Statement of Governor Deval L. Patrick
Before the DHCFP 2011 Health Care Cost Trends Hearing
Bunker Hill Community College, Charlestown, Boston
Monday, June 27, 2011

Commissioner Carrington, General O'Brien, and members of the panel:

Thank you for convening this series of hearings, and for inviting me to be with you.

The cost of health care, as everyone knows, is going up at an unsustainable rate, both in Massachusetts and around the country. Controlling those costs is an urgent challenge for small businesses, working families, and governments everywhere. Failing to do so will threaten our economic recovery. Today we have an opportunity to discuss solutions to this challenge. So I would like to focus my testimony on some of the cost containment strategies that we have put on the table.

First, where are we today?

As you all know, Massachusetts leads the Nation in health care coverage for our residents. Thanks to our landmark health care reform bill that passed in 2006, over 98 percent of our neighbors have health insurance today. 99.8 percent of children. No other state in America can touch that. Many 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 get very sick and need it most, or that a serious illness will leave them bankrupt. It's affordable, having added only about 1 percent of the state budget to state spending on the uninsured. And it stands as a values statement: that in Massachusetts we believe health is a public good and every man, woman and child deserves access to quality care.

That reform was not an end in itself. In the first place, 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 over time - even in the face of an economic collapse. In the second place, cost containment was largely put off to another day.

Now it's time for the broad coalition to do it again.

Health insurance premiums continue to increase at an unsustainable rate. The Division of Health Care Finance and Policy's recent reports, as well as the many written testimonies submitted in advance of this hearing from providers, health plans, businesses, consumers and policy experts from around the Commonwealth make that abundantly clear.

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.

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 handed their annual health insurance hike. 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.

The challenge before us is big. But we cannot be defeated by its complexity. We have solved problems like this before and with the help of the people in this room and the other witnesses appearing over the course of these hearings, we will get there.

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 what works. 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. The legislation that we have proposed gives us some new tools to get there. Secretary Bigby and Secretary Gonzalez have already outlined much of what we are proposing. I'd like to emphasize a few points.

One of our strategies is to build on innovations like early stage Accountable Care Organizations that are being tested in the market right now and to bring these up to scale. Blue Cross Blue Shield, Tufts, Harvard Pilgrim and other health plans in partnership with providers like Mount Auburn Hospital and its physicians, physicians in Lowell and Hampden County, and Mass General are testing new payment models and creating more integrated care settings right now. Our remarkable network of community health care centers has long been a model for preventive and primary care in lower cost settings. And there are lessons to import from similarly innovative delivery models at work elsewhere in the country.

These are all good first steps; but we need to scale them up in a responsible, comprehensive way to see the savings we need. As we do that, our legislation calls for the formation of a common set of expectations and standards to hold these organizations accountable for achieving better care at lower cost. We intend to prescribe the framework that will get us there. 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. And once we get there, we will make sure that savings are passed on to consumers and patients in the form of lower premiums.

ACOs will have to be a part of the solution. But they are not the only part of it. In the interests of urgency and accountability, we have proposed a variety of other measures, some new and some renewed, that also go after the cost conundrum from a variety of angles. One of this is direct government intervention.

When the Insurance Commissioner began disapproving 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 rates and saved small groups and individuals more than $100 million. It also jumpstarted the movement we now see in the industry towards integrated 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, including whether contracts have excessive provider reimbursement rates, in deciding whether to disapprove excessive premium increases. We must make certain that as we change the way we pay for and deliver care we do not lock in the inequities in reimbursements that exist today.

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 to consumers the cost savings we need to keep our economy growing. We have a moment here to share responsibility to bring premiums down. We need to seize it.

There are parts of the bill that have not gotten as much attention. Health resource planning: ensuring that the resources and services are matched to community needs. We can do a much better job at anticipating the health care needs and the health care workforce of tomorrow and as a result provide care in a more efficient, cost-effective way.

And there is work we've already done: allowing small businesses to buy insurance through cooperatives and piloting limited and tiered provider network plans through our state health insurers. We project savings in excess of $20 million this year alone through the state GIC by encouraging more employees to seek care in less costly but high quality networks. That's a real difference on the state level, one that we hope cities and towns will soon be able to enjoy after municipal health reform legislation is passed.

Taken as a whole, these measures make up the next phase for health care reform in Massachusetts. The details may be complicated, but we cannot be defeated by that 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.

That is where we are going. And we need to get there quickly. These hearings help.

Lastly, let me leave no doubt about this: we are moving. We are not going to let inertia or complexity or either the power of or high regard for the medical industry stand in the way of relief for working families and businesses. We need the Legislature to get me final legislation for signature this fall. Because the cost trends that we are discussing today are about more than numbers and data sets. They are about people and their most urgent needs. Our communities and our neighbors need us to do more. And it's up to all of us to deliver.

We led the Nation to the most successful model for universal coverage ever. If anyone's going to crack the code on cost containment, it will be we here in the Commonwealth of Massachusetts. With your help, learned study and constant urging, we will get this done and done right.

Thank you.