A New Approach To Cutting MA's Health Costs: Throw Spaghetti

By Rachel Zimmerman and Carey Goldberg

When Massachusetts passed sweeping health insurance reform in 2006, a crucial piece was missing from the landmark legislation: how to control rising medical costs.

Today, state lawmakers unveiled an ambitious new proposal to do just that, including new ways to pay doctors and hospitals, a specific cap on health-care spending tethered to economic growth and a tax on the state's most expensive hospitals if they can't justify their prices.

MIT economics professor Jonathan Gruber, an architect of the state's 2006 health law and an advisor to President Barack Obama on the national Affordable Care Act calls the new House proposal "aggressive, broad and visionary."

"This is an incredibly hard problem," said Gruber, speaking on WBUR's Radio Boston today. "What I like about this...is that it's really taking the spaghetti approach to cost control; let's throw a bunch of things against the wall and see what sticks. They're doing a bunch of different things all of which might work."

So, what does it mean for patients?

Rep. Steve Walsh, the House chair of the joint Committee on Health Care Financing, said the plan would save $160 billion over 15 years. As far as savings for patients, Walsh said: "The first thing I'd tell [a patient] is five years from now, her family plan is going to be $2,000 cheaper than it is today." Walsh said businesses would also find their health costs cut significantly.

House Speaker Robert DeLeo added: "With this bill, I think everyone’s gotten a little something they want and everyone's gotten a little something they don’t want. So that's what this legislation is all about, but at the end of the day, most importantly what it's going to provide is some real health care cost containment. That’s what the bill is all about."

One of the greatest challenges, he said, was to contain costs while not undermining a key industry in the state, with 1 in 7 jobs here linked to health care. Clearly some folks will be disappointed that the plan didn't go far enough. Gov. Deval Patrick introduced legislation in February 2011 that would have allowed greater government oversight of contracts between insurers and health care providers and moved more medical groups into global payment systems that put doctors and medical groups on a budget.

But DeLeo also made the point that once again, the state is in the forefront of health reform. "I look at this as Massachusetts being a leader once again in terms of what's going on in the health care field in the country."

Here are some details of the House bill, officially the Health Care Quality Improvement and Cost Reduction Act of 2012, presented today by lawmakers. The state Senate is expected to introduce its own version of the plan next week.

1. Oversight: A new, quasi-governmental agency called the Division of Health Care Cost and Quality would oversee the transition to the new payment and delivery system with a board including consumer, government and industry representatives.

2. Cost-Cutting: To curb the increase in medical spending, the plan establishes a cap for health-care spending linked to the local economy, the Gross State Product, minus one-half a percent.

3. Leveling The Field: The state could impose a 10 percent "luxury tax" on pricey hospitals that charge more than 20 percent of the state median price for a given service without being able to justify that higher price. (Two earlier reports by Attorney General Martha Coakley found that certain hospitals exploited their market clout and charged higher prices without offering better quality care.) Hospitals would pay this penalty into a "distressed hospital" fund for institutions that serve a high proportion of poor and vulnerable patients.

4. Accountable Care Organizations would take on greater prominence, though the bill stresses that joining an ACO would be voluntary for patients and providers. The bill defines the size of an ACO as bigger than 15,000 people and no larger than 400,000. Patients would have the right to appeal decisions made by their ACO doctors, and have the right to a second opinion.

5. Shifting Payments: The state's medical establishment would continue its shift toward global payments and away from fee-for-service systems. The measure would "transition the industry to adopt alternative payment methodologies such as global payments and bundled payments for acute and chronic conditions."

6. Technology: Electronic health records would be required for all providers by 2017.

7. Greater transparency would be attained through detailed pricing available to consumers on the Web, as well as greater disclosure of out-of-pocket costs to patients up front.

8. Streamlining Care: The measure stresses greater coordination of care through primary care, and the establishment of "patient-centered medical homes" so that patients could have a single point of coordination for all types of care.

9. MedMal: New rules on medical malpractice would create a 180-day cooling off period while both side try to negotiate a settlement. Also, the measure would allow providers to freely offer an apology to a patient.

10. Tiering: Under a provision called "smart tiering" patients might pay more for more expensive services.

11. Upping The Rates: The bill would make several changes to Medicaid, including increasing MassHealth rates paid to providers.

12. Training: Funding for workforce training and development are included in the measure, and a provision would forgive loans to primary care doctors who practice in rural or underserved areas.

Joshua Archambault, director of health care policy at the Pioneer Institute, notes that many unanswered questions remain about the House plan. "As the same familiar characters return to the stage, the character who should be the hero of this drama, the patient, is nowhere to be found," he blogs, wondering, among other things, "How will western Massachusetts comply with the state mandate of e-medical records in 5 years when many areas don’t have internet? Is it possible for the Commonwealth to get rid of fee-for-service payments completely if Medicare is still paying in that manner? There are numerous new trust funds being established in this bill. What revenues (taxes) will be raised to fund them, and for how much each year?"

But Amy Whitcomb Slemmer, Executive Director of the consumer advocacy group Health Care For All expressed optimism. "We are excited about the proposed changes to the current way doctors, hospitals, and other providers are paid," she said in a statement, "so that incentives can be aligned to promote patient-centered care that focuses on health and disease prevention, lowering health care costs. Addressing the cost and quality of the care will allow us to transform the Massachusetts system from a sick care system to a true health care system."

For readers slightly confused by the terminology here, we've started compiling a handy glossary of terms you should probably get familiar with. And if you're interested in tracking how this bill has evolved after hundreds of meetings with stakeholders and a dizzying amount of politicking, see what Walsh envisioned for the proposal back in September.

Note: This post was updated at 5:30 pm