Earlier this week, the Massachusetts Association of Health Plans (MAHP), of which Harvard Pilgrim is a member, put forth a series of voluntary and legislative proposals that are designed to make health insurance and health care in Massachusetts more understandable, more transparent and more affordable. The package comes as a follow-up to other conversations about the second part of MA health care reform — which needs to be about managing costs. The first part is working — people are getting coverage. But health care reform will not succeed over time if the cost of health care continues to grow at double digit rates every year.

MAHP kicked off these initiatives with an op-ed piece that ran in the Boston Globe this past Saturday by Tufts Health Plan CEO Jim Roosevelt and me. We tried to frame the issues up, and set the table for Monday’s announcement.

Simply put, we believe that keeping health care affordable requires everyone in health care — hospitals, physicians, health plans, consumer groups, employers and policymakers — to be involved and to work together. We believe that it is important that hospitals, physicians and others join us by working with us on the approaches we are outlining, and by offering additional measures that they will adopt as a way to control health care costs.

The proposal overall has many pieces, and you can find the entire package at the MAHP website. Here are two that are worth specific mention here.

1. Public Hearings on Cost Drivers: Requiring Health Plans & Providers to Explain Health Care Cost Increases

Experts estimate that health care spending in Massachusetts rose from $46.5 billion annually in 2002 to $62.1 billion annually in 2006. That’s a 33% increase in just four years. We need to have a broad discussion on what’s driving health care costs. MAHP endorses MA Senate President Terry Murray’s recommendation that the state require a public process for health plans to document the causes for premium increases in excess of 7% in any given year. To shine a spotlight on underlying health care costs and to provide a full representation of the entire market, we recommend that all carriers over a minimum size (over 10,000 insured members) be required to participate in an annual public hearing no matter what their rate increases are to outline the factors contributing to any changes in premiums, including their projected medical expenses due to provider reimbursement rates, patient utilization, administrative costs, capital investments, and efforts to reduce the rate of growth. Further, we recommend that the Health Care Quality and Cost Council (the Council) be the entity that convenes these hearings. As part of these hearings, the Council would be charged with examining factors driving health care costs, including but not limited to the utilization of technology, utilization of specialty care, Medicaid utilization, hospital facility costs, physician payments, prescription drug costs, and cost-shifting.

However, premiums directly reflect the cost of care, and health plans are just one component of the health care industry. In order to have a broad discussion and provide a complete picture of what is driving health care costs, hospitals, health centers, physician practices, and pharmacies shall be required to participate in these hearings. To determine the facilities and providers that would be required to appear before it, the Council shall utilize claims data it has collected from health plans and require that for each provider type (physician practices, teaching hospitals, community hospitals, community health centers, pharmacies) the top 10 entities based on the total amount of health plan reimbursements received per population served would appear before the Council to explain the factors contributing to their rising costs, including greater utilization of technology, increases in consumer demand, and higher reimbursement rates.

2. Public Disclosure by Health Plans & Hospitals

Health plans have been strong proponents of making publicly available information on the cost and quality of health care services in this state. Consumers and employers have every right to know where their premium dollars go and we recognize that this information should be available on health plans. While information on health plans’ revenues and expenses is filed with the Division of Insurance, this information can be difficult to access and hard to understand. We commit to disclosing health plan revenue and expense data in a consumer-friendly format on the MAHP website. Included in the data that we will release on a quarterly basis:

• * The amount paid for medical expenses, such as hospital and medical benefits, prescription drugs, and bonuses paid to providers
• * Total administrative costs
• * Health plan surpluses and reserve levels

Additionally, we commit to release annually information related to health plan executive compensation. This information is included in health plans’ Federal 990 Form filings, we commit to listing the compensation and any contributions to employee benefit plans and deferred compensation for corporate officers and the five highest paid employees other than officers of each health plan as long as this information is listed in conjunction with parallel disclosure of the compensation of hospital executives in an easily accessible public website. Similar disclosure is needed from the hospital community and we urge them to make publicly available data disclosing total inpatient and outpatient service revenue, total patient expenses, total capital expenses, total administrative expenses, surplus revenue, endowment levels, and executive compensation at a similar level of detail to that being released by health plans. While this data is currently filed with various state entities, it is important that hospital leaders disclose this information in a format that is easily understandable, achieves consistency in what is reported, and make it accessible to the public.

Let’s hope this discussion can be as collaborative and as fruitful as the discussion about coverage in 2006.

Posted by Charlie Baker in Health Care Costs, MA Health Reform