Massachusetts Division of Health Care Finance and Policy to Hold Cost Trend Hearing

According to David Morales, Commissioner of the Massachusetts Division of Health Care Finance and Policy, “As other parts of the nation continue to wrestle with how to expand access to health insurance, Massachusetts – having already achieved more than 97 percent insurance coverage – is turning its focus toward mitigating rising health care costs.

While there is no question that Massachusetts leads the nation on access to health care, the rapid growth in health insurance costs cuts into peoples’ wages, burdens families, reduces their insurance benefits, and forces employers to choose between investing in new jobs and paying for employee health insurance. In fact, the cost of health insurance has grown by approximately 7.5 percent each year (on average) for the last decade while gross domestic product (GDP) has only increased 3.8 percent per year during that same time period.

There is no easy answer or solution to this intensifying challenge, but in 2008, the legislature passed a law that directed the Division of Health Care Finance and Policy (the Division) to convene hearings on health care cost trends and develop recommendations thereafter to address this serious issue.

The annual hearings will begin on March 16. In anticipation of these hearings, the Division released a series of reports that analyze the Massachusetts health care marketplace and insurer and provider claims trends. These reports, as well as other relevant materials issued by the Division of Insurance and the Office of the Attorney General, will serve as “table-setters” for the hearings and can be found at http://www.mass.gov/dhcfp/costtrends.

The goal of the hearings will be to convene key health care stakeholders – health care providers, insurers, employers, consumers, and experts – in order to surface the factors driving health care costs and to identify solutions that will mitigate growth in health care spending in Massachusetts. The Division intends to build upon its earlier analyses on premium and medical costs trends as well as the work conducted by the Division of Insurance during and after their hearings on the small group insurance market, and the Attorney General’s Office, assembled through their civil investigatory demand process. These hearings will move the conversation on health care cost forward and culminate in a final report with action-oriented recommendations to mitigate cost growth and improve our health care delivery system.

These hearings will be open to the public and residents are encouraged to participate in this critical conversation about how the health care community can work together and develop concrete solutions to lower rising health care costs. In the same sense that there was a shared responsibility for expansion of coverage in Massachusetts, all stakeholders must work together to maximize quality and efficiency in our system. Massachusetts can once again be a model for the nation on health care, but we must use our collective expertise to mitigate the rapid growth in costs so we can continue to provide nearly all Massachusetts residents with access to affordable, quality health care and keep our economy strong.

What is unique about Massachusetts health care?

Health care is the largest employer in Massachusetts, and contributes significantly to the local economy – directly through employment in places where care is delivered and indirectly through industries that have been drawn to Massachusetts to be near some of the most influential medical centers and research facilities in the world. These industries include biotechnology and pharmaceuticals, among others.

Massachusetts is first among states in terms of access and seventh among states overall on the Commonwealth Fund State Scorecard. Massachusetts hospitals are often cited as among the best in the nation in terms of the quality of health care services provided, scoring higher than national average on treatment of major conditions. Furthermore, Massachusetts health insurers are consistently rated among the top ten best insurers in each category nationwide.

Massachusetts spending on health care is 15 percent higher than the rest of the nation, even when accounting for higher wages in Massachusetts and spending on medical research and education.

Continued increases in health care spending could negatively impact economic activity in other sectors.

What characteristics of the Massachusetts health care system are leading to high spending levels and rapid cost growth?

The way health care providers are paid rewards those that provide a higher number of individual services, rather than those that are best at coordinating care or delivering good quality services in less expensive settings.

A health care system dominated by a high number of specialty doctors (rather than primary care doctors that specialize in disease prevention) and by academic medical settings, both of which tend to provide costlier care. A high concentration of physicians in academic medical centers compared to national averages.

Near universal health insurance and more generous insurance coverage than in other parts of the country, which leads to greater use of health care services, which in turn leads to higher levels of health care spending.

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