Wednesday, April 25, 2012

"Cappers" vs. "Skinners" in the Struggle to Control Costs

The Disease Management Care Blog agrees that if you want a peek at a potential future scenario for health care reform, look at what has happened in Massachusetts since 2006. That's when the Bay State passed a law that, just like its cousin the Affordable Care Act (ACA), emphasized insurance reforms that included exchanges, subsidies and changes in Medicaid eligibility.

According to this recent New England Journal of Medicine article, the reforms resulted in both good and bad news. The good news is that 98% of Massachusetts' citizens have insurance coverage; the bad news is that health care now consumes a whopping 54% of the state's total budget. 

In response, the state is now pursuing cost reforms. As the DMCB understands it, Massachusetts is banking on the principle of "global payment" to incent health care providers to work within a budget. If it works out, the providers will embrace "value" by delivering needed services and cutting waste. If it doesn't work out, the providers could end up putting savings before patients by withholding medical care.

It remains to be seen what the ultimate mix of value vs. withholding will be.  Undoubtedly, Massachusetts' regulators will be vigilant for any abuses and continue to pressure the providers to prove that they're also achieving quality. The state will also undoubtedly be interested in scrutinizing the providers' overhead costs and trying to keep the industry's profits in the single digits. Expect a combination of increased transparency and intrusiveness, says the DMCB.

All well and good but the Massachusetts experience only tells half the story. For the rest of the nation and Washington DC, the potential scenarios ultimately come down to two competing world views on how to temper health care costs. On one side are the "cappers" i.e., those who believe in using Massachusetts's euphemistically named version of capitation to force providers to moderate the consumption of health care services.

On the other are the "skinners" i.e., those who want patients' "skin in the game" to harness markets by forcing consumers to share part of the cost of health care. To the DMCB's knowledge, no state has actually tried that on a Massachusetts-style scale.

Which will win out?  We don't know yet, but we'll learn how the "capper" version works in Massachusetts years before we know how the ACA is performing.

The DMCB will stay tuned.

Coda: Unfortunately, the NEJM article fails to point out that Massachusetts already had access to a large funding source called the "Uncompensated Care Pool." They also started out with a high baseline of insurance enrollment among its citizens.  What's more, having insurance doesn't necessarily mean having health care access and there is evidence that many docs in Massachusetts see little reason to accept low payment rates and are closing their practices to new patients.  Whether that continues will be the ultimate test of Massachusetts's reforms and represents a real danger for the ACA as it unfolds.

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