Massachusetts Tackles Health-Care Reform (Again)

While health care remains a contentious issue in most state legislatures, the Democratic-controlled Bay State is hard at work on its next phase of reform.
by | July 12, 2012

Now that the Supreme Court has closed the book on the first phase of health-care reform with its decision to uphold President Obama's Patient Protection and Affordable Care Act (ACA), Massachusetts is poised to kick off phase 2 -- and like the first time, this could have implications for other states.

Before the Massachusetts Legislature adjourns on July 31, chances are good that lawmakers will pass a bill to enact cost controls on health care in the state, according to a series of interviews in Boston's Beacon Hill. The measure -- which Democratic Gov. Deval Patrick is expected to sign -- would be the long-awaited follow-up to the health-care overhaul approved in 2006 by the Democratic-dominated Legislature and signed by Republican Gov. Mitt Romney.

The Romney bill -- widely viewed as the model for Obama's ACA -- was aimed at broadening coverage to previously uninsured residents. But the 2006 law was not aimed at controlling costs, which pose a particular problem in Massachusetts, the state with the highest per capita spending on health care in the nation.

Massachusetts has even more of a vested interest in curbing costs than most states do, since the 2006 law instituted state-funded subsidies to help the uninsured buy coverage. "The state now has a strong incentive to control health care spending, and that explains why Massachusetts has moved further in the cost control debate than other states," said Jonathan Oberlander, a health policy professor at the University of North Carolina School of Medicine.

As Patrick, who succeeded Romney in 2007, assumes a bigger role on the national stage, he's made cost containment a signature issue. The state's first African-American governor, Patrick is a key surrogate in Obama's reelection campaign and has been floated as a possible future U.S. attorney general.

Patrick "has been urging legislation for 18 months and more recently has been working behind the scenes trying to make sure that legislation gets passed," said Michael J. Widmer, president of the Massachusetts Taxpayers Foundation.

The governor "at every opportunity" argues that Massachusetts needs to "crack the code" on how to keep health costs affordable, said Brian Rosman, research director with Health Care for All, a group that advocates for health-care reform in Massachusetts. "There's a sense that maybe we can do it again. We were the state furthest out in front in 2006, and there's a feeling that we can inform a national debate."

Patrick and his allies are able to tout significant achievements from the 2006 bill. The state has reduced the percentage of uninsured residents from 7.4 percent in 2004 to 1.9 percent in 2010 -- the nation's lowest rate of uninsurance. The rate for children is even lower at 1 percent. "More businesses (are) offering insurance to their employees than before health-care reform started, and we are healthier," Patrick said in an MSNBC interview.

Despite the advances in health coverage, most experts seem to agree that the cost-control issue will be an even thornier challenge than expanding coverage. "When you get to costs, there's a lot more at stake for stakeholders," Widmer said. "And it's a lot more complicated in the actual details."

That's one of the reasons it's taken six plus years to pass a bill on cost control. The governor and lawmakers followed the example of the 2006 law, which included extensive deliberations with experts and a range of "stakeholder" groups, before legislation was drawn up.

In 2008, the Legislature established a blue-ribbon commission that one-year later issued a unanimous recommendation in favor of a major shift in how health care is executed in the state. It recommended the state shift away from a fee-for-service model, in which each medical procedure or test is paid for separately, to a global payments system, in which health-care providers are paid a fixed sum per patient.

The idea behind global payments is to flip the incentives. No longer would providers be driven to maximize procedures and, in turn, maximize their reimbursements; instead, they would have an incentive to run a tight ship. The provider would benefit if the patient remains healthy.

A second commission was named to study payment variations, or the question of whether, or how, different health-care providers should be paid different reimbursement rates. The panel recommended heightened transparency on price variations, efforts to bolster competitive market behavior, greater efforts to study ways of making health care more cost effective and an attempt to correlate prices more closely with quality of care.

With the two commissions having drawn up the broad outline for cost controls, attention shifted to the Legislature. In May, the House introduced a bill, followed in short order by the Senate. After a rapid-fire series of floor debates -- a stark contrast to the contentious, year-long debate over Obama's bill in Congress -- both chambers easily approved cost-control bills.

"This legislation focuses on increasing efficiency, eliminating waste and curbing costs, all while enhancing the quality of care that our patients receive," Steven Walsh, the Democratic lawmaker who spearheaded the bill in the House, told The Boston Globe. "We will not only save money for Massachusetts citizens, but we will save our health-care system over $160 billion in the next 15 years."

The House and Senate bills have notable differences. The House version is generally considered more hard-line, adopting a "luxury tax" approach -- taking from high-cost hospitals in order to aid lower-cost institutions -- and setting a more stringent target for cost curbs. Independent oversight mechanisms are also tougher in the House bill. Patrick has been coy about his preferences so far. In the meantime, not everyone is sold on the overall prescription.

Joshua Archambault, director of health-care policy at the Pioneer Institute, a free-market think tank in Boston, said he is not convinced that global payments and accountable care organizations (ACOs) are guaranteed to save money. "We think this is a real missed opportunity, because we think the only sustainable way to achieve cost control is for consumers to have more control of their health-care dollars," Archambault said. "That's not what this bill does."

In fact, a 2011 survey by the Massachusetts Medical Society (MMS) found that physicians were lukewarm, at best, about ACOs. Asked whether they would participate voluntarily in one, fewer than half said they would. "We are in somewhat uncharted territory," said Richard Aghababian, a physician and president of the MMS. "One size may not fit all with providers in the state. Solo practitioners have very different needs from multi-specialty practices; community hospitals are different from teaching hospitals."

Republican state Rep. Dan Winslow said he ended up voting for the House bill because it included a provision he'd sponsored, but he added his disappointment that the bills don't do more to cut down on coverage requirements. He urged more offerings of lower-cost, "plain cheese pizza options" for insurance, rather than ones with layers of mandated "toppings."

"Every mandate reflects a constituent interest group with lobbying dollars that fought to get a mandate in the bill, and when you attempt to peel it back, you get significant resistance," Winslow said.

Still, Winslow knows that the political winds are not on his party's side: Massachusetts has one of the most lopsidedly Democratic state Legislatures in the nation. "There's simply not enough of a Republican presence to cause friction -- it's more of a speed bump," he said.

The state's Democratic tilt may be the most important reason why health-care reform continues in Massachusetts while it limps along nationally. "Massachusetts has an overwhelmingly Democratic and liberal Legislature and a liberal governor who's interested in creating a legacy," said Tufts University political scientist Jeffrey Berry.

With such a complicated issue, no one expects immediate success. Rosman of Health Care for All notes that the 2006 bill required several legislative updates before it functioned as intended. But many experts think that if cost control can happen anywhere, it's in the Bay State.

"The last time we passed a vague piece of legislation that empowered a board to make important decisions, it was our coverage reform, and that worked out really well," said Jonathan Gruber, an MIT health-care economist who advised Romney on the Massachusetts bill and Obama on the federal bill. "So that gives me confidence that we can do it again."

Whether other states follow Massachusetts' lead, though, remains an open question. The problem of runaway health-care costs is certainly acute in most states, but there are several factors that pose challenges, not the least of which is political.

Timothy Jost, a specialist in health care at Washington & Lee University School of Law, suggested that while other states with a liberal bent may follow Massachusetts' lead, "I doubt, Texas, Oklahoma, or Arkansas will." Berry agreed, "there isn't going to be much appetite in Republican-dominated state legislatures for taking on their health-care business establishment."

Fred Bayles, director of the Boston University Statehouse Program, said he expects states to be watching the Massachusetts experiment closely. But, he added, "I don't see anyone jumping into this shark tank right away."

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