Mass. health reform has many shortcomings

The effort, entering phase 2, is misguided

THE AMERICAN PEOPLE were surprised to discover that the Affordable Care Act (ACA) deprived some patients of their health plans and their physicians, despite government promises to the contrary. We have also learned that health insurance premiums will rise sharply, in part related to certain mandated services and in part related to expiring government subsidies to insurance companies in 2017. Additionally, there will be a substantial new excise tax in 2018 for more comprehensive (so called “Cadillac”) health plans affecting millions of Americans. These revelations, four years after passage of the ACA, suggest that the legislation was inadequately vetted and understood by the Congress and the American people.

A similar lack of transparency and understanding surrounds Massachusetts statute Chapter 224, which is equally transformative of healthcare for citizens of our Commonwealth. Recent discovery that a provision of chapter 224 would result in the loss of license to practice for thousands of Massachusetts physicians (rescued by subsequent regulation), asymmetric burdens of regulation upon small accountable care organizations, and rapidly increasing costs of a complex bureaucratic structure suggest a similar failure to vet or understand chapter 224, which was passed in 2012. What other unintended consequences await discovery?

Despite its agreeable name, Chapter 224, An Act Providing Access to Affordable, Quality, Accountable Healthcare, aims to limit costs by non-market-based fiat, placing an arbitrary limit on the growth of health costs based upon the growth of the gross state product. This is essentially a planned-economy technique applied to the medical care industry.

The bill established a Health Planning Council to create a five-year plan for the healthcare industry, specifying that the state “shall include the location, distribution, and nature of all healthcare resources in the Commonwealth… make recommendations for the appropriate supply and distribution of resources, programs, capacities, technologies, and services…and options for implementing such recommendations.”

Chapter 224 requires 25 new planning or advisory entities, each with its own budget and ostensibly created to reduce costs and consider quality. They all require funds to hire experts, staff, and/or outside consultants to gather data, analyze, and make recommendations to be reported to the Legislature.

Surcharges on hospitals, provider groups, and insurers will fund most of the budgets of these new entities; however, any shortfalls may be recouped with requests to the Legislature. It’s not clear that all of these costs have been estimated.

Also without estimates are the added costs to providers and insurers to gather data, analyze, and make reports to state boards. The costs of increasing information technology, accounting, data collection, and quality review departments will be substantial, but the law also prevents providers or insurers from recouping these costs by increasing premiums or fees. Finally, it’s not clear whether some or all of the provider expenses required for reporting will be included as medical care expenses in determining total health care costs.

The move to limit the growth of costs is aimed at eliminating fee-for-service compensation, considered the primary cause of health care inflation. In its place, Chapter 224 directs implementation of alternative payment methodologies, primarily risk-bearing Accountable Care Organizations (ACOs), in which providers are subject to a predetermined fixed budget for the entire medical care of an insured population.

The state assumes this reversal of incentives for services will raise provider awareness of the cost of those services since exceeding budget due to increased medical services reduces compensation and, conversely, staying under budget may result in a provider bonus. The arrangement is framed in terms of increasing “value” in the system, where only the most “useful” services will be performed, an ill-defined criterion at best.

Despite the law’s statutory call for ACOs, savings attributed to them have yielded mixed results in voluntary pilot programs. In the first year of such programs under the ACA, there was a small 0.3 percent reduction in cost increase compared to a fee-for-service cohort. However, only 23 of the initial 32 Pioneer ACOs continued the program in its second year. Of the 32, 18 achieved below-budget spending (only 13 saved enough to receive a share of the savings), and 14 overspent the budget, (only two had statistically significant losses). It’s important to note that significant expenses in infrastructure to facilitate coordinated care were often not included in the costs. When considering all costs involved, a Health Affairs report in July 2013 concluded that the majority of Pioneer ACO’s most likely failed to break even financially.

The ACO approach ignores the most important driver of healthcare inflation: increased demand for medical services. This greater demand is due to no less than seven factors: (1) an aging population, (2) improving technology, (3) effective new medications, (4) increasing patient expectations, (5) defensive medicine secondary to medical liability concern, (6) more unhealthy lifestyle choices, and (7) more patients with the chronic diseases of aging which can only be managed and not cured.

Examples of cost drivers are numerous: improved quality of life from the increase in surgical implants of artificial knees and hips; better therapies that reduce mortality from heart disease and stroke; new cures of malignancies from drugs and bone marrow transplantations; new cures for certain infectious diseases. These are only a few examples of hundreds.

The survival of younger patients with life-threatening illnesses also facilitates older age, when those same patients may develop and require management for congestive heart failure, arthritis, and progressive neurologic diseases. Additionally, advances in diagnostic imaging facilitate earlier diagnosis, treatment, and improved outcomes. Patients demand these advanced diagnostic and treatment modalities and deserve to receive them. To focus solely on compensation reform and eliminating fee-for-service will not significantly reduce costs when true cost drivers are ignored.

Unintended consequences accompanying such a change in market mechanisms may also result: patients may be excluded from specialized services and doctors under limited networks; access for the sickest patients may be in jeopardy when the predetermined fixed global budgets are not adjusted adequately to account for increased patient need; and a two-tiered system of medical care will develop when statutory limits are placed on expenditures for medical services. Finally, and most important, the reversal of incentives implied by fixed budgets for care through capitation methodologies challenges physician advocacy for patients, risking an erosion of trust between patients and caregivers.

We cannot ignore rising costs, but cost control should begin with a market-based approach that preserves the physician-patient relationship. Such a system would include six elements: (1) transparency of price and outcomes, (2) increased prices for minimally useful services, (3) transparency of provider utilization patterns coupled with decision support systems, (4) a match of the appropriately trained professional with the patient’s need, (5) economic incentives for health organizations to devise systems to facilitate better coordination between providers, and (6) incentives for patients to adopt healthy behaviors. Value-based insurance designs are based on some of these principles.

Despite the better understood and popular Massachusetts health reform bill of 2006, stage two of Massachusetts’s reform is simply misguided. Chapter 224 builds a planned healthcare system based upon the ultimate decisions of a 10-person council, one that might have benefitted from a requirement to have at least one physician member.

This law creates a bigger bureaucracy, arbitrarily limits total medical expenditures, increases costs to be borne by the health care system and taxpayers, and threatens a system of care known throughout the world for its quality and innovation. Most important, it challenges the critical advocacy and dedication of physicians for patients, the essential requirement for patient trust and the healing process.

Meet the Author

Joel Rubenstein

Clinical Professor of Medicine, Tufts University School of Medicine
As a new governor and Legislature begin to lead the Commonwealth, it is critical that they stay alert for the unintended consequences of Chapter 224. For just as the Affordable Care Act has its shortcomings, so, too, does our state reform, and it’s important that the Commonwealth and its leadership be prepared to offer remedies as they appear.

Dr. Joel Rubenstein is Clinical Professor of Medicine at Tufts University School of Medicine and retired Chief of Cardiology at Newton-Wellesley Hospital in Massachusetts.