Massachusetts Governor Deval Patrick on August 6, 2012 signed into law legislation that aims to control health care costs in the Bay State. According to a press release issued by the governor’s office, the bill—which is titled “An Act improving the quality of health care and reducing costs through increased transparency, efficiency and innovation”—represents the next phase of health care reform in the state. In 2006, Massachusetts became the first state in the country to enact universal health coverage legislation, which was signed into law by then-Governor Mitt Romney. As a result of the 2006 law, notes the press release, 98 percent of Massachusetts residents currently have health care coverage.

According to the press release, the law could trim up to $200 billion in health care expenditures over the next 15 years. To do this, the law will, among other measures, implement a “first-in-the-nation target” to control increases in heath care costs. In the first five years, the annual increase in health care spending target will be set at the annual rate of growth of Massachusetts’ Gross State Product (GSP)—which the law sets at 3.6 percent for 2013. In the following five years, the target will decrease to half of a percentage point below the annual GSP growth rate. After that, the target will return to the annual GSP growth rate. Health care entities identified as having costs exceeding the annual targets will be required to create and work in good faith to implement a “performance improvement plan.” Under certain circumstances—for example, if a health care entity “willfully neglect[s]” to create and file a plan with the overseeing government agency or knowingly fails to provide information required by the law—noncompliant health care entities may receive a civil penalty of up to $500,000. The law, however, states that the monetary penalty shall be imposed only “as a last resort.”

Other highlights of the law include:

  • The establishment of a “Health Policy Commission” that will, among other things, conduct cost and market impact reviews of providers or provider organizations making “any material changes to [their] operations or governance structure” (e.g., a corporate merger). Under the law, a provider or provider organization must give notice to the commission and other government agencies ahead of the proposed change. The commission will then undertake a cost and market impact review of the proposed change and must refer its report to the state attorney general if the commission concludes that certain criteria are triggered. The law states that the attorney general may conduct an investigation of the provider or provider organization based on the commission’s report.
  • A requirement that Massachusetts government agencies, such as MassHealth, move to global and other alternative payment models—i.e., away from a fee-for-service model.
  • Medical malpractice reform, including the implementation of a 182-day “notice period” before a claimant can file a malpractice lawsuit.
  • Increasing transparency in health care pricing by requiring insurers to provide price information to consumers over the phone or by posting the information on their websites.

Click here to read the full text of the bill, and here to read the accompanying press release.