Scott Brown’s election to the U.S. Senate last week has obviously created uncertainty around the future of health care reform. And as all of Washington considers what to do next, it’s worth looking anew at Massachusetts health care reform because we’re as much a laboratory as a national model. Some things have worked well; others, not so.

By coincidence, the Senate election ended just days before a conference was convened in Boston by the Commonwealth Health Insurance Connector Authority and the Robert Wood Johnson Foundation titled “A National Conference on Health Care Reform in Massachusetts – How to Organize Exchanges and Other Lessons Learned,” which I had the privilege to address.

In looking at Massachusetts as a laboratory, the first thing we need to acknowledge is that our reform law was about increasing access – which it did brilliantly – and not about cost-control, which remains the single biggest challenge facing health care both here and nationally. Health care is too expensive, and there is no end in sight to the upward trend in cost. We also need to acknowledge that without addressing costs, any reform, including our own, will be undermined over time.

We’ve learned other lessons:

– Success requires pretty close to unanimity among all major stakeholders. Despite some differences, we maintained an effective, collaborative process. We found common ground in the belief that, at the end of the day, we needed to develop a process that was sustainable, equitable and effective for everyone.

–Communication and compromise are also critical. In Massachusetts, we wouldn’t have been able to draft the legislation or implement the law without it. Commonwealth Care was implemented in literally 90 days and Commonwealth Choice was implemented in less than six months. This was a monumental task.

–Openness to modifications and fine-tuning is essential. Since we began working with the Health Connector in 2007, improvements have been made in a number of areas including streamlining the bidding process and refining coverage levels and benefit designs. But we’re not done. No matter how bipartisan or well-intentioned, legislation always results in unintended consequences. Seeing those for what they are — real opportunities for continuous improvement — helps ensure the long-term viability of our historic experiment.

I am reminded every time I look at the picture I have from the April 2006 Faneuil Hall signing of the health care bill that our collective success was driven by strong leadership with a common vision. It was striking to see then-Gov. Romney and the late Sen. Kennedy side-by-side, after having worked tirelessly with so many of us to get to that day. It can be done when all parties work together. Unlike the national health care reform debate, there were no villains in Massachusetts. We’ve shown that it can only be done when all parties work together.

In case you missed it, for the last seven weeks, the Division of Insurance, at the request of Gov. Patrick, conducted so-called health plan hearings on the topic of rising health insurance premiums for small businesses. Each week, representatives from each of the Massachusetts health plans provided detailed information on topics such as cost containment initiatives, provider contracting, customer service expenses and developing premium rates.

To be clear, we support the objective for a comprehensive and transparent discussion on this topic. And we have always supported actions that will help lower the medical cost trend, which in turn will mean lower premiums.

The problem with the discussion is that it focused on just 10 percent of the problem. That’s because in Massachusetts, 90 cents of every insurance premium dollar goes to our members’ medical care. Health plan costs represent just 10 percent of the equation. It would be like asking the owner of a movie theater to do something about the ridiculous cost of making a Hollywood action picture.

Nonetheless, the information the industry as a whole provided shows that we’re making that 10 cents go a long way, particularly when it comes to clinical quality and services. That Massachusetts health plans were once again ranked higher than almost every other health plan in America by the National Committee for Quality Assurance and U.S. News and World Report is just one example.

Testimony also showed how thoughtfully we invest in initiatives, infrastructure, services and programs that improve our members’ health and provide the greatest amount of value. We talked about how we monitor, measure, refine and streamline all that we do to ensure the most cost-effective use of health insurance premiums.

The DOI has just invited the providers to come in. We hope the providers comply. Without their 90 percent of the equation, any discussion about controlling health care costs is not going to be very meaningful or productive.

And we need their input and involvement. A few years ago, key stakeholders in the health care system worked together to find a way to implement Massachusetts health care reform. And while we tackled issues that historically put us on opposite sides of the debate, we sat at the same table and forged a solution for the greater good. That’s what we need to do now. We must continue to work together – businesses, health plans, consumers, government and providers – to find solutions.

We’re all trying to make a less expensive movie.

As our nation gets closer to its health care reform finish line, it’s critical to examine the potential impact on Massachusetts residents, and on our own health care reform, which we all worked hard to implement. National health care reform should allow us to preserve what’s working well, while at the same time provide opportunities for improvement.

And there is a lot that works well in Massachusetts:

– We’ve achieved nearly universal health insurance coverage.

– Residents have access to a wide variety of health plan options through the Health Connector.

– We have in place many of the health insurance consumer protections being debated nationally, such as guaranteeing access to coverage regardless of health status and ensuring that consumers can renew their coverage regardless of medical history.

– Our health plans are consistently ranked among the top in the country, in terms of clinical quality and member satisfaction.

–On average, 90 cents of every premium dollar goes directly to pay for the cost of medical care our members receive, as compared to a much lower average number for the rest of the country.

Yet this last point also alludes to what’s not working well in Massachusetts: the cost of care. We now have the highest health care costs in the country, and our medical cost trends only fortify this unenviable position.

National reform financing strategies include taxes on high-cost “Cadillac” health insurance plans, as well as other taxes on health insurance premiums. The negative impact on Massachusetts becomes clear given our health insurance premiums are higher because our health care costs are higher.

One area to consider is the Massachusetts definition of minimum creditable coverage (MCC), as compared to definitions contained within the various national reform bills. Those bills define MCC in broad terms to give each state flexibility in designing their specific benefits. Equally important, the bills set MCC actuarial requirements at a much lower level than we currently use in Massachusetts.

So what might this mean? Because of our rich MCC, Massachusetts may end up requiring employers and individuals to buy a more expensive insurance plan built on the most expensive health care system in the nation. This variance could easily fuel a major exodus of employers — especially small employers — and individuals to lower-cost states, with serious ramifications for state revenues.

Massachusetts has served as a model for national reform, something we can all be proud of. But we have a health care cost crisis that threatens all we’ve accomplished. We need to keep the spotlight on cost drivers and take necessary actions to reduce the trend – which means that there can’t be any sacred cows, including maintaining MCC that’s potentially higher than every other state.

It’s not in our best interest to change benefit structures for all health insurance products. But could the less rich national MCC definition pave the way for Massachusetts to offer what so many consumers want — health insurance with fewer state-mandated benefits? Larger businesses that are self-insured already have this flexibility. Why not use this opportunity to do the same for others?

A new analysis shows that Medicare Advantage is doing exactly what its critics claim it’s not – controlling costs and ensuring quality of care through lower rates of avoidable hospitalizations.

The analysis, authored by Gerard Anderson, PhD, Professor and Director, Center for Hospital Finance and Management, Johns Hopkins University, and commissioned by the Alliance of Community Health Plans (ACHP) offers important, objective evidence in the current debate over funding for the Medicare Advantage program. The analysis compares traditional fee-for-service Medicare to Medicare Advantage in key categories, specifically hospital readmissions, preventable hospital admissions and emergency department visits.

Based on data reported by most of the health plans that are members of ACHP, including Fallon Community Health Plan, Medicare Advantage outperformed traditional Medicare in all categories:

–On average, the hospital readmission rate for the ACHP Medicare Advantage plans was 27 percent lower than the national average for traditional Medicare (FCHP’s rate was 18 percent lower). Hospital readmissions cost Medicare $17.4 billion in 2004.

–The ACHP plans had an average preventable emergency department visit rate that was 86 percent lower than the traditional Medicare national average (FCHP’s rate was 90 percent lower). The average Medicare payment for an emergency department visit is $510.

–On preventable inpatient admissions, the ACHP plans’ average rate was 87 percent lower than traditional Medicare’s national average (FCHP’s rate was 88 percent lower). The average Medicare payment per discharge in 2007 was $8,396.

Medicare Advantage is not a perfect program, and there is serious discussion to cut funding to the program as a way to help pay for health care reform. But this analysis clearly demonstrates the program’s value – to the health care system and to Medicare Advantage enrollees. It also reinforces findings from a recent study by Massachusetts Health Quality Partners that, on certain clinical quality measures, Massachusetts seniors enrolled in a Medicare Advantage plan receive better care than those in traditional fee-for-service plans. Medicare Advantage delivers on its promises: the right care at the right time, additional benefits beyond traditional Medicare, and greater care coordination between health plans and providers that helps enrollees remain as healthy as possible.

The funding Medicare Advantage health plans receive is a real investment in the health of this country’s Medicare beneficiaries and not a “subsidy” or “overpayment,” as it’s been referred to. The report shows that it’s possible to improve quality and lower costs in Medicare if the delivery system is structured differently. Like Fallon Community Health Plan, the regional, community-based health plans that are ACHP members are able to keep more of their Medicare patients out of the hospital and avoid unnecessary costs because they invest in delivering the kind of coordinated, patient-centered medical care that traditional fee-for-service Medicare – in its current state – cannot consistently provide.

ACHP, a Washington-based membership organization of non-profit, community-based and regional health plans and provider organizations from across the country, commissioned the analysis in response to issues raised by the Administration and Congress that hospitalization rates are too high and lack of coordination is the cause. ACHP is hoping that Congress will use the report as a guide for writing health care reform legislation and also for finding ways to work in partnership with all stakeholders in the debate.

President Obama and Health and Human Services Secretary Kathleen Sebelius have both said publicly that there are no plans to cut Medicare benefits. But a decision to cut funding to the Medicare Advantage program means that, ultimately, Medicare beneficiaries’ benefits will be cut. If funding cuts are made, Medicare Advantage enrollees will be faced with higher premiums and/or reduced benefits. Since many of these enrollees are on fixed incomes (according to statistics from the Henry J. Kaiser Family Foundation), any adjustments to their Social Security and/or pension benefits will be insufficient to cover their increased health care expenses.

Funding cuts also will have an impact here at home. A decrease in funding will seriously erode a program that approximately 190,000 Medicare Advantage enrollees in Massachusetts (about 20% of all residents on Medicare) have come to rely on.

Nationally and locally, Medicare Advantage is already achieving key objectives of health care reform by improving care quality and lowering costs. It’s a program that’s already proven itself to be part of the solution.

The caller was upset over having to pay a $1,800 MRI bill. He thought FCHP should have covered and paid for the test. In fact, the MRI was covered, but according to the plan he purchased — a $2,000 high-deductible plan — the service was subject to the deductible, which had not yet been met. So, the $1,800 was going to have to come out of his pocket. He was shocked, frustrated and angry.

Our conversation revealed that his decision to purchase a high-deductible plan was based, of course, on his desire to save money on the monthly premium. Many of us do this with our car insurance. We opt for a higher deductible because it decreases the premium. We gamble on not being involved in a car accident (and therefore not having to pay the deductible) so we can have a little more money in our pocket each month. But a gamble it is.

I posed a question to him: When he first decided to purchase a high-deductible plan, what was his contingency plan for covering the $2,000 deductible? In other words, did he have $2,000 to spend if he needed to? After some silence, he stated that he hadn’t given that much thought at the time. I think this is something many of us would have said.

We also talked about the MRI’s cost, which was in part driven by where it was performed. He had the MRI done where his doctor told him to have it done. He didn’t ask about the cost or the quality. Nor did he ask about alternative sites, such as a local, less costly community-based facility. He didn’t bother with those questions because he just assumed that his health plan was going to pay the bill. After all, he has insurance, right? Again, many of us think this way when it comes to health care.

I asked him another question: If he had known, up front, that he’d have to pay the bill, would he have gone to a facility that cost less but was just as good? I also asked him if he would have tried to negotiate a better rate with the MRI provider. His response was that he didn’t think these were options but that, naturally, had he known all of this at the time, he would have gone to a lower cost provider. We tend to be more informed about our purchases of most consumer goods, such as cars, cell phones and major appliances. Many of us invest a lot of time researching our options before making a decision. When will we learn to apply that purchasing behavior to health care? After all, health care spending represents about 6 percent of personal consumption spending. (Rand COMPARE).

Readers of this blog know that I’m a big believer in high-performing, limited networks, which reduce premiums without having to resort to high-deductibles or other cost-shifting methods. The savings come from the use of a lower-cost but high-quality network.

But to make a decision between a high-deductible plan and a high-performing, limited-network plan, for example, consumers need credible and comparative information. All of us in health care need to do a better job of providing it because changing the way we pay providers is only part of the solution to bend the medical cost trend.

We’re making progress. The Health Care Quality and Cost Council’s Web site, called My Health Care Options, helps consumers compare quality and cost data for certain procedures at Massachusetts hospitals.

And based on feedback from our members in high-deductible plans — including our MRI member — FCHP is looking at ways to provide more information and to improve our communications to members. We’re also doing outreach calls to members to help them better understand the plans they’ve purchased and to offer tips on how to get the most out of their health care coverage.

With dramatic changes coming from Washington, including the possibility of an individual mandate like the one we have in Massachusetts, educating and engaging consumers is crucial to the success of our national health care system.

We need to get started.

Eric H. Schultz is the President and CEO of Fallon Community Health Plan.

To us, the definition of a high performing medical group is one that delivers high quality, coordinated care in a cost efficient manner. When done right, a limited network comprised of high performing provider groups and hospitals provides significant value to patients and meets our policy goal in Massachusetts of holding down medical cost trends. It’s a model that makes sense — in any economy.

Interestingly, this conference had a very different definition of high performance. Some highlights:

- Speakers defined high performance as “maximizing revenue” and placed significant emphasis on the value of billing ancillary services, especially lab and radiology. They pointed out how profitable ancillary services can be, and one speaker touted the fact that their physician group delegates the task of managing high cost ancillary utilization to the insurers rather than managing ancillary utilization themselves.

- Several physician practices noted that they not only compensate their doctors based on their individual ability to generate fee-for-service revenue, but also advise them to reach a certain level of revenue — or consider joining another practice.

- A physician from a leading teaching hospital cheerfully noted the amazing financial turnaround of the facility’s emergency department, going from a money loser to a money maker (bringing in tens of millions annually) in less than a decade.

- In general, attendees at this meeting expressed opposition to any shared risk payment models and, in some instances, strongly promoted the fee-for-service model — mostly so they could bill for high profit margin ancillary services.

This point of view is disappointing at best. It provides one illustration of how a fee-for-service payment model will drive certain utilization behaviors. And when we take into account that health insurance premiums are largely driven by health care costs — roughly 90 cents out of every premium dollar — it becomes increasingly clear that we must collectively embrace provider payment reform to realize appropriate changes in health care costs.

As they finalize their discussions and prepare to present their report, the state’s Payment Reform Commission will identify payment models that drive cost-efficient, high-quality care, and not profit maximization. Hopefully, one recommendation will be global budgeting or some version of prepayment that will work well in our state’s various geographies and among our current and future physician and/or hospital organizations.

And while we are fortunate in this state to have numerous outstanding physician organizations that excel in delivering high-quality, cost-effective care within a prepayment environment, the discussions at this recent conference give us a pretty clear glimpse of the gaps that still exist between maximizing income and managing the health care dollar wisely.

Eric H. Schultz is the president and CEO of Fallon Community Health Plan.

There also is serious discussion around reducing funding to Medicare health plans (known collectively as the Medicare Advantage program) as a strategy for funding some of the national health care reform measures. For Massachusetts Medicare beneficiaries, that’s a bad thing.

As in so many things, Massachusetts was a pioneer in the Medicare program when it was among the first states to offer a health plan option to seniors. Today, Medicare Advantage is popular in the Commonwealth. Approximately 190,000 seniors (about 20% of all residents on Medicare) are enrolled in the program. There are good reasons for this popularity. These plans are high quality and low cost. And, the Massachusetts Medicare Advantage plans are ranked among the top health plans in the country by the National Committee for Quality Assurance for clinical quality and customer satisfaction.

According to statistics from the Henry J. Kaiser Family Foundation, most Medicare Advantage enrollees are lower income seniors (with incomes reported between $10,000 and $30,000). They can’t afford traditional fee-for-service plans, which have higher out-of-pocket costs and less rich benefits than many of the Medicare Advantage plans. Seniors with higher incomes frequently purchase private insurance plans to augment their traditional Medicare fee-for-service plans.

For more than 30 years, seniors have appreciated the choice, benefits and high-quality, coordinated care provided by Medicare Advantage plans and their contracted hospitals, physicians and other providers. Enrollees typically have several plans to choose from, with varying premiums (Fallon Community Health Plan offers Medicare Advantage plans with a $0 premium). Medicare Advantage plans also have benefits and services that are not covered by traditional fee-for-service plans.

Perhaps the greatest benefit of being enrolled in a Medicare Advantage plan is the coordination of care members receive. Care coordination results in reducing costs and improving quality and health outcomes. Massachusetts Health Quality Partners has shown in a recent study that, on certain clinical quality measures, Massachusetts seniors enrolled in a Medicare Advantage plan receive better care than those in traditional fee-for-service plans.

So what’s the ugly part? Cost shifting.

Medicare Advantage enrollees will be faced with higher premiums and/or reduced benefits. Since many of these enrollees are on fixed incomes, any adjustments to their social security and/or pension benefits will be insufficient to cover their increased health care expenses.

Providers will be faced with receiving a lower reimbursement for Medicare services and will seek to recoup these reductions from employers and patients that are commercially insured. This cost shifting is significant and has been occurring for several years.

FCHP has been participating in the Medicare program since 1980. We were one of the first health plans in the country to receive a contract. It’s a history and partnership we’re proud of and committed to continuing. We also have a unique position in that we have experience financing and delivering care across a variety of products – Medicare, Medicaid, PACE (Program of All-inclusive Care for the Elderly) and commercial insurance (including Commonwealth Care).

If Congress decreases funding to Medicare Advantage, it will seriously erode a benefit for thousands of seniors in Massachusetts – and those that can least afford premium increases and increased out of pocket expenses. Now more than ever, it’s important to keep health insurance affordable for everyone, including our seniors.

Eric H. Schultz is the president and CEO of Fallon Community Health Plan.

The Massachusetts health care system, which has undergone and continues to experience change, is admired by the country and the world. Of course, here at home, it’s easy to find blogs, essays, conferences, editorials, and other sources that focus on what’s broken instead of what’s working. And, yes, I’ve been a contributor to that debate. Part of it may be that we’re cranky New Englanders. But I also think we have an intolerance of mediocrity and a passion for pushing the policy envelope — attributes that have propelled our health care system forward.

For many of us, this is the time of year to look back at our achievements over the prior 12 months and assess our performance relative to the plans we made when the year was young. It’s an important exercise for many reasons, the most important of which may be that we get to take time out from fixing, creating and improving to celebrate our successes. It’s something that we don’t do often enough in this competitive culture. A recent trip to India has given me even more time
and distance to pause and appreciate what is happening here at home. In a dichotomy that exists in many other countries, India has sparkling, impressive health care facilities surrounded by people who will never set foot inside. These people are not welcome because they cannot pay for their care. And they are definitely not part of the hospitals’ business plans, which are more focused on attracting medical tourism than providing services to someone suffering from polio two blocks away.

So, we can all agree that our state’s and our country’s health care systems are not perfect. But one way or another, we in Massachusetts pretty much care for anyone who walks through a hospital door. We may — and do — disagree about how to do it, who should pay, whether we can do it more efficiently. But from across the globe, those seem like mere details.

I’m glad to be part of the Massachusetts solution as we enter 2009.

Eric H. Schultz is President and CEO of Fallon Community Health Plan.

But is there a way to reduce some of the sting of rising premiums? Through a combination of very simple strategies with larger lessons for health care, Fallon Community Health Plan has been able to hold down and, in some cases, reduce 2009 premiums for our Medicare members — despite rising health care costs.

We offer coverage to Medicare beneficiaries through 12 different Medicare Advantage plans, each with slightly modified benefits to best fit individual health status and financial risk tolerances. For 2009, we reduced premiums for four of those plans, from 10 to 42 percent. The others are remaining level.

The real story here is how we were able to do it. Regular readers of Commonhealth know that I’m perhaps the state’s biggest advocate for limited, high-performing networks. And they are the primary reason we’ve been able to reduce or hold premiums flat for our Medicare Advantage members.

What’s the secret of our success? Look no further than the original elements of not-for-profit managed care, which were based on the primary use of outstanding multi-specialty physician group practices and community hospitals to deliver care. It’s really a “back to basics” formula – something that FCHP has not lost sight of, particularly for our Medicare Advantage plans. Key ingredients to a “back to basics” formula include:

· Prepay physician groups using a formula based on the mix and health status of patients. In the old days, we called this “capitation.” When done right, a capitated payment structure is one of the most effective ways to manage health care costs.

· Partner with group practices that use electronic medical records and have incorporated patient information with chronic care management. We have established relationships with physician groups that have been doing this for well over a decade.

· Jointly establish clear inpatient and outpatient health care protocols that are coordinated, managed and measured by a joint operating committee comprised of both physicians and health plan staff.

· Establish goals that are clearly defined and keenly aligned – better health, higher patient/member satisfaction, lower cost and less administrative hassle.

· Use of “pay for performance” incentives that give both organizations – provider and health plan – a greater ability to advance improvements in more focused areas such as high cost diagnostics, access, wellness and prevention.

So what’s the catch? There really isn’t any. It’s more about having a choice:

· A smaller provider network with a more organized delivery system comprised of physicians that have the ability and interest to coordinate all health care and manage cost;

· Or, the alternative, which is what America has today, a fragmented system of outstanding clinicians and hospitals, supported by a payment system that’s misaligned with patient needs.

We are such big believers in coordinating health care delivery and prepaid health care financing that FCHP has become the only health plan in Massachusetts that is also a provider. Our Summit ElderCare program, a Program of All-inclusive Care for the Elderly, is a growing team of physicians, nurse practitioners, therapists, aids, and other staff that provide all-inclusive, coordinated care for elders. It uses the “medical home” model for frail elder care and is funded with a case mix adjusted prepayment from Medicare and Medicaid. The participant remains independent for as long as possible, the provider team manages all care, and the cost savings typically are 8 – 15% lower than the alternative.

Our experience at FCHP shows that keeping it simple – going back to basics – has a powerful impact on cost and quality. And seeking ways to link coordinated health care delivery with prepaid financing often produces positive gains for the patient, the provider and the payer, and provides lessons that can be applied to the entire insured population.

Eric H. Schultz is President and CEO of Fallon Community Health Plan.

Unbridled expansion hurts community hospitals and raises health care costs, not just by creating duplicative services but also by replacing services once delivered by local providers. When that happens, those services often increase in cost by 20 to 30 percent – without a corresponding improvement in the quality of care. When a teaching hospital moves to the suburbs, its rates do too.

As part of health care reform, the Legislature created a sensible framework for establishing new health insurance mandates, which are health care services the state requires health plans to provide. Before any new mandate can be put in place, state regulators must perform an analysis to calculate and assess its effect on health care costs.

A similar test should be applied to proposed hospital expansions. Before approving any expansion, regulators should ask:

How is quality of care improved?
How is access improved?
How will the cost of care change?

Hospital expansions should occur only if they can balance the broad health care system demands of this three-legged stool.

Community care is something we think about a lot at Fallon Community Health Plan. We have an entire product line called ‘Direct Care’ that is based on community providers. We create what are called limited, high-performing networks – a series of local providers that meet high standards of quality. The use of such a network allows us to save employers 10 to 13 percent in health insurance costs without any reduction whatsoever in benefits.

The problem posed by teaching hospitals for many local providers is brand cachet. For that reason, we also need to do a better job of getting cost and quality information to consumers and linking this to create more value-based health insurance products.

To be sure, teaching hospitals play a role in our health care system and economy. They excel at many specialties, train clinicians and attract research dollars to Massachusetts. But for most care, community hospitals provide a level of quality that is comparable to that of teaching hospitals and they do it for less money.

The bottom line – Massachusetts needs both and we should create a business and regulatory environment that allows both to flourish.

Eric H. Schultz is the president and CEO of Fallon Community Health Plan.