Massachusetts promises to rein in health-care costs. Experts question whether it can deliver.

at 09:23 AM ET, 05/30/2012

BOSTON — It’s taken as a matter of fact among Massachusetts health-care wonks: The state legislature will, by the summer’s end, pass a law aiming to reduce health-care costs by $150 billion in 15 years.

Where experts are confident that legislation will pass, they also have
Massachusetts Gov. Deval Patrick has pushed legislation that would reduce the growth in health-care costs. (Chip Somodevilla/Getty Images)
serious concerns about whether that bill can actually work — and deliver on the big health-care cost reductions that it promises.

“I’m not optimistic about [the legislature’s] ability to deal with cost,” said Nancy Turnbull, a senior lecturer on health policy at the Harvard School of Public Health.

The bill in question aims to reduce costs by overhauling how doctors, hospitals and other providers get paid. It would provide incentives to move toward “global payments” — flat fees 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.

Those payment changes would be in the service of a larger goal: slowing health-care costs to grow at a rate similar to the rest of the economy. If the health sector did not meet that target, there would be a consequence: A state agency watching over the process would have the authority to write a “corrective action plan” for health providers who weren’t moving in the right direction.

“It hasn’t been all harmony and light, but everybody seems to feel we need to move in the same direction,” Richard Moore, who chairs the Massachusetts legislature’s Committee on Health Care Financing, told me in a recent interview. “There’s the general agreement that, if we focus on getting the best quality, we can drive down cost and ensure access for everybody.”

Massachusetts has previously proved a leader in health policy. Its 2006 health insurance expansion, signed under then-Gov. Mitt Romney, became the model for federal reforms. Becoming the model for cost-control, many say, will probably prove a much bigger lift.

When Massachusetts tackled health insurance coverage, it had a number of factors leaning in its favor. The state’s uninsurance rate was among the lowest in the nation. Massachusetts had a robust health-care system, anchored by many top-notch Boston hospitals, that could absorb the newly covered, not to mention gladly accept payment from their insurers.

“In the 2006 reforms, it was an ‘all boats rise’ situation,” said Sarah Iselin, president of the Blue Cross Blue Shield of Massachusetts Foundation. “Everyone really had something to gain from expanding coverage.”

When it comes to health-care costs, however, the numbers don’t add up so clearly in the Bay State’s favor. For decades now, the state has had some of the highest health-care costs and insurance premiums in the nation. Hospitals, doctors and other health-care providers now have something to lose, as the legislature looks at policies that would pare back the size of their sector.

“We had the best preconditions for tackling coverage,” Iselin said. “But we also have some of the biggest obstacles to containing costs, largely because we’re already spending so much.”

More generally, health-care economists say we know a lot less about controlling health-care costs than we do about expanding coverage. A 2012 CBO report looked at 10 Medicare pilot projects meant to reduce the cost of caring for the elderly. None of them succeeded.

“Cost control isn’t easy,” said M.I.T. economist Jon Gruber, who advised Romney on the 2006 reform law. “On this cost control stuff, we have to be exceedingly humble. We’ve got to bend that curve eventually, and it’d be nice if it was sooner rather than later, but right now there’s too much impatience.”

If Massachusetts can’t get it right, and costs grow too quickly, there’s worry that the consequences don’t have enough teeth. Harvard University’s John McDonough, who worked on the 2006 coverage expansion, contends that a new government agency, without a specific tool box of consequences to work with, may not succeed in reducing costs.

“What they’re creating is a mechanism to blow the whistle on health-care costs,” McDonough said. “Then you hope that the whistle actually gets blown when the time comes.”

Even if it won’t bring down costs, McDonough and others agree that cost-control legislation is worth pursuing. If nothing else, it sets a framework for where the state hopes to head, and signals that cost control matters in Massachusetts. They describe it as one step in the right direction, but not the final solution.

“We don’t know the answers” about the best way to control health-care costs, Gruber said. “We just have to experiment, and be patient.”

 
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