Policy and Politics
of Cost Containment:
The View From Massachusetts
Sarah Iselin
Blue Cross Blue Shield of Massachusetts Foundation
August 5, 2010
• Mission: expand access to health care
• Improving access to coverage
• Reducing barriers to care
• Founded in 2001 by Blue Cross Blue Shield of Massachusetts
• $90M Endowment
• Independent, private foundation governed by own board of
directors
• www.bluecrossfoundation.org
July 7, 2010
The Massachusetts Health Care
‘Train Wreck’
The future of ObamaCare is unfolding here:
runaway spending, price controls, even limits
on care and medical licensing.
We have the lowest rate of uninsurance
in the country…
Massachusetts: Uninsured as % of Population
11.30%
10.20%
10.4%
9.2%
5.4%
2.7%
2003
2004
2005
2006
2007
2009
Sources: Current Population Survey, 2003-2008, US Census Bureau
Division of Health Care Finance and Policy
…but the highest costs per capita in
the world…
$7,000
$6,000
Massachusetts
United States
$5,000
$4,000
France
$3,000
Germany
Australia
Canada
United Kingdom
$2,000
$1,000
04
03
20
02
20
00
01
20
20
99
20
97
98
19
19
96
19
95
19
94
19
93
Sources: Commonwealth Fund (2008), CMS (2007), U.S. Census (2009).
Note: U.S. dollars are current-year values. Other currencies are converted based on purchasing power parity.
19
92
19
91
19
89
90
19
19
88
19
87
19
85
86
19
19
84
19
82
83
19
19
81
19
19
19
80
$0
…and per capita health care spending is
projected to nearly double by 2020.
Massachusetts Per Capita Health Care Expenditures:
1991-2020
Note: The health expenditures are defined by residence location and as personal health expenditures by CMS, which exclude expenditures on administration, public health,
and construction. Data for 2005 – 2020 are projected assuming 7.4% growth through 2010 and then 5.7% growth through 2020.
Source: Centers for Medicare & Medicaid Services (CMS), Office of the Actuary, National Health Statistics Group, 2007. Projections by the Division of Health Care Finance
and Policy.
Additional Insured: September 2009
Change since June 20, 2006
Total Additional Insured: 364,000
Private Group
Individual Purchase
Private Group
11%
Commonwealth
Care
41%
MassHealth
Commonwealth Care
Individual
Purchase
14%
MassHealth
34%
Source: Division of Health Care Finance and Policy, February 2010
Though the quality of MA health care is among
the best in the U.S., even we can improve
Research on health care in Massachusetts highlights
the problems of preventable illness and insufficient
emphasis on primary and preventive care.
• Fewer than half of all adults over age 50 receive
recommended preventive and screening care.*
• Fewer than half of adult diabetics receive recommended
preventive care.*
• Nearly half of emergency department visits are potentially
preventable.**
• 8 percent of hospitalizations and 7-10 percent of
readmissions could have been avoidable with effective
ambulatory care.**
* Cantor et al. 2007
** DHCFP, MA Health System Data Reference 2009
Cost Conversation Begins in Earnest
with Ch. 305
• Ch. 305: “An Act To Promote Cost Containment,
Transparency And Efficiency In The Delivery Of Quality
Health Care” (August 2008)
Major Provisions:
• Special Commission on the Health Care Payment
System
• Annual Division of Health Care Finance and Policy report
and hearings on health care costs with Attorney General
• Study on health plan and hospital reserves/surpluses
Creation of the Special Commission
• Created the Special Commission on the Health Care
Payment System to investigate reforming and
restructuring the payment system in order to:
• Provide incentives for efficient and effective patientcentered care.
• Reduce variations in the quality and cost of care.
FFS payment drives health care cost
growth and overuse of services
Providers are paid for each service they produce.
• Incentives for increased volume. Providers have a
financial incentive to increase the number of services they produce.
• Incentives to deliver more costly services. Providers
have a financial incentive to deliver services with higher financial
margins – often more costly services.
• Little or no incentive for achieving positive results
or for care coordination. Providers have no financial
incentive to deliver the most effective care or to coordinate care.
• Little or no incentive to deliver preventive services
and or other services with low financial margins.
Providers have little incentive to provide services with low financial
margins—including preventive care and behavioral health care.
Special Commission’s Recommendation
Current Fee-for-Service
Payment System
The Problem
Care is fragmented instead of
coordinated. Each provider is paid for
doing work in isolation, and no one is
responsible for coordinating care.
Quality can suffer, costs rise and there is
little accountability for either.
$
$
$
$
Patient-Centered Global
Payment System
The Solution
Global payments made to a group of
providers for all care. Providers are not
rewarded for delivering more care, but
for delivering the right care to meet
patient’s needs.
$
Primary Care
Hospital
Specialist
Home Health
Hospital
Specialist Primary
Care
Home
Health
Government, payers and providers will share responsibility for providing infrastructure,
legal and technical support to providers in making this transition.
Why Payment Reform, Why Now?
• Special Commission unanimously endorsed recommendations to
promote high-quality, cost-effective care through payment
reform
• Five of six most promising options analyzed by RAND study on
health care cost control options for MA involve changing
payment approaches
• Health Care Quality and Cost Council endorsed Special
Commission recommendations in “Roadmap to Cost
Containment”
• Meltdown of economy: unemployment rate, rising health
insurance premiums impeding recovery, state budget deficit,
loud small business concerns about health care costs
• Governor running for reelection against former head of major
insurer
Governor Patrick using Division of Insurance
authority to disapprove premium increases
Price increases driving most of the
increase in health care costs
AG Report: Variation in Hospital Prices
Source: Office of the Attorney General, “Report on Examination of Health Care Cost Trends and Cost Drivers” (March 16, 2010)
AG Report: Variation in Physician Prices
Source: Office of the Attorney General, “Report on Examination of Health Care Cost Trends and Cost Drivers” (March 16, 2010)
Attorney General Report Findings
• Payment differences are not correlated to quality,
sickness of patients, payer mix, teaching status,
or underlying costs
• Variation in total expense per member is not
correlated to method of payment—risk sharing
providers sometimes are paid more than providers
paid FFS
• Payment differences are related to market
leverage
AG Report: Higher priced hospitals are gaining market
share at the expense of lower priced hospitals
April 14, 2010
Partners offers $40m
to ease rates
Partners HealthCare, whose Boston teaching hospitals
have been blamed for helping to drive up medical
spending, is offering $40 million toward reducing
double-digit health insurance rate increases for small
businesses, part of a broader package that will be
unveiled today by Senate President Therese Murray.
Largest health system in MA is being
investigated at the state and federal levels
June 18, 2010
Partners report slams AG's
hospital cost study
Mass. Hospital Association Campaign
So, what’s next?
• Two cost bills since 2006
• Lots of studies and commissions
• Payment reform bill planned for the next session
• Special Commission recommendations or pilots/demos?
• MassHealth pursuing payment reform in 1115 waiver
renewal application
• Lots of interest in PPACA opportunities around payment
reform
• Punch line
• Near term – some payers moving ahead, fate of a bill unclear
• Longer term – inevitability, but some will stall as long as
possible…