Massachusetts and the ACA: Cause and Effect

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By: Eric J. Beyer

The Supreme Court’s stunning 5-4 ruling upholding the 2010 Affordable Care Act means that the most comprehensive transformation of the US health care system since the creation of Medicaid and Medicare will remain largely intact. Since the ACA closely mirrored Massachusetts’ own groundbreaking health reform – and the Supreme Court decision would not have overturned our own law –   the logical question to be asked by Massachusetts residents and businesses is: What does the ACA’s preservation mean for us?

The answer: More than one might suspect.

To be sure, the ACA is structured around many of the features already in place in Massachusetts.  Individual health insurance mandate?  Check.  Health insurance exchanges to act as brokers for offering plans to businesses and individuals?  Check.  Financial penalties levied against residents who don’t buy coverage and businesses that don’t subsidize premiums? Check.

Despite the similarities, the federal act paves the way for significant changes in the Bay State, both in how the health insurance market will look in future years and how the flow of federal funds to the state will rise—and, significantly, fall—as many key facets of the ACA are phased in. Patients, employers and health care providers will all feel its effects – for better and worse. Combined with the health care cost controls passed by our state Legislature and signed by Gov. Patrick in July, the next several years could bring significant innovation and increased efficiency in our health care market, or we could see lower-cost hospitals being forced to close, resulting in higher prices for consumers and employers. Much will depend on how the changes set forth in the ACA and the state’s cost control law are actually executed.

I believe that one of the initiatives left intact by the ACA will have a significant positive impact on the health insurance marketplace in Massachusetts. A new insurance model established by the Act called Consumer Operated and Oriented Plans (CO-OPs), is designed to create lower-cost, high-quality health insurance plans governed by their members.  The federal government in August awarded an $88.5 million loan to help create Minuteman Health, Massachusetts’ first and only CO-OP.  Minuteman is sponsored by Tufts Medical Center, along with its 1,500-member New England Quality Care Alliance physicians’ group, and Nashville-based Vanguard Health Systems, which owns MetroWest Medical Center in Framingham and Natick and Saint Vincent Hospital in Worcester. These providers, and 17 others who wrote letters in support of Minuteman’s application, viewed this initiative – created by the ACA – as a terrific opportunity to introduce a plan that would enable doctors and hospitals, consumers and employers, and the insurer, to work more closely together than ever before to improve health and reduce costs. We anticipate that Minuteman will offer individuals and employers a streamlined administrative structure, significantly greater transparency about prices, and much more data sharing between the plan and physicians so that doctors can make better decisions about designing care around patients’ needs. Members will elect the board and ultimately decide how surpluses are reinvested – either to reduce premiums or increase benefits. The plan is expected to be up and running by January 2014.

CO-OPs were designed in the ACA to bring a lower-cost, more consumer-focused option into the health insurance market.  A health insurance model that puts hospitals and doctors at the heart of data collection, sharing and innovation can yield innovative benefits.  How will these plans operate differently? If you’re a patient, imagine getting a single bill regardless of the number of providers you see. If you’re a physician, imagine having ready access to useful data about your patients that wasn’t previously available to you, to help you design their care. If you’re an employer, imagine your health plan’s care coordinators working directly with you, your employees and their own primary care providers, to set up individualized programs addressing your employees’ specific health problems, improving their health and lowering premiums.

The Supreme Court decision on the ACA maintains Congress’s recognition that the healthcare market is not operating at its maximum potential – or at least not to its maximum potential for consumers.  The CO-OP program is among the elements of the ACA that seeks to shift the paradigm, creating change in the market by directly intervening to give the consumer more standing in the market, whether through new insurance options, guaranteed coverage in spite of pre-existing conditions, or greater investment of the premium dollar in their own healthcare instead of administrative overhead.

Minuteman will be sold through the state’s health insurance exchange, the MA Health Connector;  among other channels.  Another facet of the Affordable Care Act upheld by the Supreme Court decision, the creation of health insurance exchanges, is more recognition that the current system is not working for consumers. By creating an exchange in Massachusetts, and through the ACA spurring the development of exchanges throughout the country, we have provided consumers and small business with direct access to shop, compare and purchase insurance products that work for them.  Through the exchanges we have created new competition among insurers, a direct-to-consumer marketplace and transparency around cost and benefit design that hasn’t been seen before- in short, we are changing the old way of doing business.

In addition to the innovative features they will present to members, CO-OPs have the potential to drive improvements throughout the health insurance sector.  By introducing innovative medical services, efficient administrative functions and exceptional accountability measures, we hope Minuteman will not only offer great value to its members, but that the plan will influence other insurers to follow suit.  In the high tech industry, a company that creates a better microchip influences other manufacturers to improve their product.  Why should health care be any different? Had the Supreme Court decision struck down the ACA, Massachusetts may never have had the chance to participate in this innovative new model of health insurance.

While the upholding of the ACA confers many positive benefits on the Commonwealth, other aspects of the bill threaten to significantly harm health care. It is hard to see how any patients will benefit from the $5 billion reduction in Medicare payments hospitals had expected to receive between now and 2019.  The Medicare pull backs, being used to fund the ACA’s other initiatives, will deal an unquestioned blow to providers as more and more baby boomers reach the age where Medicare entitlements kick in.  The Medicare cuts will also present a disproportionately greater impact on lower-cost hospitals with less commercial revenue – the very providers who need support and who are a key part of the answer to our cost control issues.  In addition, the ACA empowers the Centers for Medicare and Medicaid Services (CMS) to levy fines against hospitals that exceed federally-set benchmarks for patient readmission rates. We can all agree that preventing patients from needing another hospitalization less than 30 days after their most recent admission is a worthy goal. But Medicare does not provide adequate funding for the community-based support that many of these patients need in order to stay out of the hospital. While it makes sense to hold providers responsible for factors they can control, I can see little benefit to penalizing hospitals for issues they can’t influence, and which are neglected by Medicare.  In withholding funding to hospitals around these issues, we may be unduly penalizing hospitals who need this funding to build the infrastructure and bridge the gaps in community care that are necessary to significantly reduce readmissions.

It isn’t just the ACA’s Medicare reductions that pose a threat to lower-cost hospitals.  The dominance wielded by some providers and insurers in the Massachusetts market – the primary reason for our escalating health costs – could get worse under some provisions of the ACA. Accountable Care Organizations, or ACOs, will group providers into various networks, ranging from loosely affiliated doctors groups to tightly controlled networks of caregivers. The purpose of forming these affiliations is to provide consumers with better coordinated, more effective and efficient healthcare, by aligning the incentives and responsibilities of providers through a coordinated payment stream.  While patients could benefit significantly from better coordination of their care, this approach is fraught with potential pitfalls when it comes to market power.  Large provider groups with significant clout in our market already obtain unjustifiably high prices for care that is no better and considerably less efficient than many smaller, lower-cost providers. Requiring groups of physicians to align and control the flow of patients within an organization could serve to create even stronger monopolies in the market, as physicians will likely gravitate to the organizations with the highest commercial health insurance rates.  Playing this scenario out over several years, the ACOs with the most patients and highest prices will demand even higher prices. As they attract greater patient volume with even more marketing muscle and the ability to invest in shiny new facilities, the lower cost providers with less clout could be starved out of the market, leaving all of us with a more concentrated, high cost market.  Ensuring this is not the automatic result of a well-intentioned policy will take continuous engagement in reforming the market and challenging the status quo of insurers and providers by addressing the fundamental market drivers. This would create an even playing field for the most qualified providers, not just the ones with the most clout.

The breadth and scope of the ACA touches every aspect of health care, and its possible outcomes are best understood in the context of impacts on various parts of the  system—lower-cost hospitals, large health care networks, providers with large Medicare and Medicaid demographics, and new entries into the insurance market.  It isn’t surprising that the new law is fueling market apprehension reminiscent of half a decade ago when the state adopted the ACA’s progenitor.  Now, as then, significant change is approaching, and its full impact is a diagnosis in waiting.

Eric J. Beyer is President and Chief Executive Officer of Tufts Medical Center and Floating Hospital for Children. Mr. Beyer is a seasoned health care executive who is well-known and respected for his ability to align the goals of hospitals and physicians so that they can provide high quality, cost effective care in a reform environment. 

Mr. Beyer assumed the CEO role from his position as President and Chief Executive Officer of the Tufts Medical Center Physicians Organization, Inc. (Tufts MCPO).  In that role, he was responsible for overseeing all aspects of the 550-physician faculty practice and the 415-bed academic medical center’s entire ambulatory operation. When Mr. Beyer began his tenure at Tufts MC, he was charged with merging its two separate physician groups into one highly-functioning physicians’ organization. He grew that organization nearly 20 percent in almost six years and has made Tufts Medical Center an employer of choice for talented and respected physicians from academic medical centers across the country.

To view Eric Beyer’s full biography, please click here.