The Massachusetts Picture The Last Twelve Months

1
The Massachusetts Picture- The Last Twelve
Months
Nancy Turnbull, Harvard School of Public
Health Massachusetts Medical Society State of
the State October 22, 2002
2
One Year AgoState of the State in Massachusetts
Health Care

• Financial distress among many providers
• Growing gap between Haves and Have Nots
• Deteriorating physician practice environment
• Growing market dominance by certain provider
  systems and payers
• Continuing progress on reducing number of people
  without insurance
• Rising health premiums, fueled by costs for
  prescription drugs and hospitals
• Melt down of MedicareChoice products
• Sputtering economy
• Bloom off the managed care rose but no new
  flowers in the cost control garden

3
One Year LaterState of the State in
Massachusetts Health Care

• Better financial results for most providers
• But financial condition is not robust for many
• Growing distress among Massachusetts physicians
• Escalation of health premiums continues unabated,
  fueled by costs for hospital care, outpatient
  surgery, imaging services, prescription drugs and
  others
• Workforce shortages growing
• State economy in distress
• State revenues in free fall, budget being slashed
  almost daily
• Rising Medicaid costs threaten progress on
  expanding coverage
• Number of uninsured rising
• Continuing shift of intellectual capital to
  quality
• Cost control is just too hard, too political and
  too damn depressing

4
Massachusetts Hospital Margins 1996 -
Q2 2002
Based on latest available audited DHCFP financial
statements (1996-2000) and MHA Quarterly surveys
(2001-Q2 2002). Numbers are weighted averages.
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Hospital Massachusetts Hospital Margins 2Q 2002

46 of Community Hospitals and 57 of Teaching
Hospitals Had Negative Total Margins 52 of
Community Hospitals and 43 of Teaching Hospitals
Had Negative Operating Margins
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Hospitals

• Financial results have improved in aggregate
• Margins remain low by historical standards
• Wide range in performance
• Gap between haves and have nots not closing
• Disturbing trends
• Labor costs with work force shortages, shift to
  use of agency nurses
• Rising capital needs
• Uncompensated care demand rising with increase in
  number of uninsured, rising costs and looming
  cutback in MassHealth Basic

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Other Signs of Distress in Physician Practices

• Shortages of certain specialties
• Severe anesthesia,radiology, emergency medicine,
  gastroenterology
• Growing neurosurgery, orthopedics, cardiology
• Medical malpractice premiums rising at
  double-digit rates
• Worse in many other states but no consolation
• Static fees with impending Medicare cuts

9
Massachusetts Nursing Homes

• Most parent corporations have emerged from
  bankruptcy
• Closure rate has slowed
• 12 homes closed so far in 2002, half the rate of
  2001
• Quality measures have stabilized (although at a
  still troubling level)
• Slower economy and wage pass-through have helped
  labor problems
• But 20 nursing vacancy rate
• New user fee will infuse over 100 million in new
  revenues
• Transfer of funds from private pay homes and
  CCRCs to home with Medicaid residents
• New Medicare payment rules will reduce payments
  by over 60 million

10
Workforce is 1 Issue for Health Care
Organizations

• Hospitals, nursing homes, home health agencies,
  pharmacies
• Current shortages Nurses, radiology techs,
  pharmacy techs, pharmacists, nursing aides,
  certain physicians specialties
• Shortages projected by some
• Physicians
• Hospital beds

11
Health Plans are Still Profitable But Margins Are
Falling for Most
Source DoI.
12
Health Plan MembershipBlue Cross Blue Shield
vs. Top 3 Competitors
BCBS 788k
Top 3 -481k
HPHC
Tufts
-308k
-144 k
Fallon
-29k
Source Massachusetts Division of Insurance.
13
Health Plan Financial Reserves Blue Cross Blue
Shield vs. Top 3 CompetitorsNet Worth in
Millions 1998 and June 2002
Source Massachusetts Division of Insurance.
14
Premium Increases Are Higher In Massachusetts
Than in U.S. 2000 to 2001
Source DHCFP 2001 Employer Health Insurance
Survey, Kaiser / HRET Annual Survey
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Health Insurance Premiums, 2001
Source DHCFP 2001 Employer Health Insurance
Survey, Nongroup Survey Kaiser/HRET Employer
Health Benefits 2001 Note Establishments are
different than firms numbers in parentheses are
the firm size breaks for the U.S. data
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Annual Premiums for Most Popular Individual
Health Insurance Products
Increase 2001-2002Medex 9.9 HPHC 19 BCBS
9 Tufts 9-12
Source DoI
17
MedicareChoice Membership as Percent of
Medicare Beneficiaries US and
Massachusetts1993- 2002
Source CMS and Division of Insurance
18
MassHealth Enrollment Trends June 1997-August
2002
Source DMA
19
MassHealth Spending FY 1996-2003p
(estimated)
(projected)
Excludes disproportionate share hospital
payments. Source Mass. Taxpayers Foundation
20
MassHealth Is A Growing Share of the States
Budget, Both In Total and in Terms of the State
Share of Spending
Source MTF, 2002e based on governors
supplemental requests to date 2003p Medicaid
based on House 1, total budget based on MTF
projection of 3 growth over 2001.
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Expansion Accounts for 11 of Total MassHealth
Costs in FY01 and 33 of Increases from FY97-02
Medicaid Expenditures Expansion and
Non-Expansion Populations( millions)
11.7
11
10
8
4
Source Massachusetts Taxpayers Foundation. 2002.
22
Recent MassHealth Spending Growth is Lower than
Trends for Private Health Insurance Premiums
MassHealth FY 2001 PMPM Growth Compared to
Average Premium Growth
Source DMA Division of Health Care Finance and
Policy, 2001 Employer Health Insurance Survey
Kaiser Family Foundation, Trends and Indicators
in the Changing Health Insurance Marketplace,
2002.
23
MassHealthTotal Spending on Pharmacy is Growing
Twice as Fast as Spending for Any Other Service
Average Annual Percent Increases in Total
Spending, FY98 FY01
Total spending reflect the effect of changes in
membership, member mix, utilization and rates of
payment
24
Percent of Massachusetts Residents Without
Insurance
Source Division of Health Care Finance and
Policy, Health Insurance Status of Massachusetts
Residents, 1998, 2000, 2002.
25
Uninsurance Rates Are Rising for Most Groups2000
vs. 2002
Source DHCFP
26
Uninsured Nonelderly 1999-2000States with Lowest
of Uninsured Nonelderly
Source The Uninsured A Primer, Urban Institute
and Kaiser Commission on Medicaid and the
Uninsured analysis of March CPS.
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Percent of Nonelderly Who Are Uninsured by
State, 1999-2000
Source State Health Facts Online, KFF
28
Rate of Uninsured Among Low-Income People,
1999-2000
Source March Current Population Surveys, 2000,
2001 as reported on State Health Facts Online,
KFF.org Note Low-income is defined as having
income below 200 of the poverty line.
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The Massachusetts Quality Landscape is
Considerably More Crowded Than The Cost Control
Landscape

• Mass. Health Quality Partners
• Mass Coalition for Prevention of Medical Errors
• Alliance for Health Care Improvement
• New England Public Health Collaborative
• Mass Health Assessment Partnership
• New England HEDIS Coalition
• Foundation for Healthy Communities
• Mass Healthcare Purchasers Group
• Mass Division of Health Care Finance and Policy
• Mass Health Data Consortium

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One Year Ago and TodaySame Predictions about
Hot Issues for Next 12 Months

• Workforce shortages
• Tax cuts meet a slowing economy
• Growing pressure on Medicaid
• Tension between expanding public coverage and
  increasing rates of payment to providers
• Growing regional provider monopolies
• Continuing search for the New Holy Grail of Cost
  Control
• Consumer cost-sharing?
• Patient Choice, defined contribution, deductibles
  for using teaching hospitals
• Government regulation?
• Controls on supply?
• Something else? What?