Governor Patrick Found the Silver Bullet for Cost Containment?

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Thoughts on Governor Deval Patrick’s speech this morning about phase II of health reform in Massachusetts: cost containment. Without seeing the bill language these are my thoughts—however, it sounds like much “fussing over the details” will remain even after he files the bill.

Broad themes

  1. He deserves credit for putting the first bill on the table.
  2. As has been the case for almost a year, the devil is still in the details.  The speech did not do much to illuminate, but it did serve to take a few things off the table. Much of the implementation of this bill will play out in the regulatory space anyway.
  3. This is a longer term play. There are real problems happening now, especially for small businesses, and there should be concern that many of them cannot hold on till these policy debates resolve and take hold in the next 4-10 years.

Four provisions mentioned in his speech:

A) Bill will set out Standards and Benefits for Accountable Care Organizations(ACO), and alternative payment methods

I.            How prescriptive will they be on the form of ACOs?

II.            How far reaching will the ACOs be required to be? For example, can they be just contain one kind of doctor? Do they have to include some primary care doctors? How will payments work for referrals outside of an ACO? What will prevent HMO v2.0 backlash? What about care across state lines?

III.            How will legal barriers to ACO’s be overcome? The American Hospital Association has raised many.

IV.            Will payments be global (for the entire care of a patient), or bundled (per episode/sickness), or a hybrid? Who decides this?

V.            Is this a voluntary transition for providers? Will there be a minimum participation requirement?

VI.            Will the ACO standards lead to further consolidation of providers?

VII.            Are providers able to take the amount of risk management that is required under the standards and benefits? Will they all be required to take the same amount of risk?

VIII.            What role will insurers play in this new payment system? Will they turn into simply bill payers, or will they retain the risk management they have now?

IX.            Can low cost, high quality fee-for-service providers still remain in operation?

X.            June 2015 is the date set up for ACOs to predominate in Massachusetts. What is the state going to do to push this? Will there be a penalty?

B) DOI given more “tools” to review premium increases

The Governor claims this is one of his greatest accomplishments. To be blunt, one year of average increases of fewer than 10% is “kicking the can” down the road. (Something the Governor has vowed not to do.)

The sad part of the rate review debate is that the ones most impacted are the small companies trying to afford/keep insurance for their employees.  While the average increase this year seems “acceptable” to the general public, what will the situation look like in 3-5 years if the business owners are renewing for the 2nd or 3rd time in a row at a 15-20% increase? (Which many are this year.) Or what will the products on the table look like from the insurer that is taking a loss year after year? Will they remain in the state?

In my mind, the broader issue is that the Connector has failed to offer products that are attractive/affordable enough for small companies to benefit from reform in Massachusetts. Consequently we will see this annual chicken fight play out over rate reviews between insurers and the state. It certainly doesn’t seem to be the best public policy in a state with just a handful of mostly non-profit insurers.

C) Advisory Council

I.            What authority will they be given if any?

II.            What regulatory authority will they be given?

III.            Will they, like the Connector Board, represent the interests of government and unions?

IV.            Will providers, insurers, and small business purchasers have a true voice on the board?

V.            How will they avoid the gridlock that has taken place on similar boards such as the Committee on Payment Reform?

VI.            What is the role of government rate regulation? Glad to hear, for now, that the Governor has pulled back on plans to set rates in 2 ½ years, but will the Council have a say in this matter?

VII.            How will payment disparities be dealt with?

D) Modernize malpractice reform

Not worth commenting on till we see the details, hear feedback from the medical community, and see how it compares to other states efforts.

Political question:

Where are the Senate President and Speaker on the bill? Why were they not able, over a couple year period, to get agreement on four seemingly basic provisions of the bill? Two possibilities, one or both want to reserve their right going forward. Or more likely, one of them disagrees with the conversation about the regulatory environment that is being envisioned.