Health Officials: Cost Is Next Major Hurdle
Massachusetts health reform has been successful in increasing the number of insured residents in the commonwealth, top officials of the state's health care industry agree.
The next major challenge: controlling health care costs.
The Worcester Regional Research Bureau hosted a forum Monday morning at the Massachusetts College of Pharmacy and Health Sciences to discuss the landmark 2006 health care reform bill and its impacts. Panelists included Lynn Nicholas, president and CEO of the Massachusetts Hospital Association; Lora Pellegrini, president and CEO of the Massachusetts Association of Health Plans; and Glen Shor, executive director of the Commonwealth Health Insurance Connector. Eric Schultz, president and CEO of Harvard Pilgrim Health Care, moderated the discussion.
Changes Afoot
Nicholas, who represents hospitals across the commonwealth, said there is a "metamorphosis that is unprecedented" taking place in the state's health care industry. She said one problem is that government-sponsored health insurance is not paying its fair share of costs. Fifty-seven percent of care given by hospitals is paid for by the government, through Medicare, which covers the elderly, Medicaid, which covers the indigent, and other state-sponsored plans for veterans and retirees. But she said reimbursement rates from these programs do not cover the cost of care. Medicare, she said, pays roughly 92 cents of every dollar of care that is provided, while Medicaid covers 77 cents of every dollar of care. The remaining costs are made up by the hospitals.
"That difference has to be made up somewhere, and it's you, the business community, that help to pick up the tab," she said.
One solution, she said, is to get the costs down. There have already been steps in this direction, she noted. Last year, for example, there was an 83-percent drop in the growth of health care expenses, which equates to $3.4 billion in unspent medical costs. While this is partly driven by economic factors -people generally aren't seeking as much medical care in a slow economy - she said there are market drivers working as well.
Notably, there has been increased use of tiered or narrow-network health insurance options, which encourage consumers to use lower-cost hospitals and providers or have them pay extra for more expensive options.
Another change would be to shift away from a fee-for-service model in which hospitals are paid based on the amount of care that is provided, and instead move to a capitation, global payment system in which hospitals are paid a per-member, per-month amount when caring for a population.
Pellegrini, however, said the true driver of health care costs is the market clout that some hospitals and providers have. She referenced a study by the state Attorney General's office that made this point.
"We're not paying for quality, we're paying for name brand," she said.
Global payment systems alone, she warned, will not fix health care costs, but the solution has decreased the overall cost at some of the state's most expensive hospitals, she suggested.
Shor, who runs the quasi-public state Health Connector, a marketplace for individuals and small businesses to buy health insurance, said his organization will play a role in being a "shelf" to provide tiered health insurance plans and encourage use of global payment systems. Government entities can reward providers that are using innovative approaches to tackle health care expenses.
Pellegrini said after the new year she expects the state Legislature to issue a bill aimed at cost reduction measures, which could codify some of the ideas discussed at the forum.
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