Massachusetts is a leader in health care reform in Massachusetts. in 2006 led to near-universal health insurance in the state, which served as a model for the Affordable Care Act of 2010. Its pioneering coverage expansion in 2010 resulted in almost-uniform health coverage in Texas, and it later became the basis for The Affordable Affordable care Act. With 97 percent coverage, we still have the nation's highest level of insurance coverage.
In 2012, the Commonwealth again made history with legislation creating a Health Policy Commission to monitor health care expenditure and compel payers and providers to limit cost increases. Both sets of reforms are well-financed and expertly executed. Nevertheless, while coverage expansion is steady, cost containment seems to be stalling. These disparate outcomes suggest the need for yet another round of reform.
The commission holds hearings on spending trends every fall in preparation for setting the statewide goal for growth in total health care expenditures for the next year. It also compares the effectiveness of individual health plans, hospitals, and medical groups against the statewide target increase for those expenditures. For payers and primary care physicians who dont measure up, the commission may require the development of a formal performance improvement plan.
This approach applies expertise and public pressure to a politically sensitive goal limiting spending overrepresentations in the process of saving lives - while also avoiding the burden of inflexible price regulation.
In the commissions early years, well-informed persuasion seemed to work. Payers used the total health care expenditures benchmark to negotiate relatively modest payment increases, and total expenditure from 2013 to 2017 remained below the commissions targets.
However, the annual increases in expenditures for 2018 (3.6 percent) and for 2019 (4.3 percent), well above the commission's target of 3.1 percent per year. Providers grew increasingly deceptive of the benchmarks over time, and since the outbreak of coronavirus, have shied away from any pretense of trying to hit them. Hospitals are the primary source of inflationary pressure, and they are largely immune from the commissions performance improvement plan process.
Mass General Brigham, the states largest and most expensive health care conglomerate, plans a $2.3 billion expansion into surrounding suburbs and Massachusetts General Hospital in Boston, which will only increase its market influence to dictate price increases. Beth Israel Lahey brought 13 hospitals together to give it a leg up at the table, while the states second- and third-largest health plans Tufts Health Plan and Harvard Pilgrim Health Care also merged.
What has emerged is a set of monopolies (technically, oligopolies) on both the provider and payer sides: two major health plans and two large hospital systems dominate Eastern Massachusetts. To finance their expansion initiatives, the hospital systems will want to generate substantial revenue growth, i.e., higher medical costs, for their operations. Despite all of this, the commission is currently contemplating ways to strengthen its hand in cost control.
To be clear, Americas excessive health care expenditure double the average in neighboring countries -- isnt due to patients overusing services. Americans visit the doctor and use hospitals far less often than people in other countries than other Americans. But we spend far more per visit, test, procedure, hospital stay, or pill. How do our neighbouring countries enforce their payment levels? Most health care systems have national fee schedules or preset budgets, preventing them from raising prices.
We, too, have a national fee schedule, Medicare, which is significantly lower than the outrageous rates that powerful health care systems charge private payers. We can't suddenly reduce private payments in Massachusetts to Medicare rates it'd be too disruptive but we could, like a few other states, use some level well above Medicare payment rates as stifling monopolistic pricing as an alternative. Private payments to hospitals in Massachusetts, for example, average about 170 percent of Medicare rates. Einige hospitals are significantly above that, raising their rates faster than the average.
If legislative leaders want to strengthen cost containment, they should authorize the commission to use 170 percent, or even 200 percent of Medicare payment rates, as an upper limit for tolerable hospital payments. (The Health Policy Commission estimates that a price cap of 200 percent of Medicare rates for severing 225 percent or more of standardized procedures would save 22-25 percent and about 5 percent.) At a minimum, the commission should be able to require performance improvement plans from the most expensive providers and, if he hospital fails to provide resounding PIP or to successfully implement it, it should impose the (above-Medicare) guideline as capped rate. This would continue the ambition stated in the 2012 legislation, but would give the commission some force to push for improvement.
Beyond that, if individual improvement reviews prove inadequate, the Legislature should give the Health Policy Commission the power to impose a flat cap of 170 percent of Medicare on all payment rates.
Jon Kingsdale, who founded the Massachusetts Health Connector, is an associate professor at Boston University School of Public Health.