Yesterday’s takeaway was political leaders agreeing on the urgent need for decisive action to reform our health payment and delivery system. Liz Kowalczyk’s Globe lede was “State legislative leaders made their strongest statements yet in support of placing significant cost controls on health care, predicting yesterday that they will agree on a bill as early as the fall.”
Today’s process takeaway was that many stakeholders agree too. The substance takeaway was, like always, that it’s complicated.
The determination for reform that was so present on day one was again evident on day two of the Division of Health Care Finance and Policy hearings at Bunker Hill Community College, but some of the earlier optimism was tempered by varying concerns about aspects of the proposed changes.
Those concerns may have been particularly evident in part because of the difference in who testified at the hearings. Day one featured the State House’s heavy hitters and their research teams; day two featured representatives of the hospital, insurance, and business communities, as well as consumer-advocacy groups including Health Care For All.
There was a surprising amount of support, however, for the Attorney General’s suggestion of some government intervention to limit the range of variation among providers’ prices to control what she has characterized as a “dysfunctional” market. WBUR’s CommonHealth blog has lots of video highlights, and the Globe’s White Coat Notes blog has a report on the morning and afternoon sessions. Powerpoints and written statements are here. Our detailed report is a click away:
The price variation problem
The day began with a review by DHCFP Assistant Commissioner Stacey Eccleston and Assistant Attorney General Karen Tseng of their departments’ research into the extent and causes of the wide variation among prices paid to hospitals and physicians. Their research verified the now-familiar conclusion that differences in price – which can be very substantial from hospital to hospital and physician to physician – are not adequately explained by differences in the quality of care delivered or the provider’s costs. Instead, the variation seems to be explained by the high-paid providers’ market power. Ms. Tseng explained that providers with greater leverage negotiate better pay from insurers. Those extra expenditures are passed along to purchasers in the form of the steep premium rate increases that Massachusetts has experienced in recent years. Even worse, the problem seems to be self-perpetuating: high-paid providers extract more money from insurers and use that money to invest in new construction, higher salaries for staff, and better advertising, which all contribute to their capture of even greater proportions of market leverage.
Among the most important solutions proposed by the Attorney General’s office are (1) to give consumers and employers better information and new purchasing tools such as tiered and limited network plans, and (2) to impose “temporary statutory restrictions” to limit the range of provider price variation.
Tiered and limited network plans
The forthcoming introduction of tiered and limited network plans, which are due to arrive in a much bigger way on the market this fall after being explicitly authorized by last year’s Chapter 288 reforms, received mixed reviews from the morning and afternoon panelists. While many of the providers and insurers on the panels agreed with the Attorney General’s support for tiered and limited network plans in controlling health care costs, not everyone was convinced.
Andrei Soran, the CEO of the MetroWest Medical Center, said that tiered and limited network plans could prove useful if consumers get the information they’ll need to use the plans effectively. He nonetheless described the plans as merely an interim “work-around” that would not succeed in fixing the market’s leverage dysfunction.
At the afternoon panel, on consumers’ role in cost containment, Amy Whitcomb Slemmer of Health Care For All both expressed concerns that consumers may not be sufficiently aware of the limits they will face if they sign up for a tiered or limited network plan. In addition, she said, there is uncertainty about what effect tiered and limited network plans may have on separating patients from their doctors and on care coordination more generally.
Harvard health economist Michael Chernew, with an economist’s faith in markets, was optimistic about tiered and limited network plans but acknowledged that the evidence of their efficacy is scant and, where they have been used, consumer response has been modest.
Surprising support for government intervention
According to DHCFP acting Commissioner Seena Perumal Carrington’s count, more than half of the panelists who testified on day two supported the idea of temporary government intervention to reduce provider price variation. That over half the panelists were in favor of the idea is itself newsworthy; that that number included the executives of some of the state’s major hospitals is even more striking.
Not everyone agreed, of course. Partners HealthCare CEO Dr. Gary Gottlieb warned the government not to “overreact” and “overreach” based on what he believed was incomplete data and warned that imposing new regulations could disrupt the system by driving hospitals and doctors away. W. Patrick Hughes, CEO of Fallon Community Health Plan, said that proper insurance plan design would make government intervention unnecessary. Similarly, Associated Industries of Massachusetts CEO Rick Lord, who represents businesses across the state, said that new regulations weren’t necessarily needed because tiered and limited network plans and other reforms would solve some of the price variation problems we are seeing. Tufts Health Plan CEO James Roosevelt, Jr., acknowledged that it might be necessary in the short term.
Ms. Slemmer and Dr. Paul Hattis of the Greater Boston Interfaith Organization both voiced their support for government intervention to reduce variation among provider prices and thereby help contain overall health costs. Such an intervention is necessary, said Dr. Hattis.
The hearings continue
Hearings are scheduled for Wednesday and Thursday at Bunker Hill Community College. For all the documents and speakers’ presentations, check the Division of Health Care Finance and Policy’s website, www.mass.gov/dhcfp/costtrends.
For ongoing coverage, follow the hearings live with us on Twitter and keep reading our blog in the days to come.
-Samuel Solomon
