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Cutting Health Care Costs Through A Global Payment System

BOSTON — Gov. Deval Patrick pledged in his inaugural address to cut health care costs, and he said he would do that by changing the way we pay for care.

“This will be a challenge. There will be a great debate and resistance to change. But working families, small and large businesses alike, and governments too need a solution and they need it now,” Patrick said.

The governor is expected to file legislation later this month or early in February that would launch his plan to reduce health spending. WBUR’s Martha Bebinger joined Morning Edition Tuesday to explain what that would entail.

Bob Oakes: Under the governor’s bill, doctors and hospitals would no longer be paid for each individual service they provide. Instead, they would have a yearly budget for the care of their patients. How would this save money?

Martha Bebinger: Right now, if a patient has asthma or diabetes, they see a doctor or go to a hospital for the most part when they are sick. The health care system makes money on us being sick and there are few limits on the cost of care. With global payments, the budgeting plan the governor wants to use, doctors and hospitals will already have the money, so it will be in their interest to keep patients healthy and out of the hospital.

There are fears providers will tell a patient, ‘You can’t have that MRI, or knee surgery,’ just to avoid going over budget. But doctors and hospitals don’t get to keep money left over in their budgets unless they can prove that the patient with diabetes or asthma is getting the care they need.

A fundamental part of the bill would establish a new independent board or commission to oversee the transition to global payments. What’s the role of this board?

This board would set the rules related to global payments. It would set guidelines for new networks called accountable care organizations (ACOs) — this is a term you’ll start hearing a lot. With every health care movement we have to learn a new vocabulary. ACOs are networks of doctors, hospitals, mental health and rehab centers and home care agencies. Picture, Bob, if you are a doctor on a budget for my care, you want all the places you might need to send me to be in your network working off the same budget. You don’t want to get a bill from another local hospital for my appendectomy.

What if a patient wants to go to a specialist or hospital that isn’t in my, Dr. Bob’s, network?

The patient is free to go. But in reality, many of us go to the lab or specialist our primary care doctor recommends. We don’t know if he or she has a financial motive in making that recommendation. That’s something patients might want to start to ask.

This sounds like a huge change, with many steps that would take a year just to get underway, if the bill passes. So where are the savings the governor says we need now?

The administration is asking the same question. Here’s where we get to part two of the bill, or maybe a second bill. Since the transition to global payments will take a few years, the governor is considering a short-term cap on the increases hospitals can negotiate with insurers. The numbers aren’t set yet, but a 5 percent increase in one year might be the limit.

The other possibility is that this new board or commission would move ahead with global payments and have the option of capping rate increases if the transition takes too long.

It’s not hard to imagine the resistance the governor suggested this bill will trigger. Is his plan set?

The Patrick administration is working to balance the need to show some immediate savings against the claim that if the state is too heavy handed, hospitals won’t have any margin to try their own cost saving measures and will just have to cut jobs.

The House and Senate are not on board with this bill. The administration is hoping to get the endorsement for at least the outline of his plan next week from an advisory committee on payment reform legislation. And Patrick will need the backing of business, municipal and consumer group groups who say it’s time to tackle rising health care costs. We’ll see if the public thinks it’s time and that this is right way to proceed.

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