Massachusetts on my mind

David Colby continues his summer reading series on health reform.

Hopefully, many of you are relaxing this month at one of the nation's real beaches. I'm spending most of August in the backyard, maybe with my feet in an inflatable pool.  While the closest I’ll get to Cape Cod is the potato chips I’m eating, Massachusetts is on my mind. I’m sure when President Obama arrives on Martha’s Vineyard later this month he’ll get plenty of advice from the locals on how Massachusetts managed to pass health reform and whether it’s working or not.

There’s a lot to be learned from Massachusetts – the first state to pass comprehensive health care reform and guarantee insurance coverage for all its residents. With that in mind, the following are a few select reports about what happened in Massachusetts (and how it happened… and why it happened … and what it means …) that offer particularly salient lessons:

How is reform affecting real people in the Commonwealth?
This overview of the aftermath of reform in the Bay State on affordability and access was authored principally by Sharon Long and published earlier this summer in Health Affairs. It shows that while coverage has expanded dramatically, cost controls and reforms of the health care delivery system must also be key parts of comprehensive reform efforts if they are to be successful. If you are on the beach read RWJF’s short summary or if you are in your backyard check out the article from Health Affairs. 

Massachusetts and the cost conundrum
Early this year, researchers John Holahan and Linda Blumberg prepared a compelling brief that summarizes the state’s reform accomplishments, addresses head-on questions about whether the costs will climb over the long run to unsustainable levels, and suggests several options for addressing long-term costs.

The employer fear factor
A number of concerns are being voiced in Washington about what would happen to employers and employer-sponsored insurance if reform passes.  Jon Gabel and his colleagues conducted a survey of the state’s employers to examine these issues.  Their report decisively debunks the theory that employers in Massachusetts would quit offering insurance (especially small employers and/or low-wage employees), therefore pushing them into new public programs they may also be eligible for.

The implementation playbook
John McDonough, one of the founding fathers of Massachusetts’ reforms, put this paper together last summer to provides a thorough overview of all that Massachusetts accomplished in the immediate months after legislation passed: establishing new coverage programs; merging small-group and nongroup insurance markets; creating an insurance "Connector;" determining affordability and penalty standards for an individual mandate; and launching employer responsibility requirements. If and when national reform passes, these lessons on implementation will be just as important as anything we’ve learned from Massachusetts on the policy side.

Useful research and good reading for beaches and backyards alike. Find out why there is much more happiness with health reform than in Red Sox Nation this summer. I hope you enjoy and learn from them. Until next week … stay cool!

Comments

[Thomas Cox PhD, RN]

"Global Payment" as the cure for health care (finance) system inefficiency is about on a par with deinstitutionalization to hostile communities being the cure for the wretched lives of public mental hospital patients in the 1960s.

Why is it that people mean "CAPITATION" but do not want to use that word? So instead we have euphemisms for capitation: "Global Payment," "Bundled Services," Diagnosis Related Groups."

It is because the underlying mechanism - shifting the burden of managing health insurance risks to health care providers is exactly the same and everybody ought to have figured out by now that it is the mechanism and not what it is called that is fundamentally unsound.

There is neither any theoretical or practical proof that the capitation mechanism works.

In fact, "Professional Caregiver Insurance Risk" explains exactly why shifting health insurance risks to health care providers increases inefficiency in both the health care finance and health care delivery systems.

It is not really a very difficult concept to grasp:

Small insurers manage insurance risks less efficiently than large insurers.

Organizations that transfer insurance risks to health care providers are relatively BIG.

Health care providers accepting and attempting to manage health insurance risks are relatively SMALL.

BIG = Efficient risk management

SMALL = Inefficient risk management

QED

Thomas Cox PhD RN

[Garrett Martin]

David Colby’s recent blogpost contemplates Massachusetts’ experience with health reform. While much attention has been given to Massachusetts' experience and potential lessons for national reform, there has been little mention of an earlier attempt at comprehensive reform by Maine starting in 2003. With this in mind, the Maine Center for Economic Policy recently released a report entitled “National Health Reform: Lessons from Maine” available at http://www.mecep.org/view.asp?news=517. Maine’s efforts, like Massachusetts', reveal a mix of successes and shortcomings that have great potential to inform the current national debate. Some of the key lessons for federal policymakers include:

- States can’t go it alone
- A public option can work
- Payment reform is critical
- Efforts to water down comprehensive reform must be resisted

These lessons stem from Maine’s experiences developing and implementing comprehensive reform. Along the way insufficient funding, removal of measures aimed at cost containment, placement of the public option in private hands, and persistent negative attacks all but assured that the reform measures would fall short of expectations. Still, the successes are notable and include significant reductions in the number of people without insurance, documented savings of over $160 million as a result of voluntary cost containment measures and coverage expansions, and a marked decline in insurance premium growth rates. Interestingly, while Maine and Massachusetts approached reform in very different ways, at the end of the day the need for payment reform and greater cost containment to support affordability and coverage expansions has proven critical (and elusive).

A one page summary of the report can be found at http://www.mecep.org/documents/NationalReform-Lessons-InBrief.pdf and an editorial about this report that appeared in the Sun Journal, one of the state’s largest newspapers, is available at http://www.mecep.org/news_detail.asp?news=525.

Garrett Boo Martin, Economic Policy Analyst
Maine Center for Economic Policy
P.O. Box 437, 66 Winthrop Street
Augusta, ME 04332
(207) 622-7381

[David Harlow]

Tom: I think you should take a closer look at the Massachusetts proposal on global payment (I'm happy to call it "good" capitation, though many shy away from the term entirely because of its somewhat toxic historical connotations). It's linked to in my post, trackbacked above. By no means is the proposal intended to shift insurance risk to providers, which was a practice that seems to be at the core of your (and others') objections to "bad" capitation.

[Thomas Cox PhD, RN]

Hi David,

Nice to chat.

Actually I have read the relevant sections.

Both the per episode and global payment strategies attempt to fix the price to be given to providers for what is actually an uncertain cost.

The uncertainty involved can be broken down in many ways but the assumption that there is a "performance risk" and an "insurance risk," that one is distinct from the other, that there are no interaction effects, and that in any given individual case it is clear which is which, is the problem. Unfortunately, this is the old villain capitation, draped in new clothes. The clothes look great, the purulent cadaver inside looks no better than before.

"Performance risk", to the degree that it is even under a provider's control might have to do with something like pre- and post-CABG care. Get Mr. Jones up and walking 24 hours after the CABG and you are likely to have more success, a shorter recovery time, fewer complications, lower costs, and higher patient satisfaction...

But if Mr. Jones is also diabetic, a couch potato, has 5 other health issues that impinge on his, and his provider's, abilities to get Mr. Jones up - the vast ocean between "insurance risk" and "performance risk" suddenly evaporates and we have a tangled jumble of both.

Whose fault is it that Mr. Jones doesn't quite match the characteristics of an ideal "performance risk" patient? Mr. Jones? Provider? Insurer?

More to the point - who is it that eats the costs for Mr. Jones' extra week in the hospital post-CABG? Mr. Jones? The provider? The Insurer?

So, if you put providers in the position of getting a flat fee for a collection of care, even the dumbest provider will soon learn that the approach to take, because of the fragmented nature of the system, and the subtle mathematics involved, is to aim at the average level of care as though it were the ceiling.

There is actually a very simple mathematical explanation for why providers ought to do this and why providers will do this even if they do not understand the mathematics. Sadly, to quote Fermat: "Cuius rei demonstrationem mirabilem sane detexi. Hanc marginis exiguitas non caperet."

The problem here is that it often takes years or decades to train insurance personnel to respect the rights of claimants to receive the benefits they are owed. This, by the way, is why the National Association of Insurance Commissioners has a model act for abusive practices in claims settlement that had, when last I checked, been implemented in 47 states.

So here we are, shifting the responsibility for managing what are clearly uncertain economic outcomes to providers, in return for flat payments, telling providers that they are not those evil insurers, and then we wonder why they do not act like ethical insurers and honor the claims that are larger than average?

If, and the analysis I have done suggests that this is inappropriate no matter what it is called, you are going to pay providers a flat amount for a collection of care services whether per episode, or per span of time, we ought to examine the implications, as I have in my work on "Professional Caregiver Insurance Risk."

Regardless of the presumed source ("Performance risk" or "Insurance risk") of the between patient variability in costs, it is still variability. Some providers will do well, some will not, some patients will get all the care they need, and some will not.

Randomness plays a far greater role than people like to acknowledge. Life is so much easier if we fantasize that providers face less risk than insurers when the reality is that providers face more risk than insurers in such mechanisms...

Oddly enough, whether you call it "Performance risk" or "Insurance risk" you can still do the same type of risk theoretic and financial analysis and you will still come up with the same answer - risk management by providers is less efficient than risk management by larger entities.

As a footnote, if uncertain financial outcomes are going to be transferred to, and accepted by, providers we should at least have some language for describing the roles of providers as managers of clinical outcomes and "Performance risk". Here, I think that the general public can understand "Insurer risk" much more easily than the contrived expression "Performance risk."

For example, when Mr. Jones came in for his pre-surgical consult, how does Mr. Jones' surgical and recovery team explain to Mr. Jones that they are being paid a flat fee and if his recovery takes less than the average time they will be happier than they will be if his recovery takes longer than the average time.

Since Mr. Jones is going to be feeling like hell four days after his CABG, when Mr. Smith is already home completing his recovery, and the "Team" is now trying to figure out how to get Mr. Jones off their hands, out of their hospital, into some nursing home, or out on the street, because he has already "used up" more than his "average stay", shouldn't this have been something Mr. Jones was advised about before he gave his informed consent?

Mr. Jones did not consent to being pawned off on a nursing home when his recovery team got fed up because he was taking too long to recover, did he?

Certainly this is a foreseeable event, is it not? Does not "informed consent" require an explanation to Mr. Jones, that on day 5,6,7,8 he is going to be getting the bum's rush, before he signs the informed consent form?

Nice thought though and definitely a stimulating...