Last week, we attended the seventh annual Health Care Cost Trends Hearing, a two-day event organized by the Massachusetts Health Policy Commission (HPC). These hearings shine the spotlight on the drivers of health care cost growth in Massachusetts. They also bring together stakeholders to figure out ways to improve the quality and affordability of care in the state.
The first key takeaway is that overall health spending growth from 2017-2018 hit the new benchmark level of 3.1%. This was helped in large part by the fact that Medicaid spending growth was only 0.4% during this time period. Nonetheless, Massachusetts still has some of the highest health care costs in the US, and the state’s growth rate still outpaces inflation and is higher than ideal. Consumers are still getting hit hard by prices—over the past two years, premiums and cost-sharing have increased at double the rate of wages and salaries. As a result, commissioners suggested later in the hearing that perhaps this cost growth benchmark should be more aggressive in the future.
For more key takeaways, see the highlights below. All of the hearing materials are available here.
Primary care is not only good for health, it also represents a wise investment. A presentation from the Milbank Memorial Fund highlighted how more primary care spending is associated with lower Emergency Department and Inpatient Utilization. Rhode Island was used as a case example to demonstrate the value of primary care, as their Office of the Health Insurance Commissioner required its insurers to increase primary care spending in 2010. This led to increased investment in primary care and dramatic improvement on nearly all measures of state health system quality, as measured by the Commonwealth Fund.
The discussion of primary and behavioral health care dovetailed with Governor Charlie Baker’s in-person appearance to advocate for his recently-introduced bill, which proposes a 30% increase in primary care and behavioral health spending, caps pharmaceutical price increases, restricts facility fees and limits surprise billing. It was lauded for attempting to redirect resources to primary care and behavioral health: currently only eight states spend less than Massachusetts on primary care. It’s interesting to note that the bill only requires a growth in expenditure, not necessarily utilization. In other words, providers can fulfill the requirement by increasing clinician pay instead of hiring more of them—an alternative solution to the problem which gets at the issue, also discussed on the panel, of primary care providers being compensated at half the rate they could get as a specialist.
A representative from a safety net health system provided the only criticism of the governor’s bill that we heard throughout the two days. The argument was that the provision requiring higher primary care and behavioral health payment would increase the payment disparity between primary care providers who take commercial insurance and those who rely mostly on public insurance, and that restricting facility fees would hurt safety net providers who need those fees to make up budget shortfalls.
Other state leaders addressed the importance of addressing behavioral health issues. Senate President Karen Spilka discussed behavioral health care and its critical importance in a state facing an opioid crisis. Kudos to her for breaking down behavioral health stigma barriers by talking about how her father and brother were both affected. Attorney General Maura Healey made an impassioned point that there are six-to-nine month wait times for children to see a behavioral health specialist in their school district—an eternity for a child with these urgent needs.
In addition to Governor Baker’s bill, some solutions offered during the hearings included better training of doctors and nurses for addressing behavioral health and giving mid-level practitioners more authority to prescribe.
There was a robust discussion of high health care system costs due to complexity, driven in part by fragmentation of the health care delivery system, which in turn leads to unnecessary care and poor outcomes stemming from a lack of coordination. In addition, our multi-payer system adds administrative complexity. Dr. Michael Apkon, CEO of Tufts Medical Center, made the point that when he worked in Canada, the hospital he ran spent $1.5 million per year on revenue cycle management, and now in the US system his hospital spends $50 million per year because each insurance contract comes with its own processes and requirements. One panelist also noted that credentialing his clinicians with different insurers added at least three months to a clinician onboarding, and in many cases over six months. Complexity is not only felt by health professionals though—consumers have a very difficult time getting a clear answer on simple questions like how much a health services costs, information that is easily obtained in any other industry.
Dr. Apkon made another interesting point about Canada regarding health care innovation: He stated that Canada is better at implementing “macro innovation” because the government controls much of the health care system. This has reduced complexity, and led to early adoption of telemedicine, as well as regional sharing of data among providers. On the other hand, “micro innovation,” which tends to grow from venture capital-funded startups is easier in the United States, where new ideas start out and can be tested on a smaller scale before expanding.
Reducing complexity was discussed as a reason behind health system consolidation. Consolidation can potentially allow care to be shifted to lower-cost settings and improve coordination within the system. However, it also leads to more market power and higher prices, which is why the Health Policy Commission tends to review health system mergers with a high degree of skepticism.
Similar to last year’s hearing, the rise of pharmaceutical prices were highlighted as a major problem and came under a great deal of scrutiny, although notably absent were any pharmaceutical manufacturers, which meant they weren’t asked to publicly address their high drug prices, and how those are driven by profits, compensation and marketing budgets. There was a great discussion regarding which entities in the supply chain, from the manufacturer to the pharmacy benefits managers (PBMs) to the insurers to the pharmacy, actually provide value and deserve compensation for their role. However, the system of opaque rebates and cost-shifting make it difficult to discern who is creating value and who is benefiting in this system, and by how much. A few suggestions were offered to ameliorate high drug prices. Someone suggested allowing pharmaceutical companies to adjust prices up or down during the patent exclusivity period. Other suggestions included figuring out ways to reduce the cost of clinical trials, and to share failed clinical trial data in a registry. Harvard Pilgrim CEO Michael Carson made an ambitious suggestion to simply cap pharma industry margins.
The Attorney General’s office followed up on a theme from last year’s cost trends hearing: the need for patient education to increase consumerism. An example of this is cost estimators that help consumers predict how much a service will cost, depending on where they receive it. These tools are offered by a number of payers but consumers have not gotten into the habit of using them: uptake of shopping tools is only about two to seven searches per 100 members.
The office also presented compelling data on insurance churn, showing that half of patients remained in the same plan for two years. During last year’s hearing, a number of panelists talked about strategies to increase the number of their patients in alternative payment contracts. These high churn numbers are concerning because not only do they make it difficult for consumers to understand their plans, but they also disrupt the incentives and can negate the intended effects of alternative payment models (this was the subject of a blog we wrote earlier this year). Further complicating alternative payment models are the various attribution methodologies used by payors, and a lack of policies to ensure that performance of value-based arrangements is measurable and thus improvable.
It was also troubling to see that 2.5% of inpatient expenditures have shifted from lower-priced hospitals to higher-priced hospitals over the last four years—a trend that has coincided with PPO plans growing in popularity. Getting patients to use providers in the community instead of hospitals was also discussed in a panel as an important way to ensure patients are triaged to the setting befitting their acuity, which can both lower costs and improve outcomes. And making common-sense changes to insurance plan designs to lead consumers towards addressing upstream costs needs a lot more work. There is a big opportunity for plan designers, especially employers, to make common-sense changes to keep people healthy, such as eliminating cost-sharing for diabetes management.
Where Do We Go From Here?
In the culminating moment of the hearing, the final panel was asked about what good news had been heard from the two days of testimony. The question was met with about ten seconds of deafening silence. Lots of very smart people have been discussing and trying to figure out the answers to these problems for many years. But very few solutions have had real tangible benefits for consumers and despite the best efforts of many, costs have continued their steady climb. The exasperated faces and closing remarks of the commissioners seemed to mirror the frustrations of American health care consumers who continue to pay more for less. But at least, as HPC Executive Director David Seltz put it, there was a collective willingness to get together, look at data, and try to figure things out to further consumer-driven goals.
It’s promising to see the state of Massachusetts catalyze some “macro-innovation” by using its government-funded programs, such as MassHealth, to drive changes in the payment and delivery system, through implementing Accountable Care Organizations. Another step that Massachusetts could take in the right direction would be to follow Rhode Island’s lead by investing a larger proportion of current health care spending in primary care, and go beyond that by investing more in behavioral health, as proposed in Governor Baker’s bill.