Massachusetts Leads The Way Again on Health Reform

October 24, 2011
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It’s no secret that the Affordable Care Act was based largely on the health reform law signed into law by then-Governor Mitt Romney in Massachusetts. The early evidence has shown that the Massachusetts reform reduced the number of uninsured individuals to 2% of the state’s population, but hasn’t done much, if anything, to control health care costs. It looks like that may be about to change.

It’s no secret that the Affordable Care Act was based largely on the health reform law signed into law by then-Governor Mitt Romney in Massachusetts. The early evidence has shown that the Massachusetts reform reduced the number of uninsured individuals to 2% of the state’s population, but hasn’t done much, if anything, to control health care costs. It looks like that may be about to change. Legislation is being hammered out in Massachusetts that aims to control health care costs by introducing what Abby Goodnough and Kevin Sack of the New York Times label “flat global payments to networks of providers for keeping patients well, replacing the fee-for-service system that creates incentives for excessive care by paying for each visit and procedure.” After reading the rest of their article, I call that “risk-adjusted capitation with quality incentives.”

We know that capitation controls costs, but there is also evidence out there that it may reduce quality, because providers make an effort to keep patients from seeking care. Incentivizing providers with extra payments based on quality of outcomes is an attempt to offset this unintended consequence of capitation. How all this will play out is unknown, but it’s promising that Massachusetts is taking action in hopes of controlling health care costs. If it works, you’re likely to see other states and the federal government following suit. After all, everyone acknowledges that the Affordable Care Act only took the first step in getting everyone into the system, and does much less to control costs. If the Massachusetts model gets results, Obamacare part 2 may not be far off. Of course, how dire things have to get before the political process is overcome by desperation leading to action is an open ended question.