Massachusetts’ Pioneering Healthcare Reform Offers Early Look at What New Jersey May Face

Andrew Kitchenman | March 18, 2013 | Health Care
Six-year struggle to contain rising medical costs demonstrates unified front is key to success

Massachusetts Governor Deval Patrick
What does Massachusetts have to teach New Jersey? Plenty — at least when it comes to health reform.

The Bay State was the first in the country to require residents to have health insurance. Its experience offers a number of lessons to the Garden State. Chief among them: government, health, and business leaders need to work together to contain healthcare costs.

Under former Gov. Mitt Romney in 2006, Massachusetts instituted several of the key features of the Affordable Care Act, four years before the federal law was enacted. These included a mandate for every resident to purchase insurance, as well as public subsidies for low- to middle-income individuals and families to buy coverage.

Today, only 2 percent to 3 percent of the state’s population lacks health insurance.

And with the entire country struggling to hold the line on healthcare costs, Massachusetts has gotten an early jump on this potentially divisive issue, according to officials who spoke to a gathering of healthcare reporters in Boston March 14 to 17.

Still, it took until 2012, six years after the state’s first healthcare law was passed, for the government to tackle the politically vexing issue of trying to contain costs.

Current Massachusetts Gov. Deval Patrick told the Association of Health Care Journalists that rising costs led to a second healthcare reform law.

This measure encouraged accountable care organizations (ACOs), a network of doctors, hospitals, and other healthcare providers that work together to coordinate quality care for the patients they serve. ACOs are compensated for how well they perform and keep costs down, rather than for each service they provide (as with the conventional medical model).

The cost-containment bill also caps the rise of future healthcare costs to the increase in the size of the state’s economy, projected to be 3.6 percent in 2013 and 2014.

Pulling Together

Patrick said state, healthcare, business, and labor leaders continued to work together after the initial law was passed, which ultimately allowed the state to pass the cost-containment legislation.

“They stuck together to implement it and I think that’s especially important, because they realized that this was too big an undertaking to simply pass legislation and then expect that things would work on automatic pilot,” Patrick said.

He added, “I am confident that just as we showed the way for the nation in universal care, Massachusetts will be the place that cracks the code on cost containment.”

Nevertheless, Massachusetts may not be all that far ahead of New Jersey when it comes to ACOs, which several of the state’s insurers are adding at a steady clip. And with the additional pressure on costs from increased access when the ACA goes into effect in January 2014, New Jersey may soon follow Massachusetts in a massive adoption of the ACO model.

Andrew Dreyfus, president and chief executive officer of Blue Cross Blue Shield of Massachusetts,
said his company successfully signed ACO-style agreements with most of the company’s primary care providers, rising from 1,373 in 2009 to 5,136 in 2013.

In addition, 328,000 of the company’s 689,000 managed-care customers are now covered by ACOs. Dreyfus said there are early signs that the approach is successful at providing improved-quality care while slowing cost growth.

“They physicians themselves are seeing a difference,” Dreyfus said.

According to Tim Ferris, vice president of Massachusetts General Hospital and Partners HealthCare, “It will be physicians that will convince other physicians to do this.”

Across-the-Board Cuts

David Seltz, a Massachusetts state healthcare regulator, said increases in health insurance-related costs have led to state budget cuts in every other area of government. This has created an urgent need to contain cost increases.

“We knew that the double-digit cost growth wasn’t going to be sustainable,” said Seltz, executive director of the Massachusetts Health Policy Commission. He added that addressing costs has been much more politically difficult than expanding access.

Gov. Chris Christie’s decision to expand Medicaid eligibility was supported by several Massachusetts healthcare players, including Massachusetts Institute of Technology economist Jonathan Gruber, who said that it was “just insane” that states like Texas are turning down federal funding to increase Medicaid.

Gruber, an adviser to crafters of both the Massachusetts and federal laws, pointed to estimates indicating that private insurance rates are expected to rise between 5 percent and 15 percent in states that don’t expand Medicaid, because more low-income residents will be enrolling in private plans rather than low-cost Medicaid.

Gruber also said that having the state government support efforts to reach out to uninsured residents will be crucial in reducing the number of uninsured. He noted that the 2 percent to 3 percent of the Massachusetts population without insurance tend to be residents whose incomes are so low that they’re not penalized for going without coverage.

“There needs to be a constant drumbeat of recognition that this is an important population,” Gruber said, adding that research has found that these residents frequently enroll in Medicaid because other family members have joined.

While larger firms pretty much signed on to the law signed by Romney, advocates of smaller businesses were the one group that seemed displeased with how healthcare reform has been implemented in Massachusetts, which may bode ill for small businesses in New Jersey.

Jon B. Hurst, president of the Retailers Association of Massachusetts, said his group was neutral on the 2006 law but has opposed several increases in state insurance mandates since the initial law was enacted.

“That’s where the trouble began,” Hurst said of the later mandates.

Hurst said one effect of the Massachusetts reforms has been to sharply increase the cost of insurance to small employers, whose employees are now included in the same risk pool — the group of residents whose total risk is used to calculate insurance rates – as residents who buy individual health insurance.

The problem is that individual purchasers tend to have worse-than-average health, which has driven up the rates of small businesses. Since larger businesses are typically self-insured and thus aren’t affected by most state insurance regulations, it’s created an uneven playing field for small businesses that are struggling to offer competitive insurance packages.

New Jersey hospitals, particularly those with a high concentration of low-income residents, may face some of the same challenges as their Massachusetts counterparts at meeting demand. Kate Walsh, president and CEO of Boston Medical Center, New England’s largest safety-net hospital, said that expanding the number of low-income residents with insurance has put a new emphasis on managing costs.

“If we don’t manage carefully the access for all, we’re going to bankrupt the country,” Walsh said. Her hospital — which relies more than most on Medicare and Medicaid, recently cut a variety of costs by consolidating multiple emergency departments in one location, freezing salaries for two years, and renegotiating union benefits.