How Can States Control Health Care Costs — 6 Questions for David Seltz, Executive Director of Massachusetts’s Health Policy Commission

State policymakers want to know how to control health care costs.  In fact, global budgeting, the idea of putting a limit on spending, is attracting attention. The New York Times recently published an article on Maryland’s work on cost containment, Would Americans Accept Putting Health Care on a Budget?  To find out more about Massachusetts’ efforts, we asked David Seltz, executive director of Massachusetts’s Health Policy Commission, six questions about how Massachusetts addressed this issue and established a state health care cost growth target in statute.

Background
In 2012, Massachusetts took a decisive step to address this issue by establishing a state health care cost growth target in statute. The law created a new entity—the Health Policy Commission (HPC)—to implement that target and a complementary set of activities designed to hold down cost growth without shifting costs or reducing access or quality.

1. What were the key factors leading to the HPC’s creation?
   Massachusetts had the highest per capita health care costs in the country, and health care costs were growing faster than the economy. These costs were consuming an increasing portion of the state budget and had severe economic consequences, holding back job growth and placing more economic burdens on consumers and businesses. There was broad agreement that these trends were unsustainable.There was broad support for the legislation, as well as a sense of urgency to get things moving. The commissioners, experts in health care policy, delivery and financing, were appointed, and the executive director hired, very quickly.  It was important to get robust participation from stakeholders so a broadly representative advisory council was established to provide input and build ongoing support for the commission’s work.  There was already a solid foundation of data capacity to start with and that also helped the commission get to work quickly.
2.  One of the key functions of the HPC was to set a health care cost growth target—how does it work?
   The legislation set a percentage growth target for the first five years equal to the state’s economic growth. The target addresses health care costs for all payers. This is intended to discourage cost shifting and encourage development of more holistic models to transform health care.
3. In addition to setting the target, what are examples of significant policy actions taken thus far by the HPC?
   Consolidation of health care organizations is a growing trend across the country, and Massachusetts was no exception. If these mergers increased cost, then the state’s cost growth target would be compromised. The HPC set up a rigorous and transparent process to review and make recommendations about hospital and physician group mergers. For the first time, systematic information would be available to gauge the likely impact of mergers and other provider alignments on costs, access, and health care quality.
4. What have been the results so far?
   The health care cost target has worked.  We have four years of data. For two years, the costs came in under; for two years, it came in over—but on average, the cost target has been achieved and sustained. And Massachusetts is no longer the most expensive state per capita!
5. What can other states learn from your experience?
   
   The importance of setting a goal. I recommend that states set a goal that reflects their total cost of care. How you achieve that target might vary—through market based strategies or regulatory measures. But having a goal to look at, to track, provides an opportunity for stakeholders to work together on it.Stakeholder engagement never ends. It’s important for all stakeholders to see how decisions are made—to be brought in and consulted, not just to know about what you’re doing. All stakeholders—from physicians and hospitals, to health plans, patient advocates, and academics—play a role and have a voice.Don’t let the perfect be the enemy of the good. Building a better affordable health care system is a generational challenge. You won’t be able to solve it in one bill. Move forward one piece at a time, bill by bill, correcting course, abandoning or enhancing what you’ve done before.

   Having a commission that is expert-led and transparent has a lot of advantages as the environment in health care continues to change.

• With so much gubernatorial transition expected, is there any advice you can offer colleagues facing a change in administration?
  Controlling health care costs is a nonpartisan issue. It’s one of the areas in which Democrats and Republicans have a lot of agreement. Their approaches may differ, but the ultimate goal of reducing cost and having a transparent system is universal. If you can show the advantages of maintaining health care costs for families, businesses, and communities, you have an effective way to build bipartisan support for these efforts.

The Milbank Memorial Fund supports states that are investigating efforts to measure total costs of care. For more information, contact Rachel Block at rblock@milbank.org.