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79 posts categorized "Universal Health Care"

July 31, 2012

Massachusetts Health Reform Bill Tackles Cost Control and More

The Massachusetts legislature is voting today on "An Act improving the quality of health care and reducing costs through increased transparency, efficiency and innovation" reported out of conference committee at the eleventh hour, last night. (Update: The law was passed by both houses and sent to the Governor for signature this evening.) The headlines include:

1.    The health care cost growth rate may not exceed growth of the "gross state product" (GSP) for five years, and must be between the GSP and .5% below the GSP for the next five.

2.    Certification programs for Patient Centered Medical Homes and Accountable Care Organizations.

3.    Transparency and accountability for cost and quality.

4.    Investment in wellness and in community hospitals.

5.    Med-mal reform including a 6-month coooling off period and inadmissibility of medical apologies in court proceedings.

The full text of the bill, and a summary, are set forth below.  It's been a long haul, and this Part III of Massachsuetts health reform was kicked off by Governor Deval Patrick almost 18 months ago.

A return to central health planning?  Not quite, but certainly more heavily regulated than things are at the moment. Is that a bad thing?  Well, consider how the free-market approach has been working out: overall, we've seen a high-cost, low-quality experience (relatively speaking) that could use some help. Is this new law the panacea we need? Too soon to tell. But we surely cannot stick with the status quo.

MA Health Care Reform Bill - Summary


MA Health Care Reform Bill S 2400 7 30 2012

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

January 16, 2011

David Harlow is Guest on Lawyer2Lawyer Podcast on Massachusetts Health Reform Issue

LTN_RSS_2009_144x144 I am a guest on the latest edition of Lawyer2Lawyer, a podcast talk show on the Legal Talk Network hosted by fellow Bay State blawger Bob Ambrogi and Golden State lawyer Craig Williams, discussing aspects of the Massachusetts health reform plan, national health reform, and the lawsuit brought by their other guest, Michael Merlina, who is representing himself in seeking to overturn the denial of his application for a hardship exception from the individual mandate portion of the Massachusetts law.  He and his wife are being fined a little under $2000 because he says they can't afford a policy that would cost them a little over $5000.  Thus far, he reports that the state agency that denied his application has been ordered to review it again and provide a detailed response.  To listen to the show or download the podcast, go here.

Interestingly, Merlina is not challenging the individual mandate, just the application of the hardship exception rules to his situation.  As I have noted in the past, the Massachusetts law is theoretically open to challenge as being pre-empted by ERISA, but the realpolitik behind the coalition that ensured the law's passage has eliminated the risk of that sort of broad-based challenge -- at least it has to date.

Even more interesting, if you think about it, is the fact that the principal argument against health reform at the national level -- i.e., the individual mandate violates the Commerce Clause because stuff like this is supposed to be left to the states -- runs smack up against the principal argument against state and local health insurance mandates -- i.e., the mandate is pre-empted by ERISA because the federal government has claimed the entire field as it relates to health insurance.  (And, um, let's not forget that the federales get to have laws like ERISA in the first place because of ... the Commerce Clause!)  Thus, carried to their logical conclusion, these arguments mean that neither state nor federal government may impose an individual mandate.  If that's the case, then, to quote the Immortal Bard, Something is rotten in the State of Denmark (and Massachusetts, and Maryland, and California . . .).

Meanwhile, back in D.C., the Supremes recently let stand (by a 7-2 vote) a lower court ruling permitting intrastate regulation in the face of a Commerce Clause challenge (state law banning body armor possession by convicted felon survives challenge asserting in-state possession of body armor has nothing to do with interstate commerce).  The readers of entrails out there seem to think this bodes well for the health reform law (except for those who don't) when the challenges to the individual mandate come before the Supremes, probably in a year or so.

Bob posed the question that should be on everyone's minds as we get deeper and deeper into the Massachusetts model on a national scale: How could we structure this all differently so that everyone gets health insurance and there aren't so many rules, categories, exceptions, and cracks to slip through?  Well ... a single payor system would do that, and would save a bundle on administrative expenses, to boot.  Will that ever happen in this country?  Not any time soon.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

October 13, 2010

Massachusetts State Rep. Ruth Balser speaks with David Harlow about health reform, the Massachusetts experience, and potential implications for the federal effort

The Massachusetts health reform experience is often cited as a model for key aspects of the federal health reform law - the Affordable Care Act.  To gain some insight into the origins of the Massachusetts health reform law, and to explore current experience with implementation, I spoke with Rep. Ruth Balser, a legislative leader and supporter of the health reform laws in Massachusetts.  

The audio file of my interview with Rep. Ruth Balser (about 25 minutes long) is available for listening or download

A full transcript is at the end of this post (and in the linked Massachusetts State Rep. Ruth Balser interview transcript).

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

HealthBlawg :: David Harlow’s Health Care Law Blog

Interview of Massachusetts State Representative Ruth Balser

October, 2010

David Harlow:  This is David Harlow on HealthBlawg, and I have with me today Representative Ruth Balser, a state legislator in Massachusetts.  Representative Balser is a clinical psychologist by profession.  She’s a former Alderman in the City of Newton, Massachusetts and a leader in Massachusetts when it comes to health reform.

She’s a state house veteran.  She’s been on Beacon Hill for over ten years and has held leadership positions in the state legislature in various key committees and has been a prime mover behind Massachusetts health reform legislation.

Representative Balser, thank you very much for joining us today on HealthBlawg.

Rep. Balser:  Well thank you.  I’m happy to be here.  Thank for that nice introduction.  I think it’s more fair to say that I was one of a number of people who supported health care reform efforts.  The leaders at the time of course were the Speaker of the House at the time and the Senate President and the Governor, but I was a committee chair on the Joint Committee on Mental Health and Substance Abuse at the time.  I did pay particular attention in fact to protecting mental health and substance abuse within the health care reform efforts.

David Harlow:  Yes.  So that’s often an area that is ignored or left behind or gets short shrift in the discussion.

Rep. Balser:  Right.

David Harlow:  I wanted to start off with a question about how the legislation in Massachusetts came to be.  How it came to focus on access.  There are really three key issues that people keep talking about, the three-legged stool of health reform:  access, cost, and quality.

A decision was made early on in Massachusetts to address access first.  I’m wondering why did we start there?  How are we doing in terms of addressing access and also the other areas of cost and quality?

Rep. Balser:  The fact that we focused on access had to do with reapplying for a Medicaid waiver to the federal government.  We actually had to address access in reapplying for the Medicaid waiver, in my memory, so that became the initial, really financial reason for addressing the access issue.

But once the state embraced that, it really did embrace it.  There was a shared goal on the part of the legislature and the governor to try to get as close to 100% health insurance coverage as possible.

We’ve been really successful.  We have 97% of the people of Massachusetts who have health insurance plans.  I believe we lead the nation.  I believe that’s the best rate across the country.  So from that point of view, our efforts were tremendously successful.

David Harlow:  So that was based on the legislation in 2006 that’s led to that rate of coverage which I very believe that is the highest rate nationally.  And then there was another bill two years later that was intended to address cost and quality issues as well.  How has that bill been implemented?  Or what can you say about that?

Rep. Balser:  Well, first of all, there were some quality issues which we addressed in 2006 as well.  We can get back to that a little later in the conversation if you’d like.  And the more recent legislation on cost which we actually also just did this session.

In 2010, we just did some cost measures but I think it’s agreed that it’s only the beginning.  I think there’s a pretty universal agreement that the rising cost of health care is the biggest challenge that we face.  There’s a lot of discussion about trying to grapple with that going into next session.

There were some market reforms this past session.  For instance, allowing small groups, small businesses to associate in groups which might help bring down the cost.  The governor actually did some capping of rates.  But I think it has been agreed in Massachusetts that we’ve been much more successful on the access side so far than on the cost side.

David Harlow:  Yes.  So in the small group reform legislation, there were some provisions that also address moving in the direction of bundled payment rates.  It’s really sort of, from my perspective, it looks like baby steps in that direction.

Following up on some of the agency and legislative hearings and reports that were issued over the past year, how do you think that will be going?  Do you see that as a direction that we need to move in - the bundled payments?

Rep. Balser:  Well, I guess to be frank, I haven’t weighed in on a particular strategy yet.  I think first of all, your reference to baby steps would be agreed.  I think people at the legislature know that they’ve only just begun to tackle this.  I know if you listen closely to the gubernatorial race that’s going on, there’s debate going on about payment reform which I think will be the hot topic next session.

One of the reasons why our health reform of 2006 was as successful as it was and why passage was so much easier here in Massachusetts than what happened nationally, was because all the stakeholders were brought to the table.  The insurers, the providers, consumers, and legislators all came together and developed a plan which eventually they could all buy into.

I think what’s going to happen - that has not yet happened on the payment issue.  I think that’s what’s going to have to happen next.  There’s going to have to be some real leadership in pulling together the stakeholders.

Right now, you have a blame game going on with the insurers blaming the medical community, and the medical community blaming the insurers.  I think we are going to need to see some kind of process similar to what happened a few years ago when everyone came to the table and reached a plan that they could all buy into.

David Harlow:  Is there a need, do you think, for an external crisis?  You mentioned in ’06, the issue was a deadline for getting a Medicaid waiver from federal government.  Is there some external crisis or are we in the presence of one already given the cost?

Rep. Balser:  I’m not aware of something analogous to the Medicaid waiver but yes, I think everyone agrees we’re in the middle of a crisis.  I think the cost of healthcare is unsustainable.  It’s breaking government.  I mean at the municipal level, you hear about it.  At the state level, you hear about it.  Small businesses complain that it’s breaking them.  It has a huge impact on the economy.  So I think there is definitely a sense of crisis.  Although there isn’t a deadline they way there was and I guess that was helpful.  It’s always helpful to have a deadline.

David Harlow:  Sure.  So one deadline that recently came and went was the end of the federal and hospital fiscal year and that seems to have brought the dispute between Boston Medical Center and the state forward, and resulted in some resolution.  I don’t know if that’s going to be a final resolution or how it affects other hospitals and their debates with Medicaid.  But there’s some additional federal Medicaid money now available for Boston Medical Center, Cambridge Health Alliance.

It seems to me that’s not a sustainable way of addressing these issues with stop-gap additional funds.  Do you have any sense about that being a step in the right direction?  Impetus for more structural change?  Or what can we take away for other providers from this experience with Boston Medical Center?

Rep. Balser:  You know, I’m not such an expert on that, but I think what everyone’s talking about is payment reform.  That’s the news: changing from fee-for-service to global payments.  That’s one thing.  Well actually that’s one thing Governor Patrick is talking about.

Then you hear candidate Charlie Baker talking about transparency.  He’s talking about just revealing the different payments that insurers and different provider groups are negotiating.  He’s saying that if you just laid all that out on the table, that would lead to some change.  Part of it is what’s going to make a difference is who’s elected governor which we’re in the middle of the campaign about.

David Harlow:  Now Charlie Baker, a couple of decades ago, was involved in working to dismantle the rate setting structure in Massachusetts.

Rep. Balser:  That’s right.

David Harlow:  Do you see his current stance as being consistent with that?  Is transparency going to be there just for the goal of developing more of a market for health care?

Rep. Balser:  Well, I’m certainly a supporter of the governor, so I don’t know if I’ll give a fair- but I think you’re right.  He was part of breaking that down and that certainly has contributed to the problems that we’re facing.

David Harlow:  So I take it you see this is not necessarily something that could be solved by throwing it to the free market?

Rep. Balser:  Oh, no, absolutely not.  The government is going to have to play an active role in negotiating some changed relationships between the payers and the providers.  That’s going to have to change.

David Harlow:  Do you see that role and that relationship leading to any resolution in the cost inflation side?  We talked a little bit about different types of approaches to payment.  Is that something that you see as being developed by regulation?  Will there be a menu of approaches to payment that could be offered by the state government to the provider?

Rep. Balser:  Perhaps.  You know it’s interesting when, you know, this is clearly a tougher problem to solve than the access problem.  In 2006, there was actually explicit conversation about how we were not going to tackle the cost problem yet.  It’s interesting and at that time, what we were debating, I mean it’s funny because the model we set up obviously had implications for cost.

There were a few different models one could choose from to set up a healthcare -- we might talk about the old Dukakis model.  Maybe we should walk through the steps of the model so that we can, to get to the cost question because what had been tried in years past was this Dukakis model which was an employer mandate, requiring employers to pay.  And that never got implemented.  The business community rejected responsibility.

Then there were many years where there were, at least on the liberal side of the political spectrum, people advocating for a single payer system.  In other words, government taking the responsibility for who would pay because the debate was always who would pay, not how much we would pay.

David Harlow:  Yes.

Rep. Balser:  So first, it was going to be the employers.  Then there were some folks who try to argue that the government should pay.  And there were hopes that at least maybe on the national level, we could expand Medicare.  That issue got revisited with the public option debate.

Even here in Massachusetts, people were saying perhaps we needed to do a single payer first at the state level.  What we did in 2006, was decide to develop a hybrid system that would have three payers.  One would be employers, another would be government, but the third and this was really the Republican contribution which the Democrats embraced, was the individual mandate.

So when we talked about who was going to pay, the model that we developed was that again, a three-legged stool, which is often the image.  It was going to be employers, government, and the individual.  That was the breakthrough was that we broke out of this argument, would it be employers or would it be government or would it be a combination?  But the final breakthrough was actually to add the individual mandate as part of that.  And that’s the Massachusetts model that then got embraced nationally.

I should just mention for those who don’t remember, this was debated when Hilary Clinton and Barack Obama were competing for the Democratic nomination.  It was actually Senator Clinton who was pushing for the Massachusetts model and the individual mandate.  Senator Obama at the time rejected it.  Although later when he became president, he embraced and supported that.  So now we have that at the national level.

But fast forward now, I think this is what makes the cost argument so complicated because the cost on individuals has gone up.  The cost on businesses…I mean businesses got off easy in our Massachusetts health plan.  We in the House had wanted a larger employer contribution.  The Senate and the governor, the former governor actually didn’t want employers to have to make a contribution at all.  We settled on a compromise where the employers pay a much smaller contribution than we in the House would have liked.

But I think someone will have to -- maybe you’ll help me figure this out.  But I think that model that we set up, made it all the more complicated to now tackle the problem of cost.

David Harlow:  Because of the shared responsibility for coverage?

Rep. Balser:  Yeah, well and then each sort of resisting taking the full responsibility.  Yeah, you’d think maybe it would make it easier because you had different people contributing or different forces contributing.  But you know, let’s say the government was responsible like with Medicare or whatever, well, then you would just tackle it as a federal budget problem.  The businesses certainly feel they can’t in this economy afford to manage to this rising cost and individuals certainly feel they can’t.

David Harlow:  The Massachusetts experience has been both praised and vilified nationally as the national debate continues.  I guess I’m wondering whether there are particular areas of the Massachusetts experience that you would highlight as being praiseworthy.  We spoke briefly about the fact that we’ve achieved near-universal coverage…

Rep. Balser:  Right.

David Harlow:  …and an uninsurance rate on the order of two or three percent of the population which is a vast improvement.  One of the criticisms of the plan early on was that we had not anticipated how many people would sign up for the various types of programs and that the cost was too great for the state to bear.

Rep. Balser:  But the state has maintained its commitment and has covered the cost.  Well, there were a few problems from my point of view.  We always knew once we embraced this model of the individual mandate, we always knew that would only work so long as there were sufficient resources and commitment to subsidizing those individuals who couldn’t afford the mandate.

So one reason for the individual mandate was because a significant portion of the uninsured were healthy - one group amongst the uninsured for instance were healthy young adults, people who could afford it actually.  Forget the percentage but significant numbers of relatively young adults who are healthy and who had good jobs and were making good money but just didn’t choose to buy health insurance because they [overlap]

David Harlow:  Right, our young invincibles.

Rep. Balser:  Yeah, that’s right.  So that was the model for why it would make sense to have an individual mandate.  Someone’s making a young, single adult who’s making $60-70,000 or something about like that.  They can afford to pay for some health insurance.  Plus, it helps the risk pool if you have more healthy people in it.  And that the idea was that it would also bring down the cost for everyone.

But it was also clear there would be people whose employers did not provide health insurance for them and had made more money than allowed them to be eligible for Medicaid, but who would not be able to pay the full amount of a private health plan.  So the idea was that the state, the public sector would subsidize part of the cost of their health plan.

We always knew the success or failure of the program would sort of rise or fall with whether we could appropriately subsidize those folks because otherwise, the individual mandate becomes really unfair.  You force someone to pay for something they can’t afford.

So what happened was the numbers the first year or so really didn’t work totally and so the state ended up exempting a bunch of people from the mandate which of course defeated the point of universal coverage but we knew it wouldn’t be fair to require them to pay what they couldn’t pay.

But there’s still the devil in the details.  The premium’s cost has gone up and there are a lot of folks, the working poor who are out there working two full-time jobs and raising kids and who can’t afford.  So that’s a problem.

I do remember during the presidential debate when Senator Clinton defended basing the national model on the state.  She pointed out that the federal government would have more resources available and probably could do the right thing as far as subsidizing people who couldn’t fully afford it.  We’ll see how that ends up playing out with what the Congress did. 

You were asking how has it worked out.  So that’s still a problem is that the resources aren’t there to really get the right amount of subsidy for people who are struggling to pay, the individual.

The other problem was that to keep plans affordable, we ended up supporting and by we, I’m being generous because I actually opposed this.  But we ended up allowing high deductibles.  I actually had filed some amendments during the debate to limit the increase in the deductibles and those failed because that seemed like a way to bring down the cost of the plans.  But when you have very high deductibles, people end up not really getting services because they can’t afford  the outpatient care to get up to the level of the deductible.  So that’s been another problem.

David Harlow:  Right.  There’s some research that has shown that people who could use the combination of high-deductible health plans and health savings accounts the most are the people who don’t use them.  They aren’t able to put the money away or are unwilling to pay those first dollar expenses for services that would be helpful, maybe preventive services.  So that does seem to be a problem.

Rep. Balser:  Right.  But I will tell a story if you’re interesting in a role I played that I’m actually particularly proud of which is when the process first began, and we were talking about how to get to universal coverage, of course different people had different ideas.  Just like now we’re going to have different ideas about how to manage the cost.  Then we had different ideas about how to provide access.

Governor Romney at the time, released his bill first.  One of the sentences in his bill was that all new health plans created under his plan would be exempt from all the current state mandates.  And so in other words, he wanted to insure people by creating what I would call cheaper and less adequate health plans because they would be exempt from the mandates.

I was particularly concerned about the mental health and substance abuse mandates but there was a whole list -- I think there’s more than 20 mandates that over time have passed.  You know, that the legislature at one point or another felt it was important that all health plans be required to cover these different aspects of healthcare.  So there was this little sentence in his bill that would have set all these new plans could be created that would really result in people being under-insured.

So I was watching for this and the Senate then came out with their plan and it had the same language in it.  And then the House and it goes to the House and the House came out with a plan that initially had that same sentence in it which I was watching for.  I was chairing the mental health and substance abuse committee at the time and I was watching for this issue because I wanted to make sure that the insurance would be comprehensive and include good mental health and substance abuse coverage.

So when I saw that same language was being mirrored, I filed an amendment in the House to remove it and to say that any new plan created under health reform would have to live up to the same mandates that all our previous plans had.  And that was quickly supported in the House.  The chairperson of the health care finance committee who was mainly overseeing this supported me in that.  Speaker DiMasi also very quickly supported it.  So the House went on record saying that if were going have universal health care, we wanted to make sure that health care would be comprehensive.

So in terms of your original point about the three-legged access, cost and quality, we were trying to deal with both access and quality.  And the House led the way on that saying if we’re going to cover everyone, it’s got to be comprehensive, quality insurance.  And the Senate then embraced it and Governor Romney did sign it that way.

David Harlow:  And now we’re facing a similar issue in the national front as some large employers and others are trying to find exceptions to allow for these mini-plans to be seen as adequate under the national rules.  So the conversation continues.

Rep. Balser:  Right.  You know it’s tough.  It’s always tempting I guess for people to cut cost by reducing quality.  What we were trying to say around that issue was we got to try to cut the cost through perhaps market reforms or changes in the way you know, payment reform but not in terms of reducing quality.

David Harlow:  As you said, that remains front and center and that’s the next set of issues to be addressed here.

Rep. Balser:  Right.

David Harlow:  Well thank you very much.  I’ve been speaking with Representative Ruth Balser, state legislator in Massachusetts on the question of health reform and the Massachusetts experience and what we can hope to see in the future in Massachusetts and on the national stage.  Thank you again Representative Balser.

Rep. Balser:  Thank you.  Bye now.

September 27, 2010

Massachusetts health care payment plan gets renewed attention: Global payments to replace fee for service?

Federal health reform and Massachusetts health reform may find a point of convergence in the development of ACOs (accountable care organizations) and the payment mechanisms that will make them tick (or hum, or do whatever it is that we want them to do).  The Federales will be holding a listening session next week on the issues raised by ACOs across the HHS and FTC landscapes.  Meanwhile, back in Boston, the inner circle of health care regulators and the regulated community are busy hashing out an approach to global payments that could be ready for prime time by January 1.

The need for payment reform in Massachusetts has been well-documented -- see the health care market report from the AG's office, as well as an earlier report on the imperative to keep insurance risk on insurers and place performance, or quality, risk on providers.  Now, this may be easier said than done, but we've got some of the best and brightest working away at the issue.

Unfortunately, the Massachusetts legislature blinked, and has not mandated the approach across the board -- at least not yet.  Initially, the global, or bundled, payment for episodes of health care approach is being tentatively applied to just a couple of types of episodes of care. (See Section 64 of Chapter 288 of the Acts of 2010 - the small group market reform legislation enacted this summer.)

This baby-steps approach, while better than nothing, is likely fueled at least in part by the inside baseball nature of the discussion: any change may produce losers -- or at least that's the way the zero-sum-game-players see it, and none of the folks at the table wants to be a loser.  On the bright side, it seems that MassHealth (Massachusetts Medicaid) may be heading in this direction sooner rather than later, which may end up dragging other payors along as well.

Implementing global payments for episodes of care will go a long way towards incentivizing providers to join together in ACOs -- not only for purposes of qualifying for an as-yet-to-be-defined CMS demo project, but also for purposes of improving outcomes, and improving financial performance for all providers involved.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

March 17, 2010

Massachusetts health care cost trends hearings yield data, stir heated debate

MAHospSpendPP The Massachusetts Division of Health Care Finance and Policy and the Attorney General's Office are holding three days of hearings this week on health care cost trends.  You may wish to get up to speed by taking a look at the HealthBlawger's earlier review of preliminary reports on Massachusetts health care cost trends and positioning by key participants.  There is a comprehensive collection of preliminary reports and testimony on the Commonwealth's website.

Tuesday's Boston Globe reported that Harvard Pilgrim Health Care (one of the Big Three not-for-profit insurers here) released hospital payment data confirming what the AG's office had previously reported (and what has been widely surmised or known for years) -- namely, that certain hospitals get paid substantially more for the same services and results as are provided by other hospitals, based on their market power -- whether that is based on "brand-name" status of certain downtown teaching hospitals, or local geographic market power of relatively isolated providers.  The AG's final report (press release with link to report) confirms this bottom line.

Update 3/19/10: See Paul Levy's post on the hearings at Running a Hospital.

Local iconoclasts Alan Sager and Deborah Socolar, Directors of the Health Reform Program at the Boston University School of Public Health presented their health care cost trends report as well, and see the Commonwealth as heading over a cliff.  (The graphic reproduced above is drawn from this report.)  The Massachusetts Hospital Association questioned the conclusions they've drawn from the data presented.

The former CEO of Harvard Pilgrim, Charlie Baker, is Gov. Patrick's GOP challenger; as I've noted before, Patrick is seeking to re-regulate rates (while Charlie was instrumental in their deregulation).  Tim Cahill, running as an independent, has attacked the Massachusetts health reform law; the Globe, in an editorial, castigated him for his invective, calling it "irresponsible demagoguery" in the face of some rather serious problems:  

  • Health costs in 2006 equaled 17 percent of the nation’s median family income. A manageable 7 percent in 1987, they will rise to up to 45 percent by 2016 under present trends.
  • Medicare costs in 2008 equaled 3.2 percent of gross domestic product. They will rise to 4.5 percent by 2020 and 7.3 percent by 2035, based on current trends.

These nightmarish projections at yesterday’s UMass hearing came from Len Nichols, health care economist at George Mason University. “We can’t afford business as usual,’’ he warned.

Let's hope that the Commonwealth can have the space to effectively work out cost control -- the second leg of the proverbial three-legged stool of health care reform.  

In any event, health wonks around these parts will be glued to their screens Thursday and Friday, as these hearings are being livestreamed.  Folks elsewhere in the country may also find this instructive, given the close relationship between the Massachusetts approach and the approach to health insurance reform found in the Congressional bills now under consideration.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

February 14, 2010

Massachusetts Health Reform: Is Back-to-the-Future Rate Regulation the Way to Lead the Nation Right Now?

The Massachusetts health reform law, Part II - enacted in 2008 - laid the groundwork for cost control and quality improvement, as a follow-on to the initial legislation's emphasis on achieving near-universal coverage.  The legislation authorized several studies -- including a report published a few months back on global payment strategies -- and set the stage for hearings on health care cost containment to be held before the state Division of Health Care Finance and Policy (DHCFP), which are scheduled to begin March 16, 2010.

Update 2/18/10: Paul Levy posted a series of questions DHCFP would like hospitals to answer at the hearings at Running a Hospital. 

In anticipation of these hearings, and as required by the law, the Attorney General's office released a report on health care cost trends and cost drivers on January 29.  While the names of providers and payors are not included in this report, it provides a fascinating level of detail regarding what we already knew, or at least suspected: some providers are paid as much as twice as much as others for the same services, with no correlation to improved quality or outcomes.  The AG's summary conclusions in full:

[O]ur preliminary review has revealed serious system-wide failings in the commercial health care marketplace which, if unaddressed, imperil access to affordable, quality health care. In brief, our investigation has shown:

A. Prices paid by health insurance companies to hospitals and physician groups vary significantly within the same geographic area and amongst providers offering similar levels of service.

B. Price variations are not correlated to (1) quality of care, (2) the sickness or complexity of the population being served, (3) the extent to which a provider is responsible for caring for a large portion of patients on Medicare or Medicaid, or (4) whether a provider is an academic teaching or research facility. Moreover, (5) price variations are not adequately explained by differences in hospital costs of delivering similar services at similar facilities.

C. Price variations are correlated to market leverage as measured by the relative market position of the hospital or provider group compared with other hospitals or provider groups within a geographic region or within a group of academic medical centers.

D. Variation in total medical expenses on a per member per month basis is not correlated to the methodology used to pay for health care, with total medical expenses sometimes higher for globally paid providers than for providers paid on a fee-for-service basis.

E. Price increases, not increases in utilization, caused most of the increases in health care costs during the past few years in Massachusetts.

F. The commercial health care marketplace has been distorted by contracting practices that reinforce and perpetuate disparities in pricing.

This report is well worth reading, and it is well-illustrated with clear charts.  While the detail is welcome, many have criticized the AG's office for leaving out identifying information, and for coming to the party a year after the Boston Globe reported on some of the same issues.

At the end of last week, DHCFP released a series of three reports on health care cost trends as well.  The DHCFP reports are summarized here; they really serve to describe the baseline facts on the ground and explore trends form 2006 through 2008.  Here's the summary of key findings:

    * The Commonwealth's health care system is a key employer and driver of economic growth for the region. However, personal health spending per capita is higher in Massachusetts relative to the nation and continues to rise.

    * Some characteristics of the Massachusetts health care marketplace that may be contributing to the high levels of cost growth, include:
          o High concentration of physicians (especially specialists);
          o Greater availability and use of academic medical centers for both inpatient and outpatient hospital based-services, and use of outpatient hospital-based facilities for some services that could be provided in less costly settings;
          o Richer health insurance benefits compared to the nation; and
          o Use of payment methods that are not designed to incentivize efficiency and coordination of medical care.

    * Most of a health insurance premium goes toward spending on health care services as opposed to administrative and other non-medical services. On average, in Massachusetts more than 88% of premiums are spent on health care expenses (compared to less than 84% nationally).

    * Average monthly health insurance premiums increased 12% from 2006 to 2008.  If employers and individuals had purchased comparable benefits each year, the growth in premiums would have been larger.

    * Premium trends, benefit levels, and trends in health care spending vary across different-sized employer groups.  Small group premiums were higher and grew faster on average than mid-size and large group premiums, when adjusted for differences in benefits, demographics and location.   

    * Health care spending in the Commonwealth increased 7.5% per year from 2006 through 2008, a growth rate that is higher than the nation.  The increased spending can be attributed to several factors:

          o Price was an important factor contributing to rising health care spending across all service types.
          o One area of particular concern (and opportunity) is the variation in prices, which was typically greater for facility charges than professional charges.
          o In addition to price increases, care is being provided in more expensive settings over time—more inpatient care is being provided in academic medical centers and there is a decline in the provision of care at stand-alone outpatient facilities.   Much of the growth in outpatient hospital care occurred at academic medical centers located in the metro Boston area.

Again: no surprise here -- Massachusetts health care costs are higher than national averages, and are growing at an unsustainable rate.

The challenge before Massachusetts policymakers is clear:  They need to put together these puzzle pieces of data, learn from the past, model potential solutions, and plan for the future.  Even the national mainstream media acknowledges that, in the face of health reform meltdown, doing nothing is not an option.  (Where were they six months ago?)

In the midst of this challenge, Governor Deval Patrick seems to be distracted by health reform's implications for his political future.  Instead of waiting for a reasoned outcome of the deliberative process set in motion two years ago (well, as reasoned as possible, given the heavy-duty political and economic interests at stake here), he has leapt into the fray with what looks like an ill-conceived bit of political grandstanding: a bill that would give the state insurance commissioner the authority to cap health care price increases.  The Boston Globe reports:
Rates hospitals and other health providers charge insurers would be “presumptively disapproved as excessive’’ if they increased faster than the level of medical inflation, and they could be rejected after a public hearing.

Similarly, for health insurance plans sold to employers with 50 or fewer workers, premium increases that exceed one and a half times the level of medical inflation would be considered excessive and could be turned down.

The legislation would also impose a two-year moratorium on lawmakers’ mandating any new health benefits that must be covered by insurance plans, a practice that employers have said drives up their health insurance premiums. Small businesses have been hit with double-digit rate increases in recent years.
This proposal brings us back to the future here in Massachusetts:  Twenty years ago, Patrick's presumptive GOP challenger in the fall, Charlie Baker (who, thanks to some of his views being out of step with GOP orthodoxy, will likely draw many of the significant number of independent voters in Massachusetts, as well as some Democrats), was largely responsible for the dismantling of the Massachusetts health care rate setting system during his tenure in budget and health policy roles in the Weld administration.  (In fact, some of us who have been around long enough still refer to DHCFP as "the agency formerly known as Rate Setting.")  (As a second aside: For those of you tuning in from afar, Baker's most recent position was CEO of Harvard Pilgrim Health Care, one of the three dominant payors in the Commonwealth.)   Is Patrick trying to stake out a position in opposition to Baker's legacy?  What constituency is going to buy into this vision of the future?  Other local observers have also questioned the wisdom of this approach, including fellow health policy bloggers Evan Falchuck and Paul Levy.  (Taking a cue from Paul's musings on blogger disclosure in connection with this issue, I'll just say that as a life-long registered Democrat, I have voted for a Republican maybe just once.) 

Deregulation was successful twenty years ago because we were collectively convinced that payors could do a better job of holding providers' feet to the fire.  We later framed this in terms of holding providers accountable, and have employed a variety of tools over time to try and make this private-sector arrangement work: capitation, discounted fee-for-service payments, quality incentives, global payments, etc., etc.  Patrick's proposal is one version of the general acknowledgment that the market approach has essentially failed. 

Instead of going back to the future, Governor Patrick ought to let the health reform process play out.  The legislature should hold the Governor's bill pending the DHCFP hearings and the subsequent deliberations that will -- we hope -- yield a more data-driven and sustainable approach to the problem of health care costs and quality. 

And who knows?  The national debate may continue to be informed by what comes out of Massachusetts.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

December 30, 2009

Health reform unconstitutional? Get over it.

Once again, constitutional challenges to health reform have captured the attention of the daily newspapers.  A few months back, it was a couple of Bush I alumni rolling out the conservative/libertarian line in the Washington Post.  (Not everyone was convinced.)  This week, GOP opponents to health reform are sending smoke signals about a possible legal challenge to the health reform legislation now headed to conference committee in Congress.

While folks may differ on the policy questions before Congress, it seems clear that the legislation in its present form may not be derailed by a claim of unconstitutionality of the individual mandate.

The health insurance mandate contained in the health reform legislation would easily survive an attack based on the Commerce Clause of the U.S. Constitution.  Due to the limited powers granted by the States to the Federal government, Federal laws affecting economic activity may only be adopted if they regulate interstate commerce.  Such a challenge on health reform, then, would have to be based on the contention that the Federal government lacks the authority to regulate the delivery or financing of health care services because health care is neither “economic activity” nor an activity touching on interstate commerce.  Given the development of Commerce Clause jurisprudence in the U.S. Supreme Court, it is too late in the day to assert that health care services – even though they may be provided locally – do not involve interstate commerce.  To suggest that health care, a $2.4 trillion dollar a year sector of the U.S. economy, which brings goods and services crosstown and cross-country, involves only local commerce and/or “non-economic activity” strains credulity.

Next, the argument has been made that Congress cannot tax what it cannot otherwise regulate, with the corollary being that a financial penalty associated with a decision not to purchase health insurance may not be imposed.  While the basic proposition – that Congress may not tax what it cannot otherwise regulate – may have merit, the fact of the matter is that Congressional authority under the Commerce Clause is extremely broad; thus, there is indeed little that it cannot regulate and, therefore, tax.  Many other sectors of the economy are constitutionally regulated and taxed; even if the individual mandate's penalty provisions were found to constitute a tax, they would be permissible under the U.S. Supreme Court’s expansive reading of the Commerce Clause.

Health reform insurance mandates may not be challenged as a bill of attainder, violating individual rights by imposing penalties without trial.  Opponents of the law characterize the monetary penalty that may be imposed on those who fail to purchase health insurance policies as being similar to a government seizure of paychecks of Communists employed by the federal government in the 1940s – a legislative act overturned in the courts as a bill of attainder.  However, the last major case to construe the bill of attainder provision found that a law requiring then-former President Nixon to maintain his Presidential papers did not violate the provision, since the law advanced a legitimate legislative purpose – preservation of his papers after he had approved a destruction schedule and before he had established a Presidential library – and was directed at the proper class of persons being regulated (in that case, a class of one).  The legitimate legislative purpose in the case of health reform is the anticipated improvement to the health care status of the public, and the cost savings associated with primary and preventive care and anticipated system efficiencies; the class of persons being regulated is, appropriately, folks who would otherwise be uninsured, or those responsible for arranging for their insurance. In sum, the promotion of universal health insurance coverage by financial incentives and disincentives pass constitutional muster as a rational set of rules designed to improve and streamline a significant sector of our economy.

Is the legislation perfect?  No.  Is it constitutional?  Yes.  It would be more productive at this point to engage in honest debate about relative merits of the House and Senate bills and focus on the conference committee's work, to start keeping files on what will need to be tweaked in a year or two, and to prepare (providers, especially) for implementation of health reform.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

November 18, 2009

An ounce of prevention

SmokinggraphToday's Boston Globe reports on a feature of the Massachusetts universal health care law that may be replicated at the national level: MassHealth -- the Massachusetts Medicaid program -- has been covering the costs for smoking cessation counseling and medications for eligible enrollees.

Using the data available, researchers were able to associate the roll-out of these services with a significant drop in smoking rates -- a drop not seen among the small percentage of Bay Staters who remain uninsured.

Not only that, but there are cost savings involved.  Fewer health care services are required by nonsmokers -- notably, less asthma and heart attack related services.

Thanks to aggressive promotion of the services through a variety of channels, 40% of eligible smokers enrolled, as opposed to the 5-10% that the program anticipated.

The success of this program had previously been announced by the Commonwealth in June.

Bottom line from the Globe:

Although the study being released today does not assess whether the stop-smoking campaign reduced health care costs overall, the findings led some advocates to call on the state to make all health plans - public and private - provide cessation programs with low co-pays and deductibles.

As health reform is further debated at the national level, we need to focus on the investments that may be made in the nation's health that will yield monetary as well as quality returns, and this initiative is certainly one that is worthy of closer examination.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

July 29, 2009

David Harlow quoted in US News & World Report health care reform story

The saga continues in our nation's capital, and Kent Garber of US News &World Report provided a roundup of the current state of health care reform this Tuesday -- encompassing the positions of the President, the Blue Dogs, the CBO, Speaker Pelosi, Sen. Baucus, and a raft of other Congressional committee leaders -- as the deadlines for legislative action are extended further and further out.  We discussed the issues last week, and he quoted me briefly in his article.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

July 09, 2009

Large molecules, biosimilars, patent protection, and the cost of health care reform

As may be expected, interested parties are hard at work in our nation's capital lobbying key health care committee members and their staffs.  Today I want to share a small window into this usually closed-off world, informed in part by a conference call with a handful of bloggers yesterday, hosted by Jim Greenwood, President of BIO, the biotech industry association.

"Large molecule" biotech compounds used as next generation drugs for a whole range of diseases and conditions do not get the same sort of patent protection as "small molecule" drugs.  Small molecule drugs start the patent and FDA new drug application (NDA) process at the same time, with the usual effect that FDA approval for a new drug comes about 7 years after an initial application, thus giving the patent holder about 12 or 13 years of patent-protected time on the market before generic manufacturers can horn in.  Large molecules are not patented directly; the processes by which they are generated are.  Thus, a competitor may develop a means to generate a "biosimilar" -- a large molecule that has the same therapeutic effect as the original, even though its production and chemical formulation are not identical -- and market it without infringing on the innovator's patent.  The key to being able to do so is the ability to rely on the innovator's study data as part of its NDA.  The key to the innovator's ability to have the market to itself for the equivalent of the term of a patent in the small molecule world is a period of "data exclusivity" (when others can't use its data for their own applications regarding biosimilars) equal to the effective term of patent protection: 12 or 13 years.

Greenwood said yesterday that Peter Orszag and Nancy-Ann Min DeParle have suggested that 7 years' data exclusivity should be sufficient, and that the FTC opposes any data exclusivity.  Legislation filed in the last session supported by BIO would have provided 12 years of data exclusivity.  The Senate HELP bill provides for 9 years of data exclusivity, with the opportunity to get a 3-year extension in the case of a novel use for the product. 

While the arguments made by industry are reasonable, the issue must be placed in context.  Drugs and biologics, while undeniably a key component of our current health care system, have contributed greatly to the runaway cost inflation we have seen.  The proposed 21.5% cut to the Medicare Physician Fee Schedule -- the prospect of which horrifies not only physicians, but those of us who may ever want to obtain physician services in the future -- may be tempered by carving out physician-office-administered medications, which include some of the large molecule compounds at issue (an $87.5B line item, over 10 years).  Taking this expense out of the physician pot means it has to be dropped back in somewhere else; I mention this because it's an issue at the forefront of the debate, and the price tag (which is not the whole price tag for drugs and biologics) is a big number, which has the attention of policymakers.  The total annual cost of biologics has been pegged at $60B.  While the industry rightfully wants large molecule protection equivalent to small molecule protection, the public and the government are rightfully concerned about the ultimate cost of such protection, and are seeking an appropriate balance.

The lobbying on this and many other provisions continues in the Senate HELP Committee and other committees.  Many compromises lie ahead.

Update 7/16/09:  The Senate HELP Committee bill was reported out with 12 years of protection.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting