Key Takeaways from the 2021 Massachusetts Health Policy Commission Cost Trends Hearing
This Wednesday, November 17th, the Massachusetts Health Policy Commission (HPC) held its Annual Health Care Cost Trends Hearing to explore challenges and opportunities to address the state’s rising health care costs. Each year, the HPC engages a cross-section of stakeholders from across the industry for lively discussions about the state’s performance against the cost growth benchmark, a benchmark the HPC sets for the state in an effort to contain annual growth in health care spending.
A Look at Cost Growth: What Has Changed?
While Massachusetts saw slower cost growth relative to the rest of the nation in the years following the implementation of the HPC’s cost growth benchmark, this trend has since reversed. In the HPC’s recent 2021 Cost Trends Report, they report that Massachusetts experienced cost growth in excess of 4% for the past four years, surpassing the cost growth benchmark of 3.1%. This represents a downturn after earlier success: with the oversight of the HPC, Massachusetts saw health care cost growth lower than the national average each year between 2010 and 2018. However, this promising trend has tapered off; Massachusetts is now once again in line with national trends in cost growth.
A Turning Point for the HPC:
Much of the discussion from the Cost Trends Hearing this week suggests that the HPC has outgrown its mandate of containing state health care spending growth, and will require new authority to build upon its earlier successes.
Many participants remarked that 2021 is an inflection point for the HPC, and for the Massachusetts health care industry more broadly. Several HPC Commissioners shared the sentiment that new tools will be needed to strengthen the HPC’s ability to contain cost growth in new ways.
The HPC’s authority is limited in several ways, some of which were highlighted during this week’s Cost Trends Hearing:
The HPC has the authority to require high-cost payers to submit to Performance Improvement Plans, or PIPs - but to date, PIPs have never been activated.
On Wednesday, Andrew Dreyfus, President and CEO of Blue Cross Blue Shield of Massachusetts was critical of the HPC’s tools that have been left untouched, including the Performance Improvement Plan (PIP) process. The Performance Improvement Plan is intended to hold high cost payers and primary care providers accountable to taking corrective steps. However, it has never been activated - PIPs are not being utilized to their full potential as an accountability measure.
The HPC’s authority does not include oversight of hospitals.
Despite being a major cost driver for the state, hospitals do not fall within the HPC’s authority - meaning, they cannot be required to comply with the PIP process. Andrew Dreyfus of BCBS highlighted the fact that primary care providers, who are subject to PIPs, are accountable for primary care spending, which most participants agreed is an important area for investment. Hospitals, on the other hand, do not face the threat of PIPs - and perhaps they should.
The HPC lacks enforcement authority - meaning it can offer carrots, but does not wield sticks.
While the HPC is empowered to set the cost growth benchmark and monitor performance, it lacks the power to enforce penalties for high cost payers and providers that exceed the benchmark.
The HPC is also facing external challenges from the market and the health care industry, including:
Change will take a substantial commitment from all in the health care industry, but this commitment is being called into question.
After a panel with hospital executives, Commissioner Don Berwick reflected on a perceived lack of commitment from the participants to addressing total cost of care. He noted that “the will to change the system is not within the system.” Most panelists disagreed with or questioned the price cap solution option proposed in Harvard Professor Leemore Dafny’s presentation. They cited the precarious state that hospitals are in during the COVID-19 pandemic and inability to withstand further change in the system.
COVID has contributed to significant workforce challenges, which are a barrier to the change the HPC hopes to see.
Mass General Brigham (MGB) and Beth Israel Lahey Health (BILH), the largest provider organizations in the Commonwealth, noted that workforce shortages have interfered with their ability to provide care, especially behavioral health care. MGB called for collaboration with the State to implement solutions, and several commissioners, including Tim Foley and Marty Cohen, agreed that careful consideration will need to be given to how the workforce crisis should be addressed.
In light of the pandemic, inflation is projected to sustain across sectors - including health care.
HPC Commissioner and Harvard health economist David Cutler noted that the cost growth benchmark was “not meant to be immune from inflation.” Based on current economic trends, Cutler suggested that the HPC consider using their authority to reexamine the benchmark in order to account for inflation, setting a goal for spending growth that recognizes financial realities.
Getting Massachusetts Health Care Spending Back on Track
In light of these limitations and environmental factors, what can be done to put Massachusetts back on the path to controlling health care cost growth? Several potential solutions were recommended or alluded to during the Hearing - a few stood out as most promising.
Strengthening and broadening the HPC’s mandate to provide the “teeth” needed to mitigate cost growth.
EOHHS Secretary Marylou Sudders noted in her final remarks that now, nine years after Chapter 224 of the Acts of 2012 created the HPC, it may be time to look at “how to realign incentives around affordability.” The HPC can track cost growth, but needs a way to enforce cost containment strategies. Commissioner Don Berwick called for “increased authority to look at outliers” in spending growth.
The HPC may also benefit from wider reaching authority - such as including hospitals in the PIP process. Panelists called out pharmaceutical spending, a major driver of spending, as an area that could benefit from HPC oversight. Another panelist suggested that the HPC could have input into the Determination of Need process. These proposed areas for oversight, none of which are currently within the HPC’s purview, could help the HPC reach into new corners of the health care industry to contain costs in novel ways.
One example the state could look to is Maryland’s Global Budget Revenue methodology, which has been successful in controlling costs by setting fixed hospital budgets. This model provides both carrots and sticks - we will dig further into this model in a future blog post.
Investing in the workforce to stabilize an immediate crisis that detracts from collaborative efforts towards affordability.
In order to make significant long-term strides towards controlling health care spending growth, Massachusetts will have to balance the need to address the immediate workforce crisis with the need for a sustained focus on affordability. Many panelists agreed that workforce is a barrier to innovate in the cost containment space, and the two should be addressed in tandem.
Implementing cost containment efforts, like price caps, that control spending without limiting important investment.
In her keynote presentation, Professor Leemore Dafny cited several examples of states, including RI, DL, MT, OR, WA, CO and NV, that have successfully contained costs by capping prices or spending growth. She presented a simulation of price caps nationally, resulting in cost savings in each scenario. When asked by Commissioner Stuart Altman’s about her confidence level in this type of policy solution, she expressed strong confidence - 9 out of 10 - that price caps could be an effective solution for Massachusetts.
Many panelists raised concerns about the approach Dafny presented, while Dr. Charles Anderson, President and CEO of the Dimock Center was in full support of hospital price caps. A few called for special consideration for lower cost, higher value providers and payers. This could take the form of increased Medicaid reimbursements and further investment in behavioral health and primary care integration.
Dispel the false choice of affordability or health equity.
The second panel of the day was devoted to a discussion about health equity. Many panelists and commissioners reiterated the need to focus on health equity as well as affordability, as the two go hand in hand.
For instance, some raised the idea of ACO global budgets lending flexibility for spending on health related social needs as a means to make care more affordable while addressing disparities. Amy Rosenthal, Executive Director of Health Care for All, recommends including a consumer spending benchmark, which considers all patient out of pocket costs. All agreed that a continued focus on health equity is a critical component of all cost containment measures.
We look forward to discussing the topic of health equity and consumer-minded cost control further in a future blog post.
Further investigating downside risk as a potential cost mitigation strategy.
Commissioners Berwick and Cutler both raised the need for stronger incentives to bend the cost curve. Commissioner Stuart Altman and Secretary Sudders pointed to the MassHealth ACO capitated model as an example of successful cost containment innovation, one that may work for the private sector as well.
Thank you to everyone at the Health Policy Commission, as well as the panelists and speakers, who made this great discussion possible. For those who missed the hearings, you can access the recordings here. We look forward to seeing what comes of these conversations, and how they can serve to improve care access and affordability in Massachusetts.