With the measure vowing to save $200 billion over 15 years, other states may follow, costing healthcare providers billions in revenue /
As Massachusetts launches an aggressive effort to contain healthcare spending, the rest of the country will be watching. On July 31, lawmakers passed first-in-the-nation legislation pegging healthcare expenditures at or below the state’s overall rate of economic growth, a strategy officials estimate could save Massachusetts as much as $200 billion over the next 15 years.
The bill’s passage comes six years after the state enacted a landmark law expanding healthcare access, widely seen as the blueprint for the insurance provisions of the Patient Protection and Affordable Care Act.
Gov. Deval Patrick, who pushed hard for legislators to come up with a compromise before the session ended, said in a statement that he planned to sign the bill.
The legislation will require providers to meet spending targets, although the consequences for failure are still murky. To that end, the state plans to collect a wide array of new data on healthcare cost trends and quality. In the meantime, the bill fires every arrow in the cost-control quiver, including new payment methodologies, preventive care and price transparency.
“I have no doubt this will be influential because this really is the first time any state has attempted to legislate lower cost trends,” Paul Ginsburg, president of the Washington-based Center for Studying Health System Change, said of the bill. “I think other states, particularly in the Northeast, will be looking at this bill very carefully.”
From 2013 through 2017, the legislation sets healthcare cost goals at the gross state product, estimated for 2013 at 3.6%. The goals for 2018 through 2022 are even more aggressive, pushing the state to reduce spending to as low as 0.5% below the gross state product.
Healthcare spending has increased at an annual rate of about 6% or 7% in recent years, Massachusetts lawmakers said.
The Massachusetts Hospital Association called such cost goals “daunting,” particularly given added pressures to address increasing obesity rates and provide care for a rapidly aging population.
Massachusetts healthcare spending was projected to be about $68 billion in 2010, according to figures from RAND Health.
The 349-page bill, approved by a vote of 380 in the Senate and 133-20 in the House, represents a compromise from versions introduced this spring. In many ways, the new bill takes a softer, gentler approach to cost containment than did the previous bills, said attorney Stephen Weiner, chair of the health law section of Mintz Levin, Boston.
For instance, the “luxury tax,” a controversial provision that would have taxed pricier hospitals that provide premium services, was left out of the newest version. That was replaced by a one-time surcharge assessment on acute-care hospitals and health systems that have more than $1 billion in total net assets and derive less than 50% of their revenues from public payers.
The funds from hospitals’ surcharge assessments, totaling $60 million, along with $165 million in one-time surcharge assessments from payers, will be distributed among three funds. Sixty percent, or $135 million, will go to a trust fund for distressed hospitals, while $60 million will be put toward prevention and wellness efforts. The remaining $30 million will go to a fund that promotes the use of health information technology, according to the bill.
Those are worthwhile targets for improvement, said Tim Gens, the state hospital association’s executive vice president, but he argued that adding another cost burden onto certain hospitals is the wrong way to generate needed funds.
“At a time when the government is looking to lower costs, to actually impose additional costs on providers is something that we don’t think is sound public policy, particularly at a time of chronic underpayment for services,” Gens said.
Mass. Gov. Deval Patrick says the legislation will show the nation how to contain healthcare spending.
Gov. Deval Patrick, center right, shakes hands with Jack Connors, recently retired board chairman of Partners HealthCare, which may feel the effects of the surcharge assessment.