Business groups raise concerns about health bills

Say assessments will hike costs, not address underlying problems

MASSACHUSETTS BUSINESS LEADERS on Thursday raised concerns about legislative efforts to provide financial support to struggling community hospitals, saying the measures will drive up costs and could destabilize the state’s health care industry.

A letter from seven groups, including Associated Industries of Massachusetts and the Retailers Association of Massachusetts, indicated businesses were growing tired of the Legislature’s penchant for quick fixes without addressing the underlying cost problems in Medicaid and the broader health care industry.

“Establishing an assessment or setting a statutory floor with no corresponding mechanism to offset any new spending is exactly the wrong approach to deal with our state’s high health care costs, and will only exacerbate our distinction as having among the highest costs in the country,” the groups said in a letter.

James Rooney of the Greater Boston Chamber of Commerce raised similar concerns about one-time assessments to help community hospitals. “Such assessments create a temporary revenue infusion that acts only as a stop-gap that will require the state to have a repeat conversation on sustaining community hospitals and lower-paid providers within just a few years,” he said.

The letters addressed House and Senate health care bill that are currently in a conference committee, where negotiators from the two branches are attempting to resolve their differences.

 Letter from seven business groups

 The following letter was sent to House Speaker Robert DeLeo and Senate President Harriette Chandler by officials from the Retailers Association of Massachusetts, Associated Industries of Massachusetts, the Massachusetts Association of Health Plans, the Massachusetts Association of Health Underwriters, the Small Business Service Bureau, the National Federation of Independent Business, and NFP Health.

On behalf of a broad-based group of employer organizations that represent thousands of businesses providing high-quality health care to their employees and statewide groups representing insurance brokers, we are writing to share our concerns relative to the recent health care bills that have passed the House and Senate and are now in conference committee.

Many of the groups represented here agreed to support our state’s health reform efforts during 2006 —that reform promised to lower the cost of health care for employers and consumers. Just last year, many of these same groups agreed to a temporary Employer Medical Assistance Contribution (“EMAC”) as a way to begin to constrain escalating costs in MassHealth. It was our belief that the House and Senate would take up Medicaid reforms in this health care cost control bill as a way to curb Medicaid cost growth and make the employer assessment unnecessary. We are greatly disappointed that, not only are there no significant MassHealth reforms to speak of in either the House or Senate bill, but that both bills will actually raise costs if either were to become law in their current forms.

While Massachusetts has stemmed the growth in health care spending due to our state’s health care cost benchmark, we still have the highest health care costs in the nation, second only to Alaska. These high costs are directly attributable, according to state reports, to hospital and physician costs. Establishing an assessment or setting a statutory rate floor with no corresponding mechanism to offset any new spending is exactly the wrong approach to deal with our state’s high health care costs, and will only exacerbate our distinction as having among the highest costs in the country. While each bill has some positive aspects, we are writing about several key provisions we find so problematic, due to their increased costs for employers and consumers and their potential to destabilize the health care sector, that they greatly outweigh any beneficial provisions contained in the bills.

Despite language prohibiting health plans from passing the House assessment through to members, the Division of Insurance has a statutory obligation to ensure that premium rates for each year accurately reflect the cost of doing business in the Commonwealth. Further, costs as a result of higher rates for hospitals below .9 RP, as included in the Senate bill, will be reflected in the premiums charged to Massachusetts members. As a result, either scheme designed to impose hospital financial exposure on health plans will increase premiums for consumers in the state, largely small business owners and their employees.

Issues of concern include:

House Assessment for Community Hospitals:

The House proposes to establish a new $330 million assessment to fund community hospitals. This assessment would be paid by health insurance carriers and highly reimbursed hospitals. The assessment is split with the carriers paying two-thirds and the highly reimbursed hospitals paying one-third. Both hospitals and carriers are prevented from passing these assessments on in rates to employers and consumers through “no pass-through” provisions. The practical impact of the assessment on local, not- for-profit carriers is to largely destabilize this sector in favor of legislatively mandated community hospital rate increases—this burdens one important sector in favor of another important sector and does nothing to close the gap between the highest and lowest paid providers, or make for a more competitive marketplace.

Local carrier financials over the past several years demonstrate that most of our local plans are operating on either razor thin margins or at a deficit due to instability in the market resulting from changes to the Affordable Care Act and the emergence of costly new drugs and technologies. For the most part, the assessment called for in the House bill would wipe out any surplus held by Massachusetts carriers, generally less than 1% if any exists, and for most carriers would cut into their reserve levels. Reserves are statutorily required by state law and are established to meet unanticipated claims obligations. In the past, when the state faced insolvency of carriers, those reserves were critical for our employer members and their employees so that they could continue to receive coverage and care, and hospitals and physicians could have their claims paid. Just last year, a local carrier was declared insolvent, highlighting the volatility in the marketplace. The decision by the federal government last week to suspend risk adjustment transfer payments is the most recent example of an unforeseen policy change that will further erode the financial performance of some of the plans. Reserves are important protections and should not be used to fund unrelated obligations.

The House’s approach to fund approximately 26 community hospitals without regard for their affiliation status with systems, their management, quality of care, or patient satisfaction is equally troubling. It will only exacerbate the problems that have plagued us for years, and will do nothing to solve the price variation problem identified in state reports. To further illustrate the flaws of the House proposal, of the 26 hospitals that have the potential to receive funds, the vast majority are aligned with some of the most financially secure systems in the state. It is our belief that if these systems are negotiating contracts on behalf of their member hospitals, then it is up to the system to apportion the money fairly, ensure that hospitals meet a certain threshold relative price, and make certain that these additional costs are not passed on to the business community.

Likewise, we have spent the past several years talking about paying for value and quality outcomes through alternative payment methods, and recently more than 20 business groups have joined with the Health Policy Commission to bring system-wide change and savings by identifying several areas where significant cost savings can be achieved through delivery system transformation. Our initial effort will focus on Emergency Department overuse. The House bill distributes money to any hospital that meets certain demographic criteria, rather than rewarding quality improvement, patient satisfaction, or delivery system reform—this mechanism for funds distribution seems counter to every policy goal we have been working to achieve, and is a step back from the 2012 Community Hospital Acceleration, Revitalization and Transformation Investment (“CHART”) Program that tied community hospital grants to measureable goals. Under the House proposal, hospitals are awarded funds with no promise to work towards transformation—they are simply awarded funds if they receive lower reimbursements.

We oppose assessments on carriers, with or without “no pass-through” language, and as such we strongly oppose the House approach and ask that it remain in conference.

Senate Approach to Address Provider Price Variation:

The Senate sets a statutory rate floor for providers, requiring that carriers bring hospital rates up to 90% of statewide relative price. The Senate then sets an overall growth cap for hospitals tied to the Medicare market basket, this year pegged at 2.7%. The Senate provisions further require that if one hospital gets an increase, all hospitals get an increase, and tie penalties for hospitals to at least the top three hospitals that contribute to cost growth. The Senate proposal is inflationary as the statewide relative price will move upward year after year, and according to a recent analysis would increase costs by $265 million+ in new spending beginning in year three and beyond.

We have previously shared our collective position that if the legislature wishes to establish a rate floor, there must be a rate ceiling so that any rate increases coming from the establishment of a rate floor are fully offset by rate decreases from the highest paid providers so that health care costs do not increase for employers and their employees.

We have articulated, individually and collectively, a set of principles should the Legislature wish to establish a rate floor. These principles include:

 Any effort to address price variation between low and high paid hospitals must not increase overall health care spending for employers and consumers;

 Any adoption of a rate floor for providers must include a rate ceiling;

 Any effort to address provider price variation must not jeopardize the state’s cost growth benchmark;

 We oppose assessments on employers or carriers to pay for new health care spending, including rate floors.

Given these reasons, we oppose the Senate provisions and ask that they not be reported out of conference unless the provisions are amended to meet the principles outlined above.

Research as a Justifiable Factor for Variation:

We have strong concerns with the inclusion of “research” as a justifiable factor for provider price variation. We believe that this factor should be removed, as it contradicts the almost-unanimous view of the Special Commission on Provider Price Variation findings that ”research” is, in fact, an unjustifiable factor.

The inclusion of “research” as a justifiable factor for variation is disappointing and could cost employers and consumers billions of dollars. As the Trump Administration seeks to withdraw federal funding for research, as it did in this year’s budget which was later restored by Congress, changing research to a justifiable factor could allow hospitals to look to employers to fund any shortfall in research dollars. This is precisely what happened in 1997, when the Balanced Budget Act passed. Massachusetts providers sought successfully to make up for the loss of federal funding through significantly higher rates with carriers. Those increases are built into rates, even today.

Research is a key driver of jobs and innovation, but it is a broad societal obligation and not one that should be the responsibility of Massachusetts’ employer community. This singular change – moving research from an unwarranted to warranted factor for provider price variation –- could be enormously costly to the business community, and that is why it was rejected by the Special Commission on Provider Price Variation.

We urge the conference committee to reject this provision.

Single Payor/Public Option:

The Senate bill contains a provision to allow employers to buy into the state’s Medicaid program as a way to theoretically lower employer health care costs. Additionally, the Senate added an amendment requiring the Center for Health Information and Analysis to evaluate moving to a single payor system, and should the analysis show that such a system would be less expensive than the existing care delivery system, the Health Policy Commission would be required to develop an implementation plan.

Massachusetts has successfully insured close to 98% of its residents through landmark universal health care legislation—this legislation was the model for the Affordable Care Act. Our challenge in health care is not to decide how to cover individuals, we have done that, but rather how to control costs so that coverage is more affordable for employers and consumers. As such, we oppose these provisions.

Likewise, we have stated our ongoing interest in reining in MassHealth spending and growth, and agreed to the EMAC assessment with the promise and belief that lawmakers would seriously work with us to rein in these costs in order to make the assessment unnecessary.

Today, MassHealth makes up 40% of our state budget and takes revenue away from other funding priorities such as transportation and education. By attempting to grow Medicaid by adding a public option we are likely to create:

 A deeper structural budget deficit that would require new revenue to support the program due to growth in MassHealth;

 Adverse selection in the MassHealth program, as it is likely that public option would attract unhealthy risk and unanticipated claims costs that would exacerbate the already soaring costs of the program;

 A loss of membership for our smaller not-for-profit health plans that could create substantial financial losses for them;

 Questions as to the viability of the state’s Health Connector if it lost substantial membership to MassHealth; and

 Substantial rate inadequacy for providers, many of whom are lobbying for an increase in commercial rates through the establishment of a rate floor today. This issue would be exacerbated if a large number of their patient population were reimbursed under Medicaid rates rather than commercial rates.

For the foregoing reasons, we oppose the single payor and public option provisions included in the Senate bill.

In closing, it is essential that any bill reported out of conference address and lower health care costs in a meaningful and measurable way. We cannot support any provisions that increase costs for our members, their employees, or our health plan partners as these costs will be passed on in higher rates.

We thank you for this opportunity to comment on the House and Senate bills and are happy to provide additional information should you need it.

Greater Boston Chamber of Commerce letter

The following letter from James Rooney, the president and CEO of the Greater Boston Chamber of Commerce, was sent to House Majority Leader Ronald Mariano; Reps. Jeffrey Roy and Randy Hunt; and Sens. James Welch, Jason Lewis, and Bruce Tarr.

On behalf of the Greater Boston Chamber of Commerce, I am writing to submit comments regarding H.4639, An Act establishing the Honorable Peter V. Kocot Act to enhance access to high quality, affordable and transparent healthcare in the Commonwealth, and S.2211, An Act Furthering health empowerment and affordability by leveraging transformative health care. We thank both the House and Senate for advancing the critical conversation around health care costs, access, and quality.

One of the Chamber’s guiding health care policy principles is that the state must strike a balance between supporting our cornerstone health care industry and ensuring that world-class care is accessible and affordable for residents, businesses, and the state budget and. With that view, we support provisions in the bill that will expand access to world-class care, create pathways for the industry to reduce costs, or do both. We oppose proposals that will add costs to the system or expand state oversight and intervention in ways that do not recognize the complexity of our state’s health care system.

Support: Provisions that will expand care and reduce costs include expanding telemedicine coverage, changing scope of services for certain providers, enhancing transparency for consumers, and adding the pharmaceutical industry to annual health cost trend hearings.


 The framework for embracing telemedicine in both bills will bring the delivery of medicine up to date with the latest technology to provide expanded access to medical professionals while reducing costs and maintaining quality care. Specifically, the Chamber supports ensuring access to telemedicine through coverage parity without mandating rate parity. Like other services, insurers and providers should have the flexibility to negotiate the appropriate rate for these services. Additionally, the adoption of innovative health care solutions like telemedicine will produce savings over time and allow providers and patients to manage their care better, which can reduce costs in the commercial and public markets in the long-term.

Provider Versatility and Expansion of Scope of Practice Authority

Expanding provider treatment authority and scope of practice for the class of providers, as included in S.2211, has two advantages: it would provide better access to lower cost health care providers which can generate savings for the state and the commercial market and, importantly, it would improve access to quality care. Although we prefer the Senate version, the House bill offers a reasonable alternative that lays out a process for evaluating the impact of scope of practice proposals prior to the Legislature voting on them.

Increased Transparency for Consumers and Policy Makers

There are provisions in each bill that will provide more information to both patients and policymakers. H.4639 will provide more transparency for consumers by creating a uniform method for the communication of information relating to the costs of health care plan products. Patient education is an important factor in helping consumers understand the costs of health care more clearly and contributes to informed decision making.

Additionally, by bringing the pharmaceutical industry into Health Policy Commission’s (HPC) cost trend hearings and requiring companies to report drug prices and data to the Center for Health Information and Analysis (CHIA), H.4639 and the original Senate bill S.2202 provide a balanced approach for enhanced industry oversight of pharmaceutical companies and pharmacy benefit managers. We also support the early notification requirements by pharmaceutical companies to assist the state in planning for drugs coming to market that may have a significant impact on state health care expenditures, as long as such notification does not interfere with federal regulations or laws related to the timing of drug approval announcements.

Despite our support for pharmaceutical industry oversight, the Chamber strongly opposes Senator Montigny’s amendment #19, which was adopted during Senate debate. We urge you to reject the Senate’s amended approach to pharmaceutical transparency and to adopt the comprehensive framework included in the original Senate bill and H.4639. Furthermore, there should be parameters on the assessments and fees that CHIA and HPC are allowed to impose on pharmaceutical companies to pay for the new regulation and oversight required. A reasonable standard should be imposed so there is a cap or limitation on how much can be assessed to avoid additional increases in the overall costs of health care.

Oppose: Provisions that would increase the overall costs of the state’s health care system and are an overreach of the state’s authority and oversight of the industry.

One-Time Assessments

There are serious fiscal challenges at community hospitals across the state, and addressing those challenges is important because they provide critical health care access and serve as major employers in their community. However, the one-time assessments on certain health care providers and health insurance plans included in H.4639 add costs to the health care system because insurers and providers will have to restore the reserves that they draw to fund the assessment. Such assessments, whether they occur once or are ongoing, do little to address the underlying policy issues, like payer mix, that contribute to financial distress at community hospitals. Rather, such assessments create a temporary revenue infusion that acts only as a stop-gap that will require the state to have a repeat conversation on sustaining community hospitals and lower-paid providers within just a few years.

Provider Price Variation and Expansion of State Oversight

The Senate’s proposal to create the Hospital Alignment Review Council (HARC) effectively regulates provider prices by limiting the annual growth rate, even if it does not impose an outright price cap. Redistributing health care spending with the option to eventually introduce price caps is too heavy-handed an approach for a nuanced health care system.

The House and Senate bills both greatly expand state oversight and authority, particularly as it pertains to price variation. Through the HARC created in the Senate bill, the Division of Insurance (DOI), and CHIA would have expanded authority, giving them significant influence on provider pricing and reimbursement. Separately, in H.4639, DOI would have broad authority to evaluate contracts and refer those it deems influenced by unwarranted factors to HPC. Evaluating contracts between providers and payers that are complex, tied to multi-year relationships, and influenced by myriad factors is both difficult and subjective. Furthermore, at present DOI does not have the capacity to do so.

It is also important to point out that any expansion of state oversight and authority comes with a price tag, and we must be conscious of what that means for overall increased costs to our health care system.

CHIA Top 50 Employer Report

The Chamber also opposes Section 45 of S.2211 that requires CHIA to report the 50 employers in the Commonwealth that have the highest number of employees accessing state health insurance subsidies. Information provided in this report does not reflect the entire context of a situation and can unfairly label employers—particularly businesses who employ a large number of employees. The purpose of this report, other than to shame employers, remains unclear and is not a good use of state resources.

MassHealth Reforms

Finally, since the health care assessment on employers was initially proposed in January 2017, the Chamber has advocated for examining and addressing the rising enrollment in and costs of the state’s MassHealth program. Health care spending accounts for 40 percent of the state’s budget, so it is critically important for the legislature to take a serious look at how we can contain costs within the state program. We ask that there be a continued focus on and analysis of state savings to address the ever-growing share of the budget dedicated to health care, particularly in the context of other critical public needs that are important to the region’s growth, like transportation.