Key Themes and Insights from the 2018 Massachusetts Health Care Cost Trends Hearing
By Rosemarie Day & Emily Eibl
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Last week, the Massachusetts Health Policy Commission (HPC) hosted its 6th Annual Health Care Cost Trends Hearing. These hearings bring transparency to a whole new level: Massachusetts is one of the few states in the country to be systematically gathering data and shining a spotlight on all health care spending in the state. This year’s headline is that overall health care spending growth stayed well below the benchmark of 3.6% growth: health care spending growth was only 1.6% from 2016 to 2017. That said, there is still cause for concern, as described in our key themes below.
A compelling presentation by Harvard professor, Dr. Ashish Jha, demonstrated that when compared to other countries, the US does not have higher utilization rates but has higher costs for procedures, higher cost of pharmaceuticals, higher salaries of clinical staff, and higher administrative costs. The Attorney General’s office also presented very interesting data on the complexity of rate setting by payers in Massachusetts and extrapolated from national data that this complexity drives administrative costs of provider organizations and hospitals. Moving forward the Health Policy Commission board wants to further investigate administrative costs in Massachusetts and think about initiatives to address these high costs. There was also a lot of discussion in the hearing about considering price setting and total budget mechanisms as a way to cut cost growth.
Many panelists commented that they are trying to increase the number of risk-based contracts they have and believe these contracts will allow them to further push value-based care. This sentiment was bolstered by evidence presented by Dr. Ashish Jha showing that programs like accountable care organizations (ACOs) are successful at producing savings. While many panelists spoke about the promise of alternative payment models, many panelists also commented that it is difficult to fully embrace value-based care when incentives are not fully aligned. A mix of fee for service and value-based contracts leave providers in a difficult position as they are in financial arrangements with two different sets of incentives. In fact, the Health Policy Commission found that the growth of commercial alternative payment model (APM) contracts has flattened out, which is not a promising sign for overcoming the challenges of conflicting incentives. In addition to a mix of financial arrangements which inhibit aligned incentives, many contracts are value based on the surface but still fee for service at the individual provider level. MassHealth’s Medicaid ACO program generally operates in this manner. If these ACO programs had sub-capitated rates, providers would be better able to implement value-based care solutions at the provider level. While there is growth needed in the number of alternative payment model contracts and the composition of those contracts, there was broad consensus that alternative payment models are a move in the right direction.
Many of these alternative payment models and value-based care arrangements allow and incentivize providers to integrate behavioral health services and address social determinants of health. During the hearings, there were many promising efforts and models discussed by provider groups, such as East Boston Neighborhood Health Center which is implementing the Cherokee health model for behavioral health integration and South Shore Health System’s collaboration with schools, police department, EMS, behavioral health providers, and other community organizations. While there are pockets of promising efforts, many in Massachusetts still struggle with behavioral health integration and meaningfully impacting social determinants of health.
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One of the most promising pieces of news at the hearing was that cost growth from 2016 to 2017 was 1.6%, which was well below the benchmark of 3.6%. Some panelists highlighted that this is even a larger accomplishment when you consider all the new services provider organizations are investing in and providing to patients, such as care management and population health initiatives.
While the cost growth was lower last year than in previous years, affordability is still a major concern. The average small business premiums in Massachusetts are the second highest in the nation and nearly a third of total income for lower-income, commercially insured individuals is spent on health care costs.
Lack of patient education, knowledge, and availability of information was a theme repeated throughout the hearings. It creates a barrier for individuals to choose the best value insurance product based on their unique needs and the appropriate setting to seek care. This is leading individuals to choose high cost health insurance plans, to avoid community hospitals, and to go to the ER or urgent care when it is not necessary. All of these behaviors drive up costs for patients and the system as a whole.
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Pharmaceutical spending continues to grow at a higher rate than other spending categories in health care, especially for Medicaid. Addressing this issue is especially challenging because of the lack of transparency in pharmaceutical pricing.
While the lack of transparency and cost growth is worrisome, Trish Riley from the National Academy of State Health Policy (NASHP) shared some innovative solutions that states are using to try and address these issues, including transparency initiatives, Pharmacy Benefits Managers (PBM) regulation, pharmaceutical importation, prohibiting price gouging, rate setting, and volume purchasing. New York and Oklahoma were highlighted for their innovative Medicaid initiatives. New York sets a budget cap on pharmaceutical spending for Medicaid. If they go over budget, the state analyzes the highest cost drugs and then goes to the pharmaceutical companies to negotiate an additional rebate. Oklahoma Medicaid entered into three separate APMs directly with drug manufacturers. While some states have been somewhat successful in their efforts, they face considerable challenges, including legal challenges, and challenges getting the pharmaceutical industry to engage with the states.
The Health Policy Commission conducted an objective, data-driven cost impact analysis of mandated nurse staffing ratios and found that this initiative would cost an estimated $676 to $949 million. In addition to the cost implications, the opponents of the proposition argued that there is already a nursing shortage in the state and that this initiative would force hospitals, especially community and psychiatric hospitals to close because of the financial impact and staffing challenges. The proponents of the proposition argued based on somewhat inconclusive evidence from California’s effort to impose nursing staff ratios and their own projected outcomes that increased nursing staff ratios would make nursing conditions safer, increase nurse job satisfaction, and improve patient safety and outcomes.