The Massachusetts Hospital Association (MHA), on behalf of its member hospitals and health systems, appreciates this opportunity to offer comments in opposition to SB566, "An Act Relative to an Affordable Health Plan."
MHA strongly opposes SB566. This legislation inappropriately seeks to achieve reductions in premiums by tying provider reimbursement to already inadequate government payment, by forcing virtually every provider in the Commonwealth to accept these rates as a condition of licensure, and by prohibiting providers from negotiating contracts with payers to recoup these losses. The bill fails to recognize the progress being made to transform the delivery system through both voluntary efforts and Chapter 224 regulatory changes.
Hospitals and other healthcare providers recognize that rising healthcare premiums place an increasing burden on Massachusetts small businesses and agree that continued action needs to be taken to give these businesses and their employees some relief. We support providing insurance options for small businesses that would accomplish this goal, including moving to alternative payment methodologies (APMs) such as bundled and global payment arrangements. APMs offer incentives that support value, reward high quality care and offer the most sustainable options for reducing costs and improving health. SB566 is an obsolete proposal that just serves as a distraction to the real work that needs to be done. It appears its primary function is to pass costs on to employees and healthcare providers.
It must also be recognized that hospitals are of course only one piece of the healthcare delivery systems and they are continuing to make strides in reducing costs through numerous quality improvement measures, reengineering, administrative simplification, creation of integrated care organizations, and adoption of alternative payment methodologies. According to CHIA’s 2017 Annual Report on the performance of the Massachusetts healthcare system, in the Massachusetts commercial market, the share of members whose care was paid for using APMs increased by 6.3 percentage points to 42.0% in 2016, after declining in the prior year. Costs have also been reduced through reductions in force, postponement of capital expenditures, and cuts in services, reductions in discharges to post-acute care facilities, and emergency department utilization. CHIA also reported that hospital inpatient spending growth fell from 4.8% to 2.2% between 2014 and 2016 while spending on prescription drugs grew 6.1% in 2016..Overall, healthcare spending has grown more slowly, with Massachusetts exceeding the 3.6% benchmark rate in 2016 at a preliminary rate of 2.8%. SB566 is also problematic in that it regulates output prices without any recognition that providers have limited control over input prices such as pharmaceuticals, medical devices, and labor, which alone accounts for nearly two-thirds of the hospital dollar. For Massachusetts hospitals, there would be a significant financial impact based simply on the proposed reimbursement methodology. Artificially reducing payments from managed care payers for this population will further erode operating margins and place some hospitals in serious jeopardy. This doesn’t even take into account the additional administrative costs and bad debt that result from high deductibles.
The bill references a plan that is actuarially equivalent to the lowest level benefit plan available to the general public within the Connector. The actuarial value of the health plans offered in the Connector has greatly decreased under the Affordable Care Act (ACA). The current Bronze health plans offered by insurers include too much financial exposure for most people, especially since most do not have a companion requirement of possessing a Health Savings Account (HSA). Current Bronze health plan annual deductibles run as high as $3,000 for an individual and $6,000 for a family. Hospital “co-payments” defy the historical co-payment assumptions as they are typically $700-$1,000 for emergency department visits, inpatient stays, and certain outpatient services. The annual out-of-pocket maximum costs for Bronze level insurance are $7350 for an individual and $14,700 for a family. The downstream impact of high patient cost sharing can be significant when patients are discouraged from seeking necessary care – a very disturbing consequence posed by this legislation.
Healthcare providers also incur the additional administrative burden of collecting from patients after services have been rendered and after health plans process claims and determine a patient's co-insurance/deductible liability. Unlike co-payments, which can be readily available to providers at the time of service, providers are unable to define co-insurance/deductible liability at that point in time. As such, these outstanding amounts are often uncollectable and result in bad debt. Bad debt directly affects patients and local communities when hospitals and other providers are either prevented from appropriately reinvesting in their facilities or are forced to reduce services. Also of significant concern is the prohibition on cost shifting included in this bill, which would prohibit providers from recouping any losses and would thus compound the impact of government underpayments.
SB566 also requires providers to participate in the Affordable Health Plan. MHA is strongly opposed to any bill that forces providers to participate in all health plan products and instead supports the approach used in Chapter 288’s limited network plans which requires carriers to give providers the option to opt out of any new limited network plan.
Health plans must also be made accountable for reducing premiums through measures other than reducing payments to providers. This is an important point that must be addressed because insurers’ administrative demands drive up medical costs that are embedded in the medical loss ratio. It has already been well documented that cost trends are moderating and many consumers are paying more and more out of pocket costs for services. SB566 would ensure that insurers generate a profit while transferring costs to patients and providing no assurance that healthcare providers will be able to cover their costs. This is neither fair nor sustainable.
MHA fully supports a more efficient, coordinated, and collaborative healthcare delivery system, as well as a fair and affordable payment system. As we do not believe that SB566 achieves either goal, MHA strongly opposes this bill. Currently, there are numerous initiatives – both regulatory and voluntary- that are aimed at addressing rising costs of healthcare. In particular, the committee should consider the vast systemic changes directed by Chapter 224 as well as the significant changes being implemented throughout the MassHealth system, most notably the conversion to care delivery through Accountable Care Organizations (ACOs) and patient centered medical homes. The increase in adoption of APMs and the increasing support for addressing social determinants of health, and the move towards paying for value rather than volume are all positive trends that should not only reduce costs but improve patient care and satisfaction. Because of the many efforts of the healthcare community, legislators and the administration, SB566 is an obsolete proposal that would be a step in the wrong direction. MHA urges the committee to oppose this misguided legislation.
Thank you for the opportunity to testify on this important matter. If you have any questions or need further information, please contact Michael Sroczynski, MHA's Vice President of Government Advocacy, at (781) 262-6055 or msroczynski@mhalink.org.