After you've blazed a trail and made near-universal healthcare coverage a state law, what do you do for an encore?
If you're Massachusetts, you mandate cost containment.
In July the Massachusetts legislature passed a landmark bill, S 2400, touted as the first effort by a state to rein in healthcare costs. The bill, now law, links increases in healthcare spending to the state's gross state product and is expected to help reduce healthcare spending by $200 billion over 15 years.
The law holds providers and payers responsible for healthcare spending increases with outliers facing fines as high as $500,000 if they fail to meet performance targets.
Sen. Richard T. Moore (D-Uxbridge) chairs the Senate Committee on Healthcare Financing and was the primary author of S 2400. He was also the primary author of the original healthcare reform law signed by then Governor Mitt Romney in 2006, as well as the major updates enacted in 2008 and 2010.
Sen. Moore recently spoke with HealthLeaders Media about how the state's efforts to contain healthcare costs and the role providers and payers will play in the effort.
Q. What provision of S 2400 provides the biggest opportunity to reduce healthcare costs?
A. There are a couple of things. We set a statewide goal to bring healthcare costs in line with inflation, but it's up to the providers who deliver that care to figure out how they are going to meet the requirement.
We don't direct them to follow a specific course. But if they aren't meeting the goals, they will be asked to develop a specific plan to meet the goals. The law is designed as an opportunity to let the market respond to the need to get costs under control and to squeeze out clinically unnecessary or duplicative services.
We promote transparency by asking providers to identify expected out-of-pocket costs for the patient. That effort, combined with quality measures developed under a plan we passed in 2010, will help patients become better educated health consumers.
We're also pushing for programs like Medicaid and the state employee's health plan to shift from fee for service to global payment and coordination of care. We want to move away from FFS as much as we can.
We modeled our malpractice reforms on a plan Michigan has used for more than a decade. It provides for more of a mediation process between patient and provider. Most malpractice cases are settled so they never go to court and there's usually a confidentially agreement as part of the settlement. We want to learn what happened and be able to do a root cause analysis to see what can be done to minimize the chance of that situation occurring again with other patients.
We have a provision to monitor whether the reforms will reduce defensive medicine, which increase health costs. We want to make sure providers aren't ordering procedures just to cover their butts.
Q. Is there one provision of the law that you view as particularly important?
A. Well, like any good research paper, we always need to have more studies. We'll have a commission look at the variation of price. We want to know why there are price differences for a particular procedure. We've seen cases where the same physician will have different charges for the same procedure. We need a better understanding of pricing.
We know some of it is market share, but there are other reasons. We're looking for a way to compare apples to apples instead of just looking at prices and saying they are different. There are probably valid reasons for the price differences but we want to understand the value to the patient and health system that justifies those differences.
Another study group will look at the issue of diagnosis. Studies suggest that 15% to 44% of diagnosis are generally are wrong. If that's true then people are getting treatment that doesn't do them any good because the diagnosis is incorrect. What can we do about that?
Q. Health plans are removed from the actual delivery of care, so what can they do to affect the cost of care?
A. Look at Blue Cross Blue Shield of Massachusetts, which is half of the insurance market in the state. It provides quality contracts that set standards for providers. The providers only receive higher payments if they improve the quality of care without increasing the cost of care.
We created a standard for the medical loss ratio (MLR) that's higher than the federal standard in the Affordable Care Act .It's 90% now and will be reduced to 88%. Most insurers have reduced their administrative costs to meet the MLR although some have paid rebates. They have substantial incentive to be part of the solution.
Q. Are you concerned that health plans could adopt gatekeeper models and require a lot of pre-authorizations for care?
A. We've done several things to try and minimize that potential. In our 2008 amendments to the reform law we went to uniform billing and coding. With this latest bill, we provide penalties so some stragglers will complete those tasks.
Now we require standardized preauthorization procedures. Plus, we have an established internal and external appeals process so a plan can't deny a procedure just to save money. They have to follow best practices.
Q. Why legislation? Why not let market forces work this out?
A. Well, the cost of healthcare is still increasing everywhere. Health reform here didn't add to the cost but it didn't save enough either. The average rate of inflation in the state is 3.6%; average healthcare costs are increasing by 7.2%.
That's not sustainable as we look over the next 10 to 15 years. The marketplace is continuing to increase the costs so the marketplace has to be incentivized to be part of the solution.
Not every payer or provider has worked successfully to get costs under control. We've set up the framework to do that without being overly regulatory. Everybody doesn't have to use the same plan but everyone has to get to the same goal.
Q. How did you get providers and payers to go along with this?
A. We have a very capable group of providers and payers. We've been working at this for a long time. We haven't denied coverage for pre-existing conditions and or capped coverage for years. Our insurance companies and providers have done pretty well even with those requirements.
Another thing is that our efforts have been bipartisan. We've passed healthcare reform under a Republican (Mitt Romney) and Democratic (Deval Patrick) governor.
Also, we've done it incrementally. My view of healthcare reform is that it's a dynamic process that has to be adjusted if something isn't working or has unintended consequences. I think the providers and payers know we listen to them.
Margaret Dick Tocknell is a reporter/editor with HealthLeaders Media.
