5 observations at the end of the HPC’s Altman years

Newcomer Devaux should narrow focus of legislative asks

THE ”ALTMAN YEARS” came to an end at the last meeting of the Health Policy Commission when chairman Stuart Altman, a professor at Brandeis, stepped down after 10 years at the helm. The meeting raised five interesting issues for me.

Sad to see Stu go: Altman’s departure wasn’t a surprise given his 10 years on the job, some health challenges in recent years, and even staying in the role for nearly two years since his last appointed term expired. Why Gov. Charlie Baker decided to make this move now in the middle of the summer is not clear, but it seems to check all the boxes. It gives Altman’s replacement Deb Devaux six months in the job before the next governor takes over and the state’s health policy leaders start to change. Given Devaux’s substantive strengths – a strong professional background at Blue Cross Blue Shield of Massachusetts and Beth Israel Lahey and middle-of-the-road policy views on government involvement in the health care sector — this decision is likely also a welcome one for the next governor, who is now relieved of dealing with any sort of lobbying effort tied to decision-making about whom to pick as chair.

Challenges remain: I used to tease Stu a bit when I joined the commission with him in 2012. As our leader, I would tell him, you brought 40 years of failed cost control experience at both the federal and state levels to your role as chair. He took the ribbing in stride, but felt the commission was largely a success story.

If you listen to the podcast last November where John McDonough and I interviewed Stu,  you will hear him claim great success for the agency in leading the way in reducing the growth in Massachusetts health care spending to less than the national average and keeping cumulative per capita health care spending to less than the annual state benchmarks.

Altman also talked with great pride about the incredible choice of David Seltz as the commission’s director. Seltz also recruited an exceptional staff with talents in data production and policy analysis that for sure make it one of the top performing government agencies in the nation.

While that is all true, if you step back a bit and look at some of the continuing challenges to health care affordability, a more neutral observer would not be so declarative about the successes in Massachusetts. In fact, there are a lot of continuing challenges that remain fundamentally untouched by efforts to date, including health care affordability, particularly for low-income people; significant price variation in rates paid to providers, which drives a good amount of our above-average state spending; a shortage of behaviorial health care; continued reliance on fee for service payments; and an ongoing need to financially bail out struggling community hospitals.

Overall, however, I give Altman and the commission of which I was once a member a lot of credit. If I have any critique of Altman and/or the commission, it is that at the start they seemed reluctant to be more affirmative in making specific policy recommendations to the Legislature. Now that reluctance has disappeared and the commission has likely gone too far in the other direction, churning out a long laundry list of asks that could easily leave a legislator overwhelmed by the sheer number and still not knowing what the commission believes are the top priorities.

Early challenges for Devaux: She should focus on narrowing the commission’s focus to two or three issues and work hard to see to it the agency and the people aligned with it can in some collective way lobby to help bring these key legislative enactments over the finish line.  I fear from the last meeting of the commission that the fall cost trends meeting is headed like previous ones—a lot of talk without it leading to a lot of action. Devaux would be smart to focus on making these three areas key priorities for legislative action in the next year:

  • A revised review and approval process for all market expansions such that higher priced health care systems have a much more difficult burden to demonstrate that their proposed project will advance key state goals.
  • A revised performance improvement plan process that not only can be directed at hospitals with high attributed total medical expense but comes with much bigger financial penalties if spending grows beyond measured targets.
  • The passage of some sort of revenue cap (via global budgets or price caps or both) which will serve to bring better pay equity to our providers in a way that both checks the growth in overall state health care spending and creates less need to annually bailout a group of providers with state subsidies.

To capitate or not: I found the “sky is falling in” discussion led by Commissioner Chris Kryder and supported by Don Berwick thought provoking. They argued that capitation is the only way to save the hospital market and health system overall from collapsing amid a loss of investment income, increases in provider costs, and rising inflation. Kryder, however, seemed to have no faith in government’s ability to regulate health care – either fee for service or, presumably, capitation as well.

Altman was skeptical. He noted that government in the 1970s succeeded in constraining both prices and spending until Ronald Reagan took over as president. He also didn’t view capitation as a panacea, noting some health care providers went bankrupt in the 1990s and consumers soured on the idea when reduced access to care became essential to reducing spending.

I favor more full-risk capitation, but I also think that government oversight is essential to make it work. Government needs to help make sure that capitated payment doesn’t simply just bake in old fee-for-service overpayments for some providers or create rules that make it harder for specialists to avoid participation. Ideally, capitation under government guidance could support a system where more health care facilities are paid global budgets, doctors receive salaries or are paid risk-adjusted monthly per-patient payments, and specialists could be paid by a system of contact capitation.

Perhaps one way to advance capitation and make health plans more accountable would be to pass a law that says private insurers face a financial penalty if they pay out more than 10 percent of their medical spend on a fee-for-service basis. Putting direct pressure on the insurer as a way to then force them to tell providers that activity-based payment cannot be the primary method of contractual reimbursement for privately insured patients is one way to get us closer to the Kryder-Berwick endpoint—while also incorporating b Altman’s view that government may need to play a role.

Last December, when I described my state health policy wishes for 2022, I noted how all of the forces were starting to line up for a very significant increase in health care spending over these next few years. Kryder and Berwick are right to worry—and the next governor may well be forced early on to have to deal with both huge increases in Medicaid spending as well as businesses and individuals throwing up their hands facing double digit health insurance premium increases.

What’s doing with Mass General Brigham? Missing from the meeting—though no surprise—was any discussion of the details of a revised performance improvement plan to rein in costs at the state’s largest hospital system. I doubt we’ll see any movement on that front until the Legislature closes up shop for the year. My guess is Mass General Brigham is digging in its heels, so why not wait until lawmakers go home before the negotiations go public.

There’s also a concern that Mass General Brigham has inflation escalator clauses in its commercial contracts with at least one state insurer and possibly others that provide the hospital system with additional rate increases if inflation exceeds a specified target. The escalator clauses would be like adding gasoline to a fire, with spending likely growing well above the benchmark from utilization and price increases that are already well above levels granted just a year or two ago.

Any performance improvement plan should require Mass General Brigham to forego enforcing any of those clauses for at least a few years. That could yield substantial savings that we desperately need right now and show that Mass General Brigham is serious about its claim that it wants to be part of the solution and not the largest part of the problem.

Paul Hattis is a fellow at the Lown Institute.