As the nation prepares for implementation of major provisions of the Affordable Care Act, an analysis of the health reform experience in Massachusetts from PricewaterhouseCoopers’ Health Research Institute (HRI) sheds light on the potential implications for the rest of the nation’s health sector.
Major regulatory changes continue to drive industry consolidation. Nearly one third of the 70 acute care hospitals in Massachusetts have been involved either in a merger, acquisition or partnership since 2007, and another 20 percent are in various stages of discussion. By contrast, only about 9 percent of Massachusetts hospitals are entirely independent, raising doubts about the long-term viability of stand-alone community hospitals in the United States.
“The rapid pace of activity in Massachusetts reflects broader consolidation trends across the country,” said Robert Valletta, PwC U.S. health care provider leader. “Innovative partnerships can lead to new payment models that reward coordinated, team-based care as opposed to volume of procedures. Our analysis suggests the lessons learned in Massachusetts can offer insights to health industry executives across the nation as they prepare to adapt to the new landscape.”
Health plans may encounter financial instability after major regulatory changes are enacted, the data suggests. While the new enrollment in Massachusetts led to higher combined revenues across the state’s largest health plans, profits varied widely in the years following enactment of the law, HRI found.
Providers in Massachusetts have experienced more subtle financial effects: profit margins leveled out. Between 2005 and 2010, academic medical centers saw a 1.4 percent margin increase, while other hospital types saw increases below 1 percent over the same period. Hospitals in the state have experienced a decline in the use of emergency departments, as consumers access primary care in lower-cost settings. Today, the state is seeing signs of improved health among residents and positive changes in patient behavior, but also persistently high costs, which the state is continuing to address.
The Massachusetts experience should provide a good preview of what the country as a whole should expect come Jan. 1, when one of the last pieces of the Affordable Care Act—the requirement that all Americans carry health insurance, or pay a fine—goes into effect.
CNN Money reports that the Massachusetts law has a similar insurance mandate, plus tough rules for when employers must offer plans and the blueprint for a government-run online insurance marketplace, or exchange.
Ultimately, the Massachusetts law served as a model for the Affordable Care Act.
“I give a lot of talks to groups from outside the state,” Andrew Dreyfus, CEO of Blue Cross Blue Shield of Massachusetts, told CNN Money, “and I often begin, ‘Hi, my name is Andrew Dreyfus, and I am from the future.’”
So what has happened in Massachusetts since its reform went into effect in 2007? In addition to the industry consolidation, the state has also experienced a drop in uninsured residents. The uninsured rate is down from 8 percent in 2007 to 3 percent today, according to CNN Money. (Nationally, the uninsured rate is expected to drop to 10 percent—it’s at 16 percent today—by 2017.)
Costs might be a bit harder to predict on a national level. On average, Massachusetts individual plan shoppers saw their premiums drop by 33 percent the year after the reform went into effect. But this might not be a good indicator of what to expect nationally: Massachusetts already guaranteed coverage before its reform; meaning healthy consumers and the seriously ill had previously been grouped together when setting premiums. Nationally, an influx of sick people qualifying for insurance could raise premiums by 20 to 45 percent, CNN Money reports.
“Insurers will err on the side of overpricing and then rebate funds if they have to,” Robert Hurley, senior vice president at eHealthInsurance.com, told CNN Money. The report adds that consumers will have a better idea of costs sometime this summer, when states begin announcing details of their health insurance exchanges.