimbursement scheme.

The law also seeks to improve transparency around health care costs and quality. Massachusetts health plans have to offer a toll-free number and a website that allow consumers to obtain information on the estimated price of medical care and how much they likely will have to pay out of their own pockets.

In addition, the Commission has some carrots that might encourage health care providers to offer more cost-effective, patient-focused care. Last month, for example, it awarded Charlton Memorial Hospital $400,000 to improve the care of high-risk patients. The hospital will spend the money hiring three registered nurses to coordinate certain patients’ ongoing care after they’re discharged. The focus will be on complex cases and patients with multiple diagnoses who make frequent trips to the ER.

Policymakers from around the country will be watching Massachusetts closely to see if the state really can get a handle on health care costs.