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Beyond Obamacare:
Lessons from Massachusetts
A Brief History of Health Care Reform in Massachusetts
Barbara Anthony
September 2017
No#part#of#this#article#may#be#reproduced#or#distributed#without#written#permission#from#the#author!
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BEYOND!OBAMACARE:!!
LESSONS!FROM!MASSACHUSETTS!
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A!Brief!History!of!Health!Care!Reform!in!Massachusetts!
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September!2017!
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Prepared!by!
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Barbara! Anthony,! J.D.,! former! Senior! Fellow! and! Associate,! Mossavar-Rahmani!
Center! for! Business! and! Government,! Harvard! Kennedy! School,! assisted! by! Celia!
Segel,!MPP,!and!Hallie!Toher,!MPP,!Harvard!Kennedy!School.!!The!faculty!advisor!is!
Professor!Joseph!Newhouse.!
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Foreword!
This!article!is!intende d!to !be!read !by!sta te!and !federa l!policymakers;!health c a re !
advocates!and!researchers;!providers!and!insurers;!organized!labor!groups;!small!and!
large!bu sin ess !org a niz atio n s;! healthcare!policy!students!and!academics;!consum ers;!
and!all!those!who!know!how !hard!it!is!to!make!healthcare!policy!changes!in!the!United!
States!but!who!still!believe!(hope)!our!best!days!are!ahead.!The!goal!of!the!paper!is!to!
provide!perspective,!information!and!analysis!to!those!who!strive!to!improve!acc ess!to!
affordable,!quality!healthcare.!!!
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The!article!comes!at!a!time!of!great!potential!upheaval!and!uncertainty!in!terms!of!
national!healthcare!policy.!!The!evolution!of!health!care!reform!in!Massachusetts!is!
impor ta n t!b e ca u se !th e !refo rms!enacted!in !2 00 6 !p ro vid e d !the !model!for!the!Affordable!
Care!Act!(ACA),!known!as!“Obamacare.”!!
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In!2006,!Massachusetts!was!the!first!state!in!the!country!to!try!to!expand!access!to!
healthcare!to!all!its!citizens!within!the!structure!of!the!existing!marketplace.!!The!goal!
was!to!get!as!close!as!possible!to!universal!access!to!healthcare.!!The!current!
resurrection!of!a!national!debate!aro und !universa l!access!to!healthc are!is!a!step!
backwards!in!time!for!Massachusetts!healthcare!policy!makers!who!considered!this!
basic!issue!–!universal!access!-!settled.!!
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Subsequent!to!its!2006!reforms,!Massachusetts!turned!its!attention!to!cost!containment.!
In!2012,!Massachusetts!became!the!first!state!in!the!country!to!try!to!limit!the!grow th!of!
both!private!and!public!healthcare!spending.!!That!effort,!known!as!“Chapter!224!or!Ch.!
224”!is!still!unfolding.!Many!states!are!currently!work ing !on!afford ab ility!and!ex pa nd ed!
access!for!their!citizens!and!are!looking!for!new!paths!forward,!in!particular,!to!contro l!
healthcare!costs.!!This!work!!is!intende d!to !serve!as!one!alternative!to!help!those!who!
are!looking!for!idea s!that!might!be!ad ap ted !or!mo dified!to!th eir!circum sta nc es.!!
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The!article!draws!largely!on!the!author’s!!years!of!experience!in!healthcare!
policymaking!positions,!most!recently,!as!former!Massachusetts!Undersecretary!of!
Consumer!Affairs!and!Business!Regulation!from!200 9 !to!2 0 1 5 .!!In !additio n,!the!work!
also!benefits!from!her!years!of!experience!in!private!healthcare!advocacy,!and!other!
federal!an d !state!government!roles!that!exposed!the!author!to!the!dynamics!of!
healthcare!policym ak in g.!!O ve r!th e se !pe riod s,!the !auth or!either!participated!in!or!
chaired!hundreds!of!meetings!around!healthcare!reform!issues!involving!all!major!
stakeholder!groups!and!initiated!or!worked!on!num erou s!public!policy!developm ents. !
Her!analysis!comes!from!a!perspective!that!radical!change!in!healthcare!pricing!and!
delivery!systems!is!not!good!medicine!on!either!the!state!or!federal!level.!But!she!also!
appreciates!that!fundamental!chan ge!in!the !distributio n!of!hea lthca re!spe nd ing!do llars!
especially!among!private!sector!players!is!a!pre-requisite!to!sustaining!and!improving!
access!and!affordability.!!
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The!Chapter!224!experiment!in!Massachusetts!is!still!evolving.!At!this!stage,!the!
outcome!remains!uncertain!but!hopeful.!!
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Table&of&Contents&
Foreword!.......................................................................................................................................................................!2!
Introduction !and !Ba ck gro un d !..............................................................................................................................!5!
The!Development!of!Healthcare!Policy!in!Massachusetts!...................................................................!6!
Meanwhile!What!Was!Happening!at!the!National!Level!before!2006?!.........................................!8!
Massachusetts!Enacts!Broad!Scale!Health!Insuran ce !Refo rm !...........................................................!9!
Laying!the!Groundwork!for!Beyond!Obamacare!.....................................................................................!9!
The!Insurance!Wars!of!2010!.........................................................................................................................!11!
Beyond!Obamacare:!!Ch!224!..............................................................................................................................!15!
Key!Features!of!Ch.!224!...................................................................................................................................!18!
! Established!New!Agencies!for!Oversight!and!Monitoring!.................................................!19!
! Calculating!and!enforcing!a!spending!benchmark!................................................................!21!
! Registering!and!monitoring!provider!organizations!...........................................................!22!
! Transition!into!Alternative!Payment!Contracts!.....................................................................!23!
! Price!information!transparency!for!Con su m e rs !....................................................................!23!
! Annual!public!hearings!to!monitor!cost!drivers!and!growth!...........................................!24!
How!is!it!Going!So!Far?!.........................................................................................................................................!24!
Meeting!the!Benchmark!..................................................................................................................................!27!
Tracking!Trends!in!Provider!Markets!.......................................................................................................!29!
Where!is!All!That!Price!Transparency?!....................................................................................................!31!
Is!The!Bench m a rk!E nfo rcea ble !or!As pira tiona l?!..................................................................................!32!
Does!the!HPC!Need!more!Authority!to!be!Effective?!..........................................................................!34!
Conclusions:!Are!There!Lessons!from!Massachusetts?!..........................................................................!35!
Payment!Reform!.................................................................................................................................................!35!
The!Establishment!of!an!Independent!Health!Care!Agency!............................................................!37!
The!Establishment!of!a!Cost!Control!Target!...........................................................................................!37!
Healthcare!Price!Transparency!...................................................................................................................!38!
End!Notes!...................................................................................................................................................................!41!
About!the!Author!………………………………………………………………………………………………45!
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BEYOND!OBAMACARE:!LESSONS!FROM!MASSACHUSETTS!!
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A!Brief!History!of!Health!Care!Reform!in!Massachusetts!
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By!Barbara!Anthony,!J.D.,!!former!Senior!Fellow!and!Associate,!Mossavar-
Rahmani!Center!for!Business!and!Government,!Harvard!Kennedy!School,!
assisted!by!Celia!Segel,!MPP,!and!Hallie!Toher,!MPP,!Harvard!Kennedy!School.!
The!faculty!advisor!is!Professor!Joseph!Newhouse.!!!
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Introduction!and!Background!!!
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In!2006,!Massachusetts!passed!Ch.!58,!An!Act!Providing!Access!to!Affordable,!
Quality,!Accountable!Health!Care!(Ch.!58!or!“Romneycare”).!The!2006!health!reform!
legislation!provided!broad!access!to!health!insurance!for!many!previously!
uninsured!residents.!Ch.!58!primarily!addressed!issues!of!access!to!health!insurance!
in!Massachusetts,!and!was!the!model!for!the!ACA.!Many!of!the!most!potent!and!
controversial!features!of!the!ACA!came!from!the!2006!Massachusetts!law:!a!
mandate!that!individuals!buy!insurance!or!pay!a!penalty!for!failure!to!so!do;!a!
penalty!for!employers!above!a!certain!size!that!did!not!offer!coverage!to!their!
employees;!an!expansion!of!Medicaid!to!cover!more!low!income!individuals;!
subsidies!for!those!below!a!certain!level!of!income;!a!required!health!benefits!
package!that!carriers!had!to!offer;!an!online!exchange!where!consumers!could!shop!
for!insurance;!!and!many!other!features.!!At!the!time!Ch.!58!was!passed,!a!deliberate!
decision!was!made!by!state!policymakers!to!leave!the!issue!of!cost!control!to!
another!day.!!
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Massachusetts!has!among!the!highest!healthcare!costs!in!the!nation!and!for!many!
years!the!growth!of!those!costs!outpaced!the!growth!of!household!income!and!the!
overall!Massachusetts!economy.!!Average!family!premiums!for!employer-
sponsored!health!insurance!in!the!state!rose!from!$11,400!in!2005!to!nearly!
$17,000!by!2011.
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!In!2015,!such!premiums!were!$18,454,!while!they!were!$17,322!
for!the!nation!as!a!whole.!Four!states!and!the!District!of!Columbia!had!higher!
average!family!premiums.
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!According!to!the!Massachusetts!Health!Policy!
Commission’s!2016!Cost!trends!Report,!average!statewide!family!premium!and!
cost!sharing!was!about!$20,000.
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While!healthcare!costs!continued!to!escalate!in!Massachusetts!and!elsewhere,!the!
state!and!national!economies!plunged!into!a!deep!recession.!!Against!this!backdrop!
of!recession!and!continued!growth!both!in!healthcare!costs!and!enrollment!in!health!
insurance,!the!state!turned!its!attention!to!cost!control.!!
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In!Massachusetts,!the!law!that!“officially”!addresses!healthcare!costs!is!Chapter!224!
of!the!Acts!of!2012,!An!Act!Improving!the!Quality!of!Health!Care!and!Reducing!Costs!
Through!Increased!Transparency,!Efficiency!and!Innovation”!(Ch.!224).!!Ch.!224!
became!effective!on!November!5,!2012,!and!established!a!so-called!“benchmark”!to!
control!the!growth!of!healthcare!costs!in!Massachusetts.!!!The!benchmark!will!be!
described!in!more!detail!later!in!this!article,!but!generally,!Ch.!224!is!a!set!of!
interlocking!provisions!designed!to!tie!the!rate!of!healthcare!cost!growth!to!the!rate!
of!growth!in!the!state’s!economy.!!Ch.!224!established!an!independent!agency,!the!
Health!Policy!Commission!(HPC),!to!implement!and!enforce!the!benchmark!for!
healthcare!cost!growth!established!in!the!statute.!!
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Massachusetts!is!the!first!state!in!the!nation!to!establish!a!legislative!growth!target!
to!control!healthcare!costs.!!At!present,!the!law!is!unique!to!Massachusetts,!although!
a!few!states,!such!as!Rhode!Island!and!Connecticut,!are!taking!a!look!at!similar!
approaches!to!controlling!healthcare!costs.
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This!article!examines!a!number!of!issues!raised!by!Ch.!224.!(1)!The!culture!
developed!by!Massachusetts’!policymakers!and!healthcare!stakeholders!to!pass!Ch.!
224;!(2)!A!description!of!the!implementation!tools!in!Ch.!224;!(3)!The!effectiveness!
of!those!tools!and!of!the!Health!Policy!Commission!in!controlling!the!growth!of!
Massachusetts’!healthcare!costs;!and!(4)!Whether!or!not!this!approach!is!good!
public!policy.!An!exciting!feature!of!this!Massachusetts!experiment!is!that!it!is!still!
evolving!and!adapting!to!changing!market!conditions;!with!time,!new!tools!may!be!
added!to!its!cost!control!provisions.!!Its!ultimate!success!or!failure!may!not!be!
readily!apparent!for!years!to!come.!!
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The!Development!of!Healthcare!Policy!in!Massachusetts!
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Ch.!58!was!the!product!of!intense!bipartisan!negotiations!that!involved!officials!
across!the!political!spectrum!from!conservative!Massachusetts!Governor!Mitt!
Romney!(who!was!preparing!to!run!for!the!US!presidency)!to!the!liberal!icon,!
Massachusetts!Senator!Ted!Kennedy,!and!everyone!in!between.!!At!the!same!time!
that!these!negotiations!were!taking!place,!there!was!the!threat!of!a!ballot!initiative!
that!contained!a!“pay!or!play”!mandate!for!employers.!!The!ballot!initiative!never!
took!place!and!ultimately!Ch.!58!emerged!from!the!negotiating!process.!Importantly,!
this!law!involved!key!organized!stakeholder!groups!such!as!providers,!insurance!
carriers,!unions,!physicians,!employers,!religious!organizations,!consumer!advocates!
and!many!others,!working!with!state!agencies,!legislators!and!high!level!public!
officials.!!This!coalition!of!diverse!and!competing!interests!was!already!a!hallmark!of!
healthcare!market!reform!efforts!in!the!Bay!State.!!Whether!there!is!agreement!or!
disagreement,!all!stakeholder!groups!and!government!healthcare!officials!expect!a!
seat!at!the!negotiating!table.!!
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Ch.!58!itself!was!the!culmination!of!almost!two!decades!of!reforms!to!the!Bay!State’s!
healthcare!marketplace!that!began!as!early!as!1988!with!then!Governor!Michael!
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Dukakis’s!signature!“Health!Care!for!All”!legislation,!Ch.!23!of!the!Acts!of!1988.
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!The!
same!coalition!of!stakeholders!that!was!involved!in!Ch.58!had!previously!worked!to!
pass!or!oppose!the!Dukakis!legislation.!!The!Dukakis!law,!passed!amid!great!fanfare!
in!April!1988,!was!the!first!in!the!nation!designed!to!provide!basic!health!insurance!
for!all!residents!of!a!state.!“We!have!good!reason!to!rejoice!today,”!the!former!
Governor!said!from!the!Massachusetts!State!House!steps,!“as!we!once!again!become!
the!nation’s!laboratory!…for!affordable,!quality!healthcare”!for!all.
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!!The!law!was!
aimed!at!insuring!600,000!Bay!State!residents!who!lacked!health!insurance,!10%!of!
the!state’s!population,!and!included!a!“pay!or!play”!mandate!for!employers!and!
subsidies!for!low-income!citizens.!!Ch.!23!was!never!implemented!after!Governor!
Dukakis!left!office!following!an!unsuccessful!bid!for!the!presidency.!!The!state!
legislature!never!funded!its!price!tag,!which!it!pegged!as!between!$900!million!and!
$1.4!billion,!and!eventually,!it!was!repealed.
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The!coalition!of!stakeholders!that!was!formed!around!the!Dukakis!initiative!did!not!
dissolve!but!continued!to!advance!insurance!market!reforms.!!In!1991,!Republican!
Governor!William!Weld,!signed!a!law!known!as!Chapter!495
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!deregulating!the!
state’s!hospital!rate-setting!system.!This!law!also!contained!provisions!aimed!at!
reforming!the!state’s!health!insurance!market.!It!required!insurance!companies!to!
treat!all!businesses!equally!actuarially,!and!made!it!illegal!to!have!disproportionate!
variations!in!premium!increases!and!benefits.!Most!importantly,!the!law!required!
that!insurance!policies!were!renewable!annually!for!small!businesses!with!
reasonable!(and!proportionate)!premium!increases,!unless!these!businesses!proved!
unworthy!of!renewal.!The!law!also!defined!and!regulated!‘waiting!periods’!for!group!
plans!for!no!longer!than!six!months;!previously,!waiting!periods!were!not!regulated!
and!could!last!for!much!longer.!!In!addition,!the!1991!law!required!that!‘emergency!
services’!were!covered!during!the!waiting!period.!!
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!Chapter!495!was!an!effort!by!Governor!Weld!to!repeal!the!most!controversial!parts!
of!Governor!Dukakis’s!1988!law,!particularly!the!“pay!or!play”!provisions,!which!
penalized!businesses!with!over!5!employees!if!they!did!not!provide!health!insurance!
to!employees.!!However,!it!also!relied!on!market!forces!to!try!and!control!healthcare!
prices!through!carriers!and!providers!negotiating!individual!hospital!contracts.!!It!
created!fairness!standards!for!the!way!insurers!could!treat!small!businesses!and!
helped!to!finance!hospitals!with!a!majority!of!Medicaid!patients!by!creating!the!
uncompensated!care!pool.!!This!mechanism!placed!an!assessment!on!profitable!
hospitals!in!order!to!help!finance!those!hospitals!that!treated!the!most!
disadvantaged!patients.!!
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In!the!1990s,!a!number!of!states!including!Massachusetts,!began!experimenting!with!
ways!to!expand!access!to!healthcare!insurance!for!state!residents.!!The!two!most!
popular!reforms,!“guaranteed!issue”!and!“community!rating,”!were!added!to!
Massachusetts’!health!insurance!laws!in!1996.
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!These!reforms!in!Massachusetts!
grew!in!part!out!of!a!“Non-Group!Commission”!formed!by!Attorney!General!Scott!
Harshbarger’s!office!in!the!mid-1990’s.!This!group!included!the!CEOs!of!major!
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carriers,!unions,!hospital!trade!groups,!consumer!advocacy!organizations!and!
others.!!Its!recommendations!were!part!of!the!reforms!of!1996.
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Under!guaranteed!issue,!insurers!cannot!deny!coverage!to!an!individual!because!of!
that!person’s!health!status.!The!community-rating!requirement!barred!insurers!
from!charging!higher!premiums!to!a!person!because!of!that!individual’s!health!
status.
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!In!addition,!Chapter!297!established!minimal!health!plan!requirements!and!
created!a-mini-!COBRA!for!small!businesses.
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Unfortunately,!these!well-intentioned!laws!had!adverse,!unintended!consequences.!!
Because!insurers!were!no!longer!able!to!adjust!their!prices!based!on!pre-existing!
conditions,!there!was!evidence!that!people!waited!until!they!got!sick!before!buying!
coverage.
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!There!was!no!incentive!to!buy!insurance!if!an!individual!was!healthy!
because!the!individual!could!always!buy!it!later!if!she!became!ill.!!As!a!result,!the!
pool!of!insureds!becomes!smaller!and!smaller!and!sicker!and!sicker,!and!the!cost!of!
insurance!becomes!more!and!more!expensive!for!those!who!are!buying!it.!!This!
phenomenon!is!called!“adverse!selection”!and!it!leads!to!an!economic!“death!
spiral.”
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!The!number!of!people!without!insurance!actually!increases.!!This!is!what!
occurred!in!the!1990’s!into!the!early!2000’s!in!Massachusetts!and!around!the!
country.!!
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Meanwhile!What!Was!Happening!at!the!National!Level!before!2006?!
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During!the!period!that!Massachusetts!and!some!other!states!were!passing!the!
reforms!described!above,!the!nation!witnessed!the!failed!efforts!of!the!Clinton!
administration!for!broad!scale!reform!of!the!healthcare!market.!This!effort!lead!by!
then!First!Lady!Hillary!Clinton!was!known!officially!as!the!Health!Security!Act.!The!
bill!itself!was!a!complex!proposal!running!more!than!1,000!pages!and!had!an!
enforced!mandate!for!employers!to!provide!health!insurance!coverage!to!their!
employees.!!Criticism!from!conservatives,!libertarians,!the!health!insurance!industry!
and!even!fellow!Democrats!doomed!the!Clinton!plan!and!it!was!never!enacted!into!
law.!!By!1994,!there!was!no!chance!it!would!be!revived.
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While!the!effort!at!national!reform!was!defeated,!subsequently!in!1996,!the!Health!
Insurance!Portability!and!Accountability!Act!(HIPPA),
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!known!as!the!“Kennedy-
Kassenbaum”!bill!was!enacted!by!Congress!and!signed!into!law!by!President!Clinton.!!
HIPPA!improved!portability!of!health!insurance!coverage!for!workers!when!they!
changed!or!lost!their!jobs!by!restricting!the!time!period!that!an!insurer!could!deny!
care!based!on!a!‘pre-existing!condition’!given!previous!creditable!coverage.!HIPPA!is!
best!known!for!establishing!national!standards!for!privacy!around!electronic!
healthcare!transactions.!
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Indeed,!at!the!time,!a!major!lesson!derived!from!the!failed!attempts!by!the!Clinton!
and!Dukakis!Administrations!to!tackle!broad!scale!health!reform!was!that!
incremental!change!held!more!promise!of!success!than!major!reform.!!However,!a!
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strong!take-away!from!the!incremental!insurance!reform!efforts!of!the!1990s!was!
that!there!were!unintended!consequences!to!well-intentioned!laws!aimed!at!
lowering!costs!for!one!group!or!trying!to!guarantee!that!sick!people!would!not!end!
up!uninsured.!!Thus,!over!time!the!shortcomings!of!certain!incremental!reforms!
provided!empirical!evidence!for!more!broad!scale!reform.!!It!appears!that!the!small!
steps!may!have!been!a!necessary!prelude!to!gathering!consensus!for!more!
fundamental!change.!
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With!no!Federal!Plan!in!Sight,!Massachusetts!Enacts!Broad!Scale!Health!
Insurance!Reform!
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Meanwhile!back!in!Massachusetts,!notwithstanding!some!success!at!reforms,!and!
some!lowering!of!the!uninsured!rate,!in!2004,!the!uninsured!rate!in!Massachusetts!
was!still!fairly!high!at!7.4%.
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!In!addition,!Massachusetts!still!had!(and!has)!among!
the!highest!per!capita!health!care!costs!in!the!United!States.!In!2004,!health!care!
costs!per!capita!in!the!Commonwealth!reached!$6683!and!were!projected!to!grow!
faster!than!that!of!the!United!States!or!other!industrialized!countries.
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So,!in!2006,!Romneycare!was!passed!and!the!state!went!about!the!business!of!
implementing!Ch.!58!and!the!series!of!insurance!market!reforms!described!above.!!
The!result!was!that!over!the!next!few!years!there!was!a!drop!in!the!uninsured!rate!
from!7.4%!in!2004!to!2.6!%!in!2008.
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!(However,!since!then,!the!rate!of!uninsured!
has!crept!up!and!in!2015!was!between!3!-!4%.
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).!Ch.!58!also!saw!the!establishment!
of!the!Connector!Authority!and!the!creation!of!the!first!in!the!country!market!
exchange!for!the!sale!of!health!insurance!to!individuals!and!small!businesses.!!!While!
the!Connector!has!not!developed!into!a!robust!market!for!the!small!business!sector,!
it!serves!approximately!182,000!(non-Medicaid)!low-income!people!who!receive!
some!kind!of!premium!subsidy,!and!about!30,000!individuals!who!are!not!
subsidized.
18
!And,!while!the!Connector!did!suffer!serious!setbacks!after!the!passage!
of!the!ACA,!it!seems!to!be!back!on!track!now.
19
!!!!
!
Laying!the!Groundwork!for!Beyond!Obamacare!
!!
In!government!regulation,!as!elsewhere,!the!devil!is!in!the!details!and!one!detail!in!
Ch.!58!proved!to!be!an!extremely!important!precursor!to!current!events.!!Ch.!58!
established!the!Health!Care!Quality!and!Cost!Council!(HCQCC),!which!ultimately!lead!
to!the!establishment!of!the!current!Health!Policy!Commission!(HPC).!The!HCQCC!
was!charged!with!collecting!all!types!of!data!on!the!costs,!quality!and!payment!
delivery!systems!of!healthcare!in!Massachusetts.!!The!HCQCC!was!made!up!of!high-
level!state!healthcare,!insurance!and!watchdog!officials!together!with!health!
benefits!specialists!from!the!private!sector.!This!agency!collected!and!analyzed!data,!
issued!reports!and!generally!exposed!the!growth!of!healthcare!costs!to!public!
scrutiny!through!public!hearings.!!Its!final!report!issued!on!October!21,!2009,!
“Roadmap!to!Cost!Containment,”!strongly!recommended!the!need!to!move!the!
healthcare!payment!system!away!from!fee!for!service!and!toward!payment!reform!
!
10!
strategies!where!quality!rather!than!volume!would!be!rewarded.!!This!
recommendation!was!aimed!squarely!at!the!issue!of!cost!containment!that!had!been!
left!to!another!day!by!Ch.!58.!In!addition,!in!2008,!the!Legislature!established!a!
Special!Commission!on!Health!Care!Payment!Reform!(Section!44!of!Ch.!305!of!the!
Acts!of!2008).!Its!final!report,!issued!in!July!2009,!also!strongly!called!for!healthcare!
payment!reform.
20
!!!
!
By!2009,!for!over!two!decades,!various!and!diverse!stakeholders!around!the!
Commonwealth!had!worked!together.!They!held!hearings,!testified,!and!lobbied;!
everyone!from!government!officials!to!carriers,!employers,!providers,!businesses,!
consumer!groups,!labor!organizations,!and!more!became!involved!-!the!
Commonwealth!was!a!virtual!hotbed!of!health!care!policy!activists.!
!
Much!of!this!activity!focused!on!the!problems!of!ever!escalating!healthcare!costs!and!
the!promotion!of!alternative!payment!methodologies!to!replace!fee!for!service!
payments!as!a!primary!cost!containment!strategy.!!The!HCQCC!and!the!Special!
Commission!on!Payment!Reform!focused!laser-like!attention!on!fee!for!service!
payment!models,!which!were!regarded!as!largely!responsible!for!ever!escalating!
healthcare!costs.!!
!
It!is!a!widely!held!belief!among!many!healthcare!stakeholders!that!fee!for!service!
medicine!–which!generally!means!charging!a!fee!for!every!healthcare!service!or!
procedure!rendered!-!provides!the!wrong!economic!incentives!to!healthcare!
providers!and!replacing!fee!for!service!with!alternative!payment!methodologies,!
such!as,!global!or!bundled!payments,!or!pay!for!performance!contracts,!or!other!
risk-bearing!arrangements!is!the!key!to!slowing!down!the!growth!in!healthcare!
costs.!!Generally,!alternative!payment!methodologies!seek!to!reward!providers!for!
good!quality!outcomes!with!the!provider!assuming!some!downside!risk!if!the!level!
of!treatment!exceeds!some!or!all!of!the!overall!payment.!Specifically,!the!Special!
Commission!on!Payment!Reform!recommended,!among!others,!the!following!major!
actions:!!
!
1. The!development!of!Accountable!Care!Organizations!(ACOs)!
2. Cost!and!quality!reporting!
3. Risk-sharing!between!ACOs!and!payers!
4. Creation!of!an!independent!entity!to!oversee!implementation!and!transition!
strategy!!
!
With!the!fourth!recommendation,!the!groundwork!was!laid!for!the!idea!of!a!
separate!agency!to!oversee!health!care!costs!and!to!implement!payment!reform!
strategies.!!But!there!were!still!some!unforeseen!events!that!would!take!place!before!
all!the!stars!were!in!alignment!for!the!passage!of!Ch.!224!and!the!establishment!of!
the!Health!Policy!Commission.!
!
!
11!
The!Insurance!Wars!of!2010!
!
The!year!was!2010,!four!years!after!Ch.!58,!and!health!care!costs!in!Massachusetts!
continued!to!escalate!especially!for!small!employers!and!individuals!at!a!double-
digit!annual!pace.!The!Massachusetts!economy!was!suffering!from!almost!10%!
unemployment,!thousands!of!residential!foreclosures!were!taking!place,!and,!while,!
generally,!neither!wages!or!profits!were!increasing!by!much,!if!at!all,!health!care!
prices!continued!to!rise!and!providers!and!carriers!overall!enjoyed!sound!economic!
health.!!
!
The!employer!community,!in!particular,!was!growing!more!and!more!vocal!about!
double-digit!increases!in!insurance!premiums.!!Various!employer!trade!groups!
visited!the!administration!of!then!Governor!Deval!Patrick.!Some!groups!brought!
their!complaints!to!the!state’s!Executive!Office!of!Housing!and!Economic!
Development!and!its!Office!of!Consumer!Affairs!and!Business!Regulation.!!This!latter!
office!oversaw!the!state!Division!of!Insurance!which!regulates!all!insurance!
companies,!including!health!insurers.!!!!
!
The!Patrick!administration!held!meetings!with!various!insurance!carriers!
concerning!health!insurance!premiums.!Carrier!after!carrier!told!the!same!story:!
each!was!locked!into!multi-year!contracts!with!providers!that!called!for!automatic!
cost!escalation!clauses!regardless!of!whether!or!not!costs!were!actually!increasing.!
One!company!told!the!state’s!Office!of!Consumer!Affairs!and!Business!Regulation!
that!it!was!locked!into!a!3!year,!10%!per!year!increase!with!one!of!the!state’s!most!
powerful!provider!systems.!When!the!Office!of!Consumer!Affairs!and!Business!
Regulation!encouraged!carriers!to!try!and!re-open!those!contracts!with!providers,!it!
was!told!that!they!could!not!be!re-opened.
21,22
!
!
Even!though!both!carriers!and!providers!acknowledged!that!costs!were!a!problem,!
there!were!a!variety!of!reasons!proffered!as!to!why!voluntary!restraint!by!carriers!
or!providers!was!not!going!to!materialize.!Carriers!were!stuck!in!multi-year!
contracts,!and!could!not!cut!premiums!without!endangering!their!own!financial!
health.!Generally,!providers!could!not!reduce!prices!because!of!various!cross-
subsidies!in!their!systems!and!the!effect!on!industry!employment.!While!industry!
officials!commiserated!about!the!high!cost!of!healthcare,!they!claimed!there!was!
nothing!that!they!could!do!about!it.!Indeed,!Governor!Deval!Patrick!often!expressed!
exasperation!that!carriers!would!point!fingers!at!providers!and!providers!would!
point!fingers!at!carriers!and!the!structure!of!the!system.
23
!He!expressed!this!in!
meetings!as!well!as!in!public!speeches.!No!one!seemed!willing!to!help!come!up!with!
a!solution.!!!
!
These!fruitless!attempts!to!garner!support!for!industry!solutions!for!cost!control!led!
the!Patrick!Administration!to!search!for!ways!to!unilaterally!take!action.!!
Massachusetts!has!a!peculiar!calendar!for!renewing!health!insurance!contracts!and!
the!filing!of!health!insurance!rates!in!the!so-called!“merged!market.”!!The!merged!
market!in!Massachusetts!is!made!up!of!individuals!(non-Medicaid)!and!small!
!
12!
business!employees,!amounting!to!about!700,000!covered!lives.!!These!are!the!
individuals!and!employees!of!employers!who!have!to!buy!insurance!from!an!
insurance!company!as!opposed!to!larger!companies!that!self-fund!their!own!health!
insurance!and!hire!third!party!administrators,!usually!insurance!companies,!to!
administer!their!plans.!!!
!
In!the!merged!market,!carriers!and!customers!enter!into!yearly!contracts!but!new!
rates!and!contracts!are!available!at!the!start!of!each!calendar!quarter!for!the!
following!12!months.!!(For!individuals!in!the!merged!markets,!annual!enrollment!is!
now!just!once!a!year!in!January,!while!small!groups!in!this!market!continue!annual!
renewals!on!a!quarterly!basis.)!A!contract!can!begin!on!January!1!for!t he! next!12!
months;!April!1!until!March!31!of!the!following!year;!July!1!for!the!next!12!months;!
and!October!1!to!September!30!of!the!following!year.!!The!April!1!to!March!31-
contract!year!is!the!largest!renewal!period.!!Before!a!carrier!can!collect!its!new!
annual!premiums,!it!must!first!file!those!rates!with!the!state!Division!of!Insurance.!!
Under!the!law,!the!Insurance!Commissioner!has!thirty!days!to!disapprove!the!new!
proposed!rates.!If!he!takes!no!action,!the!rates!can!go!into!effect.
24
!
!
Generally,!merged!market!health!insurance!premiums!are!higher!than!large!group!
prices!for!a!variety!of!reasons.!Small!business!groups!claim!they!lack!market!clout!in!
negotiating!rates!with!individual!carriers,!but!there!are!some!higher!costs!in!the!
small!group!market!distribution!system,!such!as!brokers’!commissions.!!
Additionally,!there!is!some!evidence!showing!that!health!risks!in!the!merged!market!
are!higher!than!large!group!risks.
25
!Regardless!of!the!reasons,!small!businesses!in!
the!merged!market!voiced!strong!concern!for!a!number!of!years!leading!up!to!2010!
that!they!were!unfairly!paying!higher!premium!prices,!especially!at!a!time!when!the!
economic!recession!was!causing!serious!financial!harm!to!that!sector.!!!
!
In!January!2010,!approximately!10!different!carriers!filed!285!proposed!rates!for!
contract!renewals!on!April!1!in!the!merged!market.!!Of!the!285!rates!that!were!filed,!
235!were!for!increases!of!10!percent!or!more!over!the!previous!12!months’!rates.
26
!
Although!the!filings!are!technically!confidential!until!reviewed!and!placed!on!file!per!
the!Commissioner’s!authority,!news!had!leaked!out!that!another!round!of!double-
digit!increases!was!in!the!offing.!!This!created!additional! p ressure!on!the!Patrick!
Administration!to!take!action!to!alleviate!increases!in!healthcare!costs.!!!
!
There!are!different!legal!opinions!as!to!whether!the!insurance!laws,!Ch.!176J,!give!
the!Commissioner!the!power!to!disapprove!rates.!The!language!of!the!statute!states!
that!“the!Commissioner!shall!disapprove”!the!rates!if!he!finds!they!are!“excessive,!
inadequate!or!unreasonable!in!relation!to!the!benefits!conferred….!“And,!there!is!
language!stating!that!the!Commissioner!can!disapprove!if!the!rates!are!not!
“actuarially!sound.”!!Some!insurance!law!experts!believe!that!the!language!itself!is!
more!consistent!with!traditional!“file!and!use”!insurance!statutes.!This!means!that!
after!waiting!a!requisite!period!of!time,!insurance!company!rates!automatically!go!
into!effect.!!Others!hold!the!view!that!the!language!is!very!clear!and!the!
Commissioner!has!the!legal!authority!to!disapprove!a!proposed!rate!on!one!of!the!
!
13!
enumerated!grounds.!This!view!holds!that!although!the!Commissioner!is!not!
empowered!to!establish!health!insurance!premiums,!he!has!the!power!to!
disapprove!a!proposed!rate!change,!although!that!had!never!been!done!in!the!
history!of!the-20!year-old!statute.!
!
Ultimately,!the!Administration!decided!that!under!the!statute,!if!the!Commissioner!
found!rates!to!be!unreasonable,!he!did!have!the!power!to!disapprove.!!On!April!1,!
2010,!the!Commissioner!disapproved!235!proposed!rates,!including!every!rate!that!
involved!a!hike!of!10%!or!more.!The!disapproved!rates!ran!the!gamut!from!10%!to!
increases!by!one!carrier!of!34%.
27
!
!
The!result!of!his!disapproval!was!fairly!explosive!within!the!carrier!and!provider!
communities.!!As!a!practical!matter,!when!the!Commissioner!disapproves!a!rate,!the!
carrier!cannot!charge!the!new!rate!but!must!continue!charging!the!existing!rates!
that!have!been!in!effect!for!the!preceding!12!months.!!Still,!the!new!contracts!
between!a!carrier!and!provider!containing!increases!in!prices!for!the!coming!12!
months!remained!legally!binding.!!Because!the!Commissioner!disapproved!the!
proposed!rate!hikes!a!carrier!could!not!pass!on!to!consumers!and!small!employers!
the!rate!increases!it!had!to!pay!the!providers.!!Those!few!carriers!with!rate!hikes!
below!10%!could!go!forward!and!market!their!plans!for!the!coming!12!months!to!
the!disadvantage!of!competitors.!
!
Those!rates!scheduled!to!go!into!effect!on!April!1!were!now!thrown!into!uncertain!
territory.!!Carriers!could!not!market!policies!that!were!to!begin!on!April!1!because!
they!did!not!know!the!price!they!would!be!able!to!charge!for!such!policies.!!Under!
the!law,!when!the!Commissioner!disapproved!a!rate,!carriers!have!10!days!to!appeal!
the!Commissioner’s!decision!to!the!independent!hearing!officers!within!the!Division!
of!Insurance.
28
!Every!carrier!appealed!its!denial!and!a!hearing!schedule!for!each!
carrier!was!set!up!that!would!take!place!over!many!weeks.!The!Attorney!General’s!
office!became!involved!as!an!intervener!in!each!hearing.!!Every!hearing!is!like!a!mini!
trial.!!The!carrier,!the!Attorney!General!representing!consumers,!and!counsel!
representing!the!Commissioner!defending!his!decision!are!all!involved.!!!
!
The!hearings!are!open!to!the!public!and!the!media.!In!addition,!prior!to!the!start!of!
these!administrative!hearings,!the!carriers!as!a!group!brought!the!Patrick!
Administration!to!the!state!Superior!Court!to!fight!the!Commissioner’s!directive!that!
carriers!could!not!charge!their!new!proposed!rates!but!instead!had!to!charge!the!old!
rates!pending!appeal.!The!carriers!lost!that!legal!battle!and!t he!superior!court!
upheld!the!Commissioner’s!position,!the!new!rates!could!not!be!charged!during!the!
appeals!process.!The!result!was!that!precious!time!was!passing,!it!was!now!well!
beyond!April!1,!and!the!aggrieved!carriers!were!stuck!with!charging!the!prior!year’s!
rates.!!The!proceedings!were!played!out!in!public!view!with!lots!of!media!coverage!
that!was!unfavorable!to!the!insurance!industry.!!
!
Then!the!unpredictable!occurred.!The!DOI’s!independent!hearing!officers!found!that!
while!the!Commissioner!had!the!power!to!disapprove!rates,!he!did!not!prove!
!
14!
“unreasonableness.”!As!a!result,!the!Commissioner’s!actions!disapproving!rates!
were!not!upheld.!!The!hearing!officers!found!that!the!rates!were!“actuarially!sound”!
and!therefore,!the!Commissioner’s!disapproval!was!overturned!in!the!first!decision!
that!came!down.!
!
Notwithstanding!this!legal!win,!the!clock!was!still!ticking!for!the!remaining!carriers!
who!claimed!that!they!were!losing!money!every!day!the!administrative!hearing!
process!dragged!on.!!And!despite!the!win,!all!carriers,!including!the!carrier!that!won,!
were!willing!to!negotiate!with!the!Patrick!Administration!for!a!set!of!rates!that!could!
be!agreed!upon.!!Also,!the!public!spotlight!that!had!been!turned!on!these!large!rate!
requests,!created!an!atmosphere!in!which!carriers!may!have!believed!it!to!be!in!
their!best!interests!to!settle!with!the!Administration,!not!charge!their!members!
retroactively,!and!move!on.!!!
!
Ultimately,!over!a!period!of!two!to!three!months,!all!but!one!of!the!carriers!reached!
a!settlement!with!the!state!and!agreed!on!rate!increases!that!were!generally!under!
10%.!!And,!no!settlement!contained!any!retroactive!rate!provisions.!!Even!the!one!
carrier,!with!which!the!state!did!not!settle,!did!not!charge!its!members!retroactively.!!
!
It!is!also!noteworthy!that!carriers!were!able!to!persuade!some!providers!to!re-open!
their!contracts!and!renegotiate!for!lower!prices!in!their!contracts.!!Indeed,!it!came!to!
light!that!the!contracts!themselves!had!provisions!that!permitted!re-opening!
negotiations!if!there!was!a!significant!change!in!the!regulatory!environment.!!
!
This!very!public!battle!over!insurance!rates!set!a!precedent!for!future!dealings!
between!the!Patrick!Administration!and!insurance!carriers.!!There!was!a!tacit!
understanding!going!forward!that!the!era!of!double-digit!rate!increases!was!over!
and!there!was!also!a!realization!that!the!Division!of!Insurance!would!continue!to!
take!a!long!and!serious!look!into!proposed!rates!that!seemed!to!be!based!on!
projections!for!cost!or!utilization!components!that!were!not!firmly!supported!by!
past!experience.!!Even!though!there!was!diminished!appetite!on!the!part!of!the!
Administration!for!another!round!of!rate!disapprovals!and!public!warfare,!state!
regulators!still!had!the!authority!to!request!additional!data!and!information!from!
carriers!for!any!proposed!rate!hike.!Such!requests!were!often!time-consuming!for!
carriers!to!fulfill,!and!rates!could!not!be!marketed!until!the!Commissioner!signaled!
he!would!not!disapprove.!This!time!consuming!process!could!result!in!competitors!
getting!to!market!with!approved!rates!while!the!carrier!from!which!additional!data!
was!requested!was!still!being!reviewed.!This!“quieter”!rate!review!process!resulted!
in!a!steady!decline!in!the!level!of!rate!increases!for!the!merged!market!and!by!2012,!
rate!increases!were!generally!in!the!5!to! 6! percent!range.!For!2013,!2014!and!2015,!
annual!average!rate!increases!ranged!from!1.8%!to!about!4.8%.
29,30
!(This!trend!
somewhat!mirrored!national!trends!in!that!healthcare!spending!was!lower!
nationally!during!the!same!period.)!(!Subsequently,!in!2015,!after!the!Patrick!
Administration!left!office,!the!Division!of!Insurance!reported!rate!increases!for!
premiums!in!the!merged!market!of!between!5.4!and!8.3%!from!the!end!of!2015!
!
15!
through!the!first!quarter!of!2017.!This!is!after!12!quarters!of!growth!below!4!
percent.
31
).!!
!
Following!this!period!of!intense!activity!around!insurance!premiums!in!the!merged!
market,!the!Massachusetts!legislature!passed!Ch.!288!of!the!Acts!of!2010!known!as!
the!Small!Business!Relief!Act.!!This!law!was!passed!to!give!some!immediate!and!
long-term!relief!to!the!small!business!community!in!the!health!insurance!market.!Ch.!
288!established!standards!for!medical!loss!ratios!(MLRs),!administrative!expenses!
and!surplus!earnings!for!insurance!companies.!!The!standards!for!MLRs!set!the!
amount!of!each!dollar!that!an!insurer!had!to!spend!on!health!claims.!!For!example,!a!
MLR!of!90%!meant!that!insurers!had!to!spend!90!cents!of!every!dollar!on!paying!
health!claims.!If!they!spent!less,!at!the!end!of!the!year,!their!customers!were!entitled!
to!rebates.!!The!MLRs!established!in!Ch.!288!are!tougher!than!those!established!in!
the!ACA!!(80%!for!the!individual!and!small!group!markets,!and!85%!for!the!large!
group!market!comprised!of!firms!with!more!than!50!employees)!and!are!currently!
at!88%.
32
!In!2014,!2015,!and!2016,!rebates!of!tens!of!millions!of!dollars!were!
returned!to!small!business!customers!for!MLRs!that!were!not!met!by!insurers.!!
!
BEYOND!OBAMACARE:!!CH!224!
!
The!insurance!imbroglios!and!Ch.!288!took!place!within!a!year!or!so!after!the!HCQCC!
and!Special!Commission!recommendations!calling!for!both!payment!reform!and!the!
establishment!of!an!independent!authority!to!control!the!growth!of!Massachusetts!
healthcare!costs.!There!were!serious!and!intense!deliberations!taking!place!within!
the!Patrick!Administration!and!the!Legislature!with!all!the!various!stakeholder!
groups!over!a!new!bill!that!would!embody!the!recommendations!of!the!HCQCC.!!!
!
In!2011!and!2012,!the!country!was!focused!on!the!implementation!of!the!ACA.!Its!
opponents!were!waging!battles!and!several!court!suits!were!filed!to!repeal!parts!or!
all!of!the!ACA.!!!While!Massachusetts!set!about!to!implement!the!ACA,!the!Patrick!
Administration!and!the!Massachusetts!House!and!the!Senate!were!also!considering!
payment!reform!bills.!!In!Massachusetts,!while!access!to!healthcare!continued!to!
gain!ground,!these!new!efforts!were!aimed!at!legislatively!enshrining!cost!control!
measures.!!
!
There!were!similarities!among!the!bills.!For!example,!they!all!encouraged!the!
formation!of!Accountable!Care!Organizations!(ACOs)!in!the!private!sector!and!the!
Group!Insurance!Commission,!and!required!their!establishment!for!MassHealth!
(Medicaid)!members.!!Generally,!ACOs!are!networks!of!doctors,!hospitals,!and!other!
health!care!providers!that!share!responsibility!for!coordinating!care!and!meeting!
health!care!quality!and!cost!metrics!for!a!defined!patient!population.!The!bills!also!!
promoted!alternative!payment!methodologies!(APMs)!in!the!private!sector!and!
required!them!in!the!public!sector.!APMs!can!be!defined!broadly!as!payments!to!
providers!based!on!improved!outcomes,!with!providers!sharing!in!some!downside!
!
16!
financial!risk,!rather!than!payment!based!solely!on!volume.!!However,!there!were!
also!some!early!differences!among!the!bills.!!The!most!notable!differences!involved!
issues!of!oversight,!implementation!and!enforcement!and!some!way!to!measure!
savings!in!healthcare!costs.!A!contentious!issue!in!the!debate!was!what!to!do!about!
hospitals!that!use!market!clout!to!extract!higher!prices!in!their!contract!negotiations!
with!carriers.!!There!was!a!proposed!surcharge!on!hospitals!that!could!not!justify!
their!higher!prices!that!did!not!ultimately!make!it!into!the!final!version!of!Ch.224.!!!
!
There!was!also!a!failed!plan!to!require!separate!contracting!for!sub sidia ry!hospitals!
of!systems!with!market!power.!This!issue,!separate!contracting,!was!also!
contentious!among!certain!hospitals!and!carriers.!Payers!claimed!they!were!forced!
to!pay!so-called!“downtown!rates”!to!the!community!hospitals!that!were!part!of!
large!systems,!because!large!systems!negotiated!as!single!entities!for!all!their!
hospitals.!!Payers!argued!that!they!should!be!able!to!negotiate!separate!contract!
rates!with!such!community!hospitals!and!thereby!pay!rates!more!in!line!with!lower!
cost!community!hospitals.!In!fact,!there!is!mixed!evidence!from!antitrust!cases!that!
separate!or!“component”!contracting!actually!leads!to!lower!rates!in!the!long!run.
33
!!
!
!While!the!Patrick!Administration!did!not!initially!favor!the!creation!of!a!separate!
agency!to!oversee!cost!control!implementation,!it!did!support!the!need!for!a!
coordinating!body!made!up!of!government!and!stakeholder!organizations.!!Some!in!
the!legislature,!however,!favored!the!creation!of!a!separate!and!independent!agency!
to!carry!out!implementation!and!enforcement.!!Certain!legislative!leaders!wanted!to!
ensure!that!cost!control!efforts!would!survive!the!Patrick!Administration!and!its!
pro-cost-control!orientation.!!Many!in!the!legislature!believed!that!only!an!
independent!agency,!not!dependent!on!budgetary!appropriations,!and!not!subject!to!
the!control!of!the!executive!branch!would!be!an!effective!vehicle!for!long!term!
progress.
34
!!
!
In!addition,!there!was!the!issue!of!how!to!measure!progress!in!restraining!
healthcare!costs.!!!In!this!regard!the!legislature!and!consumer!advocates!felt!
strongly!that!numerical!goals!should!be!part!of!the!effort!to!control!costs.!!There!had!
been!much!evidence!collected!that!the!growth!of!Massachusetts’!healthcare!costs!
significantly!outpaced!the!growth!of!the!state’s!economy.!Going!forward,!there!was!
one!estimate!that!showed!that!unrestrained,!healthcare!costs!would!grow!from!
about!$72!billion!in!2012!to!over!$140!billion!by!2022.!!If!such!costs!were!
constrained!to!the!rate!of!growth!in!the!state’s!economy,!the!increase!was!projected!
to!grow!from!$72!billion!in!2012!to!almost!$99!billion!by!2022.!!!Overtime,!between!
2012!and!2022,!this!estimate!pegged!the!savings!at!almost!$200!billion.
35!
It’s!
unclear!who!first!came!up!with!the!idea!to!tie!the!growth!of!healthcare!costs!to!
growth!in!the!state’s!economy!but!the!relationship!between!the!two!had!been!
discussed!for!many!years!and!was!broadly!known.!It!appears!that!the!benchmark!
feature!itself!was!first!presented!in!a!House!bill.
36
!
!
According!to!Professor!David!Cutler!of!Harvard,!who!is!currently!a!member!of!the!
HPC,!there!were!two!good!reasons!for!ultimately!including!a!target!growth!
!
17!
benchmark!in!the!formation!of!Ch.!224.!First,!there!is!“virtue”!in!having!a!number!to!
establish!clarity!in!terms!of!achieving!a!specific!goal.!Second,!having!a!benchmark!
figure!was!a!way!of!stabilizing!healthcare!costs!for!the!public!sect or.
37
!In!addition,!
there!was!a!need!at!the!time!to!assure!the!public!that!this!reform!would!save!money!
for!the!Commonwealth!in!terms!of!reducing!the!growth!of!healthcare!costs.!
Therefore,!the!benchmark!was!a!way!of!measuring!the!savings!of!the!proposed!
legislation.!
!
There!were!internal!discussions!about!the!inclusion!of!the!benchmark!in!the!Patrick!
Administration.!!Some!believed!that!a!benchmark!would!become!a!guaranteed!rate!
of!return!for!an!industry!that!was!not!a!public!utility!where!rate!of!return!was!
needed!to!preserve!the!means!of!production.!This!would!be!the!first!time!that!a!state!
government!was!stipulating!the!growth!rate!of!any!private!sector.!Also,!by!tying!
such!growth!to!the!economy,!the!benchmark!was!assuring!upward!growth!
regardless!of!whether!or!not!it!was!warran t ed.!At!the!end!of!the!day,!however,!the!
Administration!and!the!Legislature!agreed!to!the!benchmark!concept!as!a!practical!
solution!to!controlling!healthcare!costs.!Keeping!costs!in!line!with!economic!growth!
would!be!a!significant!improvement!over!the!then!current!situation.!!The!only!other!
alternative!would!have!been!a!return!to!rate!regulation,!which!was!not!a!serious!
option!in!the!Patrick!Administration!or!the!Legislature.!!
!
Interestingly,!the!benchmark!concept!though!not!embraced!with!great!fervor!by!
carriers!and!providers!was!not!fought!as!vociferously!as!might!have!been!expected.!!
Although!these!stakeholders!opposed!the!concept,!once!the!concept!became!a!
virtual!certainty,!the!issue!was!over!what!it!should!be!rather!than!efforts!to!remove!
it!from!the!legislation.!One!reason!powerful!providers!may!have!been!willing!to!go!
along!with!the!benchmark!is!because!the!concept!“baked!in”!existing!wide!variations!
in!healthcare!pricing.!!The!benchmark!did!not!call!for!a!roll!back!in!prices;!rather!it!
was!concerned!with!future!increases.!In!Massachusetts,!there!exist!wide!variations!
in!healthcare!prices,!which!many!attribute!to!the!exercise!of!market!power!by!some!
of!the!largest!healthcare!systems.!!The!establishment!of!growth!targets!or!ceilings!
going!forward!did!not!disturb!the!pricing!disparities!that!exist!between!more!
powerful!and!less!powerful!providers.!!Payers!would!still!be!paying!providers!with!
so-called!market!clout!much!more!money!relative!to!their!competitors.!!
!
And!so!it!came!to!pass!that!6!years!after!the!passage!of!Romneycare!and!2!years!
after!the!passage!of!the!ACA,!Governor!Patrick!signed!Ch.!224!into!law.!On!August!4,!
2012,!there!was!a!triumphant!signing!ceremony!in!the!Great!Hall!of!the!
Massachusetts!State!House!jammed!pack!with!stakeholders!and!media.!!
!
!
18!
!
!
Key!Features!of!Ch.!224!!
!
There!are!many!important,!progressive!provisions!in!the!350!pages!of!Ch.!224.!!
Although!this!article!focuses!on!just!a!few!of!those!provisions,!it!is!helpful!to!place!
such!features!–!the!benchmark!and!its!enforcement!by!the!HPC!--!in!the!context!of!
some!other!major!components!of!the!legislation.!!In!order!to!appreciate!the!overall!
framework!of!Ch.!224!one!needs!to!understand!the!belief!system!within!which!it!
was!developed.!!
!
The!overriding!principle!behind!Ch.!224!was!the!belief!that!wide!scale!adoption!of!
payment!reform!is!key!to!reducing!the!growth!of!healthcare!costs.
36!
To!some!in!the!
state!legislature,!payment!reform!was!a!panacea!to!the!intractable!problem!of!high!
healthcare!costs
36!
There!was!good!evidence!produced!through!the!HCQCC!hearings!
and!Special!Commission!that!not!only!was!there!significant!growth!in!fee!for!service!
healthcare!costs,!but!also!there!was!significant!waste,!estimated!at!25%!to!50%!of!
healthcare!spending.
20!
In!addition,!in!2010,!under!the!requirements!of!Ch.!305
38!
the!
Attorney!General!started!issuing!annual!reports!on!cost!trends.!Her!reports!
documented!that!there!was!no!correlation!between!high!prices!and!quality!in!the!
healthcare!marketplace.!The!relationship!could!not!be!explained!by!variables,!such!
as,!underlying!costs,!teaching!status!or!patient!acuity.
39!
These!findings!gave!more!
support!for!the!notion!that!prices!rather!than!utilization!drove!increases!in!
spending!and!fee!for!service!payment!systems!were!producing!high!health!care!
!
19!
prices!without!concomitant!quality.!This!bolstered!the!view!that!payment!reform!
was!an!imperative.!!
!
The!development!of!Ch.!224!was!also!taking!place!against!the!backdrop!of!the!
implementation!of!the!ACA.!!Although,!as!a!practical!matter,!the!ACA!did!little!in!its!
initial!years!in!the!payment!reform!arena,!there!was!a!great!deal!of!conversation!
around!the!concept!and!the!prospective!formation!of!Accountable!Care!
Organizations!or!ACOs.!As!a!matter!of!structure,!an!ACO,!made!up!of!a!group!of!
providers,!physicians!and!hospitals,!who!are!coordinating!care!for!a!group!of!
patients,!under!a!financial!arrangement!that!includes!partial!risk-sharing,!is!the!
poster!child!for!payment!reform.!!So!the!conversations!around!Ch.!224!were!taking!
place!within!a!national!conversation!about!the!promise!of!ACOs!to!control!costs!and!
theoretically!to!provide!better!quality!care.!!
!
The!issue!for!the!framers!of!Ch.!224!was!how!to!promote!payment!reform!through!a!
legislative!vehicle.!!Decisions!were!made!relatively!early!on!that!a!mandatory!or!
compulsory!approach!that!required!the!adoption!of!alternative!payment!
!methodologies!was!not!the!most!desirable!route!to!travel.!!This!was!probably!
because!forcing!payment!reform!on!providers!and!carriers!would!likely!meet!with!
stiff!resistance!from!the!industry!as!well!as!risking!consumer!and!perhaps!labor!
backlash.!!Up!until!this!time,!healthcare!reform!legislation!in!Massachusetts!had!
been!developed!with!input!from!a!broad!array!of!savvy!stakeholders.!!And!even!
though!providers,!carriers,!businesses,!advocates!or!others!were!oftentimes!not!
satisfied!with!a!legislative!outcome,!they!never!gave!up!their!seat!at!the!negotiating!
table!and!their!interests!were!not!steamrolled!or!ignored.!
!
Discussions!within!the!Patrick!Administration!looked!carefully!at!whether!payment!
reform!should!be!a!mandatory!feature!of!Ch.!224.!The!final!decision!from!the!
executive!branch!was!to!follow!a!non-prescriptive!approach.!One!of!the!reasons!was!
the!great!uncertainty!such!measures!would!inject!into!the!healthcare!marketplace.!
No!one!could!predict!how!global!or!bundled!payments!would!affect!access!to!
healthcare!by!consumers.!A!number!of!officials!remembered!the!failed!experience!
with!capitated!payments!in!the!late!1980’s!and!early!1990’s!and!were!not!sure!how!
this!new!era!would!differ!from!that!period.!!The!earlier!period!was!characterized!
nationally!by!consumer!backlash!and!litigation!over!what!was!regarded!as!denials!of!
care!by!insurance!executives,!although!Massachusetts!was!spared!the!worst!of!such!
practices!and!its!subsequent!discord.!!
!
So!if!a!mandatory!directive!toward!payment!reform!was!not!in!the!offing,!what!was!
the!best!alternative?!!The!framers!of!Ch.!224!saw!the!statute’s!mission!to!control!
costs!as!a!long-term!undertaking.!Success!would!take!place!over!a!period!of!years.!
There!was!no!one!silver!bullet!to!speed!adoption!of!payment!reform!and!slow!down!
the!growth!of!healthcare!costs.!!One!high-level!legislative!aide!talked!about!Ch.!224!
as!trying!to!create!a!perfect!“good!storm,”!that!would!“push”!rather!than!“shove”!the!
industry!toward!slowing!cost!growth.
36
!!
!
!
20!
One!major!industry!stakeholder!succinctly!describes!Ch.!224!as!follows:!
!
! Chapter!224!has!the!ambitious!goal!of!bringing!health!care!spending!growth!
! in!line!with!growth!in!the!state’s!overall!economy.!It!aims!to!do!so!through!a!
! number!of!mechanisms,!including!the!creating!of!commissions!and!funds,!the!
! adoption!of!alternative!payment!methodologies,!increased!transparency!for!
! consumers,!a!focus!on!wellness!and!prevention,!an!expansion!of!the!primary!
! care!workforce,!health!information!technology!improvements,!and!health!
! resource!planning,!among!other!initiatives.
40
!
!
There!are!many!components!in!Ch.!224!that!are!intended!to!intersect!with!one!
another!to!“push”!the!industry!along!over!time!to!achieve!a!transformation!in!the!
way!health!care!is!delivered!and!paid!for!toward!outcomes!of!lower!costs!and!better!
quality.!!The!primary!provisions!are!described!below.!
!
(1) New!oversight!agencies!set!statewide!spending!goals!and!monitor!
provider!organizations.!
! !
The!Health!Policy!Commission!
!
Ch.!224!created!the!Health!Policy!Commission!(HPC)!as!an!independent!
agency!residing!in!but!not!under!the!control!of!the!state’s!Executive!Office!of!
Administration!and!Finance!(A&F).!!The!HPC!is!governed!by!a!diverse!11-
member!board!appointed!by!various!state!officials!as!specified!in!the!law.!!
!
HPC!Board!members!are!not!compensated!and!may!not!have!any!financial!stake!
in!or!affiliation!with!a!health!care!entity.
41
!This!is!intended!to!create!a!board!free!
of!real!or!potential!conflicts!of!interests.!!It!also!means!that!no!one!currently!
working!for!an!insurance!company!or!hospital!or!any!other!type!of!provider!sits!
on!the!board.!The!current!board!chair!is!the!esteemed!Professor!Stuart!Altman,!
the!Sol!C.!Chaikin!Professor!of!national!Health!Policy!at!Brandeis!University,!who!
has!served!as!health!policy!advisor!to!five!Presidents,!authored!countless!articles!
and!served!on!numerous!state!and!federal!health!policy!task!forces!and!
commissions.!!
!
In!December!2012,!the!Board!named!David!Seltz!as!its!first!Executive!Director.!
Mr.!Seltz!was!instrumental!in!drafting!Ch.!224!when!he!served!as!policy!advisor!
to!the!then!Massachusetts!Senate!President!Therese!Murray.!!
!
The!HPC!was!funded!through!2016!by!a!one-time!assessment!on!hospitals!and!
insurers!that!raised!$11.25!million!for!the!HPC!over!four!years.!Beginning!July!of!
2016,!the!HPC!is!funded!through!further!assessments!on!the!health!care!
industry.
42
Its!most!important!responsibilities!include!establishing!the!annual!
cost!growth!benchmark,!monitoring!progress!towards!and!enforcing!the!
benchmark.!!
!
!
21!
The!Center!for!Health!Information!and!Analysis!
!
Ch.!224!also!created!a!sister!agency!to!the! HPC,!the!Center!for!Health!
Information!and!Analysis!(CHIA).!CHIA!is!an!independent!state!agency!led!by!
an!Executive!Director!who!is!appointed!by!the!Attorney!General,!the!Auditor,!
and!the!Governor!for!a!term!of!five!years.!In!2012,!Aron!Boros!was!appointed!the!
first!Executive!Director!of!CHIA,!which!is!funded!by!an!assessment!on!hospitals,!
ambulatory!surgical!centers(ASCs)!and!certain!purchasers!of!ASC!services!such!
as!commercial!health!plans.!In!2016,!Ray!Campbell,!the!acting!Executive!Director!
of!the!Massachusetts!Group!Insurance!Commission,!was!appointed!by!
Massachusetts!Governor!Charlie!Baker!to!head!up!CHIA.!!
!
CHIA’s!responsibilities!include!measuring!the!annual!change!in!the!state’s!total!
health!care!expenditures!(THCE),!which!is!the!basis!for!measuring!the!state’s!
performance!against!the!HPC’s!annual!cost!growth!benchmark.!Very!
importantly,!CHIA!is!also!responsible!for!identifying!payers!or!providers!whose!
performance!falls!outside!the!benchmark!parameters!and!providing!that!
information!confidentially!to!the!HPC!for!further!action.
43
!
!
Under!Ch.!224,!CHIA!calculates!THCEs!as!the!annual!total!of!all!health!care!
expenditures!from!public!and!private!sources,!including!all!medical!
expenditures,!public!and!private,!paid!to!providers,!all!patient!cost-sharing!
amounts,!such!as!deductibles!and!co-payments,!and!the!net!cost!of!private!health!
insurance.
44
!If!CHIA!identifies!a!health!care!entity!whose!spending!is!excessive!
and!which!threatens!the!ability!of!the!Commonwealth!to!meet!the!benchmark,!
the!HPC!can!require!the!entity!to!submit!a!Performance!Improvement!Plan.!
!
!
(2) The!Health!Policy!Commission!calculates!and!enforces!a!spending!
benchmark!
! !!!
The!benchmark!is!established!by!a!formula!tied!to!the!growth!in!the!state’s!long-
term!potential!gross!state!product!(PGSP),!an!estimate!that!is!prepared!by!the!
state’s!Executive!Office!of!Administration!and!Finance.!Under!Ch.!224,!the!
benchmark!for!calendar!years!(CY)!2013-2017!was!equal!to!the!PGSP!which!is!
3.6%.!!For!CY!2018!to!2022,!the!benchmark!is!equal!to!PGSP!!minus!0.5%,!and!is!
currently!3.1%.!For!CY!2023!and!beyond,!the!benchmark!is!set!to!PGSP!but!under!
the!legislation,!can!be!modified!by!the!HPC!to!any!figure.
45
![By!way!of!
comparison,!overall!United!States!healthcare!spending!is!projected!by!the!Centers!
for!Medicare!and!Medicaid!Services!(CMS)!to!grow!at!a!rate!of!5.8%!per!year!from!
2015!to!2025.
31
!]!!
!
As!stated!above,!under!Ch.!224,!the!HPC!can!require!an!entity!to!submit!a!
Performance!Improvement!Plan!(PIP).!!PIPs!must!identify!the!factors!that!led!to!
!
22!
cost!growth!and!include!specific!cost!savings!measures!for!the!entity!to!
undertake!within!18!months.!!
!
The!HPC!is!empowered!to!approve!a!PIP!that!has!a!reasonable!expectation!of!
successful!implementation.!!However,!if!the!HPC!determines!that!a!PIP!is!not!
acceptable,!the!entity!may!be!requested!to!resubmit!another!PIP!for!approval.!!
!
If!the!HPC!determines!that!a!health!care!entity!has!willfully!neglected!to!file!a!
required!plan,!or!failed!to!file!a!PIP!in!good!faith,!or!failed!to!implement!a!PIP!in!
good!faith,!or!knowingly!failed!to!provide!or!falsify!information!required!by!the!
HPC,!the!HPC!may!assess!a!civil!penalty!on!the!health!care!entity!of!not!more!than!
$500,000.!The!HPC!website!is!supposed!to!include!the!names!of!entities!required!
to!file!a!PIP.!!Recently,!the!HPC!has!issued!regulations!governing!the!PIP!process.!!
All!the!information!provided!to!the!HPC!under!a!PIP!process!is!confidential!and!
cannot!be!disclosed!without!consent!except!in!summary!form!or!when!the!HPC!
believes!such!disclosure!is!in!the!public!interest.!The!HPC!regulations!state!t hat!
such!information!is!not!a!public!record.
46
!To!date,!no!entity!has!been!publicly!
named!to!file!a!PIP.!
!
(3) The!Health!Policy!Commission!registers!and!monitors!provider!
organizations!
!
Ch.!224!also!requires!the!central!registration! of!provider!organizations,!especially!
Risk!Bearing!!Provider!Organizations!(RBPOs)!which!are!organizations!that!
engage!in!risk!bearing!contracts!with!carriers.!Unless!exempt!due!to!small!size,!
provider!organizations!are!required!to!give!detailed!information!about!their!
organizational!structure,!finances!and!operations!to!the!HPC!and!to!register!with!
the!HPC!for!two!year!terms.!This!information!and!data!will!be!used!by!the!HPC!
when!determining!the!need!for!an!entity!to!file!a!performance!plan.!!!
!!
In!addition,!RBPOs!must!provide!the!HPC!with!an!annual!risk!certificate!from!the!
state!Division!of!Insurance!(DOI).!In!order!to!obtain!a!risk!certificate!from!the!
DOI,!RBPOs!must!demonstrate!that!they!are!not!assuming!financial!risk!that!could!
threaten!their!financial!solvency!when!entering!into!downside!risk!contracts!with!
insurance!companies.
47
!The!“muscle”!in!this!provision!is!that!insurance!carriers!
are!prohibited!from!entering!into!downside!risk!contracts!with!RBPOs!unless!the!
RBPO!has!obtained!a!risk!certificate!or!a!risk!certificate!waiver.
48
!The!purpose,!of!
course,!is!to!insure!that!providers!do!not!take!on!significant!performance!risk!that!
they!may!not!be!able!to!fulfill.
49
!!
!
Under!Ch.!224,!provider!organizations!of!all!types!are!required!to!inform!the!HPC,!
CHIA!and!the!AG!before!making!material!changes!(Material!Change!Notices!or!
MCN)!to!their!governance!structure!or!operations.!Such!changes!include!mergers,!
acquisitions,!and!corporate!affiliations.
47
!Providers!must!give!60!days!notice!to!
these!regulatory!authorities!before!making!any!such!changes.!!!
!
23!
!
If!the!proposed!changes!are!likely!to!significantly!impact!the!competitive!market!
or!the!state’s!ability!to!meet!the!cost!growth!benchmark,!the!HPC!can!conduct!a!
Cost!and!Market!Impact!Review!(CMIR).!In!addition,!should!actual!health!care!
cost!growth!exceed!the!benchmark!in!a!given!year,!the!HPC!can!also!conduct!a!
CMIR!on!any!organization!identified!by!CHIA!as!having!excessive!spending.!
!
!!!!!If!the!HPC!embarks!on!a!CMIR!of!any!proposed!transaction,!it!must!issue!a!
preliminary!report!and!identify!any!provider!entity!that!has!a!dominant!market!
share!for!the!services!it!provides;!charges!prices!for!services!that!are!materially!
higher!than!the!median!prices!charged!by!other!providers;!and!has!a!health-
status-adjusted!Total!Medical!Expenditures!(TME)!that!is!materially!higher!than!
the!median!for!other!providers.
47
!As!of!mid-2017,!the!HPC!had!received!
approximately!82!Notices!of!Material!Change!and!it!has!conducted!CMIRs!on!five!
of!those!notices.
50
!The!applications!of!the!entities!filing!such!notices,!the!type!of!
transaction!and!the!HPC’s!CMIR!reports!are!all!public!information.!!
!
In!addition,!the!HPC!must!refer!to!the!Attorney!General!any!entity!that!meets!the!
last!three!criteria.!Similarly,!under!Ch.!224,!the!Attorney!General!can!investigate!
suspected!unfair!competitive!conduct!or!anti-competitive!behavior!and!issue!a!
report!about!such!conduct!such!to!the!HPC.!!Of!course,!none!of!this!affects!the!
Attorney!General’s!powers!under!exiting!state!or!federal!antitrust!or!consumer!
protection!laws!to!bring!actions!directly!on!behalf!of!the!Commonwealth!without!
any!involvement!or!referral!being!made!by!or!to!the!HPC.!!
!
(4) Statewide!health!care!entities!must!transition!into!Alternative!Payment!
Contracts!
!
Ch.!224!requires!the!Health!Connector,!the!Group!Insurance!Commission!(GIC),!
and!the!state!Office!of!Medicaid!to!implement!APMs!to!the!maximum!extent!
possible.!!Specific!enrollment!goals!were!set!for!the!Office!of!Medicaid.!By!2015,!
80%!of!Medicaid!members!were!to!be!enrolled!in!APMs.
51
!Consistent!with!Ch.!
224,!the!GIC!which!manages!health!and!other!benefits!for!more!than!430,000!
public!employees,!retirees,!and!their!families,!has!been!moving!forward!with!a!
project!to!require!its!plans!to!meet!specific!numerical!targets!for!the!percentage!
of!members!covered!by!risk-based!contracts.!By!FY!2016,!roughly!50%!of!its!
members!were!covered!by!such!contracts.
52
!!
!
(5) Requires!carriers!and!providers!to!make!price!information!transparent!
for!Consumers!
!
Another!important!feature!of!Ch.!224!concerns!price!transparency.!!Ch.!224!
requires!carriers!and!providers!to!make!prices!available!to!consumers.!!!The!
issue!here!is!that!even!with!the!growth!of!High!Deductible!Health!Plans!and!
significant!increases!in!out-of-pocket!spending,!consumers!are!still!in!the!dark!
!
24!
when!it!comes!to!the!price!of!healthcare.!!As!a!general!proposition!there!is!also!
virtue!in!making!healthcare!prices!transparent!based!on!the!belief!that!markets!
function!better!when!prices!are!known!and!not!secret ! or!hard!to!obtain.!!
!
Ch.!224!requires!that!carriers!make!online!cost!estimator!tools!available!to!their!
members!so!that!members!can!shop!for!common!procedures!and!see!the!amount!
of!money!such!procedures!will!cost!the!consumer!and!how!much!of!their!
deductibles!will!remain.!!Providers,!including!hospitals,!physicians,!and!dentists!
are!also!required,!upon!request,!to!provide!information!about!their!charges!or!if!
a!patient!is!insured!on!the!amount!of!money!the!patient’s!insurer!is!paying!for!
the!procedure!
!
(6) The!Health!Policy!Commission!holds!annual!public!hearings!to!monitor!
cost!drivers!and!growth!
!
There!are!numerous!public!reporting!requirements!prescribed!by!Ch.!224.!
Perhaps!the!most!important!are!the!Annual!Cost!Trends!Hearings!and!Report.!!
Under!Ch.!224,!the!HPC!is!required!to!hold!public!hearings!based!on!CHIA’s!
annual!report!on!the!Massachusetts!health!care!market.!!The!hearings!which!are!
held!in!October!examine!health!care!provider!and!private!and!public!health!care!
payer!costs,!prices,!and!trends!with!particular!attention!to!factors!that!
contribute!to!cost!growth.!!Pursuant!to!the!law,!each!year!a!comprehensive!set!of!
witnesses!testify!and!present!information!under!oath.!!HPC!!must!then!publish!
an!annual!report!by!December!31!that!is!based!on!the!hearings!and!testimony!
and!which!describes!spending!trends,!underlying!factors!and!recommendations!
for!strategies!to!increase!health!system!efficiency.
30
!
!
!
How!is!it!Going!So!Far?!
!
While!Ch.!224!is!still!in!its!early!years!of!implementation,!there!is!some!evidence!that!
it!is!producing!results!that!are!going!in!the!direction!intended!by!its!framers.!The!
statute!imposes!specific!annual!ceilings!on!healthcare!cost!growth!and!relies!
primarily!on!market!players!to!adopt!payment!reform!strategies!to!stay!within!the!
specific!cost!growth!goal.!!The!law!does!not!require!that!each!provider!or!payer!
reach!a!specific!goal!in!terms!of!cost!control,!rather,!it!sets!a!general!goal!for!the!
industry!and!then!seeks!to!measure!the!performance!of!individual!players!who!may!
be!impeding!the!attainment!of!the!industry!goal.!!
!
In!doing!so,!there!are!a!number!of!ways!that!Ch.!224!relies!on!a!bully!pulpit!or!!
“name!and!shame”!paradigm!to!accomplish!results.!!In!the!reports!of!CHIA!and!the!
HPC!there!is!some!amount!of!entity!specific!data!available!to!the!public!and!to!
industry!watchdogs!and!there!is!the!potential!under!the!law!for!more!such!
!
25!
transparency,!such!as!the!public!posting!of!entities!who!are!under!a!PIP!or!the!
entities!that!have!filed!Material!Change!Notices.!!
!
As!of!October!2015,!CHIA!had!supplied!the!HPC!with!a!confidential!list!of!entities!
that!experienced!excessive!cost!growth,!including!20!providers!and!five!insurers!for!
2012!and!2013.!!While!the!list!is!confidential!by!l a w,!according!to!Seltz,!the!name!of!
any!entity!selected!for!a!PIP!would!be!made!public.
53
!As!no!PIPs!were!required!in!
2016,!2017!will!be!the!first!year!that!industry!outliers!could!be!required!to!develop!
PIPs!and!that!list!should!be!made!public!under!the!HPC!recently!adopted!
regulations.!!
!
Second,!in!2015,!the!proposed!mergers!of!Partners!Healthcare!Systems!(Partners)!
and!South!Shore!Hospital!System!and!Partners!and!Hallmark!Health!System!(on!
Massachusetts!north!shore)!presented!an!unexpected!opportunity!for!the!HPC!to!
perform!a!highly!visible!and!influential!CMIR.!!As!of!mid-2017,!the!HPC!had!received!
over!80!Material!Change!Notices,!see!supra,#pages!23,!but!the!Partners!proposals!
were!by!far!the!most!important!from!a!market!conduct!standpoint.!The!high!quality!
work!produced!by!the!HPC!on!the!likely!effects!on!healthcare!costs!of!the!proposed!
mergers!provided!the!court!with!an!objective!analysis!that!was!relied!upon!in!its!
decision!not!to!approve!a!proposed!settlement!in!that!case.
54
!Moreover,!it!gave!the!
public!a!transparent!and!easy!to!understand!view!of!the!likely!impacts!of!the!
proposal:!higher!prices!and!higher!costs.!Perhaps!most!importantly,!its!analysis!in!
the!Partners!case!established!the!HPC!as!an!objective!and!competent!watchdog!in!
the!pursuit!of!its!statutory!mandate!to!monitor!and!control!the!growth!of!healthcare!
costs!in!Massachusetts.!!
!
Third,!the!decision!to!not!mandate!APMs!in!the!private!sector,!but!rather!to!
encourage!goals!for!APM!adoption,!may!have!been!the!right!call,!although!the!
adoption!of!APMs!by!both!government!and!the!commercial!sectors!has!not!been!at!a!
rapid!pace.!!Although!there!are!no!penalties!for!failure!to!meet!APM!goals,!if!an!
entity!ends!up!with!cost!growth!that!is!an!outlier!compared!with!the!benchmark,!the!
“encouragement”!of!APM!goals!could!become!more!prescriptive!in!a!subsequent!PIP.!!
David!Seltz,!HPC!Executive!Director!recently!said,!somewhat!tongue!in!cheek,!that!
entities!called!to!prepare!PIPs!should!not!regard!such!as!being!called!to!the!
principal’s!office!as!much!as!being!called!in!to!see!the!guidance!counselor.
55
!But,!
earlier!in!an!article!in!the!Boston!Business!Journal,!HPC!member!Professor!David!
Cutler!said!the!opposite:!“….it’s!important!that!we!be!clear!about!what!it!is!that!will!
get!you!sent!to!the!principal’s!office.”
53
!Either!way,!it!seems!the!HPC!can!use!the!PIP!
provision!as!a!way!to!move!the!market!toward!APM!adoption!at!a!faster!pace.!!
!
The!state!Medicaid!Office!and!the!GIC!are!moving!forward!toward!meeting!their!
APMs!goals!and!objectives.
56
!APM!coverage!among!MassHealth!managed!care!
organizations!(MCOs)!and!primary!care!clinician!plans!(PCC)!is!now!about!32!and!
23!percent,!respectively.
57
!In!addition,!MassHealth!has!some!ambitious!ACO!pilot!
projects!involving!shared!savings/risk!arrangements!with!quality!incentives!to!
promote!the!adoption!of!APMs!in!this!public!program.
57
!!It!should!be!noted,!
!
26!
however,!that!Massachusetts!anticipates!that!investments!in!these!new!programs!
will!continue!to!be!supported!by!a!waiver!worth!$52.4!billion!that!had!been!
negotiated!with!the!Obama!administration.!!
!
Among!commercial!HMOs,!the!rate!of!APM!coverage!increased!8!percentage!points!
between!2012!and!2014!and!the!three!major!commercial!payers!met!the!HPC’s!2016!
target!of!at!least!60%!of!each!payer’s!HMO!lives!covered!by!APMs.!However,!in!
2016,!the!HPC!noted!that!the!expansion!of!APM!coverage!had!stalled!in!the!
commercial!sector!and!it!recommended!two!specific!goals:!(1)!all!commercial!
payers!should!increase!the!use!of!global!APMs!to!pay!for!at!least!80!percent!of!their!
health!maintenance!organization!(HMO)!–!covered!lives!in!2017;!and!(2)!payers!and!
providers!should!begin!introducing!APMs!for!preferred!provider!organizations!
(PPO)!products!with!a!goal!of!reaching!33!percent!of!their!PPO!loves!in!2017.
57,58
!
!!
Overall,!the!rate!of!Massachusetts!residents!covered!by!APMs!declined!in!2015!to!
36%!from!38%.!!Even!APM!coverage!across!commercial!plans!fell!to!58%from!60%.!
According!to!the!HPC,!this!drop!in!APM!coverage!within!HMOs!is!due!largely!to!a!
drop!in!HMO!members!among!the!largest!health!plans!in!the!state.
57
!
Notwithstanding!the!HPC’s!goal!of!80%!HMO!coverage!b y! 2017,!that!objective!does!
not!seem!attainable.!!
!
With!respect!to!PPO!APM!members!on!the!commercial!side,!the!results!are!
disappointing.!!In!2015,!the!commercial!PPO!market’s!APM!coverage!overall!rate!
was!1!percent,!although!some!payers!report!APM!coverage!in!PPO!plans!ranging!
from!11%!percent!to!26%.
57
!It!is!only!recently!that!health!plans!have!begun!to!try!
and!expand!APMs!to!PPO!products.!A!major!challenge!in!the!application!of!APMs!to!
PPO!markets!is!trying!to!link!patients!to!a!given!primary!care!provider!(PCP)!since!
PPO!members!are!not!required!to!select!a!PCP.
57
!!
!
The!evidence!to!date!on!the!use!of!APMs!to!reduce!costs!is!still!inconclusive.!Some!
believe!that!when!providers!are!presented!with!lower!payments!in!the!form!of!
APMs,!providers!may!forgo!costly!investments!in!a!new!building!or!research!but!do!
not!zero!in!on!reducing!the!unit!costs!of!healthcare.!!Instead!providers!look!at!
potential!costly!inputs!and!make!decisions!on!which!inputs!to!forgo.!!Nonetheless,!
these!observers!also!believe!that!APMs!can!have!a!modest!effect!on!cost!control.!For!
example,!most!hospitals!are!now!investing!heavily!in!patient!discharge!planning!to!
avoid!costly!re-admissions!(although!this!likely!reflects!Medicare!penalties!rather!
than!Ch.!224).!They!are!also!looking!at!better!ways!to!manage!high!cost!chronically!
ill!patients!as!well!as!focusing!on!better!management!of!the!severely!mentally!
impaired.
37
!On!balance,!it!appears!that!not!mandating!APMs!for!the!private!sector!
was!the!right!decision!as!the!market!is!experimenting!albeit!slowly!with!APM!
adoption.!!Since!the!prospect!of!unintended!consequences!is!always!a!problem!in!
healthcare!market!changes,!strategies!that!avoid!abrupt!changes!can!be!a!safer!route!
to!travel.!
!
!
27!
Fourth,!the!notion!of!establishing!an!independent!agency!with!its!own!funding!
source!and!whose!leadership!is!not!dependent!on!who!occup ies! the!Governor’s!
office!appears!to!have!been!a!sound!decision.!!In!January!2016,!the!governorship!of!
Massachusetts!changed!from!Democrat!Deval!Patrick!to!the!moderate!Republican!
Charlie!Baker.!The!new!administration!has!not!pursued!major!legislative!or!
administrative!policy!changes!to!the!HPC!or!CHIA,!although!the!new!administration!
appears!not!to!be!continuing!the!previous!administration’s!handling!of!insurance!
rate!increases.!![The!Administration!did!propose!governance!changes!to!CHIA!and!
while,!ultimately,!CHIA!remained!independent,!it!now!has!an!Oversight!Council.]!As!!
noted!previously,!supra#at!15-16,!the!state!reported!premium!increases!in!the!
merged!market!of!between!5.4%!and!8.3!%!from!the!end!of!2015!through!the!first!
quarter!of!2017!and!there!are!strong!indications!that!payers!are!preparing!for!a!
return!to!double-digit!increases!in!the!merged!market!which!they!are!blaming!in!
part!on!drug!prices.
59
!!
!
That!said,!recently,!in!an!effort!to!more!directly!attack!high!healthcare!costs,!
Governor!Baker!issued!a!series!of!proposals!including!one!that!would!limit!the!
percent!increase!that!insurers!could!agree!to!pay!to!providers!based!on!the!size!of!
the!provider.!!The!largest!providers!would!be!unable!to!obtain!any!increase!under!
his!“conversation!starter”!proposal.
60
!!
!
Fifth,!the!overall!idea!of!a!benchmark!itself!is!thought!by!some!to!provide!leverage!
to!carriers!in!provider–carrier!contract!negotiations.
61
!Indeed,!the!presence!of!the!
3.6%!benchmark!was!articulated!by!some!carrier!representatives!to!the!Patrick!
Administration!as!a!helpful!ceiling!during!contract!negotiations!with!providers!
following!the!insurance!wars!of!2010.
61
!Other!carriers,!however,!see!the!
implementation!of!the!benchmark!as!falling!unfairly!on!carriers!at!least!in!the!
immediate!term!because!carriers!are!subject!to!rate!review!while!providers!are!not!
subject!to!such!scrutiny.
62!
Of!course,!this!begs!the!question!that!the!ceiling!becomes!
the!goal!very!quickly!and!efforts!to!control!costs!may!be!driven!by!the!desire!among!
carriers!to!fall,!first!and!foremost,!in!the!safe-harbor!zone.!A!more!negative!view!of!
the!benchmark’s!effectiveness!was!expressed!by!a!high!level!insurance!industry!
representative!who!opined!that!all!the!cost!controls!in!Ch.!224!nibble!around!the!
edges!because!no!one!wants!to!take!on!the!high!priced!providers.
62
!
!
Meeting!the!Benchmark!
!
Since!2012,!CHIA!has!collected!health!care!data!to!gauge!compliance!with!the!state’s!
benchmark!of!3.6%.!The!HPC!has!reported!that!the!final!numbers!for!growth!of!
THCEs!in!2013!was!2.4%,
63
!in!2014,!4.2%,!and!in!2015,!4.1%.!
64
!In!its!January!20,!
2016!release,!the!HPC!identified!two!primary!reasons!for!growth!over!the!
benchmark!of!3.6%:!first,!the!effect!of!the!ACA!which!led!to!both!permanent!and!
temporary!increases!in!MassHealth!(Medicaid)!enrollment,!and,!second,!!high!drug!
spending,!which!resulted!from!the!introduction!of!new!high!–cost!drugs,!large!
increases!for!existing!drugs,!and!a!relatively!small!number!of!drugs!going!off-patent.!
!
28!
It!should!be!noted,!however,!that!in!each!of!these!years,!healthcare!spending!grew!in!
the!United!States!as!well!as!in!Massachusetts.!!Analysts!attributed!national!growth!
to!the!expansion!of!ACA!coverage,!increased!prescription!drug!spending!and!
economic!growth.!!
!
Interestingly,!in!its!2016!report,!the!HPC!also!highlighted!the!continued!low!growth!
in!commercial!insurance!spending.!The!HPC!reported!that!in!2015,!the!largest!
insurers,!Blue!Cross!Blue!Shield,!Harvard!Pilgrim!Health!Care!and!Tufts!Health!Plan!
all!kept!spending!below!the!benchmark,!but!that!healthcare!providers!had!more!
mixed!results.!!All!major!insurers!have!been!below!the!benchmark!from!2012!
through!2015.
29,30,65
!!It!is!also!the!case!that!during!2013!and!2014,!the!Patrick!
Administration!continued!to!vigorously!scrutinize!proposed!rate!increases!from!
insurance!companies.!The!final!average!premium!increase!for!2013!was!less!than!
3%!and!for!2014,!it!was!under!4%.
29,30
!It!could!be!that!the!leverage!of!3.6%!in!
carrier!negotiations!also!played!a!part!in!this!growth!rate!below!the!benchmark.!!
!
Another!factor!influencing!the!slow!growth!on!the!commercial!side!for!is!the!
explosion!of!high!deductible!health!plans!(HDHPs).!!In!2014,!in!Massachusetts,!1!out!
of!5!families!had!deductibles!of!$3,000!or!more!and!the!number!is!growing.!!The!use!
of!high!deductible!plans!is!particularly!common!in!the!merged!market!of!individual!
and!small!business!employers,!with!45%!of!the!individual!and!38%!of!small-group!
membership!in!such!plans.
66
!
!
A!major!rationale!behind!HDHPs!is!the!belief!that!making!consumers!sensitive!to!the!
price!of!health!care!services!will!incentivize!consumers!to!seek!less-expensive!care!
and!reduce!unnecessary!utilization.!!The!growth!of!HDHPs!is!a!national!
phenomenon!and!presents!some!troubling!issues.!It!can!result!in!less!financial!
protection!when!people!need!to!use!care!and!some!research!shows!that!consumers!
with!HDHPs!are!making!decisions!not!to!spend!their!deductibles!and!defer!or!forgo!
needed!care.
67
!!
!
While!we!do!not!know!for!sure!if!the!care!that!is!deferred!is!necessary!or!
unnecessary,!!studies!suggest!that!this!phenomenon!is!in!part!responsible!for!the!
slowdown!nationally!in!commercial!healthcare!cost!growth.
68,69
!It!could!be!that!on!
the!commercial!side!of!the!market,!Massachusetts!is!not!exceeding!the!benchmark!
minus!drug!prices!and!MassHealth!hikes,!but!the!reason!may!or!may!not!be!
attributable!to!Ch.!224.!It!is!too!early!to!know!with!any!certainty.!!
!
The!2014!data!presents!an!interesting!problem.!Medicaid!total!medical!
expenditures!have!blown!through!the!benchmark,!and!we!know!the!reasons!why!
this!has!occurred:!a!badly!managed!MassHealth!system!that!permitted!many!people!
not!otherwise!eligible!for!MassHealth!to!enroll!and!receive!taxpayer!funded!benefits,!
and!an!escalation!of!drug!prices,!especially!for!new!break!through!cures!such!as!
Sovaldi!and!Harvoni!for!Hepatitis!C.!!The!state!has!since!re-determined!eligibility!for!
MassHealth!recipients!and!assuming!that!the!MassHealth!problems!will!not!be!
repeated,!that!would!leave!the!state!to!grapple!with!the!high!cost!of!drugs,!clearly!a!
!
29!
national!problem.!!The!HPC!could!play!a!leadership!role!in!terms!of!exploring!state!
or!national!policy!options!regarding!drug!prices.!With!respect!to!the!spending!of!
public!dollars!for!prescription!drugs,!there!are!1.8!million!people!in!MassHealth!and!
430,000!members!in!the!Group!Insurance!Commission.!We!don’t!know!if!the!state!is!
maximizing!its!purchasing!clout!in!this!market.!Similarly,!we!don’t!know!the!range!
of!options!that!may!be!available!to!commercial!carriers!or!providers!to!maximize!
their!purchasing!power!with!drug!companies,!although!they!certainly!have!an!
incentive!to!minimize!costs.!We!do!know!that!some!payers!have!been!able!to!
negotiate!better!deals!with!drug!companies!than!some!of!their!competitors.
70
!!
!
In!its!recent!2016!report,!the!HPC!made!a!series!of!recommendations!that!focused!
on!cost!issues!under!the!control!of!local!providers!and!payers.!The!HPC!focused!on!
hospital!price!variation!that!does!not!reflect!differences!in!quality!or!other!common!
measures!of!value!and!concludes!that!policy!action!is!required!to!address!price!
variation.!!The!HPC!does!not!state!what!specific!policy!actions!it!recommends!but!
reports!that!it!will!undertake!addit ion al!research!and!analysis!to!discuss!further!
policy!options.
71
!
!
Tracking!Trends!in!Provider!Markets!
!
As!described!above,!Ch.!224!directs!the!HPC!to!track!and!report!on!material!changes!
to!the!operations!or!government!structures!of!provider!organizations.!!The!HPC!is!
directed!to!engage!in!a!more!comprehensive!review!of!transactions!anticipated!to!
have!a!significant!impact!on!healthcare!costs!or!market!functioning.!Specific!
regulations!governing!this!process!were!issued!in!December!2014,!and!all!providers!
are!on!notice!about!the!process!and!what!it!entails.
46
!After!receiving!a!Material!
Change!Notice!(MCN),!the!HPC!has!thirty!days!to!conduct!a!preliminary,!quantitative!
analysis!of!the!proposed!change!and!to!issue!a!preliminary!report!with!findings.!!
There!is!a!period!of!feedback!from!the!parties!and!other!market!participants!and!a!
final!report!is!issued!within!185!days!from!the!date!the!notice!is!filed.!!The!HPC!
cannot!stop!a!transaction!or!require!certain!conditions.!However,!the!HPC!can!refer!
its!report!on!the!transaction!to!the!AG!or!to!any!other!public!agency!for!further!
action!as!warranted.!!While!the!information!gathered!in!its!reviews!is!exempted!
from!the!public!records!law,!the!HPC!is!given!the!latitude!under!Ch.!224! to!engage!in!
a!balancing!test!and!disclose!information!in!its!CMIR!report.!!This!possibility!of!
disclosure!is!another!aspect!of!the!transparency!pow ers! of!the!HPC.!
!
As!noted!above,!from!2013!to!May!2017,!the!HPC!received!and!reviewed!82!MCNs.
50
!
Nearly!half!of!the!proposed!transactions!involved!mergers!of!hospitals,!physician!
groups!or!other!providers!or!payers.
50
!The!HPC!also!reviews!clinical!affiliations!that!
do!not!result!in!ownership!changes,!such!as,!contracting!arrangements!among!
providers!that!may!facilitate!coordination!of!care!and!involve!risk-sharing!
arrangements,!such!as!ACOs.!!
!
!
30!
Perhaps!the!most!important!of!those!transactions!to!date!are!those!involving!three!
community!hospitals!and!a!large!physician!practice!by!Partners.!The!HPC!CMIRs!
found!that:!1.!The!proposed!transactions!were!anticipated!to!increase!total!medical!
spending!by!more!than!$38.5!million!to!$49!million!per!year!as!a!result!of!unit!price!
increases!and!shifts!in!care!to!higher-priced!Partners!facilities;!2.!The!resulting!
system!would!increase!the!ability!and!incentives!to!leverage!higher!prices!and!other!
favorable!terms!in!contract!negotiations!with!payers.!This!effect!was!not!included!in!
the!projected!costs!increases;!and!3.!The!parties!in!the!proposed!transaction!did!not!
provide!adequate!evidence!to!support!claimed!improvements!or!efficiencies!in!care!
delivery!systems!post-merger.!!The!HPC’s!CMIR!was!filed!with!the!Superior!Court!,!
which!did!not!approve!the!proposed!transactions;!ultimately,!the!transactions!were!
abandoned.!
!
Regardless!of!the!form,!the!HPC!is!charged!with!examining!any!potential!material!
changes!in!market!structure.!!A!major!undertaking!is!HPC’s!monitoring!of!the!
growing!numbers!of!acquisitions!of!physician!groups!by!hospitals!and!the!transition!
from!independent!or!affiliated!practices!to!employment!models.!For!many!years,!
there!has!been!growing!evidence!that!hospital!acquisition!of!physician!practices!
leads!to!higher!prices!for!both!types!of!providers.
72
!Market!growth!and!power!is!
dependent!on!referral!patterns!from!physicians!to!hospitals!and!keeping!patients!
within!the!hospital-doctor!network.!The!Partners!transactions!included!the!
proposed!acquisition!of!the!physician!group,!Harbor!Medical!Associates!(HMA).!
While!the!HPC!analysis!included!this!component,!!the!court!did!not!block!Partners!
from!acquiring!HMA.!!
!
As!a!practical!matter,!much!of!the!HPC’s!analysis!of!market!impact!is!similar!to!what!
federal!or!state!antitrust!authorities!may!undertake!in!reviewing!mergers!or!clinical!
or!financial!collaborations!among!providers.!!The!HPC!threshold!for!review!is!
somewhat!different!than!that!required!by!federal!authorities.!Its!review!considers!
impacts!on!cost,!quality!and!access,!although!the!HPC!does!not!have!the!power!to!
disapprove!these!affiliations.!A!federal!antitrust!review!has!to!be!guided,!under!law,!
by!whether!the!transaction!may!pose!a!risk!of!a!substantial!lessening!of!competition!
in!a!relevant!market!or!whether!in!the!absence!of!clinical!or!financial!integration,!
restraints!of!trade!may!take!place.
73
!!
!
The!HPC,!under!Ch.!224,!casts!a!broader!net!to!expose!transactions!that!while!not!
legally!anti-competitive!may!nonetheless!be!able!to!exercise!a!negative!impact!on!
the!state’s!ability!to!stay!within!the!cost!benchmark.!This!is!potentially!a!very!
significant!power!and!is!consistent!with!the!overall!Ch.!224!framework!of!
transparency!in!transactions!and!using!the!HPC’s!bully!pulpit!to!“name!and!shame”!
outlier!entities.!!
!
!
!
!
31!
Where!is!All!That!Price!Transparency?!!!!!!
!
The!issue!of!price!transparency!was!the!subject!of!scrutiny!at!the!HPC’s!2015!Cost!
Trend!Hearings.!!Although!all!major!payers!have!established!their!online!tools,!the!
use!of!these!sites!by!members!thus!far!has!been!limited.!!The!HPC!reported!in!its!
2015!Report!that!it!is!not!clear!whether!low ! usage!has!been!due!to!poor!usability!or!
low!consumer!awareness!of!the!sites,!but!the!rates!are!consistent!for!national!rates.!
It!should!be!noted,!however,!that!Aetna,!an!insurer!that!began!building!its!online!
tool!in!the!mid-2000’s,!reported!in!an!open!HPC!hearing!that!it!had! over! one!million!
hits!nation-wide!in!2014.
74
!Aetna!currently!has!over!700!procedures!on!its!site!
while!most!Massachusetts!based!carriers!have!far!fewer.!
!
The!HPC!also!reported!on!efforts!by!public!interest!groups!to!gauge!compliance!with!
the!law!by!carriers!and!providers.!!In!2015!both!Health!Care!for!All!(HCFA)!and!the!
Pioneer!Institute!(PI)!(an!organization!the!author!is!currently!affiliated!with)!
conducted!surveys!to!gauge!consumer!friendliness!and!effectiveness!of!carrier!tools!
and!provider!protocols!for!price!transparency.!
!!
In!general,!HCFA!reported!that!price!information!was!difficult!to!find,!cost!data!was!
not!presented!in!conjunction!with!easily!understood!quality!information,!and!high-
value!choice!options!were!not!highlighted!for!consumers!to!see.!Overall,!HCFA!
graded!the!carriers!with!a!“C”!grade.
75
!!The!Pioneer!Institute!looked!at!22!out!of!66!
Massachusetts!hospitals!in!2015!and!again!in!2017!and!tried!to!obtain!the!price!of!
an!MRI!of!the!left!knee!without!contrast.!!PI!investigators!found!that!lots!of!
“persistence!and!diligence”!was!required!to!obtain!price!information!and!many!
hospitals!appeared!not!to!have!systems!in!place!to!answer!questions!about!price.!In!
addition,!while!Ch.!224!requires!providers!to!give!out!price!information!within!two!
days!of!request,!PI!found!the!average!time!took!between!2!and!4!business!days.!!A!
subsequent!survey!among!almost!100!Massachusetts!physician!specialists!and!
dentists!by!PI!yielded!similar!results,!except!that!dental!offices!were!much!more!
forthcoming!with!price!information!to!prospective!patients.
76
!!
!
In!all!its!annual!reports,!HPC!advocates!for!the!continued!use!of!demand!side!
incentives!such!as!price!and!quality!information!to!foster!the!choice!of!more!
efficient!providers!by!consumers.!At!present,!it!appears!that!the!Commonwealth!has!
a!long!way!to!go.!!There!is!very!little!advertising!or!information!directed!at!
consumers!that!informs!them!of!their!right!to!price!information.!While!there!was!a!
small!campaign!around!carrier!transparency!tools!led!by!the!Commonwealth!in!the!
fall!of!2014,!there!has!been!no!statewide!campaign!or!indeed!much!individual!
advertising!by!carriers!themselves.!!Providers!are!woefully!behind!in!terms!of!
developing!consumer!friendly!protocols!for!patients!to!obtain!price!information.!!
The!survey!of!hospitals!also!looked!at!their!websites,!the!first!place!a!consumer!may!
go!to!find!information.!!PI!found!that!only!a!few!hospitals!had!any!information!on!
their!websites!about!!a!consumer’s!right!to!price!information.
76-78
!It!is!also!worth!
noting!that!the!ACA!requires!hospitals!to!post!charges!or!else!inform!consumers!as!
to!how!they!can!be!obtained.!The!federal!government!has!issued!guidelines!to!
!
32!
hospitals!about!transparency!in!pricing!so!that!consumers!may!have!the!ability!to!
compare!prices!across!providers.
79
!
!
Notably!absent!in!Ch.!224!are!any!enforcement!mechanisms!around!the!
transparency!provisions!in!the!law.!While!the!Baker!Administration!is!an!advocate!
for!transparency,!there!have!been!few!efforts!to!date!to!move!this!issue!forward!and!
to!create!a!culture!of!price!transparency!in!healthcare.!!Similarly,!the!Attorney!
General’s!Office!has!not!used!its!legal!powers!under!the!state’s!Consumer!Protection!
Law!to!enforce!existing!transparency!la w s.!The!HPC!itself!merely!recommends!that!
the!Commonwealth,!payers!and!providers!should!enhance!strategies!that!would!
increase!price!and!quality!transparency.!This!lack!of!state!leadership!may!not!be!
accidental.!!There!are!credible!reports!that!in!order!for!the!legislature!to!obtain!
consensus!on!these!transparency!provisions,!there!was!an!understanding!that!there!
would!be!no!explicit!enforcement!provisions,!transparency!would!take!time,!and!it!
would!be!regarded!as!an!aspirational!achievement.!!
!
Is!The!Benchmark!Enforceable!or!Aspirational?!!!
!
While!the!HPC’s!enforcement!tools!regarding!the!benchmark!are!not!very!strong,!it!
is!possible!that!the!constant!flow!of!public!actions!and!hearings!from!the!HPC!may!
have!some!salutatory!effect!on!pricing!behavior!of!providers.!While!there!is!no!cause!
and!effect!evidence!that!the!HPC!has!had!a!direct!impact!on!provider!behavior,!with!
the!exception!of!the!failed!Partner’s!merger!in!2015,!there!may!be!enough!HPC!
activity!and!scrutiny!to!suspect!some!impact!on!pricing!decisions.!!
!
!A!close!reading!of!the!HPC’s!2016!Annual!Health!Care!Cost!Trends!Report!shows!
the!breadth!and!analytical!detail!that!both!the!HPC!and!its!sister!agency,!CHIA,!have!
become!famous!for!doing.!!This!means!that!the!performance!of!various!sectors-!
payers,!hospitals,!physician!groups,!the!commercial!market,!pharmaceuticals,!
MassHealth!and!Medicare!-!are!measured!and!held!up!to!public!scrutiny.!Is!each!
sector!adding!to!higher!healthcare!costs!or!is!it!engaging!in!efficiency!enhancing!
care!delivery!systems!that!lead!to!lower!costs?!!For!the!past!couple!of!years,!price!
increases!in!the!pharmaceutical!industry!have!been!called!out!for!attention.!That!
said,!some!HPC!commission!members!themselves!have!been!aggressive!in!
questioning!providers!about!cost!trends!apart!from!pharmaceuticals.!!
!
The!annual!HPC!hearings!have!become!quite!a!ritual!with!healthcare!executives!
girding!themselves!for!sometimes!tough!public!grilling!by!HPC!commission!
members.!Most!recently,!this!past!winter,!commission!member!Professor!David!
Cutler!relentlessly!asked!a!group!of!providers!if!their!organizations!had!seen!any!
efficiencies!from!years!of!consolations.!Cutler!asked!the!question!over!and!over!but!
the!respondents!were!unable!to!answer.
80
!Further,!Cutler!!pointed!out!that!even !if!
pharmaceutical!prices!were!taken!out!of!the!cost!equation,!provider!costs!are!still!
rising.!!He!asked!providers!why!there!have!not!been!more!cost!reductions!resulting!
from!integrated!systems.
80
!
!
33!
!
A!question!is!whether!public!scrutiny!from!Commission!members!is!effective!in!
sending!the!following!message:!consolidations!and!growth!that!do!not!produce!
savings!for!the!system!that!can!ultimately!be!passed!onto!consumers!are!not!
heading!us!in!the!right!direction.!!!
!
The!public!shaming!of!providers!or!payers!that!are!spending!above!the!benchmark!
has!yet!to!materialize,!assuming!it!would!yield!results!anyway.!!Ostensibly,!under!
the!HPC’s!new!regulations,!if!a!firm!is!asked!to!prepare!a!PIP,!that!entity’s!name!will!
be!made!public.!!But!the!HPC!has!just!recently!put!its!rules!for!doing!so!into!place!
and!they!will!not!be!employed!retroactively.!!!
!
It!is!worth!noting,!however,!that!in!its!2015!Cost!Trends!Report,!the!HPC!reported!
on!the!cost!of!vaginal!and!C-section!deliveries!at!all!hospitals!in!the!state!providing!
such!services.!!The!data!named!specific!hospitals!and!the!average!spending!amounts!
in!each!category!as!well!as!the!C-section!rate!for!each!hospital.
81
!Although!the!data!
were!based!on!the!years!2011-2012,!they!provided!a!rare!public!glimpse!into!the!
wide!disparities!in!prices!charged!by!Massachusetts!hospitals!for!the!same!
procedure.!!So-called!“unwarranted!price!variations”!have!long!been!a!topic!of!
discussion!in!Massachusetts,!and!the!HPC!has!repeatedly!stated!that!unwarranted!
price!variations!in!provider!prices!are!unlikely!to!decrease!absent!direct!policy!
action.
71
!Although!there!is!no!precise!definition!of!“unwarranted!price!variation,”!it!
can!generally!be!defined!by!differences!in!price!that!cannot!be!explained!by!
inpatient!acuity,!high-cost!outlier!cases,!or!quality.
82
!!
!
The!HPC!does!not!have!any!statutory!authority!over!prices!charged!by!providers.!!Its!
sister!agency,!CHIA,!similarly,!has!no!such!authority.!CHIA,!however,!is!the!
repository!of!the!state’s!all!payer!claims!database!(APCD)!and!although!a!recent!
United!States!Supreme!Court!decision,!Gobeille#v.#Liberty#Mutual#Insurance!(March!1,!
2016)!has!cast!doubt!on!self-funded!plans’!obligation!to!provide!the!state!wit h!t his!
price!information,!data!from!fully-insured!plans!must!still!be!provided.
83,84
!!CHIA!
has!the!authority!to!share!these!data!by!provider!name,!but!de-identified!as!to!
patient,!with!the!public.!!To!date,!however,!such!sharing!has!been!limited!to!
research!organizations!which!are!charged!a!hefty!fee!for!such!de-identified!dat a.!!
For!a!while!discounts!were!available!to!researchers!seeking!APCD!data!from!CHIA!
but!that!no!longer!appears!to!be!the!practice.!!This!is!an!unfortunate!policy!as!
greater,!not!less,!transparency!in!healthcare!prices!is!very!needed.!!!
!
So,!if!enforcement!tools,!including!the!$500,000!fine,!for!a!firm!that!does!not!fulfill!
its!PIP,!are!not!enough,!and!if!the!HPC!has!no!authority!over!provider!prices,!is!the!
whole!benchmark!concept!and!regulatory!structure!merely!an!aspirational!exercise?!!!
Aspirational!goals!are!merely!that!–!a!desired!outcome!without!strong!enforcement!
incentives.!One!outcome!of!aspirational!goals!is!that!when!they!are!not!achieved!and!
in!Massachusetts!when!price!variation!does!not!diminish,!new!legislative!proposals!
arise!to!fill!the!void.!!
!
!
34!
There!are!legislative!proposals!that!tried!to!go!further!than!the!benchmark!and!take!
direct!aim!at!high!prices.!As!discussed,!supra,!at!page!35,!in!2017,!Massachusetts!
Governor!Charlie!Baker!proposed!that!insurance!companies!be!limited!to!the!
percent!increase!they!can!pay!providers!based!on!provider!revenue!size.!!Insurers!
would!have!been!prohibited!from!giving!any!increase!to!the!largest!third!of!
providers.!Although!this!proposal!was!seen!as!a!“conversation!starter,”!the!proposal!
appears!to!no!longer!be!under!consideration.!!But!the!fact!that!is!was!floated!at!all,!
could!be!a!portend!of!things!to!come.!
!
That!said,!the!fact!remains!that!the!benchmark,!now!at!3.1%!for!calendar!year!2018,!
is!a!fixed!part!of!the!regulatory!landscape!regardless!of!the!efficacy!of!its!
enforcement!tools.!It!is!a!backdrop!to!C-suite!decision-making!and!a!cudgel!that!
hangs!over!the!industry’s!head.!!Although!difficult!to!measure!in!terms!of!
effectiveness,!the!benchmark!and!the!HPC!have!become!part!of!the!inter-
stakeholder!cultural!landscape!in!Massa chu setts!healthcare.!!! !
!
Does!the!HPC!Need!more!Authority!to!be!Effective?!!
!
One!of!the!HPC’s!most!resource!consuming!functions!involves!Cost!and!Market!
Impact!Reviews!(CMIR)!discussed!supra!at!pages!22-23.!!In!general,!these!studies!
look!at!entities!that!hold!a!dominant!share!in!their!respective!market!and!charge!
prices!that!are!materially!higher!than!the!median!prices!of!other!providers!or!have!
health-status-adjusted!Total!Medical!Expenditures!(TME)!that!are!materially!higher!
as!well.!!So,!what!can!the!HPC!do!with!a!CMIR!that!uncovers!such!situations?!It!can!
issue!a!public!report!on!such!providers!and,!it!can!refer!its!report!and!the!providers!
to!the!Attorney!General’s!Office!(AGO).!The!AGO,!under!Chapter!224,!can!investigate!
unfair!methods!of!competition!or!anti-competitive!conduct!and!the!AGO!can!issue!a!
report!back!to!the!HPC.!!
!
In!the!midst!of!this!circular!report!writing,!one!should!not!lose!sight!of!the!fact!that!
the!AGO,!under!existing!consumer!and!antitrust!laws,!can!already!bring!legal!actions!
for!unfair!methods!of!competition!under!the!state!Consumer!Protection!Law,!
Chapter!93A,!or!for!violations!of!the!state!antitrust!laws,!Chapter!93.!Under!certain!
conditions,!the!state!AGO!can!also!bring!actions!under!federal!antitrust!law!as!well.!!
The!AGO!does!not!need!Chapter!224!for!permission!to!enforce!existing!consumer!or!
antitrust!laws!and!Ch.!224!does!not!give!the!AGO!any!new!authority!to!enforce!
incipient!anti-competitive!conduct!than!it!already!has!under!existing!law.!!
!
So,!what!is!wrong!with!this!statutory!framework!aimed!at!limiting!the!growth!or!
exercise!of!market!power?!!First,!the!HPC!has!no!legal!authority!at!all!to!do!anything!
about!such!conduct.!And,!the!AGO!already!has!legal!authority!to!take!action!if!the!
conduct!amounts!to!a!violation!of!existing!consumer!or!antitrust!laws.!!In!short,!
Chapter!224!does!nothing!to!limit!the!growth!of!market!power!(which!under!
traditional!antitrust!merger!analysis!is!the!ability!of!the!combined!entity!to!raise!
price!more!than!5%!for!a!non-transitory!period!of!time).!!
!
35!
!
The!legislature!could!give!the!HPC!or!other!regulatory!agencies!more!authority!over!
certain!transactions!to!further!limit!the!growth!of!market!power!by!particular!
entities.!!For!example,!the!legislature!could!direct!the!AGO!to!promulgate!
regulations!proscribing!as!unfair!methods!of!competition!even!small!increases!in!
market!share!if!an!entity!already!has!a!certain!share!of!market!or!markets.!!Or,!the!
HPC!could!be!given!authority!to!deny!transactions!that!may!not!rise!to!the!level!of!
an!antitrust!violation!but!nonetheless!would!have!an!adverse!impact!on!cost!
containment.!!In!a!time!when!“determination!of!need”!or!“DON”!regulatory!regimes!
are!under!scrutiny!for!impeding!new!competition!into!healthcare!markets,!any!such!
new!powers!given!to!the!HPC!would!have!to!be!carefully!tailored.!!
!
There!are!many!courses!that!the!legislature!could!take!to!make!the!HPC!more!
effective!at!keeping!the!focus!on!cost!containment!and!more!targeted!at!the!
benchmark!limits.!!In!fairness,!however,!there!are!some!costs!that!may!beyond!the!
state’s!jurisdiction,!such!as!pharmaceutical!prices,!which!the!HPC!can!do!little!about.!!
That!said,!the!overwhelming!majority!of!healthcare!costs!are!within!the!control!of!
providers!and!payers!and!thus,!would!be!within!the!jurisdiction!of!the!HPC!or!other!
state!entities!to!control.!!!
!!
!Conclusions:!Are!There!Lessons!from!Massachusetts?!
For!the!past!11!years,!Massachusetts!has!engaged!in!an!effort!to!achieve!near!
universal!access!to!healthcare,!and!most!recently,!to!try!and!contain!the!cost!of!that!
healthcare.!!In!the!course!of!its!pursuit!toward!health!care!for!all!its!residents,!
Massachusetts!has!taken!full!advantage!of!federal!dollars!that!are!available!for!its!
Medicaid!population!and!low-income!residents!who!qualify!for!subsidies!under!
Obamacare.!!Recent!national!events!threaten!some!of!the!progress!that!
Massachusetts!has!made.!!If!federal!Medicaid!dollars!are!dramatically!cut,!
Massachusetts!will!have!hard!choices!to!make!in!terms!of!maintaining!coverage!for!
its!low!income!and!non-working!poor.!!The!state!currently!spends!40%!of!its!budget!
on!Medicaid!including!federal!dollars.!While!an!analysis!of!that!problem!is!beyond!
the!scope!of!this!paper,!it!is!useful!to!understand!that!some!of!what!happens!in!
healthcare!may!be!beyond!the!state!legislature’s!authority!or!the!oversight!of!the!
HPC.!!However,!while!some!events!are!beyond!the!state’s!control,!they!will!
nonetheless!affect!non-Medicaid!provider!and!payer!markets!as!well,!and!that!will!
implicate!agencies!such!as!the!HPC!and!its!cost!control!efforts.!
!
(1) Payment!Reform!
!
The!underlying!thrust!of!Ch.!224!was!payment!reform!and!the!belief!that!the!
practice!of!fee-for-!service!(FFS)!medicine!was!a!major!factor!in!raising!the!level!of!
health!care!spending.!!The!prospect!of!various!alternative!payment!methodologies!
(APM),!such!as!global!payments,!bundled!payments,!or!any!form!of!payment!that!
!
36!
placed!some!risk!on!providers’!performance!was!thought!to!be!a!better!alternative.!!
Indeed,!Medicare!has!already!embarked!on!an!ambitious!program!to!change!the!way!
it!reimburses!providers!to!move!providers!toward!more!APM!options.!!Ch.!224!set!
APM!goals!for!public!health!care!programs!such!as!Medicaid!and!the!state’s!Group!
Insurance!Commission.!It!set!“aspirational”!goals!for!the!commercial!market!as!well.!
The!healthcare!marketplace!is!a!dynamic!place!and!there!are!payers!and!providers!
who!are!experimenting!with!various!payment!forms!apart!from!FFS.!The!continued!
emergence!of!large!healthcare!systems!that!can!command!top!price,!in!turn,!incent!
other!systems!to!adopt!payment!reform!mechanisms!as!a!way!to!stay!competitive.!!!
!
Whether!it!is!by!law!or!by!necessity,!there!has!been!a!shift!toward!payment!reform!
over!these!past!several!years.!As!discussed!earlier,!it!has!not!been!as!dramatic!a!shift!
as!some!proponents!anticipated.!The!bottom!line,!however,!is!that!payment!reform!
in!its!various!incarnations!seems!to!be!a!permanent!and!evolving!feature!in!
Massachusetts!and!federal!healthcare!markets.!!Most!recently,!MassHealth!has!
embarked!on!an!ambitious!program!to!overhaul!the!way!Medicaid!providers!are!
reimbursed.!As!reported!in!the!Boston#Business#Journal!on!June!8,!2017,!MassHealth!
is!restructuring!Medicaid!into!18!selected!healthcare!organizations!where!providers!
will!be!given!a!set!amount!of!money!per!patient.!The!18!networks!will!cover!
900,000!of!the!state’s!1.9!million!MassHealth!enrollees.!!The!concept!is!based!on!an!
accountable!care!organization!model!where!each!of!the!18!groups!will!manage!
patients!over!a!period!of!time!for!a!fixed!amount!of!reimbursement,!including!
federal!funds!for!information!technology!investments.!!!
!
Has!payment!reform!produced!the!cost!savings!that!Ch.!224!framers!anticipated?!!
Generally,!across!the!country,!payment!reform!has!a!mixed!record!in!terms!of!cost!
savings!and!quality!outcomes.
85
!Indeed,!in!some!cases,!implementing!payment!
reform!and!enhancing!the!coordination!of!care!cause!increasing!costs!as!new!
technologies!must!be!adopted!to!ultimately!facilitate!such!systems.!In!some!cases,!
law!requires!new!electronic!medical!records!technologies!as!was!the!case!in!
Massachusetts.!!
!
Although!payment!reform!is!required!in!the!public!sector!under!Ch.!224,!it!is!
aspirational!in!the!commercial!market.!The!decision!not!to!require!payment!reform!
in!the!commercial!market!appears!to!have!been!a!correct!decision!if!only!because!
the!alternative,!mandatory!payment!reform!in!private!markets,!was!fraught!with!
unintended!consequences.!!!
!
Currently,!FFS!medicine!and!APMs!exist!simultaneously!in!the!Massachusetts!
commercial!healthcare!marketplace,!with!FFS!still!dominating!the!market.!And,!we!
cannot!conclude!that,!where!adopted,!APMs!have!generally!yielded!lower!healthcare!
cost!growth!or!greater!quality!outcomes.!!Consolidation!in!healthcare!markets!may!
ultimately!prove!to!be!a!primary!driver!of!the!adoption!of!payment!reform!as!
competitors!seek!to!lower!costs!to!remain!viable.!!In!addition,!it!seems!critical!that!
the!state!act!by!example!in!terms!of!embracing!APMs!in!its!various!programs!that!
spend!public!dollars!for!healthcare.!!
!
37!
!
(2) The!Establishment!of!an! Independent!Health!Care!Agency!
!
It!was!not!always!certain!that!Ch.!224!would!result!in!the!establishment!of!a!new!
healthcare!agency!–!the!Health!Policy!Commission,!with!broad!powers!over!the!
industry.!!There!were!those!who!believed!that!establishing!new!healthcare!
bureaucracies!was!unnecessary!and!that!new!powers!should!instead!be!given!to!
existing!agencies,!such!as!the!Department!of!Public!Health,!the!Division!of!Insurance,!
and!various!other!regulatory!agencies,!most!of!which!are!in!the!Executive!Branch!of!
state!government.!!However,!there!was!a!view!in!the!Legislature!that!in!order!to!
create!change!that!would!not!be!dependent!on!the!policies!of!Commonwealth’s!
Governors,!it!was!necessary!to!create!an!independent!agency!that!was!not!subject!to!
the!control!of!the!chief!executive.!!Thus,!the!HPC!was!created!and!funded!t hrough!
assessments!on!the!healthcare!industry.!!(See,!supra,!p.!20,!for!a!description!of!the!
Commission!itself.)!!!
!
It!appears!that!an!independent!agency!was!likely!the!correct!decision,!especially!
once!the!concept!of!a!benchmark!became!embedded!in!the!law.!!The!benchmark!
needs!an!enforcement!agency!and!mechanisms.!!It!would!be!difficult!though!not!
impossible!to!entrust!benchmark!enforcement!to!agencies!within!the!control!of!the!
governor.!!That!said,!although!the!legislature!chose!the!independent!agency!route,!it!
did!not!grant!the!toughest!enforcement!powers!to!this!agency.!Thus,!we!see!
enforcement!powers!that!are!slow!moving,!involving!lots!of!reports!and!analyses,!
ample!time!for!compliance!and!some!would!argue!a!rather!weak!ultimate!penalty!of!
$500,000.!!!
!
It!would!not!be!a!fair!assessment,!however,!to!judge!the!efficacy!of!the!HPC!solely!on!
its!fining!abilities.!!The!market!impact!analysis!which!the!HPC!performed!and!
provided!to!the!court!in!the!previously!mentioned!proposed!mergers!among!
Partners!Healthcare!and!hospitals!on!both!the!north!and!south!shores!of!
Massachusetts!was!extremely!important!in!the!court’s!final!decision!in!those!cases.!
In!addition,!the!HPC!was!viewed!publicly!as!an!independent!voice!in!these!
proceedings!with!a!professional!and!sound!economic!analysis.!These!proposed!
mergers!created!an!unexpected!opportunity!for!the!HPC!to!establish!itself!as!an!
honest!watchdog!on!behalf!of!cost!containment.!!
!
(3) The!Establishment!of!a!Cost!Control!Target!
!
Ch.!224!established!a!growth!level!for!Total!Health!Care!Expenditures!(THCE)!that!
was!tied!to!the!overall!long-term!economic!performance!of!the!Commonwealth.!!It!
includes!all!healthcare!expenditures!including!public!(Medicaid,!Medicare,!the!
Group!Insurance!Commission)!and!private!spending.!!While!the!benchmark!may!
have!been!proposed!as!a!way!to!demonstrate!savings!for!public!consumption,!tying!
growth!in!healthcare!costs!to!economic!growth!is!not!irrational.!!However,!the!
!
38!
underlying!principle!is!that!Massachusetts!does!not!expect!an!actual!decline!in!
healthcare!costs,!just!a!slowing!in!the!growth!of!such!costs.!!!
!
As!stated!earlier,!the!benchmark!“baked!in”!the!high!prices!that!already!existed.!!
This!feature!may!account!for!the!lack!of!vociferous!opposition!to!the!benchmark!by!
the!state’s!most!powerful!healthcare!industry!entities.!!It!may!have!been!the!price!
that!had!to!be!paid!for!enactment.!It!is!also!interesting!to!note!that!no!other!non-
public!utility!industry!in!the!state!is!subject!to!this!form!of!regulation.!!Probably!the!
most!important!feature!of!any!benchmark!is!that!it!sets!expectations!and!establishes!
the!norm!around!which!the!industry!will!be!measured.!!!
!
A!September!7,!2016!headline!in!the!Boston!Globe!read!as!follows:!“Mass.!Makes!
progress!in!containing!health!care!spending.”!!The!first!sentence!claimed!that!“the!
growth!of!healthcare!spending!moderated!last!year….!a!sign!that!its!ground-
breaking!experiment!to!rein!in!medical!costs!is!making!tentative!progress.”!This!
story!which!was!written!before!the!final!THCE!figure!for!2015!was!adjusted!upward!
to!4.1%!from!a!preliminary!3.9%,!painted!an!optimistic!view!that!healthcare!
expenditures!were!moderating.
86
!!
!
In!the!article,!Stuart!Altman,!Chair!of!the!HPC,!says!that!Massachusetts!is!the!only!
state!to!try!and!do!something!about!total!healthcare!spending.!!In!fact,!states!have!
limited!options!when!it!comes!to!cost!control!of!healthcare!expenditures.!!
Massachusetts!used!to!regulate!hospital!prices!but!repealed!that!law!in!the!mid-
nineties.!Maryland!is!a!state!that!continues!to!regulate!hospital!unit!prices!and!per!
capita!hospital!spending.!!A!state!can!either!regulate!prices!directly!as!Maryland!
does!or!try!for!broader!systemic!reforms!that!may!ultimately!lead!to!lower!costs.!In!
Ch.!224,!Massachusetts!chose!the!latter!route.!!It!is!a!more!circuitous!route!than!
direct!regulation!and!much!depends!on!cooperation!and!the!bully!pulpit.!!These!are!
tough!public!policy!calls!to!make!as!no!one!can!predict!if!the!outcome!will!be!
positive.!!One!issue!for!any!state!considering!this!direction!should!be!the!degree!of!
authority!needed!to!regulate!conduct!that!enables!the!growth!or!exercise!of!market!
power.!!Such!conduct!may!not!implicate!antitrust!concerns!but!nonetheless!may!
result!in!non-transitory!pricing!behavior.!!!Remedies!such!as!heavy!fines!and!cease!
and!desist!orders,!as!well!as!having!as!much!as!possible!a!matter!of!public!record!
would!seem!appropriate!given!the!Massachusetts!experience!from!Ch.!224!
!
!
(4) Healthcare!Price!Transparen cy!
!
When!Ch.!224!was!first!passed,!some!of!its!most!promising!features!were!the!
provisions!requiring!transparency!in!healthcare!prices.!Nationally,!Massachusetts!
was!applauded!for!having!enacted!among!the!best!transparency!laws!in!the!nations.!!
Transparency!would!be!good!for!consumers!and!for!the!market!as!a!whole.!At!long!
last,!the!usual!secrecy!and!obfuscation!surrounding!healthcare!prices!would!be!
!
39!
stripped!away.!!Unfortunately,!the!state!has!not!lived!up!to!the!promise!of!those!
provisions.!!
!
At!the!time,!there!was!a!widely!held!view!that!high!healthcare!costs!warranted!
scrutiny!and!transparency.!!The!idea!was!a!simple!one,!given!high!deductible!health!
plans!and/or!the!development!of!financial!incentives,!consumers!would!choose!high!
quality!–!lower!cost!providers!for!non-emergent!care.!!Some!thought!there!was!a!
natural!alliance!between!consumers!and!their!insurance!companies!where!both!
would!benefit!from!transparent!pricing.!!Competitor!providers!would!seek!to!lower!
costs!so!as!to!remain!competitive.!!The!market!would!work!better.!!So,!what!could!go!
wrong?!
!
First,!there!was!a!lack!of!understanding!that!teaching!consumers!that!healthcare!
price!transparency!matters!is!a!cultural!revolution!that!requires!ongoing!education,!
high!visibility!and!material!rewards.!!Employers!are!an!important!part!of!the!
learning!curve!as!well,!and!they!require!time!and!attention!and!financial!incentives!
from!payers!and!providers.!!It!is!not!enough!to!build!mediocre!cost!estimator!tools!
and!expect!their!adoption!and!use!simply!because!they!are!available.!!Building!
consumer!friendly!tools,!employing!helpful!staff!to!teach!and!facilitate!value!choices!
–!these!are!just!first!steps.!Employees!and!employers!must!be!approached!as!
partners!in!an!ongoing!endeavor!that!can!benefit!everyone.!!
!
One!example!is!a!recent!project!adopted!by!the!indemnity!plan!of!the!state’s!Group!
Insurance!Commission!managed!by!Unicare.!This!project!pays!employees!–!all!with!
very!low!deductible!plans!-!anywhere!from!$15!to!$500!for!choosing!value!
providers!from!among!40!common!procedures.!!There!is!ongoing!education!and!
targeted!marketing!to!reinforce!the!transparency!message.!!Other!employers!in!the!
state!are!experimenting!with!their!own!programs!to!incent!employees!to!save!on!
overall!healthcare!costs.!
!
Second,!there!were!no!explicit!compliance!or!enforcement!mechanisms!in!the!laws!
that!were!passed.!This!allows!providers!especially!to!flaunt!the!law!with!impunity.!!
They!are!not!required!to!post!prices!or!make!them!available!online.!Only!recently,!
has!the!Massachusetts!Health!and!Hospital!Association!even!provided!lip!service!to!
the!idea!that!transparency!for!consumers!is!worthwhile.
87
!!
!
Third,!there!has!been!an!absence!of!leadership!at!the!state!level!in!terms!of!
promoting!these!laws!and!encouraging!consumers!to!learn!about!healthcare!prices.!!
!
Fourth,!there!has!been!significant!resistance!among!providers!and!their!trade!
associations!and!from!payers!as!well!in!terms!of!investing!in!systems!and!programs!
to!promote!transparency.!!
!
These!are!a!set!of!negative!lessons!that!can!be!taken!from!Ch.!224’s!transparency!
provisions.!!None!of!these!problems,!however,!is!insurmountable.!!The!ingredients!
of!a!successful!transparency!initiative!are!simply!the!reverse!of!what!we!are!doing!
!
40!
wrong!in!Massachusetts.!!First,!state!leadership!should!understand!that!
institutionalizing!transparency!means!changing!attitudes!and!this!will!take!time.!!!
We!have!seen!education!and!targeted!marketing!change!attitudes!on!any!number!of!
public!policy!issues!from!drunk!driving!to!tobacco!use!to!littering.!!The!state!is!in!a!
unique!position!to!bring!stakeholders!together!and!to!challenge!them!to!develop!
consumer!friendly,!effective!price!transparency!tools!and!programs.!!Second,!
enforcement!mechanisms!are!needed!to!challenge!payers!and!providers!to!work!
with!the!business!community!to!develop!innovative!programs!to!promote!
consumers’!choosing!high!value!providers!over!high-priced!providers.!!!
!
All!the!rhetoric!about!“patient-centered”!care!is!fairly!meaningless!if!as!a!matter!of!
public!policy!we!choose!to!keep!consumers!in!the!dark!about!healthcare!prices.!
!!
!
!!
! !
!
41!
End!Notes!
1.! Health!Policy!Commission.!2016#Cost#Trends#Report.!Commonwealth!of!
Masssachusetts.!January!2017;!p.!15!
2.! Kaiser!Family!Foundation.!Average#Premium#per#Enrolled#Employee#for#
Employer-Based#Health#Insurance.##State!Health!Facts;!2017!
3.! Health!Policy!Commission.!2016#Cost#Trends#Report.!Commonwealth!of!
Masssachusetts.!January!2017;!p.!8!
4.! Group!for!Health!Care!Innovation.!Report#of#the#Working#Group#for#Healthcare#
Innovation.!Executive!Office!Of!Health!And!Human!Services;!State!of!Rhode!
Island.!2015;!p.!!
5.! Commonwealth!of!Massachusetts.!Chapter#23:#An#Act#To#Make#Health#Security#
Available#To#All#Citizens#Of#The#Commonwealth#And#To#Improve#Hospital#
Financing,#in#the#Acts#of#1988.!1988;!!
6.! Ifill!Gwen.!"Rejoicing,!Dukakis!Signs!Landmark!Health!Bill."!The#Washington#
Post;!April!22,!1988.!
7.! Eckholm!Erik.!"Health!Care!Plan!Falters!In!Massachusetts!Slump."!The#New#
York#Times;!1991.!
8.! Commonwealth!of!Massachusetts.!Chapter#495:#An#Act#Improving#Health#Care#
Access#And#Financing,#26.!1991;!!
9.! Commonwealth!of!Massachusetts.!Chapter!297:!An!Act!Increasing!The!
Affordability!And!Accessibility!Of!Health!Insurance!In!The!Commonwealth!
1996.!
10.! Anthony!Barbara.!Non#Group#Commission.#Personal!Communication;!1996!
11.! United!States!Supreme!Court.!King#v.#Burwell,#135#S.#Ct.#475.!2014;!!
12.! Manolis!C.,!Bernie!Good,!B.C.!and!Shrank,!W.!Mandating!Coverage!Of!Abuse-
Deterrent!Opioids!Would!Be!A!Costly!Distraction!From!More!Effective!
Solutions.!HealthAffairsBlog.#2017.!
http://healthaffairs.org/blog/2017/05/26/mandating-coverage-of-abuse-
deterrent-opioids-would-be-a-costly-distraction-from-more-effective-
solutions/.!Accessed!2016/06/27.!
13.! Broder!David!S.!and!Haynes!Johson.!The#System:#The#American#Way#of#Politics#
at#the#Breaking#Point.#.!Boston:!Backbay!Books;!1997.!
14.! Becker!W.!C.,!Fiellin!D.!A.!Abuse-Deterrent!Opioid!Formulations!-!Putting!the!
Potential!Benefits!into!Perspective.!N#Engl#J#Med.#2017;376(22):2103-2105.!
15.! Health#Insurance#Portability#And#Accountability#Act,#Public#Law#104-191.!
1996;!!
16.! Massachusetts!Division!of!Health!Care!Finance!and!Policy.!Health#Care#in#
Massachusetts:#Key#Indicators.!May!2009;!p.!!
17.! Ducharme!Jamie.!"Mass.!Has!the!Lowest!Health!Uninsured!Rate!in!the!
Country."!Boston#Magazine##November!2011.!
18.! Massachusetts!Health!Connector.!CCA#Board#Report#Metrics.!Connector!
Massachusetts!Health;!April!2017;!p.!!
19.! Schoenberg!Shira.!"More!than!100,000!People!Enroll!in!Massachusetts!Health!
Connector!Plans,!but!Glitches!and!Questions!Remain."!Masslive.com;!February!
12,!2015.!
!
42!
20.! Kirwan!Leslie!and!Sarah!Iselin.!Recommendations#of#the#Special#Commission#
on#the#Health#Care#Payment#System.!Massachusetts!Special!Commission!on!
the!Health!Care!Payment!System;!July!2009;!p.!!
21.! Dart!R.!Public!Health!Need!for!Abuse-Deterrent!ER!Morphine.!Egalet#
Presentations#for#the#August#4,#2016#Joint#Meeting#of#the#Anesthetic#and#
Analgesic#Drug#Products#Advisory#Committee#and#the#Drug#Safety#and#Risk#
Management#Advisory#Committee.#2010.!
22.! Allen!Scott,!and!Thomas!Farragher.!"Partners,!Insurer!under!Scrutiny."!
Boston.com;!January!23,!2009.!
23.! Fitzgerald!Jay.!"Deval!Patrick!Tells!Reg u lator!to!Curb!Skyrocketing!Health!
Costs."!Boston#Herald;!February!11,!2010.!
24.! Commonwealth!of!Massachusetts.!Chapter#176J:#Small#Group#Health#
Insurance.!Found!Online;!1992;!!
25.! Rothschild!Michael,!Stiglitz!Joseph.!Equilibrium!in!competitive!insurance!
markets:!An!essay!on!the!economics!of!imperfect!information.!The#quarterly#
journal#of#economics.#1976:629-649.!
26.! Weisman!Robert.!"Health!Care!Hikes!Rejected."!Boston.com;!April!2,!2010.!
27.! Sack!Kevin.!"Massachusetts!Insurance!Regulators!Reject!Most!Requests!for!
Higher!Rates."!New#York#Times;!April!1,!2010.!
28.! Commonwealth!of!Massachusetts.!Chapter#176J:#Small#Group#Health#
Insurance.!Found!Online;!1992;!section!6h!
29.! Health!Policy!Commission.!2014#Cost#Trends#Report.!Commonwealth!of!
Massachusetts;!January!2015;!p.!!
30.! Health!Policy!Commission.!2015#Cost#Trends#Report.!Commonwealth!of!
Massachusetts.!January!2016;!p.!!
31.! Health!Policy!Commission.!2016#Cost#Trends#Report.!Commonwealth!of!
Masssachusetts.!January!2017;!p.!41!
32.! Commonwealth!of!Massachusetts.!An#Act#to#Promote#Cost#Containment,#
Transparency#And#Efficiency#in#the#Provision#of#Quality#Health#Insurance#for#
Individuals#and#Small#Businesses.!2010;!!
33.! Dafny!Leemore,!et!al.!Letter#to#Judge#Sanders.!July!2014;!!
34.! Anthony!Barbara.!Interview#with#David#Martin,#former#Director#of#Health#
Policy#and#Strategy#at#the#MA#Executive#Office#of#Health#and#Human#Services.#
February!2016!
35.! Bebinger!Martha.!"Breaking:!Mass.!Aims!To!Set!First-In-Nation!Health!Care!
Spending!Target."!Commonhealth;!July!30,!2012.!
36.! Staff!Senator!Richard!Moore.!Interview#with#staff#for#former#Senate#Chair#of#
Joint#Healthcare#Committee,#former#Senator#Richard#Moore.#Interview!by:!
Anthony!Barbara;!March!26,!2015!
37.! Cutler!David.!Interview#with#HPC#member#David#Cutler.#Interview!by:!Anthony!
Barbara;!February!10,!2016!
38.! Commonwealth!of!Massachusetts.!Chapter#305,#An#Act#To#Promote#Cost#
Containment,#Transparency#And#Efficiency#In#The#Delivery#Of#Quality#Health#
Care,#of#the#Acts#of#2008.!2008;!!
39.! Office!of!the!Attorney!General!Martha!Coakley.!Examination#of#Health#Care#
Cost#Trends#and#Cost#Drivers.!June!22,!2011;!p.!2!
!
43!
40.! Gosline!Anna!and!Elisabeth!Rodman.!Summary#of#Chapter#224#of#the#Acts#of#
2012.!Blue!Cross!Blue!Shield!of!Massachusetts!Foundation;September!28,!
2012.!
41.! U.S.!Food!and!Drug!Administration!(FDA).!Targiniq!ER!(oxycodone!
hydrochloride!and!naloxone!hydrochloride!extended-release!tablets)!
Package!Insert.!!
https://www.accessdata.fda.gov/drugsatfda_docs/label/2014/205777lbl.pd
f.!Accessed!March,!2017.!
42.! Health!Policy!Commission.!Overview#of#Chapter#224.!Slidedeck!(accessed!online);!
November!2012;!Slide!37!
43.! Gosline!Anna!and!Elisabeth!Rodman.!Summary#of#Chapter#224#of#the#Acts#of#
2012.!Blue!Cross!Blue!Shield!of!Massachusetts!Foundation;September!28,!
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44.! Blue!Cross!Blue!Shield!of!Massachusetts!Foundation.!Chapter!224!Tracking!
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45.! Blue!Cross!Blue!Shield!of!Massachusetts!Foundation.!Cha p t er!224!Tracking!
Tool.!August!2014:5.!
46.! Commission!Health!Policy.!958#CMR#10:00#et#seq.!Regulation;!!
47.! Blue!Cross!Blue!Shield!of!Massachusetts!Foundation.!Chapter!224!Tracking!
Tool.!August!2014.!
48.! Commonwealth!of!Massachusetts.!Chapter#224:#AN#ACT#IMPROVING#THE#
QUALITY#OF#HEALTH#CARE#AND#REDUCING#COSTS#THROUGH#INCREASED#
TRANSPARENCY,#EFFICIENCY#AND#INNOVATI ON.!sec.!176T;!2012;!!
49.! The!1990s!saw!some!serious!upheavals!among!California!providers!who!
failed!financially!when!they!could!not!perform!the!risk!bearing!contracts!they!
had!assumed.!
50.! Massachusetts!Executive!Office!of!Administration!and!Finance.!Official!
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55.! Seltz!David.!The#State#of#Health#Care#Costs#in#Massachusetts.#Mintz!Levin!
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58.! Chernew!Michael!E,!Mechanic!Robert!E,! Landon!Bruce!E,!Safran!Dana!Gelb.!
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44!
59.! Bartlett!Jessica.!"State!Bracing!for!Double-Digit!Price!Hikes!as!Massachusetts!
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62.! Anonymous.!Conversation#with#a#leading#CEO#of#a#major#health#plan.#
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68.! Sinaiko!Anna!D,!Mehrotra!Ateev,!Sood!Neeraj.!Cost-sharing!obligations,!high-
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69.! Aron-Dine!Aviva,!Einav!Liran,!Finkelstein!Amy.!The!RAND!health!insurance!
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76.! Anthony!Barbara!assisted!by!Scott!Haller.!"Bay!State!Specialists!and!Dentists!
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78.! Anthony!Barbara!assisted!by!Scott!Haller.!"Massachusetts!Hospitals!Score!
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79.! Centers!for!Medicare!&!Medicaid!Services.!Fiscal#Year#2015#Policy#and#
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!
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46!
About!the!Author!
!
Barbara!Anthony,!lawyer,!economist,!and!public!policy!expert,!is!a!former!Senior!
Fellow!and!Associate!at!the!Harvard!Kennedy!School’s!Center!for!Business!and!
Government!where!she!concentrated!in!researching!Massachusetts'!healthcare!cost!
containment!efforts!(2015-2017).!She!is,!currently,!a!Senior!Fellow!in!Healthcare!
Policy!at!the!Pioneer!Institute!(2015!-present).!Previously,!she!served!as!
Massachusetts!Undersecretary!of!Consumer!Affairs!and!Business!Regulation!(2009-
2015)!and!worked!at!the!intersection!of!state!and!federal!commercial!regulation!
and!the!business!community!for!many!years.!!Among!other!positions,!Anthony!
served!as!Executive!Director!of!Health!Law!Advocates;!Director!of!the!Northeast!
Regional!Office!of!the!Federal!Trade!Commission;!Chief!of!the!Public!Protection!
Bureau!in!the!Office!of!the!Massachusetts!Attorney!General;!and!Senior!Trial!
Attorney!in!the!Antitrust!Division!of!the!US!Department!of!Justice.!Anthony!is!a!
well–known!consumer!advocate!and!appears!as!a!media!commentator!on!
healthcare,!consumer!protection!and!business!regulation!issues.!
