"Next Up: Cost Control and Delivery System Reform" by Anya Rader Wallack

The Commonwealth is at a crossroads. In order to sustain the rising cost of health reform, we can pursue one of two strategies. The first would be “every payer for itself,” with Medicare, Medicaid, the Connector, and the private sector doing their bit to control spending for their chunk of the pie. The second would be the development of a more comprehensive and thoughtful approach that controls costs with an eye toward transforming our delivery system.

The latter, of course, is the strategy most likely to work over the long term. So the question is not what we should do. It’s whether we can bring to the table those who have the greatest ability to control health care costs, get them to set aside some of their self interest, and develop bold new approaches to solving the problem. The state has already shown that it can be a national leader in expanding health insurance coverage to the uninsured. In just two years, Massachusetts cut its rate of uninsured from approximately 13 percent to just three percent. Employer-sponsored health insurance is holding steady. And residents of the Commonwealth generally are happy with the effects of Chapter 58.

But we eased our way into this deal by putting more money in the system. Chapter 58 included Medicaid rate increases for providers, and Medicaid managed care plan rates have increased at about five percent annually in recent years. Payments to safety net providers continued as we moved gradually from a system of paying for the uninsured through the free care pool to an insurance-based mechanism. And for the second year of the Commonwealth Care program, the Connector negotiated a nine percent rate increase with MCOs.

The add-more-money strategy was not sustainable, particularly in the face of an economic downturn.

With state revenues taking a dive, the Patrick Administration has had to cut Medicaid provider rates and Medicaid managed care plan rates have been flat-lined. CommCare rates will be negotiated later this year, probably with a significantly smaller rate of increase. Meanwhile, the state has followed through on its commitment to the federal government to move away from special payments to safety net providers — a large chunk of these payments will disappear, under the terms of the state’s Medicaid waiver, in 2010. And you can bet that Congress is taking a hard look at ways to reign in Medicare spending.

It’s time for Massachusetts to take up the next challenge — health care cost containment and delivery system reform. We need a cost control plan that:

• examines the potential impact of cost control approaches, including innovative new models for organizing care delivery and payment;
• makes reasoned choices among cost control options;
• implements cost controls that result in appropriate changes to our delivery system, assuring greater support for primary care and more appropriate use of our limited resources; and
• monitors the outcome of cost controls over time to assure that they are not having unintended effects.

The Health Care Quality and Cost Council has pledged to develop such a plan over the next six months. At the same time, the Payment Reform Commission created this year by the legislature will be examining opportunities for comprehensive payment reform. Massachusetts has unusually smart and forward-thinking leaders in its business, health insurance, advocacy and health care provider communities. We should be able to bring all of this attention and talent together to provide yet another example to the nation: how to do cost containment right.

There is a lot of talk out there about health care cost containment, payment reform, and changing the delivery system to support primary care and prevention. There are few live examples. Let us create one.

Anya Rader Wallack is Executive Director of the Massachusetts Medicaid Policy Institute