Back to the future, what happened to HMOs? Look in Massachusetts


Once again in its quest to rein in health care costs Massachusetts is taking the lead backward. Rushing headlong into reform for the sake of expanding coverage, the State is now grasping for solutions to deal with costs.  That’s good of course, just that they, like the U.S., got it backwards. To date they have tried capping premium increases, talked about imposing capitation payments for physician services, and now its dawned on someone perhaps they should look at the profits of hospitals. 

But the best idea of all is the Accountable Care Organization, a coordinated way of providing health care with a group of physicians.  If that sounds familiar, the concept used to be called an HMO.  Back in the late 1970s some of us embraced that system only to see it gradually fall by the wayside; both profit and non profit HMOs.   What killed the HMO?  We did, that is, patients were convinced they were scrimping on care to save money, and they were telling doctors what to do and generally rationing care.  Doctors, many of whom embraced the idea reluctantly and out of necessity quickly found that operating an HMO with business as usually didn’t work.  Employers were were told they skimmed the healthy people from their groups and then when it was learned these generous benefit packages were not offset by managing care and costs, the idea was generally abandoned. 

Good luck Massachusetts!

By Steve Adams
Posted Apr 17, 2010 @ 07:59 AM

Senate President Therese Murray’s prescription to shrink small businesses’ health care costs might soothe some issues but isn’t a miracle cure, according to health care and industry figures.  The Plymouth Democrat this week called for caps on health insurance companies’ administrative costs and asked for a $100-million donation from health care providers.

The bill is the latest of a flurry of fervent efforts, at the state and national level, to corral health care costs. Yet most every attempt has failed, with medical expenditures tripling in the past 18 years to $2.3 trillion.

Murray acknowledged the challenges in a speech to the Greater Boston Chamber of Commerce Wednesday, noting some cost increases are beyond the control of insurance companies. But she said insurers need to be held more accountable.  Murray’s plan would force insurers to prove they are using at least 90 percent of premiums for medical services, rather than administrative costs. Those that don’t would have limits placed on their premium hikes.

“Obviously the insurers set the premiums, but they reflect the medical cost trends,” said Eileen McAnneny, senior vice president of government affairs for Associated Industries of Massachusetts. “Unfortunately, the Senate president’s bill only addressed the insurance piece.”

Murray said her long-term goal is to convert Massachusetts to “global payments” within five years. With global payment, providers would be paid in advance each year for each patient – not separately, for each drug or service rendered – based on a person’s age and health status. That system would encourage the creation of so-called “accountable care organizations,” a new breed of provider networks that coordinate patients’ care among member primary physicians, hospitals and specialists.

Keep an eye on the Bay State, it’s a looking glass into our future frustrations.

Health care cost control in the Bay State


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