Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
The Massachusetts legislature on July 31 passed a health care cost-containment bill that proponents say could save up to $200 billion over the next 15 years. Gov. Deval Patrick (D) is expected to sign it Aug. 6.
The legislation sets spending targets for providers in the state and assesses penalties if those targets are exceeded. The overall goal is to move away from a fee-for-service health care system to one where providers are paid based more on the health outcomes of their patients (HPW 5/14/12, p. 1).
The legislation will likely be a boon to accountable care organizations in the state, as well as the formation of alternate payment models, such the Blue Cross and Blue Shield of Massachusetts’ Alternative Quality Contract, a modified global payment model designed to encourage cost-effective, patient-centered care by paying participating physicians and hospitals for the quality, not the quantity, of the services they deliver (HPW 1/30/12, p. 8).
The law says that from 2013 through 2017, health spending should not rise more than the growth rate of the state’s gross state product (GSP). The annualized growth rate was 4.0% for the second quarter of 2012, according to the journal MassBenchmarks, published by the UMass Donahue Institute in collaboration with the Federal Reserve Bank of Boston. From 2018 through 2022, spending increases would be capped at one-half of a percentage point under the GSP.
If providers fail to meet those targets, they would have to develop a performance review plan and send it to a new state entity, known as the Health Policy Commission, for review. If they fail to implement the plan, a provider could face fines of up to $500,000.
The Massachusetts Association of Health Plans (MAHP) expressed satisfaction with the bill. In a prepared statement, MAHP President and CEO Lora Pellegrini said, “We are pleased that the bill includes measures to address the market power of certain providers and the prices they charge. Dealing with those issues is critical to the bill’s success by ensuring that price differences among providers are correlated to the quality, acuity and complexity of patient care and are not due to an institution’s or system’s size, brand recognition or geographic isolation.”
The Boston Globe on July 31 reported that medical spending in the state over the past few years has climbed to between 6% and 7% annually, compared with the state economy’s annual growth of about 3.7%. However, the newspaper said costs appear to be slowing due to the economic downturn.
View the text of the legislation at http://tinyurl.com/d2j3gza.
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