The Commonwealth is currently debating greater government intervention in our health care system with payment reform legislation. Maine is moving in the opposite direction.
This press release was just put out by the think tank Maine Heritage Policy Center.
Unprecedented: Rates for health insurance plans to drop as much as 60%
PORTLAND – Rates for individual health care plans in Maine will drop as much as 60% in July as a result of health reform law PL 90, the free-market health insurance reform bill passed by the legislature last year. The Maine Heritage Policy Center was a key advocate of the bill.
Information contained in Anthem’s most recent rate proposal indicates substantial positive results from the law’s passage. After years of double-digit rate increases, the overall increase in this latest filing was only 1.7%. But digging deeper, the impact on individuals opting for newly-offered products is astounding.
Young people are big winners: 19- to 24-year-olds will be able to buy a health insurance plan with a $2,000 deductible for about $200 per month—a substantial reduction compared to the current cost of $450.
A 19- to 24-year-old with a deductible of $10,000 would pay just $100 a month—less than a typical iPhone plan.
Anthem’s new plan, Healthchoice Plus, offers dramatic savings. The plan features a lower deductible ($2,000 vs $2,250) and includes mental health coverage, not offered in Anthem’s previous Healthchoice product. Despite the lower deductible and additional coverage, premiums for the new product are far lower – from 28% lower for policyholders 60 and older to 52% lower for those aged 19 to 24.
During the debate over the health reform law last year, left-wing advocacy groups and editorial writers were sharply critical of the free market proposal. In a Bangor Daily News editorial titled “Rushed insurance reform is wrong medicine”, the paper called the new law “flawed and unstudied.”
New Hampshire lawmakers have a long history of jeering Massachusetts over taxes, but it looks like they have moved to a much bigger sacred cow, health care.
The Boston Globe ($)recently reported that in New Hampshire there is a bill, “eliminating a state review process and exempting it [specialty destination hospitals] from a tax that New Hampshire’s nonprofit hospitals pay.”
By contrast, the two recently proposed payment reform bills on Beacon Hill move in the opposite direction. The bills “reform” the determination of need process to make it more government-centered and will severely limit any future expansion of similar facilities in the Commonwealth. Massachusetts policymakers should be watching our borders closely as they aim to significantly alter our local payment methods for health care.
The diametrically opposed directions being debated in these two states could have long-term implications for where patients receive their health care. As more health care institutions are forced to compete on price and quality, Massachusetts providers may lose out.
Not only will some patients living in Massachusetts go to these out-of-state practices, but the Commonwealth could also lose patients traveling to our state for medical tourism reasons. Companies like Patient advocates in Maine run on a business model of finding the lowest-cost highest-quality providers, and Massachusetts providers may soon have lots of new competition in our region.
If you blinked over the past seven days, you might have missed the rollout of two major pieces of legislation that will dramatically restructure health care delivery here in Massachusetts. While the Governor put his proposal out over a year ago, it has taken the Legislature a long time to take up the issue.
Suddenly, everyone is in a rush. The House rushed their bill out the door at an oddly-timed late Friday afternoon press conference on Friday, May 4th. They plan on debating the bill in a month or so.
The Senate is in even a bigger rush — their bill came out on Wednesday, May 9th. Amendments are due by 5 PM on Friday. And debate begins on Tuesday of next week. Hope Senators can digest all 268 pages in time.
And all this activity will result in a final piece of legislation by the end of July if legislative leaders stick to their stated calendar.
Contrast this highly compressed round of healthcare reform with the 2006 effort — Both the Senate and the Governor had released their bills by April of 2005. The House put forward their bill in October 2005. Then the conference process and negotiations resulted in a bill signing on April 12, 2006, roughly a year after two versions were public and over five months after all versions were public.
This time around there will be dramatic changes to one of our state’s most important industries, healthcare (which accounts for close to 10% of gross state product), in less than three months. And the Legislature will have other major bills dealing with the budget, crime, and economic development (just name a few) to deal with over the same period.
That’s ripe environment for unintended consequences, mischief, and leaving hard decisions to the regulatory or administrative process. Keep a close eye.
Are the House and Senate giving us a false choice for how to control health care costs in Massachusetts? Aren’t there other options?
A few major themes have emerged from the two payment reform proposals and highlight the fact that they fail to align incentives for patients to be more involved in the purchase of their health insurance and their health care.
For example, even with full transparency of cost and quality (which is a huge lift on its own) for many patients, high-cost still correlates with higher quality in medicine. A recent report from Attorney General Coakley proved this theory wrong, but simply providing patients with cost data without placing the right incentives in their health plan to choose the low-cost high-quality provider will result in many selecting the most expensive care. As a result, these proposals will fall short of sustainably bending the cost curve. There is another way for the Commonwealth- patient-centered health plans, see Health Affairs($) for national savings estimates. The impact would be significant in Massachusetts as less than 3% of residents are on a form of these plans, compared to 13% nationally.
Any reform of payment methods must be aware of limits on the state’s power to regulate the 53% of Massachusetts companies that are self-insured (and are therefore regulated by the federal government), and of course Medicare beneficiaries in the state. The bills do not touch long term care, prescription drugs, hospital fixed costs, health plan reserves, medical devices or insurance overhead. So what does that leave us, an awfully small pool out of the roughly $60B to cut from. From a practical standpoint, are we looking to “fix” our health care problems by laying off workers or severely reducing their pay? That is one of the few options left. Is that a long-term sustainable and innovative approach?
The media and most stakeholders have missed this point completely. Instead of debating what arbitrary reduction in growth we would like to see, we need to be realistic and have a debate about how these proposals will play out in implementation, the unintended consequences, and how stakeholders will react to the incentives in the bill. (For example, how do we deal with those living in Massachusetts but receiving their care in another state. Or the other way around.)
My concern is that both houses of the legislature will pass their versions with some minor tweaks, and then in conference committee, behind closed doors and with lots of industry lobbying, a “compromise” will be struck taxing both insurers and providers.
From a consumer and long-term health sector perspective, this will be a raw deal.
It is built on two flawed assumptions. First that new taxes, assessments, and surcharges will not be passed onto consumers in some form. Second, that the answer to our health care problem is chasing previous flawed government intervention with more flawed government intervention. These two assumptions should not be the terms of debate for payment reform in Massachusetts. Is there a third pill to consider?
Before digging into the Senate bill this afternoon, I wanted to express my concern about early media coverage of the payment reform debate. The spotlight has become focused on 3 or 4 points, all contained in press releases.
No one can knowledgably comment on the Senate bill since they have not seen the full language- as they are still finalizing parts of it this morning.
It is easy to say the two bills look the same from the press release, but are they?
The debate over somewhat arbitrary cost growth goals is pointless, unless there is a debate about the mechanisms to get there. Did we forget that DHCFP data tells us 53% of employers are self-insured in our state and therefore not regulated at the state level?
I am worried, after talking with a number of health care industry folks over the last 4 or 5 days, that each is looking at their slice of the pie and failing to see the big picture… or even questioning how these proposals will play out in implementation.
On the flip side, I worry that folks on Beacon Hill see this debate more as an academic exercise or a political battle, and not establishing comprehensive and sensible reforms that engage consumers.
Early media reporting on the bill is very important because it is often the only coverage the public pays full attention to, and frames the debate for most public figures. Are we to accept the supposition that the only viable options are taxing providers or insurers– or both– and government intervention to correct past flawed government intervention?
The House version of payment reform creates a new mega agency, the Division of Health Care Cost and Quality. To be fair, the House collapses a few other state agencies into the new Division, but there is no question this entity is given far-reaching and broad regulatory power. The Division will be independent and “not subject to the supervision and control of any other” public entity. (Section 29, subsection 2(a))
The controversial federal Affordable Care Act drew negative attention for how many times the Secretary of HHS was instructed to act on major policy, roughly 700 times in 2,700 pages.
The House’s bill outdoes the ACA by requiring the division to take action 163 times in 178 pages, or almost once every page. The mandate approach results in 941 instances in which the House mandates action in the bill, by using the word “shall.”
A sample of the dizzying and expansive Division’s responsibilities includes but is not limited to:
Assessing a number of penalties, fines, and surcharges. I counted 26 in the bill. Some are one-offs, others reoccurring and some are sticks to be utilized to guarantee compliance. Of course, most of the cost of these will be passed onto patients one way or another.
Setting acceptable standards for alternative payment methodologies.
Overseeing and being involved with alternative payment contracts.
Developing quality metrics including parameters for clinical outcomes, but limiting insurer’s use of quality data outside of division approved metrics.
Defining and overseeing accountable care organizations on many levels.
Designing and managing the state-wide health technology infrastructure needed to meet the mandated 5-year window for Health IT.
Monitoring and participating in workforce development and planning. Including multiple student loan forgiveness programs, and other recruitment and retaining programs to keep doctors in state or practicing in under-served areas.
Setting out extensive mandated transparency mechanisms for consumer education on cost and quality data and trying to improve administrative simplification.
Surveying patients annually for their perception of access to services, including many subgroups such as the homeless.
Yet many questions about implementation remain, and policymakers should look very closely at the following:
Will transparency without the correct tools and incentives for consumers backfire? For many patients, high-cost correlates with higher quality. Of course the Attorney General’s report proved this theory wrong, but if you provide patients with cost data but their health plan is not set up to incentivize the use of low-cost high-quality providers, you will have many seeking out the most expensive folks. (The direct opposite goal of this legislation.)
As the Division sets up uniform reporting of revenues, charges, costs, and utilization (that by statute will need to be in line with federal reporting standards) will the state follow the federal government’s ACA lead of 140,000 coding categories? For example, if you’ve been bitten by a turtle for the second time you would use code W5921XD.
Will the Division have the expertise and technological knowledge to implement the many goals laid out in the legislation? Even with numerous expert advisory committees, many of the functions the Division will be conducting are replicating what the private sector currently does. One only has to look at the Health Care Cost and Quality Council to see an example of a great public advisory board that has struggled to produce a meaningful product that has wide market penetration. Policymakers should ask if is a good investment to ask a public entity to run so much, when you are trying to reduce spending.
The issue of privacy and health information technology is complex and expensive. The bill currently waves its hand on this issue, and serious thought is required.
What will the Division cost to run? The most likely smaller Connector costs roughly $30 million a year to run. How much more should we expect this mega-agency to cost?
Finally, policymakers should take a serious look at the wide-ranging authority given to the Division. On multiple occasions, the Division is instructed to “take actions necessary to ensure….” or “promulgate regulations or guidelines to implement the findings of this section.” We must ask if we are comfortable with bureaucrats holding the reins to 18% of our state’s economy, that may not have the expertise, resources, or shared values that we do to balance the trade offs associated with government centered cost controls. They decide where billions of dollars will be directed or granted from trust funds. Do we trust their judgment and are we confident that industry influence will not sway these few government officials?
The next act of the Massachusetts health care reform drama is about to play out on Beacon Hill. 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. Instead we are sitting down to a repeat performance.
The language of reform is promising, but the reality of implementation remains hazy. Over the next few days I will blog on why the House of Representatives’ bill left out the patient as part of the solution. However, for now, below are just a few questions to prime the pump for this discussion and for you to consider:
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?
While Governor Patrick has been pleading with the Legislature to act on his February 2011 payment reform bill that would move our health care system towards global payments and accountable care organizations, his MassHealth (Medicaid) office has moved in the opposite direction. (You can read my testimony on the Governor’s bill here)
In March 2011, the MassHealth program changed their default enrollment policy for new enrollees that did not affirmatively select a managed care option–either one of the 5 Medicaid managed care organizations (MCO) or the Primary Care Clinician Plan (PCC).
Before the switch, if an individual, after being determined eligible for Medicaid, did not affirmatively select a managed care option, the MassHealth office would auto-enroll them into either one of the 5 Managed Care Organizations or the PCC Plan on an equal basis. While deemed part of the “program of managed care” by MassHealth, the PCC program reimburses participating providers based on a fee-for-service method of payment. MCOs, on the other hand receive a capitated payment that is calculated on a per member per month basis. This capitated payment puts the MCO at risk and covers the cost of caring for the entire member.
The original move to assign members to only the PCC Plan was initially referred to as a “temporary” policy aimed at preserving cash flow. Keeping members in the FFS PCC plan allows the state to avoid making the upfront capitation payment to MCOs and additionally, not have to pay for members enrolled in the PCC plan unless the member goes to the doctor. As one employee informed me, “sometimes these PPC plans end up being cheaper for the state due to lower utilization.”
The debate over how heavily the state should rely on MCOs has been ongoing for years in the Commonwealth. The topic has surfaced more recently as numerous states around the country have moved to fully embrace managed care in their Medicaid population including states as diverse as Florida and California.
CMS estimated that 39 million Medicaid beneficiaries in 2010 were in managed care, or more than 70 percent of all enrollees. That is a big change from just ten years ago when only 3 million beneficiaries were enrolled in managed care. Massachusetts has one of the lowest percentages of Medicaid enrollees in managed care of states that use managed care, 54% in 2010. By contrast, multiple states are moving to 100% managed care.
For full background, the MassHealth program has historically had some groups they have kept out of managed care and who are specifically placed on a fee-for-service coverage — those receiving long term care of any age, and members with Medicare and private insurance coverage.
The removal of the more diverse auto-enroll process is a clear change in policy that directly conflicts with the stated goals of the Administration for the broader health care market. As a result, an estimated 7,500 members per month are being put into the PCC program instead of one of the managed care organizations. So do the cost justifications support moving to PCC over managed care? No one knows! Not even the Legislature.
The Patrick Administration has never shown a willingness to fully engage in the debate over managed care, and as a result the Legislature has taken a number of actions to push the issue, and this year is no different. For example, see outside section 61 in the House budget, or Section 178 of Chapter 131 of the Acts of 2010, which established a Managed Care Advisory Committee. The study established in Chapter 131 has never been completed and moreover, the Administration has never even convened the Committee.
Pioneer has attempted to obtain additional information about the Administration’s decision making process on managed care but has been rejected on the grounds that the documents we requested are off limits because they are covered by the deliberative process exemption, which names as exempt from disclosure “inter-agency or intra-agency memoranda or letters relating to policy position being developed by the agency.” Which I assume covers every past and current report or analysis if you decide to stretch it broadly enough. Pioneer has appealed.
This is no small issue as MassHealth makes up ~36% of the state budget, and has continued to crowd out spending on other priorities like education and public safety. From a high level, the public policy response to this increase in enrollment and costs by the leaders of the Commonwealth has been to cut benefits and/or provider rates. However, the price setting taking place in the program will most likely have a limited life because of doctor’s concerns about under reimbursement. If doctors refuse to take new MassHealth patients—as they already are—the safety net will wither further.
I am not of the opinion that global payments or accountable care organizations will be the panacea to our health care situation, and the Attorney General’s landmark transparency report (finding 2) along with many new academic papers seem to support this skepticism. However as the Governor ultimately controls the MassHealth program and is pushing payment reform, one is left to wonder when he will be asked what the Medicaid office is up to.
The Massachusetts Taxpayers Foundation (MTF) put out a report late last week on the cost of Massachusetts health reform. The number from the report that has gotten the most media attention has been– $91 million.
Over the five full fiscal years since the law was implemented, the incremental additional state cost per year has averaged $91 million…
This is a very strange way to interpret the cost data. Here is the breakdown from the report:
The better number to highlight would be the incremental increase each year over the 2006 baseline.
2006
2007
2008
2009
2010
2011
Over 2006 baseline (millions)
-
$268
$645
$1,037
$834
$906
If you add this up and divide by 5, you come up with an average over the 2006 baseline of $738 million, and a state share of $369 million per year. That is a much different story than the $91 million being widely reported.
Context is always needed in cost discussions, so as a reminder Massachusetts was spending roughly $1 billion annually before reform. The state redirected a sizable portion of that money to individuals to allow them to purchase insurance on their own. The reform was expected to cost money, so having some increase each year is expected, but fully understanding the sources can help explain the real story of the reform. For example, I have written on the failed promise to phase out “temporary” safety net hospitals payments before.
My methodology above has its flaws just like the MTF report. It does not account for medical inflation, or for stimulus money that would lower the state share in FY2009, 10, and 11. We both assume a 50% federal match which was not the case in those years.
First, there is no mention of the FY 2009 $1 per pack cigarette tax that was passed to help fund the Commonwealth Care program, or the one-time $50 million assessments imposed on hospitals and insurers. The cigarette tax accounts for roughly $130 million in additional revenue each year.
Second, the calculations don’t include additional expenditures related to the reform law. The ones that immediately come to mind are $25 million of start-up funds for the Connector, or the roughly $12 million a year for community outreach grants, except in FY12.
Thirdly, the current Administration has added to the confusion of cost as it has been broadcasting two different messages.
Nationally, the Governor has been saying the reform has been manageable.
However locally on Beacon Hill, his budget staff and the Legislature have made policy decisions each fiscal year that send a conflicting message. They have cut Medicaid benefits and provider reimbursements, raised taxes, moved certain legal immigrants from the subsidized Commonwealth Care program to a cheaper insurance plan and capped enrollment to save money (which prompted a lawsuit that the state just lost), and have not fully funded to meet the demand in the health safety net or the uncompensated care pool. The MTF report cites the uncompensated care shortfall this year at $130 million. Governor Patrick went as far as to suggest in March 2009 that the state should use $40 million in stimulus funds for rate increases to acute hospitals and an additional $120 in supplemental payments to Cambridge Health Alliance and Boston Medical Center. Of course, all of these actions should not be attributed to the reform, as the economic downturn certainly played a role.
Fourthly, it is somewhat misleading to compare the reform spending to the total state budget. A much better comparison would be the state share of the reform as a percent of the new and redirected spending. This was done in The Great Experiment and instead of 1% of the total state budget being your reference, you see that a more narrow and fair comparison shows that the state is paying just under 20% of the cost of new and redirected money that has paid for reform. (see table)
Finally, this entire discussion of who pays what share is a distraction, as Massachusetts taxpayers pay both state and federal taxes. Ultimately they care about total spending and less about state spending, a fact that is often lost on policymakers and the media.
Jonathan Gruber and John McDonough are widely quoted in the media on both Romneycare and Obamacare. Without question they are both extremely intelligent, I have a deep respect for their commitment to health policy and enjoy the frequent interactions I have with them.
However, I have wondered for months when the media will finally acknowledge that they both have a political angle. This week President Obama’s campaign made it official by putting them into a video:
Will this put an end to the neutral observer status afford them in most media stories?
