Sunday, June 27, 2010

Contradictions in Massachusetts

I have written before about the strange things going on in the Massachusetts health care insurance market. For those from out of state, here are some quotes that will give you a sense of the contradictions in the public policy arena.

They are, respectively, from two stories that appeared on the same day in the Boston Globe: "Rate cap for insurer overturned" and "Officials give up cutting health perks."

(1) An insurance appeals board yesterday overturned the state’s cap on health premium increases for small business and individual customers covered by Harvard Pilgrim Health Care . . . [finding] that rate increases Harvard Pilgrim initially sought in April are reasonable given what it must pay to hospitals and doctors. That ruling trumped the Insurance Division’s earlier finding that the requested increases were excessive.

(2) The state’s public employee unions won a major victory this week when the Legislature abandoned efforts to allow cities and towns to trim generous health care benefits enjoyed by thousands of municipal employees, retirees, and elected officials.

You can read the rest and related stories, but what is most disturbing is that the spirit of cooperation and compromise that existed when Massachusetts approved its health care reform law in 2006 has broken down. Part of the reason is that commitments made at that time have not be delivered upon. For example, the state had promised to lift Medicaid payment rates to something closer to the cost of delivering that service. Once the economy sank and state budgets were stressed, that was not possible. This left providers needing to collect more of their income from private insurers.

Meanwhile, the underlying determinants of health care cost increases continued apace -- wages and salaries of health care workers, supplies and equipment, drug prices, increased utilization, the medical arms race, and unhealthy life styles. Certain providers received disproportionate payment increases based on their market power and used those excess revenues to gain market share. Collectively, the industry did little to reduce harm and improve quality and garner the cost savings that would be possible from that. Access to primary care did not improve, forcing patients to go to emergency rooms. Those primary care practices that do exist often functioned as triage way stations for patients to go see higher priced specialists. For those who thought payment reform (i.e., capitation) was the answer, little progress was made, in part because insurers have yet to see a market for the restricted networks (i.e., reduced consumer choice) that would facilitate that kind of pricing regime.

So, now we are in a situation in which everyone is blaming everyone for the problem. Truthfully, everyone is the problem, and so this is an accurate representation, but it is not a helpful approach. Deadlock is the result.

At times like this, people often look for a global solution to sort things out. That is a mistake. There is not a politically possible global solution. There are too many legitimate vested interests to pass a bill or adopt a regulation that shifts hundreds of millions of dollars of costs from one group to another. As seen in the two stories above, it will either be legally unacceptable or politically infeasible.

Instead, it is a time for incremental changes that are directionally appropriate. There are things that can garner majority support that will move the system towards a more sustainable level.

But to agree on those, the rhetoric needs to be toned down, both within the field and from the government. The demonization of any particular sector destroys the kind of trust that enables people of good will to invent solutions that create value for all.


RalfLippold said...

.... have a look on - with a good example about implications of healthcare systems (MainCare as taken example), it is in the later half of JohnSterman's excellent speech.

Frank Opelka, MD FACS said...

The Accountable Care Act mirrors much of the health reform changes attempted in Massachusetts. All of us fear that the same reform failures will snag US health care reform.

Quality, safety, and high valued health care are laudable and noble goals. However, access trumps quality, safety and value.

I agree with the incremental changes on the one hand. On the other, I seek the global changes needed to set us on the incremental path.

We need to change our health care delivery system culture - starting with the doctor patient relationship. We need patients interested in owning more of their health (as compared to just owning more of their health care). We need to use our delivery system resources at the top of their licenses which really applies to primary care.

Barry Carol said...

I think there is lots of potential to drive down utilization, especially in the areas of end of life care and diagnostic testing but it would mean less revenue for hospitals, doctors and trial lawyers.

At the end of life, while doctors cannot predict precisely when someone will die, they can usually tell when a disease or condition is not curable. Particularly for patients with advanced Alzheimer’s, dementia, cancer and heart failure, they and their families should be made aware that a palliative care consultation that would explain the available medical options and the quality of life implications of each is available. If it’s not covered by insurance, the cost should be communicated ahead of time, and, if the patient or the family can’t pay, perhaps a charitable foundation could be established that could help cover the cost. Cancer patients in particular should fully understand what they are signing up for before they are subjected to treatments that can include serious side effects. Any opposition from surgeons, oncologists or interventional cardiologists needs to be overcome. This is an area where I think we need to become more like the European healthcare systems in terms of how good sound medical practice is defined and applied.

Regarding diagnostic testing, meaningful tort reform would be helpful here. I define this, not as damage caps, but as robust safe harbor protection from lawsuits for doctors who follow evidence based guidelines where they exist. Also, medical disputes should be resolved by special health courts presided over by judges with appropriate expertise and the ability to higher neutral experts able to sort through conflicting scientific claims. These cases should not be decided by juries of ordinary people with no medical expertise.

In the end, however, I suspect that hospitals, doctors, and trial lawyers will not be eager to see their revenue and income reduced. It’s much easier to rail against prices charged by drug and device manufacturers or premiums charged by insurers. Or, perhaps consumers just need to pay ever higher taxes and/or a greater percentage of medical costs out of their own pockets.

Cetus said...

Paul, new to your blog so sorry if you've consistently been an incrementalist for some time. Not to say I disagree with your read on the current climate, but this post strikes me as capitulation, as settling for an uninspired and uninspiring position. "We're all people of goodwill with legitimate positions, so let's try to find common ground and measure progress in inches for the time being."

In terms of claiming there is no politically viable global solution at present, sorry but that's a failure of leadership/imagination. Waiting out the ugly partisanship won't work; it's only becoming dumber and more shrill by the day on both sides. Because all of this is set against a backdrop of deep anger indiscriminately targeting institutions, private and public, painted with a broad brush.

Don't hold your breath for a collective "Pogo moment" in which everyone realizes that the enemy is us. When some of the major forces in play have deadlock precisely as their objective, capitulating into incrementalism IS choosing sides.

Like the old song says, Paul: Which side are you on?

And if you say the patient's side I'm going to throw up.

Lynn Nicholas said...

Paul, you make a number of good points, and the state would do well to take a tactic from hospitals’ playbook in terms of doing its fair share to advance healthcare reform, not only as a policy-making entity, but also as a major employer in Massachusetts.

The Patrick administration should follow the example set by Bay State hospitals when it comes to healthcare benefit design. Our hospitals have implemented streamlined benefits, made pension changes, and created select network options for our own employees. Through innovative efforts such as LEAN and Six Sigma, Massachusetts hospitals are re-engineering how our healthcare system works and are finding clinical efficiencies.

In contrast, a vast majority of state employees remain in costly PPO health insurance plans, and workers are neither encouraged nor required to choose more cost-efficient or health conscious options. And while state employees get premium (so to speak) insurance coverage, the majority of our hospitals are experiencing serious financial woes thanks to continued underpayment from the state’s MassHealth program.

On average, hospitals receive less than 70 cents on the dollar reimbursement from the state for treating Medicaid patients, and about 93 cents on the dollar in Medicare payments. And there are additional reductions in Medicare payments on the horizon under federal healthcare reform.

To put the scale of the underpayment problem into perspective, on a statewide basis government payers make up 51% of total hospital revenues. It doesn’t take an economist to know that losing money on more than half of the care you provide is unsustainable.

The state needs to start leading by example with its own workforce, which is nearly comparable to the number of hospital employees in Massachusetts, and get behind educating its workers about the need for benefit redesign. Collectively we could really make a difference.

Pat Hughes said...

Paul - I find myself in agreement with much of what you have to say, particularly the breakdown of the coalition that led to the passage of health care reform here in Massachusetts. But, where I respectfully disagree is on the point of whether there’s a market for limited networks.

Our experience shows that cost-saving limited networks, if done right, are very attractive to business customers. Our limited network product, Direct Care, which can be as much as 10 percent less expensive than traditional plans, has grown by more than 40 percent over the past 4 years. Currently 80% of residents in the Commonwealth live in the Direct Care service area.

The key is to build networks using high-quality providers, identified by performance data, and to build aligned incentives for the insurer and the provider. We also provide a mechanism for Direct Care members to visit a teaching hospital outside the network for a second opinion or to receive care for a procedure that the network doesn’t specialize in.

The point of limited networks is to avoid high-cost hospitals for procedures that can be performed equally as well in another lower-cost setting. The Attorney General’s recent report on health care costs pointed out that there is no correlation between cost and quality.

So, perhaps not everyone is a big fan of limited networks yet, but they are precisely the kind of sensible, incremental change that can lead to a solution in Massachusetts – and across the nation.