IN THE STATES: Massachusetts Health Reforms Are Bold, But Will They Succeed?

With Congress on its summer break, it seems like a good time to take a look at what's going on in Massachusetts. The state is covering 97 percent of its people. Costs remain a challenge -- but Massachusetts is moving diligently and creatively toward solutions.

The New York Times noted in an editorial this Sunday:

Massachusetts' experiment in universal health coverage has become a favorite whipping boy for opponents of health care reform. They claim the program is a fiscal disaster and that the whole country will be plunged into similar disaster if President Obama and Congress' s Democratic leaders have their way.

That is an egregious misreading of what is happening in Massachusetts. The state's experience so far suggests that it is more than possible to insure almost all citizens, and stay within planned budgets -- although it will take great creativity and political will to hold down risings costs so that the program is sustainable.

The people of Massachusetts would probably welcome some good news right now.  In addition to a major baseball controversy, a fund for helping unemployed residents purchase insurance running dry, and a partial cut to health funding for legal immigrants, Bay State residents were reminded the other day by NPR that their health costs were the highest in the country.

At least it's nice and mild on the Cape.

The state made huge headlines three years ago when it became the first in the country to require individuals to purchase health insurance (recent update here). It made more headlines last month when an expert panel recommended a movement away from fee-for-service and towards global payment. This is without question the biggest news in health reform outside of Washington in 2009. Let's give it a closer look.

It's helpful to remember that the panel's major recommendation is not the only delivery system reform news coming out of Massachusetts.  As I wrote recently, their Senior Care Options program is an innovative strategy for providing coordinated care to beneficiaries dually eligible for Medicare and Medicaid. The state is also using grant money to convert 14 community health centers into patient-centered medical homes. The sites will use a team approach: a primary-care physician working with a nurse or health educator to ensure patients understand their treatment, are more closely monitored, and have more contact with their clinicians than just  "15 minutes every three months."

The payment commission originated in a bill passed last summer, aimed at protecting Massachusetts' historic achievement of insuring 97percent of its citizens. As supporters at the time noted, soaring costs could threaten to undo this milestone -- just as soaring costs are threatening the coverage of all middle class Americans, making comprehensive reform at the national level a necessity this year.  A commission was needed in their state to determine what steps could be taken to bend the cost growth curve.

As stated above, Massachusetts has the highest health costs in the nation.  What's even more troubling is what the picture looks like if nothing is done. The chart below shows health spending in the state doubling (!) by 2020.

 But Massachusetts isn't sitting back and doing nothing.

Here's a quick refresher for why global payments are being considered as a possible solution. In a system of global payment, insurers pay a set rate on a per member per month basis to an integrated delivery system or Accountable Care Organization for all services needed by that individual. Providers will make money by keeping their patients healthy, thereby reducing the health services they require, instead of making money off of providing services. A variety of risk adjustments will be introduced to ensure fairness. Our ability to measure, monitor, and reward quality is much better than during the HMO heyday of the 1990s. 

The report issued in July states that the transition should take place within five years.  This will allow time for hospitals, physicians, and other providers to form Accountable Care Organizations -- either real (incorporated) or virtual (networked). And while an oversight body will determine the global payment methodology, it is anticipated that the market will set the payment amounts. 

No one thinks this will be easy, but the physicians seem tentatively on board. Twenty percent of Massachusetts physicians are already paid via global budget, so great responsibility falls to them to work with their colleagues to champion the new system. This can be thought of as a  "nice guy" cost control initiative; global payment with market rates will require all providers to work together to provide care efficiently and effectively.  If, on the other hand,  costs continue to grow beyond our ability to pay, cost containment 20 years from now could be ugly and involve price controls. Avoiding that through smart and comprehensive health reform now would be good for the country. 

As for the next steps, the proposal must be approved by the legislature and the governor.  Although not a foregone conclusion, the commission that voted unanimously for the recommendations were appointed by the legislature and the governor, and there is a clear consensus that the current spending trajectories are unsustainable.

So can we consider the news of the proposed movement to global payment ‘good'?  We've clearly got to do something about health care costs that grow faster than the economy as a whole every year. Global payments are a potentially innovative approach, and Massachusetts' willingness to explore this option will provide a natural experiment from which future reforms can learn.