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Health care reformers need look no farther than Massachusetts about the need to curb rising health care costs. Few cost-cutters on the table.

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By Jennifer Liberto, senior writer

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WASHINGTON ( -- How big of a deal is cutting the rising cost of health care? Ask Massachusetts.

Massachusetts is three years ahead of the nation when it comes to health care reform.

The state now insures more than 97% of its population -- the highest such rate nationwide. But it's also grappling with higher-than-expected costs.

Now, some worry that the growing price tag in Massachusetts could threaten national efforts.

"Anything that is on the track that we're on today will not only derail health care reform but could literally derail the economy," said Lynn Nicholas, president of the Massachusetts Hospital Association.

To be sure, as Congress grapples with how to fix the nation's health care system, cost has become the hot-button issue.

President Obama and many Democrats in Congress say bringing down costs is a key element of current proposals.

But a congressional budget chief recently said that current proposals would not do enough to rein in costs.

And nonpartisan industry experts say lawmakers need to focus more closely on costs.

"There's enormous potential, and the bills have made a good start," said David Cutler, a Harvard University professor and health economist. "I think there's some sentiment for making them do a little bit more." Cutler suggested, however, that policymakers can always go back and tackle health care savings later on.

Trying to rein in costs

As with the national proposals, the original thinking in Massachusetts was to give nearly everyone access to health insurance.

The early tabs for universal coverage rolled in higher than expected, partly because of the program's popularity.

While the program is now meeting its budget, the higher cost of providing health care plus general budget woes have forced state lawmakers to trim millions from health care programs like insurance subsidies for legal immigrants, mental health services and substance abuse programs.

Massachusetts' mounting budget pressures also spurred state leaders to try to attack some of the fundamental increases in health care costs, starting with the way health care is paid for.

In July, a special state panel tasked with looking at revamping payment systems came up with a new idea.

The panel wants to cut rising costs by getting rid of the most common way of paying for health care -- fee-for-service, which some say favors quantity of care over quality.

The panel wants to eliminate fee-for-service and instead pay for care through so-called global payments.

Under a global payments system, providers would get paid a set fee -- once a month or once a year -- based on how many patients they have, how sick their patients are and whether they're meeting quality standards.

"There is a very wide recognition that the fee-for-service system does not promote the kind of care in the right setting," said Nicholas who is on the state panel. "It's very easy to abuse. And it's not a sustainable model. So there is virtually absolute agreement to move away from that as a primary model."

Say, for example, you have a scratchy throat and headache. Under fee-for-service, you go to a doctor and get a throat culture and maybe blood work. You get a diagnosis. You pay for the doctor, the blood test, the culture and the lab technician and anyone else who had anything to do with your visit.

Under the global payments system, the doctor, nurse and lab technicians would get paid whether or not you go in. So, you might first e-mail or call and review your symptoms and figure out if it's worth even coming in.

"In fee-for-service, they would have no interest in providing you that service for free, because if they did, it would undercut their economic opportunity," said Dr. Gene Lindsey, president and chief executive of Atrius Health in Massachusetts, which uses a global payment system. "With global payments, you can deal with health care in the same way you can make an airline ticket reservation."

The state legislature and Congress would still have to approve creating a statewide global payments system.

What they are talking about in Washington

A similar idea has popped up in the national health care reform debate. But the remedy pitched is smaller in scope and it's not clear how much momentum it has.

A House bill would keep fee-for-service overall, but create a limited pilot project in Medicaid and Medicare that would bundle services for an entire health care episode, so that they're all paid together. A Senate Finance panel has suggested similar bundling payments for hospital stays, so that all services, including re-admissions within 30 days of a hospital discharge, are grouped together.

President Obama has talked about creating savings by reimbursing more for preventative care. In a recent town hall, he explained that treating diabetes through weight loss and diet is cheaper than letting it progress to where circulation problems develop and a leg has to be amputated.

"So why not make sure that we are also reimbursing the care that prevents the amputation? Right? That will save us money," Obama said.

The Congressional Budget Office doesn't agree it will save money. In an analysis of the House bill, the agency shows no cost savings from eliminating copayments and deductibles for preventive care. It also says that covering preventative services in Medicaid could cost an extra $7 billion over the next 10 years.

Another cost-saver was announced earlier this summer, when health care reform negotiators got U.S. drug makers to promise to cut the cost of medication to seniors by about $80 billion over the next 10 years to help pay for health care reform.

However, the $80 billion in cuts wouldn't address why U.S. residents pay more for prescription drugs than in any other country in the world. House Democrats have vowed to take a stab at lowering drug costs across the board.

Another controversial cost-cutter on the table would be a public health care insurance option. Proponents say that a public insurance option could compete with private insurers and "keep the insurance companies honest," Obama said this week. Yet a public option might not happen.

One much-touted way to cut rising health care costs, that President Obama talked about on the campaign trail, involves investing in information technology. Paying to install databases that keep track of medical records can help health care become more efficient.

Better electronic record keeping could ensure that costly tests aren't duplicated or that drugs aren't prescribed that react with other kinds of drugs. But nobody's quite sure how much such an investment can save.

"There is agreement that technology can drive costs down and quality up, but it's how you do it," says Stephen Lieber, chief executive of the Healthcare Information and Management Systems Society, a nonprofit which represents technology companies. "You can't focus on technology as the only way to drive costs down. It's a tool to implement other policy decisions." To top of page

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