No Quick Fix In the National Debate over Health Reform, Massachusetts Is Ahead of the Game

Editor’s Note: This is the first of two articles examining the broad, and controversial, subject of health care reform. Next month: The impact of reform on businesses, HMOs, and individual insurance purchasers.

As debate rages in Washington over the size, scope, and details of national health care reform, no one can say with any certainty what shape a final bill will take.

Supporters of government intervention in health care say the U.S. has an obligation to ensure that its people have access to basic medical services, while opponents point to the massive cost of a proposed new entitlement at a time of already-soaring federal debt.

But here in the Bay State, the recent law mandating health insurance for most residents and progress toward significant changes in the way hospitals and doctors are paid position the state on the cutting edge of the debate — and those developments, some predict, will make the transition to national health reform easier for Massachusetts than for other states.

“That’s what we’re hoping,” said Daniel Keenan, senior vice president of Government Relations at Mercy Medical Center. “From a policy perspective, it feels like we have resolved the access issue, and there’s a lot of discussion at the federal level about how to do what Massachusetts has already done.”

The Commonwealth has done more than mandate insurance coverage. It has started to shine a light on the cost and quality of care at hospitals, making the information publicly available and encouraging hospitals to reduce complications and costly readmissions, while also considering drastic changes in the way providers are paid to reduce bloat and waste.

“Massachusetts as a whole is far ahead of the rest of the nation when it comes to health care reform,” Keenan said. “Most of what’s being contemplated at the federal level is taking place here. We have 97{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} insured in the state, and the federal proposals, even in the most progressive model, won’t get that high. The only thing we’re not fully progressed on is the cost measures.”

And cost, of course, is the major concern of most opponents of reform on the national level, or at least those who are skeptical of an expanded government role in health care.

Dollars and Sense

The two bills currently being promoted by Democrats in the U.S. House and Senate (Republican support is virtually nil) both propose a ‘public option’ in competition with private insurers, although the Senate bill would allow states to opt out if they wish. Hoping to get a bill passed by year’s end, lawmakers continue to debate issues like how rates to pay doctors, hospitals, and other providers will be set; what penalties to assess employers who do not provide insurance and individuals who choose not to purchase it; and how reform will be paid for, likely a combination of taxes and Medicare cuts.

Proponents of both bills put their cost at or just under $900 billion over 10 years, and the Congressional Budget Office reports that the Senate bill will reduce the federal deficit by $81 billion over the first 10 years.

But those numbers have been disputed by opponents of the legislation. For instance, Joseph Antos, a scholar with the American Enterprise Institute for Public Policy, argues that the favorable budget score is based on some creative deferrals of anticipated spending, not to mention massive cuts to Medicare providers that Congress is likely to override. Antos predicts the bill will add as much as $376 billion to the federal deficit through 2019.

Meanwhile, lawmakers have a history of severely underselling the true costs of entitlement programs. According to the Wall Street Journal, when Medicaid was launched, the House Ways and Means Committee estimated that its first-year costs would be $238 million, but instead they surpassed $1 billion, and the program now costs 37 times more than it did when it was created, after adjusting for inflation. Its current cost of $251 billion is a $50 billion increase over last year alone.

Similarly, when Medicare was created in 1965, Congressional budget officials said the cost would rise to only $12 billion in 1990, but its actual price tag when the ’90s rolled around was $90 billion — more than a sevenfold miscalculation. Since its inception, the rate of increase in annual Medicare spending has outpaced inflation almost every year, and a program that started at $4 billion now costs $428 billion annually.

There are other examples, such as the 1988 Medicare home-care benefit that was supposed to cost $4 billion by 1993, and actually rose to $10 billion. There are a few exceptions as well, such as the 2003 Medicare prescription drug bill, which currently costs about one-third of original projections because of lower-than-anticipated participation and unforeseen savings from generic drugs.

Despite uncertainty over cost, the leadership of the American Hospital Assoc. has lined up behind Obama’s efforts, with president and CEO Rich Umbdenstock calling for not only expanded health insurance coverage, but a simultaneous change in delivery systems that allows physicians and hospitals to better coordinate care and promote prevention and wellness — a concept at the center of Massachusetts’ move toward accountable care organizations (more on that later).

“Every day, hospitals and caregivers are on the front lines in providing care to all Americans, regardless of whether they have insurance. Without health coverage, patients are less likely to receive the preventive care that could keep them well,” Umbdenstock noted in a statement.

“Patients are showing up in hospital emergency rooms sicker and with more chronic conditions than ever before. That is why hospitals have stepped forward to be part of the solution. America’s hospitals stand ready to do our part to extend coverage to more Americans and to continually strive toward providing high-quality care for patients that is more efficient and affordable.”

He did, however, express hope that stronger action be taken by lawmakers to reform the medical liability system and “rein in excessive lawsuits that are currently driving physicians to practice defensive medicine and raise the cost of care for everyone.” Proponents of malpractice reform note that the additional tests that arise from defensive medicine run counter to current efforts to streamline care and make it less expensive for everyone.

Being Accountable

Earlier this year, the state-appointed Special Commission on the Health Care Payment System proposed a sweeping health-payment reform for Massachusetts that centers on the concept of accountable care organizations (ACOs), each of which would include doctors, other community-based providers, and hospitals working together to collectively provide a full range of services for each patient.

The ACO would take responsibility for caring for a patient for the year and, in exchange, accept some form of payment from the insurer. The system is geared toward controlling costs because it provides a one-time payment regardless of how many tests, procedures, and hospital admissions a patient requires, theoretically leading to greater efficiency and consolidation of services.

However, some anxiety permeates the discussion of ACOs in Massachusetts. As Dr. Mario Motta, president of the Mass. Medical Society (MMS), recently testified on Beacon Hill, if the state institutes a payment system that’s never been tried elsewhere, he wants it done carefully and deliberately.

Specifically, he promoted the use of small pilot programs at first. “We need to uncover the unintended consequences, learn from mistakes, and adjust, before it’s rolled out to larger sectors of our population,” he said.

Meanwhile, Dr. Alice Coombs, president-elect of the MMS and the only physician member of the state’s payment reform commission, conceded that the health care system in Massachusetts is too diverse to impose a single solution on everyone and that the differences in specialties, physician practices across the state, economic conditions, and even patients must be considered. “Our physicians are telling us that one size does not fit all,” she said.

Hospitals looking for ways to thrive under a changing reimbursement system can take heart that efforts across the country to improve quality of care — a much-touted watchword in Pioneer Valley hospitals — actually lead to a corresponding drop in costs.

Take Pennsylvania, for example, where for the past 20 years a state agency has published medical outcomes, like death and complication rates, from various surgeries and treatments at hospitals. In doing so, it has uncovered stark connections between quality of care and lowered costs, mainly as a result of keeping readmission rates down.

That, again, reflects the feeling of reform proponents that, if virtually all Americans are insured and encouraged to partake in regular and preventative care, they will be generally healthier, and their lifetime health costs will drop — and so will those of hospitals accustomed to treating poor and uninsured patients in the ER at great cost.

To that end, the Senate bill under discussion includes $75 million annually for the U.S. Department of Health and Human Services to develop methods of improving quality, including possibly publishing outcomes.

To further promote transparency, the HHS created the Hospital Compare Web site (www.hospitalcompare.hhs.gov), that breaks down how effectively hospitals are avoiding hospital-caused injuries and death, reducing infection, properly treating stroke and heart-attack victims, and performing in dozens of other categories.

According to that site, “Mercy Medical Center has costs that are lower than many other providers in the region, and quality score outcomes that in many areas are higher,” said Mark Fulco, the hospital’s vice president of Strategy and Marketing.

“Insurers and payers are starting to utilize this information to make their decisions, and prefer their members to be treated by hospitals that have proven cost savings and shown to eliminate unnecessary complications. We’re extremely progressive in our approach to changing the model of practice and making patient care as effective and low-cost as possible.”

It’s a shift that had to happen, Fulco explained, because until now, there hasn’t been enough public recognition of the actual cost of health care — and how much it’s rising under the current private-insurance system. “There hasn’t been price sensitivity,” he said. “But as the consumer is bearing more and more of the cost of health insurance and health care, we’re seeing a dramatic shift in price sensitivity.”

Bottom Line

Meanwhile, hospitals are left to wonder, amid their own internal quality and efficiency improvements, how a surge of newly insured patients will affect their bottom line.

“If we have 15{06cf2b9696b159f874511d23dbc893eb1ac83014175ed30550cfff22781411e5} on the national level without insurance and we provide them with insurance, that’s more opportunities for hospitals to get paid,” Keenan said. “Now, if everyone in Massachusetts has insurance anyway, if federal payments are reduced, we’re not going to get that back in insurance because everyone’s already insured. So that’s a concern. On the positive side, we’re well-represented in this debate by our Congressional delegation, and our concerns will be heard.”

Expect the conversation to be lively.