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Blue Cross puts the reform hammer down in Massachusetts

Instead of paying for services, Blue Cross is paying a fixed fee per member, per month for health care.
Written by Dana Blankenhorn, Inactive

Ever since Massachusetts enacted health reform three years ago, requiring coverage but deferring cost controls, the state has been waiting to see who would impose a model for reform and what that model would be.

The answers are Blue Cross Blue Shield, the state's largest health insurer, and capitation.

Instead of paying for services, Blue Cross is paying a fixed fee per member, per month for health care.

That effort got a big boost recently when Tufts Medical Center, one of the state's largest, agreed to the new contract, which Blue Cross calls an "alternative quality contract."

On the surface this looks like a return to the HMO era, and critics are already eager to pounce on perceived failure to urge a single payer plan that takes insurers out of the equation for most care.

BCBSMA (their preferred acronym) was among the first companies to sign with Google Health for PHRs. It has been actively pushing hospitals in the state toward electronic records, and has claimed savings from the effort. It has also expanded what it calls the nation's largest e-prescribing program.

The pressures it faces now are both political and economic. It is losing customers and is under political pressure both to rein in administrative costs and stop so much to its executives.

Despite these efforts Massachusetts remains a high health care cost state, as the Dartmouth Atlas reported last month. Medicare cost increases are moderating, but in 2006 it still cost $8,671 to cover an average Medicare patient in Boston, against $6,783 in Portland, Maine.

The Dartmouth study blamed decisions by doctors based on the high availability of hospital beds, imaging centers and other high-cost centers, along with the payment system, for the disparities.

In other words, having a lot of sellers in this market raises costs, it does not lower them. Creating real competition among health care suppliers is going to be the hard part of health reform, and necessary if insurers are to retain their place in the system.

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