Massachusetts changed how we provide health care. Now it wants to change how we pay for it.

at 01:00 PM ET, 04/30/2012

BOSTON - When Massachusetts Health and Human Services Secretary Judy Ann Bigby began trying to image the future of health care, she started by digging deep into the past.

Bigby pulled a copy of a 1961 article from the New England Journal of Medicine, “The Ecology of Medical Care.” It contains a famous diagram— famous, at least, as health policy diagrams go —of where Americans seek medical care.
(New England Journal of Medicine)
She brought the diagram to Massachusetts Gov. Deval Patrick. “He looked at it and saw that where people are getting care, it’s mostly primary care offices,” she said. “Then he flipped it upside and said, ‘but all the money is going in this tiny box here. That’s where all the money is.’”

In 2006, under then-Gov. Mitt Romney, the state was the first in the nation to extend insurance coverage to all its citizens. Now, it’s looking to slow its health care cost growth in equally groundbreaking ways.

“There’s a bit of Bay State pride tied up in this,” said Brian Rosman, who directs research for the advocacy group, Health Care for All Massachusetts. “We were the first to figure out universal coverage. Now we want to be the first to crack health care costs.”

In the next few months, Massachusetts is expected to pass legislation that will overhaul how doctors, hospitals and other providers get paid. The forthcoming payment-reform bill is expected to include many incentives for hospitals to accept “global payments:” a flat-fee for all the care delivered for a specific individual, or group of individuals. The hope is to take away financial incentives to provide more care, when less might be equally effective.

“That’s been one of the biggest battles,” said Bigby, who spoke at a conference last week hosted by the Lown Cardiovascular Research and New America Foundations. “Some have characterized it as government intervention. We won’t require global payments, but include incentives that would encourage providers to use alternatives to fee-for-service.”

So far, Massachusetts businesses have proved amenable to such payment changes —in many ways, they’re already moving in that direction without any direction from the government. In 2009, Blue Cross Blue Shield of Massachusetts launched the “Alternative Quality Contract,” a sweeping attempt by Massachusetts’ largest insurance provider

Under the Alternative Quality Contract, a medical group accepts a global budget to cover all health care services for a set of patients. Groups can also earn a bonus, up to 10 percent, if they do well on 64 quality measures, things like controlling blood pressure and high-marks on patient experience.
(The Commonwealth Fund)
The program has, in three years, attracted 12 provider groups. They cover, in total, 615,000 Massachusetts residents. And while the program hasn’t brought health care cost growth beneath the rest of the economy, one New England Journal of Medicine study last year found it did slow cost growth when compared to providers using other financing strategies.

Doctors under the Alternative Quality Contract tended to deliver the same volume of care as their counterparts who did not participate. But they became more strategic about where they delivered care, referring their patients to other doctors who charge less for a given procedure.

“The long-term effect of the AQC system on spending growth,“ Harvard health care economist Zirui Song concluded, “Depends on future budget targets and providers’ ability to further improve efficiencies in practice.”

The payment reform law that Massachusetts will soon create new incentives for doctors, hospitals and providers to participate in a payment system that looks a lot like the Alternative Quality Contract.

Last February, Patrick introduced legislation which would have moved all Massachusetts health care providers to value-based payments (arrangements like the Alternative Quality Contract) by June 2015. A new government entity, created by the bill, would facilitate that change, setting various benchmarks and timelines.

The bill was introduced on Feb. 17, 2011. It then sat, with no movement at all, for 14 months. But now momentum is beginning to build. Last week, the Massachusetts Joint Committee on Health Care Financing moved Patrick’s bill forward unchanged.

Massachusetts Senate president Therese Murray told the State House News Service that she expects to bring the bill before the entire legislative body by mid-May.

Before that happens, Massachusetts Health Secretary Bigby does expect one big change: Legislators are roundly expected to add a hard cap on state health care spending that will be tethered to growth in the Gross State Product.

“The thing we know is that they plan to set a spending cap for health care spending that will be linked to the gross state product, minus some percentage,” Bigby said. “Some say 0.5 percent, some say 1, some say 2.”

It’s worth noting that this is a pretty ambitious goal: Massachusetts wants to get its health care costs to grow slower than the rest of the economy.

That will certainly be difficult, but not necessarily impossible. As Annie Lowrey reports in Sunday’s New York Times, health care costs have grown at the same pace as the rest of the economy for the past two years. And Massachusetts has, for many years prior to its universal coverage law, had the highest health care costs in the nation, leaving more space for some potential cuts.

The governor’s office is waiting to see what spending cap the legislature proposes. Consumer groups want to know how that spending cap will be enforced, ensuring it won’t be in a way that could hurt the care that Massachusetts residents receive.

The life and science industry, which is huge in the state, has some concerns about less health care spending stifling innovation.

All of these conversations will be happening in the next few months. And it will be worth keeping an eye on Massachusetts: It did, after all, create what became a national model for health insurance reform. Now it has a chance to do the same with landmark payment reform legislation.

 
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