Massachusetts seeks to lead on health reform—again

New York Times outlines Massachusetts' global payment efforts

Topics: Health Policy, Market Trends, Strategy, Pay-for-Performance, Accountable Care, Quality, Performance Improvement, Reimbursement, Finance

October 19, 2011

The New York Times this week examined Massachusetts' efforts to rein in health care costs through global payment agreements, highlighting state leaders' strategy to encourage the model without a legislative mandate. 

Massachusetts has been a model for national health reform since the state enacted its 2006 health care system overhaul. Focusing primarily on expanding access to care, the law "largely succeeded in providing universal health coverage," the Times reports. Only 2% of Massachusetts residents and less than 1% of Massachusetts children currently are uninsured.

State officials now are looking for ways to control health care costs in the state, an issue that state reform law architects admit they had deferred for the future. One state report indicates that Massachusetts per capita health spending was 15% higher than the national average last year, while another found that insurance premiums from 2007 to 2009 rose between 5% to 10% annually. According to Gov. Deval Patrick (D), "[w]e have shown the nation how to extend care to everybody, and we'll be the place to crack the code on costs."

The evolution of global payment plans
In 2009, a commission appointed by the Legislature outlined a global payment plan where networks would receive an annual fee to provide health care to each patient regardless of the actual cost of care. The plan allowed for higher fees for patients with greater health risks and provided financial incentives for meeting quality goals and cutting costs.

Meanwhile, Blue Cross Blue Shield of Massachusetts that year began testing a global payment plan that now covers roughly two-thirds of Blue Cross HMO members. A recent NEJM study found that the insurer's program generated "modest" savings while improving quality of care. Partners HealthCare last month joined the program and renegotiated its contract with the insurer to accept lower reimbursement.

Earlier this year, Patrick submitted a bill to the state Legislature that would create a global payment system for most state workers, Medicaid recipients, and residents with state-subsidized health insurance. The proposal would establish parameters to help private health insurers follow the state's example. Ultimately, Patrick hopes the plan would move all Massachusetts insurers toward global payment systems without a legislative mandate.

Reducing rate disparities
Despite the promise of global payment systems, it remains unclear that they will effectively reduce medical spending in the state. According to the Times, some stakeholders argue that the state will need to control providers' ability to negotiate high reimbursement rates to achieve cost savings.

Reports issued over the past two years by Attorney General Martha Coakley (D) have found wide rate disparities at Massachusetts hospitals that cannot be explained by quality variations. According to the findings, the rate disparities impede global payment systems' ability to cut costs.

Meanwhile, hospitals hope to persuade lawmakers that price controls are unnecessary. A Partners spokesperson points to the Partners-Blue Cross agreement as an example of the market "working to address affordability." Patrick agrees that such private agreements are important; however, he said the state "still need[s] a bill because we've got to have scale. It can't be one-offs" (Goodnough/Sack, Times, 10/17). 

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