Massachusetts Policy Makers Focus in on Health Care Cost Drivers

January 27, 2014 § Leave a comment

By Melissa Shannon, Director of Government Relations and Public Affairs

By now, everyone knows that Massachusetts has led the nation in expanding access to health insurance, with our 2006 health reform law serving as the blueprint for the Affordable Care Act (you remember the whole Romneycare to Obamacare name game). But, what you may not know is that Massachusetts is seeking to lead the nation in the other major challenge in health care policy – containing costs.  In the Summer of 2012, the Massachusetts legislature passed a law known as Chapter 224 which seeks to “bend the trend” – i.e, decrease the rate of escalation in health care costs in order to make the gains we’ve made in health care coverage sustainable, without crowding out all other parts of government, business and individual budgets.   The legislation sets the ambitious but necessary goal of limiting the growth rate of health care costs in Massachusetts to no more than the rate of growth in the state’s economy as a whole, currently 3.6% a year.

One of the first significant milestones in that effort is the release of the first health care Cost Trends Report  by the Health Policy Commission, the entity overseeing the state’s efforts to contain health care costs.   The report establishes a baseline for health care costs in Massachusetts – to which to compare the market to in future years  – and explores, in unprecedented detail, what some of the cost drivers may be.  While the 66 pages of text, 6 hours of public discussion and the guide to no-less-than 69 acronyms used in the report may intimidate some, the report contains many useful nuggets of information that are consistent with our experience here at Commonwealth Care Alliance, but not previously published, including:

  • Health care costs per person in 2009 were 36% higher in Massachusetts than the national average across all payers. (The most recent year for which they could make the comparison.) –
  •  Of that 36%, only 16% is attributable to immovable factors such as coverage and access, the age of our population and the input costs.  The remaining 20% is what the Health Policy Commission wants to focus on.
  • Of the 36% difference ($2,463 on average), almost ¾ is attributable to hospital and long-term care costs.
  • Isolating Medicare, Massachusetts costs were 9% above the US average and all of the difference was hospital and long term care costs.  Our professional services, pharmacy and durable medical equipment costs were all below the national averages.
  • Isolating Medicaid, Massachusetts costs were 21% above the US average, with long-term care making up 73% of the difference. Of course, we have more generous benefits than many states and a greater percentage of our population enrolled.
  • Across all payers, hospital utilization is much higher in Massachusetts than in other states, particularly for outpatient visits, which we use at a 72% greater rate.
  • Price has been the primary driver in commercial expenditure growth, while utilization was the primary driver for Medicare expenditure growth. (2009-2011)
  • We use teaching hospitals much more than our counterparts nationwide, 40 to 16%.
  • Five percent of patients account for nearly half of all spending among the Medicare and commercial populations in Massachusetts. Of these patients, 29 percent remained in the top five percent by spending the following year.
  • And, most familiar to us at CCA, the Health Policy Commission found that patients who have both a behavioral health diagnosis and a chronic condition were 4.2 times more expensive in the commercial market and 7 times more expensive in Medicare in 2010.

While many components of the health care marketplace in Massachusetts are struggling to contain their expenses in response to the new law, Commonwealth Care Alliance is succeeding . With our proven track record caring for the most expensive patients in our health care system to create both better outcomes and lower costs for those patients, our model of care  offers best practices to replicate.


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