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2012 Law & Public Policy

The state’s dilemma: Paying for universal health coverage

By Kate Moylan | Read as PDF.  In 2006, Massachusetts passed legislation mandating health coverage for nearly all residents. However, the cost of health care remains extremely high and threatens to wreck this major initiative of national importance.

There are two issues to consider. One is fairness insofar as different providers are paid differently for the same or similar service. The other is total cost. While efforts to ensure fairness are necessary as a short-term solution, the Legislature should focus its work on lowering overall costs.The 2006 legislation has achieved its goal of universal health coverage in Massachusetts. Coverage is at 98.1 percent for adults, 99.8 percent for children, and 99.6 percent for seniors. This is a great achievement. Nonetheless, controlling cost to pay for this coverage demands attention.

The majority of providers in Massachusetts currently are paid on a fee-for-service basis, which rewards physicians for delivering more tests, procedures and otherservices, but does not offer incentives to improve the quality of care. For example, the difference in payments made to the lowest- and highest-paid hospitals in one insurer’s network is more than 300 percent. This shows the fee-for-service model does not work.

Legislators have been working on a solution to contain cost from the beginning. But current reform efforts primarily focus on fairness, and do not address how to bring down the total cost of health care. Proposed legislation and recommendations from the Special Commission on Provider Price Reform take different approaches to “fairness.”

In September 2011, House Majority Leader Representative Ronald Mariano introduced the PEER Act, which would institute similar payments for similar services. The PEER Act would affect a limited number of hospitals and physician groups. It would divide Massachusetts into four geographic regions and try to lower payments to the highest-paid hospitals in each region while raising payments to the lowest-paid ones. However, savings are contingent on a no-exemptions approach.

In 2010 the Legislature established the Special Commission on Provider Price Reform to investigate rising cost in payment rates to providers. The Commission was a collaborative effort that included key stakeholders from the Legislature, medical field, private insurers, the academic world, and the state agency that would be in charge of implementing the new policy.

In November 2011, the Special Commission released its six recommendations, including long-term and short-term goals. One recommendation sought to establish a short-term process to ensure that prices correlate to quality, so as to reduce cost. It would establish an independent panel to arbitrate payment rates. It is only a temporary measure to control price variation, and could be terminated once acceptable payment factors are identified. This is a better option than the PEER Act because it brings both the payer and provider together and allows an independent panel to determine whether the requested price is fair.

However, controlling “fairness” does not guarantee lowering overall health care cost. Massachusetts should explore a new payment system, such as a global payment model. Global payments would shift the State’s health system away from its reliance on the wasteful fee-for-service approach to a lump sum payment on a per patient basis.

Global payment plans reward performance and focus on primary care. Global payment plans would encourage the creation of health care organizations made up of hospitals, physicians and other providers working together as a team and introduce accountability for quality and cost. The team would accept responsibility for all or most of the care that members need. The Special Commission recommendation and a global payment system could work together. Health care organizations could use panel-determined prices to establish reasonable global payments for quality care.

Kate Moylan is a 2013 graduate of Suffolk University Law School, with an interest in health law and litigation. She received her B.A. in History from Providence College in 2010. For the past six months, she has been interning for the Massachusetts legislature in the Senate Joint Committee on Health Care Finance and is particularly interested in health care policy.

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