Mass. Mandatory Health Plan Enters Cost Control Phase

Massachusetts is facing a daunting goal as it enters the second year of its grand experiment of extending health care coverage to nearly all citizens — reining in spiraling costs that could threaten the landmark law.

“The sustainability of reform depends on our ability to restrain or constrain or moderate the increase in costs,” said Jon Kingsdale, executive director of the Health Insurance Connector Authority, which oversees the health care law.

“That’s going to take a huge concerted effort by all players in the health care area,” he added.

For Massachusetts residents deemed able to afford health care, but refuse, that means facing new monthly fines that could total as much as $912 for individuals and $1,824 for couples by the end of the year.

That’s a steep increase. Those who failed to get insured in 2007, the first year of the law, faced the loss of their personal exemption on their tax returns, worth $219.

But pressuring individuals to get insured is only part of a multi-pronged attempt to cut health care costs to ensure the viability of the law, which has thrust Massachusetts into the center of the national health care debate.

The state’s insurers, hospitals and lawmakers are also finding themselves under pressure to slow spending, or come up with new revenue.

Much of that pressure is being felt by hospitals.

“Hospitals are probably the largest perceived target because they are easy to identify,” said Lynn Nicholas, president and CEO of the Massachusetts Hospital Association.

The state’s hospitals are pursuing a series of initiatives to help slow rising costs, from streamlining administrative functions to bringing on more qualified health care workers, especially nurses, Nicholas said.

Hospitals are also looking at the way they manage chronic diseases to see if they can improve care while trimming costs. They are beginning with diabetes, a disease that disproportionately affects minorities and can lead to more serious health problems.

“We can deliver better care to people with diabetes and we can do that in a way that at the same time reduces the cost of care,” Nicholas said.

The state’s insurers also say they are committed to reducing costs.

Dr. Marylou Buyse, president of the Massachusetts Association of Health Plans, said the group has unveiled its own cost-cutting plan and called for public hearings to study the issue.

“We have to understand what is driving the rising costs because unless you understand the problem, you can’t come up with solutions,” she said.

Kingsdale said the health care community should look at a range of options.

One strategy is to institute new safeguards to reduce medical errors, he said. That could shorten the length of hospital stays and cut down on the number of readmissions, all factors driving up costs.

Kingsdale also said limiting reliance of expensive tests _ like CT or MRI scans _ when they are of questionable medical help could also cut costs without hurting the quality of care.

Officials also need to consider limiting the cost of a day in the hospital and cutting administrative costs, he said.

“It’s probably going to be a combination of all of those,” he said.

No one is expecting costs to drop. Kingsdale said his goal is to limit annual cost increases to about five percent for the state’s $60 billion health care industry. That’s compared to recent double digit increases.

The state also needs to be prepared to step in with more money if needed, although Kingsdale said he has “no idea how much more the state is going to have to put in.”

No one knows for sure exactly how many residents remain uninsured despite the enormous effort of the last year. Estimates before the law took effect ranged from 400,000 to 600,000.

During 2007, the state enrolled about 300,000 of those, whether in subsidized programs or in lower-cost non-subsidized plans.

Kingsdale that the state has to stand firm on the most controversial part of the law, the requirement that those who can afford insurance be required to pay for it. The state makes free or discounted insurance available to poor and low income residents.

“In 2008 it’s a more substantial penalty and it will probably go up again in 2009,” he said. “The intention is not to penalize people, but to motivate them to get enrolled.”

While some health care advocates say they are waiting to see the impact of the higher fines on individuals and families, hospital association CEO Nicholas said she agreed the state has to stand firm.

“One of the biggest pressures is will we have the ability to stick to our guns on personal responsibility?” Nicholas said. “If we get soft on that issue everything could go down.”