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Proposal may reduce health cost increases

By Liz Kowalczyk
Globe Staff / November 4, 2011

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A group of influential health care executives and academics is finalizing a proposal that would allow Massachusetts hospitals and insurers to try to control rising medical costs on their own for three more years, in an effort to head off more immediate state action.

If they do not succeed, only then could they face possible outside controls.

The plan is being developed by the Eastern Massachusetts Healthcare Initiative, which includes the state’s largest hospital and physician networks, such as Partners HealthCare, and insurers including Blue Cross and Blue Shield of Massachusetts.

Stuart Altman, a professor of national health policy at Brandeis University in Waltham and chairman of the group, said the plan differs in two key ways from legislation Governor Deval Patrick proposed.

The group wants a panel of independent experts and stakeholders to oversee the transition to a less expensive health care system, rather than a commission composed mostly of government officials, as Patrick favors, Altman said yesterday.

Altman’s group wants the panel to monitor medical spending first, with the goal of keeping annual increases to about 5 percent after three years and 4 percent after five years. During the first three years, the panel would develop enforcement mechanisms.

The governor wants to go further, giving the insurance commissioner power to scrutinize insurers’ contracts with providers and to reject insurance rate hikes that are based on excessive payment increases to hospitals and doctors.

“We are saying the market is already working, so we wouldn’t improve things by immediately imposing regulations,’’ Altman said.

The health care group, which recently met with Dr. JudyAnn Bigby, Patrick’s secretary of Health and Human Services, plans to release its proposal next week. The Globe obtained a copy of the draft proposal, which was developed with the help of major employers. Bigby could not be reached for comment.

House and Senate leaders are expected to file their own bill early next year. Representative Steven M. Walsh, a Lynn Democrat and cochairman of the Committee on Health Care Financing, has talked about keeping providers and payers to 4 percent increases or less. Walsh said he could not comment on the group’s proposal because he had not been briefed on it.

Patrick administration regulators said yesterday that they have approved an average 4.8 percent increase in base premiums for individuals and small businesses proposed by Massachusetts insurers, to take effect Jan. 1.

The increase is lower than in past years, but some said it is still too much.

There is general agreement among government officials and the industry that the state should move to a system of global or bundled payments, in which providers are given a monthly per-patient budget for all care, rather than allowing them to continue billing for each separate service.

Altman’s group wants a health care panel to monitor whether providers and insurers are moving toward this new payment system in their contracts and impose sanctions if they do not.

But while he said members of the Eastern Massachusetts Healthcare Initiative unanimously back the plan, at least one group, the Massachusetts Association of Health Plans, raised questions about it. Spokesman Eric Linzer said it appears to include loopholes that would let the highest-paid hospitals and doctors groups continue to charge higher prices than many competitors for providing similar care.

Partners, a member of the initiative, includes Massachusetts General and Brigham and Women’s hospitals, which are among the better paid providers.

Liz Kowalczyk can be reached at