MA Health Reform Update

Now that MA has very high levels of coverage, focus has shifted to cost control in the Governor’s Bill. Some interesting comments at the MA Health Reform Update meeting on Beacon Hill this week.

Key points:

  • Hospital market power is a key issue, especially for Partners and ACOs
  • MA wants to kill fee for service, and soon
  • The primary cost control strategies are new payment methodologies
  • MA may adopt the Michigan-model med mal apology system

Panel 1:  Government Perspectives. Participants: Nancy Turnbull, Harvard SPH (moderator); JudyAnn Bigby, Secretary of the MA Executive Office of HHS; Barbara B. Anthony, Undersecretary, MA Office of Consumer Affairs and Business Regulation; Steven M. Walsh, House Chair, MA Health Care Financing Committee; Thomas M. O’Brien, Chief, Health Care Division, MA Office of the AG

Panel 2:  Stakeholder Perspectives. Participants: Kevin Outterson, BU Law (moderator); Charles T. Alagero, VP & GC, Mass Medical Society; Eileen P. McAnneny, Senior VP, Associated Industries of MA; Lora M. Pellegrini, CEO, MA Assn of Health Plans; Amy Whitcomb Slemmer, ED, Health Care for All; Michael E. Sroczynski, VP MA Hospital Assn


  • Market Power

Bigby said we “don’t want ACO consolidation into a few large providers.” Anthony said the MA Commissioner of Insurance will look at health plan contracts with providers to see if some providers are achieving “excessive” rates. O’Brien highlighted their groundbreaking report on provider payments in MA, which the AG created with data from Civil Investigative Demands and testimony under oath. The next report is due out in late June, for the June 27-30 meeting of the Special Commission on Provider Pricing. (The 2011 MA DHCFP report is here). Walsh wants health plans to be “more aggressive” in negotiating with leading hospitals. He said that some leading academic medical centers in Boston were “pooling inefficiency” by overcharging commercial providers through market power. He compared those hospitals to an unnamed Boston AMC that nearly broke even on government payors, driven by market constraints to be more efficient. Some in the room understood the “inefficient” system to be Partners and the “efficient” one to be BMC, although Chair Walsh was careful not to say. One interesting suggestion from Chair Walsh was that perhaps the Partners’ EMR system should be open to all providers. Pellegrini (health plans) said they’ve known for years that some providers have tremendous market power, especially after the formation of Partners. She cautioned that some providers receiving global payment are higher cost providers – emphasizing that global payment alone won’t deal with the market power issue.

  • Payment Reform

Bigby said we “have more than enough money in the system now, but just need to change how providers are paid.”  Bigby expects that by 2015, the majority of MA payments will be “alternative” models other than FFS. She wants to include Medicare in the new MA payment rules, if possible (it’s beginning to happen first with dual eligibles).

How will payment reform be different from capitation in the 1990s? Bigby offered 2 ideas. The first was modern risk adjustment models, with better data. The second (she said) was the absence of provider reinsurance for catastrophic risk in the 1990s. On the first point, undoubtedly we have better data today, but I’m skeptical that alone accounts for the death of capitation. On the second, Bigby is probably wrong. Many states were deeply involved in regulating provider insurance risk under capitation, as was the federal government in the negotiated rulemaking for Medicare PSOs.

O’Brien promised more CIDs to evaluate how bundled payments worked in MA, expressing a concern if bundled payments (and the BCBS Alternative Quality Contract) merely continued to pay certain providers more due to market power. Walsh predicted a variety of payment methodologies (global, episodic, bundled) and provider structures (ACOs, medical home, integrated systems). Walsh emphasized the need to kill FFS as the default mechanism, transitioning to P4P.

Alagero (doctors) and Sroczynski (hospitals) asked for flexibility in payment models, emphasizing that “one size doesn’t fit all” throughout the Commonwealth.  In particular, the ACO rules are too complex for small providers. But Alagero also expressed concern with multitudes of quality measures, from Medicare, Medicaid, and private payers.  He called for a standardized set of quality measures, with a transparent process for developing them. Sroczynski worries about driving ACOs through the Medicaid population, suggesting it would be better to start with better reimbursed populations first.

  • Cost Control

MA pushed back against the proposed health insurance rates last year, and Anthony said this effort saved MA consumers $100 million by “spurring the market to try harder.” By this summer, each health plan must offer at least 1 limited network with at least a 12% discount. Chair Walsh claimed that “about a third” of health spending in MA could be “squeezed” through cost control. He promised a new House bill in addition to the Governor’s bill, which will include more disclosure and transparency provisions.  Walsh acknowledged that one unintended consequence of disclosure of provider rates might be to increase costs as some community hospitals demand higher payments. Cost control is the primary goal for employers, according to McAnneny.  Hospitals said they were strongly committed to taking costs out of the system, including $5 billion in administrative costs.

  • Med Mal

The Governor’s proposal includes a Michigan-model disclosure/apology system, with a 6 month cooling off period after the apology. Apologies cannot be introduced into evidence if a lawsuit is ultimately filed. The goal is to reduce defensive medicine costs. It appears that all of them can live with the Governor’s proposal.

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