Three years ago, the Commonwealth of Massachusetts enacted a far-reaching health reform law that politicians and the media hailed as a model for other states and the federal government. That law has become the major blueprint for health system change on a national scale, and its advocates, with Sen. Edward Kennedy at the top of the list, are aggressively marketing some variation of the Massachusetts plan as the reform of choice. Until recently, there has been little analysis of how the law has worked. This is the third in an occasional series of posts that will explore the Massachusetts law, with an eye toward helping the press and the public understand the flashpoints as legislation based on the Bay State’s experiment winds its way through Congress. The entire series is archived here.
At the tail end of last year, The Boston Globe published the best story on health policy I’ve seen since I began posting for Campaign Desk. The Globe’s Spotlight Team examined the reasons why health care costs so much in Massachusetts. In doing so, the team took on the state’s largest health insurer, Blue Cross Blue Shield, and the state’s medical powerhouse, Partners HealthCare, which runs two of the country’s premier teaching hospitals, Massachusetts General and Brigham and Women’s Hospital.
The Globe story, part of an ongoing series entitled “Unhealthy System,” disclosed how Blue Cross and Partners, the state’s largest private employer and its biggest health care provider, sealed a deal in 2000 that raised health insurance costs across the state. The agreement, which the Globe said was called a “market covenant” by Blue Cross, precipitated the financial troubles the state now faces in maintaining its ambitious health reform law that subsidizes insurance for families with incomes below $66,150. And it reveals the difficulties in containing medical costs when dominant players and their market power seem to set the market’s rules.
One could argue that Partners and Blue Cross gained their clout during the managed care heyday in the early 1990s, when HMOs squeezed doctors and hospitals to reduce costs. In retaliation, providers organized into large systems like Partners. The Globe found that Blue Cross raised “the rate it pays Partners by 75 percent since 2000,” and that Partners also pressured the state’s other big insurers to extend similarly large rate increases. The insurers passed the costs on to policyholders, hiking individual premiums by almost nine percent per year since the agreement was made—more than twice the annual rise in the late 1990s.
Massachusetts has the most expensive care in the country, partly because of expensive styles of medical practice that call for the use of costly high tech interventions. Boston University health policy expert Alan Sager told me health care spending was one-third higher than the national average in 2004, two years before the state enacted its law. “If we cover more people with no offsetting cost controls, we can expect Massachusetts health care to be even costlier than in 2004,” he said.
As more people gained insurance coverage and used it to obtain medical services (which was the point of the law), the care they received piled more costs onto the state’s already expensive system. It’s a simple mathematical proposition: more services lead to higher total expenditures. Jon Kingsdale, who heads the state’s Health Insurance Connector Authority, is blunt: “The cost of health care needs to be under control to sustain the individual mandate or the whole thing unravels. If costs continue to soar, the enforceability of the mandate is in jeopardy.”
Media outlets have delivered that message, but most stories stop short of careful analysis that would be useful as Congress crafts legislation that mirrors Massachusetts reform. (Yesterday, Sen. Edward Kennedy released his bill, containing elements of the Massachusetts plan.) The May issue of the AARP Bulletin told its millions of readers: “At stake ultimately is whether the Massachusetts reforms can survive if health care costs continue to rise unchecked.” But it didn’t offer any discussion of solutions. A shallow story on Marketplace attributed the “pricey” Massachusetts system partly to people who use emergency rooms when they can’t afford a doctor.
New York Times reporter Kevin Sack dug deeper, unearthing the roots of the dilemma: serious cost containment would cut the income of the formidable Massachusetts medical establishment. As Brandeis health policy professor Stuart Altman told the Times: “Really controlling costs requires just stopping spending.” In other words, what’s needed is a limit or cap on spending allocated to medical services. Nobody is talking about that, either in Massachusetts or nationally.