Payment Reform & Cost Containment:
What You Need to Know
Monday, February 13, 2012
Some Facts About the MA Market
• 98% of resident insured in Massachusetts.
• Commercial Market: 50% self insured, 50% fully insured.
• Of those fully insured, 50% in PPO and 50% in HMO
• 47 mandated benefits; 8 added since health reform passed
• Mandates are not required to be covered by self insured companies
• Fall exclusively on individuals, small businesses and mid-size
companies
• MA health care costs among highest in the nation.
Why We Need to Care About Health
Care Costs?
MA: A model for the federal law; Best record on access
Affordability is Another Story
600
Growth in Health Spending in MA Expected to Surpass Other Economic Indicators
Index of Health Expenditures Per Capita and Other Indicators in MA, 1991-2020
Per Capita Health
Expenditures:
550 in 2020
550
500
450
400
Per Capita GDP:
337 in 2020
350
300
Wage and Salary:
325 in 2020
250
200
Consumer Price
Index (CPI):
224 in 2020
150
100
91 92 993 994 995 996 997 998 999 000 001 002 003 004 005 006 007 008 009 010 011 012 013 014 015 016 017 018 019 020
19 19
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
2
Per Capita Health Expenditures
Per Capita GDP in MA
Average Wage and Salary in MA
CPI Boston
source: Division of Health Care Finance & Policy, MA Health Care Cost
Trends, Nov. 2009
What Does the Data Tell Us?
Health Plan & Hospital Margins - 2010
sources: Health plan & hospital filings with the Division of Health Care Finance & Policy
and Division of Insurance
What Does the Data Tell Us?
“Price variations are correlated to market leverage – the relative market
position of the hospital or provider group compared with other hospitals or
provider groups within a geographic region or within a group of academic
medical centers.”
“Price increases, not increases in utilization, caused most of the increases in
health care costs during the past few years in Massachusetts.”
“Higher priced hospitals are gaining market share at the expense of lower
priced hospitals, which are losing volume.”
Office of the Attorney General
Examination of Health Care Cost Trends and Cost Drivers
March 16, 2010
What Does the Data Tell Us?
“Prices paid for the same hospital inpatient services and for physician and
professional services vary significantly for every service examined. There was at
least a three-fold difference for every service and for most, a variation of six- or
seven-fold.”
“If private payer prices among hospital inpatient services and physician and
professional services were narrowed to reflect a range spanning the existing 20th
percentile to 80th percentile of payments, the potential total savings for these two
groups of services would be about $267 million.”
Massachusetts Division of Health Care Finance & Policy
MA Health Care Cost Trends, Price Variation in Health Care Services
May 2011
What Does the Data Tell Us?
If private payer prices among hospital inpatient services and
physician and professional services were narrowed:
Professional
Services
Inpatient Hospital
Services
Total Savings/Increase
Payments paid at 2009 median
$640MM
$112MM
$752MM
All payments above the 80th
percentile lowered to 80th
percentile
$320MM
$170MM
$490MM
Lowering rates above the 80th
percentile & increasing rates
below the 20th percentile
$179MM
$88MM
$267MM
Massachusetts Division of Health Care Finance & Policy
MA Health Care Cost Trends, Price Variation in Health Care Services
May 2011
What Does the Data Tell Us?
“There is wide variation in the payments made by health insurers to providers
that is not adequately explained by differences in quality of care. Globally paid
providers do not have consistently lower total medical expenses.”
“Promote tiered and limited network products to increase value-based
purchasing decisions.”
“Reduce health care price distortions through temporary statutory restrictions
until tiered and limited network products and commercial market transparency
can improve market function.”
Office of the Attorney General
Examination of Health Care Cost Trends and Cost Drivers
June 22, 2011
What Does the Data Tell Us?
What Does the Data Tell Us?
What Does the Data Tell Us?
What are the Reasons for High
Health Care Costs?
AG & DHCFP reports & hearings in 2010 & 2011:
• Price is the #1 driver of health care costs, not utilization
• More and more care being delivered in high cost settings.
• Certain providers have used their market clout & geographic isolation to
drive prices in the Massachusetts
• Prices aren’t based on quality outcomes or severity of patient illnesses
or case mix.
• High costs do not equal high quality. Many high quality providers
among the lowest paid.
• High public payer case mix does not translate into higher payments.
Those with the highest Medicaid volume are among the lowest paid.
• How you pay does not = lower costs – some globally paid providers
among the highest paid.
• AG called for short term Government intervention to address provider
rate distortions
The State’s Response
2010
• Chapter 288 of the Acts of 2010
• Requires carriers to develop tiered and limited network
products with 12% savings off of lowest priced plan.
• Additional financial reporting by health plans and
providers.
• Nation’s strictest MLR standards, limits to annual
increases to administrative spending, and limits on profit
or surplus to 1.9%.
The State’s Response
2011
• Governor’s Payment Reform Bill – Key Provisions:
• Move from FFS to alternative payment methods;
• Standards for ACOs;
• Directs DOI w/ DHCFP to set annual rates of provider
reimbursement;
• DOI may establish different amounts for different categories of
providers
• Based on criteria such as:
•
•
•
•
Annual increases to GDP
Total Medical Expense
Relative Price
Price variation
• Health plan rates will be denied if they exceed these parameters;
• Greater government oversight and time frames to move to
alternative payment methods
How Will This Change the Health
Care System?
ACOs
• Spurred by Medicare Pioneer ACO Pilot
• Goal is to:
• Reward physicians for quality outcomes not volume thru alternative
payment models
• Create an integrated care delivery system with EMR and robust
data
• Primary Care Physicians as the quarterback for a patient’s care
• Physicians manage the care and risk of patient population
Will We See A Payment Reform Bill
Before July 31, 2012
In Address, Guv to Focus on Pending Priorities: Health Care, Sentencing
– January 23, 2012
House Chairman Sees Billions in Savings, Pledges “Boldest” Health Care Bill
– January 25, 2012
Moore Eyes Health Care Bill By March, Mariano Touts Short-Term Plans
– February 8, 2012
Speaker DeLeo: “I remain committed to reforming our health care system…
We will continue to monitor the market disparity between our large providers and
those in your neighborhoods that are offering low-cost high-quality care and we
will thoughtfully implement the most appropriate mechanisms for balancing out
the system.”
– February 8, 2012
How Will Health Care Change?
The Potential Transition
• A move towards ACOs, greater integration, alternative
payment methods where providers are rewarded for good
quality outcomes rather than volume
• We will, and are seeing, potential for greater consolidation
in the health care market with just the simple discussion of
ACOs
Will greater consolidation lead to higher prices?
Payer consolidation leads to lower prices while provider
consolidation leads to higher prices.*
Sept. 2011 Health Affairs
*”The Increased Concentration of Health Plan Markets Can Benefit Consumers
Through Lower Hospital Prices,” Health Affairs, September 2011.
How Will Health Care Change?
For a successful transition
• PCPs to be the quarterbacks for patient care with a shared
philosophy by providers across specialties to work with the
PCP as part of an integrated team;
• Provider understanding of how to manage risk;
• EMR and integration of care management systems; and
• Consumers engaged in their health care and willing to take
restricted choice for a better care experience
Key Questions to Ask About
Payment Reform
•
•
•
•
•
•
•
Will changing the way we pay really save money?
How does this address market power?
How long do we have to wait for a return on investment?
Will changing the way we pay lead to market consolidation?
Will consolidation lead to lower or higher costs in the long run?
What does this mean for choice?
How do we ensure providers have control over where patients
get care?
• What does this mean for products available to employers?
• How does this affect self-insured employers?
MAHP’s Position
Any Final Bill Must
• Truly address containing costs;
• Address the AG's findings re: market power – fix the foundation
• Not mandate payment methods or ACOs – should incorporate
a voluntary approach to new payment methods and ACOs
• Not limit employer or individual choice in the market place
• Ensure appropriate regulatory and consumer protection
standards for AC0s and for providers taking risk
• Not mandate use of health plan reserves to pay for provider
infrastructure
What Can Employers Do?
You have an important voice
Get Involved