Testimony of Governor Deval Patrick
In support of House No. 1849
An Act Improving the Quality of Health Care and Controlling Costs by Reforming Health Systems and Payments
May 16, 2011

Chairman Moore, Chairman Walsh and Members of the Joint Committee:

Thank you for your commitment to this issue, for convening this hearing and the series that follow, and for permitting me to testify in support of our proposal to reduce health insurance premiums.

In 2006, Massachusetts enacted a landmark health care reform bill. Many of you here were part of that historic Act. The primary goal of that bill was to expand access to health insurance to everyone in the Commonwealth.

It has been a resounding success. You know the facts:

• 98% of residents now have insurance, including 99.8% of children.
• More private companies offer their employees insurance now than before the bill was passed.
• People no longer have to fear having their insurance cancelled when they got very sick and needed it most, or that a serious illness would leave them bankrupt.
• It's affordable, having added roughly 1% to state spending.
• And it stands as a values statement, that in Massachusetts we believe health is a public good and every man, woman and child deserves quality care.

But that bill was not an end in itself. It was a marker we put down about the kind of community we wanted to live in. That's why a broad range of interests came together to get a good bill, and then stuck together as we worked to implement and refine it - even in the face of an economic collapse.

Now it's time to do it again.

Health insurance premiums continue to increase at an unsustainable rate. This is not a challenge unique to Massachusetts and it has nothing to do with our 2006 reform. Premiums increased across the Nation on average 130 percent over the last decade. Mississippi, a state that has no public commitment to universal care, has seen premiums increase 113 percent in the same period. The point is that, across the Nation, just like across the Commonwealth, working families, small businesses and governments alike are being squeezed every year by ever-higher premiums. If the first phase of reform was about reaching the 400,000 or more uninsured, this phase is about relief for all six and half million Massachusetts residents.

Secretary Bialecki will address the impact on our economy. I meet many small business owners all across the state who see their commercial activity picking up and are ready to start hiring again - until they get their annual health insurance hike. Double digit increases send them scrambling to find new carriers, with less coverage at the same price or the same coverage with higher deductibles, in an annual ring-around-the-rosy of shifting plans. I have yet to meet a business owner in the state, especially a small business owner, who doesn't see health care costs as a significant impediment to adding jobs. And with small businesses making up 85 percent of the businesses in this state, there is an unyielding economic truth we have to face: if they don't start hiring, we don't get a recovery.

This is to say nothing about the burden rising premiums place on municipal governments. Plan design, which the Legislature is grappling with now, is critical. But that is about cost shifting, not cost reduction. We must do both.

I know that the Members understand and share this sense of urgency and I thank them for that. The challenge before is big but we cannot be defeated by its complexity. We have solved problems like this before and we can do it again.

The good news is that there's an emerging consensus about solutions. By most accounts, higher quality care -- meaning well integrated, "whole person" care -- equates to lower cost. Instead of the fragmented, fee-for-service system we have today, we ought to pay for integrated care. Paying for that kind of care will encourage different kinds of behaviors in the delivery of care - with the added benefit of restraining cost increases. We believe increases can and should be limited to about the rate of GDP growth. Secretary Bigby will cover this in more detail.

The bill I filed will to hasten the move to integrated, high quality care and lower costs to consumers. The bill proposes specifically

1. To provide a common set of standards and benchmarks for the formation of integrated care organizations, commonly known as ACOs, and alternative payment methodologies;

2. To clarify the authority of the Commissioner of Insurance to consider a wider array of factors when considering whether to disapprove excessive premium increases, including the underlying provider rates and how they compare to medical cost inflation and GDP growth;

3. To organize an advisory council of stakeholders and consumer voices to monitor the progress of this next stage of reform and other experiments in cost control; and

4. To modernize the system of resolving claims of medical malpractice in favor of an apology and prompt resolution, to de-emphasize so-called "defensive medicine."

Many existing agencies have a role today. But for simplicity through this transition we propose to make the Department of Health Care Finance and Policy a one-stop shop for innovators in the medical community. This Department would work closely with the community to expand the integrated care groups that are being formed now, monitor the creation of new ones, and set up guidelines for insurers and providers. And we will require that the savings generated benefit consumers -- those families and businesses paying the premiums -- not just improve the margins of the health care industry.

Under our plan, integrated care organizations and insurers that pay for healthy outcomes, not just the volume of service, will predominate in our Commonwealth by June of 2015.

I want to address two concerns that you may hear in the course of these proceedings, one concerning the powers of the Insurance Commissioner and the other concerning the salutary effects of the market.

When the Insurance Commissioner disapproved proposed premium increases last spring, many objected. But after years of asking and even cajoling, it was the only option we had - - and it worked. That disapproval lowered premium rates to single digits last year and again this year. It also jumpstarted the movement we now see in the industry towards integrated care. While I hope that we can lower health insurance premiums through the other provisions in this bill and through a transition to integrated, accountable care, the Division of Insurance review remains a valuable and necessary tool to protect small businesses and individuals. The language in our bill makes the authority of the Commissioner more explicit to consider all of the relevant criteria in making his or her decision to disapprove excessive premium increases.

Some in the industry say that the state needs only to lay out a framework for reforming the way we deliver care, and the market will take care of the rest. And it is true that there are many good things happening in the market right now, in providers large and small, in care settings across Massachusetts. Blue Cross Blue Shield is modeling a new global payment system that pays doctors for quality, not quantity. Mass General has a pilot program underway with Medicare that provides intensive management of some of their sickest patients to avoid readmission; and in a year, they've seen healthier outcomes and markedly lower costs. There are doctors in Springfield and MetroWest working in integrated care settings, and patient-centered medical homes sprouting up around the state. These are good steps; but we need to scale these up, we need a set of common expectations and standards, and we need to assure that the savings are passed on to consumers and patients in the form of lower premiums. Legislation will maintain a needed sense of urgency and accountability.

The goal is not to punish any part of the industry or to return to the days of price regulation. I believe that everyone in the Massachusetts health care industry is sincere in their efforts and desire to deliver lower cost and better health care. The goal of this proposal is to keep the pressure on all of us - including the state - to move as fast we can to bring the cost savings we need to keep our economy growing.

Taken as a whole, these measures make up the next phase for health care reform in Massachusetts. The details may be complicated, but let's not be defeated by complexity. Higher quality, well integrated, "whole person" care means lower cost. From now on, we propose to pay for that rather than the fragmented system we have today.

Every day I appreciate more the phenomenal accomplishment of the first round of health care reform. A broad coalition joined together to try something, to get off the dime and move. I also understand more clearly every day why cost control was put off to another day: because if you think access was hard, wait until you take on cost control. But just like with the first round of health care reform, this is about what kind of Commonwealth we want to live in. The goal is more affordable, higher quality care. The legislation I am filing gives us some tools to get there. Once enacted, it is going to take partnership with you and commitment on the part of the many important interests you will hear from to make it real.

You and I both know that some of those interests are powerful, and have deep stakes in maintaining the status quo. Our job is to balance all the interests, but always to strike the balance in favor of the public good. That's how, with the Speaker's and Senate President's partnership, we delivered meaningful reforms in transportation, the pension system, the ethics and lobbying rules, and education after decades of failed attempts. It's also how Massachusetts devised the most successful model yet in America for universal coverage. And that is how we here will be the ones to crack the code on cost control.

You all know by now how strongly I feel about bearing our generational responsibility - that old-fashioned idea that each of us in our time must do all we can to leave things better for those who come behind us. This is that challenge. I look forward to working with you to meet it.

Thank you.